value would then be added to income and compared with unprotected expenditure risk, which is the risk remaining after the effects of insurance are factored in.
The Definition of Affordability—Affordability is another very difficult concept. It can be defined as a family’s risk of exceeding an affordability threshold. In this respect, the threshold could be defined as a percentage of family income, which includes the annuitized value of assets. The definition of an affordability threshold should probably vary by the family’s relative resource level—that is, its resources relative to the level of income required to cover basic needs under the SPM and the official poverty measure. At least as a starting point, the affordability thresholds outlined in the ACA could be considered.
One of the major questions that will go hand in hand with the design of a measure of MCER is whether any risk, no matter how small, of a catastrophic outcome places a family at economic risk. Basically, every family is going to be at some small amount of risk of experiencing a catastrophic outcome, and there are some difficulties with determining how to treat that.
Meier emphasized that it is important to reach consensus on the conceptualization and measurement of medical care expenditure risk at an early stage of development. In particular, agreement is required on a minimum benefit standard, a concrete definition of affordability (that is, what percentage of income will be the threshold and whether annuitized assets are to be included), whether there are going to be adjustments for underutilization, and data considerations, such as the collection or construction of new variables.
Meier reiterated that MCER is an increasingly important component of poverty. Risk is prospective and individual but can be aggregated to the family or household level. The approach she and Wolfe favor is that the MCER measure be developed as a separate index. However, she noted, there is potential for incorporation into a single measure in the future. She reiterated that an MCER index is distinct from medical out-of-pocket expenditures because it captures the risk component, which is critically important.
She said that although she and Wolfe have outlined a basic framework for the development of the index, its definition and construction is a very complex process. There are many normative considerations in the design of an index. A well-formed measure requires attention to numerous methodological details. Several areas will require particular focus in future work.