An Updated Measure of Poverty (Re)Drawing the Line (2023) / Chapter Skim
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3 Challenging Categories: Medical Care
3 Challenging Categories: Medical Care
Pages 43-52
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From page 43... ...
While there is no way for individuals to insure their good health against the risk of unexpected medical events -- that is, to guarantee that one's underlying health status can be returned to its baseline level -- individuals can insure against the risk of unexpected medical spending. Most individuals prefer to pay a predictable health insurance premium to mitigate the risk of unpredictable spending on medical care because they are risk averse.1 Nonetheless, most health insurance policies in the United States do not cover all costs of medical care: they require cost sharing in the form of copayments or coinsurance, such that consumers bear some of the costs of care (intended to deter unnecessary use of medical care)
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From page 44... ...
MOOP expenses in the SPM include household payments for health insurance premiums plus household payments or copayments for other medically necessary items, such as prescription drugs, doctor visits, hospital visits, dental services, vision aids, medical supplies, and over-the-counter, healthrelated products that are not covered by insurance. As shown in Figure 3-1, accounting for MOOP expenditures in the estimate of a households' resources typically raises the SPM poverty rate by about 3 percentage points overall; the increase is largest for those age 65 and older.
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From page 45... ...
. The HIPM approach, which explicitly incorporates the value of health insurance transfers into poverty measurement, builds on similar innovations in the SPM for incorporating other in-kind transfers.
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• Fox and Burns (2021a) 3. Health-Inclusive SPM thresholds, plus health SPM resources, plus net health • Korenman and Remler Poverty Measure insurance need insurance transfers, minus capped (2016)
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The essential benefits package includes a set of 10 categories of services that plans must cover including doctors' services, inpatient and outpatient hospital care, prescription drug coverage, pregnancy and childbirth, mental health services, and dental care for children. To the extent that health insurance requires cost sharing, which the ACA benchmark plans all require, there remains a need for MOOP spending on medical care, which is addressed separately below.
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From page 48... ...
to the poverty threshold to represent the health insurance need. The PPM would also add a value for health insurance benefits provided by government or employers to household resources, up to the price of the benchmark plan.5 Because the PPM threshold includes a need for health insurance, resources in the PPM do not deduct all out-of-pocket spending on insurance premiums.
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From page 49... ...
benchmark health insurance plan should be used to represent the basic health insurance need for a typical American household (or the designated resource-sharing unit for poverty measurement)
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Starting in 2025, it will also be possible to cap the deduction for cost-sharing expenses for Medicare recipients, since the Inflation Reduction Act of 20228 caps prescription drug out-of-pocket spending at $2,000.9 The cap is operationalized by using the out-of-pocket limits specified in ACA Marketplace plans or other information about health insurance status and household characteristics. For example, many households covered by Medicaid with no cost sharing required would have their deduction for NP-MOOP spending capped at zero.
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From page 51... ...
Nonpremium out-of-pocket expenses, capped at the maximum out-of-pocket for the benchmark plan, are subtracted from resources.11 (See line 2c in Panel 1B in Appendix 3B.) • Those with unsubsidized ACA marketplace coverage and those who buy insurance directly from an insurance company outside the Marketplace receive no health insurance transfer, and thus no net health insurance benefit amount is added to their resources, nor is out-of-pocket premium spending subtracted from their resources, since their need for health insurance is already captured by the need included in the threshold.12 Nonpremium out-of-pocket expenses, capped at the benchmark maximum out-of-pocket, are subtracted from resources (see line 2d in Panel 1B in Appendix 3B)
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, and determining the basic plan premium would require access to the detailed health information and actuarial models used to set private insurance premiums. Indeed, this would represent a return to the conditions that led the National Academies' 1995 panel to exclude health needs and health insurance benefits from the recommended approach that became the SPM.
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