NCPA - National Center for Policy Analysis

Tracking Inflation Among The Elderly

October 19, 1998

The Labor Department has been maintaining a separate, experimental consumer price index (CPI) for the elderly since 1982. The index, called CPI-E, places greater weight on the cost of goods and services -- such as medical treatment, prescription drugs and housing -- which Americans over age 61 are more likely to purchase.

In recent months, CPI-E has been rising faster than the conventional CPI.

  • Between August 1997 and August 1998, CPI-E increased 1.7 percent, compared to 1.3 percent for the CPI -- primarily reflecting, experts say, rising health costs.
  • Only a few days ago, the Social Security Administration announced that the 1999 cost-of-living increase for benefit payments would be 1.3 percent.
  • The Labor Department also maintains a third, all but ignored index called CPI-W, which measures prices paid by urban wage earners and clerical workers -- and it is on the basis of this index that annual Social Security cost-of-living increases are decided.
  • Advocates for the elderly, such as the American Association for Retired Persons, want the federal government to use the CPI-E to calculate the increases.

But since CPI-E is experimental and not an official indicator, it would have to be upgraded -- at an estimated cost of $40 million per year. Making the switch would also require action by Congress, which specified the use of CPI-W in 1972.

Meanwhile, the Department of Health and Human Services has announced that premiums for Medicare will increase by $1.70 a month to $45.50 next year. And the deductible for in-patient hospital care will rise by $4 to $768.

Source: John Simons, "Elderly's Benefits Trail Increase in Prices," Wall Street Journal, October 19, 1998.


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