Benefit Bulletin: September 2015

Benefit Bulletin: September 2015

Government's Poverty Measure Leaves Out A Lot Of The Poor

According to the federal government, "poverty" is defined in most parts of the country as an annual income of $11,770 for an individual or $15,930 for a household of two. But some policy experts say that the official poverty measure is outdated and doesn’t accurately reflect people's financial resources and expenses. An alternate poverty measure indicates that the rate, in reality, is much higher. Under the alternative measure, called the Supplemental Poverty Measure (SPM), about 15% of people ages 65 and older have incomes below the poverty threshold, compared to 10% under the official measure.

The discrepancy between the two raises major issues of fairness because the income thresholds of the official federal poverty guidelines are used to determine eligibility for critical safety-net benefit programs. That includes the Medicare Savings Program that covers Part B premiums and, for some, out-of-pocket costs, Part D Extra Help with prescription costs, SNAP (Supplemental Nutrition Assistance Program or food stamps), energy assistance, transportation, and even nursing home care, among others.

Unlike the official poverty measure, the SPM bases its income thresholds on patterns of expenditures that are more recent, and accounts for expenditures like medical out-of-pocket costs and Medicare premiums, income and Social Security payroll taxes when determining family income. In addition, thresholds are further adjusted for geographic differences where the cost of living is higher.

But despite agreement among economists that the SPM is a better measure of poverty, it is not yet used to determine eligibility for federal and state benefits. Because it isn't, that could prevent increasing numbers of older low-income people from receiving safety-net benefits in the future. Proposals that make people pay higher Medicare premiums, deductibles and co-payments would lead to a higher poverty rate among people 65 and over as measured by the SPM, but the official poverty rate would be unchanged by those changes because it doesn't account for Medicare expenditures.

Today millions of people over 60 are struggling with rising housing, healthcare bills, and inadequate nutrition with no help, because their incomes may be just a few dollars more than the official poverty threshold. There is a better way to measure poverty. We urge you to bring this issue to the attention of the public by sharing this article with others, and by writing letters to the editor of your local paper.


Sources: "Seniors and Income Inequality: How Things Get Worse With Age," Drew Altman, The Wall Street Journal, June 11, 2015. "Poverty Among Seniors: An Updated Analysis of National and State Level Poverty Rates Under the Official and Supplemental Poverty Measures," Kaiser Family Foundation, June 2015.