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Appendix B: Adjusting Basic Family Budgets
- Brookings Institution Press
- Chapter
- Additional Information
This appendix explains the steps we took to make basic family budgets compatible with our estimates of nominal work support system income and benefits in order to generate the self-sufficiency ratios that are presented in chapter 5. The problem is that the basic family budgets include some estimates of the income required to purchase services that work support programs provide (such as medical coverage and child care), and the extent to which the system provides these services varies from place to place. Depending on the participation scenario under consideration, we needed to subtract the estimated income required to purchase those services because we wanted budget differences to reflect differences in state policy, not differences in the estimated cost or value of the services. Child care and health care are not always out-of-pocket expenses for the hypothetical family of three considered in this analysis. Under some work support participation scenarios in some states, selected family members qualify for Medicaid; and under some work support participation scenarios in all states, the family receives a child care grant. For the full participation scenario , we subtracted the estimated annual costs for health care and child care from the total basic family budget and from the work support income and benefit total. For the tax and entitlement scenario, we subtracted the estimated value of medical assistance from the total basic family budget and the work support income and benefit total. For the tax and school meals scenario , the basic family budget was used without modification. Further adjustments were required to estimate health care expenses, depending upon state Medicaid eligibility policies. For states in which the parent in our hypothetical family of three was eligible for Medicaid, medical 189 Appendix B: Adjusting Basic Family Budgets 11-8191-1 App B 11/2/05 4:23 PM Page 189 costs were excluded from basic family budgets for the full participation and tax and entitlements scenarios. However, in states that did not extend Medicaid eligibility to the parent, the estimated cost of health insurance for the parent was added back in to the basic family budget for the full participation and tax and entitlement scenarios. This cost was estimated by using quotes for health insurance coverage for a 35-year-old female nonsmoker obtained from www.ehealthinsurance.com (the source used in the construction of the original basic family budget estimates).1 The cost of health insurance was estimated in the highest cost-of-living area in each state (selected on the basis of basic family budget information); when that was not possible, state capitals were used as the basis for the estimate. Such estimates were available for all required states except New Hampshire and West Virginia. To estimate the cost of health insurance in those two states, for each of the other states the insurance quote was divided by the estimated market value of medical assistance provided in that state (taken from the March supplement of the 2002 Current Population Survey). These proportions were averaged, and the average was multiplied by the estimated market values of medical assistance in New Hampshire and in West Virginia to estimate the costs of health insurance in those states. Basic family budgets were also adjusted for child care expenses, depending upon state-level policies and participation scenario. In a few states, the cost estimate in the basic family budget was less than the maximum state child care grant. In such cases, the state copay requirement was added back into the basic family budget as the estimated child care cost for the full participation scenario. However, in most states and the District of Columbia, the maximum child care grant was less than the estimated cost of child care. In such cases, the net cost (the difference between the estimated market price and the maximum child care grant) was compared to the state copay requirement. If the copay requirement was less than net cost, net cost was added back into the basic family budget as the estimated cost of child care for the full participation scenario. If the required copay was greater than net cost, the copayment amount was added back into the basic family budget as the estimated cost of 190 Appendix B 1. For a discussion of the sources and methods used to construct basic family budgets, see Boushey and others (2001, app. A). We selected the lowest cost plan that offered a deductible of $500 (the lowest available). Except for the deductible, the features of the plan...