The U.S. Census Bureau is finding new waves to measure poverty. Since 2011, they have been using a new method called Supplemental Poverty Measure (SPM). This new measure takes into account various safety net programs.
The SPM now takes into account the hundreds of billions of dollars given by the federal government to the needy including food stamps, cash assistance programs, Medicaid, Medicare, and ObamaCare. It makes adjustments for major expenses such as out-of-pocket medical spending, income, and taxes.
The significance of these new measures can be seen by noting that the new measure of out-of-pocket medical spending alone added 10.5 million people to the ranks of the poor in 2016. With this new SPM, we can see that poverty rates have declined for children, non-elderly adults and the elderly since the inception of ObamaCare.
Chris Conover, Duke University healthcare economist, helps us unpack the details of the new measure. He notes the new measure accounts for the benefits provided by Medicaid and Medicare by subtracting out-of-pocket medical expenses from income to determine the net amount available to spend on necessities such as food, clothing, shelter, and utilities.
Compared to the traditional poverty measure, the SPM reduces the measured poverty rate among children. The reason for this is that most children’s medical expenses are covered by Medicaid or the Children’s Health Insurance Program (CHIP). This is seen in the below graphic:
However, the new SPM also notes increased poverty among the elderly. The elderly are covered by Medicare, not ObamaCare. Medicare has an actuarial value of 80% – that means 80% of the costs are covered by the federal government. The remaining 20% must be covered by the individual. Although many elderly purchase supplemental plans to cover this 20%, these policies increase out-of-pocket medical costs. Since the SPM measures these costs, it reflects higher numbers in poverty.
The impact of these out-of-pocket medical expenses can be seen in the last two bars on the far right of the above graphic. The difference is roughly 40% – and this single factor accounts for an increase in the measured poverty rate from 10.7 percent to 14.0 percent in 2016.
The Impact of ObamaCare
The poverty rates among children, non-elderly adults and the elderly have declined since 2010 when ObamaCare was passed by Congress. Is this due to ObamaCare or in spite of ObamaCare?
The economy has grown, albeit slowly, since the recession of 2008. This is certainly one reason for declining poverty rates since 2010. But Conover found some surprises when unpacking the numbers.
- For children and non-elderly adults, the decline in poverty rates was unaffected by out-of-pocket medical expenses
- For the elderly, poverty actually increased when using SPM but excluding out-of-pocket medical expenses
How to explain these findings?
ObamaCare had a limited effect on the elderly. It was not meant to alter Medicare. Many seniors gravitated to Medicare Advantage Plans to lower their healthcare costs but ObamaCare actually tried to restrict these plans. Despite these restrictions, these plans grew from 11.1 million in 2010 to 17.6 million participants by 2016.
The “donut hole” that affects Medicare drug plans saw a gradual closing that helped some. According to the National Committee to preserve Social Security and Medicare, “since passage of the ACA in 2010, more than 9.4 million people with Medicare have saved over $15 billion on prescription drugs.”
So it is unclear just how much ObamaCare has actually impacted poverty. But it certainly is clear that the new Supplemental Poverty Measure has improved our ability to measure the number of Americans living in poverty.