CPI-E

The CPI-E is essentially a price index for the elderly. The CPI-E was developed by the Bureau of Labor Statistics (BLS) and is intended to measure price changes in a basket of goods and services that are relevant to Americans 62 years of age and older. The composition of the CPI-E is different from other BLS indexes such as the consumer price index for urban consumers (CPI-U) and the consumer price index for wage earners and clerical workers (CPI-W). For example, health care costs account for 11 percent of the CPI-E and only 5.6 percent of the CPI-W. Those who advocate for the interests of retirees argue that Social Security cost of living increases (COLA) should be based on a price index such as the CPI-E that provide an accurate gauge of the rate of inflation that is relevant to retirees. At the moment, Social Security COLA increases are based on the CPI-W--not the CPI-E.

Chained CPI Could Short-Change Retirees

Congress is considering an alternative inflation measure as part of its deficit reduction initiatives. The alternative inflation measure is known as the chained consumer price index or chained CPI . The chained CPI includes an adjustment mechanism that presumably accounts for consumers switching to substitute goods and services when a similar category of goods or services experiences rapid price increases. The overall result of this adjustment for substitutes is a price index that that...

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