Purpose: This study compared the official poverty rate for adults aged 65 years and older with alternative measures that portray the true resources and needs of older adults.
Design and methods: The analysis used data from the 2004 Health and Retirement Study on income, assets, in-kind transfers, and out-of-pocket medical expenses. It also incorporated the effects of federal and state income taxes on net incomes, and accounted for the potential annuity value of assets in measuring resources.
Results: The alternative poverty measures that account for out-of-pocket health spending estimate that between 0.3 and 1.5 million more older adults live in poverty than acknowledged by the official measure.
Implications: These results highlight the need to update poverty measures so that they better reflect older adults' circumstances. This will become increasingly important as policymakers consider reforms to improve solvency in the Social Security and Medicare programs that may require benefit cuts or increased cost sharing.