But what about the 20 million Americans over the age of 65 who worked a lifetime only to be forced to spend their remaining years in poverty or near poverty conditions? The national debate around Social Security ignores the plight of older Americans and focuses on ways to cut Social Security and Medicare by raising the age of eligibility, means testing, etc.
Why the disconnect?
For one thing, the campaign to raise the minimum wage for fast-food workers is funded by unions. Millions of economically vulnerable older Americans were involuntarily pushed out of the workforce by epidemic and unaddressed age discrimination or ill-health. They have no union and, apparently, no other effective advocate.
Another reason is that elder poverty is poorly understood . The federal government’s official poverty rate for older Americans – like the U.S. unemployment rate and the Social Security benefit formula – is outdated and misrepresents reality. The official poverty rate was created by the Census Bureau in the 1960s and looks only at a family or individual’s cash income. In 2010, the Bureau was forced to create an alternative measure, the Supplemental Poverty Measure (SPM), that provides a more realistic picture. The SPM reflects not only available financial resources but liabilities (taxes, out-of-pocket medial spending, housing expenses and other factors) and cost of living differences between states. However, the SPM still is not the “official” measure that is widely cited by politicians and policy makers. So many Americans do not have a realistic picture of true elder poverty.
The official poverty rate for older Americans is a fictional measure perpetuated by a moribund federal bureaucracy that is stuck somewhere in the 1960s.
The Kaiser Family Foundation recently did an analysis comparing the Census Bureau’s official poverty rate and the SPM poverty rate for Americans aged 65 and above. The Foundation reports the poverty rate among older adults is higher under the SPM (15%) than under the official measure (10%) because the SPM deducts out-of-pocket medical expenses from income when estimating the share of people living in poverty.
The Foundation cites the case of “Doris”, 85, a widower who rents an apartment in Miami, Florida. In 2013, her sole source of income was $12,000 in Social Security benefits, and she spent $500 on out-of-pocket medical expenses. Under the official measure, Doris is not counted as living in poverty because her $12,000 income is higher than the $11,200 official poverty threshold for an elderly person living alone. Under the SPM, Doris IS counted as being in poverty because she lives in an area with a high cost of living. Doris’s resources under the SPM are $11,500 (deducting her medical expenses from her income), which is less than the SPM poverty threshold for single renters living in Miami (about $13,400).
Does anyone really doubt that Doris is poor? And a $500 out-of-pocket expenditure for medical expenses is modest. Older Americans must pay cost sharing for Medicare-covered benefits, costs for non-covered services (i.e. hearing, dental, prescriptions), and, for those who can afford it, premiums for Medicare and supplemental coverage (such as the plans offered by the AARP, the largest seller of Medigap plans in the U.S.). Traditional Medicare does not place any limit on beneficiaries annual out-of-pocket spending.
The Kaiser Foundation analysis found that almost half of Americans aged 65 and older have incomes less than $23,500, which is equivalent to 200 percent of the poverty rate in 2015. These Americans are “economically vulnerable” – one crisis away from poverty.
According to The Kaiser Family Foundation report:
- Close to half (45%) of adults ages 65 and older had incomes below twice the poverty thresholds under the SPM in 2013, compared to 33% of older adults under the official measure.
- The poverty rate was higher among women ages 65 and older than men in this age group in 2013 under both the official measure (12% versus 7%) and the SPM (17% versus 12%). Among people ages 80 and older, 23 percent of women lived below the SPM poverty thresholds in 2013, compared to 14 percent of men.
- The official poverty rate in 2013 was nearly three times larger among Hispanic adults than among white adults ages 65 and older (20% versus 7%) and two and a half times larger among black adults ages 65 and older (18%). Rates of poverty for all three groups were higher under the SPM, with 28 percent of Hispanic adults, 22 percent of black adults, and 12 percent of white adults ages 65 and older living below the SPM poverty thresholds in 2013.
- The share of seniors living in poverty is larger in every state under the SPM than under the official measure, and at least twice as large in 9 states: California (21% versus 10%), Connecticut (14% versus 7%), Hawaii (17% versus 8%), Indiana (13% versus 6%), Massachusetts (16% versus 8%), Maryland (16% versus 8%), Nevada (18% versus 9%), New Hampshire (14% versus 6%), and New Jersey (15% versus 7%).
Clearly, society should be thinking about how to increase the financial security of older Americans and not how to make things worse. Older Americans who have worked their entire lives do not deserve to live in poverty any more than a fast-food worker. This is especially true in a society like the United States that has staggering and unjust wealth inequality.