This week The Washington Post reported results from its December poll with ABC, which took the public pulse on a number of fiscal matters.The public wants compromise, the Post headline tells us, but some specifics were not popular. Among them was the “chained Consumer Price Index,” an alternative way of adjusting Social Security benefits for inflation that saves the government a ton of money. The president has agreed to put the chained CPI on the negotiating table.
As we and others have been reporting, deficit hawks favor changing the CPI calculation because that adjustment could produce some $217 billion in savings over the next 10 years, with about $145 billion coming from cuts to Social Security and other government pensions. Where would those savings come from? From lower Social Security payments (including disability benefits), which would increase 0.3 percentage points less on average each year under the new formula, eventually resulting in a much smaller check when beneficiaries reach their 80s. Perhaps those numbers are sinking in. The Post got similar results from both registered voters and all adults, when it asked whether respondents would accept changes that increase benefits at a slower rate. Sixty percent of all adults and 57 percent of registered voters said the change was not acceptable.Thirty-four percent of all adults and thirty-six percent of registered voters said that it was.
The Post picked up public disapproval even though there’s been little reporting on how the formula will affect real live Social Security beneficiaries—the aging faces that the wonks advising Congress seldom see. There should be more reporting on just how these numbers affect flesh and blood people.
In an effort to do that myself, I visited the senior center in the Chelsea area of Manhattan this week, to learn how people living with the help of Social Security think they will fare under the chained CPI. Here are three of them:
Sixty-one-year-old Phyllis Carleton says she was thrown into “abject poverty” a year ago, when she suffered a heart attack that left her heart severely damaged. Carleton has a family history of cardiac problems—her brother died of a heart attack at age 44—and she must cope with the genetic hand she’s been dealt. She worked most of her career as a make-up artist for high-end cosmetics companies that sold their products at high-end Manhattan stores. The real job, she said, was selling, and she was expected to sell around $2,500 worth of products each day. Some days she did, and, as an independent contractor, she could make as much as $40,000 a year. She had no employer-sponsored health coverage. Still, with a rent-stabilized apartment, she managed pretty well financially, though she dropped the health insurance she bought on her own when the premiums got too expensive.
After the heart attack, she expected to return to the job, but found that her damaged heart barely allowed her to walk a few blocks. Attempts to open her blocked arteries with stents haven’t worked. Eventually she got Social Security disability benefits of $885 a month, for a yearly income of $10,620.
But that plus came with a minus: Carleton had been getting welfare payments when she first got out of the hospital, and with that came food stamps and Medicaid. Now her Social Security income is too high to qualify for food stamps and Medicaid, although she can buy into Medicaid to cover her doctor bills and the 14 medications she is taking. Friends are helping her with those payments. After a two-year waiting period that began last August, she will be eligible for Medicare. (Obamacare did not eliminate the long wait for Medicare benefits faced by people on Social Security disability.)
Until then, Carleton is ensnared in a Medicaid Catch 22. Higher income decreases her eligibility for Medicaid. So, “If I got a COLA increase,” she said, “I’d have to pay it back to Medicaid, so I won’t benefit from any cost-of-living increase.”
Meanwhile, over time, the chained CPI will also affect Social Security disability benefits, just as it will retirement benefits, thus eroding Carleton’s purchasing power. The advocacy group Social Security Works estimates that a person receiving an average disability benefit of around $13,000 a year at age 45 would receive a cut of a little more than $1,000 by the time he or she reaches age 75.