Medical Care Transfers, Poverty and the Aged

This article explores alternative approaches to calculating the value of Medicare and Medicaid and the impact of these programs on the incidence of poverty among the aged. Three methodological frameworks are contrasted, both in theory and in practice. Medical benefits are measured, respectively, as the cost to the government of providing the program, as the amount of cash that would leave the recipient equally well-off, and as the amount of funds freed for spending on other goods. The size of benefits is particularly sensitive to the measurement technique employed. Consequently, when medical benefits are added to income to estimate their antipoverty impact between 1968 and 1974, the choice of measurement approach remains important. The estimated amount of poverty reduction attributable to Medicare and Medicaid ranges between 26 and 61 percent.