Changes to Poverty Measure Could Disqualify Thousands from State and Federal Programs

The Office of Management and Budget (OMB) is seeking public comment on possible changes to how the federal poverty measure is annually adjusted for inflation. The changes would impact individuals’ eligibility for multiple programs because the US Department of Health and Human Services uses the poverty measure to establish poverty level guidelines. A wide range of government assistance programs would be affected, including:

Alternative methods proposed by OMB … could reduce the poverty line by up to 3.4 percent over the next 10 years.
  • Medicaid
  • Children’s Health Insurance Program (CHIP)
  • Advanced Premium Tax credits (APTCs) and cost-sharing reduction payments (CSRs) allotted through state health insurance marketplaces
  • Supplemental Nutrition Assistance Program (SNAP)
  • Women, Infants, and Children (WIC) program
  • Health Professions Student Loans
  • AIDS Drug Assistance Program
  • Community Health Center funding
  • Low Income Home Energy Assistance Program (LIHEAP)

Currently, the poverty measure is adjusted by a factor known as the Consumer Price Index for all Urban Consumers (CPI-U), which has been in place since the measure was implemented. While changes could affect long-standing eligibility for state and federal programs, OMB states that an alternative inflation index would more accurately measure inflation. Alternative methods proposed by OMB include use of the “chained” CPI or the Personal Consumption Expenditures Price Index (PCEPI) — these two measures grow more slowly than the CPI-U and could reduce the poverty line by up to 3.4 percent over the next 10 years.

Over time, a slower rate of inflation would significantly impact individuals’ eligibility for the programs listed above. At particular risk would be individuals whose income hovers at the margin of eligibility, who would lose eligibility if the calculation was modified. For example, estimates indicate that more than 500,000 would lose eligibility for Medicaid or CHIP, including 300,000 children. In addition, the millions of Americans who qualify for subsidies to purchase coverage through the insurance marketplaces would see a reduction in the amount of subsidies they receive that make coverage more affordable, or they could become ineligible for those subsidies altogether. Similar reductions in eligibility would occur across programs critical to social determinants of health, including food assistance programs (SNAP and WIC) and early education programs such as Head Start.

An increase in the number of low-income individuals who are no longer eligible for health and other social supports could have significant repercussions on states’ safety net programs. There will be a rise in the number of uninsured as individuals lose eligibility for, or are priced out of coverage. Some may use their limited income for necessities like food, child care, and utilities instead of health care. These changes could result in increased uncompensated care costs. Additionally, states’ health care system costs could increase if individuals without coverage delay seeking care and wait to seek treatment for conditions only when they become urgent — and more costly to treat.

Additionally, using the chained CPI may not fully account for the rising price of necessities that low-income households spend a larger percentage of their income to purchase, such as housing, which in recent years has increased faster than overall CPI. Many analysts, as well as the National Academy of Sciences, have noted that the current poverty measure already does not accurately capture important costs such as child care that strain many low-income families’ budgets.

Comments on the OMB proposal are due Friday, June 21, 2019 and can be submitted here. Following this comment period, it is unclear whether the administration will conduct a more formal rule-making process related to these potential changes, or simply seek to implement them through OMB guidance.