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The Honolulu Advertiser
Posted on: Tuesday, September 8, 2009

New formula doubles elderly poverty rate


By HOPE YEN
Associated Press

Hawaii news photo - The Honolulu Advertiser

Simon Norwood, a Little Rock, Ark., construction worker who has a part-time, minimum wage job, can't find regular work and survives on food stamps.

DANNY JOHNSTON | Associated Press

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AARP: www.aarp.org

Census Bureau: www.census.gov

Commerce Department: www.commerce.gov/

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WASHINGTON — The poverty rate among older Americans could be nearly twice as high as the traditional 10 percent level, according to a revision of a 54-year-old formula for calculating medical costs and geographic variations in the cost of living.

The National Academy of Science's formula, which is gaining credibility with public officials, would put the poverty rate for Americans 65 and older at 18.6 percent, or 6.8 million people, compared with 9.7 percent, or 3.6 million people, under the existing measure.

The original government formula, created in 1955, doesn't take account of rising costs of medical care and other factors.

"It's a hidden problem," said Robin Talbert, president of the AARP Foundation, which provides job training and support to low-income seniors and is backing legislation that would adopt the NAS formula. "There are still many millions of older people on the edge, who don't have what they need to get by."

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.

Advocates for updating the formula note that President Obama indicated during the presidential campaign that he supported an improved measure as part of a broader strategy to reduce poverty.

Simon Norwood of Little Rock, Ark., 56, says he's still keeping faith in that promise.

A lifelong construction worker who receives food stamps, Norwood hasn't had regular work for months once jobs dried up in the housing meltdown. He doesn't dare to think about getting sick or injured because he doesn't know whether he could cover the expenses.

Now working a part-time, minimum-wage job, Norwood said it doesn't matter to him how the poverty numbers are sliced so long as people get a fair shake at getting assistance.

"I often tell my son, 'You've got to save your money. Live within your means,'" he said. "Because you never know when things might take a turn."

If the academy's formula is adopted, a more complete picture of American poverty could emerge that would capture everyday costs of necessities besides just food. The result could upend long-standing notions of those in greatest need and lead to shifts in how billions of federal dollars for the poor are distributed for health, housing, nutrition and child-care benefits.

The overall official poverty rate would increase, from 12.5 percent to 15.3 percent, for a total of 45.7 million people, according to rough calculations by the Census Bureau.

The changes have been discussed for years in academic circles, and both Democrats and Republicans agree that the decades-old formula, which is based on a 1955 cost of an emergency food diet, is outdated.

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 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 has varied little from its current 12.5 percent.

This week, the Census Bureau will publish official poverty figures for 2008 with a cautionary note about the shortcomings. The agency said it will expedite release of alternative numbers in the following weeks, because of the interest expressed by lawmakers and the Obama administration.

"The current poverty measure does a very bad job of measuring the impact of quite a few of our anti-poverty policies," Rebecca Blank, the Commerce Department's undersecretary of economic affairs, said. "It isn't meaningless, but it isn't complete."

Although the White House Office of Management and Budget dictates how federal poverty is measured, legislation pending in Congress would require use of the National Academy approach. Advocates are hoping the White House may act on its own.

Cities are already showing interest.

In New York City, roughly one in three senior citizens fell below the poverty line after Mayor Michael Bloom-berg adopted the new formula last year; state officials in Albany, N.Y., plan to publish their revised numbers next month. Los Angeles, Miami, Washington, San Francisco and Chicago also have been considering a switch.

Nationally, official poverty rates for older Americans have improved significantly over the past 30 years because of 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."