The New Poverty Measure Administrative Data as a Source of Medical Expenses

In this paper we explore the potential of future health services administrative data systems to improve the measurement of poverty. We first discuss the current and proposed new methods of measuring poverty, focusing on the need and the difficulty in capturing out-of-pocket medical (OOP) costs in the context of a survey focused on economic issues. We then discuss a current data collection effort that may serve as a model for future compilation of administrative data (the Hospital Cost and Utilization Project (HCUP), a federal-state-industry partnership in health care data, directed by the Agency for Health Care Policy and Research (AHCPR)). We conclude with a discussion of how the OOP costs can be integrated into a measure of poverty. Out-of-pocket medical expenditures cannot be accurately measured with a few items in a survey otherwise focussed on income, poverty, and program participation and thus must be imputed from an external source. Two sources are considered: special purpose surveys and general purpose administrative systems. Special purpose surveys offer the most promise in the short term but the quality of the imputed data suffers due to a highly skewed distribution of OOP costs. General purpose administrative systems, if they can be harnessed, offer the highest quality measure over the long term. The success of HCUP gives us hope that these data can eventually be harnessed thus we recommend a two pronged approach: statistical link to special purpose survey in the short term and development of and direct link to administrative systems over the long term.