effect on the poverty rate of subtracting out-of-pocket medical care costs from income. For the elderly, our measure may somewhat understate the effect on the poverty rate. Thus, Doyle, Beauregard, and Lamas (1993: Table 2a) estimate that subtracting out-of-pocket medical care expenses would raise the poverty rate for the elderly by 6.8 percentage points, compared with our estimate of 3.5 percentage points; see Table 5-9 (both increases are standardized to the poverty rate for the total population).

The treatment of out-of-pocket medical care costs is clearly a topic for which further work is needed. As a first priority, improved imputation procedures should be developed for both the March CPS and SIPP. Data from the next round of the NMES (scheduled for 1996) should prove very helpful in this regard. Work should also be done to explore ways of obtaining reasonable estimates of actual expenses in SIPP, acknowledging that SIPP (let alone the March CPS) cannot obtain the kind of detailed information on medical care costs that is the focus of the NMES. A mixed strategy may prove optimal: asking some broad questions on expenses in SIPP and using the more detailed NMES information to adjust the responses appropriately.16 In any case, we stress the importance of accounting for out-of-pocket medical care costs in the poverty measure. Even the lower bound for the estimated increase in the poverty rate represents a significant effect. Moreover, by taking account of such expenses, the poverty measure will be able to contribute to tracking the effects of changes in the health care financing system on families' resources for consumption.

Prior Income Years

Data and Procedures

It is clear from the analysis that implementation of the proposed poverty measure will have important effects on the overall poverty rate in total and for various population groups. What is less clear is the effect on time trends. We attempted to conduct the same kinds of analyses reviewed above for 1992 with the March 1990, 1984, and 1980 CPS files. For the current measure, we used the official thresholds for 1992, 1989, 1983, and 1979. For the proposed measure, we used a $14,800 reference family threshold for 1992 and thresholds for the earlier years that reflect changes in spending on food, clothing, and shelter by two-adult/two-child families projected backwards from 1992; Con-

16  

The method of "bracketing" responses, that is, asking respondents who answer "don't know" whether the amount is above or below certain levels (e.g., $100, $500, $1,000, $5,000, $10,000) may improve the completeness of reporting of out-of-pocket medical care expenses in SIPP. The bracketing method has been used successfully for asset reporting in the Health and Retirement Survey (see Chapter 4) and will be used in the next round of that survey for out-of-pocket medical care expenses.



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