Ways and Means Draws Bead on Medicare Cuts, Chained
CPI to Limit COLA for Social Security
HHS Secretary Sebelius in witness chair today on
total budget for HHS, CMS with Social Security proposal the target this
April 12, 2013 – The
Republican-led House Ways and
Means Committee has grabbed the lead in questioning President Obama’s
2014 budget proposals for the Department of Health and Human Services,
which includes the Centers for Medicare and Medicaid Services. HHS
Secretary Kathleen Sebelius will testify there today and next Thursday
the hearing topic will be on entitlement reform proposals, with emphasis
on the controversial Chained Consumer Price Index, which will be used to
lower cost-of-living adjustments for seniors and others in future years.
media reports say focus of White House is to strike a ‘Grand Bargain’
with Republicans who want to change Medicare into a voucher-style
system; Medicare proposal has one revenue item - higher premiums
for couples making more than $170,000 a year - April 11, 2013
Today’s hearing, which will focus on the total
budget for HHS, was announced last week by committee chair Dave Camp
(R-MI). The sole witness will be Sec. Sebelius.
The Hill, on its blog, says, “There's plenty in the department's
budget request for lawmakers to ask Sebelius about. It seeks an
additional $1.5 billion for the federal insurance exchange, and HHS
officials have so far not answered when asked about the consequences of
not receiving that money. The budget also proposes a handful of Medicare
benefit cuts, such as charging wealthy seniors a higher premium.”
Congressman Sam Johnson (R-TX), chairman of the
Subcommittee on Social Security, yesterday announced the first in a
series of hearings on the President’s and other bipartisan entitlement
This hearing, according to the announcement, will
focus on using the Chained Consumer Price Index to determine the Social
Security cost-of-living adjustment. This proposal was included in the
President’s Fiscal Year 2014 Budget, the report by the National
Commission on Fiscal Responsibility and Reform, and the report of the
Bipartisan Policy Center’s Debt Reduction Task Force.
The hearing will be Thursday, April 18, 2013, in
B-318 Rayburn House Office Building, beginning at 9:30 a.m.
Following is the background on the issue as
presented by the subcommittee news release.
“Social Security beneficiaries receive an increase
in their benefits, known as the cost-of- living adjustment (COLA), each
year there is inflation. Prior to 1972, Congress enacted increases in
Social Security benefits on an ad hoc basis. The Social Security
Amendments of 1972 (P.L. 92-603) established an automatic process for
determining whether a COLA would be provided beginning in 1975.
“The Social Security COLA is based on the
percentage change in a measure of inflation known as the Consumer Price
Index for Urban Wage Earners and Clerical Workers (CPI-W). The
percentage change is measured by comparing the highest third calendar
quarter average CPI-W previously recorded to the average CPI-W for the
third calendar quarter of the current year.
“The COLA becomes effective in December of the
current year and is payable in January of the following year. If there
is no percentage increase in the CPI-W between the measuring periods, no
COLA is payable, as happened in 2009 and 2010. In 1975, the CPI-W was
the only inflation measure produced by the Bureau of Labor Statistics (BLS).
Since then, other indices have been developed by the BLS.
Key Links on
President Obama’s Proposed 2014 Budget
“In December 1996, a Senate-appointed commission to
study the CPI, chaired by Michael J. Boskin, Ph.D. (the Boskin
Commission) found that both the CPI-W and the later developed Consumer
Price Index for All Urban Consumers (CPI-U) overstated inflation in a
number of ways.
“The BLS modified the indices to respond to a
number of the Commission’s recommendations regarding how these two
indices were measured, but did not address their inability to account
for the fact that as prices change, consumers will adjust their spending
habits across categories of goods (e.g., if the price of beef goes up,
consumers might buy pork instead).
“In 2002, BLS introduced the Chained Consumer Price
Index for All Urban Consumers (C-CPI-U), which accounts for consumer
substitution between CPI item categories, as well. According to the
2003 BLS report, Introducing the Chained Consumer Price Index, the
C-CPI-U is “designed to be a closer approximation to a ‘cost of living’
index than existing BLS measures.”
“This index cannot be used to determine Federal
program adjustments unless Congress passes, and the President signs,
legislation permitting the change.”
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