Cecily O'Connor
RedwoodAge.com

The 2.3 percent increase announced by the Social Security Administration for 2008 falls well short of what many seniors need to meet rising costs.

Many seniors claim the increase wasn't calculated appropriately, and as such, does little more than add salt to growing financial wounds. That's because their costs are rising significantly faster than the annual Social Security Cost of Living Adjustment (COLA). 

The problem extends to Medicare as well. Consider that between 2001 and 2008, Medicare Part B premiums, which cover doctors visits, tests and outpatient hospital care, have risen more than 93 percent, while the COLA has increased 19 percent, according to analysis by The Senior Citizens League, a nonpartisan seniors group. 

"As a result [seniors] have reduced buying power," said Brad Phillips, TSCL spokesman. 

The limitation has been on seniors' radar for some time. They ranked the need for a fair Social Security COLA as the most important issue they face, ahead of other hot buttons such as Medicare and prescription drugs, according to a TSCL poll conducted in 2006. 

It's tough for seniors to make up the Social Security shortfall at a time when other expenditures are eating away at monthly budgets. Expenses such as home heating oil and gasoline have more than doubled since the start of the decade, while food staples like potatoes and butter have increased 47 percent and 39 percent, respectively, according to TSCL. 

Even with the recent COLA increase, at least 5 million people over 65 remain in poverty. A majority of the 48 million Americans over 65 that receive a Social Security check depend upon it for at least half of their total income. 

The Boomer Concern
It's been obvious for some time that Social Security won't be able to keep up with payments to swelling ranks of retirees - at the current rate the fund would deplete its reserves in 2041. 

Solutions to fill that gap are illusive. Reform pledges by President Bush to privatize Social Security never materialized, with Republicans and Democrats remaining at odds over the issue, considering it the political third rail going into an election year. At the same time, the Medicare system is confronting even bigger funding problems because of skyrocketing health care costs. 

The crunch is especially concerning now that first baby boomers will turn 62 next year, a birthday that makes them eligible to collect Social Security benefits, Philips said. The first boomer signed up for Social Security earlier this week.

CPI Changes
One way to address Social Security discrepancies involves changing the Consumer Price Index (CPI) that determines COLA. Current calculations are based on the CPI for urban wage earners and clerical workers, which tracks habits of younger workers who generally don't spend as much of their income on health care, Phillips said. 

TSCL argued that the CPI for Elderly Consumers (CPI-E), which the government already uses to track older Americans' spending, is a more appropriate benchmark for calculating monthly checks. And if it were adopted, could augment benefits. For example, a senior who retired with a benefit of $460 in 1984 would have received nearly $10,300 over the past 23 years with the CPI-E, according to TSCL.

Two bills were introduced in April that propose using the CPI-E; one bill emphasizes CPI-E for calculating cost of living increases for Social Security, while the other factors Medicare benefits into the equation as well. TSCL supports both measures.