Social Security beneficiaries have received cost of living allowances (COLA) every year since 1975, when the automatic adjustments were created in the program. The adjustment is calculated based on the an particularly aspect of the Consumer Price Index (CPI), which has actually gone down in the past 12 months for the first time in decades. The law prohibits cuts in the benefit amount based on the CPI drop, so the benefit amount will not go down despite the drop.
But for most seniors the cost of living has actually continued to increase this past year. The CPI used to calculate the SS COLA is based on "urban wage earners and clerical workers." That population is not likely bearing the same kinds of expenses in the same proportions as most seniors, particularly regarding the dramatic and increasing costs of healthcare. Like the Federal Poverty Line calculation, the algorithms and types of data used to produce this index have not kept pace with contemporary expense patterns, and neither index has ever been accurate for seniors who have different levels of spending than younger people in America.
The good news is that most Medicare beneficiaries will also see no increase in their Part B premiums for 2010.
For more information check out this article from the University of Illinois http://illinois.edu/lb/article/72/30133
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