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Revision to long-used formula shows more Americans in poverty, particularly older people
HOPE YEN
Associated Press Writer
9:25 PM EDT, September 4, 2009
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WASHINGTON
(AP) — The poverty rate among older Americans could be nearly twice as
high as the traditional 10 percent level, according to a revision of a
half-century-old formula for calculating medical costs and geographic
variations in the cost of living.
The National Academy of
Science's formula, which is gaining credibility with public officials
including some in the Obama administration, would put the poverty rate
for Americans 65 and over at 18.6 percent, or 6.8 million people,
compared with 9.7 percent, or 3.6 million people, under the existing
measure. The original government formula, created in 1955, doesn't take
account of rising costs of medical care and other factors.
"It's
a hidden problem," said Robin Talbert, president of the AARP
Foundation, which provides job training and support to low-income
seniors and is backing legislation that would adopt the NAS formula.
"There are still many millions of older people on the edge, who don't
have what they need to get by."
If the academy's formula is
adopted, a more refined picture of American poverty could emerge that
would capture everyday costs of necessities besides just food. The
result could upend long-standing notions of those in greatest need and
lead eventually to shifts in how billions of federal dollars for the
poor are distributed for health, housing, nutrition and child-care
benefits.
The overall official poverty rate would increase, from
12.5 percent to 15.3 percent, for a total of 45.7 million people,
according to rough calculations by the Census Bureau. Data on all
segments, not only the elderly, would be affected:
— The rate for children under 18 in poverty would decline slightly, to 17.9 percent.
—
Single mothers and their children, who disproportionately receive food
stamps, would see declines in the rates of poverty because noncash aid
would be taken into account. Low-income people who are working could
see increases in poverty rates, a reflection of transportation and
child-care costs.
— Cities with higher costs of living, such as
New York, Chicago and San Francisco, would see higher poverty rates,
while more rural areas in the Midwest and South might see declines.
—
The rate for extreme poverty, defined as income falling below 50
percent of the poverty line, would decrease due to housing and other
noncash benefits.
— Immigrant poverty rates would go up, due to transportation costs and lower participation in government aid programs.
The
changes have been discussed quietly for years in academic circles, and
both Democrats and Republicans agree that the decades-old White House
formula, which is based on a 1955 cost of an emergency food diet, is
outdated.
The current calculation sets the poverty level at
three times the annual cost of groceries. For a family of four that is
$21,203. That calculation does not factor in rising medical,
transportation, child care and housing expenses or geographical
variations in living costs. Nor does the current formula consider
noncash aid when calculating income, despite the recent expansion of
food stamps and tax credits in the federal economic stimulus and other
government programs. The result: The poverty rate has varied little
from its current 12.5 percent.
Next week, the Census Bureau will
publish official poverty figures for 2008 with a cautionary note about
the shortcomings. The agency says it will expedite release of
alternative numbers in the following weeks, because of the interest
expressed by lawmakers and the Obama administration in seeing a fuller
range of numbers.
"The current poverty measure does a very bad
job of measuring the impact of quite a few of our anti-poverty
policies," Rebecca Blank, the Commerce Department's undersecretary of
economic affairs, said in an interview. "It isn't meaningless, but it
isn't complete."
Although the White House Office of Management
and Budget dictates how federal poverty is measured, legislation
pending in Congress would require use of the National Academy approach.
Advocates are hoping the White House may act on its own.
Cities are already showing interest.
In
New York City, roughly one in three senior citizens fell below the
poverty line after Mayor Michael Bloomberg adopted the new formula last
year; state officials in Albany, N.Y., plan to publish their revised
numbers next month. Los Angeles, Miami, Washington, San Francisco and
Chicago also have been considering a switch.
Nationally,
official poverty rates for older Americans have improved significantly
over the past 30 years due to expansions of Social Security and
Supplemental Security Income. But many older people with modest cash
incomes would fall below the poverty line under the NAS formula due to
out-of-pocket expenses from rising Medicare premiums, deductibles and a
coverage gap in the prescription drug benefit that is known as the
"doughnut hole."
The NAS figures could take on added
significance at a time when the government is touting an overhaul of
Medicare and Social Security as its best hope for reducing the
ballooning federal debt.
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