Medical Out-of-Pocket Expenses MOOP in Experimental Poverty Measures

1. Medical Out-of-Pocket Expenses MOOPin Experimental Poverty Measures Kathleen Short To be presented at the Pan American Health Organization Regional Workshop on Improving the Measurement of Poverty in the Americas Health Adjusted Poverty Lines

2. Census Bureau poverty measurement research • Investigate measurement issues related to NAS recommendations • Present for discussion different approaches to calculate revised poverty measures • Three approaches to including MOOP • Illustrates the effect of different approaches on measures of • Who is poor? • How poor are they?

3. Accounting for health care in a poverty measure • Official U.S. poverty measure Y < T Y = a measure of available resource to meet needs T = a measure of basic needs • Measuring poverty with health care costs Y + B < T + H H = all health care costs = B + m B = health care costs paid by insurance m = MOOP

4. Measuring poverty with health care Y + B < T + B + m Y < T + m • Three approaches • MSI (NAS) Y – m < T • MIT Y < T + m • CMB Y + m – m < T + m

5. MOOPMedical Out-of-Pocket Expenses • Health insurance premiums • Co-pay for doctor and dentist visits • Prescription and over-the-counter drugs • Medical supplies not covered by insurance • Medical services not covered by insurance

6. National Academy of Science’s Panel on Poverty and Family Assistance (NAS) • Poverty Threshold Recommendations • Percent of median spent on basic goods • FCSU = food, clothing, shelter and utilities, and a little more • For reference family, use equivalence scales • Geographic adjustment for cost of living • Family Resource Recommendations • Add non-cash benefits to cash income • Foodstamps, housing subsidies, energy assistance • Subtract necessary expenses • Taxes, work expenses, MOOP

7. MSI Citro and Michael (1995), Betson (1995) and Betson (2001) • MOOP subtracted from income • Two stage model to assign values • Probability of incurring MOOP • Amount of MOOP • Approximate MOOP cumulative density • Based on age, race, income, and insurance coverage • 1996-1997 Consumer Expenditure survey (CE)

8. MITBavier (1998) and Banthin et al., (2001) • MOOP in threshold for reference family using CE • FCSUM • Adjust MOOP portion, p, based on risk factors of families by relevant characteristics • 1996 Medical Expenditure Panel Survey MEPS to adjust the thresholds by health insurance coverage, presence of elderly, family size, self-reported health status • Adjust for uninsured

9. MIT Threshold = { FCSUM * p * mi } + { FCSUM * (1-p) * bi } • FCSUM = $$ for basic bundle plus MOOP for reference family • p = proportion of FCSUM that is MOOP • bi = three parameter equivalence scale for FCSU for ith family • mi = moop for ith family/moop for reference family

10. What is the question? • What was ‘actually’ spent on MOOP last year, ma? • A few families faced large medical expenses • Most had only a few • How much is a family of this type ‘expected’ to spend for MOOP expenses, me? • All families of a certain type can expect to face this amount of expenses

11. Combined MOOP measure -- CMB Y + me – ma = T + me • Add expected medical expenses to thresholds, me • Add expected amount to income minus actual medical expenses, ma • Better off if actual health expenses less than expected • Worse off if actual health expenses greater than expected

12. Thresholds for reference family 2000(dollars)

13. Poverty rates 2000

21. Conclusions • Different ways of incorporating health care costs in poverty measures • What is the question • Actual expenses • Expected expenses • Measurement choices matter • Who is poor? • How poor are they?