National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Out-of-Pocket Medical Care Expenditures

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Suggested Citation:"Out-of-Pocket Medical Care Expenditures." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 253
Suggested Citation:"Out-of-Pocket Medical Care Expenditures." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 254

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EFFECTS OF THE PROPOSED POVERTY MEASURE 253 Area and Population Size Index Value East South Central—continued Metropolitan areas of 500,000-1,000,000 0.947 Metropolitan areas of 1,000,000-2,500,000 N.A. Metropolitan areas of 2,500,000 or more N.A. West South Central (Arkansas, Louisiana, Oklahoma, Texas) Nonmetropolitan areas and metropolitan areas under 250,000 0.858 Metropolitan areas of 250,000-500,000 0.911 Metropolitan areas of 500,000-1,000,000 0.942 Metropolitan areas of 1,000,000-2,500,000 0.962 Metropolitan areas of 2,500,000 or more 1.005 West Mountain (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming) Nonmetropolitan areas and metropolitan areas under 250,000 0.888 Metropolitan areas of 250,000–500,000 0.976 Metropolitan areas of 500,000–1,000,000 1.039 Metropolitan areas of 1,000,000–2,500,000 1.003 Metropolitan areas of 2,500,000 or more N.A. Pacific (Alaska, California, Hawaii, Oregon, Washington) Nonmetropolitan areas and metropolitan areas under 250,000 0.969 Metropolitan areas of 250,000–500,000 1.018 Metropolitan areas of 500,000–1,000,000 1.028 Metropolitan areas of 1,000,000–2,500,000 1.104 Metropolitan areas of 2,500,000 or more 1.217 NOTES: Housing cost indexes calculated from 1990 census data on gross rent for apartments with specified characteristics, adjusted to reflect the share of housing in the proposed poverty budget; see Chapter 3. Nonmetropolitan areas are combined with metropolitan areas of less than 250,000 population because of restrictions on geographic area coding in the CPS and SIPP N.A., not applicable and for a description of the Census Bureau's tax simulator. Because of the Census Bureau's procedures to protect confidentiality on the public-use March CPS files, care must be taken in subtracting taxes for high-income people so as not to inadvertently move them below the poverty line. Also, the portion of taxes due to realized capital gains should not be subtracted because such gains are not part of the proposed resources definition.) Out-of-Pocket Medical Care Expenditures The March CPS does not contain any information on medical care expenses (out-of-pocket or otherwise), although it does provide some relevant information

EFFECTS OF THE PROPOSED POVERTY MEASURE 254 that is helpful for imputation purposes, such as age and health insurance coverage. We imputed out-of-pocket expenses by using tabulations provided by the Agency for Health Care Policy and Research (AHCPR) from the 1987 National Medical Expenditure Survey (NMES), aged to represent the 1992 population.5 AHCPR prepared separate multivariate tabulations for families (and unrelated individuals) for which the head was under age 65 or age 65 and older. The tabulation for families headed by someone younger than 65 cross- classified the age of head and type of health insurance coverage (private, public, or no insurance) by family size, family annual income-to-poverty ratio, and race of head. The tabulation for families headed by someone age 65 or older included the same variables, except that the categories for type of insurance coverage were different (Medicare and private, Medicare and public, all other).6 Because of the small sample size of the NMES, we had to combine many of the cells in these two very large multivariate tabulations to have a minimum of 100 observations in each cell. The tabulation that we used for families headed by someone younger than age 65 cross-classified health insurance status (covered, not covered) by family size (one, two-three, four or more people), by race of head (black, other), and by annual income-to-poverty ratio (less than 1.50, greater than or equal to 1.50). The tabulation that we used for families headed by someone aged 65 or older cross-classified the age of head (under 75, 75 and older) by income-to-poverty ratio (under 1.50, greater than or equal to 1.50) and by family size (one, two or more people). For each category in these two tabulations, we had the weighted counts of families with no out-of-pocket medical care expenditures and with non-zero expenditures within each of 10 expenditure ranges. Out-of-pocket expenditures included health insurance premiums, copayments, deductibles, and all other health care expenditures paid directly by the family. The lower bounds for the 10 expenditure ranges were $1, $500, $1,000, $1,500, $2,000, $2,500, $5,000, $7,500, and $12,500. The imputation of out-of-pocket expenditures to the March 1993 CPS was a multistep procedure. The first step was to determine whether the individual CPS record would be imputed to have any out-of-pocket expenditures. For families who reported receiving Medicaid, we assumed that they would have no out-of-pocket medical expenditures.7 For non-Medicaid families, we randomly assigned a fraction of these families to have some out- 5 A multiple regression would have been preferable for imputation purposes (because it would then have been possible to introduce more variation), but it could not be obtained within the time and resources available. 6 Although type of health insurance coverage is captured in these tabulations, differences in generosity of coverage within type (e.g., differences among state Medicaid programs) are not. 7 This assumption is an approximation, as the generosity of Medicaid programs varies across states, and some families with Medicaid coverage do incur out-of-pocket medical expenditures. See Taylor and Banthin (1994: Table 2) for estimates from the 1987 NMES of out-of-pocket expenses by type of insurance coverage.

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Each year's poverty figures are anxiously awaited by policymakers, analysts, and the media. Yet questions are increasing about the 30-year-old measure as social and economic conditions change.

In Measuring Poverty a distinguished panel provides policymakers with an up-to-date evaluation of

  • Concepts and procedures for deriving the poverty threshold, including adjustments for different family circumstances.
  • Definitions of family resources.
  • Procedures for annual updates of poverty measures.

The volume explores specific issues underlying the poverty measure, analyzes the likely effects of any changes on poverty rates, and discusses the impact on eligibility for public benefits. In supporting its recommendations the panel provides insightful recognition of the political and social dimensions of this key economic indicator.

Measuring Poverty will be important to government officials, policy analysts, statisticians, economists, researchers, and others involved in virtually all poverty and social welfare issues.

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