Policymakers in Washington are consumed with the federal budget deficit. The Congressional Budget Office serves as the official referee in budget debates, keeping score of how proposed legislation would make the deficit bigger or smaller. But Congress and the public could get a fuller picture of the implications of legislative changes if the CBO broadened its analysis. What if, in addition to assessing the effect of a proposed law on the budget deficit, the CBO also gauged the effect on people who are poor or on the precipice of poverty ?
In fact, a recent report from the U.S. Census Bureau has introduced a tool that could help do just that. This different way of calculating who is poor takes into consideration a broader range of living expenses and the help that people get from government programs. It found that 2.5 million more people are living in poverty than were classified as poor under the previous (and still official) method, bringing the not-so-grand total to 49 million Americans. The single biggest factor driving the increase? Out-of-pocket health-care costs.
Indeed, if the burden of health-care expenses were not taken into account, then 10 million fewer people would have been classified as poor.
One of the biggest jumps in poverty under the new method is among people with private health insurance. We tend to think of such people, most of whom get coverage through their jobs, as being better equipped to handle the cost of getting sick. But even those who are insured are increasingly vulnerable to high health-care costs, in no small part because, as costs keep rising, employers have shifted more of the burden onto workers. The share of employees with an insurance deductible of $1,000 or more for single coverage has tripled in the past five years. The trend is especially strong among small businesses, where half of workers face a deductible of at least $1,000 in 2011. For those on the edge of poverty, a big medical bill could send you over it — even if you have insurance.
The effect of health-care costs is particularly acute for the elderly, with the proportion of seniors living in poverty increasing from 9 percent under the official census measure to 16 percent under the alternative measure. Under the new method, an astounding 49 percent of seniors are living at or below twice the poverty level, a threshold at which people are still considered low-income (up from 35 percent under the official method).
The revised census measure sheds light on the influence of health costs on poverty and crystallizes the effects government programs have on people’s financial well-being. Under the old measure, you could give a family food stamps or assistance with energy or medical costs and it would make no difference in the official count of how many Americans are poor. The new method helps clarify how public policy makes a difference, for good or for ill. For example, providing assistance with medical costs or home heating subsidies reduces the number of people counted as poor.
And there would be no reason to stop at a CBO analysis of poverty impact. The implications of proposed legislation on jobs could be examined, and a fuller picture of the broader economic impact of legislation could be made clear, earlier.
Why not start with the work of the deficit reduction supercommittee? If the panel were to propose, say, more cost-sharing for Medicare beneficiaries, that would certainly save the federal government money. But it would also increase out-of-pocket health costs among the elderly and drive more into poverty if lower-income beneficiaries are not protected. Big cuts in federal funding for Medicaid could have the same effect if more people become uninsured. Another case might be the Affordable Care Act. Whatever one’s views on the health-reform law, repealing or drastically scaling back its tax credits for health insurance premiums would lead to more people being uninsured and poor.
We recognize that a wonky analysis from a congressional agency isn’t likely to change many minds in today’s polarized political environment. But whatever the disagreements over how to reduce the deficit, surely everyone can agree that we should avoid new policies or budget cuts that make more people poor. The census has given Congress a tool to help draw the line.
Drew Altman is president of the Kaiser Family Foundation. Larry Levitt is Kaiser’s senior vice president for special initiatives.