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Raise Doesn't Live Up To The Name

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By HUMBERTO and GEORGINA CRUZ Tribune Media Services

Published: December 16, 2007

Updated: 12/15/2007 12:11 pm

How much of a raise is it, really?

For the nearly 50 million Americans who collect Social Security retirement benefits, the 2.3 percent cost-of-living-adjustment in their monthly checks beginning in January may make only a small dent on their growing expenses.

The 2.3 percent increase, the smallest in four years, will raise the monthly benefit for the typical benefit recipient by $24 a month, from $1,055 to $1,079.

Of that amount, $2.90 will be consumed by a rise in Medicare Part B premiums, which are typically deducted from Social Security checks for beneficiaries who are also enrolled in Medicare.

The basic premium for Medicare Part B, which covers doctors' bills and basic medical services, will increase from $93.50 to $96.40 a month.

Following a means-testing formula that went into effect in 2007, taxpayers with adjusted gross income above $82,000 (individual) or $164,000 (filing joint) will pay a higher premium.

In addition, senior advocacy groups claim, the Social Security benefits increase is failing to keep up with actual expenses.

"While essential, the COLA (cost-of-living adjustment) is not enough to help many beneficiaries keep up with the skyrocketing costs of health care, energy and food," said David Sloane, director of government relations and advocacy for AARP, the giant membership and lobbying group for people 50 and over.

One major issue is that the annual Social Security COLA is based on changes of the Bureau of Labor Statistics' Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

But this is a slow-rising index that tracks the spending habits of younger workers who don't spend as much of their income on health expenditures, complains the Senior Citizens League, a non-partisan action group based in Alexandria, Va., that has been among the most vocal in lobbying for a change.

The group supports two similar bills introduced in Congress that would base future cost-of-living adjustments on the CPI for Elderly Consumers, an index that has tracked the spending patterns of older Americans since 1983.

A recent study by the league contends Americans 65 and over have actually lost 40 percent of their purchasing power to inflation since 2000.

For example, common expenses such as gasoline and heating oil have more than doubled since the beginning of the decade, while food staples such as potatoes and butter have increased by 47 and 39 percent respectively, the study found.

"An annual increase of 2 percent (actually 2.3 for this year's cost of living adjustment) isn't enough to shield seniors from costs that are rising by double digits," said Shannon Benton, executive director of the league.

In addition, Benton took exception to the announcement by Medicare that Part B premiums had risen only 3.1 percent (from $93.50 to $96.40 a month) for 2008.

"Excluded from their announcement is the fact that premiums have jumped 93 percent since 2001, when premiums were just $50 per month," she said. During that time, Social Security benefits have gone up only about 19 percent.

"Many people have the mistaken notion that such a 'low' Medicare premium increase is good news for seniors, but they forget that it's been rising five times faster than their Social Security checks," Benton said.

"Medical expenses alone are leaving seniors to fend for themselves with all other rising costs such as gasoline, home heating, and groceries."

As a matter of course, this column does not get involved in political or policy debates, so we won't argue whether the bills the League supports should be passed or whether one inflation index is more appropriate than another.

But we think it's important to bring the debate to the public's attention.

And, as you plan your own expenses, we suggest you compute your own "personal" inflation index, or how much the goods and services you use the most will cost you next year.

Humberto and Georgina Cruz are a husband-and-wife writing team who work together in this column. Send questions and comments to AskHumberto@aol.com, GVCruz@aol.com, or c/o Tribune Media Services, 2225 Kenmore Ave., Suite 114, Buffalo, NY 14207. Personal r

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