August 31, 2009: Bridging the Gap, By Peter S. Arno, Director of Doctoral Studies, Department of Health Policy and Management, School of Health Sciences and Practice, New York Medical College

Low socioeconomic status, measured variously in terms of poverty, income, wealth, education, or occupation, has been repeatedly linked to an increased burden of disease and death. Yet major social programs that affect the economic well-being of large segments of the population have rarely been examined for their potential health impact.

A better understanding of the link between health status and broad-based programs such as Social Security and the Earned Income Tax Credit (EITC) would add an important and missing dimension to the public discourse regarding the future of income support policies and their potential to improve our standard of living and reduce socioeconomic health disparities.

Social Security is the single most important and effective income support program ever introduced in the U.S. It has been credited with alleviating the burden of poverty for millions of Americans, particularly for the elderly. Recent census data indicate that over 40 percent of the U.S. population aged 65 and older is kept out of poverty by Social Security. Supplemental Security Income (SSI), which provides cash benefits to low-income elderly people, has also helped to improve the economic status of the poorest stratum of Social Security beneficiaries.

However, surprisingly little research has tried to demonstrate a link between Social Security benefits and potential health consequences. One major exception is the work of Jere Behrman, Robin Sickles, and Paul Taubman. In 1998, they found that although additional Social Security benefits did lower mortality rates (which may also reflect higher lifetime earnings), increased SSI payments had an even larger impact on mortality. More recently, in 2008, Herd, Schoeni, and House examined the impact of SSI on disability for beneficiaries 65 and older and concluded that higher SSI benefit levels reduced disability in this group.

The next most significant national policy mitigating poverty is the Earned Income Tax Credit (EITC). Established by Congress in 1975 and dramatically expanded during the 1990s, the EITC is the largest antipoverty program for the non-elderly in the United States today. In 2006, more than 22 million families received nearly $44 billion from the EITC. A refundable credit originally designed to encourage work by offsetting the impact of federal taxes on low-income families, it has also been shown to increase employment, particularly among single mothers.

The amount of the credit increases with rising income, plateaus at a certain level of earning, and then falls as it approaches the maximum earning level until reaching zero (Figure 1). With maximum benefits in tax year 2008 of $4,824, the value of the EITC is substantial, particularly among the working poor. For example, the EITC would give a minimum wage worker with two children a 40 percent increase in annual earnings. In addition, 22 states plus the District of Columbia, New York City, and Montgomery County, Maryland offer their residents a supplemental earned income tax credit, which could raise annual incomes over 50 percent for those receiving federal and state (or local) credits.

Owing to the refundable nature of the (federal and most state) credits, even if workers have no federal income tax liability, as is true of most families below the poverty threshold, they can still receive the full value of the credit; thus, it effectively serves as a wage subsidy.

The EITC, as an income support program, has been highly successful at targeting families at the low end of the income distribution. More than half of the credit goes to families under the official poverty line, and nearly three-quarters is claimed by families earning less than $20,000 per year. It is estimated that more than four million people, at least half of them children, are removed from poverty each year as a result of the EITC.

Further, income support to families with young children, the main focus of the EITC, may also provide material resources at a critical time, enhancing child development and long-term positive health outcomes. Although there have been no definitive studies published demonstrating the health impact of the EITC, we have reported some suggestive findings linking receipt of the EITC with lower infant mortality rates and improved child health insurance coverage in a recent paper in the Journal of Public Health Policy.

Bridging the gap between major social and economic policies and their potential health consequences would critically enhance public discussion and policymaking regarding programs such as Social Security and the EITC. Further research is needed to empirically demonstrate these effects, but it is already clear that researchers and policymakers must begin to think more broadly about the impact of economic and social welfare policies on population health and access to care as we move closer to national health care reform.

Figure 1

Earned Income Tax Parameters, 2008 (single parent families with >1 child)

Source: www.IRS.gov

Peter S. Arno, Phd, is a Professor and Director of Doctoral Studies at the Department of Health Policy and Management in the School of Health Sciences and Practice at New York Medical College