A State-by-State Snapshot of Poverty Among Seniors: Findings From Analysis of the Supplemental Poverty Measure

by Zachary Levinson, Anthony Damico, Juliette Cubanski and Patricia Neuman, Kaiser Family Foundation May 20, 2013

During recent deficit reduction discussions, policymakers have debated whether to increase Medicare beneficiaries’ contributions toward their medical care and reduce the cost of living adjustment to Social Security benefits.  Having a clear picture of the extent of poverty among seniors, both nationally and at the state level, is important in the context of these debates.  Traditionally, the Census Bureau has estimated poverty rates using the “official” poverty measure, which was created in the early 1960s.  Some have expressed concern that the official measure is outdated and does not accurately reflect individuals’ incomes or financial resources.

In response, the Census Bureau released an alternative measure for the first time in 2011, known as the supplemental poverty measure, which defines income and poverty differently than the official measure.  The Census Bureau has reported that poverty rates among the elderly (those ages 65 and older) are higher under the supplemental poverty measure (15%) than under the official poverty measure (9%), which is due in large part to the fact that the former deducts health expenses from income.1

This analysis looks beyond the national data to examine results by state.  The brief describes the two measures of poverty and examines the share of seniors living in poverty and the share of seniors with modest incomes (defined here as below 200 percent of poverty), by state, under both measures, based on pooled data from the 2009 to 2011 Current Population Surveys.

Key Findings

Seniors Living in Poverty, by State:

• The share of seniors living in poverty is higher in every state under the supplemental measure than under the official measure,2 and at least twice as high in 12 states: California, Colorado, Connecticut, Hawaii, Massachusetts, Maryland, Minnesota, New Hampshire, New Jersey, Nevada, Wisconsin, and Wyoming.
• The share of seniors living in poverty under the supplemental measure is especially high in some areas.  Based on the supplemental measure, about one in four seniors (26%) are living in poverty in DC and roughly one in five seniors are living in poverty in six states: California (20%); Hawaii, Louisiana, and Nevada (19%), and Georgia and New York (18%).

Seniors with Incomes Below 200 Percent of Poverty, by State:

• Nationally, nearly half of all seniors (48%) live with incomes below 200 percent of the poverty threshold under the supplemental measure, compared to 34 percent under the official measure.3  The share of seniors with incomes below 200 percent of poverty is higher under the supplemental measure in every state than under the official measure.4
• Under the supplemental measure, at least two-fifths of seniors (40%) have incomes below 200 percent of poverty in 48 states and in DC; using the official measure, this is the case in only six states.
• At least half of seniors have incomes below 200 percent of poverty in 10 states and DC based on the supplemental measure: DC (59%); California (56%); Hawaii (55%); Georgia (54%); Louisiana, New York, Rhode Island, and Tennessee (52%); Florida and Mississippi (51%); and Arizona (50%).

Background

The Census poverty measure is used to provide official statistics of the share of Americans living in poverty.5  Under this measure, poverty thresholds are set at three times the subsistence food budget from 1963 (adjusted for inflation) and vary based on the size of a family and the age of its members.  Among one- and two-person families, thresholds are lower for units with elderly members.  For example, in 2011, the poverty threshold (which is different from the “federal poverty level”) was $11,702 for an individual under age 65, but $10,788 for an elderly individual.6, 7  When comparing incomes to this threshold, the Census Bureau includes all monetary income (such as income from a job and Social Security benefits) prior to taxes.8

The Census Bureau’s supplemental poverty measure is based on recommendations of a 1995 National Academy of Sciences Panel and differs from the official measure in several ways, including the following:

• Poverty thresholds.  The supplemental measure bases poverty thresholds on more recent patterns of expenditures on basic necessities (with a small additional allowance) and adjusts them to reflect homeownership status and regional differences in housing prices.  For example, under the supplemental measure, the poverty threshold was about $9,500 for a single homeowner without a mortgage living in Charlotte, North Carolina, but was about $16,300 for a homeowner with a mortgage living in San Jose, California.  Unlike the official poverty threshold, the supplemental poverty threshold does not differentiate between adults above and below age 65.9
• Resources.  When measuring family resources, the supplemental measure adds to monetary income the value of tax credits and in-kind government benefits (such as food stamps) received.  It deducts job-related expenses and taxes from income, as well as out-of-pocket expenses on health care.10  This last deduction is especially important from the perspective of people ages 65 and older, who devote a substantial portion of their incomes to health expenses. In 2009, half of seniors spent at least 16% of their income on health care.11

Proponents of the supplemental measure argue that it is an improvement upon the official measure because it: provides a more up-to-date standard of the income needed to meet basic needs; adjusts those standards to reflect regional variations in the cost of living; and more accurately conveys the income available to meet those needs by taking into account tax liabilities and credits, in-kind government benefits, and out-of-pocket medical and other expenses.12

Others have been critical of the supplemental measure.  One criticism is that medical spending is sometimes discretionary, which could imply that the new measure may at times overstate the extent to which medical expenses crowd out spending on basic needs.13, 14  A broader criticism of income-related poverty measures, including both the official and supplemental measures, is that they do not consider the value of families’ assets, which could have especially important implications for some seniors.15  Another limitation of both measures is that they do not consider the risk of facing unaffordable medical expenses in the future, nor the extent to which individuals are insured against those risks.16

The poverty rates described in this brief apply to non-institutionalized seniors only, rather than the total Medicare population (which includes younger people with disabilities).  The rates presented in this paper are therefore lower than the poverty rates for the Medicare population as a whole because of the exclusion of nonelderly beneficiaries with disabilities (a population with much higher poverty rates than seniors) and the exclusion of seniors residing in facilities, who are more likely to have low incomes than seniors residing in the community.

Findings

Seniors Living in Poverty Nationwide.

The supplemental poverty measure indicates that elderly poverty rates overall and at the state level are much higher than indicated by the official poverty measure.  At the national level, this result is largely due to the fact that the supplemental measure deducts health expenses from income, while the official measure does not.17  Based on pooled data from 2009-2011:18

• About one in ten individuals ages 65 and older (9%) have incomes below the poverty level using the official measure, compared to about one in seven (15%)  hen using the supplemental measure (see Figure 1).  The difference between the measures is not as pronounced among non-elderly adults, and poverty rates among children are actually lower under the supplemental measure than they are under the official measure 19 (although poverty rates are higher among children than seniors under both poverty measures, and considerably higher under the official poverty measure).20
• The share of elderly people with incomes under 200 percent of poverty is just over a third (34%) under the official measure, but nearly one-half (48%) under the supplemental measure.  Conversely, a smaller share of seniors has incomes above 400 percent of the poverty threshold under the supplemental measure than under the official measure (19% compared to 32%).

Figure 1: Percent of People in the U.S. Ages 65 and Older, by Income as a Percent of Poverty, 2009-2011

Seniors Living in Poverty, by State. 

Poverty rates among seniors are higher in every state under the supplemental measure than they are under the official measure:21

• Under the supplemental measure, at least 10 percent of seniors live in poverty in nearly every state (all states but Iowa) and in DC; in contrast, under the official measure, senior poverty rates are below 10 percent in most states (39) (see Figure 2 and Appendix Tables 1-3).
• Under the supplemental poverty measure, 15 percent or more of seniors live on incomes below the poverty level in nearly half of the states (23) plus DC, but under the official measure, senior poverty rates are at or above 15 percent only in DC and Louisiana.

Figure 2: Distribution of States by Percent of Residents Ages 65 and Older in Poverty, 2009-2011

The share of seniors living in poverty under the supplemental measure is especially high in some states:

• In DC, about one in four seniors (26%) live in poverty under the supplemental measure, compared to 16 percent under the official measure (see Figure 3 and Figure 4).22
• In California, one-fifth of seniors (20%) live in poverty under the supplemental measure, compared to 8 percent under the official measure.
• Nearly one in five seniors live in poverty in another five states, including Hawaii, Louisiana, and Nevada (19%) and Georgia and New York (18%).

Figure 3: Percent of Individuals Ages 65 and Older With Incomes Below 100% of the Official Poverty Threshold, by State, 2009-2011

Figure 4: Percent of Individuals Ages 65 and Older With Incomes Below 100% of the Supplemental Poverty Threshold, by State, 2009-2011

While the share of seniors in poverty is higher under the supplemental measure than the official measure in every state, the difference is especially large in some states.  For example:

• In 12 states, poverty rates among seniors are at least twice as high under the supplemental measure as they are under the official measure:  California, Colorado, Connecticut, Hawaii, Massachusetts, Maryland, Minnesota, New Hampshire, New Jersey, Nevada, Wisconsin, and Wyoming (see Figure 5).
• In New Hampshire, the share of seniors living in poverty is nearly three times as high (17% under the supplemental measure compared to 6% under the official measure).

Figure 5: Percent of People Ages 65 and Older in Poverty, by State, 2009-2011

The difference between the official poverty measure and the supplemental poverty measure may vary geographically for several reasons, including state income distributions; differences in housing prices, which are factored into the supplemental poverty thresholds; variations in health utilization and costs, since medical expenses are deducted from income under the supplemental measure but not the official measure; and differences in the generosity of state Medicaid programs, which affects medical expenses.

Seniors with Incomes Below 200 Percent of Poverty, by State.

As is the case with poverty rates, the share of seniors with incomes below 200 percent of poverty is higher under the supplemental measure in every state than it is under the official measure, based on pooled data from 2009-2011 (see Appendix Tables 1-3).23  Under the supplemental measure, at least two-fifths of seniors have incomes below 200 percent of poverty in nearly every state (all but North Dakota and South Dakota) plus DC.  In contrast, under the official measure, this is only the case in six states (Arkansas, Georgia, Kentucky, Louisiana, Mississippi, and Tennessee).

In 10 states and DC, at least half of seniors have incomes below 200 percent of poverty under the supplemental measure.  For example:

• In DC, nearly three-fifths of seniors (59%) have incomes below 200 percent of poverty under the supplemental measure, compared to 37 percent under the official measure.
• In California, 56 percent of seniors have incomes below 200 percent of poverty under the supplemental measure, compared to 33 percent under the official measure.
• In Hawaii, 55 percent of seniors have incomes below 200 percent of poverty under the supplemental measure, compared to 30 percent under the official measure.

Although the share of seniors with incomes below 200 percent of poverty is higher in every state under the supplemental measure than under the official measure, the share is much higher in some states.  For example:

• The share of seniors with incomes below 200 percent of poverty is at least 20 percentage points higher under the supplemental measure than it is under the official measure in California, Hawaii, and DC.
• This is also true in Maryland, where nearly one-half of seniors (48%) have incomes below 200 percent of poverty under the supplemental measure, compared to just over one-quarter (27%) under the official measure.
• The difference is also greater than 20 percentage points in Connecticut, where 46 percent of seniors have incomes below 200 percent of poverty under the supplemental measure, compared to 26 percent under the official measure.

Discussion

During recent deficit reduction discussions, policymakers have put forth a variety of proposals to reduce Federal spending that would affect people on Medicare, including options that would shift costs onto beneficiaries by increasing the program’s cost-sharing requirements or premiums and that would reduce Social Security benefits over time.  This analysis provides context for that debate.  Based on the Census Bureau’s supplemental poverty measure, the poverty rate among people ages 65 and older is higher than is reflected in the official poverty measure, and is particularly high among seniors in some states.  With notable differences between the two measures, there is ongoing interest in assessing these methods for measuring poverty and the implications of each measure for public policy.

Under the supplemental poverty measure, which deducts health spending from income, poverty rates could increase if beneficiaries were required to pay higher cost sharing or premiums for Medicare.  Medicaid would cover new cost-sharing requirements for some people, but many low-income beneficiaries do not receive Medicaid coverage.  Proposed reductions in Social Security benefits, such as imposing a slower rate of growth on benefits by using the chained Consumer Price Index in the cost-of-living update,24 would be expected to contribute to higher poverty rates among older seniors under both the supplemental and official measure over time.  The supplemental measure suggests that a greater share of seniors may already be struggling financially than is conveyed by the official measure.