Welfare reform: Unanticipated but inevitable consequences for health insurance coverage for the poor

Abstract

Whether by design or by unintended consequence, the new welfare reform law will have a major impact on the nature and extent of Medicaid coverage for children, women, disabled persons, and the elderly. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 was signed into law on August 22, 1996. This column explores the linkage between welfare and Medicaid and the inevitable consequences for Medicaid of changing the structure and operation of the underlying welfare programs on which it rests. The new welfare law ends the 61-y federal guarantee of cash assistance for children in poor families and cuts $54 billion from social welfare programs, including child nutrition and food stamps, for other poor and near-poor families. The new welfare reform law also scales back public benefits to noncitizens. While these welfare reforms were intended by the drafters of the legislation, changes brought about by the law may go well beyond those that have been anticipated. These unanticipated effects result from the complex relationship between Medicaid and welfare. Medicaid is the major source of public financing for health insurance and long-term care for low-income persons. In 1994, 34.2 million persons (1 in 10 Americans) were covered by Medicaid. Historically, Medicaid was designed to pay for the health care of recipients of federal cash assistance. To a large extent this continues to be true today. In 1993,60% of the individuals who received Medicaid also received cash assistance. Poor families with children have received income support through a meanstested entitlement, the Aid to Families with Dependent Children (AFDC) program. The new law replaces AFDC with a cash welfare block grant, Temporary Assistance for Needy Families (TANF) . In 1993, AFDC provided cash assistance to nearly 5 million families, including 9.8 million children. Previously, families who received AFDC were automatically eligible for Medicaid. Because the new TANF block grant eliminates the entitlement to assistance for any parent or child, the new law could have resulted in a significant loss of Medicaid coverage among former AFDC recipients. To prevent this result, the new law contains specific provisions requiring states to provide Medicaid to any individual who meets the state’s July 16, 1996, AFDC eligibility rules. While it may appear that the new welfare reform law makes few changes to the Medicaid program, we anticipate that the new welfare law will have major direct and indirect effects on Medicaid eligibility and enrollment for perhaps millions of women, children, disabled persons, and the elderly. There are three core aspects to Medicaid’s relationship with welfare, each of which is essential in assessing the effects of the new welfare reform law on the Medicaid program: eligibility, operations, and administration. Traditionally,