Medical Out-of-Pocket Expenses, Poverty, and the Uninsured∗
Kyle J. Caswell† and Brett O’Hara SEHSD Working Paper 2010-17‡ U.S. Census Bureau Washington, D.C. December 29, 2010
Abstract The National Academy of Sciences (NAS) Panel on Poverty and Family Assistance argued that the current ofﬁcial U.S. poverty measure should be updated to capture changes in the population’s healthcare costs and needs; families with sufﬁciently high medical out-ofpocket (MOOP) expenditures may be ‘poor’ even though they are not counted as such. This research offers three distinct advances toward achieving the NAS recommendations as they concern MOOP spending. Firstly, this paper uses the newly collected MOOP ...view middle of the document...
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1 Introduction Medical out-of-pocket (MOOP) spending may reach a non-trivial share of overall expenditures, especially for low-income families. Among insured families, on average, half of total MOOP spending is on health insurance premiums (Banthin et al., 2008). In some cases, health events may result in high non-premium MOOP spending—regardless of health insurance coverage status. For example, researchers estimated that approximately half of all U.S. bankruptcies in 2001 involved medical debt and approximately 75 percent of the people affected had health insurance coverage at the onset of their illness (Himmelstein et al., 2005). Others have identiﬁed correlations with health events and signiﬁcant wealth losses (Cook et al., 2010; Smith, 1999). In short, MOOP spending lowers family resources such that available income for food and shelter decreases—namely, components used to measure poverty status. Given this reality, the National Academy of Sciences Panel on Poverty and Family Assistance made several recommendations concerning the incorporation of MOOP spending into an alternative measure of poverty (Citro and Michael, 1995). The NAS recommended approach is to include actual MOOP spending as a limitation on resources: total family income minus total family MOOP spending, which is the numerator of a poverty rate. The fundamental advantage of the NAS recommended approach is that the distribution of actual MOOP spending is preserved. Nonetheless, others have argued that expected MOOP spending should be incorporated into the poverty thresholds (i.e., the denominator of a poverty rate). The argument for incorporating expected MOOP spending in the threshold is that some families under-consume medical services; in particular, people have unmet medical needs because, in part, they do not have health insurance coverage (e.g., Banthin, 2004). This research offers three general reﬁnements to incorporate MOOP expenditures into the poverty measure. Firstly, this work uses the newly added questions collected in the 2010 Current Population Survey Annual Social and Economic Supplement (CPS ASEC). These new questions are designed to directly calculate the Supplemental Poverty Measure (SPM) and MOOP spending. This work investigates the quality of the new MOOP spending data vis-` -vis altera native well-known and high-quality data sources. Secondly, the effect of incorporating the new MOOP spending data into the poverty estimates is investigated using the NAS recommendation. That is, observed total family MOOP spending is subtracted from family income, and the ofﬁcial thresholds are used to measure the change in the incidence of poverty. This simple estimation offers an improvement...