Rising Prices Hurt Seniors 

By Diane Lade, South Florida Sun-Sentinel 

May 15, 2009 

Prices for prescription drugs, medical care and homeowners insurance rise faster than Social Security checks.

Senior citizens have lost about 20 percent of their buying power in the past decade, as prices of prescription drugs, medical care and homeowner's insurance have risen far faster than annual increases in their Social Security checks, according to a report released by a national retiree lobbying group.

The Senior Citizens League is using the analysis to renew a pitch put forward years ago: Social Security raises should be based on what older Americans, rather than workers, spend their money on.

The league, which started as a military retirees organization, says the government should switch to what's been dubbed the Consumer Price Index for the Elderly, or CPI-E. The CPI-E puts a greater weight on health care and housing costs than the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W, which now is used to calculate the annual Social Security cost-of-living increases.

"We're hearing from all over the country from people that are having trouble keeping up with inflation. Some have had to come out of retirement and take second jobs," Executive Director Shannon Benton said.

This week, U.S. Rep. Peter DeFazio of Oregon introduced HR 2365, a bill that would require Social Security to use the CPI-E. Congress first asked the federal Bureau of Labor Statistics to create the index in 1987, as the nation began preparing for a wave of retiring Baby Boomers, but legislation to adopt it never has passed.

RetireSafe, a seniors group that supports personal accounts in Social Security and reducing the capital gains tax, also favors the CPI-E. It even has created a calculator allowing recipients to see exactly how much higher their benefit would be under an elder consumer index.

These CPI-E campaigns come as the Congressional Budget Office is forecasting that due to low inflation, seniors will receive no cost-of-living increase in 2010 and possibly in 2011, a first time in 35 years. The rate is set in October.

In the report, league researchers said they found monthly Social Security payments have increased 31 percent since 2000. The percentage was based on an $816 monthly payment in 2000 rising to $1,072 this year. But the average national prices of 20 items most likely to be part of seniors' household budgets rose 58 percent during that same period. The calculation gave extra weight, as the CPI-E would, to what comprised the majority of seniors' spending, primarily housing, medical care and transportation.

The Medicare Part B health care premium, for coverage of doctor visits and outpatient care, had the highest increase, jumping 112 percent in nine years. Some food items, including eggs and coffee, went up almost as much.

Floridians, in some cases, may be suffering more.

The league report found a 60 percent hike in homeowner's insurance between 2000 and 2009. But in Florida, residents paid roughly $2.4 billion in 2000 for about 3.2 million homeowner insurance policies -- for an estimated average policy cost of $755. That estimate more than doubled to $1,680 in 2008, based on the Office of Insurance Regulation's statewide premium count of $6 billion and a policy count of 3.6 million.

Marie Butta, 81, is paying $75 more for windstorm coverage on her Deerfield Beach house this year and expects the premium to go up again next year. By switching to generic medications and cutting back on dinners out, she and her husband "haven't really felt the pinch yet, thank God, for that," she said.

The labor statistics bureau, which calculates an experimental annual CPI-E, found it rose 126.5 percent from 1982 through 2007, compared to 110 percent for the CPI-W.

But bureau economist Kenneth Stewart, in a paper published in the Monthly Labor Review last year, warned that the experimental CPI-E "has limitations as an estimate of the inflation rate experienced by older Americans" and should be viewed cautiously."

The Center for Retirement Research at Boston College came to similar conclusions in an October study on the impact of inflation on Social Security benefits. Rather than using the standard index as a base, center Director Alicia Munnell and research associate Dan Muldoon suggested one for elders should be built from scratch, sampling more senior households and gathering more prices at places where older consumers shop.

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