tic product has grown substantially since poverty measurement began. In 1965, it was about 5 percent of U.S. gross domestic product (Congressional Budget Office, 2008:3). In 2010 this percentage grew to about 17.6 percent, and it is projected to grow to about 20 percent by 2020 (Centers for Medicare & Medicaid Services, Office of the Actuary, 2011:1). Therefore, in terms of thinking about individuals’ well-being, capturing MCER has become increasingly important.

A third reason Wolfe mentioned to measure MCER is that it is sensitive to public policies that influence medical care coverage, such as Medicaid, Medicare, and provisions of the 2010 Patient Protection and Affordable Care Act (ACA). MCER is a way to capture the success or failure of programs in terms of their effects on both risk and targeting to those with low incomes. It will be ever more important, she said, as the nation moves into the era of expanding coverage under the ACA.

Difference Between MCER and Medical Out-of-Pocket Expenditures

Medical out-of-pocket expenditures are essentially contributions to health insurance premiums plus out-of-pocket expenditures for expenses not covered by insurance. Medical out-of-pocket is an ex post concept: it refers to expenditures—that is, actual utilization rather than risk of need. It is closer to what one thinks about in terms of traditional poverty measurement.

When people need medical care but do not have coverage or have limited coverage and limited income, they tend to underutilize care. When only actual medical out-of-pocket is included in a measure, underutilization is missed. If access to care is increased, leading to more coverage, people get recommended tests and treatments, and in fact their health is improving. In this situation, if the measure captures only medical out-of-pocket, then one may well think that an individual’s health is declining because of the additional tests and treatments, believing that they are more vulnerable because their medical out-of-pocket has gone up, even though their health has improved.

Therefore, an out-of-pocket expenditure measure that does not adjust for underutilization is not very satisfactory, either in terms of thinking about people’s real underlying needs or the success of programs. It gives the wrong picture for both. Most important, or most essential, it does not capture risk. It does not fit with the whole concept of health insurance, yet it is tied to measuring premiums and types of coverage. So if one thinks about the concept of risk, medical out-of-pocket is not a consistent or reliable measure.

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