In 1992, the National Research Council (NRC) convened a study panel at the request of Congress to conduct a comprehensive examination of poverty measurement in this country. The study panel released its report, Measuring Poverty: A New Approach, in 1995. In 2004, the NRC’s Committee on National Statistics held a follow-up workshop to review the panel’s recommendations and to consider alternative poverty measures that would be regularly reported. The issue of how to handle health care needs and expenditures was one of the issues addressed by both efforts.

Both the 1995 consensus report and the 2004 workshop participants came to the following conclusion: The core problem with the official poverty measure is that it does not provide an accurate picture of the extent of economic poverty, the trend in economic poverty, or differences among population subgroups or geographic areas.

The current measure does not reflect core consumption needs (food, clothing, shelter, health care) in the threshold or adequately capture economic resources, because it measures only pretax monetary income. Nor does it capture true differences in costs by different family sizes and composition—so-called economies of scale or equivalence scale issues. It does not take geographic differences in prices into account (e.g., heating and cooling needs). With respect to medical care needs and insurance coverage, the current measure does not take into account

  • The extent of medical care costs and the variation in these costs across the population that reflect real differences in rates of illness and disability,
  • Differences in medical care coverage (health insurance),
  • Rising costs of that insurance and required copayments, nor
  • Rising health care costs as a share of both family budgets and the economy more generally.

Together, these deficiencies mean that important public policies, such as the Supplemental Nutrition Assistance Program (SNAP), housing vouchers, publicly provided health insurance, and changes in taxes, are not captured. Beyond these deficiencies, the official measure does not reflect the changing standard of living of most Americans. Thus, rather than a comprehensive measure of economic well-being, the official poverty measure is a very narrow concept that is not influenced by real changes in public policy or changes in the relative prices of core consumption items.

2011 Release of Supplemental Poverty Measure

The Supplemental Poverty Measure (SPM) is designed to provide an improved understanding of economic well-being in the United States and to measure the influence of public policies on the low-income population.

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