How's your new Cost-Of-Living Adjustment (COLA) for 2008? My neighbor Irene says she can't understand why the government calls it a cost-of-living adjustment when it doesn't remotely cover the increase in her cost-of-living.

As usual, Irene hit the nail on the head. That's because the COLA doesn't cover seniors cost of living. It's based on the increase in costs experienced by younger working people instead. How fair is that?

Recently the Kaiser Family Foundation did a survey to find out who spent more on health care, which is rising much faster than overall inflation seniors or younger workers. The survey found that:In all cases, those age 65 and older spend far more on health care than younger adults, but their (seniors) incomes are substantially lower.For example, among households with two or more people medical expenditures in 2003 were nearly five times higher for seniors ($2,308) than for others ($514).

Recently I looked into what people who retired with an average monthly benefit of $1,055 in 2007 would receive over the course of a 25-year retirement if the government used the senior CPI, the Consumer Price Index for the Elderly (CPI-E), to calculate the annual increase, instead of the young worker index, the CPI-W.

Over a 25-year retirement, average benefits would increase $18,227 more using the CPI-E instead of the CPI-W. While the difference is modest at first, the higher COLAs compound over the years like interest, providing the highest increases when seniors are older and more likely to have expensive chronic health conditions. By the end of the 25-year period a retiree would receive a monthly benefit that's $150 higher using the CPI-E, or $1,800 more for the year.

Medicare premiums have more than doubled since the beginning of the decade. At that rate we all need a COLA calculated by using a seniors CPI. Two FAIR COLA bills have been introduced in the House and a companion bill may soon be introduced in the Senate. Why not send your Representative a note and tell them what sort a job you think your COLA is doing in helping your benefits keep up with costs? And when you do, be sure to ask him or her to co-sponsor The Consumer Price Index for the Elderly legislation (H.R. 2032 and H.R. 1953). MARY (signature)

Average Lifetime Benefits Would Be $18,227 Higher Using CPI-E;
By Mary Johnson

Sources:Out-of-Pocket Health Spending Among Older Versus Younger Adults 1998-2003, Kaiser Family Foundation, September 2007.