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Measuring Poverty: A New Approach
concept of a budget for consumption needs. Hence, it is clear that the definition of family resources should add to money income the value of near-money in-kind benefits that are intended to support consumption. Thirty years ago, assistance programs that provided in-kind benefits rather than money were small in number and scope. Subsequently, such programs—which include food stamps, subsidized housing, school lunches, meal programs for the elderly, and home energy assistance—have expanded greatly, and the poverty measure should take account of their effects.
Some in-kind benefits are harder to value than others because they are less fungible (i.e., less interchangeable with other resources) and of less value to the recipient than the same amount of money income: public housing raises the most problems in this regard. Also, for some types of benefits (e.g., employer-provided housing or meals), there is little information or experience with how to value them. However, we believe that the Census Bureau has sufficient experience with valuing the major types of in-kind benefits so that reasonable estimates can be added to money income without waiting for further research. Of course, research should continue on improved methods for valuing in-kind benefits, and changes in methodology should be made as appropriate. (Employer-provided benefits that are necessary for work, such as subsidized child care, parking, or free uniforms or tools, should not be valued as part of income because the proposed definition of disposable income subtracts out-of-pocket costs for child care and other work-related expenses, net of any employer subsidy.)
Medical Care Costs
Perhaps the most striking omission from the list of in-kind benefit programs that we propose to count as family resources for purposes of measuring poverty is medical care benefits. Certainly, Medicare, Medicaid, and employer-provided health insurance have helped many millions of Americans over the past three decades. It seems odd that the proposed poverty measure does not explicitly reflect this achievement of public policy and also does not explicitly reflect the gaps in health insurance coverage of the population that still exist. In fact, the proposed measure does take account of health insurance benefits, but indirectly—in terms of the extent to which they reduce out-of-pocket medical care expenses and thereby increase disposable income for other consumption. Also, we recommend that separate measures be developed of the economic risk from inadequate or no health insurance coverage to accompany the measure of economic poverty.
Researchers have wrestled with the valuation of health care benefits for purposes of poverty measurement for over a decade, without providing satisfactory solutions. One reason is that, in contrast to such benefits as food stamps, health care benefits are not very fungible. Food stamps are fungible for