An Updated Measure of Poverty (Re)Drawing the Line (2023) / Chapter Skim
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Pages 23-61
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From page 23... ...
Indeed, the Census Bureau pilot project involved developing methods by which ACS data could be used to support historical, sub-annual estimates of health insurance coverage or other elements of interest (Albright and Asiala, 2015)
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From page 24... ...
One recently remedied inconsistency in the SPM resulted from the inclusion of in-kind benefits for food, rent, and energy in the estimate of resources, while the estimate of thresholds only accounted for spending on SNAP in-kind benefits -- because the CE collects limited or no data on these programs. Beginning with the 2020 poverty estimates released in September 2021, the CE data used to estimate SPM thresholds include imputed values for the Low Income Home Energy Assistance Program, NSLP, WIC, and rental assistance from government sources.23 Among the many dimensions along which tradeoffs must be assessed, the value of statistical consistency must be weighed against accuracy criteria.
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From page 25... ...
To date, the Census Bureau has taken steps in this direction, including dropping or masking variables deemed too disclosive and, for its 2020 data products, adopting protection algorithms that satisfy differential privacy concepts.25 These algorithms introduce noise into virtually every data point. For the ACS, the Census Bureau is researching construction of a synthetic public-use microdata file; this would likely require a validation server for analysts to ascertain whether their estimates from public-file data are sufficiently accurate or are too distorted for use.26 For poverty measurement, these methods could, in some cases, reduce the accuracy of estimates requiring subnational geographic detail or details of certain populations, such as smaller racial groups.
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From page 26... ...
, policy makers would benefit from more timely and frequent warnings of increasing material hardships during fast-moving economic shocks like the COVID-19 pandemic. Some people lost income but had resources available to continue living in a similar fashion; such information would be useful for measuring poverty at high-frequency intervals.28 Given that geographic detail in poverty measurement is necessary for assessing policy variation among states for programs such as Medicaid, increasing temporal detail could compete with, and possibly deplete, resources for that important purpose.
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From page 27... ...
14 For the years 1959–1968 the statistics on poverty contained in the Census Bureau's Current Population Reports, Series P-60, No. 68, shall be used by all executive departments and establishments for statistical purposes.
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From page 28... ...
14 is ambiguous, it appears that the Census Bureau could simply shift the emphasis in the way the OPM and PPM feature in its P-60 reports.31 RECOMMENDATION 2.1: Due to its vital role in tracking the effects of public policies and programs on the size and composition of the population living in or near poverty, and its resulting status as the preferred measure of many researchers and policy makers, the Supplemental Poverty Measure should be elevated to the nation's headline poverty statistic and renamed accordingly (e.g., to the Principal Poverty Measure)
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From page 29... ...
A good case can be made for further expansion of threshold categories, as the basic needs of most families today extend beyond FCSUti. Explicit inclusion of high-expenditure family budget items in the threshold equation arguably makes a poverty measure more transparent.32 Currently, major household budget items -- most notably medical care and workrelated needs such as childcare and commuting -- are accounted for by subtracting expenditures from estimates of resources available to the SPM resource unit to cover FCSUti expenses.
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From page 30... ...
RECOMMENDATION 2.4: The Census Bureau should recognize and initiate research on how to incor porate childcare needs -- which are a basic and regular expense for many families -- into the Principal Poverty Measure as an explicit threshold category for families with children. Rather than being deducted from resources as a work expense as done currently, childcare would, under the PPM, ideally be treated more analogously to other threshold categories, particularly the new medical care component.
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From page 31... ...
, times a multiplier, utilities (telephone and internet) , plus housing needs based on Fair Market multiplied by 1.2; using CUs with Rents, health insurance needs based on basic children insurance, and childcare based on service costs Threshold Vary by family size, Vary by resource unit size, Vary by household size and composition; Adjustments composition, and age of composition, and housing tenure; geographic adjustments are built into housing, householder with geographic adjustments for medical care, and childcare needs differences in housing costs Updating Consumer Price Index for 5-year moving average of Update health, housing, and childcare with Thresholds All Urban Consumers: expenditures on FCSUti, lagged available data; spending updated using 3-year all items 1 year and adjusted by a FCSUti moving average of expenditures on FCti lagged CPI-U price index 1 year and adjusted by a FCti CPI-U price index Resource Gross before-tax regular Sum of cash income, plus noncash Sum of cash income plus noncash benefits that Measure cash income benefits that resource units can use households can use to meet their FCti needs, to meet their FCSUti needs, minus plus childcare subsidies, health insurance tax payments net of refundable tax benefits and subsidies, and imputed rental credits, work expenses, childcare income flow for homeowners; minus tax expenses, nonpremium MOOP payments net of refundable tax credits, work expenses, and child support paid to expenses, nonpremium MOOP expenses, another household homeowner costs, and child support paid to another household SOURCE: Extended from Fox (2020)
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From page 32... ...
RECOMMENDATION 2.5: The Census Bureau and Bureau of Labor Statistics should conduct a review of the basis for the 20-percent multiplier. This review should include: • Assessing whether a multiplier set at a different level better matches current spending patterns on the basket of goods currently included in the Supplemental Poverty Measure threshold; • Evaluating the spending categories included in the threshold multiplier, specifically whether transportation should be a larger share and should vary by metropolitan and nonmetropolitan residence status; • Recalculating the multiplier based on the new basic needs bundle; and • Developing a plan for updating the multiplier for future changes in spending patterns.
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From page 33... ...
People who do not work may, on average, have lower transportation costs, but the same is true for people who do not have to take their children to school every day.35 Additionally, families face money and time tradeoffs between housing and commuting -- as illustrated by inexpensive but time-intensive options such as walking and biking -- which may be captured by adding transportation as an explicit category of the threshold. To improve the accuracy of the PPM, variation in transportation costs faced by families across geographic locations, and across housing and job situations, could one day be 35 Murphy et al.
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From page 34... ...
The National Academies' report Measuring Poverty: A New Approach (NRC, 1995) acknowledged expert judgment as an inherent characteristic of poverty measurement, stating "although judgment enters into nearly all aspects of the poverty measure -- from how to value in-kind benefits to how to specify the particular form of an equivalence scale -- questions of the threshold concept and level are more inherently matters of judgment than other aspects of a poverty measure" (p.
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From page 35... ...
Currently, the housing portion of the FCSUti threshold is calculated using data from the CE. However, as developed in Chapter 5, a method based on the use of Fair Market Rents (FMRs)
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From page 36... ...
The recently reevaluated TFP addresses many shortcomings of the previous TFP, reflecting the food consumption patterns of a broader set of Americans and taking some time-saving substitutions of prepared foods into account.42 While using the TFP to represent food needs for PPM thresholds is appealing due to its consistency with the approaches for measuring housing, health insurance, and childcare needs, there are potential drawbacks to this approach. Unlike the other needs-based approaches, the cost of the TFP is the same across the 48 contiguous states, and the only region-specific plans are for Alaska and Hawaii.
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From page 37... ...
Also, some debts, such as child support owed, may not always accrue interest but may be binding in terms of payment (i.e., wage garnishing) .46 These questions suggest the need for a well-reasoned guiding principle regarding the types of assets and debts that should be included for resource estimates in an experimental poverty measure.
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From page 38... ...
Sharing residences lowered official poverty rates through the pooling of resources.49 2.6.2. Consumer Units versus Household Units In revisiting the unit of analysis issue, the central question facing the Census Bureau is whether to maintain the current SPM approach or to switch to the household and to include additional unrelated people therein.
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From page 39... ...
Since the CPS-ASEC collects income information for every household member age 15 and older, the poverty status of these older unrelated children can, in principle, be determined. However, when these children live in multi-SPM households, they likely share income and expenditures with the other SPM resource units.
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From page 40... ...
explicitly appear as threshold needs.1 As described in Chapter 2, while shifting aspects of the calculation from the resource side to the threshold side will raise threshold levels, adding health insurance benefits and childcare subsidies to estimates of households' resources means that, on balance, these modifications to the SPM will not necessarily change measured poverty rates.2 A family unit lives in poverty under the SPM if the value yielded by Equation 2.2 is less than that yielded by Equation 2.1; a family unit is living in poverty under the PPM if the value yielded by Equation 2.4 (a or b) is less than that yielded by Equation 2.3.
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From page 41... ...
; I is income of family i; R is government transfers; T is taxes; Work is work-related expenses; CCOOP is out-of-pocket childcare cost for family i; MOOP is all out-of-pocket spending on insurance, cost sharing, and over-the-counter medications for family i; CSi is child support paid by family i; g is geographic area; FCti is median of expenditures on the food, clothing, and telephone/internet threshold component; FMR is fair market rent applicable for household i in geographic area g; REQ/FMR is the rental equivalence for the homeowner, which initially is estimated using the appropriate FMR; Rentasst is the household's rental assistance, BHP is the basic health insurance plan; CC is childcare cost; HOOP is out-of-pocket housing costs that apply to homeowners and which is capped at the imputed rental income; For renters (REQ/FMRgj − HOOPi) = 0; PremMOOP is premium payments, which are capped at the at the BHP or Medicaid/Veterans Health Administration limit; Csub is childcare subsidy; Msub is medical subsidy (zero if unsubsidized)
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From page 43... ...
While there is no way for individuals to insure their good health against the risk of unexpected medical events -- that is, to guarantee that one's underlying health status can be returned to its baseline level -- individuals can insure against the risk of unexpected medical spending. Most individuals prefer to pay a predictable health insurance premium to mitigate the risk of unpredictable spending on medical care because they are risk averse.1 Nonetheless, most health insurance policies in the United States do not cover all costs of medical care: they require cost sharing in the form of copayments or coinsurance, such that consumers bear some of the costs of care (intended to deter unnecessary use of medical care)
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From page 44... ...
The current SPM approach likely understates the impact of government health insurance spending on measured poverty because the only channel through which these outlays can affect poverty is an indirect one -- via the deduction of MOOP expenditures from resources.2 This fails to capture potentially important effects of government health insurance programs. For example, consider an uninsured individual who forgoes medical care entirely because of its high cost.
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From page 45... ...
. The HIPM approach, which explicitly incorporates the value of health insurance transfers into poverty measurement, builds on similar innovations in the SPM for incorporating other in-kind transfers.
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From page 46... ...
By excluding the value of health insurance benefits from resources, the SPM-MIT does not reflect the impact of public health insurance transfers on poverty estimates, such as those published annually in the Census Bureau's SPM reports (e.g., Fox, 2020)
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From page 47... ...
RECOMMENDATION 3.1: For the Principal Poverty Measure, the current approach to medical spend ing in the Supplemental Poverty Measure should be replaced with one that includes health insurance in the estimates of both the needs threshold and resources. The proposed approach within the PPM incorporates key modeling elements developed by Korenman and Remler (2016)
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From page 48... ...
to the poverty threshold to represent the health insurance need. The PPM would also add a value for health insurance benefits provided by government or employers to household resources, up to the price of the benchmark plan.5 Because the PPM threshold includes a need for health insurance, resources in the PPM do not deduct all out-of-pocket spending on insurance premiums.
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From page 49... ...
benchmark health insurance plan should be used to represent the basic health insurance need for a typical American household (or the designated resource-sharing unit for poverty measurement)
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From page 50... ...
RECOMMENDATION 3.4: The definition of resources in the Principal Poverty Measure should include a value for any health insurance benefits or subsidies received from an employer or from the govern ment but must also reflect the fact that such transfers cannot be used to pay for nonhealth needs. This is achieved by capping the value of the transfer that is added to resources at an amount that is less than or equal to the health insurance need that is added to the threshold.
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From page 51... ...
Nonpremium out-of-pocket expenses, capped at the maximum out-of-pocket for the benchmark plan, are subtracted from resources.11 (See line 2c in Panel 1B in Appendix 3B.) • Those with unsubsidized ACA marketplace coverage and those who buy insurance directly from an insurance company outside the Marketplace receive no health insurance transfer, and thus no net health insurance benefit amount is added to their resources, nor is out-of-pocket premium spending subtracted from their resources, since their need for health insurance is already captured by the need included in the threshold.12 Nonpremium out-of-pocket expenses, capped at the benchmark maximum out-of-pocket, are subtracted from resources (see line 2d in Panel 1B in Appendix 3B)
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From page 52... ...
In this chapter, the panel's case has been made that the Census Bureau should move forward with development of a PPM that incorporates an explicit need for health insurance in the threshold, adds the value of health insurance transfers to resources, and modifies the deduction of MOOP spending from resources so that only nonpremium MOOP expenses are deducted. Medical care is a major component of individual spending, whether directly or in the form of health insurance.
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From page 53... ...
Supplemental Poverty Measure: SPM thresholds do not include a need for medical care, particularly care paid by insurance. Instead, they include an implicit need for care or insurance paid for out of pocket, by subtracting health insurance premiums and other MOOP expenses (e.g., copays, deductibles)
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From page 54... ...
, but also due to changing thresholds over time, which deviate from the standard used in 1963.1 In the FPM, resources include market income plus cash transfers, the market value of in-kind transfers (including Medicare and Medicaid) , the market value of employer contributions to employees' health insurance premiums, and tax credits -- minus federal income and payroll taxes.
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From page 55... ...
Thus, the current panel does not view the FPM's treatment of health insurance as a viable alternative to the SPM for ongoing poverty measurement. Two remaining approaches to modifying the poverty measure are not included in this Appendix because they do not explicitly deal with health or health insurance.
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From page 56... ...
This is because the inclusion of the benchmark premium in the PPM needs threshold is largely offset by the addition of health insurance transfers to resources. For individuals without health insurance benefits, however, more of these individuals will likely be counted as poor by the PPM than by the SPM, because the PPM needs threshold includes the benchmark premium, but there is no addition to resources.
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From page 57... ...
Thus, MAPD plans will have identifiable maximum out-of-pocket limits for medical care and prescription drug spending.) Example 1: Single individual, age less than 65 and not Medicare eligible Assumptions • Benchmark premium is $5,000 • Out-of-pocket spending on premiums varies with coverage type: • Employer-sponsored coverage: $1,200 • Medicaid: $60 • Marketplace coverage with a tax credit: $1,000; value of tax credit is $4,000 • Marketplace coverage without a tax credit: $5,000 • Regardless of coverage type, non-premium MOOP spending is $500 Resources Needs Panel 1A Supplemental Poverty Measure ($)
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From page 58... ...
= (−$1,800 − $1,000) −0 = −$2,800 Resources Needs Panel 2B: Principal Poverty Measure ($)
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From page 59... ...
. Moreover, the federal government spends a substantial amount on childcare subsidies, the value of which is not currently tracked in either the Official Poverty Measure or Supplemental Poverty Measure (SPM)
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From page 60... ...
, in which respondents are asked if they pay for childcare and, if so, how much they pay while the parents are working. The SPM, then, treats childcare costs the way it treats work-related expenses such as commuting costs.3 The current SPM approach is simple to implement using data available in the CPS-ASEC.
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From page 61... ...
; (2) changes that the Census Bureau could make in the near future after further research to bring paid childcare and childcare subsidies into the threshold and resources respectively; and (3)
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