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Poverty Formula Revised: New Method Doubles Number Of Elderly Poor

HOPE YEN   03/ 2/10 10:44 PM ET   AP

Poverty Formula Elderly Poor

WASHINGTON — The government took steps Tuesday to highlight the increasing numbers of poor Americans, adopting a revised formula that is expected to double the number of older people classified as living in poverty to nearly 1 in 5.

Under the new formula, overall poverty is expected to increase from 13.2 percent, or 39.8 million people, to 15.8 percent, or 47.4 million, mostly due to rising expenses from medical care and other factors.

The new measure will not replace the official poverty rate but will be published alongside the traditional figure next year as a "supplement" for federal agencies and state governments, according to the directive announced Tuesday by the Commerce Department and White House.

Demographers say the main impact of the change will be to highlight higher numbers of Americans in poverty than previously known, particularly among Americans 65 and over. Because it will be considered a supplemental measure, however, it will not change how billions of federal dollars for the poor are distributed for health, housing, nutrition and child-care benefits.

"The new supplemental poverty measure will provide an alternative lens to understand poverty and measure the effects of anti-poverty policies," said Rebecca Blank, the Commerce Department's undersecretary of economic affairs, a frequent critic of the traditional measure.

That traditional measure, which is based on a 1955 cost of an emergency food diet, does not factor in rising medical care, transportation, child care or geographical variations in living costs. Nor does it consider non-cash government aid such as food stamps or tax credits when calculating income, which has surged higher in recent months under the federal stimulus program.

The first set of supplemental figures won't be published until September 2011. But they are largely based on alternative figures previously released by the Census Bureau that put poverty rates much higher than the official rate.

For example, under the alternative measure:

_About 18.7 percent of Americans 65 and older, or nearly 7.1 million, are in poverty compared to 9.7 percent, or 3.7 million, under the traditional measure. That's due to out-of-pocket expenses from rising Medicare premiums, deductibles and a coverage gap in the prescription drug benefit.

_About 14.3 percent of people 18 to 64, or 27 million, are in poverty, compared to 11.7 percent under the traditional measure. Many of the additional poor are low-income, working people with transportation and child-care costs.

_Child poverty is lower, at about 17.9 percent, or roughly 13.3 million, compared to 19 percent under the traditional measure. That's because single mothers and their children disproportionately receive non-cash aid such as food stamps.

_The Northeast and West have bigger jumps in poverty, due largely to cities with higher costs of living such as New York, Boston, Los Angeles and San Francisco.

David Johnson, the Census Bureau's chief of the Housing and Household Economic Statistics Division, said while substantial increases are expected in the number of older Americans in poverty, the final numbers could be cushioned somewhat because the new formula will also take into account whether a person is more likely to own a home without a mortgage.

The supplemental figures could take on added significance at a time when many in the government point to an overhaul of Medicare and Social Security as the best hope for reducing the ballooning federal debt. With the potential to add more older Americans to the ranks of the poor, the numbers may underscore a need for continued – if not expanded – old-age benefits as a government safety net.

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Filed by Adam J. Rose  |