Consumer Price Index:

Cost-of-Living Concepts and the Housing and Medical Care Components

GGD-96-166: Published: Aug 26, 1996. Publicly Released: Aug 26, 1996.

Additional Materials:


Office of Public Affairs
(202) 512-4800

Pursuant to a congressional request, GAO determined: (1) whether changes made to the housing component of the consumer price index (CPI) made it more or less suitable as a cost-of-living measure; and (2) the advantages and disadvantages of changing the current measurement of medical care costs to a cost of living measurement.

GAO found that: (1) the CPI is not a cost-of-living index, but a measure of the change in prices paid for a fixed market of goods and services; (2) a comprehensive cost-of-living index is broader in coverage than an index based on consumer expenditures and budgets; (3) the Bureau of Labor Statistics (BLS) uses the rental equivalence method to better measure housing costs within the CPI structure; (4) this method has made the CPI more suitable for measuring cost of living; (5) two-thirds of medical care expenses are excluded from the CPI, since they are paid by third parties payers; (6) including third-party payments in the CPI would move the CPI towards a cost-of-living index; (7) BLS excludes third-party payments from the CPI to better represent direct expenditures by consumers; (8) changing the medical care component of CPI would improve the formulation of health-care-specific policies and macroeconomic policies, but there is little technical feasibility in making such changes; (9) the Stigler committee believes that CPI should better reflect the cost-of-living index; (10) it is difficult to design a cost-of-living index for the federal government because of the additional uses of CPI; and (11) policymakers need to consider how the CPI will be affected by changing the medical care component and whether any single price index can account for such cost-of-living measurements.

Aug 13, 2020

Jul 29, 2020

Jul 27, 2020

Jun 26, 2020

Apr 30, 2020

Mar 17, 2020

Mar 3, 2020

Nov 20, 2019

Sep 25, 2019

Looking for more? Browse all our products here