House Democrats plan to introduce a bill to raise the Social Security cost-of-living adjustment from 1.3 percent to 3 percent to help seniors facing a greater financial burden amid the pandemic.
The Social Security Administration announced on Oct. 13 that the cost-of-living adjustment (COLA) for Social Security and Supplemental Security Income benefits will be 1.3 percent starting in January 2021.
But two House lawmakers, Reps. Peter DeFazio (D-Ore.) and John Larson (D-Conn.), have proposed an emergency increase of this adjustment, arguing that the outbreak of the CCP (Chinese Communist Party) virus has put additional financial burdens on seniors as they take extra precautions to stay safe.
“This absolutely anemic COLA won’t even come close to helping them afford even their everyday expenses, let alone those exacerbated by COVID-19. Raising the COLA to 3 [percent] for 2021 will provide seniors with an immediate, crucial lifeline during the ongoing coronavirus crisis,” DeFazio said in a statement.
“Social Security is our country’s number one financial security program, and, because of the COVID-19 pandemic, people are depending on it now more than ever. Seniors are seeing a rise in food, medical, housing costs, and more, and a 1.3 percent cost of living adjustment (COLA) is just not enough during these difficult times,” Larson said in a statement.
According to the American Association of Retired Persons (AARP), a 1.3-percent COLA will mean that the typical beneficiary will see a meager $20 more per month and possibly less if Medicare Part B premiums go up in 2021 as these can eat up the adjustment. As part of a short-term government funding bill passed at the end of September and signed into law by President Donald Trump, any increase in Medicare Part B premiums for next year would be capped at 25 percent of the standard premium increase.
While it remains unknown what the standard Medicare Part B premium increase for 2021 would be, as this is calculated according to an actuarial formula and typically announced in November, AARP said in a statement that it expects the premium to be low enough so that seniors will see at least some of the cost-of-living adjustment money.
“The guaranteed benefits provided by Social Security and the COLA increase are more crucial than ever as millions of Americans continue to face the one-two punch of the coronavirus’s health and economic consequences,” said AARP Chief Executive Officer Jo Ann Jenkins, in aa statement. “In fact, thanks to recently enacted changes supported by AARP to lower the Medicare premium for next year, more seniors will at least see a small monthly COLA.”
According to the AARP, annual increases to Social Security COLAs have averaged 1.65 percent over the past decade. DeFazio and Larson have also called for a change in the way these annual adjustments are calculated by switching to a different inflation index.
“Congress also needs to change the way the COLA is formulated. Our bill, the Social Security 2100 Act, enacts the CPI-E formula for adjustments to ensure the COLA reflects the rise in costs seniors are facing” Larson said.
CPI-E, or the Consumer Price Index for the Elderly, is one of several inflation measures calculated by the Bureau of Labor Statistics. It is based on households whose reference person or spouse is 62 or older. Currently, Social Security COLAs are calculated using the CPI-W index, which reflects price increases for urban wage earners and clerical workers.
Some experts argue the CPI-W measure is a poor choice for calculating Social Security COLAs as it doesn’t reflect the added spending by seniors on health care.
“Seniors 65 and older spend more than twice as much on health care, and those 75 and older spend nearly three times more on health care than younger consumers. Not only do health care expenditures steadily increase with age but health care costs have also consistently risen much faster than other market basket categories,” said the National Committee to Preserve Social Security and Medicare, in a paper arguing for the adoption of CPI-E as a better option for calculating Social Security COLAs.
The lawmakers plan to introduce the bill on Friday, CNBC reports.