On the Importance and Intrinsic Difficulties of Incorporating Health Insurance Benefits in Absolute Poverty Trends

Abstract

Abstract Context: US government poverty measures do not include health insurance in the threshold or health insurance benefits in resources. Yet the 2019 Economic Report of the President presented long-term trends using the full-income poverty measure (FPM), which includes health insurance benefits as resources. A 2021 technical advisory report recommended statistical agencies produce absolute poverty trends with and without health insurance. Methods: The authors analyzed the conceptual validity and relevance of long-term absolute poverty trends incorporating health insurance benefits. They estimated the extent to which the FPM credits health insurance benefits with meeting nonhealth needs. Findings: In FPM estimates, health insurance benefits alone remove many households from poverty. Long-term absolute poverty trends incorporating health insurance benefits have intrinsic difficulties, because health insurance benefits are in-kind, mostly nonfungible, and large, and because health care undergoes substantial technological change—features that interact to undermine validity. Valid poverty measures with health insurance benefits require resources and thresholds consistent at each point in time, while absolute poverty measures require thresholds constant in real terms over time. These goals conflict. Conclusions: Statistical agencies should not produce absolute poverty trends incorporating health insurance benefits. Instead, they should focus on less-absolute poverty measures with health insurance benefits.