Background: Under current law Social Security determines whether there will be a COLA for the succeeding year and its amount in October each year by comparing the average CPI-W (Consumer Piece Index – Urban Wage Earners And Clerical Employees) for July through September of that same year to the average CPI-W for July through September of the last year which produced a COLA. I call this the “baseline .” This year, the baseline we are working from is the period from July through September, 2008, which generated a 5.8% COLA in 2009.
The Baseline CPI-W Amounts
July 2008 CPI-W: 216.304
August 2008 CPI-W: 215.247
September 2008 CPI-W: 214.935
2008 Average CPI-W: 215.495. This is shown as the bottom purple line on the graph below, and is the threshold we must exceed to receive any sort of COLA in 2012..
The Current CPI-W
The remarks which follow pertain to the CPI-W, not the CPI-U.
According to the Bureau of Labor Statistics (BLS), the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 0.3% in August 2011 to an index level of 222.326 (1982-84=100).
Food and Beverages increased 0.6% in August and 4.5% over the past twelve months.
Housing increased 0.1% in August and 1.7% over the past twelve months.
Apparel increased 2.4% in August and 4.3% over the past twelve months.
Transportation was unchanged in August and increased 12.9% over the past twelve months. Gasoline decreased o.5% in August and increased 32.5% over the last twelve months.
Medical Care increased 0.2% in August and 3.3% over the past twelve months.
Recreation increased 0.0% in August and 0.2% over the past twelve months.
Education & Communications increased 0.6% in August and but only 0.3% over the past twelve months.
Other Goods & Services increased 0.2% in August and 1.1% over the past twelve months.
You can see the entire report at Consumer Price Index Summary. The CPI-W figures are in Table 4, a link to which is at the bottom of the page.
Current CPI-W Amounts
December 2010 CPI-W: 215.262 (+ 0.24%)
January 2011 CPI-W: 216.400 (+ 0.53%)
February 2011 CPI-W: 217.535 (+ 0.52%)
March 2011 CPI-W: 220.024 (+1.14%)
April 2011 CPI-W: 221.743 (+0.78%)
May 2011 CPI-W: 222.924 (+1.01%)
June 2011 CPI-W: 222.522 (-0.2%)
July 2011 CPI-W: 222.686 (+0.07%)
August 2011 CPI-W: 223.326 (+0.29%)
There are 5 colored horizontal lines on the graph. The lowest one, at 215.495, is the baseline CPI-W, which has to be exceeded in July through September for there to be any COLA in 2012. The other lines, at 217.650, 219.805, 221.960, and 224.155 are the CPI-W amounts needed for COLAs of 1%, 2%, 3%, and 4% respectively.
We are now 2/3 of the way through the three month period which determines the COLA. The average of the July 2011 CPI-W amount of 222.686 and the August 2011 CPI-W amount of 223.326 is 223.006. When compared to the average for July through September 2008, the baseline, 215.495, this would generate a COLA of about 3.49%. I believe SSA rounds this to the nearest tenth of a percent, so they would calculate the COLA to be 3.5% with the current data. I expect that the CPI-W will continue its increase in September. Anything above 223.006 would raise the average. I do not think the rate of increase will change much, perhaps another 0.3% or so. (By the way, this amount of increase in September would generate a COLA of about 3.6%)
The next report from the Bureau of Labor Statistics, showing the September 2011 CPI-W, is scheduled to be released Thursday, October 19 at 8:30 AM EDT.
This information is also repeated essentially verbatim from preceding reports, and is repeated here as a reminder.
If we get a Social Security COLA in 2012, Medicare Part B premiums will increase by a significant amount.
Part B premiums have been kept at the 2009 amount, $96.40, in 2010 and 2011, for about 75% of beneficiaries who were eligible for Part B prior to January 2010. According to law, the Social Security check amount cannot be decreased, so beneficiaries entitled before January 2010 could not have their Medicare Part B premiums increased. The Trustees project that the 2012 Part B premium amount will be $111.40, based on the assumption that there will be a COLA in 2012. This is an increase of $15.00.
The average Social Security beneficiary receives $1170.00 per month. Let’s say that we do get a 3% COLA in January, 2012. That would mean that the COLA to a beneficiary receiving the average amount would be an increase of $35.00. That beneficiary’s Part B Premium increase of $15.00 would be deducted from this, leaving a net increase of $20.00 per month.