Social Security cola should be raised, not lowered

Posted in Health - aging, mostly by EloiSVM42 on July 21, 2011

It is intuitively logical and just to build a cost of living adjustment (cola) into benefit programs. Without one, benefits will shrink cruelly over time, due to inflation, until the “benefit” becomes worthless, if the beneficiary is unfortunate enough to live that long.

There are compelling arguments for and against how the government calculates colas today, and also good arguments for and against some proposed alternatives, e.g., why would we eliminate gasoline and food prices from the calculation just because they are “volatile?” They comprise a large portion of what people actually buy.

Whatever the arguments pro and con in general, the current calculation method is illogical and unfair for calculating colas for Social Security benefits, about which colas get the most attention. This is because the cost patterns of Social Security recipients differ significantly from the average consumer. (Full disclosure: I am a Social Security recipient.)

Currently, we are being told the cola calculation needs to be re-adjusted to save money, and that this is OK because the formula overstates Social Security recipients’ cost of living. This is utter nonsense, concocted to rationalize a money-saving, but unjustified reduction in Social Security benefits. In fact, the cola should be increased, not decreased. Here’s why:

By definition, the vast majority of Social Security beneficiaries are older, at least 62. By this stage in our lives, our costs of living skew much more heavily toward healthcare than when we are younger. I’ll mention some personal experience below, but does anyone deny that healthcare costs are growing must faster than living costs in general?

In 2008, the latest year for which there are complete data, healthcare costs rose 4.4%. This is a slower rise than recent years (healthcare costs rose almost 18% a year between 1990 and 2008), but still well ahead of inflation, the basis for cola adjustments.

My own experience goes something like this: through my 30’s, I went to the doctor, and an eye doctor about once a year for a check-up. In my 40’s I added an orthopedist for the occasional back strain. In my 50’s I added a neurologist for proctoscopic exams, and in my 60’s I added a cardiologist.

In late 2009, I was diagnosed with a serious, life threatening disease that required two surgeries and radiation and chemotherapy to treat, with the result I was in a doctors office or hospital nearly every day for the first four months of 2010.

Finally, my drugs are covered by the Medicare Rx plan, and I have been in the “donut hole,” paying full price for my drugs for most of the last four years. In 2010 I was in it after January.

Bottom line: I’ve paid more in medical bills since I turned 65 three years ago than I paid my entire life previously.

My wife is too young for Medicare, so she has personal health insurance, whose premiums, already expensive, have risen 44% in two years. And this insurance pays for almost nothing. The deductible is astronomical. A recent trip to the ER cost us thousands of dollars. We keep the insurance for catastrophic illness only, and should we have one, I am sure there will be a huge fight with the insurance company, bless ‘em.

This is not a critique of our healthcare industry; I’ll address that another time, and there is much to critique. This is only to observe that Social Security beneficiaries’ costs are heavily skewed to healthcare, and that healthcare costs are rising much faster than inflation as a whole. A fairer cola calculation for Social Security payments would take this into account.




One Response

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  1. EloiSVM42 said, on July 31, 2011 at 8:21 pm

    I thought the guy was looking at the wrong end. Seriously, I mis-named the specialty. I assume he was a proctologist,but I don’t remember that term being used.

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