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New formula finds more Americans in poverty

Health costs push tally to 47 million

By Hope Yen
Associated Press / January 6, 2011

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WASHINGTON — The number of poor people in the United States in 2009 was millions higher than previously known, with 1 in 6 Americans — many of them 65 and older — struggling in poverty due to rising medical care and other costs, according to preliminary census figures released yesterday.

Under a new revised census formula, overall poverty in 2009 stood at 15.7 percent, or 47.8 million people. That’s compared to the official 2009 rate of 14.3 percent, or 43.6 million, that was reported by the Census Bureau in September.

Across all demographic groups, Americans 65 and older sustained the largest increases in poverty under the revised formula — nearly doubling to 16.1 percent. As a whole, working-age adults 18 to 64 also saw increases in poverty, as well as whites and Hispanics. Children, blacks, and unmarried couples were less likely to be considered poor under the new measure.

Due to new adjustments for geographical variations in costs of living, people residing in the suburbs, the Northeast, and West were the regions mostly likely to have poor people — nearly 1 in 5 in the West.

At the same time, government aid programs such as tax credits and food stamps kept many people out of poverty, helping to ensure the poverty rate did not balloon even higher during the recession in 2009, President Obama’s first year in office.

The new numbers will not replace the official poverty rate but will be published alongside the traditional figure this fall as a “supplement’’ for federal agencies and state governments to determine antipoverty policies. Economists have long criticized the official poverty measure as inadequate because it only includes pretax cash income and does not account for medical, transportation, and work expenses.

“Under the new measure, we can clearly see the effects of our government policies,’’ said Kathleen Short, a Census Bureau research economist who calculated the revised poverty numbers.

The official measure is based on a 1955 cost of an emergency food diet and does not factor in other living costs. Nor does it consider noncash government aid when calculating income, which surged higher in 2009 during the recession.

Short’s analysis, published yesterday as part of a series of census working papers on poverty, shows that out-of-pocket medical expenses had a significant impact in affecting the number of poor — without those costs, poverty would have dropped from 15.7 percent to 12.4 percent.

The effect was seen most notably among older Americans. Under the official poverty rate, about 8.9 percent lived in poverty, mostly because they benefit from Social Security cash payments. But when taking into account out-of-pocket medical expenses and other factors, that number rises to 16.1 percent.

The numbers cited for 2009 are preliminary, but census officials say they offer a good representative look at the state of US poverty and where the numbers are headed when 2010 figures are released this fall.

Among the findings:

■ Transportation, commuting, and child-care costs weigh on working-age Americans. The official poverty rate for those aged 18 to 64 is 12.9 percent, the highest since 1960s levels that launched the war on poverty. Under the revised formula, working-age poverty increases even higher, to 14.8 percent.

■ Without the earned-income tax credit, the poverty rate under the revised formula would jump from 15.7 percent to 17.7 percent. The absence of food stamps separately would increase the poverty rate to 17.2 percent.

■ Under the revised formula, the West had the most people in poverty at 19.2 percent. It was followed by the South at 16.1 percent, the Northeast at 14.3 percent, and the Midwest at 12.5 percent.

The supplemental figures could take on added significance at a time when many in the government point to an overhaul of Medicare and Social Security as the best hope for reducing the ballooning federal debt.

With the potential to add more senior Americans to the ranks of the poor, the numbers may underscore a need for continued — if not expanded — senior benefits as a government safety net.