SECTION 15. OTHER PROGRAMS CONTENTS Overview Food Stamp Program Administration, Program Variations, and Funding Eligibility Benefits Quality Control (QC) Interaction With TANF, SSI, and GA Programs Recipiency Rates Recent Legislative History Medicaid Eligibility Families, Pregnant Women, and Children Aged and Disabled Persons The Medically Needy Medicaid and the Poor Services Financing Reimbursement Policy Administration Medicaid and Managed Care Legislative History Program Data State Children's Health Insurance Program Eligibility Benefits Cost Sharing Financing Legislative History Program Data Federal Housing Assistance Types of Assistance Trends in Levels and Budgetary Impact of Housing Aid School Lunch and Breakfast Programs Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Child and Adult Care Food Program Centers and Outside-of-School Programs Family and Group Day Care Homes Workforce Investment Act Description of Major Differences Between WIA and JTPA Head Start Low-Income Home Energy Assistance Program (LIHEAP) Background Program Components Allotments to States Eligibility and Types of Assistance Planning and Administration Veterans Benefits and Services Workers' Compensation Overview Through 1996 Recent Developments in Statistical Compilation References OVERVIEW A wide variety of Federal programs outside the jurisdiction of the Committee on Ways and Means provide benefits to individuals and families that also receive assistance from programs within the Committee's jurisdiction (see appendix K). This section describes several such programs: food stamps; Medicaid; the State Children's Health Insurance Program (SCHIP); housing assistance; School Lunch and Breakfast Programs; the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); the Child and Adult Care Food Program (CACFP); the Workforce Investment Act (WIA); Head Start; the Low-Income Home Energy Assistance Program (LIHEAP); veterans benefits and services; and workers' compensation. Most families receiving Temporary Assistance for Needy Families (TANF) or Supplemental Security Income (SSI) would have incomes low enough to qualify them for assistance under these programs. Unlike the principal assistance programs under the jurisdiction of the Committee on Ways and Means, participation in Head Start, LIHEAP, and other programs is limited by appropriations. Income received from TANF is counted in determining eligibility and benefit levels for these programs. However, because these programs provide in-kind rather than cash assistance, benefits are not counted in determining eligibility for TANF. Tables 15-1 and 15-2 describe the overlap in recipients between programs within the jurisdiction of the Committee on Ways and Means and other major Federal assistance programs. Table 15-1 illustrates that 81.0 percent of TANF recipient households also received food stamps during the first quarter of 1998; 30.6 percent received WIC; 97.3 percent received Medicaid; 60.3 percent received free or reduced-price school meals; and 32.2 percent received housing assistance. Table 15-2 presents the percentage of recipients of other means-tested programs who are participating in programs under Ways and Means jurisdiction. For example, 35.1 percent of food stamp households received TANF benefits at some time during the first quarter of 1998; 30.1 percent received SSI; 30.5 percent received Social Security; 1.6 percent received unemployment benefits; and 27.9 percent received Medicare. Table 15-3 shows the percentage of households receiving Aid to Families with Dependent Children (AFDC)/TANF or SSI and also receiving assistance from other programs for selected time periods. The figures at the bottom of the AFDC/TANF portion of the table show that the number of households receiving AFDC/ TANF increased rapidly between 1990 and 1994, declined somewhat in TABLE 15-1.--PERCENT OF RECIPIENTS IN PROGRAMS WITHIN THE JURISDICTION OF THE COMMITTEE ON WAYS AND MEANS RECEIVING ASSISTANCE FROM OTHER MAJOR FEDERAL ASSISTANCE PROGRAMS, 1997-98 ---------------------------------------------------------------------------------------------------------------- Ways and Means assistance program ----------------------------------------------------- Other assistance program Social Unemployment TANF SSI Security compensation Medicare ---------------------------------------------------------------------------------------------------------------- Food stamps............................................... 81.0 43.7 7.3 7.0 7.3 WIC....................................................... 30.6 5.5 1.3 7.9 0.9 Medicaid.................................................. 97.3 95.0 16.9 16.9 17.2 Free or reduced-price school meals........................ 60.3 18.4 4.0 18.0 2.9 Public or subsidized rental housing....................... 32.2 23.4 5.7 4.0 5.8 VA compensation or pensions............................... 1.1 2.8 4.9 1.2 4.9 Number of households receiving benefits (in thousands) 3,008 4,772 28,833 1,546 26,525 ---------------------------------------------------------------------------------------------------------------- Note.--Table shows number of households for December 1997-March 1998. Table reads that 81.0 percent of TANF households also receive food stamps. SSI recipients living in California receive a higher SSI payment in lieu of food stamps, and thus are not included in the food stamp percentages. Source: U.S. Census Bureau, Survey of Income and Program Participation. TABLE 15-2.--PERCENT OF RECIPIENTS IN OTHER MAJOR FEDERAL ASSISTANCE PROGRAMS RECEIVING ASSISTANCE UNDER PROGRAMS WITHIN THE JURISDICTION OF THE COMMITTEE ON WAYS AND MEANS, 1997-98 ---------------------------------------------------------------------------------------------------------------- Other assistance program ---------------------------------------------------------------- Free or Ways and Means assistance program reduced- Public or VA Food WIC price subsidized Medicaid compensation stamps school rental or pensions meals housing ---------------------------------------------------------------------------------------------------------------- TANF........................................... 35.1 25.6 21.5 21.6 22.5 1.4 SSI............................................ 30.1 7.4 10.4 24.9 34.8 5.7 Social Security................................ 30.5 10.2 13.6 36.3 37.4 59.3 Unemployment compensation...................... 1.6 3.4 3.3 1.4 2.0 0.8 Medicare....................................... 27.9 6.3 9.0 34.3 35.2 55.2 Number of households receiving benefits (in 6,932 3,585 8,444 4,487 13,014 2,369 thousands)................................ ---------------------------------------------------------------------------------------------------------------- Note.--Table shows households for December 1997-March 1998. Table reads that 35.1 percent of food stamp recipient households receive TANF. SSI recipients living in California receive a higher SSI payment in lieu of food stamps, and thus are not included in the food stamp percentages. Source: U.S. Census Bureau, Survey of Income and Program Participation. TABLE 15-3.--PERCENT OF HOUSEHOLDS RECEIVING AFDC/TANF OR SSI AND ALSO RECEIVING ASSISTANCE FROM OTHER PROGRAMS FOR SELECTED TIME PERIODS ---------------------------------------------------------------------------------------------------------------- Year Assistance program ---------------------------------------------------------------- 1984 1987 1990 1992 1993 1994 1995 1997-98 ---------------------------------------------------------------------------------------------------------------- AFDC/TANF: Food stamps................................ 81.4 81.7 82.7 86.2 88.9 88.3 87.2 81.0 WIC........................................ 15.3 18.6 18.7 21.5 18.5 21.4 24.7 30.6 Free or reduced-price school meals......... 49.2 55.6 52.7 55.5 56.9 57.5 63.1 60.3 Public or subsidized rental housing........ 23.0 19.4 34.7 29.5 33.1 30.3 31.1 32.2 Medicaid................................... 93.2 95.5 97.6 96.2 97.6 96.4 97.2 97.3 VA compensation or pensions................ 2.8 1.9 1.3 1.9 1.1 1.1 0.8 1.1 Number of households receiving benefits 3,585 3,527 3,434 4,057 4,831 4,906 4,652 3,008 (in thousands)........................ SSI: Food stamps................................ 46.5 39.7 41.3 46.2 48.0 50.1 50.0 43.7 WIC........................................ 2.5 2.5 3.0 4.3 3.7 5.4 5.6 5.5 Free or reduced-price school meals......... 12.7 11.9 15.3 18.2 21.3 23.8 25.2 18.4 Public or subsidized rental housing........ 21.6 20.0 21.4 23.8 23.9 24.9 24.1 23.4 Medicaid................................... 100.0 99.6 99.7 99.8 99.5 100.0 100.0 95.0 VA compensation or pensions................ 4.7 7.7 5.7 4.0 4.5 3.9 3.6 2.8 Number of households receiving benefits 3,008 3,341 3,037 3,957 3,861 4,223 4,580 4,772 (in thousands)........................ ---------------------------------------------------------------------------------------------------------------- Note.--Data on households interviewed between December 1997 and March 1998. SSI recipients living in California receive a higher SSI payment in lieu of food stamps, and thus are not included in the food stamp percentages; in 1997, the TANF Program replaced the Aid to Families with Dependent Children (AFDC) Program. Source: U.S. Census Bureau, Survey of Income and Program Participation. 1995, and then fell rapidly between 1995 and 1997/1998. Due to the rapid decline after 1994, the AFDC/TANF rolls declined by 16 percent over the entire period. The number of households receiving SSI declined slightly in 1990 and 1993, but otherwise increased throughout the period between 1984 and 1998. The rolls increased by nearly 60 percent over this period. The percentage of AFDC/TANF households receiving other benefits fluctuated over the 1984-98 period, but the biggest programs--food stamps, school meals, housing assistance, and Medicaid--increased and then declined. Food stamps experienced increased coverage until 1993, after which it fell off by nearly 9 percent between 1994 and 1998. School lunches also fell off somewhat between 1995 and 1998. Medicaid coverage increased between 1984 and 1990, but the pattern was erratic after that and 1990 proved to be the high-water mark of coverage. The high-water mark for housing was 1990. The pattern of receiving other benefits for SSI households is broadly similar; namely, initial increases and then declines. For every program, except Medicaid which was received by 100 percent of SSI households, and veterans benefits, coverage increased between 1984 and 1994 but then declined either between 1994 and 1995 or between 1995 and 1998. Medicaid too declined from its 100 percent coverage in 1995 to 95 percent in 1998. The explanation for declining coverage probably varies from program to program, but the pattern of general decline after 1994 or 1995 deserves careful study, especially if it continues to occur over the next several years. FOOD STAMP PROGRAM Food stamps are designed primarily to increase the food purchasing power of eligible low-income households to a point where they can buy a nutritionally adequate low-cost diet. Participating households are expected to devote 30 percent of their counted monthly cash income to food purchases.\1\ Food stamp benefits then make up the difference between the household's expected contribution to its food costs and an amount judged to be sufficient to buy an adequate low-cost diet. This amount, the maximum food stamp benefit, is set at the level of the U.S. Department of Agriculture's lowest cost food plan (the Thrifty Food Plan or TFP), varied by household size, and adjusted annually for inflation. Thus, a participating household with no counted cash income receives the maximum monthly allotment for its household size while a household with some counted income receives a lesser allotment, normally reduced from the maximum at the rate of 30 cents for each dollar of counted income. --------------------------------------------------------------------------- \1\ Because not all of a household's income is actually counted when determining its food stamp benefits, the program, in effect, assumes that most participants are able to spend about 20-25 percent of their total cash monthly income on food. --------------------------------------------------------------------------- Benefits are available to most households that meet Federal eligibility tests for limited monthly income and liquid assets. But household members must fulfill requirements related to work effort and, in general, must be U.S. citizens. Recipients in the two primary cash welfare programs (TANF and SSI) generally are automatically eligible for food stamps, as are recipients of State general assistance (GA) payments, if their household is composed entirely of TANF, SSI, or GA beneficiaries.\2\ --------------------------------------------------------------------------- \2\ Except for (1) SSI recipients in California, where a State- financed adjustment to SSI benefits has replaced food stamp assistance; and (2) General Assistance Programs that do not meet minimum Federal standards for determining need. --------------------------------------------------------------------------- Administration, Program Variations, and Funding The regular Food Stamp Program operates in all 50 States, the District of Columbia, Guam, and the Virgin Islands. The Federal Government is responsible for most of the rules that govern the program, and, with limited variations for Alaska, Hawaii, and the territories, these rules are nationally uniform. However, by law and regulation, States have a number of significant options to vary from Federal administrative, benefit calculation, and eligibility rules, especially for those who also are recipients of their State's cash welfare programs, and a number of waivers from regular rules and procedures have been (and continue to be) granted. Sales taxes on food stamp purchases may not be charged, and food stamp benefits do not directly affect other assistance available to low-income households, nor are they taxed as income. Alternative programs are offered in Puerto Rico, the Northern Mariana Islands, and American Samoa, and program variations occur in a number of demonstration projects and in those jurisdictions that have elected to exercise the limited number of program options allowed. Funding is overwhelmingly Federal, although the States and other jurisdictions have financial responsibility for significant administrative costs, as well as liability for erroneous benefit determinations (as assessed under the food stamp ``quality control'' system, discussed below). Federal administrative responsibilities At the Federal level, the program is administered by the Agriculture Department's Food and Nutrition Service (FNS). The FNS gives direction to welfare agencies through Federal regulations that define eligibility requirements, benefit levels, and administrative rules. It is also responsible for arranging for printing food stamp coupons and distributing them to welfare agencies, for overseeing State programs for the electronic issuance of food stamp benefits, and for approving and overseeing participation by retail food stores and other outlets that may accept food stamps. Other Federal agencies that have administrative roles to play include: the Federal Reserve System (through which food stamp benefits are redeemed for cash, and which has some jurisdiction over ``electronic benefit transfer (EBT)'' methods for issuing food stamp benefits), the Social Security Administration (responsible for providing the Social Security numbers recipients must have, for providing limited application ``intake'' services, and for providing information to verify recipients' income), the Internal Revenue Service (providing assistance in verifying recipients' income and assets), the Immigration and Naturalization Service (helping welfare offices confirm alien applicants' status), and the Secret Service and the Agriculture Department's Inspector General (responsible for counterfeiting and trafficking investigations). State and local administrative responsibilities States, the District of Columbia, Guam, and the Virgin Islands, through their local welfare offices, have primary responsibility for the day-to-day administration of the Food Stamp Program. They determine eligibility, calculate benefits, and issue food stamp allotments (using coupons or electronic benefit transfers) following Federal rules. They also have a significant voice in carrying out employment and training programs and in determining some administrative features of the program (e.g., the extent to which verification of household circumstances is pursued, the length of eligibility certification periods, the structure of EBT systems). Most often, the Food Stamp Program is operated through the same welfare agency and staff that runs the State's TANF Program. Puerto Rico, the Northern Mariana Islands, and American Samoa In addition to the regular Food Stamp Program, the Food Stamp Act directs funding for a Nutrition Assistance Program in the Commonwealth of Puerto Rico and another in American Samoa. Separate legislation authorizes a variant of the Food Stamp Program in the Commonwealth of the Northern Mariana Islands. Since July 1982, Puerto Rico has operated a Nutrition Assistance Program of its own design, funded by an annual Federal ``block grant.'' \3\ The Commonwealth's Nutrition Assistance Program differs from the regular Food Stamp Program primarily in that: (1) funding is limited to an annual amount specified by law \4\; (2) the Food Stamp Act allows the Commonwealth a great deal of flexibility in program design, as opposed to the regular program's extensive Federal rules (e.g., benefits are paid in cash (checks) rather than food stamp coupons); (3) income eligibility limits are about one-third those used in the regular Food Stamp Program; (4) maximum benefit levels are about 40 percent less than in the 48 contiguous States and the District of Columbia; and (5) different rules are used in counting income for eligibility and benefit purposes. In fiscal year 1999, Puerto Rico's Nutrition Assistance Program aided approximately 1.1 million persons each month with monthly benefits averaging $74.50 a person ($193 a household). --------------------------------------------------------------------------- \3\ Prior to July 1982, the regular Food Stamp Program operated in Puerto Rico, although with slightly different eligibility and benefit rules. \4\ For fiscal years 2000 and 2001, $1.268 billion and $1.301 billion are earmarked. The block grant funds the full cost of benefits and half the cost of administration. --------------------------------------------------------------------------- Under the terms of the 1976 Covenant with the Commonwealth of the Northern Mariana Islands and implementing legislation (Public Law 96-597), a variant of the Food Stamp Program was negotiated with the Commonwealth and began operations in July 1982. The program in the Northern Marianas differs primarily in that: (1) it is funded entirely by Federal money, up to a maximum grant of $5.1 million a year (increased to $6.1 million for fiscal year 2000); (2) a portion of each household's food stamp benefit must be used to purchase locally produced food; (3) maximum allotments are about 5 percent higher than in the 48 contiguous States and the District of Columbia; and (4) income eligibility limits are about half those in the regular program. As of the end of fiscal year 1999, the Northern Marianas' program assisted 5,100 people each month with monthly benefits averaging about $75 a person (see section 12). As with the Northern Marianas, American Samoa operates a variant of the regular Food Stamp Program. Under the Secretary of Agriculture's authority to extend Agriculture Department programs to American Samoa (Public Law 96-597) and a 1996 amendment to the Food Stamp Act made by the Federal Agriculture Improvement and Reform Act (Public Law 104-127), American Samoa receives an annual grant of up to $5.3 million to operate a Food Stamp Program limited to low-income elderly and disabled persons. While maximum monthly allotments are similar to those in the regular Food Stamp Program ($125 a person), income eligibility limits are about 25 percent lower. In fiscal year 1999, the program aided about 3,200 persons a month with average monthly benefits of just over $100 a person (see section 12). Program options The Food Stamp Act authorizes demonstration projects to test program variations that might improve operations. However, because of the law's substantial limits on how much any demonstration can reduce benefits or restrict eligibility, an administration policy that effectively bars demonstrations that have a significant cost to the Food Stamp Program, and implementation of the 1996 welfare reform law's provisions for State flexibility, no major demonstration projects are operational. Instead: (1) a few small demonstrations are operating in some States (these deal with joint application processing and standardized food stamp benefits for SSI recipients, cash benefits for the elderly and SSI recipients, and evaluation of earlier welfare reform demonstrations); and (2) extensive waivers of administrative rules are routinely granted. In addition to demonstration projects, States are allowed to implement some options. States may change administrative requirements such as those pertaining to application processing and reporting of household circumstances. They may issue benefits (at their own cost) to ineligible noncitizens and those ineligible under the new work rule for able-bodied adults without children (discussed below). With 50-percent Federal cost sharing, they can operate ``outreach'' programs to inform low-income persons about food stamps and support nutrition education efforts. They may choose to issue food stamp benefits through EBT systems. They may choose to operate a ``simplified'' program under which they can use many of their TANF rules and procedures when determining food stamp benefits for TANF recipients. They largely determine the length of eligibility certification periods. They may sanction food stamp recipients failing to meet other public assistance program rules or failing to cooperate in child support enforcement. They may, to a certain extent, waive the application of the new work rule for able-bodied adults without dependents (ABAWDs) (discussed below); and they may choose to disqualify an entire household if the head of household fails to fulfill work- related requirements. They may include the cash value of food stamp benefits when using welfare to subsidize some recipients' wages and can pay food stamp benefits in cash to other working households getting off cash welfare. Finally, States and localities may opt to run ``workfare'' programs, and States determine the type(s) of employment or training programs in which recipients must participate. Funding The Food Stamp Act provides 100 percent Federal funding of food stamp benefits, except where States choose to ``buy into'' the program and pay for issuing food stamp benefits to ineligible noncitizens or those made ineligible by the new work rule for ABAWDs (discussed below). The Federal Government also is responsible for its own administrative costs: overseeing program operations (including oversight of participating food establishments), printing and distributing food stamp coupons to welfare agencies, redeeming food stamp benefits through the Federal Reserve, and paying the Social Security Administration for certain intake services. In most instances, the Federal Government provides half the cost of State welfare agency administration.\5\ However, the 50-percent Federal share can be increased to as much as 60 percent if the State has a very low rate of erroneous benefit determinations. In addition, the Federal Government shares the cost of carrying out employment and training programs for food stamp recipients: (1) each State receives a Federal grant for basic operating costs (a formula share of $172 million in fiscal year 2000 and $219 million in fiscal year 2001); and (2) additional operating costs, as well as expenses for support services to participants (e.g., transportation, child care) are eligible for a 50-percent Federal match.\6\ Finally, States are allowed to retain a portion of improperly issued benefits they recover (other than those caused by welfare agency error): 35 percent of recoveries in fraud cases and 20 percent in other circumstances. Federal and State Food Stamp Act spending since 1979 is shown in table 15-4. --------------------------------------------------------------------------- \5\ Under the terms of Public Law 105-185, most States are subject to an annual reduction in their normal Federal share totaling about $200 million nationwide. \6\ The overwhelming majority (80 percent) of the formula grant funds must be spent on services to those covered by a new work requirement for able-bodied adults without dependents. --------------------------------------------------------------------------- Eligibility The Food Stamp Program has financial, employment/training- related, and ``categorical'' tests for eligibility. Its financial tests require that most of those eligible have monthly income and liquid assets below limits set by law. Under the employment/training-related tests, certain household members must register for work, accept suitable job offers, and fulfill work or training requirements (such as looking or training for a job) established by State welfare agencies. And, under a new work requirement established in 1996, food stamp eligibility for ABAWDs is limited to 3-6 months in any 36-month period unless they are working at least half time or in a work or training activity. Categorical eligibility rules make some automatically eligible for food stamps (many TANF, SSI, and GA recipients), and categorically deny eligibility to others (e.g., strikers and most noncitizens, postsecondary students, and people living in institutional settings). Applications cannot be denied because of the length of a household's residence in a welfare agency's jurisdiction or because the household has no fixed mailing address or does not reside in a permanent dwelling. TABLE 15-4.--RECENT FOOD STAMP ACT EXPENDITURES, 1979-99 [Obligations in millions of dollars] ------------------------------------------------------------------------ Administration \2\ -------------------- Fiscal year Benefits \1\ State Total (Federal) Federal and local ------------------------------------------------------------------------ 1979......................... $6,480 $515 $388 $7,383 1980......................... 8,685 503 375 9,563 1981......................... 10,630 678 504 11,812 1982......................... 10,408 709 557 11,674 1983......................... 11,955 778 612 13,345 1984......................... 11,499 971 805 13,275 1985......................... 11,556 1,043 871 13,470 1986......................... 11,415 1,113 935 13,463 1987......................... 11,344 1,195 996 13,535 1988......................... 11,999 1,290 1,080 14,369 1989......................... 12,483 1,332 1,101 14,916 1990......................... 15,090 1,422 1,174 17,686 1991......................... 18,249 1,516 1,247 21,012 1992......................... 21,883 1,656 1,375 24,914 1993......................... 23,033 1,716 1,572 26,321 1994......................... 23,736 1,789 1,643 27,168 1995......................... 23,759 1,917 1,748 27,424 1996......................... 23,510 1,984 1,842 27,336 1997......................... 20,810 2,058 1,904 24,772 1998......................... 18,228 2,169 1,988 22,385 1999......................... 17,217 2,100 1,874 21,191 ------------------------------------------------------------------------ \1\ All benefit costs associated with the Food Stamp Program, Puerto Rico's block grant, and grants to American Samoa and the Northern Marianas are included. Fiscal year 1998 and 1999 amounts shown in the table also cover the cost of State-financed benefits for noncitizens (approximately $100 million a year). For certain years, small downward adjustments have been made for overpayments collected from recipients and issued but unredeemed benefits. Over time, the figures reflect both changes in benefit levels and numbers of recipients. \2\ All Federal administrative costs associated with the Food Stamp Program appropriation and grants to Puerto Rico, American Samoa, and the Northern Marianas are included: Federal matching spending for the various administrative and employment and training program expenses of States and other jurisdictions, and direct Federal administrative costs. Figures for Federal administrative costs beginning with fiscal year 1993 are for those paid out of food stamp appropriations; for earlier years, these figures include estimates of food-stamp-related Federal administrative expenses paid out of other Agriculture Department appropriations accounts ($40-$60 million a year). Fiscal year 1998 and 1999 Federal amounts shown in the table also cover the administrative cost of State-financed benefits for noncitizens. State and local costs are estimated based on the known Federal shares of administrative and employment and training program expenses and represent an estimate of these costs to States and other jurisdictions; however, the State/local figures shown in the table do not include administrative expenses for State-financed benefits to noncitizens. Source: U.S Department of Agriculture budget justification materials for fiscal years 1981-2000. Compiled by the Congressional Research Service. The food stamp household The basic food stamp beneficiary unit is the ``household.'' A food stamp household can be either a person living alone or a group of individuals living together; there is no requirement for cooking facilities. The food stamp household is unrelated to recipient units in other welfare programs (e.g., TANF families with dependent children, elderly or disabled individuals or couples in the SSI Program). Generally speaking, individuals living together constitute a single food stamp household if they customarily purchase food and prepare meals in common. Members of the same household must apply together, and their income, expenses, and assets normally are aggregated in determining food stamp eligibility and benefits. However, persons who live together can sometimes be considered separate ``households'' for food stamp purposes, related coresidents generally are required to apply together, and special rules apply to those living in institutional settings. Most often, persons living together receive larger aggregate benefits if they are treated as more than one food stamp household. Persons who live together, but purchase food and prepare meals separately, may apply for food stamps separately, except for: (1) spouses; (2) parents and their children (21 years or younger), and (3) minors 18 years or younger (excluding foster children, who may be treated separately) who live under the parental control of a caretaker. In addition, persons 60 years or older who live with others and cannot purchase food and prepare meals separately because of a substantial disability may apply separately from their coresidents as long as their coresidents' income is below prescribed limits (165 percent of the Federal poverty guidelines). Although those living in institutional settings generally are barred from food stamps, individuals in certain types of group living arrangements may be eligible and are automatically treated as separate households, regardless of how food is purchased and meals are prepared. These arrangements must be approved by State or local agencies and include: residential drug addict or alcoholic treatment programs, small group homes for the disabled, shelters for battered women and children, and shelters for the homeless. Thus, different food stamp households can live together, food stamp recipients can reside with nonrecipients, and food stamp households themselves may be ``mixed'' (include recipients and nonrecipients of other welfare benefits). Income eligibility Except for households composed entirely of TANF, SSI, or GA recipients (who generally are automatically eligible for food stamps), monthly cash income is the primary food stamp eligibility determinant.\7\ In establishing eligibility for households without an elderly or disabled member,\8\ the Food Stamp Program uses both the household's basic (or ``gross'') monthly income and its counted (or ``net'') monthly income. When judging eligibility for households with elderly or disabled members, only the household's counted monthly income is considered; in effect, this procedure applies a more liberal income test to elderly and disabled households. --------------------------------------------------------------------------- \7\ Although they do not have to meet food stamp financial eligibility tests, TANF, SSI, and general assistance households must still have their income calculated under food stamp rules to determine their food stamp benefits. \8\ In the Food Stamp Program, ``elderly'' persons are those 60 years or older. The ``disabled'' generally are beneficiaries of governmental disability-based payments (e.g., Social Security or SSI disability recipients, disabled veterans, certain disability retirement annuitants, and recipients of disability-based Medicaid or general assistance). --------------------------------------------------------------------------- Basic (or gross) monthly income includes all of a household's cash income except the following ``exclusions'' (disregards): (1) most payments made to third parties (rather than directly to the household); (2) unanticipated, irregular, or infrequent income, up to $30 a quarter; (3) loans (deferred repayment student loans are treated as student aid, see below); (4) income received for the care of someone outside the household; (5) nonrecurring lump-sum payments such as income tax refunds and retroactive lump-sum Social Security payments (these are instead counted as liquid assets); (6) Federal energy assistance; (7) expense reimbursements that are not a ``gain or benefit'' to the household; (8) income earned by schoolchildren 17 or younger; (9) the cost of producing self- employment income; (10) Federal postsecondary student aid (e.g., Pell grants, student loans); (11) advance payments of Federal earned income credits; (12) ``on-the-job'' training earnings of dependent children under 19 in the Workforce Investment Act (WIA), formerly the Job Training Partnership Act (JTPA), Programs, as well as monthly ``allowances''; (13) income set aside by disabled SSI recipients under an approved ``plan for achieving self-support''; and (14) payments required to be disregarded by provisions of Federal law outside the Food Stamp Act (e.g., various payments under laws relating to Indians, payments under the Older Americans Act Employment Program for the Elderly). Counted (or net) monthly income is computed by subtracting certain ``deductions'' from a household's basic (or gross) monthly income. This procedure is based on the recognition that not all of a household's income is equally available for food purchases. Thus, a standard portion of income, plus amounts representing work expenses or excessively high nonfood living expenses, are disregarded. For households without an elderly or disabled member, counted monthly income equals gross monthly income less the following deductions: --A standard deduction set at $134 a month, regardless of household size; different standard deductions are used for Alaska ($229), Hawaii ($189), Guam ($269), and the Virgin Islands ($118). --Any amounts paid as legally obligated child support; --Twenty percent of any earned income, in recognition of taxes and work expenses; --Out-of-pocket dependent care expenses, when related to work or training, up to $175 a month per dependent, $200 a month for children under age 2; --Shelter expenses that exceed 50 percent of counted income after all other deductions, up to a periodically adjusted ceiling now standing at $275 a month. Different ceilings prevail in Alaska, Hawaii, Guam, and the Virgin Islands: $478, $393, $334, and $203, respectively. For households with an elderly or disabled member, counted monthly income equals gross monthly income less: --The same standard, child support, earned income, and dependent care deductions noted above; --Any shelter expenses, to the extent they exceed 50 percent of counted income after all other deductions, with no limit; and --Any out-of-pocket medical expenses (other than those for special diets) that are incurred by an elderly or disabled household member, to the extent they exceed a threshold of $35 a month. Except for those households comprised entirely of TANF, SSI, or GA recipients, in which case food stamp eligibility generally is automatic, all households must have net monthly income that does not exceed the Federal poverty guidelines. Households without an elderly or disabled member also must have gross monthly income that does not exceed 130 percent of the inflation-adjusted Federal poverty guidelines. Both these income eligibility limits are uniform for the 48 contiguous States, the District of Columbia, Guam, and the Virgin Islands; somewhat higher limits (based on higher poverty guidelines) are applied in Alaska and Hawaii. The net and gross eligibility limits on income are summarized in table 15-5. TABLE 15-5.--COUNTED (NET) AND BASIC (GROSS) MONTHLY INCOME ELIGIBILITY LIMITS FOR THE FOOD STAMP PROGRAM, FISCAL YEAR 2000 ------------------------------------------------------------------------ 48 States, the District of Household size Columbia, and Alaska Hawaii the territories ------------------------------------------------------------------------ Counted (net) monthly income eligibility limits \1\: 1 person...................... $687 $860 $791 2 persons..................... 922 1,154 1,061 3 persons..................... 1,157 1,447 1,331 4 persons..................... 1,392 1,740 1,601 5 persons..................... 1,627 2,034 1,871 6 persons..................... 1,862 2,327 2,141 7 persons..................... 2,097 2,620 2,411 8 persons..................... 2,332 2,914 2,681 Each additional person........ +235 +294 +270 Basic (gross) monthly income eligibility limits \2\: 1 person...................... 893 1,118 1,029 2 persons..................... 1,199 1,500 1,380 3 persons..................... 1,504 1,881 1,731 4 persons..................... 1,810 2,262 2,082 5 persons..................... 2,115 2,644 2,433 6 persons..................... 2,421 3,025 2,784 7 persons..................... 2,726 3,406 3,135 8 persons.................... 3,032 3,788 3,486 Each additional person....... +306 +382 +351 ------------------------------------------------------------------------ \1\ Set at the applicable Federal poverty guidelines, updated for inflation through calendar 1998. \2\ Set at 130 percent of the applicable Federal poverty guidelines, updated for inflation through calendar 1998. Source: U.S. Department of Agriculture, Food and Nutrition Service. Allowable assets Except for households automatically eligible for food stamps because they are composed entirely of Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), or GA recipients, eligible households must have counted liquid assets that do not exceed federally prescribed limits. Households without an elderly member cannot have counted liquid assets above $2,000. Households with an elderly member cannot have counted liquid assets above $3,000. Counted liquid assets include cash on hand, checking and savings accounts, savings certificates, stocks and bonds, individual retirement accounts (IRAs) and Keogh plans (less any early withdrawal penalties), and nonrecurring lump-sum payments such as insurance settlements. Certain less liquid assets are also counted: a portion of the value of vehicles (generally, the fair market value in excess of $4,650) and the equity value of property not producing income consistent with its value (e.g., recreational property). Counted assets do not include the value of the household's residence (home and surrounding property), business assets, personal property (household goods and personal effects), lump- sum earned income tax credit payments, burial plots, the cash value of life insurance policies and pension plans (other than Keogh plans and IRAs), and certain other resources whose value is not accessible to the household, would not yield more than $1,000 if sold (e.g., a car with a small equity value), or are required to be disregarded by other Federal laws. Work-related requirements To gain or retain eligibility, most able-bodied adults must: (1) register for work (typically with the welfare agency or a State employment service office); (2) accept a suitable job if offered one; (3) fulfill any work, job search, or training requirements established by administering welfare agencies; (4) provide the administering welfare agency with sufficient information to allow a determination with respect to their job availability; and (5) not voluntarily quit a job without good cause or reduce work effort below 30 hours a week. If the household head fails to fulfill any of these requirements, the entire household may, at State option, be disqualified for up to 180 days. Individual disqualification periods differ according to whether the violation is the first, second, or third; minimum periods, which may be increased by the State welfare agency, range from 1 to 6 months. Those who are exempt by law from these basic work requirements include: persons physically or mentally unfit for work; those under age 16 or over age 59; and individuals between 16 and 18 if they are not head of household or are attending school or a training program; persons working at least 30 hours a week or earning the minimum wage equivalent; persons caring for dependents who are disabled or under age 6; those caring for children between ages 6 and 12 if adequate child care is not available (this second exemption is limited to allowing these persons to refuse a job offer if care is not available); individuals already subject to and complying with another assistance program's work, training, or job search requirements; otherwise eligible postsecondary students; and residents of drug addiction and alcoholic treatment programs. Those not exempted by one of the above-listed rules must, at least, register for work and accept suitable job offers. However, their State welfare agency may require them to fulfill some type of work, job search, or training obligation. Welfare agencies must operate an employment and training program of their own design for work registrants whom they designate. Welfare agencies may require all work registrants to participate in one or more components of their program, or limit participation by further exempting additional categories and individuals for whom participation is judged impracticable or not cost effective. Program components can include any or all of the following activities: supervised job search or training for job search, workfare, work experience or training programs, education programs to improve basic skills, or any other employment or training activity approved by the Agriculture Department. However, at least 80 percent of unmatched Federal money provided for States' employment and training programs must be spent on services to those covered by the new work rule for ABAWDs (see below). Recipients who take part in an employment or training activity beyond work registration cannot be required to work more than the minimum wage equivalent of their household's benefit. Total hours of participation (including both work and any other required activity) cannot exceed 120 hours a month. Welfare agencies also must provide support for costs directly related to participation (e.g., transportation and child care). Agencies may limit this support to $25 per participant per month for all support costs other than dependent care, and to local market rates for necessary dependent care. In addition to these work-related requirements, the 1996 welfare reform law (Public Law 104-193) added a new work requirement for most able-bodied adults between 18 and 50 without dependents. They are ineligible for food stamps if, during the prior 36 months, they received food stamps for 3 months while not working at least 20 hours a week or participating in an approved work/training activity. Those disqualified under this rule are able to reenter the Food Stamp Program if, during a 30-day period, they work 80 hours or more or participate in a work/training activity. If they then become unemployed or leave work/training, they are eligible for an additional 3-month period on food stamps without working at least 20 hours a week or participating in a work/training activity. But they are allowed only one of these added 3-month eligibility periods in any 36 months for a potential total of 6 months on food stamps in any 36 months without half-time work or enrollment in a work/training program. At State request, this rule can be waived for areas with very high unemployment (over 10 percent) or lack of available jobs. Moreover, States may, on their own initiative, exempt up to 15 percent of those covered under the new work rule. In fiscal year 1999, States reported 2 million new work registrants. Of these, approximately 1.4 million--including an estimated 700,000 ABAWDs--were subject to employment and training program placement. Just over 600,000 of the 1.4 million potentially subject to employment and training participation requirements were reported actually placed in a work/training component. Work/training slots were not found for many of the remainder, or they left the Food Stamp Program or were sanctioned for failure to fulfill their obligation. Categorical eligibility rules and other limitations Food stamp eligibility is sometimes denied for reasons other than financial need or compliance with work-related requirements. Many noncitizens are barred--eligibility is extended only to children, the elderly, and disabled who were legally resident before August 1996, refugees and asylees for a limited period of time, veterans, those with a substantial history of work covered under the Social Security system, and certain other limited groups of aliens. Households with members on strike are denied benefits unless eligible prior to the strike. With some exceptions, postsecondary students (in school half time or more) who are fit for work and between ages 18 and 50 are ineligible. Persons living in institutional settings are denied eligibility, except those in special SSI-approved small group homes for the disabled, persons living in drug addiction or alcohol treatment programs, and persons in shelters for battered women and children or shelters for the homeless. Boarders cannot receive food stamps unless they apply together with the household in which they are boarding. Those who transfer assets for the purpose of qualifying for food stamps are barred. Persons who fail to provide Social Security numbers or cooperate in providing information needed to verify eligibility or benefit determinations are ineligible. Food stamps are denied those who intentionally violate program rules, for specific time periods ranging from 1 year (on a first violation) to permanently (on a third violation or other serious infraction); and States may impose food stamp disqualification when an individual is disqualified from another public assistance program. Automatic disqualification is required for those applying in multiple jurisdictions, fleeing arrest, or convicted of a drug-related felony. And States may disqualify individuals not cooperating with child support enforcement authorities or in arrears on their child support obligations. Benefits Food stamp benefits are a function of a household's size, its net monthly income, and maximum monthly benefit levels (in some cases, adjusted for geographic location). An eligible household's net income is determined (i.e., the deductions noted earlier are subtracted from gross income), its maximum benefit level is established, and a benefit is calculated by subtracting its expected contribution (30 percent of its counted net income) from its maximum allotment. Thus, a 3- person household with $400 in counted net income (after deductions) would receive a monthly allotment of $215 (the maximum 3-person benefit in the 48 States, $335, less 30 percent of net income, $120). Allotments are not taxable and food stamp purchases may not be charged sales taxes. Receipt of food stamps does not affect eligibility for or benefits provided by other welfare programs, although some programs use food stamp participation as a ``trigger'' for eligibility and others take into account the general availability of food stamps in deciding what level of benefits to provide. In fiscal year 1999, monthly benefits averaged $72 a person and about $170 a household. Maximum monthly allotments Maximum monthly food stamp allotments are tied to the cost of purchasing a nutritionally adequate low-cost diet, as measured by the Agriculture Department's Thrifty Food Plan (TFP). Maximum allotments are set at: the monthly cost of the TFP for a four-person family consisting of a couple between ages 20 and 50 and two school-age children, adjusted for family size (using a formula reflecting economies of scale developed by the Human Nutrition Information Service), and rounded down to the nearest whole dollar. Allotments are adjusted for food price inflation annually, each October, to reflect the cost of the TFP in the immediately previous June. Maximum allotments are standard in the 48 contiguous States and the District of Columbia; they are higher, reflecting substantially different food costs, in Alaska, Hawaii, Guam, and the Virgin Islands (table 15-6). Minimum and prorated benefits Eligible one-and two-person households are guaranteed a minimum monthly food stamp allotment of $10. Minimum monthly benefits for other household sizes vary from year to year, depending on the relationship between changes in the income eligibility limits and the adjustments to the cost of the TFP. In a few cases, benefits can be reduced to zero before income eligibility limits are exceeded. At present, minimum monthly allotments for households of three or more persons range from $2 to over $80. In addition, a household's calculated monthly allotment can be prorated (reduced) for 1 month. On application, a household's first month's benefit is reduced to reflect the date of application. If a previously participating household does not meet eligibility recertification requirements in a timely fashion, but does become certified for eligibility subsequently, benefits for the first month of its new certification period normally are prorated to reflect the date when recertification requirements were met. Application, processing, and issuing food stamps Food stamp benefits normally are issued monthly. The local welfare agency must either deny eligibility or make food stamps available within 30 days of initial application and must provide food stamps without interruption if an eligible household reapplies and fulfills recertification requirements in a timely manner. Households in immediate need because of little or no income and very limited cash assets, as well as the homeless and those with extraordinarily high shelter expenses, must be given expedited service (provision of benefits within 7 days of initial application). TABLE 15-6.--MAXIMUM MONTHLY FOOD STAMP ALLOTMENTS, FISCAL YEAR 2000 ---------------------------------------------------------------------------------------------------------------- 48 States and the Virgin Household size District Alaska \1\ Hawaii Guam Islands of Columbia ---------------------------------------------------------------------------------------------------------------- 1 person....................................................... $127 $158 $199 $188 $164 2 persons...................................................... 234 290 365 345 301 3 persons...................................................... 335 415 523 495 431 4 persons...................................................... 426 528 664 628 548 5 persons...................................................... 506 627 789 746 651 6 persons...................................................... 607 752 947 896 781 7 persons...................................................... 671 831 1,047 990 863 8 persons...................................................... 767 950 1,196 1,131 987 Each additional person........................................ +96 +119 +150 +141 +123 ---------------------------------------------------------------------------------------------------------------- \1\ Maximum monthly allotments for designated urban areas of Alaska. Two separate higher allotment levels are applied in remote rural areas of Alaska. They are 28 and 55 percent higher than the urban allotments shown here. Source: U.S. Department of Agriculture. Food stamp issuance is a welfare agency responsibility, and issuance practices differ among welfare agencies. Food stamp coupons have traditionally been issued by: (1) providing (usually mailing) recipients an authorization-to-participate card that is then turned in at a local issuance point (e.g., a bank or post office) when picking up their monthly allotment; or (2) mailing food stamp coupon allotments directly to recipients. However, in a growing number of States, electronic benefit transfer (EBT) systems are used. EBT systems replace coupons with an ATM-like card used to make food purchases at the point of sale by deducting the purchase amount from the recipient's food stamp benefit account. EBT issuance is used (either statewide or in part of the State) in the majority of States (reaching more than half of food stamp recipients). All remaining States are well along in the process of converting to EBT issuance, which is expected to be the national norm by 2002. Using food stamps ``Paper'' food stamp benefits are usually issued in the form of booklets of coupons. The smallest coupon denomination is $1; if change of less than $1 is due on a food stamp purchase, it is returned in cash. Typically, participating households use their food stamps in approved grocery stores to buy food items for home preparation and consumption; food stamp purchases are not taxable. However, the actual list of approved uses for food stamps is more extensive, and includes: (1) food for home preparation and consumption, not including alcohol, tobacco, or hot foods intended for immediate consumption; (2) seeds and plants for use in gardens to produce food for personal consumption; (3) food purchased at approved farmers' markets; (4) in the case of the elderly and SSI recipients and their spouses, meals prepared and served through approved communal dining programs; (5) in the case of the elderly and those who are disabled to an extent that they cannot prepare all of their meals, home-delivered meals provided by programs for the homebound; (6) meals prepared and served to residents of drug addiction and alcoholic treatment programs, small group homes for the disabled, shelters for battered women and children, and shelters or other establishments serving the homeless; and (7) where the household lives in certain remote areas of Alaska, equipment for procuring food by hunting and fishing (e.g., nets, hooks, fishing rods, and knives). As noted earlier, food stamp benefits also can be used through EBT cards. In this case, the card is swiped through an approved retailer's point-of-sale device, automatically debiting the recipient's food stamp account and crediting the retailer's bank account; unlike coupon transactions, recipients receive no cash change, and special arrangements must be made for nontraditional sites like farmers' markets. Quality Control (QC) Since the early 1970s, the Food Stamp Program has had a QC system to monitor the degree to which erroneous eligibility and benefit determinations are made by State welfare agencies. The system was established by regulation in the 1970s as an administrative tool to enable welfare officials to identify problems and take corrective actions. Today, by legislative directive, the QC system also is used to calculate and impose fiscal sanctions on States that have very high rates of erroneous benefit and eligibility decisions. It also provides outside evaluators with a general picture of the integrity of the eligibility and benefit determination process in each State. Under the QC system, welfare agencies, with Federal oversight, continuously sample their active food stamp caseloads, as well as their decisions to deny or end benefits. The agencies perform indepth investigations of the eligibility and benefit status of the randomly chosen cases looking for errors in applying Federal rules and otherwise erroneous benefit and eligibility outcomes. Over 90,000 cases are reviewed each year, and each State's sample is designed to provide a statistically valid picture of erroneous decisions and, in most instances, their dollar value in benefits. The resulting error rate information is used by program managers to chart needed changes in administrative practices, and by the Federal Government to assess fiscal sanctions on States with error rates above certain tolerance levels. This information also is used to reward States with error rates below a separate lower tolerance level, and to review administering agency plans for action to correct procedures to control errors. Both error rate findings and any assessed sanctions are subject to appeal through administrative law judges and the Federal courts. Sanctions may be reduced or waived if the State shows good cause or if it is determined that the sanction amounts should be invested in improved State administration. Interest may be charged on outstanding sanction liabilities if the administrative appeals process takes more than 1 year. QC reviews generate annual estimates of the proportion of cases in which administrators or recipients make an ``error'' and the dollar value of those errors. Caseload and dollar error rates are calculated for overpayments (including incorrect payments to eligible and ineligible households) and underpayments. The accuracy of welfare agency decisions denying or terminating assistance also is measured, with an error rate reflecting the proportion of denials and terminations that were improper; no dollar value is calculated. The national weighted average for the dollar value of overpayments was estimated at 7.6 percent in fiscal year 1998 (table 15-7). This was noticeably above the all-time low of 7 percent in 1991. Error rates for underpayments have been relatively unchanged historically (running about 2 percent), but have risen recently. In fiscal year 1998, the national weighted average underpayment dollar error rate was estimated at 3.1 percent. Finally, the rate of denials and terminations found improper in the most recent estimate (1994) was 3.8 percent. TABLE 15-7.--FOOD STAMP QUALITY CONTROL ERROR RATES, FISCAL YEAR 1998 [Percent of benefits paid or not paid in error] ------------------------------------------------------------------------ Overpayment Underpayment Combined State error rate error rate error rate ------------------------------------------------------------------------ Alabama......................... 6.55 1.12 7.67 Alaska.......................... 11.82 2.37 14.19 Arizona......................... 4.32 1.58 5.90 Arkansas........................ 4.96 1.01 5.96 California...................... 8.17 4.35 12.52 Colorado........................ 7.67 3.02 10.69 Connecticut.................... 10.34 2.79 13.13 Delaware........................ 9.71 2.74 12.45 District of Columbia............ 7.41 3.25 10.66 Florida......................... 8.47 4.47 12.94 Georgia......................... 9.90 3.75 13.65 Guam............................ 8.15 2.17 10.32 Hawaii.......................... 3.23 1.58 4.82 Idaho.......................... 6.12 4.33 10.45 Illinois....................... 11.04 3.00 14.04 Indiana........................ 4.98 1.81 6.79 Iowa........................... 10.02 3.35 13.37 Kansas......................... 8.03 3.08 11.10 Kentucky........................ 4.53 2.87 7.40 Louisiana...................... 5.52 2.16 7.67 Maine.......................... 7.43 2.72 10.15 Maryland....................... 11.56 3.84 15.40 Massachusetts................... 4.96 2.51 7.46 Michigan....................... 13.13 4.55 17.67 Minnesota...................... 3.35 1.83 5.18 Mississippi.................... 3.70 2.31 6.01 Missouri....................... 6.73 1.57 8.31 Montana........................ 5.29 2.04 7.33 Nebraska........................ 12.51 4.18 16.69 Nevada......................... 6.25 2.62 8.88 New Hampshire.................. 5.74 4.46 10.19 New Jersey..................... 8.70 3.21 11.91 New Mexico..................... 7.80 2.85 10.64 New York........................ 8.61 4.33 12.93 North Carolina................. 7.92 2.86 10.78 North Dakota................... 6.32 3.03 9.36 Ohio........................... 6.19 3.10 9.29 Oklahoma....................... 7.65 3.22 10.87 Oregon......................... 11.47 1.98 13.45 Pennsylvania.................... 7.42 2.43 9.85 Rhode Island.................... 4.66 2.37 7.03 South Carolina................. 6.60 1.46 8.07 South Dakota................... 1.59 0.52 2.11 Tennessee....................... 6.58 2.16 8.74 Texas........................... 3.82 1.45 5.27 Utah........................... 7.69 2.01 9.70 Vermont........................ 10.56 2.69 13.25 Virginia........................ 6.83 4.30 11.13 Virgin Islands................. 4.41 2.15 6.56 Washington...................... 12.04 3.16 15.21 West Virginia.................. 8.51 2.88 11.39 Wisconsin...................... 9.28 5.30 14.58 Wyoming........................ 3.48 1.33 4.81 --------------------------------------- U.S. average................ 7.63 3.07 10.69 ------------------------------------------------------------------------ Note.--Underpayment and overpayment rates may not add to combined rates due to rounding. Source: Food and Nutrition Service. The dollar error rates reported through the food stamp QC system are used as the basis for assessing the financial liability of States for overpaid and underpaid benefits. Although well over $1 billion in sanctions have been assessed since the early 1980s, less than $10 million has been collected. The appeals process has delayed collection, and sanctions have been forgiven or waived both by Congress and the administration. In amending the rules governing sanctions in 1988 and 1990, Congress forgave accumulated sanctions, and, in late 1992, the administration waived sanctions by allowing States to invest the amounts in improved administration. Permission for States to invest sanction amounts in improved program administration has now become the rule, and States regularly apply and agree to invest sanction amounts under Federal guidelines rather than pay the Federal Government. Moreover, the administration chose to reduce sanction assessments for fiscal year 1998 from $78 million (22 States) to $27 million (16 States) by removing small errors from the assessment calculations and because of the presumed error-rate effects of high and increased proportions of households with earnings and immigrant applicants. Legislated rules governing fiscal sanctions have changed a number of times. Under the most recent revision (1993), sanctions are assessed against States with combined (overpayment and underpayment) dollar error rates above the national weighted average combined error rate for the year in question (10.7 percent in 1998). Each State's sanction amount is determined by using a ``sliding scale'' so that its penalty assessment equals an amount reflecting the degree to which the State's combined error rate exceeds the national average (the ``tolerance level''). For example, if the tolerance level is 10 percent and a State's error rate is 12 percent, the State would be assessed a sanction of 0.4 percent of benefits paid in the State that year (the State's error rate is 2 percentage points, or 20 percent, above the tolerance level, and it is assessed a sanction representing 20 percent of the amount by which it exceeds the tolerance level; 2 percentage points 0.2 = 0.4). A State with a combined error rate of 14 percent would owe a penalty of 1.6 percent of benefits, or 40 percent of the amount by which it exceeds the 10-percent tolerance level (4 percentage points 0.4 = 1.6). Thus, the degree to which a State is assessed sanctions increases as its error rate rises, rather than having sanctions assessed equally on each dollar above the tolerance level. In fiscal year 1998, 22 States had combined error rates above the 10.7 percent tolerance level and were assessed some $78 million in sanctions (later lowered to $27 million, see above). States also can receive increased Federal funding for administration if their error rates are below a second, much lower threshold. States with a combined error rate below 6 percent are entitled to a larger-than-normal Federal share of their administrative costs. The regular 50-percent Federal match is, depending on the degree to which the State's error rate is below 6 percent, raised to a maximum of 60 percent, as long as the State's rate of improper denials and terminations is below the national average. This ``enhanced'' administrative funding has typically totaled $10-$20 million a year; in fiscal year 1998, five States had combined error rates below 6 percent (and the requisite low rate of improper denials) and received $27 million in enhanced funding. Finally, the QC system identifies the various sources of error and requires that States develop and carry out corrective action plans to improve payment accuracy. These reviews generally show that the primary responsibility for overpayment errors is almost evenly split between welfare agencies and clients. The most common errors are related to establishing food stamp expense deductions and households' income. Intentional program violations (e.g., fraud) can occur in a number of ways; the most common are intentionally misrepresenting household circumstances in order to obtain food stamps or increase benefits and trafficking in food stamp coupons. About one-quarter of the dollar value of erroneous benefit and eligibility determinations identified through QC reviews are fraudulent--just under 2 percent of all benefits issued in 1998. The most recent Agriculture Department study on the extent of food stamp coupon trafficking estimated it at some $800 million in 1993--3.7 percent of all benefits issued that year. Interaction With TANF, SSI, and GA Programs The Food Stamp Program is intertwined with Temporary Assistance for Needy Families (TANF), SSI, and State/local General Assistance (GA) Programs in three ways: it is administratively linked with TANF and GA Programs, most TANF, SSI, and GA recipients are automatically (categorically) eligible for food stamps, and the food stamp recipient population is made up largely of TANF, SSI, and GA participants. State and local offices and personnel administering TANF and GA Programs are typically the same offices that enroll people for food stamps and issue food stamp benefits. Joint food stamp-TANF/GA application and interview procedures are common. And information about applicants and recipients is shared. This coadministration does not apply in the case of the SSI Program, which is administered separately through Social Security Administration offices--although these offices do provide limited intake and referral services for the Food Stamp Program and one small pilot project provides standardized food stamp benefits through SSI offices. Food stamp rules generally make households in which all members are TANF, SSI, or GA recipients categorically eligible for food stamps, without reference to regular food stamp eligibility requirements. TANF recipients are broadly defined as anyone receiving benefits or services through a State's TANF Programs. SSI recipients' eligibility for food stamps is barred in California (see earlier eligibility discussion), and GA Programs must meet minimal Federal standards to qualify their recipients for food stamps. Categorical eligibility for food stamps is particularly important in cases where States have chosen TANF rules that are more liberal than food stamps (e.g., disregarding the value of vehicles for working households) in order to encourage work effort. However, it is important to keep in mind that food stamp rules often qualify a household for food stamps even after loss of TANF, SSI, or GA benefits. For most persons participating in the Food Stamp Program, food stamp aid represents a second or third form of government assistance. Fewer than 20 percent of food stamp households rely solely on nongovernmental sources for their cash income, although over one-quarter have some income from these sources (e.g., earnings, private retirement income). According to 1997 data from QC surveys, TANF (or Aid to Families with Dependent Children (AFDC)) contributed to the income of some 35 percent of food stamps households, and for the large majority of them TANF/AFDC was their only cash income. Supplemental Security Income (SSI) benefits went to about 26 percent of food stamp households; GA payments were received by around 6 percent. Recipiency Rates Table 15-8 shows overall food stamp participation rates from 1975 to 1998 using two measures: as a proportion of the total U.S. population and as a percentage of the population with income below the Federal poverty thresholds. Food stamp enrollment has fluctuated widely over the last 25 years, reaching its peak in fiscal year 1994; in that year, it averaged 27.5 million persons a month, with an all-time high of 28 million in the spring of 1994 (not including 1.4 million persons receiving aid under Puerto Rico's nutrition assistance grant in lieu of food stamps). TABLE 15-8.--FOOD STAMP PARTICIPATION RATES IN THE UNITED STATES, 1975- 98 ------------------------------------------------------------------------ Number of Food stamp participation food stamp as a percent of---- Year participants --------------------------- (in Total Poor millions) population \1\ population ------------------------------------------------------------------------ 1975.......................... 16.3 7.6 63.0 1976.......................... 17.0 7.9 68.1 1977.......................... 15.6 7.2 63.1 1978.......................... 14.4 6.5 58.8 1979.......................... 15.9 7.1 61.0 1980.......................... 19.2 8.4 65.6 1981.......................... 20.6 9.0 64.7 1982.......................... 20.4 8.8 59.3 1983.......................... 21.6 9.2 61.2 1984.......................... 20.9 8.8 62.0 1985.......................... 19.9 8.3 60.2 1986.......................... 19.4 8.0 59.9 1987.......................... 19.1 7.8 59.1 1988.......................... 18.7 7.6 58.9 1989.......................... 18.8 7.6 59.6 1990.......................... 20.0 8.0 59.6 1991.......................... 22.6 9.0 63.3 1992.......................... 25.4 10.0 68.9 1993.......................... 27.0 10.4 68.7 1994.......................... 27.5 10.5 72.1 1995.......................... 26.6 10.1 73.0 1996.......................... 25.5 9.6 69.8 1997.......................... 22.9 8.5 64.3 1998.......................... 19.8 8.2 57.4 ------------------------------------------------------------------------ \1\ Calculated as a percent of total U.S. resident population at the end of the fiscal year through 1996. For later fiscal years, calculated as a percent of total U.S. resident population reported in the March Current Population Survey (271 million for 1998). Note.--Participants in Puerto Rico are not included in this table. Data are monthly average for each year. Source: U.S. Census Bureau. Food stamp enrollment is responsive to changes in the economy (i.e., recipients' employment status and earnings), food stamp eligibility rules (and potential applicants' perception of their eligibility status), and administrative practices, as well as recipients getting or losing public assistance eligibility. With few changes in eligibility rules, the caseload expanded from a monthly average of 22.6 million persons in fiscal year 1991 to the 1994 peak. Since 1994, enrollment has declined continuously, dropping to 19.8 million persons in 8.2 million households during fiscal year 1998 because of the effects of an improved economy, Federal and State welfare reform initiatives, and a lower participation rate among those eligible. In fiscal year 1999, participation continued to decline, to a monthly average of 18.2 million people in 7.7 million households, reaching the lowest level since the 1970s. Until recently, Agriculture Department studies (e.g., for January 1994) have indicated that just over 70 percent of those individuals eligible for food stamps actually participate.\9\ The improved state of the economy and a number of more restrictive food stamp eligibility rules implemented in recent years are acknowledged to be primary factors affecting reduced food stamp participation. But the relatively dramatic recent decline in enrollment has led many observers to conclude that other factors are at work and that the 70+ percent participation rate noted above (as opposed to the number of persons eligible) has dropped significantly, to 63 percent in fiscal year 1997 by one estimate. Reasons cited for this decline range from changing welfare office administrative practices to recipients' lack of understanding that being dropped from (or discouraged from applying for) one public assistance program does not mean automatic ineligibility for food stamps. Based on preliminary Department studies, less- than-optimum participation appears to be concentrated among needy families with children and the ``working poor,'' but a full understanding of the dynamics of declining participation has not emerged. --------------------------------------------------------------------------- \9\ Participation rates were and are not uniformly as high as 70+ percent among all segments of the food-stamp-eligible population: e.g., participation is very low among the elderly (below one-third) and the ``working poor'' (less than half those eligible) and relatively high among those enrolled in other public assistance programs. While overall participation among eligible individuals was estimated at some 70 percent, the proportion of benefits issued as a proportion of potential benefits to all those eligible was projected to be higher (approximately 80 percent). Participation rates also varied by State-- from an estimated 40 percent to virtually all those thought to be eligible in a few States according to one Department study. Participation also differed by presence of children (higher participation rates) and income (declining participation rates with increased income). --------------------------------------------------------------------------- Table 15-9 shows the average monthly number of people (in thousands) who received food stamp benefits in each State, the District of Columbia, and the participating Commonwealths and territories for selected years between 1975 (when the Food Stamp Program became nationally available) and 1999. There has been a general increase in food stamp participants since 1975, with enrollment peaking in 1994. Recent Legislative History (For legislative history prior to 1996, see previous editions of the Green Book.) The 1996 Omnibus ``farm bill'' (the Federal Agriculture Improvement and Reform Act; Public Law 104-127) extended the Food Stamp Act's overall authorization for appropriations through fiscal year 1997, with no specific dollar limits. It also: (1) continued the requirement for nutrition assistance grants to Puerto Rico and American Samoa, and for employment and training programs, through fiscal year 2002; (2) revised rules for penalizing food stores in trafficking cases involving management; and (3) extended authority for several pilot projects. Later in 1996, the omnibus welfare reform law (the Personal Responsibility and Work Opportunity Act; Public Law 104-193) made the most extensive changes to the Food Stamp Program since the Food Stamp Act was rewritten in 1977. Under this law, spending TABLE 15-9.--FOOD STAMP RECIPIENTS BY JURISDICTION, SELECTED FISCAL YEARS 1975-99 [In thousands] -------------------------------------------------------------------------------------------------------------------------------------------------------- State 1975 \1\ 1979 \2\ 1985 \3\ 1990 \3\ 1994 \3\ 1995 \3\ 1996 \3\ 1997 \3\ 1998 \3\ 1999 \3\ -------------------------------------------------------------------------------------------------------------------------------------------------------- Alabama............................................. 393 525 588 449 551 525 509 486 427 405 Alaska.............................................. 12 25 22 25 46 45 46 45 42 41 American Samoa...................................... NA NA NA NA 2 3 3 3 3 3 Arizona............................................. 166 129 206 317 512 480 427 364 296 257 Arkansas............................................ 268 277 253 235 283 272 274 266 256 253 California.......................................... 1,517 1,334 1,615 1,936 3,155 3,175 3,143 2,815 2,259 2,027 Colorado............................................ 162 145 170 221 268 252 244 217 191 173 Connecticut......................................... 189 155 145 133 223 227 223 210 196 178 Delaware............................................ 39 45 40 33 59 57 58 54 46 39 District of Columbia................................ 112 100 72 62 91 94 93 90 85 84 Florida............................................. 767 828 630 781 1,474 1,395 1,371 1,192 991 933 Georgia............................................. 569 559 567 536 830 816 793 698 632 617 Guam................................................ 21 18 20 12 15 16 18 18 25 20 Hawaii.............................................. 84 96 99 77 115 125 130 127 122 125 Idaho............................................... 39 47 59 59 82 80 80 70 62 57 Illinois............................................ 948 837 1,110 1,013 1,189 1,151 1,105 1,020 923 820 Indiana............................................. 255 275 406 311 521 470 390 348 313 298 Iowa................................................ 118 117 203 170 196 184 177 161 141 129 Kansas.............................................. 63 73 119 142 192 184 172 149 119 115 Kentucky............................................ 449 405 560 458 522 520 478 444 412 396 Louisiana........................................... 502 523 644 727 756 711 670 575 537 516 Maine............................................... 151 121 114 94 136 132 131 124 115 109 Maryland............................................ 273 299 291 254 387 399 375 354 323 264 Massachusetts....................................... 560 429 337 347 442 410 374 340 293 261 Michigan............................................ 685 706 985 917 1,031 971 935 839 772 683 Minnesota........................................... 191 143 228 263 316 308 295 260 220 208 Mississippi......................................... 390 452 495 499 511 480 457 399 329 288 Missouri............................................ 299 280 362 431 593 576 554 478 411 408 Montana............................................. 38 33 58 57 71 71 71 67 62 61 Nebraska............................................ 50 55 94 95 111 105 102 97 95 92 Nevada.............................................. 34 27 32 50 97 99 97 82 72 62 New Hampshire....................................... 66 44 28 31 62 58 53 46 40 37 New Jersey.......................................... 565 524 464 381 545 540 541 490 425 385 New Mexico.......................................... 154 159 157 157 244 239 235 205 175 178 New York............................................ 1,398 1,704 1,834 1,546 2,154 2,183 2,099 1,919 1,627 1,545 North Carolina...................................... 537 517 474 419 630 614 631 586 528 505 North Dakota........................................ 19 20 33 39 45 41 40 38 34 33 Northern Mariana Islands............................ NA NA 4 4 4 4 4 4 4 4 Ohio................................................ 924 760 1,133 1,078 1,245 1,155 1,045 874 734 640 Oklahoma............................................ 184 184 263 267 376 375 354 309 288 271 Oregon.............................................. 208 160 228 216 286 289 288 259 238 224 Pennsylvania........................................ 893 923 1,032 954 1,208 1,173 1,124 1,009 907 835 Puerto Rico......................................... 1,800 1,822 1,480 1,480 1,410 1,370 1,330 1,240 1,180 1,140 Rhode Island........................................ 104 80 69 64 93 100 91 85 73 76 South Carolina...................................... 421 369 373 299 385 364 358 349 333 309 South Dakota........................................ 31 37 48 50 53 50 49 47 45 44 Tennessee........................................... 435 531 518 527 735 662 638 586 538 511 Texas............................................... 1,085 1,027 1,263 1,880 2,730 2,564 2,372 2,034 1,636 1,401 Utah................................................ 50 44 75 99 128 119 110 98 92 88 Vermont............................................. 46 40 44 38 65 59 56 53 46 44 Virginia............................................ 293 320 360 346 547 546 538 476 397 362 Virgin Islands...................................... 25 34 32 18 20 23 31 20 17 17 Washington.......................................... 239 205 281 337 468 476 476 442 362 307 West Virginia....................................... 204 182 278 262 321 329 300 287 269 247 Wisconsin........................................... 163 171 363 286 330 320 283 232 193 182 Wyoming............................................. 11 11 27 28 34 34 33 29 25 23 --------------------------------------------------------------------------------------------------- Total......................................... 19,199 18,926 21,385 21,510 28,888 27,995 26,871 24,106 20,974 19,334 -------------------------------------------------------------------------------------------------------------------------------------------------------- \1\ Year end participation, July 1975. Total does not match totals in other tables, which are annual average participation. \2\ Year end participation, September 1979. Total does not match totals in other tables, which are annual average participation. During fiscal year 1979, and into 1980, participation increases were largely due to the elimination of the food stamp purchase requirement. Figures for Alabama and Mississippi are estimates. \3\ Annual average monthly participation. NA--Not available. Note.--Data are average monthly number of recipients for each year. Source: U.S. Department of Agriculture, Food and Nutrition Service. Compiled by the Congressional Research Service. on food stamps was projected for a net reduction of $23.3 billion through fiscal year 2002 (or 13 percent less than under then-current law over fiscal years 1997-2002). The food-stamp- related provisions of the welfare reform act: (1) gave States significantly more control over program operations and expanded their administrative options (e.g., allowed States to more closely conform their TANF and food stamp rules and sanction food stamp recipients for failure to meet other public assistance program requirements), (2) established a new work rule limiting participation by able-bodied adults without dependents (ABAWDs) who are not working or in training for work to 3 months in any 3-year period, (3) added other new work rules (e.g., disqualification for significantly reduced work effort), (4) instituted an across-the-board benefit reduction, (5) barred eligibility for most legally resident noncitizens, (6) increased penalties for violating Food Stamp Program rules, and (7) encouraged implementation of electronic benefit transfer (EBT) systems for issuing food stamp benefits (requiring systems be in place nationwide by 2002). In 1997, the Balanced Budget Act's (BBA) food stamp component followed up on the 1996 welfare reform law with amendments that allowed States to exempt significant numbers of ABAWDs from new work requirements and more than doubled Federal funding for employment and training programs for food stamp recipients (targeted on adults without dependents). It also required States to establish systems to ensure that prisoners are not counted as part of any food stamp household. Separately, the 1997 emergency supplemental appropriations law (Public Law 105-18) permitted States to ``buy into'' the Food Stamp Program and pay for benefits to noncitizens ineligible for federally financed food stamps and adults without dependents made ineligible by work requirements. Most recently, the 1998 Agricultural Research, Extension, and Education Reform Act (Public Law 105-185) significantly reduced spending for the Federal share of State food stamp administrative costs--some $200 million a year--by imposing a flat annual dollar reduction on most States' entitlements to correct for a perceived ``windfall'' extra payment States can potentially receive through the interaction between food stamp and TANF funding rules. It also lowered Federal payments to States for employment and training programs for food stamp recipients. A portion of the money saved by these reductions was then used to restore food stamp eligibility to some of the noncitizens made ineligible by the 1996 welfare reform law (e.g., elderly and disabled persons legally resident at the time the 1996 law was enacted). Table 15-10 provides an overview of the characteristics of food stamp households for selected years since 1980; table 15- 11 summarizes annual vital statistics about the program since 1972. MEDICAID Medicaid, authorized under title XIX of the Social Security Act, is a Federal-State matching entitlement program providing medical assistance to low-income persons who are aged, blind, disabled, members of families with dependent children, or in certain other TABLE 15-10.--CHARACTERISTICS OF FOOD STAMP HOUSEHOLDS, SELECTED YEARS 1980-97 [In percent] -------------------------------------------------------------------------------------------------------------------------------------------------------- 1980 1985 1989 1990 1991 1992 1993 1994 1995 1996 1997 Food stamp recipient households (August) (Summer) (Summer) (Summer) (Summer) (Summer) (Summer) (Summer) (Annual) (Annual) (Annual) -------------------------------------------------------------------------------------------------------------------------------------------------------- With gross monthly income: Below the Federal poverty levels...... 87 94 92 92 91 92 91 90 92 91 92 Between the poverty levels and 130 10 6 8 8 9 8 8 9 8 8 8 percent of the poverty levels........ Above 130 percent of the poverty 2 (\1\) (\1\) (\1\) (\1\) (\1\) 1 1 (\1\) 1 (\1\) levels............................... With earnings............................. 19 20 20 19 20 21 21 21 21 23 24 With public assistance income \2\......... 65 68 73 73 70 66 68 69 68 67 67 With AFDC/TANF income................. NA 39 42 43 41 40 40 38 38 37 35 With SSI income....................... 18 19 21 19 19 19 20 23 23 24 26 With children............................. 60 59 60 61 61 62 60 61 60 59 58 And female heads of household......... NA 46 50 51 51 51 52 51 50 50 49 With elderly members \3\.................. 23 21 20 18 17 15 16 16 16 16 18 With elderly female heads of household NA 16 14 11 10 9 NA 11 NA NA \4\ 12 \3\.................................. ------------------------------------------------------------------------------------------------------------- Average household size.................... 2.8 2.7 2.6 2.6 2.6 2.5 2.6 2.5 2.5 2.5 2.4 -------------------------------------------------------------------------------------------------------------------------------------------------------- \1\ Percentage equals 0.5 or less. \2\ Public assistance income includes Aid to Families with Dependent Children, TANF, SSI, and general assistance. \3\ Elderly members and heads of household include those age 60 or older. \4\ Estimate. NA--Not available. Note.--The proportion of households with public assistance income shown in this table is an estimate that generally overcounts them because it is not corrected for households with multiple sources of public assistance income. The proportion of households with elderly female heads shown in this table for years prior to 1994 is an estimate that generally undercounts them because it counts only single-person female households. The 1995-97 figures represent characteristics over the full course of each fiscal year. Source: U.S. Department of Agriculture, Food and Nutrition Service surveys of the characteristics of food stamp households. Compiled by the Congressional Research Service. TABLE 15-11.--HISTORICAL FOOD STAMP STATISTICS, SELECTED YEARS, 1972-99 ---------------------------------------------------------------------------------------------------------------- Total Federal spending Average monthly (in millions) \1\ Average benefits (per person) Four-person ------------------------ monthly ------------------------ maximum Fiscal year Constant participation Constant monthly Current (1999) (in millions Current (1999) allotment \3\ dollars dollars \2\ of persons) dollars dollars \2\ ---------------------------------------------------------------------------------------------------------------- 1972 \4\.......................... $1,871 $7,516 11.1 $13.50 $52.90 $108 1974.............................. 2,843 10,097 12.9 17.60 53.30 116 1975 \5\.......................... 4,624 14,774 17.1 21.40 59.00 150 1976.............................. 5,692 16,973 18.5 23.90 62.00 162 Transition quarter \6\............ 1,367 3,941 17.3 24.40 62.90 166 1977.............................. 5,469 15,161 17.1 24.70 61.60 166 1978.............................. 5,573 14,434 16.0 26.80 61.00 170 1979 \7\.......................... 6,995 16,444 17.7 30.60 62.50 182 1980.............................. 9,188 19,008 21.1 34.40 65.30 204 1981.............................. 11,308 21,051 22.4 39.50 68.70 209 1982 \8\.......................... 11,117 19,286 22.0 39.20 65.70 233 1983 \8\.......................... 12,733 21,329 23.2 43.00 71.20 253 1984 \8\.......................... 12,470 20,056 22.4 42.70 68.50 253 1985 \8\.......................... 12,599 19,560 21.4 45.00 70.80 264 1986 \8\.......................... 12,528 18,970 20.9 45.50 70.10 268 1987 \8\.......................... 12,539 18,463 20.6 45.80 67.50 271 1988 \8\.......................... 13,289 18,798 20.1 49.80 70.90 290 1989 \8\.......................... 13,815 18,649 20.2 51.90 69.30 300 1990 \8\.......................... 16,512 21,233 21.5 59.00 74.00 331 1991 \8\.......................... 19,765 24,195 24.1 63.90 77.10 352 1992 \8\.......................... 23,539 27,966 26.9 68.50 82.20 370 1993 \8\.......................... 24,749 28,543 28.4 68.00 80.00 375 1994 \8\.......................... 25,525 28,679 28.9 69.00 78.90 375 1995 \8\.......................... 25,676 28,067 28.0 71.30 78.90 386 1996 \8\.......................... 25,494 27,116 26.9 73.30 78.60 397 1997.............................. 22,868 23,684 24.1 71.30 73.90 400 1998.............................. 20,397 20,786 21.0 71.10 72.50 408 1999.............................. 19,317 19,317 19.3 72.30 72.30 419 ---------------------------------------------------------------------------------------------------------------- \1\ Spending for benefits and administration, including Puerto Rico. \2\ Constant dollar adjustments were made using the overall Consumer Price Index for All Urban Consumers (CPI-U) for spending and the CPI-U ``food at home'' component for benefits. \3\ For the 48 contiguous States and the District of Columbia, as in effect at the beginning of the fiscal year in current dollars. \4\ The first fiscal year in which benefit and eligibility rules were, by law, nationally uniform and indexed for inflation. \5\ The first fiscal year in which food stamps were available nationwide. \6\ July through September 1976. \7\ The fiscal year in which the food stamp purchase requirement was eliminated, on a phased in basis. \8\ Includes funding for Puerto Rico's nutrition assistance grant; earlier years include funding for Puerto Rico under the regular Food Stamp Program. Participation figures include enrollment in Puerto Rico (averaging 1.1 to 1.5 million persons a month under the nutrition assistance grant and higher figures in earlier years). Average benefit figures do not reflect benefits in Puerto Rico under its nutrition assistance grant. For fiscal years 1998 and 1999, State-financed costs for benefits to some noncitizens are included (approximately $100 million a year). Note.--Figures in this table have been revised from similar tables presented in earlier versions of the Green Book to reflect more recent spending information and more precise inflation adjustments for constant dollar amounts. Source: Compiled by the Congressional Research Service. categories of pregnant women and children. Within Federal guidelines, each State designs and administers its own program. Thus, there is substantial variation among States in coverage, types and scope of benefits offered, and amount of payment for services. Legislation passed in the 105th Congress changed the rules governing Medicaid reimbursement to hospitals and community health centers, increased States' flexibility to enroll Medicaid recipients into managed care programs, and gave States additional options for conducting outreach and eligibility determinations. Recent legislation in the 106th Congress made further changes to Medicaid law. In addition to technical amendments to the Balanced Budget Act of 1997, Public Law 106- 113 included provisions allowing for increased disproportionate share allotments to certain States and the District of Columbia. The legislation also extended access to a special $500 million fund to pay for Medicaid eligibility determinations resulting from welfare reform and modified the phase-out schedule of cost-based reimbursement for federally qualified health centers and rural health clinics. The Foster Care Independence Act of 1999 (Public Law 106-169) allowed States to extend health insurance coverage under Medicaid for former foster care youth under age 21. Finally, the Ticket to Work and Work Incentives Improvement Act of 1999 (Public Law 106-170) gave States the option to eliminate upper income and assets eligibility limits for workers with disabilities. Eligibility The requirements of Federal law, coupled with the decisions of individual States in structuring their Medicaid Programs, determine who is actually eligible for Medicaid in a given State. In general, Federal law places limitations on the categories of individuals that can be covered and establishes specific eligibility rules for groups within those broad categories. Traditionally, Medicaid eligibility was limited to the following categories of individuals: low-income families with dependent children (in which one parent was absent, incapacitated or unemployed), low-income persons with disabilities, and low-income elderly. In addition, certain individuals with higher income, especially those facing large costs for medical care, were eligible as ``medically needy.'' Beginning in the 1980s, additional coverage categories were added to Medicaid for higher income children and pregnant women. Other coverage groups are identified in the statute as needing special protection against the high cost of medical care. Over 50 distinct population groups are identified in the Federal law. Some are mandatory groups that all States must cover; some are optional eligibility groups. Contributing to the complexity of the Medicaid Program are financial criteria. Medicaid is a means-tested entitlement program. To qualify, applicants' income and resources must be within certain limits, most of which are determined by States, again within Federal statutory parameters. Further complicating this picture is the flexibility States have in defining countable income and assets. Consequently, income and resource standards vary considerably among States, and different standards apply to different population groups within a State. In general, individuals in similar circumstances may be automatically eligible for coverage in one State, but required to assume a certain portion of their medical expenses before they can obtain coverage in a second State, and not eligible at all in a third State. Families, Pregnant Women, and Children Prior to the enactment of the 1996 welfare reform law (Public Law 104-193), there were two major routes to Medicaid for low-income families and children. The first was through cash welfare: individuals who qualified for Aid to Families with Dependent Children (AFDC), cash assistance, or Supplemental Security Income (SSI) were automatically eligible for Medicaid. The second was through legislation enacted during the last two decades that extended coverage to low-income pregnant women and children with no ties to the welfare system. The 1996 reforms replaced the AFDC Program with a block grant to States for Temporary Assistance for Needy Families (TANF), severing the automatic connection between cash assistance received by low-income families with children and Medicaid. The following categories describe eligibility pathways for families, pregnant women, and low-income children since welfare reform.\10\ --------------------------------------------------------------------------- \10\ Children can also qualify for Medicaid as a result of disability. For a detailed description of eligibility for persons with disabilities, see the subsequent section on SSI-related groups. --------------------------------------------------------------------------- Persons who would be eligible for cash assistance under the old AFDC Program Unlike AFDC, TANF eligibility does not confer automatic Medicaid eligibility. Nonetheless, current law (section 1931) preserves Medicaid entitlement for individuals who meet the requirements for the former AFDC Programs that were in effect in their States on July 16, 1996, even if they do not qualify for assistance under TANF. This categorical group was created to ensure that low-income families do not lose their Medicaid eligibility as a result of welfare reform. States are required to use the eligibility determination processes that were already in place for AFDC and Medicaid, including the same income and resource standards and other rules formerly used to determine if a family's income and composition made it eligible for AFDC and Medicaid. The 1996 welfare reform law allows States to modify their ``prereform'' AFDC income and resource standards as follows: (1) States may lower their income eligibility standards, but not below those used on May 1, 1988; (2) States may increase their income and resource standards up to the percentage increase in the Consumer Price Index (CPI); and (3) States may use less restrictive income and resource methodologies than those in effect on July 16, 1996. The 1996 income standards for AFDC Programs are well below the current Federal poverty level (FPL). For example, the maximum AFDC payment levels on July 16, 1996, range from about 14 percent of the current poverty level in Alabama to about 86 percent in Connecticut. The median level nationwide is 45 percent. In addition, for most eligibility categories in most States, individuals must have resources valued at less than a specified amount (typically $1,000 for an adult with one or more dependent children) to be eligible for Medicaid. States determine what items constitute countable resources and the dollar value assigned to those countable items. Assets may include, for example, cars, savings accounts, real estate, trust funds, and tax credits. A number of States have established more generous standards for determining Medicaid eligibility than those in place in 1996 and some States have taken advantage of the flexibility offered under section 1931 to realign Medicaid eligibility with eligibility for the new TANF Programs. By using less restrictive methods for calculating income and/or resources, those States effectively raised the income and resource standards in determining Medicaid eligibility for persons living in families with dependent children. In the near term, the flexibility afforded by section 1931 is not likely to become a major pathway for children into the Medicaid Program. Children with income too high to qualify for cash assistance have a number of other pathways to Medicaid. On the other hand, this provision may hold important promise for extending coverage to the parents of children who have fewer alternative pathways to Medicaid, or for simplifying Medicaid eligibility while at the same time qualifying entire families for coverage--an option that could help to raise participation in a program that has become increasingly complex for States to administer and for qualifying family members to navigate. Poverty level pregnant women and children Between 1986 and 1991, Congress gradually extended Medicaid to groups of pregnant women and children defined in terms of family income, rather than in terms of their ties to the AFDC Program. These are groups who, prior to the 1996 welfare reforms, did not qualify for cash assistance. States are required to cover pregnant women and children under age 6 with family incomes below 133 percent of the Federal poverty income guidelines. In 2000, the poverty guideline in the 48 contiguous States and the District of Columbia is $14,150 for a family of three. Coverage for pregnant women is limited to services related to the pregnancy or complications of the pregnancy. Eligibility extends to 60 days after termination of the pregnancy. Children receive full Medicaid coverage. Since July 1, 1991, States have been required to cover all children who are under age 19, who were born after September 30, 1983, and whose family income is below 100 percent of the FPL. The 1983 start date means that the mandatory coverage is extended to children by one age cohort each year until reaching all those under age 19 in fiscal year 2002. States are permitted, but not required, to cover pregnant women and infants under 1 year of age whose family income is between 133 and 185 percent of the FPL. In 1999, 41 States and the District of Columbia extended coverage to some or all pregnant women and infants in this category. States wishing to further expand eligibility have several options under Medicaid law, including waivers of Federal rules. The Balanced Budget Act of 1997 (Public Law 105-33), gives States the option of providing 12 months of continuous Medicaid coverage for children regardless of whether they continue to meet income eligibility tests, and to presume that certain low-income children are eligible in advance of completing the application process, allowing the States to provide services during the time that eligibility is being determined. States have been able to use ``presumptive eligibility'' for providing coverage to pregnant women before enrollment is finalized since 1986. Transitional medical assistance An increasingly important eligibility group for families with children is called ``transitional medical assistance'' or TMA. TMA was created to address the concern that the loss of Medicaid for individuals who could successfully obtain employment would provide a disincentive to seek and to keep jobs. States are required to continue Medicaid for 6 months for families that were covered by Medicaid under section 1931 in at least 3 of the last 6 months preceding the month in which the family lost such assistance due to increased hours of employment, increased earnings of the caretaker relative, or the family member's loss of one of the time limited earned income disregards. States must extend Medicaid coverage for an additional 6 months for families that were covered during the entire first 6-month period, and are earning below 185 percent of the Federal poverty line. The eligibility pathway for these groups will sunset at the end of fiscal year 2001. A small additional group of TMA-eligible persons are those who lose Medicaid coverage under section 1931 because of increased child or spousal support. Families eligible for this 4 month extension must have been receiving Medicaid under section 1931 in at least 3 of the preceding 6 months. Other AFDC-related groups While the AFDC Program no longer exists, a number of Medicaid eligibility groups that are tied to States' former AFDC rules remain. These rules continue to apply today because of the 1996 welfare reform law's provision requiring Medicaid coverage for people who would have qualified for the former AFDC Program. Other AFDC-related groups include persons who did not receive cash assistance because the payment would be less than $10; persons whose payments were reduced to zero because of recovery of previous overpayments; certain work supplementation participants; and persons who were ineligible for AFDC because of a requirement that could not be imposed under Medicaid. For example, States are permitted to deny Medicaid benefits to nonpregnant adults and heads of households who lose TANF benefits because of refusal to work, but must continue to provide Medicaid coverage to their children. States must continue Medicaid for recipients of adoption assistance and foster care under title IV-E of the Social Security Act. The Foster Care Independence Act of 1999 (Public Law 106-169) amends Medicaid law by giving States the option to extend Medicaid coverage to former foster care recipients ages 18, 19, and 20, and further allows States to limit coverage to those who were eligible for assistance under title IV-E before turning 18 years of age. Ribicoff children ``Ribicoff children,'' named for the former Senator that sponsored legislation authorizing coverage for this group, is a coverage pathway that is gradually diminishing in importance as more children are included under the poverty-related coverage categories. Ribicoff children are children under age 21 who meet income and resource requirements for the former AFDC Program but who do not meet other categorical requirements for AFDC. Included in this category are often children who are in State-sponsored foster care, are institutionalized, or are inpatients in psychiatric facilities. Targeted low-income children authorized under the State Children's Health Insurance Program (SCHIP) SCHIP was established by the Balanced Budget Act of 1997 under a new title XXI of the Social Security Act. The program, while completely separate from Medicaid, allows States to access funds to cover targeted low-income children through group health or other insurance that meets specific standards for benefits and cost sharing, or through their Medicaid Programs, or through a combination of both.\11\ SCHIP is discussed here because many States have extended Medicaid coverage to targeted low-income children, although they pay for that coverage with title XXI funds. --------------------------------------------------------------------------- \11\ Under limited circumstances, States have the option to purchase a health benefits plan that is provided by a community-based health delivery system, or to purchase family coverage under a group health plan as long as it is cost effective to do so. --------------------------------------------------------------------------- Title XXI defines SCHIP-eligible children as those who are not eligible for Medicaid or are covered under a group health plan or other insurance, and are living in families with incomes that are either: (1) above the State's Medicaid financial eligibility standard in effect in March 1997 but less than 200 percent of the FPL; or (2) in States with Medicaid income levels for children already at or above 200 percent of the poverty level as of March 1997, within 50 percentage points over this income standard. Within those broad statutory requirements, each State can define the group of targeted low- income children who may enroll in SCHIP. As of January 1, 2000, the Health Care Financing Administration (HCFA) had approved SCHIP plans for all 50 States, the District of Columbia, and 5 territories. Twenty-four States use Medicaid expansions, 15 have separate State programs, and 17 combine a Medicaid expansion and a separate State program. (For a more detailed description of the SCHIP Program, see below). Section 1902(r)(2) and demonstration waivers Medicaid statute includes other provisions that provide States with options to extend coverage to individuals who would not otherwise qualify. One of these provides States with flexibility in defining methods for counting income and assets (authorized under section 1902(r)(2) of the Social Security Act), and another allows States to create demonstration projects (authorized under section 1115 of the Social Security Act) to test new approaches for providing health care coverage. Section 1902(r)(2) of the Social Security Act allows State Medicaid Programs to submit a State plan amendment to use more liberal methods for calculating income and resources for some categories of Medicaid eligibles. Most States that have chosen to implement section 1902(r)(2) have done so only for children. In addition, most States using the flexibility created by section 1902(r)(2) do so by disregarding certain types or amounts of income to extend Medicaid to children in families with earnings that are too high to qualify for one of the other eligibility groups, or have assets that exceed the allowable levels. Demonstration waivers, authorized in section 1115 of the Social Security Act, enable States to waive some Medicaid requirements to create demonstration projects that promote the objectives of the Medicaid statute. Through a fairly cumbersome application process, a number of States have used such waivers to enact broad-based and sometimes statewide health reforms although demonstrations under this provision need not be statewide. A number of the demonstrations extend comprehensive health insurance coverage to low-income children (and families) who would otherwise not be eligible for Medicaid. Section 1115 waivers are also often used by the States to enroll their Medicaid beneficiaries in managed care plans.\12\ (See ``Medicaid Managed Care'' section below.) --------------------------------------------------------------------------- \12\ Section 1115 waivers have been used to create managed care delivery systems to provide acute and long-term care services to the aged and disabled. --------------------------------------------------------------------------- Aged and Disabled Persons SSI-related groups With one important exception, States are required to provide Medicaid coverage to recipients of SSI, the cash assistance program for aged, blind and disabled persons. For 2000, persons qualifying for SSI cannot have income in excess of $572 per month or resources of more than $2,000. The major exception to automatic Medicaid coverage for SSI recipients is in so-called ``209(b)'' States. States may elect the option, described in section 209(b) of the Social Security Amendments of 1972 (Public Law 92-603), allowing them to use income and resource standards that are no more restrictive than those in effect on January 1, 1972 (before the implementation of SSI) that established the option. These standards may vary in the definition of disability used, or in income or resource standards or definitions. There are 11 section 209(b) States: Connecticut Hawaii Illinois Indiana Minnesota Missouri New Hampshire North Dakota Ohio Oklahoma Virginia States that use more restrictive eligibility rules under section 209(b) must also allow applicants to deduct medical expenses from their income (not including SSI or State supplemental payments) in determining eligibility. This process is known as ``spend down.'' For example, if an applicant has a monthly income of $600 (not including SSI or State supplemental payments) and the State's maximum allowable income is $300, the applicant would qualify for Medicaid after incurring $300 in medical expenses. As discussed below, the spend down process is also used in establishing eligibility for the medically needy. Many States, recognizing that the SSI benefit standard may provide too little income to meet the individual's living expenses, supplement SSI with additional cash assistance payments known as State supplemental payments. States use a variety of different policies for providing these payments. Some States provide State supplemental payments to certain groups of elderly or disabled individuals whose income is too high to qualify for SSI. In those States, Medicaid coverage may be extended to persons receiving State supplemental payments on the same basis as persons receiving SSI. Some examples of specified groups of elderly or disabled State supplemental payment recipients include those living independently in the community but with special needs for in-home personal care assistance or home-delivered meals; or those residing in protected living arrangements, such as adult foster care or domiciliary care provided in large congregate care facilities. In 1999, all but seven States provided some amount of supplemental payments. When States provide Medicaid coverage to persons receiving State supplemental payments, the combined Federal SSI and State supplemental benefit payments become the effective income eligibility standard. Because specified amounts of income are disregarded in determining eligibility for SSI and most State supplemental payment programs, a person with income which exceeds the maximum benefit m