Noncash Benefits:

Initial Results Show Valuation Methods Differentially Affect the Poor

PEMD-87-7BR: Published: Oct 24, 1986. Publicly Released: Oct 31, 1986.

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In response to a congressional request, GAO examined the alternative methods to value noncash benefits of total federal support for the poor to determine whether: (1) the conceptual, operational, or computational aspects of the methods distort the estimates of poverty derived from them; and (2) if there are such factors, how big their influence is on poverty estimates.

GAO found that when medical benefits were added to food and housing benefits under the recipient-value and poverty-budget-share methods, persons with incomes just below the poverty line were moved just over the line; however, under the market-value method, persons with incomes well below the poverty line were moved up well over the line. Each of the technical issues influenced the poverty rate, including that: (1) the nonsharability of medical benefits inappropriately showed many individuals as not poor, because the procedures allocated the medical benefits of enrollees to the entire family, even though not all members were covered; (2) the basis for calculating and assigning the market value for Medicare and Medicaid inappropriately showed that many individuals were moved out of the poverty range; (3) computing an average benefit level to individuals enrolled in medical programs inappropriately showed many individuals as not poor; and (4) misreporting food stamp recipiency and amounts showed that the current method underestimated poverty by about 1.4 million individuals. The conceptual and technical aspects affected some subgroups more than others, such as single female heads of households, while none of the issues affected persons in married-couple families. GAO believes that its study shows that adequate information exists to both interpret proposed methods for cashing out in-kind benefits and make future decisions about which method should be used to represent poverty.

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