The Consumer Price Index—or CPI— measures the average change in price of goods and services purchased in households throughout the United States. The Social Security Administration (SSA) uses CPI to calculate Cost of Living Adjustments (COLA). COLA is used to keep Social Security Disability Insurance and Supplemental Security Income benefits on pace with inflation—a general increase in prices over time.
Specifically, CPI looks at the cost of items and services in the following categories:
- Food and Drink- cereal, chicken, restaurant meals, snacks, milk, wine, and coffee.
- Housing- rent, oil, and furniture.
- Apparel- men’s clothing, women’s clothing, and jewelry.
- Transportation- new vehicles, airline fare, gas, motor vehicle insurance.
- Medical Care- prescription medications, medical supplies, physician’s services, eye care, eyeglasses, and hospital services.
- Recreation- television, toys, pets, and sports equipment.
- Education and Communication- college tuition, postage, telephone services, and computer software.
- Miscellaneous Goods and Services- tobacco, smoking products, haircuts, and funeral expenses.
If the average price of these goods and services increases over time, the cost of living will be adjusted accordingly. As a result, disability benefit recipients will receive a small increase in the amount of benefits they receive.