Section 18. Description of Other Major Federal Assistance Programs Not Within the Jurisdiction of the Committee on Ways and Means Several Federal programs outside of the jurisdiction of the Committee on Ways and Means provide benefits to some share of those people who also benefit from assistance programs that are within the jurisdiction of the committee. This appendix describes several such programs: food stamps; Medicaid; housing assistance; school lunch and breakfast programs; the supplemental food program for Women, Infants, and Children (WIC); assistance provided under the Job Training Partnership Act; Head Start; the Low-Income Home Energy Assistance Program (LIHEAP); Veterans' Benefits and Services Programs; and Workers' Compensation programs. Most families receiving AFDC would have incomes low enough to qualify them--or particular members of their families--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 are limited either by appropriations, or, in the case of the school feeding programs, by the willingness of schools to participate. Income received from AFDC is counted in determining eligibility for these programs--as well as benefit levels, in some cases. However, because these programs provide in-kind rather than cash assistance, benefits received under these programs are not counted in determining eligibility for AFDC. Tables 18-1 and 18-2 describe the overlap in recipients between programs within the jurisdiction of the Committee on Ways and Means and other major Federal assistance programs. Table 18-1 illustrates that 86.2 percent of AFDC recipient households received food stamps some time during the first quarter of 1992; 21.5 percent received WIC; 96.2 percent received Medicaid, 55.5 percent received free or reduced-price school meals; and 29.5 percent received housing assistance of some form. Table 18-2 illustrates the reverse. For example, 47.5 percent of food stamp households received AFDC benefits at some time during the first quarter of 1992; 24.8 percent of food stamp households received SSI; and 6.4 percent of food stamp households received unemployment compensation benefits. TABLE 18-1.--PERCENT OF RECIPIENTS IN PROGRAMS WITHIN THE JURISDICTION OF THE COMMITTEE ON WAYS AND MEANS RECEIVING ASSISTANCE FROM OTHER MAJOR FEDERAL ASSISTANCE PROGRAMS [Households, first quarter of 1992] ---------------------------------------------------------------------------------------------------------------- Social Unemployment AFDC SSI Security compensation Medicare ---------------------------------------------------------------------------------------------------------------- Number of households receiving benefits (in thousands).... 4,057 3,957 26,688 4,502 24,084 Percent receiving: Food stamps............................................. 86.2 46.2 7.3 10.4 6.6 WIC..................................................... 21.5 4.3 0.8 4.0 0.7 Free or reduced-price school meals...................... 55.5 18.2 3.7 12.7 2.4 Public or subsidized rental housing..................... 29.5 23.8 7.5 3.9 7.8 Medicaid................................................ 96.2 99.8 13.8 14.2 14.0 VA compensation or pensions............................. 1.9 4.0 6.5 2.2 6.9 ---------------------------------------------------------------------------------------------------------------- Note: Table reads that 86.2 percent of AFDC households, also receive food stamps. The 994,000 SSI recepients 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. Bureau of the Census, Survey of Income and Program Participation. TABLE 18-2.--PERCENT OF RECIPIENTS IN OTHER MAJOR FEDERAL ASSISTANCE PROGRAMS RECEIVING ASSISTANCE UNDER PROGRAMS WITHIN THE JURISDICTION OF THE COMMITTEE ON WAYS AND MEANS [Households, first quarter of 1992] ---------------------------------------------------------------------------------------------------------------- Free or Public or Food reduced subsidized VA stamps WIC school rental Medicaid compensation meals housing or pensions ---------------------------------------------------------------------------------------------------------------- Number of households receiving benefits (in thousands)....................................... 7,358 2,500 7,982 4,871 10,533 2,699 Percent receiving: AFDC............................................ 47.5 34.8 28.2 24.6 37.0 2.8 SSI............................................. 24.8 6.8 9.0 19.3 37.5 5.9 Social Security................................. 26.4 8.8 12.5 40.9 34.9 64.6 Unemployment compensation....................... 6.4 7.2 7.2 3.6 6.1 3.7 Medicare........................................ 21.5 6.3 7.1 38.7 32 61.8 ---------------------------------------------------------------------------------------------------------------- Note: Table reads that 47.5 percent of food stamp recipient households receive AFDC. The 994,000 SSI recepients 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. Bureau of the Census, Survey of Income and Program Participation. Table 18-3 illustrates the percentage of households receiving AFDC or SSI and also receiving assistance from other programs for selected time periods. This table is constructed from table 18-1 in previous editions of this document. As shown in table 18-3, the number of households receiving AFDC and SSI benefits in the first quarter of 1991 has increased significantly in comparison to earlier years. In the first quarter of 1992, the number of households receiving SSI benefits had another significant increase, while the number of AFDC households stayed relatively constant. The percentage of households receiving other benefits has fluctuated over the period. For most types of benefits, there is no discernible pattern, and the percentage has remained consistently the same. The one exception to this general rule is the percentage of AFDC households also receiving public or subsidized rental housing. Between the second quarter of 1987 and the first quarter of 1990, the percentage of AFDC households receiving housing benefits increased from 19.4 percent to 34.7 percent. The percentage had dropped down again slightly by the first quarter of 1992. TABLE 18-3.--PERCENT OF HOUSEHOLDS RECEIVING AFDC OR SSI AND ALSO RECEIVING ASSISTANCE FROM OTHER PROGRAMS FOR SELECTED TIME PERIODS ---------------------------------------------------------------------------------------------------------------- 1984 1986 1987 1988 1990 1991 1992 ---------------------------------------------------------------------------------------------------------------- Quarter 4 1 2 4 1 1 1 AFDC: Number of households receiving benefits (in thousands)......................................... 3,585 3,617 3,527 3,329 3,434 4,051 4,057 Percent receiving: Food Stamps..................................... 81.4 80.3 81.7 84.6 82.7 84.6 86.2 WIC............................................. 15.3 15.1 18.6 19.1 18.7 16.3 21.5 Free or reduced-price school meals.............. 49.2 50.5 55.6 52.5 52.7 52.2 55.5 Public or subsidized rental housing............. 23.0 24.8 19.4 31.3 34.7 31.5 29.5 Medicaid........................................ 93.2 95.2 95.5 95.6 97.6 96.9 96.2 VA compensation or pensions..................... 2.8 1.7 1.9 .9 1.3 2.4 1.9 SSI: Number of households receiving benefits (in thousands)......................................... 3,008 3,110 3,341 3,186 3,037 3,593 3,957 Percent receiving: Food Stamps..................................... 46.5 44.7 39.7 42.2 41.3 44.3 46.2 WIC............................................. 2.5 2.7 2.5 2.5 3.0 2.2 4.3 Free or reduced-price school meals.............. 12.7 14.7 11.9 15.5 15.3 17.5 18.2 Public or subsidized rental housing............. 21.6 20.7 20.0 22.2 21.4 24.9 23.8 Medicaid........................................ 100.0 100.0 99.6 99.6 99.7 99.6 99.8 VA compensation or pensions..................... 4.7 5.2 7.7 6.1 5.7 3.1 4.0 ---------------------------------------------------------------------------------------------------------------- Note: The 994,000 SSI recepients living in California receive a higher SSI payment in lieu of food stamps, and thus are not included in the food stamp percentages. 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 be able 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 level, is derived from the U.S. Department of Agriculture's lowest- cost food plan (the Thrifty Food Plan), 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, intended to enable it to purchase an adequate low-cost diet with its food stamps alone, while one 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 and intended to enable it to purchase an adequate low-cost diet with a combination of food stamps and its own cash. --------------------------------------------------------------------------- \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 percent of their total cash monthly income on food. --------------------------------------------------------------------------- Benefits are available to nearly all households that meet Federal eligibility tests for limited monthly income and liquid assets, as long as certain household members fulfill work registration and employment and training program requirements. In addition, recipients in the two primary Federal/State cash welfare programs, the AFDC and SSI programs, generally are automatically eligible for food stamps, as are recipients of State general assistance payments, if the household is composed entirely of AFDC, SSI, or general assistance beneficiaries.\2\ --------------------------------------------------------------------------- \2\Except for SSI recipients in California, where a State-financed adjustment to SSI benefits has replaced food stamp assistance, and general assistance programs that do not meet certain Federal standards. --------------------------------------------------------------------------- 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 virtually all of the rules that govern the program and, with limited variations for Alaska, Hawaii, and the territories, these rules are nationally uniform. States, the District of Columbia, and the territories may choose to offer the program or not. However, if they do offer food stamp assistance, it must be made available throughout the jurisdiction and comply with Federal rules. Sales taxes on food stamp purchases may not be charged, and food stamp benefits do not affect other assistance available to low-income households, nor are they taxed as income. Alternative programs are offered in Puerto Rico and the Northern Mariana Islands, 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). 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 (1) printing food stamp coupons and distributing them to welfare agencies and (2) 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 stamps are redeemed for cash, and which has some jurisdiction over ``electronic benefit transfer'' methods for issuing food stamp benefits), the Social Security Administration (responsible for the social security numbers recipients must have, provision of limited application ``intake'' services, and providing information to verify recipients' income), the Internal Revenue Service (providing assistance in verifying recipients' income and assets), and the Immigration and Naturalization Service (helping welfare offices confirm alien applicants' status). 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 following Federal rules. They also have a significant say about carrying out employment and training programs and some administrative features of the program (e.g., the extent to which verification of household circumstances is pursued, the method by which food stamps are issued). Most often, the Food Stamp program is operated through the same welfare agency and staff that runs the Federal/State AFDC and Medicaid programs. Puerto Rico and the Northern Mariana Islands 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. 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; (3) benefits are paid in cash (checks) rather than food stamp coupons; (4) income and liquid assets eligibility limits are about half those used in the regular Food Stamp program; (5) maximum benefit levels are about one-quarter less than in the 48 contiguous States and the District of Columbia; and (6) different rules are used in counting income for eligibility and benefit purposes. In fiscal year 1993, Puerto Rico's nutrition assistance program aided approximately 1.44 million persons each month with monthly benefits averaging $58 a person. --------------------------------------------------------------------------- \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 year 1993, $1.051 billion was earmarked; approximately $30 million of this amount was used to fund 2 special projects--a cattle tick eradication program and a wage-subsidy program. 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 (P.L. 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 $3.7 million a year; (2) a portion of each household's food stamp benefit must be used to purchase locally produced food; (3) maximum allotments are about 20 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. In fiscal year 1993, the Northern Marianas' program assisted some 2,900 people each month with monthly benefits averaging $72 a person. Program options The Food Stamp Act authorizes demonstration projects to test program variations that might improve operations.\5\ In addition, States are allowed to implement a few optional aspects of the Food Stamp program. States may require ``monthly reporting'' and ``retrospective budgeting'' for parts of their food stamp caseload. They may disregard the first $50 a month in child support payments, if they pay the benefit cost of doing so. States or localities may choose to run ``workfare'' programs, and State welfare agencies exercise primary responsibility in the design of food stamp employment and training programs. And States can operate ``outreach'' programs, with Federal cost-sharing, to inform low-income persons about food stamps. --------------------------------------------------------------------------- \5\At present, eight types of demonstration projects are underway: (1) ``cashout'' projects for the elderly and SSI recipients, (2) ``electronic benefit transfer'' projects testing alternative methods of benefit delivery, (3) projects providing cash benefits to very poor households who are eligible for expedited service, (4) projects testing simplified AFDC/FS application and benefit determination procedures, (5) ``welfare reform'' demonstrations testing various combinations of standardized AFDC/FS rules, cashing out food stamp benefits, and merging AFDC/FS rules and benefits, (6) a project granting quarterly (instead of monthly) benefit payments to SSI recipients eligible for very small benefits, (7) demonstrations conforming the operations of the AFDC JOBS program and the food stamp program's employment and training activities, and (8) awards to nonprofit organizations to test ways to improve program responsiveness to specific target groups in the low-income population. --------------------------------------------------------------------------- Funding The Food Stamp Act provides 100 percent Federal funding of food stamp benefits. The Federal Government is also 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 coupons through the Federal Reserve, and payments to the Social Security Administration for certain intake services. In most instances, the Federal Government provides half the cost of State welfare agency administration, including the cost of optional outreach activities.\6\ The 50-percent Federal share can be increased to as much as 60 percent where the State has a very low rate of erroneous benefit determinations. And, the cost of carrying out employment and training programs for food stamp recipients is shared in two ways: (1) each State receives a Federal grant for basic operating costs (a formula share of $75 million a year) 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.\7\ Finally, States are allowed to retain a portion of improperly issued benefits that they recover (other than those caused by welfare agency error): 25 percent of recoveries in fraud cases and 10 percent in other circumstances. --------------------------------------------------------------------------- \6\Until April 1994, the cost of certain activities was matched at more than the 50-percent rate: costs associated with the development of computer capability and fraud control activities were eligible for 63 and 75 percent Federal sharing, respectively; costs for implementing the Systematic Alien Verification for Entitlements (SAVE) program were fully reimbursed by the Federal Government. \7\The Federal 50-percent share for support services is limited. Coverage extends to (1) dependent care costs up to $160 per dependent per month and (2) other expenses (e.g., transportation) up to $25 per participant per month. Beginning in September 1994, States will be allowed to set their own limits on dependent care costs eligible for Federal matching, so long as they are not higher than local market rates. TABLE 18-4.--RECENT FOOD STAMP ACT EXPENDITURES [In millions of dollars] ------------------------------------------------------------------------ Administration\1\ -------------------- Fiscal year Benefits\2\ 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......................... 23,032 1,774 1,498 26,304 ------------------------------------------------------------------------ \1\All Federal administrative costs associated with the Food Stamp program and Puerto Rico's block grant are included: Federal matching for the various administrative and employment and training expenses of States and other jurisdictions, and direct Federal administrative costs. Figures for Federal administrative costs beginning with fiscal year 1989 include only those paid out of food stamp appropriation and the food stamp portion of the general appropriation for food program administration. Figures for earlier years include estimates of food stamp related Federal administrative expenses paid out of other Agriculture Department accounts. State and local costs are estimated based on the known Federal shares and represent an estimate of all administrative expenses of participating States and other jurisdictions (including Puerto Rico). \2\All benefit costs associated with the Food Stamp program and Puerto Rico's block grant are included. The benefit amounts shown in the table reflect small downward adjustments for overpayments collected from recipients and, beginning in 1989, issued but unredeemed benefits. Over time, the figures reflect both changes in benefit levels and numbers of recipients. Source: Budget documents prepared by the FNS. Compiled by the Congressional Research Service. 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 food stamp 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. The limited number of categorical eligibility rules make some automatically eligible for food stamps (most AFDC, SSI, and general assistance recipients), and categorically deny eligibility to others (e.g., strikers, illegal and temporarily resident aliens, those 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 it has no fixed mailing address or does not reside in a permanent dwelling. 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. It is unrelated to recipient units in other welfare programs (e.g., AFDC families with dependent children, elderly or disabled individuals and 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, some related co-residents are required to apply together, and special rules apply to those living together in institutional settings. Most often, persons living together receive larger aggregate benefits if they are treated as more than one food stamp household. In determining whether co-residents are treated as separate households, the following rules are applied. Unrelated co-residents may apply and be treated as separate households if they purchase food and prepare meals separately (this includes roomers and live-in attendants). As with unrelated persons, elderly or disabled adults (together with their spouses)\8\ and parents of minor children (together with their children) may apply and be treated separately from any other related co-residents, if they purchase food and prepare meals separately. Moreover, elderly persons who live with others and cannot purchase food and prepare meals separately because of a substantial disability may apply and be treated separately from their co-residents, as long as their co-residents' income is below prescribed limits. --------------------------------------------------------------------------- \8\In the Food Stamp program, ``elderly'' persons are those age 60 or older. The ``disabled'' generally are beneficiaries of governmental disability-based assistance (e.g., social security or SSI disability recipients, disabled veterans, certain disability retirement annuitants, recipients of disability-based Medicaid or general assistance). --------------------------------------------------------------------------- On the other hand, separate household treatment is barred for certain related co-residents, regardless of how food is purchased and meals are prepared: --Co-resident spouses may not apply and be treated separately; --Children under 18 and their co-resident parent(s) or caretaker(s) may not apply and be treated separately, although persons caring for foster children may opt to exclude the child(ren) from their household unit, and categorically ineligible parents (e.g., certain aliens) may apply on behalf of their otherwise eligible children; --Except for the elderly, disabled, and parents with minor children, closely related adult co-residents (i.e., parents and their adult children, brothers and sisters) may not apply and be treated separately. Effective September 1994, the definition of a food stamp household is revised to provide that persons who live together, but purchase food and prepare meals separately, may apply separately, except for: (1) spouses, (2) parents and their children (21 years or younger), other than children who themselves have a spouse or children, and (3) minors 18 years or younger (excluding foster children) who live under the parental control of a caretaker. Finally, 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 AFDC, SSI, or general assistance recipients (who generally are automatically eligible for food stamps), monthly cash income is the primary food stamp eligibility determinant.\9\ --------------------------------------------------------------------------- \9\Although they do not have to meet food stamp income and assets tests, AFDC, SSI, and general assistance households must still have their income calculated under food stamp rules to determine their food stamp benefits. --------------------------------------------------------------------------- In establishing eligibility for households without an elderly or disabled member, 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 applies a more liberal income test to elderly and disabled households. Basic (or gross) monthly income includes all of a household's cash income, only excepting the following ``exclusions'' (disregards): (1) most payments made to third parties (rather than directly to the household);\10\ (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) energy assistance; (7) expense reimbursements that are not a ``gain or benefit'' to the household; (8) income earned by schoolchildren; (9) the cost of producing self-employment income; (10) Federal postsecondary student aid (e.g., Pell grants, student loans)\11\ (11) advance payments of Federal earned income tax credits; (12) ``on-the- job'' training earnings of dependent children under 19 in Job Training Partnership Act (JTPA) programs, as well as JTPA monthly ``allowances;'' (13) income set aside by disabled SSI recipients under an approved ``plan to achieve self- sufficiency'' (PASS); 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). --------------------------------------------------------------------------- \10\Some third-party (``vendor'') payments for normal living expenses are not disregarded. \11\Postsecondary student aid other than Federal aid is disregarded to the extent that it is used or earmarked for tuition, mandatory school fees or expenses, loan origination fees, and miscellaneous education-related expenses. --------------------------------------------------------------------------- Counted (or net) monthly income is computed by subtracting certain ``deductions'' from a household's basic (or gross) monthly income. It recognizes that not all of a household's income is equally available for food purchases by disregarding a standard portion of income, plus amounts representing work expenses or excessively high non-food living expenses. For households without an elderly or disabled member, counted monthly income equals their basic (gross) monthly income less the following deductions: --an inflation-indexed (each October) ``standard deduction'' set at $131 a month in fiscal year 1994, regardless of household size;\12\ --------------------------------------------------------------------------- \12\Different standard deductions are used for Alaska ($223), Hawaii ($185), Guam ($262), and the Virgin Islands ($115). --------------------------------------------------------------------------- --20 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 $160 a month per dependent, rising to $200 a month for children under age 2 and $175 a month for other dependents in September 1994; and --any shelter expenses, to the extent they exceed 50 percent of counted income after all other deductions, up to a periodically adjusted ceiling standing at $207 a month from October 1993 through June 1994, and rising to $231 in July 1994.\13\ --------------------------------------------------------------------------- \13\Different ceilings prevail in Alaska, Hawaii, Guam, and the Virgin Islands. Through June 1994, they are $359, $295, $251, and $152; in July 1994, they will rise to $402, $330, $280, and $171. --------------------------------------------------------------------------- For households with an elderly or disabled member, counted monthly income equals their basic (gross) monthly income less the following deductions: --the same standard, 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. Finally, during fiscal year 1995, States will implement a newly enacted additional deduction: households will be allowed to deduct any amounts paid as legally obligated child support. Except for those households comprised entirely of AFDC, SSI, or general assistance recipients, in which case food stamp eligibility generally is automatic, all households must have counted (net) monthly income that does not exceed the Federal poverty guidelines, as adjusted for inflation each October. Households without an elderly or disabled member also must have basic (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. TABLE 18-5.--COUNTED (NET) AND BASIC (GROSS) MONTHLY INCOME ELIGIBILITY LIMITS [Effective October 1993 through September 1994] ------------------------------------------------------------------------ 48 States, Household size D.C., and the Alaska Hawaii territories ------------------------------------------------------------------------ COUNTED (NET) MONTHLY INCOME ELIGIBILITY LIMITS\1\ ------------------------------------------------------------------------ 1 person..................... $581 $725 $670 2 persons.................... 786 982 905 3 persons.................... 991 1,239 1,140 4 persons.................... 1,196 1,495 1,375 5 persons.................... 1,401 1,752 1,610 6 persons.................... 1,606 2,009 1,845 7 persons.................... 1,811 2,265 2,080 8 persons.................... 2,016 2,522 2,315 Each additional person....... +205 +257 +235 ------------------------------------------------------------------------ BASIC (GROSS) MONTHLY INCOME ELIGIBILITY LIMITS\2\ ------------------------------------------------------------------------ 1 person..................... $756 $943 $871 2 persons.................... 1,022 1,277 1,177 3 persons.................... 1,289 1,610 1,482 4 persons.................... 1,555 1,944 1,788 5 persons.................... 1,822 2,278 2,093 6 persons.................... 2,088 2,611 2,399 7 persons.................... 2,355 2,945 2,704 8 persons.................... 2,621 3,279 3,010 Each additional person....... +267 +334 +306 ------------------------------------------------------------------------ \1\Set at the applicable Federal poverty guidelines, updated for inflation through calendar 1992. \2\Set at 130 percent of the applicable Federal poverty guidelines, updated for inflation through calendar 1992. Allowable assets Except for those households who are automatically eligible for food stamps because they are composed entirely of AFDC, SSI, or general assistance 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 $4,500) 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 or are required to be disregarded by other Federal laws. Work registration and employment and training program requirements Unless exempt, adult applicants for food stamps must register for work, typically with the welfare agency or a State employment service office. To maintain eligibility, they must accept a suitable job if offered one and fulfill any work, ``job search,'' or training requirements established by administering welfare agencies. If the household head fails to fulfill any of these requirements, the entire household is disqualified, typically for 2 months; in other cases, failure to comply disqualifies the noncomplying household member only. Those who are exempt by law from work registration, having to accept a suitable job offer, and employment and training program requirements (work, job search, training) include: persons physically or mentally unfit for work, those under age 16 or age 60 or older, 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, and 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 (i.e., those in AFDC work, training, or job search programs or fulfilling unemployment compensation 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, the main thrust of the food stamp employment and training program is to ensure that nonexempt recipients (``mandatory'' work registrants) also fulfill some type of work, job search, or training obligation. To carry this out, welfare agencies are required to 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 (with the Agriculture Department's approval) by further exempting additional categories and individuals for whom participation is judged ``impracticable'' or not ``cost-effective.'' But they must allow otherwise exempt recipients to participate as volunteers and may set up special programs for them. Once the ``pool'' of work registrants who will be required to participate in an employment or training program is identified, welfare agencies must place at least 15 percent of them in one or more program components. Program components can include any or all of the following activities, at the welfare agency's option: 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. 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, and total hours of participation (including both work and any other required activity) cannot exceed 120 hours a month. Welfare agencies also must provide participants 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. Categorical eligibility rules and other limitations A few food stamp rules deny food stamp eligibility for reasons other than financial need (limited income or liquid assets) or compliance with work registration or employment and training program requirements: (1) Where the head of household has voluntarily quit a job without good cause, the household's eligibility is barred for 90 days; (2) Households containing members on strike are ineligible, unless eligible prior to the strike; (3) Postsecondary students (in school half-time or more) who are physically and mentally fit for work and between ages 18 and 50 are ineligible unless they are assigned to school by a JTPA or other employment and training program, are employed at least 20 hours a week or participating in a federally financed work-study program, are a parent with responsibility for the care of a dependent child under age 6, an AFDC recipient, responsible for a child between 6 and 12 and do not have access to child care adequate to allow both work and school, or are a full-time single parent student responsible for a child under age 12; (4) Eligibility is barred to illegal or temporarily resident aliens;\14\ (5) Eligibility is denied persons living in institutional settings, except for those in special SSI-approved small group homes for the disabled, persons living in drug addiction or alcoholic treatment programs, and persons in shelters for battered women and children or shelters for the homeless; (6) Boarders are ineligible unless they apply together with the household they are boarding with; (7) Eligibility is denied those who transfer assets for the purpose of qualifying for food stamps; (8) Those who intentionally violate food stamp rules are disqualified for specific time periods ranging from 6 months (on first violation) to permanently (on a third violation); (9) Those failing to provide social security numbers, or to cooperate in providing information needed to verify eligibility or benefit determinations, are ineligible. --------------------------------------------------------------------------- \14\In addition, a legal alien's sponsor's income and assets may deny the alien eligibility. --------------------------------------------------------------------------- BENEFITS Food stamp benefits are a function of a household's size, its counted (net) monthly income, and maximum monthly benefit levels (in some cases, adjusted for geographic location). An eligible household's counted income is determined (as for eligibility), its maximum benefit level is established (depending on its size and location), and a benefit is calculated by subtracting its expected contribution (30 percent of its counted income) from its maximum allotment; maximum allotments are available only to those with no counted monthly income. 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 1993, monthly benefits averaged $68 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).\15\ Maximum allotments are set at: the monthly cost of the TFP for a 4-person family consisting of a couple between ages 20 and 50 and 2 school-age children, adjusted for family size (using a formula reflecting economies of scale developed by the HNIS), increased by 3 percent, and rounded down to the nearest whole dollar. They are adjusted for food price inflation annually, each October, to reflect the cost of the TFP in the immediately previous June. --------------------------------------------------------------------------- \15\The TFP is the cheapest of four food plans designed by the Agriculture Department's Human Nutrition Information Service (HNIS) and is priced monthly (using data from price surveys done for the CPI-U). --------------------------------------------------------------------------- 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 18-6.--MAXIMUM MONTHLY FOOD STAMP ALLOTMENTS [Effective October 1993 through September 1994] ------------------------------------------------------------------------ 48 States Virgin Household size and Alaska\1\ Hawaii Guam Islands D.C. ------------------------------------------------------------------------ 1 person................ $112 $147 $187 $166 $144 2 persons............... 206 271 343 304 265 3 persons............... 295 388 492 436 380 4 persons............... 375 492 625 553 483 5 persons............... 446 585 742 657 573 6 persons............... 535 702 890 789 688 7 persons............... 591 776 984 872 760 8 persons............... 676 887 1125 997 869 Each additional person.. +85 +111 +141 +125 +109 ------------------------------------------------------------------------ \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 29 and 56 percent higher than the urban allotments shown here. 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, and in a few cases, benefits can be reduced to zero before income eligibility limits are exceeded (making some households eligible for no benefit). At present, minimum monthly allotments for households of three or more persons range from $2 to slightly over $80. In addition, a household's calculated monthly allotment can be prorated (reduced) for one 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 are normally 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 5 days of initial application). Food stamp issuance is a welfare agency responsibility and issuance practices differ among welfare agencies. Most food stamp coupons are issued by: (1) providing (usually mailing) recipients an authorization-to-participate (ATP) 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, several pilot projects issue cash benefits, and in a small but growing number of areas, 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. Using food stamps Food stamp benefits are 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. 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) in the case of the elderly and SSI recipients (and their spouses), meals prepared and served through approved communal dining programs for the elderly and disabled; (4) 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; (5) 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 (6) 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, sales taxes may not be charged on food stamp purchases. Quality control Since the early 1970s, the Food Stamp program, like other welfare programs, has had a ``quality control'' system to monitor the degree to which erroneous eligibility and benefit determinations are made by welfare agencies. The system was established by regulation in the1970s as an administrative tool to enable welfare officials to identify problems and needed corrective actions. Today, by legislative directive, it is also used to calculate and impose fiscal liabilities (``sanctions'') on States that have very high rates of erroneous benefit payments (very high dollar ``error rates''). Under the quality control system, welfare agencies, with Federal oversight, continuously sample their active food stamp caseloads, as well as the correctness of decisions to deny or end benefits, and perform in-depth investigations of the eligibility and benefit status of randomly chosen cases in the samples 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,'' to reward States with error rates below a separate lower tolerance level, and to review welfare 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. Quality control reviews generate annual estimates of caseload and dollar error rates: the proportion of cases in which an error is found and the dollar value of the errors as a proportion of total benefit dollars. 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 total national weighted average dollar error rate for overpayments was estimated at 8.2 percent in fiscal year 1992; this was up from 7 percent in 1991 (the all-time low) and was the highest rate recorded since 1985. The fiscal year 1992 caseload error rate for overpayments was estimated at 17.6 percent. Error rates for underpayments have been relatively unchanged over time. In fiscal year 1992, the national weighted average underpayment dollar error rate was estimated at 2.5 percent, and the underpayment caseload error rate was 9.9 percent. Finally, the rate of denials and terminations found improper was 5.1 percent in 1992. The dollar error rates reported through the food stamp quality control system are used as the basis for assessing the financial liability of States for overpaid and underpaid benefits. Although well over $500 million in sanctions have been assessed since the early 1980s, only approximately $5 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. Rules governing fiscal sanctions have changed a number of times. Under the most recent revision (1993), sanctions are assessed 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 1992). 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: i.e., 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 x 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 x 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 1992, 12 States had combined error rates above the 10.7 percent tolerance level. 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 $5-10 million a year; in fiscal year 1992, six States had combined error rates below 6 percent. Finally, the quality control system also identifies the various sources of error and requires that the majority of States develop and carry out corrective action plans to improve payment accuracy using the information gathered through quality control reviews. These reviews generally show that the primary ``responsibility'' for overpayment errors is almost evenly split between welfare agencies and clients, and the most common errors are related to establishing food stamp expense ``deductions'' and households' income. TABLE 18-7.--FOOD STAMP QUALITY CONTROL ERROR RATES: FISCAL YEAR 1992 [Percent of benefits paid or not paid in error] ------------------------------------------------------------------------ Underpayment Overpayment Combined State error rate error rate error rate ------------------------------------------------------------------------ Alabama......................... 1.76 6.47 8.23 Alaska.......................... 1.20 7.12 8.32 Arizona......................... 3.19 10.16 13.35 Arkansas........................ 2.23 5.25 7.47 California...................... 3.71 7.00 10.71 Colorado........................ 1.80 5.81 7.61 Connecticut..................... 2.47 5.65 8.12 Delaware........................ 1.51 6.87 8.38 D.C............................. 3.10 7.46 10.56 Florida......................... 3.96 15.71 19.68 Georgia......................... 2.65 8.30 10.96 Guam............................ 2.16 6.84 8.99 Hawaii.......................... .99 2.86 3.85 Idaho........................... 2.45 4.73 7.18 Illinois........................ 2.42 7.55 9.97 Indiana......................... 3.23 10.33 13.56 Iowa............................ 3.08 7.68 10.76 Kansas.......................... 1.27 5.62 6.89 Kentucky........................ 1.79 3.06 4.85 Louisiana....................... 1.82 7.33 9.15 Maine........................... 2.31 6.12 8.43 Maryland........................ 2.00 6.99 8.99 Massachusetts................... 1.22 6.16 7.38 Michigan........................ 1.97 7.08 9.05 Minnesota....................... 2.23 8.25 10.48 Mississippi..................... 1.80 8.28 10.08 Missouri........................ 2.64 7.13 9.77 Montana......................... 1.99 6.68 8.75 Nebraska........................ 2.52 6.69 9.21 Nevada.......................... 1.35 5.49 6.83 New Hampshire................... 2.43 9.63 12.06 New Jersey...................... 3.13 5.04 8.17 New Mexico...................... 2.85 5.70 8.55 New York........................ 2.97 8.23 11.20 North Carolina.................. 2.34 6.55 8.89 North Dakota.................... 1.58 4.30 5.89 Ohio............................ 1.88 11.31 13.19 Oklahoma........................ 2.64 6.28 8.92 Oregon.......................... 1.74 7.47 9.21 Pennsylvania.................... 1.95 6.18 8.13 Rhode Island.................... 1.30 3.10 4.40 South Carolina.................. 1.99 7.01 9.00 South Dakota.................... .92 3.60 4.52 Tennessee....................... 2.53 10.59 13.12 Texas........................... 2.22 9.61 11.83 Utah............................ 1.41 5.71 7.12 Vermont......................... 1.59 4.74 6.33 Virginia........................ 2.65 6.26 8.91 Virgin Islands.................. 2.33 3.32 5.64 Washington...................... 2.12 9.61 11.73 West Virginia................... 1.83 8.82 10.64 Wisconsin....................... 2.57 6.74 9.32 Wyoming......................... 2.73 5.92 8.65 ======================================= U.S. average.................... 2.50 8.19 10.69 ------------------------------------------------------------------------ Note: Underpayment and overpayment rates may not add to combined rates due to rounding. Source: Food Stamp Quality Control Annual Report, Fiscal Year 1992. INTERACTION WITH CASH ASSISTANCE PROGRAMS The Food Stamp program is intertwined with cash assistance in two ways: it is administratively linked to cash welfare aid at the State and local levels, and its recipient population is made up largely of recipients of other government benefits. At the State and local levels, the Food Stamp program is administered by the same welfare offices and personnel that administer cash assistance such as AFDC and general assistance. And joint food stamp/cash welfare application and interview procedures are the general rule. This coadministration does not apply for most elderly or disabled persons, whose SSI cash assistance is typically administered through Social Security Administration offices, although these offices do provide limited intake services for the Food Stamp program. For most persons participating in the Food Stamp program, food stamp aid represents a second or third form of government payment. Fewer than 20 percent of food stamp households rely solely on nongovernmental sources for their cash income, although over 25 percent have some income from these sources (e.g., earnings, private retirement income). According to quality control data, the AFDC program contributes to the income of about 41 percent of food stamp households, and for almost all of them AFDC is their only cash income. SSI benefits go to some 19 percent of food stamp households, and almost one- third have no other income. About 20 percent of food stamp households receive social security or veterans benefits. And nearly 15 percent are paid general assistance, unemployment insurance, or workers' compensation benefits. TABLE 18-8.--CHARACTERISTICS OF FOOD STAMP HOUSEHOLDS: 1980-91 [In percent] -------------------------------------------------------------------------------------------------------------------------------------------------------- Year and month survey was conducted ------------------------------------------------------------------------------------------------------------- Food stamp recipient households 1981 1980 (Aug.) 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 (Aug.) (Aug.) (Feb.) (Aug.) (Summer) (Summer) (Summer) (Summer) (Summer) (Summer) (Summer) -------------------------------------------------------------------------------------------------------------------------------------------------------- With gross monthly income: Below the Federal poverty levels...... 87 90 95 93 93 94 93 94 92 92 92 91 Between the poverty levels and 130 percent of the poverty levels........ 10 9 5 7 6 6 6 6 8 8 8 9 Above 130 percent of the poverty levels............................... 2 1 * * 1 * * * * * * * With earnings............................. 19 20 18 20 19 20 21 21 20 20 19 20 With public assistance income\1\.......... 65 69 69 75 71 68 69 74 72 73 73 70 With AFDC income...................... NA 40 42 50 42 39 38 41 42 42 43 41 With SSI income....................... 18 19 18 18 18 19 18 21 20 21 19 19 With children............................. 60 56 58 68 61 59 61 61 61 60 61 61 And female heads of household......... NA 43 45 52 47 46 48 50 50 50 51 51 With elderly members\2\................... 23 21 20 18 22 21 20 21 19 20 18 17 With elderly female heads of household\2\......................... NA 14 14 12 16 16 15 15 14 14 11 10 ============================================================================================================= Average household size.................... 2.8 2.7 2.8 2.9 2.8 2.7 2.7 2.7 2.6 2.6 2.6 2.6 -------------------------------------------------------------------------------------------------------------------------------------------------------- \1\Public assistance income includes AFDC, SSI, and general assistance. \2\Elderly members and heads of household include those age 60 or older. *Less than 0.5 percent. Source: U.S. Department of Agriculture (Food and Nutrition Service) surveys of the characteristics of food stamp households. Compiled by the Congressional Research Service. FOOD STAMP RECIPIENCY RATES Table 18-9 shows gross food stamp participation or recipiency rates using three different measures for the United States from 1975 to 1993. The actual number of food stamp participants has fluctuated widely over the last 18 years, reaching its highest average monthly level of 27 million (not including Puerto Rico) in 1993. As a percentage of the total U.S. resident population, food stamp participation rose significantly from a rate of 8.1 participants per 100 persons in 1975 to 10.4 percent in 1993. In the poor and pretransfer poor populations, the food stamp participation rates in 1991 were 63.3 and 59.3 percent respectively. ``Pretransfer poor'' is defined as income including Social Security and other social insurance benefits but not including means-tested benefits in relationship to the poverty thresholds. A recent report by the U.S. Department of Agriculture, entitled ``Food Stamp Program Participation Rates: January 1989,'' provides a more refined analysis of Food Stamp program participation rates and the extent to which the program is serving its target population. The report estimates that 59 percent of individuals eligible for food stamps participated, and that 56 percent of eligible households participated. Those households received 66 percent of benefits payable if all eligible households had been enrolled. In addition, particular subgroups of the eligible population participated at different rates. Among groups defined by monthly income levels, participation rates were highest for those with the lowest income and declined as income levels rose. Participation rates were 81 percent for those with income below half the Federal poverty guidelines, 68 percent for those with income between half the guidelines and the guidelines themselves, and 17 percent for those with incomes above the poverty thresholds. Demographic groups also showed different participation rates. Eligible elderly households participated at a rate of 29 percent, while households composed of single adult females with children were enrolled the at rate of 78 percent and 90 percent of eligible disabled nonelderly adult households participated. TABLE 18-9.--FOOD STAMP PARTICIPATION RATES IN THE UNITED STATES, 1975-93 ---------------------------------------------------------------------------------------------------------------- Food stamp participation as percent of-- Number of ----------------------------------------------- food stamp Pre-transfer Year participants Total Poor poor (in population\1\ population\2\ population\3\ millions) ---------------------------------------------------------------------------------------------------------------- 1975.............................................. 16.3 7.6 63.0 NA 1976.............................................. 17.0 7.9 68.1 NA 1977.............................................. 15.6 7.2 63.1 NA 1978.............................................. 14.4 6.5 58.8 NA 1979.............................................. 15.9 7.1 61.0 57.1 1980.............................................. 19.2 8.4 65.6 60.7 1981.............................................. 20.6 9.0 64.7 60.8 1982.............................................. 20.4 8.8 59.3 56.3 1983.............................................. 21.6 9.2 61.2 58.5 1984.............................................. 20.9 8.8 62.0 58.5 1985.............................................. 19.9 8.3 60.2 56.6 1986.............................................. 19.4 8.0 59.9 56.2 1987.............................................. 19.1 7.8 59.1 55.6 1988.............................................. 18.7 7.6 58.9 55.2 1989.............................................. 18.8 7.6 59.6 55.6 1990.............................................. 20.0 8.0 59.6 55.7 1991.............................................. 22.6 9.0 63.3 59.3 1992.............................................. 25.4 10.0 68.9 64.0 1993.............................................. 27.0 10.4 NA NA ---------------------------------------------------------------------------------------------------------------- \1\Total U.S. resident population was 258.4 million at the end of fiscal year 1993. \2\Data on the U.S. poor population can be found in appendix J, table 3. \3\Data on the U.S. pretransfer poor population can be found in appendix J, table 15, and previous editions of the Green Book. ``Pretransfer'' is defined as after social insurance income (including Social Security) but before receipt of any means-tested transfers. NA--not available. Note: Puerto Rico not included in table. Table 18-10 shows the number of people (in thousands) who received food stamp benefits in each State, including the District of Columbia, Puerto Rico, and the territories, for selected fiscal years between 1975 and 1993. The number of recipients varies greatly by State; in 1993, the number of beneficiaries ranged from 13,000 to 18,000 in the territories and 34,000 in Wyoming to 2.9 million in California. In nearly all States, there was a significant increase between 1975 and 1993. This is reflected in the total number of enrollees, which increased from 17.4 million persons (plus 1.8 million in Puerto Rico) in 1975, to 27 million people (plus 1.4 million in Puerto Rico) in 1993.\16\ --------------------------------------------------------------------------- \16\The 17.4 million person enrollment for food stamps in 1975 differs from the 16.3 million person participation level noted in table 9 because it represents year-end enrollment as opposed to annual average participation. The same is true for 1979, for which table 10 shows enrollment of 17.1 million persons (excluding Puerto Rico), and table 9 shows 15.9 million persons. State-by-State participation for 1975 and 1979 is not available on an annual average basis. --------------------------------------------------------------------------- TABLE 18-10.--FOOD STAMP RECIPIENTS, BY STATE: SELECTED YEARS, 1975-93 [Thousands of persons] ---------------------------------------------------------------------------------------------------------------- Fiscal years State --------------------------------------------------------------------------------------- 1975\1\ 1979\2\ 1985\3\ 1989\3\ 1990\3\ 1991\3\ 1992\3\ 1992\3\ ---------------------------------------------------------------------------------------------------------------- Alabama................. 393 525 588 436 449 504 550 560 Alaska.................. 12 25 22 26 25 30 38 43 Arizona................. 166 129 206 264 317 388 457 489 Arkansas................ 268 277 253 227 235 258 277 285 California.............. 1,517 1,334 1,615 1,773 1,936 2,212 2,558 2,866 Colorado................ 162 145 170 211 221 241 260 273 Connecticut............. 189 155 145 114 133 171 202 215 Delaware................ 39 45 40 30 33 41 51 58 District of Columbia.... 112 100 72 58 62 72 82 87 Florida................. 767 828 630 668 781 1,021 1,404 1,500 Georgia................. 569 559 567 485 536 648 751 807 Hawaii.................. 84 96 99 78 77 83 94 103 Idaho................... 39 47 59 61 59 65 72 79 Illinois................ 948 837 1,110 990 1,013 1,096 1,156 1,178 Indiana................. 255 275 406 285 311 375 448 497 Iowa.................... 118 117 203 168 170 180 192 196 Kansas.................. 63 73 119 128 142 156 175 188 Kentucky................ 449 405 560 447 458 496 529 530 Louisiana............... 502 523 644 725 727 742 779 779 Maine................... 151 121 114 84 94 116 133 138 Maryland................ 273 299 291 249 254 304 343 375 Massachusetts........... 560 429 337 314 347 397 429 443 Michigan................ 685 706 985 874 917 978 994 1,022 Minnesota............... 191 143 228 245 263 286 309 317 Mississippi............. 390 452 495 493 499 520 536 537 Missouri................ 299 280 362 404 431 490 549 591 Montana................. 38 33 58 56 57 61 66 70 Nebraska................ 50 55 94 92 95 99 107 113 Nevada.................. 34 27 32 41 50 63 80 93 New Hampshire........... 66 44 28 22 31 47 58 60 New Jersey.............. 565 524 464 353 381 441 495 531 New Mexico.............. 154 159 157 151 157 188 221 244 New York................ 1,398 1,704 1,834 1,463 1,546 1,717 1,885 2,045 North Carolina.......... 537 517 474 390 419 517 597 627 North Dakota............ 19 20 33 39 39 41 46 48 Ohio.................... 924 760 1,133 1,068 1,078 1,171 1,251 1,269 Oklahoma................ 184 184 263 261 267 296 346 370 Oregon.................. 208 160 228 213 216 240 265 283 Pennsylvania............ 893 923 1,032 916 954 1,052 1,137 1,186 Rhode Island............ 104 80 69 57 64 78 87 92 South Carolina.......... 421 369 373 272 299 329 369 394 South Dakota............ 31 37 48 50 50 52 55 56 Tennessee............... 435 531 518 500 527 608 702 774 Texas................... 1,085 1,027 1,263 1,636 1,880 2,155 2,454 2,659 Utah.................... 50 44 75 95 99 110 123 133 Vermont................. 46 40 44 34 38 47 54 58 Virginia................ 293 320 360 333 346 414 495 535 Washington.............. 239 205 281 283 337 385 432 462 West Virginia........... 204 182 278 259 262 281 310 322 Wisconsin............... 163 171 363 291 286 294 334 337 Wyoming................. 11 11 27 27 28 31 33 34 Guam.................... 21 18 20 13 12 11 20 13 Northern Marianas....... NA NA 4 4 4 2 2 3 Puerto Rico............. 1,800 1,822 1,480 1,460 1,480 1,490 1,480 1,440 Virgin Islands.......... 25 34 32 16 18 15 16 18 --------------------------------------------------------------------------------------- Total............. 19,199 18,926 21,385 20,232 21,510 24,105 26,888 28,426 ---------------------------------------------------------------------------------------------------------------- \1\Yearend participation, July 1975. Total does not match totals in other tables, which are annual average participation. \2\Yearend 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 participation. Source: U.S. Department of Agriculture, Food and Nutrition Service. LEGISLATION In the early 1980s, Congress enacted major revisions to the food stamp program to hold down costs and tighten administrative rules. The Omnibus Budget Reconciliation Act of 1981, the Agriculture and Food Act of 1981, and the Omnibus Budget Reconciliation Act of 1982 all contained amendments that the Congressional Budget Office has estimated held food stamp spending for fiscal years 1982 through 1985 nearly $7 billion (13 percent) below what would have been spent under pre-1981 law. These laws delayed various inflation indexing adjustments, reduced the maximum benefit guarantee by 1 percent (restored in 1984), established income eligibility ceilings at 130 percent of the Federal poverty levels, initiated prorating of first- month benefits, replaced the food stamp program in Puerto Rico with a nutrition assistance block grant, reduced benefits for those with earnings and high shelter expenses, ended eligibility for most postsecondary students and strikers, and raised fiscal penalties for States with high rates of erroneous benefit and eligibility determinations. In 1985, the Food Security Act (P.L. 99-198) reauthorized food stamp appropriations through fiscal year 1990 and reversed the earlier trend, significantly liberalizing food stamp rules. Major new initiatives included: a requirement for States to implement employment and training programs for food stamp recipients, automatic food stamp eligibility for AFDC and SSI recipients, and a prohibition on collection of sales taxes on food stamp purchases. Benefits were raised for some disabled and those with earnings, high shelter costs, and dependent care costs. Puerto Rico's nutrition assistance block grant was increased. Eligibility standards were liberalized, primarily by increasing and easing limits on assets. This was followed by several laws in 1986 and 1987 that opened up access to and increased benefits for the homeless, liberalized treatment of student aid, energy assistance, and income received from employment programs for the elderly and charitable organizations, further added to benefits for those with high shelter costs, and allowed Washington State to operate a special AFDC/food stamp demonstration project (followed by similar authorization for Minnesota in 1989). Legislation expanding eligibility and benefits continued into 1988 and 1989. The Hunger Prevention Act of 1988 (P.L. 100-435) increased food stamp benefits across the board, liberalized several eligibility and benefit rules, eased program access and administrative rules, and restructured the employment and training program and quality control system. The across-the-board benefit increase in maximum benefits (above normal inflation adjustments) called for by the act was 0.65 percent in fiscal year 1989, 2.05 percent in fiscal year 1990, and 3 percent in later years. Eligibility and benefit liberalizations included higher benefits for those with dependent care expenses, extension of liberal treatment for disabled applicants and recipients to new categories of disability, addition of a new income disregard for earned income tax credits, and liberalized treatment for farm households. Major provisions pertaining to program access and administration authorized 50-percent Federal cost sharing for State-option outreach activities, required coordination with cash welfare program application procedures, loosened rules governing monthly reporting and retrospective budgeting, allowed training of community volunteers to help screen applicants, and required, in some instances, issuance of the first 2 months' worth of benefits in a single allotment. Employment and training rules were revised by allowing some expansion in the types of activities supported (e.g., basic skills education), requiring increased support for participants' dependent care expenses, and mandating new performance standards for States. Finally, the food stamp quality control system was completely revamped to substantially reduce fiscal sanctions on States for erroneous benefit determinations, retroactively to fiscal year 1986. The 1990 Food, Agriculture, Conservation, and Trade Act (P.L. 101-624) reauthorized food stamp appropriations through fiscal year 1995. Although early versions of this act would have significantly liberalized food stamp eligibility and benefit rules, budget constraints dictated minimal expansions: limited revisions for postsecondary students, forgiveness of most pre-1986 quality control fiscal sanctions on States, a few changes in administrative rules to open up program access and strengthen penalties for trafficking, and new pilot projects and study commissions for welfare program coordination. In addition, other laws eliminated a special requirement for single food stamp/SSI applications for those about to be discharged from institutions and barred the food stamp program from counting (as a liquid asset) lump-sum earned income tax credit payments. Most recently, the Mickey Leland Childhood Hunger Relief Act (incorporated in the 1993 Omnibus Budget Reconciliation Act, P.L. 103-66) increased food stamp benefits and eased eligibility rules by: increasing and then removing the limit on special benefit adjustments (deductions) for households with very high shelter expenses, ending a practice of reducing benefits when there are short ``procedural'' breaks in enrollment, disregarding child support payments as income to the payor, increasing the degree to which vehicles are disregarded as assets in judging eligibility, revising the definition of a food stamp household to allow more persons who live together to apply separately, increasing the degree to which dependent care expense deductions can be claimed, expanding the degree to which Earned Income Tax Credits are disregarded as assets and State/local general assistance is disregarded as income, and boosting Puerto Rico's block grant. The Act also lowered the Federal share of some State administrative expenses (to 50 percent), reduced quality control fiscal penalties on States with high rates of erroneous benefit and eligibility determinations, and liberalized the appeals process for those penalties. Finally, it expanded support for employment and training programs for food stamp recipients, added a new method for collecting claims against recipients, and increased penalties related to trafficking in food stamps. The net cost of the 1993 amendments was estimated at $2.5 billion over fiscal years 1994-98. TABLE 18-11.--HISTORICAL FOOD STAMP STATISTICS ---------------------------------------------------------------------------------------------------------------- Total Federal spending Average monthly (in millions)\1\ Average benefits (per person) 4-person ------------------------ monthly ------------------------ maximum Fiscal year Constant participation Constant monthly Current (1993) (in millions Current (1993) allotment\2\ dollars dollars\3\ of persons) dollars dollars\3\ ---------------------------------------------------------------------------------------------------------------- 1972\4\........................... $1,871 $6,242 11.1 $13.50 $45.00 $108 1973.............................. 2,211 6,865 12.2 14.60 45.00 112 1974.............................. 2,843 7,370 12.9 17.60 45.20 116 1975\5\........................... 4,624 10,922 17.1 21.40 50.10 150 1976.............................. 5,692 12,718 18.5 23.90 52.80 162 Transition quarter\6\............. 1,367 3,000 17.3 24.40 52.90 166 1977.............................. 5,469 11,707 17.1 24.70 52.40 166 1978.............................. 5,573 10,947 16.0 26.80 52.00 170 1979\7\........................... 6,995 12,326 17.7 30.60 53.20 182 1980.............................. 9,188 14,883 21.1 34.40 55.40 204 1981.............................. 11,308 16,824 22.4 39.50 58.50 209 1982\8\........................... 11,117 15,947 22.0 39.20 56.10 233 1983\8\........................... 12,733 17,985 23.2 43.00 60.60 253 1984\8\........................... 12,470 16,989 22.4 42.70 58.10 253 1985\8\........................... 12,599 16,893 21.4 45.00 60.30 264 1986\8\........................... 12,528 16,412 20.9 45.50 59.60 268 1987\8\........................... 12,539 15,710 20.6 45.80 57.30 271 1988\8\........................... 13,289 16,106 20.1 49.80 60.30 290 1989\8\........................... 13,815 15,664 20.2 51.90 58.60 300 1990\8\........................... 16,512 17,739 21.5 59.00 63.10 331 1991\8\........................... 19,765 20,589 24.1 63.90 65.80 352 1992\8\........................... 23,539 24,027 26.9 68.50 69.90 370 1993\8\........................... 24,806 24,806 28.4 68.00 68.00 375 ---------------------------------------------------------------------------------------------------------------- \1\Spending for benefits and administration, including Puerto Rico. \2\For the 48 contiguous States and the District of Columbia, as in effect at the beginning of the fiscal year in current dollars. \3\Constant dollar adjustments were made using the overall Consumer Price Index for All Urban Consumers (CPI-U) for administrative costs and the CPI-U ``food at home'' component for benefits. \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 1.4 to 1.5 million persons a month under the nutrition assistance grant and higher figures in earlier years). Average benefit figures do not reflect somewhat lower benefits in Puerto Rico under its nutrition assistance grant. Note: Figures in this table have been revised from similar tables presented in earlier versions of this print to reflect more recent spending information and more precise inflation adjustments for constant dollar amounts. Source: Compiled by the Congressional Research Service. MEDICAID\17\ Medicaid, authorized under title XIX of the Social Security Act, is a Federal-State matching entitlement program providing medical assistance for low-income persons who are aged, blind, disabled, members of families with dependent children and certain other pregnant women and children. Within Federal guidelines, each State designs and administers its own program. Thus there is substantial variation among the States in terms of persons covered, types and scope of benefits offered, and amounts of payments for services. --------------------------------------------------------------------------- \17\For further information on the Medicaid program see: U.S. Congress, House Committee on Energy and Commerce, Medicaid Source Book: Background Data and Analysis (A 1993 Update), Energy and Commerce Committee Print 103-A. U.S. Govt. Print. Off. January 1993. --------------------------------------------------------------------------- Medicaid eligibility is generally linked to eligibility under programs within the jurisdiction of the Committee on Ways and Means, namely AFDC and SSI. Further, some poor aged persons are covered under both the Medicare and Medicaid programs. ELIGIBILITY Eligibility for Medicaid has traditionally been linked to actual or potential receipt of cash assistance under the Aid to Families with Dependent Children (AFDC) or Supplemental Security Income (SSI) programs. Legislation in the last decade has gradually extended coverage to low-income pregnant women and children who have no ties to the welfare system, and has provided partial coverage for new groups of low-income Medicare beneficiaries. Medicaid is available to two broad classes of eligible persons: the ``categorically needy'' and the ``medically needy.'' The two terms once distinguished between welfare- related beneficiaries and those qualifying only under special Medicaid rules. However, nonwelfare groups have been added to the ``categorically needy'' list over the years. As a result, the terms are no longer especially helpful in sorting out the various populations for whom mandatory or optional Medicaid coverage has been made available, and some analysts believe they should be abandoned. However, the distinction between the categorically and medically needy is still an important one, because the scope of covered services that States must provide to the categorically needy is much broader than the minimum scope of services for the medically needy. All States must cover certain mandatory groups of categorically needy individuals.\18\ Coverage of additional categorically needy groups is optional, as is coverage of the medically needy. The following discussion describes the mandatory and optional categorically eligible groups within each of the two basic populations served by Medicaid: families with children and the aged, blind, and disabled. The medically needy are discussed separately at the end of this section. --------------------------------------------------------------------------- \18\Arizona does not operate a traditional Medicaid program. Since 1982 it has operated a federally assisted medical assistance program for low-income persons under a demonstration waiver. --------------------------------------------------------------------------- FAMILIES AND CHILDREN AFDC-related groups Mandatory.--States must provide Medicaid to all persons receiving cash assistance under AFDC, as well as to additional AFDC-related groups who are not actually receiving cash payments. These groups include: persons who do not receive a payment because the amount would be less than $10; persons whose payments are reduced to zero because of recovery of previous overpayments; certain work supplementation participants; certain children for whom adoption assistance agreements are in effect or for whom foster care payments are being made under title IV-E of the Social Security Act; and persons ineligible for AFDC because of a requirement that may not be imposed under Medicaid. States are required to continue Medicaid for specified periods for certain families losing AFDC benefits after receiving them in at least 3 of the preceding 6 months. If the family loses AFDC benefits because of increased income from earnings or hours of employment, Medicaid coverage must be extended for 12 months. (During the second 6 months a premium may be imposed, the scope of benefits may be limited, or alternate delivery systems may be used.) If the family loses AFDC because of increased child or spousal support, coverage must be extended for 4 months. States are also required to furnish Medicaid to certain two-parent families whose principal earner is unemployed and who are not receiving cash assistance because the State is one of those permitted (under the Family Support Act of 1988) to set a time limit on AFDC coverage for such families. Optional.--States are permitted, but not required, to provide coverage to additional AFDC-related groups. The most important of these are the ``Ribicoff children,'' whose income and resources are within AFDC standards but who do not meet the definition of ``dependent child.'' States may cover these children up to a maximum age of 18, 19, 20, or 21, at the State's option, and may limit coverage to reasonable subgroups, such as children in privately subsidized foster care, or those who live in certain institutional settings. States may also furnish Medicaid to persons who would receive AFDC if the State's AFDC program were as broad as permitted under Federal law. Non-AFDC pregnant women and children Beginning in 1986, Congress has extended Medicaid to groups of pregnant women and children who are defined in terms of family income and resources, rather than in terms of their ties to the AFDC program. Mandatory.--States are required to cover pregnant women and children under age 6 with family incomes below 133 percent of the Federal poverty income guidelines. (The State may impose a resource standard that is no more restrictive than that for SSI, in the case of pregnant women, or AFDC, in the case of children.) Coverage for pregnant women is limited to services related to the pregnancy or complications 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 Federal poverty level. (Coverage of such children through age 7 has been optional since OBRA 1987.) The 1983 start date means that coverage of 18-year-olds will take effect during fiscal year 2002. Optional.--States are permitted, but not required, to cover pregnant women and infants under one year old with incomes below a State-established maximum that is above 133 percent of the poverty level but no more than 185 percent. As of July 1993, 34 States had made use of this option; 25 had set their income limits at the maximum of 185 percent. AGED AND DISABLED PERSONS SSI-related groups Mandatory.--States are generally required to cover recipients of SSI. However, States may use more restrictive eligibility standards for Medicaid than those for SSI if they were using those standards on January 1, 1972 (before the implementation of SSI). States that have chosen to apply at least one more restrictive standard are known as ``section 209(b)'' States, after the section of the Social Security Amendments of 1972 (Public Law 92-603) that established the option. These States may vary in their definition of disability, or in their standards related to income or resources. There are 12 section 209(b) States: Connecticut Minnesota North Dakota Hawaii Missouri Ohio Illinois New Hampshire Oklahoma Indiana North Carolina Virginia States using more restrictive income standards must allow applicants to deduct medical expenses from income (not including SSI or State supplemental payments, SSP) in determining eligibility. This process is known as ``spenddown.'' For example, if an applicant has a monthly income of $400 (not including any SSI or SSP) and the State's maximum allowable income is $350, the applicant would be required to incur $50 in medical expenses before qualifying for Medicaid. As will be discussed below, the spenddown process is also used in establishing medically needy eligibility. States must continue Medicaid coverage for several defined groups of individuals who have lost SSI or SSP eligibility. The ``qualified severely impaired'' are disabled persons who have returned to work and have lost eligibility as a result of employment earnings, but still have the condition that originally rendered them disabled and meet all non-disability criteria for SSI except income. Medicaid must be continued if such an individual needs continued medical assistance to continue employment and the individual's earnings are insufficient to provide the equivalent of SSI, Medicaid, and attendant care benefits the individual would qualify for in the absence of earnings. States must also continue Medicaid coverage for persons who were once eligible for both SSI and Social Security payments and who lose SSI because of a cost of living adjustment (COLA) in their Social Security benefits. Similar Medicaid continuations have been provided for certain other persons who lose SSI as a result of eligibility for or increases in Social Security or veterans' benefits. Finally, States must continue Medicaid for certain SSI-related groups who received benefits in 1973, including ``essential persons'' (persons who care for a disabled individual). Optional.--States are permitted to provide Medicaid to individuals who are not receiving SSI but are receiving State- only supplementary cash payments. Qualified Medicare beneficiaries and related groups Mandatory.--Effective January 1, 1991, States must provide limited Medicaid coverage for ``qualified Medicare beneficiaries'' (QMBs). These are aged and disabled persons who are receiving Medicare, whose income is below 100 percent of the Federal poverty level, and whose resources do not exceed twice the allowable amount under SSI. States must pay Medicare part B premiums (and, if applicable, part A premiums) for QMBs, along with required Medicare coinsurance and deductible amounts. Effective January 1, 1993, all States must pay part B premiums (but not part A premiums or part A or B coinsurance and deductibles) for beneficiaries who would be QMBs except that their incomes are between 100 percent and 110 percent of the poverty level; the upper limit rises to 120 percent on January 1, 1995. States are also required to pay part A premiums, but no other expenses, for ``qualified disabled and working individuals.'' These are persons who formerly received Social Security disability benefits and hence Medicare, have lost eligibility for both programs, but are permitted under Medicare law to continue to receive Medicare in return for payment of the part A premium. Medicaid must pay this premium on behalf of such individuals who have incomes below 200 percent of poverty and resources no greater than twice the SSI standard. Optional.--States are permitted to provide full Medicaid benefits, rather than just Medicare premiums and cost-sharing, to QMBs who meet a State-established income standard that is no higher than 100 percent of the Federal poverty level. Institutionalized persons and related groups (all optional) States may provide Medicaid to certain otherwise ineligible groups of persons who are in nursing facilities or other institutions, or who would require institutional care if they were not receiving alternative services at home or in the community. States may establish a special income standard for institutionalized persons, not to exceed 300 percent of the maximum SSI benefits payable to a person who is living at home and has no other resources. States may also provide Medicaid to persons who would qualify for SSI but for the fact that they are in an institution. A State may obtain a waiver under section 2176 of OBRA 1981 to provide home and community-based services to a defined group of individuals who would otherwise require institutional care. Persons served under such a waiver may receive Medicaid coverage if they would be eligible if in an institution. Such individuals may also be covered in a State that terminates its waiver program in order to take advantage of a new, no-waiver home and community-based services option created by OBRA 1990. A State may also provide Medicaid to several other classes of persons who need the level of care provided by an institution and would be eligible if they were in an institution. These include children who are being cared for at home, persons of any age who are ventilator-dependent, and persons receiving hospice benefits in lieu of institutional services. THE MEDICALLY NEEDY (ALL OPTIONAL) Forty-one States and other jurisdictions provide Medicaid to at least some groups of ``medically needy'' persons. These are persons who meet the nonfinancial standards for inclusion in one of the groups covered under Medicaid, but who do not meet the applicable income or resource requirements for categorically needy eligibility. The State may establish higher income or resource standards for the medically needy. In addition, individuals may spend down to the medically needy standard by incurring medical expenses, in the same way that SSI recipients in section 209(b) States may spend down to Medicaid eligibility. For the medically needy, spenddown may involve the reduction of assets, as well as of income. The State may set its separate medically needy income standard for a family of a given size at any level up to 133\1/ 3\ percent of the maximum payment for a similar family under the State's AFDC program. States may limit the groups of individuals who may receive medically needy coverage. If the State provides any medically needy program, however, it must include all children under 18 who would qualify under one of the mandatory categorically needy groups, and all pregnant women who would qualify under either a mandatory or optional group, if their income or resources were lower. As of October 1, 1993, the following States covered some groups of the medically needy: American Samoa Maryland Pennsylvania Arkansas Massachusetts Puerto Rico California Michigan Rhode Island Connecticut Minnesota Tennessee District of Columbia Montana Texas Florida Nebraska Utah Georgia New Hampshire Vermont Hawaii New Jersey Virgin Islands Illinois New York Virginia Iowa North Carolina Washington Kansas North Dakota West Virginia Kentucky Northern Mariana Islands Wisconsin Louisiana Oklahoma Maine Oregon MEDICAID AND THE POOR In 1992, Medicaid covered 11.2 percent of the total U.S. population (excluding institutionalized persons) and 47 percent of those with incomes below the Federal poverty level. Because categorical eligibility requirements for children are less restrictive than those for adults, poor children are much more likely to receive coverage. Table 18-12 shows Medicaid eligibility by age and income status in 1992, as reported in the March 1993 Current Population Survey (CPS) conducted by the Census Bureau. Note that persons shown as receiving Medicaid may have had other health coverage as well. Nearly all the elderly, for example, have Medicare and/or private coverage. Children under age 6 with family incomes below poverty are most likely to be covered. Coverage rates drop steadily with age and income until age 65. TABLE 18-12.--MEDICAID COVERAGE BY AGE AND INCOME STATUS, 1992 [All numbers are in thousands] ------------------------------------------------------------------------ Percent Age Medicaid Total with Medicaid ------------------------------------------------------------------------ Poor: 0 to 5....................... 4,458 6,046 73.7 6 to 18...................... 5,419 9,220 58.8 19 to 44..................... 4,988 13,201 37.8 45 to 64..................... 1,349 4,431 30.4 65 and over.................. 1,205 3,983 30.2 -------------------------------------- Total...................... 17,419 36,880 47.2 ====================================== Family income between 100 and 133 percent of poverty: 0 to 5....................... 726 1,693 42.9 6 to 18...................... 865 3,246 26.6 19 to 44..................... 968 5,708 17.0 45 to 64..................... 412 2,176 18.9 65 and over.................. 564 3,004 18.8 -------------------------------------- Total...................... 3,534 15,827 22.3 ====================================== Family income between 133 percent and 185 percent of poverty: 0 to 5....................... 737 2,690 27.4 6 to 18...................... 706 5,251 13.4 19 to 44..................... 891 9,847 9.0 45 to 64..................... 293 3,619 8.1 65 and over.................. 426 4,644 9.2 -------------------------------------- Total...................... 3,053 26,051 11.7 ====================================== Family income greater than 185 percent of poverty: 0 to 5....................... 888 13,079 6.8 6 to 18...................... 966 28,879 3.3 19 to 44..................... 1,363 74,489 1.8 45 to 64..................... 468 39,524 1.2 65 and over.................. 720 19,240 3.7 -------------------------------------- Total...................... 4,405 175,211 2.5 ====================================== All individuals: 0 to 5....................... 6,809 23,508 29.0 6 to 18...................... 7,956 46,596 17.1 19 to 44..................... 8,210 103,245 8.0 45 to 64..................... 2,522 49,750 5.1 65 and over.................. 2,914 30,870 9.4 -------------------------------------- Total...................... 28,411 253,969 11.2 ------------------------------------------------------------------------ Source: Current Population Survey (CPS), Annual March Income Supplement. Table prepared by CRS. The table excludes persons in institutions and approximately 300,000 children under age 15 whose income was not reported. The Medicaid counts are lower than those reported by HCFA, because some beneficiaries fail to report their coverage on the CPS. Some may also underreport their income. In addition, the income used to determine poverty status in this table includes cash welfare, while Medicaid eligibility is based on income prior to the receipt of welfare benefits. SERVICES States are required to offer the following services to categorically needy recipients under their Medicaid programs: inpatient and outpatient hospital services; laboratory and X- ray services; nursing facility (NF) services for those over age 21; home health services for those entitled to NF care; early and periodic screening, diagnosis, and treatment (EPSDT) for those under age 21; family planning services and supplies; physicians' services, and nurse-midwife services. OBRA 1989 required States to provide ambulatory services offered by federally qualified health centers, effective April 1, 1990, and services furnished by certified family or pediatric nurse practitioners, effective July 1, 1990. States may also provide additional medical services such as drugs, eyeglasses, inpatient psychiatric care for individuals under age 21 or over 65 (see table 25). OBRA 1990 added two new optional services: home and community-based services for the functionally disabled elderly and community supported living arrangement services for the developmentally disabled. Total expenditures under these services are capped. States are permitted to establish limitations on the amount of care provided under a service category (such as limiting the number of days of covered hospital care or number of physicians' visits). Certain services to children may not be limited. Federal law establishes the following requirements for coverage of the medically needy: (1) if a State provides medically needy coverage to any group it must provide ambulatory services to children and prenatal and delivery services for pregnant women; (2) if a State provides institutional services for any medically needy group it must also provide ambulatory services for this population group; and (3) if the State provides medically needy coverage for persons in intermediate care facilities for the mentally retarded (ICF/ MRs) or institutions for mental diseases, it must offer to all groups covered in its medically needy program the same mix of institutional and noninstitutional services as required under prior law (that is, either all of the mandatory services or alternatively the care and services listed in 7 of the 25 paragraphs in the law defining covered services). FINANCING The Federal Government helps States share in the cost of Medicaid services by means of a variable matching formula which is adjusted annually. The matching rate, which is inversely related to a State's per capita income, can range from 50 percent to 83 percent though currently the highest rate is 78.85 percent. Federal matching for the territories is set at 50 percent with a maximum dollar limit placed on the amount each territory can receive. The Federal share of administrative costs is 50 percent for all States except for certain items where the authorized rate is higher. REIMBURSEMENT POLICY States establish their own service reimbursement policies within general Federal guidelines. OBRA 1989 codified the regulatory requirement that payments must be sufficient to enlist enough providers so that covered services will be available to Medicaid beneficiaries at least to the extent they are available to the general population in a geographic area. Beginning April 1, 1990, States are required to submit to the Secretary their payment rates for pediatric and obstetrical services along with additional data that will assist the Secretary in evaluating the State's compliance with this requirement. Until 1980, States were required to follow Medicare rules in paying for institutional services. The Boren amendment, enacted with respect to nursing homes in 1980 and extended to hospitals in 1981, authorized States to establish their own payment systems, as long as rates were reasonable and adequate to meet the costs of efficiently and economically operated facilities. Rates for hospitals must also be sufficient to assure reasonable access to inpatient services of adequate quality. A Supreme Court ruling in 1990, Wilder v. Virginia Hospital Association, affirmed that hospitals have the right under this rule to seek Federal court review of State reimbursement levels. Suits alleging inadequate hospital and nursing home payment have been filed in a number of States. In addition to meeting general adequacy tests, State hospital reimbursement systems must provide for additional payments to facilities serving a disproportionate share of low- income patients. Unlike the comparable Medicare payments, Medicaid payments must follow a formula that considers a hospital's charity patients as well as its Medicaid caseload. OBRA 1990 established new rules for Medicaid reimbursement of prescription drugs. The law denies Federal matching funds for drugs manufactured by a firm that has not agreed to provide rebates. Under amendments made by the Veterans Health Care Act of 1992, a manufacturer is not deemed to have a rebate agreement unless the manufacturer has entered into a master agreement with the Secretary of Veterans Affairs. Rebate amounts vary depending on the nature of the drug. The minimum rebate is 11 percent of the average price. OBRA 1990 established a 4-year moratorium on reductions in most payment rates for pharmacists. Practitioners and providers are required to accept payments under the program as payment in full for covered services except where nominal cost-sharing charges may be required. States may generally impose such charges with certain exceptions. They are precluded from imposing such charges on services for children under 18, services related to pregnancy, family planning or emergency services, HMO services for the categorically needy, and services provided to NF inpatients who are required to spend all of their income for medical care except for a personal needs allowance. ADMINISTRATION Medicaid is a State-administered program. At the Federal level, the Health Care Financing Administration (HCFA) of the Department of Health and Human Services is responsible for overseeing State operations. Federal law requires that a single State agency be charged with administration of the Medicaid program. Generally, that agency is either the State welfare agency, the State health agency, or the umbrella human resources agency. The single State agency may contract with other State entities to conduct some program functions. Further, States may process claims for reimbursement themselves or contract with fiscal agents or health insuring agencies to process these claims. RECENT LEGISLATIVE CHANGES The following is a summary of the major Medicaid changes enacted as part of the Omnibus Budget Reconciliation Act of 1990 (OBRA 1990), Public Law 101-508: 1. Reimbursement for prescribed drugs.--The law requires manufacturers of prescription drugs to provide rebates to State Medicaid programs. States will be required to cover all the drugs manufactured by a firm entering into a rebate agreement. The minimum rebate is 10 percent of the average manufacturer price for the product. Beginning in 1993, States are required to have prospective (i.e., point-of-sale) and retrospective drug utilization review (DUR) programs, to assure that prescriptions are appropriate and medically necessary. Until the end of 1993, enhanced Federal matching payments are provided for State administrative costs related to the rebate and DUR programs. The law establishes a 4-year moratorium on reductions in most payment rates for pharmacists. 2. Required payment of premiums and cost-sharing for enrollment under group health plans where cost-effective.-- Effective January 1, 1991, the law requires States to pay premiums for group health plans for which Medicaid beneficiaries are eligible, when it is cost-effective to do so. Guidelines for determining cost-effectiveness are to be issued by the Secretary. States will pay any cost-sharing required by a plan and continue to furnish any Medicaid benefits not covered under the plan. Providers under group health plans will be required to accept plan payment as payment in full for Medicaid enrollees. 3. Protection of low-income Medicare beneficiaries.--The law accelerates phase-in of the requirement that States pay Medicare premiums and cost-sharing for QMBs, Medicare beneficiaries with incomes below 100 percent of the Federal poverty level; for all but 5 States, the requirement was effective January 1, 1991. All States must pay part B premiums (but not part A premiums or cost-sharing) for beneficiaries with incomes below 110 percent of the poverty level in 1993 and below 120 percent in 1995. 4. Child health provisions.--Effective July 1, 1991, all States are required to cover children under age 19 who were born after September 30, 1983, and whose family income is below 100 percent of the Federal poverty level. States are required to accept Medicaid applications for mothers and children at locations other than welfare offices, and are required to continue benefits for pregnant women until 2 months after the end of the pregnancy, and for infants through the first year of life. States are required to make additional payments for outlier cases and are prohibited from imposing durational limits on coverage for patients who are under age 1 in any hospital or under age 6 in a disproportionate share hospital. 5. Home and community-based care as optional service.--The law permits States to provide home and community-based services to functionally disabled Medicaid beneficiaries aged 65 or over, effective the later of July 1, 1991, or 30 days after the publication of interim rules. States will be permitted to limit eligibility for the services without waivers and thus to provide the services without meeting cost-effectiveness tests. Federal matching payments cannot exceed 50 percent of what it would have cost to provide Medicare nursing facility care to the same group of beneficiaries. Total Federal expenditures will be limited to $580 million over the period fiscal years 1991 to 1995. 6. Community supported living arrangements.--The law permits between two and eight States to provide community supported living arrangement services to developmentally disabled individuals who live with their families or in small community residential settings, effective the later of July 1, 1991, or 30 days after the publication of interim rules. Services will include personal assistance, training and habilitation, and other services needed to help with activities of daily living. Total Federal expenditures will be limited to $100 million over the period fiscal years 1991 to 1995. 7. Payments for COBRA continuation coverage.--The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA, Public Law 99-272) provides that employees or dependents leaving an employee health insurance group in a firm with 20 or more employees must be offered an opportunity to continue buying insurance through the group for 18 to 36 months (depending on the reason for leaving the group). OBRA 1990 permits State Medicaid programs to pay for COBRA continuation coverage, when it is cost effective to do so, effective January 1, 1991. S