Medical expenditures and the measurement of poverty in the United States

Abstract

Using data from the Medical Expenditure Panel Survey (MEPS) we estimate the fraction of the US population that is health poor. A person is health poor if their income prior to paying health insurance premiums and out-of-pocket healthcare costs is above the poverty line, but their income net-of-premiums and out-of-pocket healthcare costs is below the poverty line. Because resources used to finance health insurance premiums and out-of-pocket costs are (A) lexicographically preferred and (B) cannot be used to maintain an individual’s standard of living, they should be excluded from official poverty estimates. Approximately 1% to 2% of the US population is health poor. Elderly individuals, individuals in ill health, and low-income individuals are more likely to be health poor than other groups. We use our estimates of the health poor to evaluate alternative healthcare reform policies. The Affordable Care Act reduced the proportion of individuals near-poverty that are health poor from 23% to 18% and reduced the proportion of all individuals that are health poor from 1.5% to 1.1%. In contrast, counterfactual simulations of a Medicare for All plan similar to Saez and Zucman’s (2019b) suggest that Medicare for All would all but eliminate health poverty.