Proposed Change to Federal Poverty Definition Would Cut Aid to Millions of Californians (Public Comment Open until June 21, 2019)

Posted On 11 June, 2019

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*Proposed Trump Administration Change to Federal Poverty Definition Would
Cut Aid to Millions of Californians*
*By Ian Eve Perry *» *Read the blog online
<
laborcenter.berkeley.edu/proposed-fpl-cpi-change/>*

In May, the Trump administration *announced
<
www.federalregister.gov/documents/2019/05/07/2019-09106/request-for-comment-on-the-consumer-inflation-measures-produced-by-federal-statistical-agencies>*
it was considering changing the way the federal poverty line is adjusted
annually for increases in cost of living, and is *seeking public comment
<
www.federalregister.gov/documents/2019/05/07/2019-09106/request-for-comment-on-the-consumer-inflation-measures-produced-by-federal-statistical-agencies#open-comment>*
until June 21, 2019. The alternatives they are considering could *take
away Medi-Cal eligibility for tens of thousands of Californians, reduce
subsidies for over one million Californians with subsidized insurance from
Covered California, and reduce the number eligible for dozens of other
programs including CalFresh*. The *Center on Budget and Policy Priorities
estimates
<
www.cbpp.org/research/poverty-and-inequality/poverty-line-proposal-would-cut-medicaid-medicare-and-premium-tax>*
that, nationally, millions of people could lose or see reductions in their
benefits.

Currently, the federal poverty line is adjusted each year according to the
growth of the *Consumer Price Index **for All Urban Consumers (CPI-U)*
<
www.bls.gov/opub/hom/pdf/cpihom.pdf>, which measures the price
level for goods and services purchased by residents of urban or
metropolitan areas. The Trump administration is considering using the *Chained
**Consumer Price Index for All Urban Consumers (Chained CPI-U)*
<
www.bls.gov/opub/hom/pdf/cpihom.pdf>, which tries to take into
account changing purchasing decisions caused by price increases.

To understand the difference between the two measures, imagine a family
that buys five pieces of fruit per week: three apples and two oranges.
CPI-U calculates the overall change in prices assuming that even as the
prices of apples and oranges rise by different amounts, the family still
continues to buy three apples and two oranges. Chained CPI-U, however,
makes an adjustment to take into account that, while the family still buys
five pieces of fruit, they may instead buy two apples and three oranges if
the price of apples went up more than the price of oranges.

Importantly, this means *Chained CPI-U shows slower growth in the cost of
living*than CPI-U. Over the next ten years, the *Congressional Budget
Office projects
<
www.cbo.gov/system/files/2019-01/51135-2019-01-economicprojections.xlsx>*
that the cost of living measured by CPI-U will increase by 27 percent, but
the cost of living measured by Chained CPI-U will increase by only 24.5
percent. The current CPI-U may *already
<
gregkaplan.uchicago.edu/sites/gregkaplan.uchicago.edu/files/uploads/kaplan_schulhoferwohl_jme_2017.pdf>
underestimate
<
ssrn.com/abstraSchct=2567357>* cost of living increases for
low-income people, and using the Chained CPI-U would only exacerbate that
issue.

There are many *other issues
<
www.nap.edu/openbook.php?isbn=0309051282>* with the official
poverty threshold beyond the choice of inflation index. *This proposal
cherrypicks one of those issues, only serving to set the federal poverty
line meaningfully lower than under current practice*.

Many public healthcare and public assistance programs, including Medi-Cal,
subsidies for insurance through Covered California, and CalFresh, have
eligibility thresholds or benefit formulas that are based on family income
as a percentage of the federal poverty line. With a lower federal poverty
line, family income as a percentage of it would rise, *making some families
ineligible for programs or reducing the benefit they receive*.

Using projections from the *UC Berkeley-UCLA California Simulation of
Insurance Markets (CalSIM) Model
<
healthpolicy.ucla.edu/programs/health-economics/projects/CalSIM/Pages/default.aspx>*,
we estimate that if the use of Chained CPI-U were to be adopted in 2021, by
2028:

– *30,000 adults and 30,000 children* who would otherwise be enrolled in
Medi-Cal would lose eligibility; and

– *Over 1 million Californians* with subsidized coverage through Covered
California would receive smaller premium subsidies, and some would lose
their subsidies entirely. A family of four with an income of $80,000 would
have to pay an *additional $300 per year in premiums
<
www.cbpp.org/research/poverty-and-inequality/poverty-line-proposal-would-cut-medicaid-medicare-and-premium-tax>*.
Some of these Californians would also receive reduced assistance with
out-of-pocket costs. For a California family with income just below 200
percent of the poverty line, this change could more than triple
their *deductible
<
www.coveredca.com/PDFs/2019-Health-Benefits-table.pdf>*.

Additionally, some of the *3.7 million Californians
<
public.tableau.com/profile/california.department.of.social.services#!/vizhome/CFdashboard-PUBLIC/Home?publish=yes>*
enrolled in CalFresh could lose access to the program, as could many of
the Californians enrolled in *dozens of other public programs
<
www.chn.org/proj/the-latest-plan-to-deny-assistance-shrinking-the-poverty-line/>*
which use the federal poverty line to establish eligibility or benefits.

While this proposal may seem simply technical in nature, the harm in
California would be very real. Over time, millions of Californians would
lose eligibility for benefits or receive reduced benefits, and that reduced
assistance would translate to hundreds of millions of fewer federal dollars
flowing into the state’s economy.

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