Impacts on Poverty of Expected Federal FY26 Policy Changes: Results from the Principal Poverty Measure

• In Event: Poverty Measurement: New Advances, Insights and Policy Implications

Abstract

We simulate the impacts of proposed Federal tax and spending changes on poverty using a pilot version of the Principal Poverty Measure (PPM), a revision of the Supplemental Poverty Measure (SPM) recommended by a 2023 NASEM consensus study report. Spending reductions proposed include changes to Federal health insurance programs (ACA subsidies, Medicaid and Medicare), in addition to housing, food and other assistance. While the SPM has long been used to estimate poverty impacts of housing and food assistance, only a health-inclusive poverty measure such as the PPM or Health Inclusive Poverty Measure (HIPM) can estimate direct impacts from changes to programs such as Medicaid, ACA subsidies or Medicare (Remler, Korenman and Hyson 2017).

Overall, PPM rates for 2022 and 2023 (preliminary) were somewhat higher than SPM rates, but were far higher for the uninsured and renters, and lower for homeowners (Hyson, Korenman and Ellen 2025). The impacts of housing assistance on the PPM are larger than its impacts on the SPM, especially for small households and for adults over the age of 65, given that they live in smaller households on average. The PPM therefore changes the sociodemographic and regional composition of poverty, with differences driven mainly by the measures’ different treatment of medical care and housing.

The PPM incorporates the expansion of minimum basic needs to explicitly include health care and revises the treatment of housing and utilities in the threshold. For our pilot PPM threshold, we use a benchmark ACA or Medicare Advantage plan for the health insurance need, based on the HIPM; HUD Fair Market Rents for the housing need; and SNAP maximum benefit amounts based on the USDA’s Thrifty Food Plan for the food need. For resources, the PPM incorporates an implicit income flow from owned homes, capped at the threshold housing need and net of expected homeowner costs; and health insurance benefits, net of capped premium payments.

Our estimated cross-comparisons of SPM and PPM poor households suggest that the PPM revisions classify a more disadvantaged population as poor. We simulate poverty impacts of proposed changes to Federal tax and spending policy. In early 2025, media reports of a budget freeze suggested that Medicaid and several non-health (housing, food, cash) benefits would be eliminated. Our preliminary estimate of the immediate (static) impact of these cuts show an increase in the rate of child poverty by two thirds, mostly the result of Medicaid cuts. Although they are not causal estimates, our simulations illustrate the size of behavioral adjustments and state and local policy responses necessary to offset the Federal changes. We plan further estimates of changes in Medicare and ACA subsidies in expansion states compared to non-expansion states overall, and for demographic groups at greatest risk. We will conduct additional simulations of poverty impacts as Federal tax and spending changes are specified and become law.

Author

• Sanders D. Korenman, Baruch College (City University of New York)
  Presenting Author