Chained CPI: Ugly consequences for seniors

One of the most serious threats facing Montana's seniors and veterans is an acronym you've probably heard recently: Chained CPI. It's a policy you're going to be hearing a lot more of as the budget debate continues to heat up in Washington.

Mary Williams

In his most recent budget, President Barack Obama proposed changing the formula used for determining annual cost-of-living adjustments, called COLAs, that seniors, veterans and those with disabilities receive in benefits, including Social Security, federal and military retirement, disabled veterans' benefits and disability insurance benefits. The change is to a formula called the chained CPI, or consumer price index, and it's gaining steam.

Supporters of the chained CPI claim it is a "painless" fix that would add $230 billion to the U.S. budget over the next decade. Of course, there is no painless way to save $230 billion. But, it is unacceptable that the president and some in Congress suggest burdening some of the most vulnerable Americans with a $230 billion price tag under the guise of what they refer to as a "modest change." It is a "modest change" — read "reduction" — in benefits only with regard to the short term; the long-term reduction would be substantial. The bottom line is that after 30 years of a compounded chained CPI formula, an individual's benefits would be 9.4 percent lower than they would have been under the current inflation formula, the CPI-W.

Proponents of the chained CPI often minimize the reductions in benefits by saying the chained CPI is a "more accurate measure of inflation" or just a "technical adjustment." But both the current formula used to calculate COLAs — the CPI-W — and the chained CPI fail to accurately reflect the principal costs most seniors face: health care. Americans age 65 and older spend roughly 13 percent of their income on health care. Younger Americans spend about 5 percent. If there's going to be any change to the formula, it should follow the common sense approach of the CPI-E formula, which accounts for seniors' health care costs and more accurately predicts needed cost-of-living adjustments.

Too many acronyms, perhaps, to keep track of, but the bottom line is that the chained CPI will, over time and as a result of its snowballing nature, make the poor poorer. Those who retire at a younger age — the military — along with those who receive disability benefits and those who live the longest will be hit the hardest.

What does that mean for those of us here in Montana, especially as our Legislature is considering how to deal with Medicaid and other support to the most needy in our state? Instead of having a population of seniors who have the income to meet most or many of their needs, the chained CPI will, over time, create a population which will require ever more public assistance, both federal and state, to meet basic needs. This seems to cancel out the touted "savings" the chained CPI is supposed to create.

As a former federal employee with 25 years service at the Central Intelligence Agency, I understand that getting our fiscal house in order is important. But attempting to use the elderly, veterans and disabled to balance the budget is not the way we should go. This issue is too important to ignore. We must take the time to understand the impact of this damaging proposal and voice our opposition to our elected officials before it's too late and the chained CPI becomes law.