Health care spending and poverty

The Census Bureau has developed a new poverty measure that accounts for how households spend their money. Spending on necessities like healthcare is now recognized. How does this change affect the poverty numbers? N.C. State University economist Mike Walden explains.

“And … this is very interesting because what the new measure does is (it) looks at not only monies that people spend on necessities — and the more that they spend on necessities, this would have an impact on increasing poverty — but also looks at the monies that people might receive from government programs to support that spending.

“And when we look at health care and how it affects the poverty numbers, there’s a distinct difference by household type: Families with children actually have a lower poverty rate based on the new measures, and this is because those families with children receive considerable assistance from the government for medical expenses from Medicaid and the children’s health insurance program. So what this does is give families more discretionary income and therefore their poverty rate is somewhat lower.

“But for the elderly, this new measure actually increases the poverty rate, because … although elderly households receive assistance for medical expenses from Medicare and Medicaid, they also spend a much higher percentage of their own income from other sources on medical care — out-of-pocket spending for complimentary insurance projects and programs.

“And so what this does is reduces this discretionary income and causes their poverty rate to go up. And indeed … the new measures actually double the poverty rate for some of these elderly households.

“So this is very interesting and it does show how spending on health care is affecting these poverty numbers.”