Alternate Poverty Formula Doubles Senior Poverty Rate

(Associated Press, September 4, 2009) The poverty rate among older Americans could be nearly twice as high as the traditional 10 percent level, according to a revision of a half-century-old formula for calculating medical costs and geographic variations in the cost of living.

The National Academy of Science's formula would put the poverty rate for Americans 65 and over at 18.6 percent, or 6.8 million people, compared with 9.7 percent, or 3.6 million people, under the current measure. The original government formula, created in 1955, doesn't take account of rising costs of medical care and other factors.

Senior citizens living in poverty is "a hidden problem," said Robin Talbert, president of the AARP Foundation. "There are still many millions of older people on the edge, who don't have what they need to get by."

Last year, New York City recognized that current poverty measure was a poor gauge of either the degree of economic deprivation in the City or the impact of programs intended to alleviate it. The City adopted the NAS numbers, as a realistic threshold of poverty, essentially doubling the number of seniors in poverty (from 18.1 percent to 32 percent). Albany officials plan to reveal revised state numbers next month.

The current calculation sets the poverty level at three times the annual cost of groceries. For a family of four that is $21,203. That calculation does not factor in rising medical, transportation, child care and housing expenses or geographical variations in living costs. Nor does the current formula consider noncash aid when calculating income, despite the recent expansion of food stamps and tax credits in the federal economic stimulus and other government programs. The result: The poverty rate for the overall population has varied little from its current 12.5 percent.
Nationally, official poverty rates for older Americans have improved significantly over the past 30 years due to expansions of Social Security and Supplemental Security Income. But many older people with modest cash incomes would fall below the poverty line under the NAS formula due to out-of-pocket expenses from rising Medicare premiums, deductibles and a coverage gap in the prescription drug benefit that is known as the "doughnut hole."