well-being to a greater extent than consumption. This may be more a measurement issue than a conceptual one. That is, consumption tends to be reported more accurately than income among those with low income. At higher income levels, the reverse may be true. In addition, at higher income levels, people consume less of their income, so consumption will tend to understate well-being.

For the measurement of MCER, consumption-based measures are problematic, as MCER represents the likelihood of incurring medical consumption beyond what a family or individual can afford. If one includes out-of-pocket medical expenditures in the measure of resources, then such expenditures become affordable by definition. Another, more general issue with consumption-based measures of resources became evident in hindsight in the lead-up to the global recession beginning in 2008. Spending beyond one’s apparent means (one’s income) may indicate a risk of defaulting on future obligations—creating exactly the situation that MCER is intended to quantify. But consumption-based measures do have merit in pointing out that families that are consistently able to spend more than they take in as measured income are tapping into additional resources that are readily available. At a minimum, this should lead us to consider more directly the role of assets as resources.


In the context of how people pay for extraordinary and, especially, unexpected expenses, the role of assets cannot be overlooked. Assets accumulate over a lifetime. Under models of life-cycle saving, people accumulate savings (including funds held in retirement accounts) during their working years and then draw on these savings in retirement. Savings, together with Social Security and pensions, replace the earnings forgone in retirement.

A number of researchers have used data from the Health and Retirement Study to explore the relationship between health and the accumulation of assets. Several studies focused on expenditures in the last year of life, most recently Marshall, McGarry, and Skinner (2010). Others have looked at a broader span of years. Coile and Milligan (2009) examined the response of asset holdings to acute health events and new diagnoses. De Nardi, French, and Jones (2010) investigated savings behavior as a response to potential medical costs. More recently, Poterba, Venti, and Wise (2010) assessed the relationship between health and asset accumulation among the elderly and near-elderly. Using an index of health status constructed from a combination of self-reports, diagnoses, and activities of daily living, they found positive relationships between health and asset accumulation, which imply that poor health reduces asset accumulation. These last findings are of particular interest because they suggest that individuals with poor health

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