Description and Assessment of State Approaches to Diversion Programs and Activities Under Welfare Reform

Publication Date

Jul 31, 1998

An Interim Report of the Findings of the First Phase of the Research

The George Washington University Center for Health Policy Research, August 1998

Kathleen A. Maloy, JD, PhD
LaDonna A. Pavetti, PhD¹
Peter Shin, MPH
Julie Darnell, MHSA²
Lea Scarpulla-Nolan, MA

Funded By:
The Administration for Children and Families and The Assistant Secretary for Planning and Evaluation
US Department of Health and Human Services

Acknowledgments

Many people contributed to the completion of this preliminary study. Most important among them are the numerous state officials who gave their time, granted interviews, and furnished materials. We appreciate their time and assistance; without their participation this study would not have been possible.

We also appreciate the assistance and support from federal officials with the Administration for Children and Families and the Assistant Secretary for Planning and Evaluation in the US Department of Health and Human Services. We are grateful for the opportunity, which they gave to us, to explore this important area of welfare reform.

We are grateful to The Robert Wood Johnson Foundation for providing additional support to assist in the completion of this phase of the project and the production of this report.

Finally, we appreciate the efforts of Soeurette Cyprien, Research Assistant on the project. Without her tireless efforts in arranging interviews, developing and managing files, and providing production assistance, completion of this study and report would not have been possible.

This report was reviewed by federal officials with the Administration for Children and Families, the Assistant Secretary for Planning and Evaluation, and the Health Care Financing Administration in the US Department of Health and Human Services, by staff of the Center on Budget and Policy Priorities, and by state officials from 30 states. We appreciate their valuable comments and the report benefited from their review. The opinions expressed in this report belong solely to the authors, however, and we are also responsible for any errors or omissions.

¹ Dr. Pavetti is a Senior Researcher at Mathematica Policy Research, Inc., Washington, DC.

² Ms. Darnell is a Research Associate at The Institute for Health Services Research and Policy Studies, Northwestern University, Chicago, IL.

AN OVERVIEW OF THE DIVERSION STUDY: CONCEPTUAL AND METHODOLOGICAL ISSUES

A. Introduction

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193, PRWORA) ended the individual entitlement to welfare benefits under Aid to Families with Dependent Children (AFDC), established by the Social Security Act of 1935. Under the new law, states are provided with a block grant to establish a new program, Temporary Assistance for Needy Families (TANF). In contrast to the AFDC program where families could receive benefits for as long as they met the eligibility criteria, TANF benefits are time-limited. In addition, within two years of the enactment of PRWORA, states must require that TANF recipients participate in work and work-related activities to be eligible for benefits.

The new law also "de-links" Medicaid and welfare benefits. Eligibility for Medicaid is no longer automatic for TANF recipients and individuals can be eligible for Medicaid without having to be eligible for TANF. Although states are required to establish separate eligibility criteria for Medicaid and to utilize pre-TANF criteria to determine Medicaid eligibility, there are concerns that the complexities of TANF implementation, especially the shift to a time-limited, work-based assistance system, could result in the failure of many otherwise-eligible children and families to apply, or be found eligible, for Medicaid.⁽¹⁾Moreover, the fact that states may deny Medicaid coverage to otherwise-eligible family heads who fail to work could potentially decrease the likelihood that Medicaid eligibility will be maintained for children of non-compliant families. Recent dramatic declines in Medicaid coverage serve to strengthen these concerns.

In general, the potential impact of the PRWORA is not well understood and it will likely be many years before the full effects of this law at the state and local levels become evident in public assistance and Medicaid recipient and expenditure data. Moreover, these data by themselves may mask the principal causes underlying enrollment trends. In the interim, however, federal and state policy makers will continue to face the immediate challenges of implementing PRWORA and responding to the short-term effects created by these changes. Thus, it is important to examine various aspects of the early implementation of the PRWORA at the state and local levels to begin to understand the full effects of this new law on low-income children and families as well as on their communities and environments.

Even before the passage of PRWORA, many states were experimenting with ways to increase participation in work by reforming their welfare programs through waivers of otherwise-applicable AFDC program rules.⁽²⁾ One way in which states sought to encourage work was to divert individuals who were either job-ready or had other sources of income from becoming welfare recipients by offering them a one-time financial payment and/or job placement assistance as an alternative to enrollment in welfare. While these and other efforts to divert families from the welfare system appear to be an increasingly common component of states' welfare to work efforts, these programs are not well-understood both in terms of their actual operation or potential effects.

In an effort to better understand state efforts to divert families from welfare and the potential interactions with Medicaid eligibility, this research, funded by the Administration for Children and Families, Department of Health and Human Services, has four purposes:

to describe state diversion programs and activities;

to describe the actual implementation of these diversion programs and identify potential consequences of diversion on low-income families, particularly with respect to entry into Medicaid;

to examine whether and how the potential changes in Medicaid enrollment rates associated with diversion efforts might affect traditional health care safety net providers, and

to examine potential strategies for monitoring changes in Medicaid enrollment rates due to diversion over time.

It is important to note that the primary goal of this research is not to examine the work-related impacts of diversion programs and activities, but is instead to examine the (perhaps unanticipated) ramifications of implementing these programs/activities on Medicaid coverage for children and families.

The study will be carried out in two phases. The first phase involves the collection and analysis of descriptive data about diversion programs and/or diversion activities in all fifty states. The second phase involves a series of five case studies to facilitate the collection and analysis of qualitative data about state diversion programs and/or activities with respect to several key issues including: 1) the implementation and the actual operation of the diversion programs and/or activities, 2) the experiences of diversion participants, 3) the potential effects on Medicaid participation rates, and 4) the potential effects on health care safety net providers and community institutions.

This report presents the findings from the first phase of this research. These findings are primarily based on the results of a fifty-state inquiry of state approaches to diversion. Below, we provide a more detailed description of the conceptual framework underlying this analysis and the methods used to conduct the fifty-state inquiry. We then provide an overview of state approaches to diversion and conclude this chapter with a roadmap to the rest of the report.

B. A Conceptual Framework for Examining Diversion Programs

The implementation of state-wide welfare reforms under the Section 1115 AFDC waivers and PRWORA has spawned numerous new and innovative strategies for providing assistance to families seeking cash assistance. One of the initial challenges involved in trying to understand such sweeping reforms is developing clear and consistent definitions of new approaches to providing assistance to families. Thus, before presenting a detailed description of the methods and results from the first phase of this study, we describe the conceptual framework that guided our data collection and analysis.

Conceptual Framework: Formal and Informal Diversion Activities

The starting point for this analysis is a distinction between policies and programs that are explicitly designed to divert potential TANF recipients from receiving assistance and those that may divert potential recipients from receiving assistance even though that is not their primary purpose. We refer to programs and activities that fit into the former category as formal diversion activities and the latter as informal diversion activities.

We define formal diversion programs as activities that are explicitly designed to provide assistance to TANF applicants in an effort to eliminate their need for ongoing cash assistance. Building on earlier research by Holcomb et al. (1998), ⁽³⁾ we examine three specific diversion programs and activities that fit this criteria: (1) lump sum payments; (2) exploration of alternative resources and (3) mandatory applicant job search requirements.

These three types of diversion activities are similar but not identical in structure and purpose. Lump sum programs are designed to keep families with a short-term financial need from ever entering the welfare system. Mandatory applicant job search programs are designed to serve two purposes: (1) to encourage job ready recipients to find employment quickly in an effort to reduce their need for ongoing assistance and (2) to send a clear message that program expectations have changed. The exploration of alternative sources of support with families is intended to discourage families from applying for cash assistance if other assistance is available to them and to help them think more broadly about how they can draw upon resources in their communities and families during times of need.

We define informal diversion as diversion that occurs as a response to program rules and requirements that are intended to impose a stricter set of expectations on recipients even though a potential TANF recipient has not participated in those activities. For example, some families who know they will be expected to look for work immediately (or almost immediately) may choose to look for work and find it on their own, eliminating their need to apply for assistance. Other families may not apply for assistance because they anticipate that they will not be able to meet the higher expectations set forth by the new program. Others may choose not to apply because they assume they are no longer eligible under the new program rules.

The distinction between formal and informal diversion is not always crystal clear. For example, although we examine job search as a formal diversion program activity, it is likely that mandatory applicant job search programs result in both formal and informal diversion. For families who apply for assistance, receive some job search assistance and find employment before their formal application for cash assistance is approved, mandatory applicant job search functions as it was intended - as an explicit, formal activity to divert families from receiving ongoing cash assistance. However, for families who choose not to apply for assistance because of the job search requirement - either because they think the requirement is too onerous, are already employed or don't feel capable of meeting the requirement-- a mandatory job search requirement will be diverting recipients informally rather than formally.

Similar to mandatory applicant job search, the exploration of alternative resources can also act as a formal and informal means of diversion. Families who are linked with alternative community or family resources are formally diverted from receiving assistance because their needs have been met through alternative resources. However, families who expect that they will be required to explore alternative resources even though they do not believe those resources can meet their needs may choose not to apply for assistance and be informally diverted from receiving assistance.

The primary focus of this analysis is on formal diversion programs. However, it is possible that diversion that occurs informally is having or will have as large an impact on receipt of AFDC/TANF and/or eligibility for Medicaid as formal diversion activities. Thus, whenever possible we include informal diversion activities in our discussion although, for analytic purposes, we have far less information at this point on this type of diversion than on formal diversion programs and activities.

Pre-PRWORA Formal Diversion Activities

Prior to the passage of PRWORA, under the flexibility provided to states through the Section 1115 waiver process, three states (Montana, Utah and Virginia) began operating AFDC demonstration programs to provide "would-be" AFDC recipients with assistance in the form of a lump sum payment. Four other states (Georgia, Illinois, Missouri and New Hampshire) received approval through the Section 1115 waiver process for demonstration programs that required applicants to participate in job search activities as a condition of eligibility. Wisconsin began to explore alternative resources with applicants for assistance when it implemented its Self-Sufficiency First waiver statewide in January 1996.

Current Diversion Programs and Activities Are Not Well Understood

As the emphases on moving recipients into the labor market quickly and on reducing the time families spend receiving assistance have heightened, diversion programs have become an increasingly common component of state efforts to reform their welfare programs. However, these programs are not well-understood in terms of their design, actual operation, or potential effects. In particular, state efforts to divert families from ever receiving welfare benefits could also increase the likelihood that these families are ineligible or, if eligible, fail to be considered for Medicaid eligibility.

Given the lack of consistent knowledge about what state diversion programs and activities "look like," a necessary first step involves developing descriptive information about diversion efforts in all fifty states and the District of Columbia. To fully understand the design and structure of state diversion programs, information is needed on: (1) how states are structuring their formal diversion efforts, (2) how decisions are made regarding the appropriateness of participants for diversion, (3) what choices TANF applicants have regarding their participation in diversion activities, (4) what kinds of support services are available, (5) what trade-offs/penalties are involved in participating in diversion, and (6) what provisions, if any, are in place to ensure that eligibility for Medicaid is pursued for diverted TANF applicants.

The two-phase structure of this study is deliberate in light of the gaps in knowledge. The first phase will develop the information and knowledge necessary to support the case study approach. The second-phase case studies build on the first phase and will continue the exploration and documentation of the important issues and questions involved in state efforts to implement diversion programs/activities as part of welfare reform.

C. Study Methods

The information presented in this report is based on telephone conversations with program administrators in 50 states and the District of Columbia. Information was collected using a flexible topical guide covering a broad range of areas of interest. An introductory letter with specific information about the project and a series of follow-up telephone calls were used to identify the appropriate state-level officials knowledgeable about the states' diversion programs and activities and to schedule a time to discuss the issues outlined in the topical guide. All respondents received a copy of the topical guide prior to the scheduled discussion. Conversations ranged from 45 to 90 minutes depending upon the range and intensity of the states' diversion programs and activities. Prior to talking with state administrators, project staff reviewed all approved Section1115 AFDC waivers and state TANF plans.

The topical guides were structured to collect information about a range of policies and program activities that are intended to divert TANF applicants. The three types of formal diversion programs/activities identified earlier were explored in the guides: lump sum payments, linkage with and/or exploration of alternative resources, and mandatory applicant job search. Information on other work-related conditions of TANF eligibility (such as attending an employment-oriented orientation) and other non-work related requirements, such as signing a personal responsibility agreement was also gathered. Additional issues that were discussed included: how links with Medicaid are being addressed, what kinds of data collection efforts regarding diversion programs are being undertaken, and whether the state had any indicators of the success of diversion programs and activities.

Within these broad topic areas, particular areas of inquiry focused on: 1) the goals of the state's diversion programs, 2) the specific provisions and requirements of the diversion programs, 3) the populations targeted for diversion, 4) the payback requirements and/or other trade-offs associated with receiving lump sum cash payments, 5) the length of time diversion programs have been in effect, 6) the kinds of supports for work and transitional benefits that are available for families who are diverted, 7) the mandatory or voluntary nature of the diversion programs, and 8) the specific procedures for encouraging and/or ensuring that diverted persons apply for Medicaid.

With respect to informal diversion activities, we anticipated that obtaining meaningful information about the operation of such activities during conversations with state officials would be difficult and the results speculative at best. Consequently, we did not include a discussion of this issue in our conversations. As noted above, however, although our ability to consider informal diversion activities at this point is limited, the phenomenon of informal diversion is probably an important factor in the changing circumstances of low-income families. The most appropriate sources of information about informal diversion are likely to be diverted TANF applicants and their families and friends. The case studies to be conducted in phase two of this study will thus provide the opportunity to examine this important issue more closely.

D. Overview of States' Formal Efforts to Divert Families from TANF

This section presents a general overview of the results of our inquiries into formal state diversion programs and activities. Subsequent chapters address these results in more detail.

As illustrated by Table I-1, 31 of the 50 states and the District of Columbia ⁽⁴⁾ from which we were able to gather information on diversion programs and activities have implemented at least one diversion activity in at least part of the state. Twenty states are operating lump sum payment programs with three additional states planning to implement such programs in 1998. Seventeen states are operating lump sum payment programs statewide, two states are operating them less than statewide and in one state, although the state law allows lump sum payment programs, counties have the discretion to decide whether or not to operate such a program.

**TABLE I-1. DISTRIBUTION OF FORMAL STATE DIVERSION PROGRAMS (n=51)**
State	Lump Sum	Alternative Resources¹⁵	Job Search
Alabama			ü
Alaska	¹
Arizona	²		ü
Arkansas	ü		ü
California	ü³		¹⁸
Colorado	ü⁴
Connecticut	⁵
Delaware
District of Columbia	⁶		¹⁸
Florida	ü	ü	¹⁸
Georgia			ü
Hawaii
Idaho	ü	ü	ü
Illinois
Indiana			ü¹⁷
Iowa	ü⁷		¹⁸
Kansas		¹⁶	ü
Kentucky	ü		¹⁸
Louisiana
Maine	ü⁸		¹⁸
Maryland	ü	ü	ü
Massachusetts
Michigan			¹⁸
Minnesota	ü
Mississippi
Missouri			ü
Montana	ü	ü	¹⁸
Nebraska
Nevada	⁹		ü
New Hampshire
New Jersey	¹⁰		^{10, 18}
New Mexico
New York		ü	ü
North Carolina	ü		¹⁹
North Dakota
Ohio	ü²⁰		ü²⁰
Oklahoma	¹¹		ü
Oregon			ü
Pennsylvania
Rhode Island	¹²
South Carolina			ü
South Dakota	ü		¹⁸
Tennessee
Texas	ü⁷	ü	¹⁸
Utah	ü
Vermont	¹³
Virginia	ü
Washington	ü
West Virginia	ü
Wisconsin	ü¹⁴	ü	ü
Wyoming			¹⁸
Total	20	7	16

Seven states are using an aggressive approach to help potential TANF recipients identify alternative resources that may ameliorate their need for TANF benefits. Sixteen states require TANF applicants to engage in active job searches before their application for assistance is approved. In 15 of those 16 states, applicant job search is mandatory statewide while in the one remaining state the requirement has only been implemented in a few counties.⁽⁵⁾

As Table I-2 illustrates, most states that are operating diversion programs have implemented only one of the three formal diversion activities examined for in this study. In 12 states, lump sum payment programs are the only diversion activities in place while in 10 states, the only diversion activities in place are mandatory applicant job searches. There are no states in which the exploration of alternative resources is the only formal diversion activity. With respect to the states that have implemented just two of the three formal diversion activities, the states' choices are distributed fairly evenly among the three combinations: three states have lump sum payment programs and alternative resources; one state has alternative resources and mandatory applicant job search, and two states have lump sum payment program and mandatory applicant job search. Only three states, Idaho, Maryland, and Wisconsin have implemented all three formal diversion activities. In these states, all three diversion activities have been implemented statewide.

TABLE I-2. COMBINATIONS OF STATE DIVERSION ACTIVITIES (n=51)

No Diversion Activities (20 States)
Alaska Connecticut District of Columbia Delaware Hawaii Illinois Louisiana	Massachusetts Michigan Mississippi Nebraska New Hampshire New Jersey New Mexico	North Dakota Pennsylvania Rhode Island Tennessee Vermont Wyoming
Only One Diversion Activity (22 States)
Lump Sum California Colorado Iowa Kentucky Maine Minnesota North Carolina South Dakota Utah Virginia Washington West Virginia	Alternative Resources	Mandatory Applicant Job Search Alabama Arizona Georgia Indiana Kansas Missouri Nevada Oklahoma Oregon South Carolina
Only Two Diversion Activities (6 States)
Lump Sum and Alternative Resources Montana Texas Florida	Alternative Resources and Mandatory Applicant Job Search New York	Lump Sum and Mandatory Applicant Job Search Arkansas Ohio
Three Diversion Activities (3 States)
Idaho Maryland Wisconsin

Table I-3 suggests a few interesting regional patterns ⁽⁶⁾ in terms of which states have chosen to pursue which of the three formal diversion activities. The West Region has the greatest concentration of both lump sum payment and job search requirements with almost 60 percent and almost 40 percent of the states in this region respectively establishing these programs. The South Region shows a similar concentration of both lump sum payment and job search requirements with almost 60 percent and 40 percent of the states in this region respectively establishing these programs. By contrast, the Midwest Region shows less of a dichotomy between these two activities with almost 50 percent of the states in this region establishing lump sum payment programs and almost 50 percent establishing job search requirements. Finally, the Northeast Region shows the lowest concentration of lump sum payment and job search requirements with just 10 percent of the states in this region establishing either of these programs.

**TABLE I-3. DISTRIBUTION OF FORMAL STATE DIVERSION PROGRAMS (n=48)**¹
**BY REGION AND SUBREGION**
State	Lump Sum	Alternative Resources¹⁴	Job Search
WEST REGION
Mountain Subregion
Arizona	²		ü
Colorado	ü⁴
Idaho	ü	ü	ü
Montana	ü	ü	¹⁷
New Mexico
Utah	ü		¹⁷
Wyoming			¹⁷
Pacific Subregion
California	ü³		¹⁷
Nevada	⁸		ü
Oregon			ü
Washington	ü
MIDWEST REGION
East North Central Subregion
Illinois
Indiana			ü¹⁶
Michigan			¹⁷
Ohio	ü¹⁹		ü¹⁹
Wisconsin	ü¹³	ü	ü
West North Central Subregion
Iowa	ü⁶		¹⁷
Kansas		¹⁵	ü
Minnesota	ü
Missouri			ü
Nebraska
North Dakota
South Dakota	ü		¹⁷
NORTHEAST REGION
Middle Atlantic Subregion
New Jersey	⁹		^{9, 17}
New York		ü	ü
Pennsylvania
New England Subregion
Connecticut	⁵
Maine	⁷		¹⁷
Massachusetts
New Hampshire
Rhode Island	¹¹
Vermont	¹²
SOUTH REGION
East South Central Subregion
Alabama			ü
Kentucky	ü		¹⁷
Mississippi
Tennessee
South Atlantic Subregion
Delaware
Florida	ü	ü	¹⁷
Georgia			ü
Maryland	ü	ü	ü
North Carolina	ü		¹⁸
South Carolina			ü
Virginia	ü
West Virginia	ü
West South Central Subregion
Arkansas	ü		ü
Louisiana
Oklahoma	¹⁰		ü
Texas	ü⁶	ü	¹⁷
TOTAL	20	7	16

One explanation for this regional pattern with respect to lump sum payment diversion could be the fact that Utah and Virginia both had lump sum programs in place relatively early, i.e., 1993 in Utah in the West Region and 1995 for Virginia in the South Region. It is difficult to speculate why states in the Northeast Region have not pursued diversion programs to the extent that the other three regions have. One possible explanation is that several of the states in this region (most notably Vermont, Massachusetts and Connecticut) implemented comprehensive reforms prior to the implementation of PRWORA and have not changed the directions of their reforms since PRWORA was passed.

The subregional⁽⁷⁾ configurations also presented in Table I-3 suggest a few patterns that add precision to the regional analysis. For example, in the South Region, the states with lump sum payment programs and job search requirements are clearly concentrated in the South Atlantic Subregion; this subregion includes Virginia. In addition, Kentucky, the only state with lump sum in the East South Central Subregion, borders on Virginia. To the extent that states look to neighboring states for policy innovations, Virginia's early establishment of lump sum payment diversion may explain this subregional pattern, at least with respect to lump sum payments.

In the Midwest Region, the states with lump sum and job search requirements are clearly concentrated in the West North Central Subregion - this subregion borders on the Mountain Subregion of the West Region. Given that both subregions of the West Region have the highest concentrations of lump sum and job search requirements, this proximity may explain this subregional pattern.

E. Roadmap to the Rest of the Report

The remaining chapters of this report examine formal state diversion programs and activities in much greater detail.

Chapter Two focuses on lump sum payment programs. In this chapter, we explore how states determine applicants' eligibility for lump sum payments, for what purposes these payment may be used, and what costs/penalties are associated with participating in lump sum diversion. Chapter Three describes how states have altered their intake processes to help TANF applicants explore the availability and access alternative resources. Chapter Four examines mandatory applicant job search programs. In this chapter we explore how states have defined their job search requirements, who is expected to fulfill these requirements and how much discretion caseworkers have in granting exceptions to these requirements.

Chapter Five explores the potential impact of formal or direct diversion programs and activities and of diversion that occurs informally on the Medicaid eligibility of diverted TANF applicants. Chapter Six concludes with a discussion of state efforts to assess the success of their formal diversion programs and activities. In this chapter we also assess the implications of the findings reported here and, in light of these implications, discuss the methodological approach for the second phase of this research which will focus on how state diversion programs and activities, both formal and informal, are being implemented, and how these diversion activities are affecting low-income families particularly with respect their eligibility for Medicaid.

Notes

^1. Rosenbaum, S. & Darnell, J. (1997). An Analysis of the Medicaid and Health-Related Provisions of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193). Washington, D.C.: Center for Health Policy Research, The George Washington University Medical Center, February. Ku, L. & Coughlin, T. (1997). How the New Welfare Reform Law Affects Medicaid. Washington, D.C.: The Urban Institute, February

^2. Department of Health and Human Services. (1997). Setting the Baseline: A Report on State Welfare Waivers. Washington, D.C.: U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, June. General Accounting Office (1997). Welfare Reform: States' Early Experiences with Benefit Termination. Washington, D.C.: GAO/HEHS-97-74, May

^3. Holcomb, P., Pavetti, L., Ratcliffe, C. & Reidinger, S. (1998). Building Employment Focused Welfare Systems: Workfare and Other Work-Oriented Strategies in Five States Washington, DC:The Urban Institute, March.

^4. Hereinafter the District of Columbia shall be included as a state when summary numbers are given about state diversion activities and programs, e.g., we will refer to these results as 31 of 51 states have implemented at least one diversion activity in at least part of the state

^5. Twelve additional states require applicants to participate in a work-related orientation and/or register with the job service prior to benefit authorization.

^6. Regional analyses of state-based or state-specific decision making is a common approach to examining state policy making, and the significance of variations therein, in the political science literature. The four broad regions and nine sub-regions used in this study represent the commonly-accepted approach to dividing up" the country. See Bradshaw, M., Regions and Regionalism in the United States, University Press of Mississippi:Jackson MI and London, 1988, at p.4. Because the premise of regional analysis is that states in proximity to each other will exert an effect on each others' policy making, Alaska and Hawaii are usually not included in regional analysis and thus we have excluded them as well. The purpose of the sub-regional analysis is add another level of geographic precision to the analysis. The following are the four regions. West: WA, OR, CA, NV, ID, MT, WY, UT, CO, AZ, NM; Midwest: ND, SD, NE, KS, MN, IA, MO, WI, IL, IN, MI, OH; South: TX, OK, AR, LA, MS, AL, TN, KY, WV, VA, DE, MD, NC, SC, GA, FL; Northeast: NY, PA, ME, VT, NH, RI, MA, CT, NJ. See Figure I-1 .

Broad Regions - United States.

^7. The West region is composed of two subregions: Pacific and Mountain; the Midwest region is composed of two subregions: West North Central and East North Central; the Northeast is composed of two subregions: Middle Atlantic and New England, and the South region is composed of three subregions: West South Central, East South Central and South Atlantic. See Figure I-2.

Sub regions - United States

Footnotes to Table I-1

¹ Alaska's lump sum program is not scheduled for implementation until July 1, 1998. Alaska must first resolve certain policy issues before it can implement the program.

² Arizona state law allows the state to offer diversion lump sum. However, it has not implemented such a program because of concerns about guaranteeing transitional Medicaid benefits to persons who receive a lump sum cash payment.

³ On January 1, 1998, California began implementing its CalWorks Program, which includes a diversion component. Counties are implementing the program at their own pace.

⁴ In Colorado, the county officials have decision-making authority in determining when and how lump sum diversion programs will become operational in their counties.

⁵Just at the time of finishing the interim report, Connecticut informed us that they passed legislation enabling the state to implement a lump sum diversion program effective October 1, 1998.

⁶ The District of Columbia is in the process of developing a lump sum payment program. No implementation date has been set and the program must be reviewed and approved by the City Council.

⁷ In Iowa and Texas, the lump sum program is implemented on less than a statewide basis. Iowa currently operates a pilot lump sum diversion program in three counties but plans to expand the program to additional counties; and Texas currently operates the program in one county but plans to expand the program to 15 counties in April 1998 and go statewide in August 1998.

⁸ Although Maine does not consider its diversion program to be lump sum, Maine's diversion program matches the study definition of lump sum diversion program - the lump sum payment is provided only on an up-front basis (i.e., to eligible TANF applicants only) and payback terms apply when diverted families return during the period of ineligibility.

⁹ Nevada's lump sum program is not scheduled for implementation until October 1, 1998. Like Alaska, Nevada must first resolve certain policy issues around its lump sum plan before it can be implemented.

¹⁰New Jersey is developing a diversion program that may include lump sum payment and "employability services" in which TANF applicants would have to participate as a condition of eligibility. State officials anticipate completing development by July 1998 although substantial issues related to determining eligibility for lump sum payment remain unresolved.

¹¹Oklahoma official reported that the state has a welfare reform law requiring the creation of a lump sum payment program. However, Oklahoma has no plans for developing such a program.

¹² Rhode Island's lump sum program has not been scheduled for implementation. The state is developing a diversion program that will be implemented in an experimental pilot program in select areas of the state.

¹³Vermont is planning to develop a lump sum payment program but state officials did not report specific plans or dates for this development.

¹⁴ Although Wisconsin officials did not identify the state's Job Access Loan as a lump sum payment program, the major components of the job access loan program are very similar to components of lump sum payment programs. Job access loans are lump sum payments made available to TANF applicants, as well as TANF recipients, to help them avoid receiving TANF benefits by obtaining or maintaining employment. Although this lump sum payment is expressly a loan that must be paid back, several states essentially require full repayment of lump sum payments through the operation of "penalties." See Chapter Two and Table II-1.

¹⁵The states marked in this column have newly established aggressive efforts to identify alternative resources as a way to meet TANF applicants' needs and to divert them from receiving TANF benefits. In these states, receipt of TANF benefits is seen as the "last resort" and locating other forms of assistance for families, e.g., child care, plays an important role in achieving this "last resort" goal.

¹⁶ While Kansas uses a very aggressive approach to identify alternative resources, this activity only occurs in conjunction with assisting the TANF applicant with the job search requirements. For the states marked in this column, alternative resources approaches exist separately from both lump sum payment and job search as independent diversion activities.

¹⁷ In Indiana, the job search requirements are implemented in two counties.

¹⁸ Twelve states, while not having specific job search requirements, do require work orientation, work registration, or both as a condition of eligibility for TANF. (States with job search requirements frequently include work registration and/or work orientation as part of the job search requirements.) California, Maine, Michigan, Montana, and Texas require work orientation only; Iowa, Kentucky, New Jersey, and Utah require work registration only; and the District of Columbia, Florida, and Wyoming require work orientation and work registration. In a thirteenth state, South Dakota, TANF applicants considered ready to work must go to the Department of Labor as opposed to the Department of Social Services to complete their TANF applications and must complete a Personal Responsibility Plan (PRP) that could, at the discretion of the DOL employment specialist, require the applicant to engage in a variety of work-related activities including job training and job search.

¹⁹ North Carolina's TANF plan currently prohibits job search as a condition of eligibility. Electing counties (those counties that upon approval by the General Assembly will have flexibility with regard to eligibility criteria and benefit levels) may make job search a condition of eligibility. One of the 26 counties that has applied to be Electing proposes that applicants be required to seek employment for at least the first two weeks while their application pends.

²⁰ In Ohio, all 88 counties have substantial flexibility in designing and implementing their lump sum payment and mandatory applicant job search diversion programs. The state does provide the counties with a model framework for developing their diversion programs - the Ohio model is known as the Prevention, Retention, and Contingency program (PRC). For example, the parameters include a maximum lump sum payment of $1800, limited eligibility to families earning 150 percent of poverty rate or less, and that PRC is a one-time grant.

Footnotes to Table I-3

¹ Alaska, District of Columbia, and Hawaii are not included in this table because they are not traditionally included in regional analyses.

³ On January 1, 1998, California began implementing its CalWorks Program, which includes a diversion component. Counties are implementing the program at their own pace.

⁴ In Colorado, the county officials have decision-making authority in determining when and how lump sum diversion programs will become operational in their counties.

⁵Just at the time of finishing the interim report, Connecticut informed us that they passed legislation enabling the state to implement a lump sum diversion program effective October 1, 1998.

⁶ In Iowa and Texas, the lump sum program is implemented on less than a statewide basis. Iowa currently operates a pilot lump sum diversion program in three counties but plans to expand the program to the rest of the counties; and Texas currently operates the program in one county but plans to expand the program to 15 counties in April 1998 and go statewide in August 1998.

⁷ Although Maine does not consider its diversion program to be lump sum, Maine's diversion program matches the study definition of lump sum diversion program - the lump sum payment is provided only on an up-front basis (i.e., to eligible TANF applicants only) and payback terms apply when diverted families return during the period of ineligibility.

⁸ Nevada's lump sum program is not scheduled for implementation until October 1, 1998. Like Alaska, Nevada must first resolve certain policy issues around its lump sum plan before it can be implemented.

⁹New Jersey is developing a diversion program that may include lump sum payment and "employability services" in which TANF applicants would have to participate as a condition of eligibility. State officials anticipate completing development by July 1998 although substantial issues related to determining eligibility for lump sum payment remain unresolved.

¹⁰Oklahoma official reported that the state has a welfare reform law requiring the creation of a lump sum payment program. However, Oklahoma has no plans for developing such a program.

¹¹ Rhode Island's lump sum program has not been scheduled for implementation. The state is developing a diversion program that will be implemented in an experimental pilot program in select areas of the state.

¹²Vermont is planning to develop a lump sum payment program but state officials did not report specific plans or dates for this development.

¹³ Although Wisconsin officials did not identify the state's Job Access Loan as a lump sum payment program, the major components of the job access loan program are very similar to components of lump sum payment programs. Job access loans are lump sum payments made available to TANF applicants, as well as TANF recipients, to help them avoid receiving TANF benefits by obtaining or maintaining employment. Although this lump sum payment is expressly a loan that must be paid back, several states essentially require full repayment of lump sum payments through the operation of "penalties." See Chapter Two and Table II-1.

¹⁴The states marked in this column have newly established aggressive efforts to identify alternative resources as a way to meet TANF applicants' needs and to divert them from receiving TANF benefits. In these states, receipt of TANF benefits is seen as the "last resort" and locating other forms of assistance for families, e.g., child care, plays an important role in achieving this "last resort" goal.

¹⁵While Kansas uses a very aggressive approach to identify alternative resources, this activity only occurs in conjunction with assisting the TANF applicant with the job search requirements. For the states marked in this column, alternative resources approaches exist separately from both lump sum payment and job search as independent diversion activities.

¹⁶ In Indiana, the job search requirements are implemented in two counties.

¹⁷Eleven states, while not having specific job search requirements, do require work orientation, work registration, or both as a condition of eligibility for TANF. (States with job search requirements frequently include work registration and/or work orientation as part of the job search requirements.) California, Maine, Michigan, Montana, and Texas require work orientation only; Iowa, Kentucky, New Jersey, and Utah require work registration only; and Florida and Wyoming require work orientation and work registration. In a twelfth state, South Dakota, TANF applicants considered ready to work must go to the Department of Labor as opposed to the Department of Social Services to complete their TANF applications and must complete a Personal Responsibility Plan (PRP) that could, at the discretion of the DOL employment specialist, require the applicant to engage in a variety of work-related activities including job training and job search.

¹⁸ North Carolina's TANF plan currently prohibits job search as a condition of eligibility. Electing counties (those counties that upon approval by the General Assembly will have flexibility with regard to eligibility criteria and benefit levels) may make job search a condition of eligibility. One of the 26 counties that has applied to be Electing proposes that applicants be required to seek employment for at least the first two weeks while their application pends.

¹⁹ In Ohio, all 88 counties have substantial flexibility in designing and implementing their lump sum payment and mandatory applicant job search diversion programs. The state does provide the counties with a model framework for developing their diversion programs - the Ohio model is known as the Prevention, Retention, and Contingency program (PRC). For example, the parameters for the lump sum payment diversion program include a maximum lump sum payment of $1800, limited eligibility to families earning 150 percent of poverty rate or less, and that PRC is a one-time grant.

LUMP SUM PAYMENT PROGRAMS

A. Introduction

Lump sum payment programs are one of the formal program options states have established to divert families from the TANF rolls. Lump sum payments are generally made available to TANF applicants with short-term emergency needs that can be solved permanently with the payment. It is anticipated that these applicants will not require further TANF assistance after the immediate need is resolved. In almost one-half of the states with this program, eligible applicants must have work-related needs directly affecting their ability to obtain or maintain employment such as loss of transportation due to needed car repairs. In the remaining states, eligible applicants can have a range of short-term or emergency needs such as overdue rent or utilities bills and child care problems that, if left unaddressed, will shortly put them at risk for requiring TANF assistance.

Under lump sum payment diversion programs, caseworkers screen TANF applicants to determine if a lump sum payment can address the immediate reason for the TANF application and will likely resolve the crisis permanently. Caseworkers must either find potential recipients of a lump sum payment eligible for TANF, or have gathered enough information during the initial application process to presume TANF eligibility. Accepting the lump sum payment in lieu of TANF benefits is not mandatory. On the other hand, accepting this diversion payment generally results in the applicant being ineligible to reapply for TANF benefits for a certain period of time. Although a number of states do allow recipients of lump sum payments to reapply for TANF benefits before the period of ineligibility has expired, such situations usually result in some type of penalty such as a requirement that a portion of the lump sum payment be repaid or a reduction in the applicant's lifetime TANF limit based on the amount of the lump sum.

B. Twenty States Currently Operate Lump Sum Payment Diversion Programs

As shown by Table II-1, twenty states are currently operating lump sum payment programs formally designed to divert TANF applicants from receiving ongoing assistance. An additional three states have developed program designs and plan to begin their programs before the end of 1998. Alaska and Nevada will implement their programs on July 1, 1998 and October 1, 1998 respectively and Rhode Island will establish a pilot program in selected areas of the state by the end of 1998. Four states not shown in Table II-1, Connecticut, the District of Columbia, New Jersey and Vermont, are in the very early stages of developing lump sum diversion programs. Arizona state law allows the development of such a program but it has not been implemented because of concerns about guaranteeing transitional Medicaid benefits to persons who receive a lump sum payment. In addition to the 20 states that have already implemented lump sum diversion programs, the remainder of this discussion will include the programs in Alaska, Nevada, and Rhode Island because, even though these state have not yet implemented their lump sum diversion programs, they have developed specific designs for their programs.

**TABLE II-1. CHARACTERISTICS OF LUMP SUM PAYMENT PROGRAMS (n=23)¹**
State	Date in effect	How often can apply for lump sum	Maximum Amount for 3-person family	Maximum payment formula¹⁰	Duration of ineligibility for TANF	Repayment terms if applying during period of ineligibility¹⁴	Count towards lifetime limit
Alaska¹	7/98	Once-a-year	$860	2 months	3 months	entire amount must be repaid and method of repayment is prorated
Arkansas	7/97	no stated limit	$612	3 months	100 days	cannot reapply//entire amount must be repaid and method of repayment prorated¹⁶
California²	1/98				equivalent to TANF aid months¹¹	entire amount must be repaid; repayment is prorated or counted against the limit	ü¹⁷
Colorado²	7/97			3 months
Florida	11/97	one time only	$606	2 months	3 months	entire amount must be repaid upfront
Idaho	7/97	one time only	$828	3 months	2 for 1¹²	cannot apply for TANF during period of ineligibility	ü¹⁸
Iowa²	10/97⁶				equivalent to twice TANF aid months¹²	no repayment
Kentucky³	2/97, 8/97	once a year	$1500⁷		12 months	no repayment but can reapply
Maine⁴	8/97	one time only	not stated	not stated	3 months	entire amount must be repaid and method of repayment is prorated
Maryland	10/97	no stated limit	$1164⁸	3 months⁸	equivalent to TANF aid months¹¹	cannot apply for TANF during period of ineligibility
Minnesota	1/98	once every three years	$3052⁹	4 months	equivalent to TANF aid months¹¹	cannot apply for TANF during period of ineligibility
Montana	2/96	one time only	$1350	3 months	equivalent to twice TANF aid months¹²	cannot apply for TANF during period of ineligibility
Nevada¹	10/98	no stated limit	$1000⁸	3 months	equivalent to TANF aid months¹¹	cannot apply for TANF during period of ineligibility	ü¹⁸
North Carolina	3/97	once a year	$816	3 months	none specified¹³	entire amount must be repaid and method of repayment is prorated¹³
Ohio²⁰	10/97
Rhode Island¹		one time only	$1662	3 months	equivalent to twice TANF aid months¹²	cannot apply for TANF during period of ineligibility
South Dakota	9/97	no stated limit	$860	2 months	3 months	entire amount must be repaid and method of repayment is prorated
Texas⁵	11/96⁶	one time only	$1000	flat amount	12 months	cannot apply for TANF during period of ineligibility with exceptions for children¹⁵
Utah	1/93	every 4 months	$1278	3 months	3 months	entire amount must be repaid and method of repayment is prorated	ü¹⁸
Virginia	7/95	one time only	$1416	4 months	equivalent to 1.33 TANF aid months¹¹	cannot apply for TANF during period of ineligibility
Washington	11/97	once a year	$1638	3 months	12 months	amount of repayment is prorated and method of repayment is prorated
West Virginia	1/97-1/98	one time only	$759	3 months	3 months	cannot apply for TANF during period of ineligibility	ü¹⁸
Wisconsin¹⁹	9/97	no stated limit	$1600	depends on need	not applicable	entire amount must be repaid¹⁹

Few states have had extended experience with lump sum diversion programs. As illustrated by Table II-l, most states implemented their programs within the last three to fourteen months or since late 1996. Montana, Utah and Virginia are the exceptions to this with Utah implementing the first state lump sum payment diversion program in January 1993, Virginia implementing the second such program in July 1995, and Montana implementing the third in February 1996.

In 18 of the 20 states that have lump sum programs already in operation, the programs are available on a statewide basis. Of the remaining two states, Iowa currently operates its lump sum program in three counties with no immediate plans for expansion; and Texas currently operates its lump sum payment program in one county but plans to expand the program to 15 counties in April 1998 and go statewide in August 1998.

C. Who Is Eligible for Lump Sum Payments

In general, the eligibility criteria for lump sum payments require that the TANF applicant have a short-term need that can be resolved by the lump sum payment and that, as a result of receiving the lump sum payment, the applicant will have no immediate or future need for TANF assistance.

There is some variability among the states with respect to who can be considered for lump sum payments. Eleven states - Alaska, Arkansas, Iowa, Maine, Montana, Nevada, North Carolina, Rhode Island, South Dakota, West Virginia and Wisconsin - specifically require that TANF applicants considered for lump sum payments have an employment-related need that when solved will allow the applicant to obtain or maintain employment. For example, in South Dakota, only applicants with current employment or the potential for immediate employment and a strong work history are considered for the lump sum payment. In Arkansas, lump sum payments are considered only for applicants who are currently employed but have a problem jeopardizing that employment or for applicants who are promised a job but need assistance securing the job. In Wisconsin, an applicant can be considered for a "Job Access Loan" for any need that is job-related - including payment of rent if an applicant is likely to be evicted and lose their employment as a result of having nowhere to live.

The remaining states do not use the employment-related eligibility criteria and all TANF applicants can be considered for lump sum payments. An exception is Utah where only those applicants who are single parents or who come from a two parent family where one parent is incapacitated can be considered for lump sum payments.

There also appears to be some variability among the states with respect to how much discretion is afforded to caseworkers in determining who is eligible for lump sum payments. In six states - Alaska, California, Idaho, Maryland, Rhode Island and Wisconsin- caseworkers are explicitly given discretion within broad eligibility criteria to determine which TANF applicants are appropriate for lump sum payments. Five other states - Florida, Nevada, Utah, Virginia, and West Virginia - emphasize a collaborative approach between the caseworker and the TANF applicant to determining the appropriateness of participating in the lump sum payment program.

In all states, appropriate candidates for lump sum payments must also be determined as eligible, or likely to be eligible, for TANF assistance. Given this, it is also important to note that participation in lump sum payment diversion is described as voluntary in all states. TANF applicants who are determined eligible for lump sum payments can choose not to accept these payments in lieu of TANF assistance. There are reportedly no negative consequences for exercising such a choice.

D. What is Required for the Application Process

The process of diverting TANF applicants from going on the TANF rolls by assessing their potential eligibility for lump sum payments can also affect the TANF application process. There is substantial variability among the states with respect to what is required for the application process.

Nine states - Colorado, Idaho, Maine, Maryland, Montana, Rhode Island, Texas, Virginia, and Washington, require that individuals fully complete the TANF application and eligibility verification process before the lump sum payment will be authorized. The remaining states use a range of approaches to processing the authorization for lump sum payments and most require that applicants provide just enough information for the caseworker to presume the likelihood of eligibility for TANF assistance. Seven of these states - Alaska, California, Florida, Minnesota, Nevada, South Dakota, and Utah - do not explicitly require income verification Even where income verification is not required and limited information is acceptable, states may require that the TANF application be completed - this is clearly the case in Minnesota. For most of the states requiring limited information, however, the TANF application is not likely to be completed or the completed application may be withdrawn when lump sum payments are authorized.

This variability in the application process may be greater in states where counties are primarily responsible for administering the lump sum payment programs. Six states - California, Colorado, Iowa, Maryland, North Carolina and Wisconsin - have provided for county administration of these diversion programs. Counties in these states have been given substantial discretion in determining how they implement and administer the lump sum payment programs. This discretion will no doubt affect how the application process is handled.

There are reasons to be concerned about the variability in the application process, particularly with respect to whether or not a TANF application may be completed or withdrawn. Given that all states reported using a joint application for TANF and for other benefits such as Medicaid and Food Stamps, a withdrawn or incomplete application raises the issue of whether the application for these other services is processed when an applicant is diverted with lump sum payments. Although most states asserted that a TANF applicant's application for Medicaid and Food Stamps is processed immediately and thoroughly notwithstanding their status as a diverted recipient, there could be an increased likelihood of diverted applicants' eligibility for Medicaid "falling through the cracks" in states where a diverted applicants' TANF application is not completed or withdrawn. Interviews with states that only collect limited applicant information suggest that some lump sum recipients may not be offered additional services for which they may otherwise qualify.

South Dakota provides an example of an unusual approach to administering the lump sum payment program that could create the potential for lump sum recipients not to receive the additional services for which they may be eligible. In South Dakota, only applicants who are not exempt from work requirements may be considered for lump sum payments. These applicants must be processed by the Department of Labor (DOL) where they are also screened for lump sum payment eligibility. If the applicants accept diversion payments, then the DOL must ensure that the applicants either go or return to the Department of Social Services (DSS) office to complete the full application for Medicaid and Food Stamps. Applicants who receive diversion payments do not complete the TANF application and are recorded in the state's information system as either an incomplete or denied application due to receipt of diversion.

E. The Lump Sum Payment

The process of screening TANF applicants for their potential eligibility for lump sum payments involves 1) determining what the immediate needs of the applicants are and how many of these needs can be addressed by lump sum payments, and 2) determining how the lump sum payments will be made. This section describes these characteristics of lump sum payment programs as reported by the states: how much can applicants receive in lump sum payments, for what purpose can these payments be used, in what form are the lump sum payments awarded, and how often can one apply for these payments. These program dimensions can also be found in Table II-1.

How Much Applicants Can Receive in Lump Sum Payments

The general approach used by the states is to set a ceiling, i.e. a maximum amount, for the lump sum payment potentially available to a TANF applicant and then determine the actual payment amount based on the diverted applicant's specific needs. These maximum amounts are most frequently calculated as multiples of the monthly TANF benefit as shown in Table II-1. In eleven states, the maximum payment is three times the monthly TANF benefit, in three states the maximum payment is twice the monthly benefit, and in two states it is four times the monthly benefit. Two states, Kentucky and Texas offer a flat amount as the maximum payment, $1500 and $1000 respectively. A few states allow for lump sum payments in excess of the maximum amount. If an applicant in Maryland has compelling needs as determined by the caseworker, then supervisors can approve up to 12 months of lump sum payments. An applicant can not receive more than the $1500 ceiling in Kentucky during the 12 month period. Nevada also plans to allow applicants with special circumstances to receive more than the maximum amount subject to an administrator's approval.

Table II-1 also shows the maximum amount for lump sum payments as calculated for a family of three in each state. The amount ranges from $606 in Florida to $1638 in Washington to $3052 in Minnesota.⁽¹⁾ This wide range reflects the variability in the TANF monthly benefit levels across the country as the states, similar to the AFDC program which TANF replaced, set their own standards of need and benefits levels for their TANF programs.

How Can the Lump Sum Payments Be Used

Sixteen of the 20 states with operating lump sum payment programs allow the lump sum payments to be used to address any short-term need in order keep the family off the TANF rolls and help the family attain or maintain self-sufficiency. These short term needs can include a wide range of expenses or debts such as child care, car repairs, medical bills, clothing, rent, utility bills, and work uniforms or tools. In Maryland, lump sum cash payment was used to assist a TANF applicant in purchasing a license required by state law to sell used cars. In Washington, lump sum payments were used to assist in the start-up of a small business.

Six states - Arkansas, Iowa, Nevada, Rhode Island, South Dakota and Wisconsin - specify that lump sum payments can only be used to address employment-related needs.⁽²⁾ In Nevada, for example, the lump sum cash payment could be provided to a TANF applicant living in a remote area who has a job offer elsewhere and needs help with moving expenses. The payment could also be used to purchase work clothing, obtain a license, or repair a vehicle. In South Dakota, the lump sum payment program is viewed as a work-related support service and is considered appropriate only for individuals with strong work histories who are employed or are about to be employed. Payments can only be used for specific expenses primarily related to keeping or getting a job.

Several states require, before authorizing an amount for lump sum payments, that specific needs be documented with bills, receipts, or other evidence of expense and that caseworkers approve each expense for which the lump sum will be used. Minnesota requires such documentation of specific needs, and in Arkansas caseworkers must verify how the lump sum payment was used. In Nevada, the lump sum payment amount must be supported by documentation and the caseworkers' final determination must be approved by a supervisor. Caseworkers in West Virginia can get involved in negotiating the amount of an expense, e.g., car repair estimate, to ensure that the expense is not in excess of the maximum amount available. In Kentucky, the proposed lump sum payment must meet a short term need such as transportation, housing or an employment-related need and must be verfied by the caseworker.

On the other hand, some states require little verification of applicants' needs and documentation of how the lump sum payments are actually used. In Florida there is no verification process and no follow-up on how the payments were spent. In Montana, while up-front verification of expenses/needs is required, the state does not require verification that the lump sum payment was actually used for the verified expenses/needs.

In most states, the assessment of applicants' short-term needs and the calculation of the amount of lump sum payments occur at one point in time during the screening process. A few states, however, have created a window of time during which an applicant who has received lump sum payments may return for additional payments. In Washington, for example, an applicant is considered eligible for lump sum diversion for one month. If the initial lump sum payment is less than the maximum amount ($1638 for a family of three), then a recipient may seek assistance for other eligible expenses during that month - effectively "drawing down" on the maximum amount. Utah and Kentucky use a similar approach for its lump sum payment program; in Kentucky the "window" for drawing down the $1500 maximum amount is 12 months and in Utah the "window" for drawing down the $1278 maximum is four months.

How Lump Sum Payments Are Made

The lump sum payments are made available to recipients in three forms: cash, vouchers, and third party payments. The states' choices about how lump sum payments are made could be related to their decisions about how rigorously to verify applicants' needs and document the use of the lump sum payments. The use of vouchers and third party payments affords the states greater assurances that the lump sum payments will be used for their intended purposes than the use of cash payments given directly to the recipients.

However, while the states generally reported using a combination of cash, vouchers, and third party payments depending upon the nature of the expense, most states appeared to prefer the use of cash payments over vouchers and third party payments. Only four states out of the 20 states with operating lump sum payment programs have an explicit preference for non-cash payments: Maine and Washington use only vouchers; Minnesota prefers to use vouchers but will occasionally allow a cash payment; and South Dakota prefers vouchers or vendor payments - cash payments are very rare. Four states, Florida, Idaho, Utah and Wisconsin, use only cash payments.

How Often One Can Receive Lump Sum Payment Assistance

As illustrated by Table II-1, there is substantial variability among states regarding how often a family can receive lump sum cash payments. Eight states have a "one time only" policy essentially meaning that families can receive lump sum payment once in a lifetime. Five states do not specify a limit for how often applicants can receive a lump sum payment. Washington, Kentucky, North Carolina, and Alaska allow applicants to receive lump sum payments once a year; Minnesota allows applicants to receive lump sum payments every three years; and in Utah families can apply every four months to receive lump sum payments.⁽³⁾ In California, Colorado and Iowa, the limits will likely vary because these decisions are made at the county with no guidance from the state.

F. Cost/Trade-offs Associated with Receiving Lump Sum Payments

The process of determining applicants' eligibility for lump sum payments also involves informing the applicants of the costs or trade-offs associated with electing to be diverted and to receive these payments in lieu of TANF assistance. As reported by the states, these costs or trade-offs include: 1) a period of ineligibility during which one cannot reapply for TANF assistance, 2) a period of ineligibility during which one can reapply for TANF assistance subject to certain penalties, e.g., repayment of the lump sum, 3) penalties automatically triggered with any future application for TANF assistance, e.g., reduction of the lifetime limit and 4) full repayment of the assistance provided.

All twenty states operating lump sum payment programs impose some type of potential cost or penalty for diverted families receiving lump sum payments if they apply for TANF benefits in the future. Only Kentucky reports no cost or penalty. While Wisconsin requires full repayment of any "Job Access Loan" they provide, the repayment terms do not affect eligibility for other services provided through TANF.⁽⁴⁾ Table II-1 shows the penalty provisions reported by the states. As noted above, participation in the lump sum payment diversion is voluntary for TANF applicants; the existence of potential penalties may affect their decisions to participate. Consequently, the extent of the costs/trade-offs associated with accepting a lump sum payment in each state may be an indicator of the states' expectations about 1) how carefully TANF applicants are screened for eligibility for lump sum payments to ensure that only relatively stable families are assisted and 2) whether large numbers of TANF applicants will or should actually be diverted with lump sum payments.

Duration of Periods of TANF Ineligibility:

Seventeen of the 20 states operating lump sum payment programs impose limits on TANF eligibility as a penalty for diverted families accepting lump sum payments; these families become ineligible to reapply for TANF benefits for a prescribed period of time. In Colorado, Kentucky, and Iowa, decisions about the specific periods of TANF ineligibility are made at the county or local level.⁽⁵⁾ There is significant variability among the states with respect to how these periods of ineligibility are determined.

The length of these periods of ineligibility is most frequently determined as a function of how much lump sum assistance was received by families relative to the standard monthly TANF benefit. Nine states - California, Idaho, Iowa, Maryland, Minnesota, Montana, Nevada, Rhode Island, and Virginia - use this approach although there is variability within this common approach. For example, in California, Maryland, Minnesota, and Nevada, the period of ineligibility is determined by calculating how many months of TANF assistance are represented by the amount of lump sum payments received. For example, if a family of three in Montana receives $900 in lump sum payments, then they are ineligible to apply for TANF assistance for two months. In Idaho, Iowa, Montana, Rhode Island, and Virginia, the period of ineligibility is a multiple of the number of months of TANF assistance is represented by the amount of lump sum payments received. For example, if a family of three in Rhode Island receives $1108 in lump sum payments, then they are ineligible to apply for TANF assistance for four months, i.e., two months of ineligibility for every month of assistance received through a lump sum payment. Montana uses this same approach.

Nine states - Alaska, Arkansas, Florida, Maine, South Dakota, Texas, Utah, Washington, and West Virginia - require a set period of ineligibility unrelated to the amount of assistance received in lump sum payments. The most common period is three months; six out of the nine states use this approach. Washington and Texas both require for a 12-month period of ineligibility. Although Kentucky also requires a 12-month period of ineligibility for TANF assistance, the effect of this state's period of ineligibility is not relevant to a discussion of costs/trade-offs because, as noted above, Kentucky imposes no penalties on individuals reapplying for TANF assistance after receiving lump sum payments during this 12-month period although certain criteria must be met to be eligible again.

Several states reported that, during the screening process for lump sum diversion, efforts are made to inform TANF applicants about the potential costs associated with receiving lump sum payments. For example, in Montana, families who accept a lump sum payment sign an agreement stating they understand that they are ineligible for TANF benefits for a certain number of months.

Cannot Apply for TANF Assistance During Period of Ineligibility

Nine states - Idaho, Maryland, Minnesota, Montana, Nevada, Rhode Island, Texas, Virginia, and West Virginia - do not allow applicants to reapply for TANF until their period of ineligibility has expired. As previously discussed, the length of the periods of ineligibility in these states is primarily a function of how much lump sum assistance was received but can be as long as 12 months in Texas and six months in Idaho. Texas is the only state that explicitly provides for an exception to this period of strict ineligibility in situations where children are adversely affected.

Can Apply for TANF During Period of Ineligibility Subject to Repayment Requirement

Ten states - Alaska, Arkansas, California, Colorado, Florida, Maine, North Carolina, South Dakota, Utah, and Washington, allow recipients of lump sum assistance to reapply for TANF assistance during the period of ineligibility.⁽⁶⁾ These state impose a repayment penalty on families who reapply. These penalties range from requiring recipients to repay the entire amount of the lump sum payment before receiving any TANF assistance to requiring recipients to repay a portion of the lump sum payment over a period of time concurrent with receipt of TANF assistance

How Much Must Be Repaid: One state - Washington - allows lump sum recipients to prorate the amount of their repayment. The amount of the lump sum payment is prorated over the 12-month period of ineligibility and is reduced by the number of months the recipient remained off TANF. For example, if a recipient of a $1200 lump sum payment applied for TANF six months later, her repayment amount would $600. Eight states - Alaska, Arkansas, California, Florida, Maine, North Carolina, South Dakota and Utah - require that the entire amount of lump sum payment assistance be repaid.⁽⁷⁾

How Repayment Is Made: Eight states - Alaska, Arkansas, California, Maine, North Carolina, South Dakota, Utah, and Washington - allow families to prorate how they make their repayment. Prorated repayment is generally accomplished by affecting a partial reduction in future TANF benefits until the amount is recouped. In Maine, for example, TANF payments are reduced by ten percent until the family has repaid the diversion assistance amount. In South Dakota on the other hand, repayment must be made within three months, even if it means that the recipient receives no TANF assistance. Utah uses the same approach to repayment although families only repay the amount equal to what their TANF grant would have been during those three months, i.e., a family may not have to repay entire amount of lump sum diversion. In California, families may choose between a partial reduction in future TANF benefits sufficient to accomplish repayment or a reduction in their lifetime limit equal to the repayment amount. Only one state - Florida - requires that the entire repayment amount be paid before families can receive TANF assistance.

Automatic Costs/Penalties Associated with Receiving Lump Sum Payments

Automatic penalties refer to circumstances where certain "costs" are immediately associated with receipt of lump sum payments and are not a function of whether reapplication for TANF assistance occurs during a period of ineligibility. In Idaho, Nevada, and West Virginia, for example, the amount of the lump sum assistance is translated into the equivalent number of months of TANF assistance and automatically applied against the recipient's lifetime TANF limit. In Idaho this reduction occurs at a rate of "two for one," i.e., the equivalent number of months of TANF assistance is doubled and then applied against the recipient's lifetime TANF limit. In Utah, on the other hand, families are assessed one month against their lifetime TANF limit for each episode of diversion assistance.

One other state imposes a different form of automatic penalty. In Arkansas, if lump sum payment recipients ever reapply for TANF assistance, they face a choice: either repay the entire amount or have the amount applied against their lifetime limits for TANF benefits. Lump sum recipients reapplying within the 100-day period of ineligibility must repay the entire amount.

G. State Approaches to Lump Sum Payment Programs As Formal Diversion

The foregoing discussion illustrates that there are numerous components of lump sum payment programs and a variety of ways in which states have chosen to structure these diversion programs. How these programs are structured can suggest something about the role played by lump sum diversion within the states' overall approach to welfare reform.

States can be characterized as making it easy for TANF applicants to be diverted where the lump sum payment program policies use relatively broad eligibility criteria, allow lump sum payments to be used for more than just work-related needs, and don't impose stringent repayment requirements or other penalties on lump sum payment recipients. States can also be seen as deliberately limiting the number of participants in their lump sum payment programs when the program policies use very specific eligibility criteria, limit the use of lump sum payments to work-related needs, and impose onerous repayment requirements and automatic penalties.

The components of lump sum payment programs may indicate that the states view such programs primarily as supports for obtaining or maintaining employment, or suggest that the states view their program as means to expand emergency assistance for short-terms needs of families without reducing these families' lifetime TANF limits. States can opt for more or less oversight on how recipients use the lump sum payments or on how programs are administered at the county level.

The following brief descriptions provide four examples of the various approaches taken by states to structuring their lump sum payment programs.

Florida: Florida's lump sum payment program represents an unusual combination of 1) being among the most relaxed in terms of determining family needs and monitoring the use of the lump sum payments, and 2) having among the most stringent repayment terms if reapplication for TANF assistance is made during the three-month period of ineligibility - the entire amount must be entirely repaid before receiving further assistance. The state emphasizes a collaborative approach between the caseworkers and the families in determining whether to participate in the program. Families can only participate in the lump sum program one time.

Idaho: Idaho's lump sum payment program is unique in that it imposes the most severe automatic penalty on lump sum payment recipients: a two-for-one reduction in the recipients' lifetime limit of 24 months of TANF assistance. The program also imposes among the most severe restrictions on eligibility for TANF assistance following receipt of lump sum assistance: a two-for-one period of ineligibility during which families cannot reapply for assistance. Caseworkers explore every other option with applicants before they consider lump sum payment. The applicants' circumstances are reviewed very carefully to determine if a lump sum cash payment is the best option for them. Applicants are expected to consider fully the penalties associated with lump sum payments before agreeing to be diverted; they can only participate in the lump sum payment program one time.

Kentucky: Kentucky's program is unique because applicants may draw down the maximum lump sum payment - $1500 - over a 12-month period as long as they present eligible expenses. (Washington is the only other state where a recipient can draw down the maximum amount.) Although Kentucky has a 12-month period of ineligibility for TANF assistance, families can reapply for assistance during this period without a repayment penalty when there is job loss through circumstances beyond the person's control or an unexpected problem affecting the person's ability to care for their children. Caseworkers are expected to interpret these exceptions liberally because the state is not interested in unduly penalizing diversion recipients.

Minnesota: Minnesota's maximum lump sum payment amount is the highest among the states: $3052. Minnesota uses third party payments to distribute the lump sum payments; eligible families are almost never given cash. This form of diversion is intended to be used very infrequently and only for families who will be stabilized permanently; Minnesota has a substantial emergency assistance program for which a family would be considered first. Families receiving lump sum assistance are ineligible for TANF assistance for a period equivalent to number of months of TANF assistance represented by the amount of the lump sum - a maximum of four months. The period of ineligibility is absolute, there are no exceptions for reapplication. A family cannot receive lump sum payment assistance again for three years.

Notes

^1. It is important to note that Minnesota includes cash value of Food Stamps when calculating the maximum amount for lump sum payment which is $3052.

^2. It is useful to point out the distinction between the eligibility criteria in ten states that require applicants to have work-related needs and the restrictions on how lump sum payments can be used in five states that require work-related needs. In five states with the work-related eligibility but not the work-related restriction on lump sum payments, while applicants must have work-related needs, the lump sum payments can also be used for other needs.

^3.In practice, it is very rare that families in Utah receive lump sum payments as frequently as every four months.

^4. Wisconsin requires a minimum of 25 percent repayment in cash. The remaining 75 percent can be repaid either in cash or through "good works" in the community.

^5. As noted above, it is expected that the counties in Colorado and Texas will impose specific periods of ineligibility for TANF assistance.

^6. Colorado is again included in this list. Although no specific provisions are shown in Table 2, it is assumed that the counties in this state will require repayment for reapplication during the period of ineligibility.

^7. North Carolina reportedly will enact legislation in 1998 changing this policy and providing for no repayment

Footnotes to Table Il-I

¹ Although Alaska, Nevada and Rhode Island have not yet implemented their diversion lump sum program, we include them in this table

because they have a detailed plan which will be implemented. Rhode Island does not have an implementation date at this time.

² Blank entries for the California, Colorado, and Iowa indicate that the scope and nature of the terms are determined at the county level with varying levels of guidance from the states. For example, Iowa sets the period of ineligibility for TANF assistance at 2:1, i.e., two months of ineligibility for each equivalent TANF aid month represented by the lump sum amount.

³ A blank entry for the Kentucky indicates that case workers have discretion over the scope and nature of the terms.

⁴ Although Maine does not consider its diversion program to be lump sum, we have classified Maine's program as a lump sum payment

programs because its program matches our definition of diversion and the elements of a lump sum payment program in other states.

⁵ Texas offers a fixed amount of$1000. The lump sum is not a function of monthly TANF benefits.

⁶ The lump sum payment diversion program is implemented on less than a statewide basis in two states: Iowa, and Texas. Iowa currently operates its lump sum diversion program in three counties and is planning to expand to additional counties for state fiscal year 1999; and Texas currently operates the program in one county but plans to expand the program to 15 counties in April 1998 and go statewide in August 1998.

⁷ Kentucky offers a maximum amount of$1500. The lump sum is not a function of monthly TANF benefits.

⁸ In special circumstances the lump sum amount can exceed $1000 in Nevada with administrative approval. In Maryland, diversion recipients with compelling circumstances can receive up to 12 month's worth of assistance with administrative approval.

⁹ Minnesota is the only state in which the lump sum amount includes the cash value of the food stamps so the actual cash amount an applicant will receive is $763/month and not the monthly maximum TANF cash assistance amount of $532. Diverted families apply for Food Stamps and the diversion lump sum payment is not counted as income or resources in the Food Stamp application. All other states offer lump sum equal to monthly cash assistance an applicant would get under TANF based on family size.

¹⁰ For Maximum Payment Formula, the number of months refer to a multiple of the monthly benefits an applicant would get under TANF based on family size.

¹¹ In California, Maryland, Minnesota, and Nevada, if an individual takes a lump sum cash payment the period she must wait to reapply for TANF is equivalent to the number of TANF aid months represented by the lump sum amount. In Virginia, the period of ineligibility is 1.33 times the equivalent number of TANF aid months represented by the lump sum amount.

¹² In Idaho, Iowa, Montana, and Rhode Island, if an individual takes a lump sum cash payment, the period of ineligibility is two time the equivalent number of TANF aid months represented by the lump sum amount. No other states double the period of ineligibility based on the value of the lump sum payment.

¹³North Carolina does not have a specific period of ineligibility for recipients of lump sum payments. While the current program provides for repayment, proposed revisions to North Carolina's TANF plan, which are about to be approved by the legislature, provide that the lump sum payments do not have to be repaid.

¹⁴ Repayment terms describes the amount diverted families must repay and the method of repayment. Pro-rated amount indicates that families who receive diversion payments equivalent to 3 months may only have to payback 2 months of it. A pro-rated method of repayment indicates that there is a percentage withhold.

¹⁵ Texas makes some exceptions with regard to children. For example, if families break up in the interim and the children for some reason are living with the grandmother, then the grandmother can apply for TANF cash assistance on behalf of the children.

¹⁶ In Arkansas, lump sum assistance is treated like a loan and the repayment requirement applies to all diversion recipients, regardless of whether they reapply for TANF assistance. While the applicant agrees to forego TANF assistance for 100 days upon receipt of lump sum payment, this period of ineligibility has no bearing on the payback requirement. If the repayment is not deducted from future TANF assistance, the terms of repayment are determined between the caseworker and the recipient. By contrast, in most states repayment is associated with reapplying for TANF during the period of ineligibility.

¹⁷ In California, there may be a cost of accepting diversion. The month in which the lump sum payment is made/received counts toward the 60-month time limit even though the diverted individual has complied with the duration of ineligibility. In contrast, most states count the amount towards the time limit terms only when families come back during the period of ineligibility.

¹⁸ Idaho, Nevada, Utah, and West Virginia impose an automatic cost for accepting diversion. Lump sum recipients will have their lump sum counted towards toward the lifetime limit even though they comply with the duration of ineligibility. Nevada and West Virginia translate the lump sum amount into the equivalent number of TANF assistance months and apply these months against the recipients' lifetime TANF limit. For each episode of diversion assistance, Utah counts one month against the diversion recipient's lifetime TANF limit. Idaho is particularly unique in that the individual has two months for every equivalent TANF month counted toward the lifetime limit.

¹⁹ Although Wisconsin officials did not identify the state's Job Access Loan as a lump sum payment program, the major components of the job access loan program are very similar to components of lump sum payment programs. Job access loans are lump sum payments made available to TANF applicants, as well as TANF recipients, to help them avoid receiving TANF benefits by obtaining or maintaining employment. Although this lump sum payment is expressly a loan that must be paid back, several states essentially require full repayment of lump sum payments through the operation of "penalties."

²⁰In Ohio, all 88 counties have substantial flexibility in designing and implementing their lump sum payment programs. The state does provide the counties with a model framework for developing their diversion programs - the Ohio model is known as the Prevention, Retention, and Contingency program (PRC). For example, the parameters include a maximum lump sum payment of $1800, limited eligibility to families earning 150 percent of poverty rate or less, and that PRC is a one-time grant. Counties have the flexibility to use PRC funds to create non-lump sum payment programs. For example, one county has used this money to purchase vans to transport clients to their jobs.

LINKING TANF APPLICANTS WITH ALTERNATIVE RESOURCES

A. Introduction

Until the recent shift to a more work-oriented assistance system, eligibility for cash assistance focused primarily on determining whether a family met the financial and household composition requirements to be eligible for assistance. Thus, the eligibility determination process generally focused on making sure that all of the documentation required to verify income, assets, the presence and ages of children in the household and deprivation was provided. The processing of applications in a timely manner without errors defined success. Given this emphasis, in most offices, eligibility workers spent little, if any time, talking with applicants about the circumstances that led them to apply for assistance and whether there were other resources that they could access to alleviate their current situations.

The shift to a more work-oriented, transitional assistance has started to alter this eligibility determination process. Workers are taking more responsibility for informing applicants about program expectations and work-related benefits such as child care, transportation or child support assistance. Seven of the 51 states examined for this report (Florida, Idaho, Maryland, Montana, New York, Texas, and Wisconsin) are making a concerted effort to explore alternative resources with applicants before proceeding with an application for TANF. These efforts are designed to accomplish a number of different objectives: 1) to help families become more self-reliant by thinking more broadly about their needs and potential options for meeting those needs; 2) to provide families only with the assistance they need (e.g., child care assistance) rather than assuming all families need cash assistance; and 3) to provide cash assistance only as a last resort so that families subject to a lifetime time limit will have access to resources at times when they are most in need.

In contrast to other forms of formal diversion, there are generally no specific policies that guide the process of linking TANF applicants with alternative resources. Instead, this approach is implemented through changes in the interaction between workers and applicants. Workers now ask questions in a different way and assume a different universe of potential solutions. Cash assistance is viewed as one of many resources available to help a family rather than the only resource. Since efforts to link applicants with alternative resources are relatively new and not driven by a detailed set of policies we do not have sufficient information to describe and compare state approaches along a number of common dimensions. Thus, to examine how these programs work, we describe how several states have integrated efforts to link applicants with alternative resources into their eligibility determination process.

B. Examples of State Approaches to Alternative Resources Diversion

In Montana, efforts to link TANF applicants with alternative resources occurs through their JOB Supplement Program (JSP) that offers child care assistance, food stamps, Medicaid and lump sum payments but does not offer a monthly TANF cash grant. JSP is primarily for people with a fairly stable source of income or the ability to find employment quickly. Time spent in JSP does not count towards the time limit on TANF benefits. Families who do not have any source of income are steered into Pathways, Montana=s more traditional AFDC/TANF program that provides cash assistance.

When families apply for assistance in Montana, they meet with a Families Achieving Independence in Montana (FAIM) coordinator, a caseworker who does both eligibility determination and case management. During their initial interview, caseworkers conduct a comprehensive assessment of an individual=s needs and circumstances and consider all potential resources. The caseworker uses several tools to conduct this assessment: a household budget sheet, an action plan in which an individual writes out what the goals of the family are for the immediate future, and a screening guide or a self-assessment tool that describes credit problems, substance use/abuse, domestic violence, literacy level, and other barriers or strengths. During this interview process, if the applicant is found to have family in the area, the caseworker will talk to the applicant about how strong the family support system is and what kinds of resources can be drawn from that family (e.g., a mother who can watch grandchildren instead of incurring child care cost). Caseworkers can also make referrals to community agencies and contact family members if appropriate. In general, caseworkers do not make phone calls and instead provide the applicant with the information necessary to contact resources, e.g., information about the housing authority for housing needs, or the district transit authority for transportation assistance.

Montana=s JSP program was created to help individuals identify what resources and support systems other than TANF were available in their community. Montana has also supported the creation of local entities known as Community Advisory Councils (CAC). The CACs have a variety of local responsibilities including decision about how to support welfare reform and diversion programs. To assist with the mplementation of JSP, each CAC conducts a needs assessment of their community and develops a comprehensive resource guide for the caseworkers. Montana=s approach to providing assistance is that they do not want families to accept cash assistance unless they absolutely have to. However, families have the option to turn down participation in JSP and have their application for cash assistance processed.

Florida=s efforts to link families with alternative resources are less formalized than Montana=s efforts. In their efforts to determine whether a family=s needs might be met through a lump sum payment, caseworkers also explore whether there are resources within the community that could be used to help a family meet their needs. Caseworkers are expected to be knowledgeable about the resources available in the community. Although caseworkers explore the potential availability of alternative resources, they do not actively discourage people from applying for TANF benefits. On the other hand, their goal is to help people save the time-limited TANF benefits available to them for the difficult situations when they may need these benefits the most.

New York=s Front Door diversion program occurs at the local level. The state estimates that about half of the counties in the state formally screen applicants to see if they can be diverted. The goal of the state=s program is to divert applicants for assistance by helping them identify other services and resources that might be available to them. In counties where this type of diversion is in place, caseworkers explore the following types of questions with TANF applicants: Is there anyone else who can help you? Have you worked recently? If so, why did you leave work? Is the current problem temporary? What can you do to avoid public assistance? Those receiving Front Door diversion services are eligible to receive job search assistance, work orientation and child care. Caseworkers also try to identify applicants who are disabled and get them to apply for SSI, VA or Social Security Disability benefits.

Wisconsin=s efforts to divert individuals through alternative resources represent the most aggressive approach among the ten states. Wisconsin conducts an extensive screening process and also makes financial resources other than TANF available to the applicant. Specifically, after the applicant has applied for TANF, she meets with a Aresource specialist.@ The resource specialist helps the TANF applicant identify potential alternative resources and will make necessary referrals to other agencies for case management services, transportation, child care, Medicaid, food stamps, job search and emergency assistance. Additionally, the resource specialist will screen job ready applicants for a job access loan. The loan can range from $25 to $1600, depending on the need, and is available to TANF applicants who indicate an emergency financial need to maintain or obtain employment. In effect, the resource specialist explores all available options and directs the TANF applicant to other services and resources before TANF is considered.

C. Implications for Cash Assistance Eligibility Procedures

These descriptions of state efforts provide an initial look at the ways in which states are beginning to change their eligibility determination procedures to consider a broad range of resources that may be available to help TANF applicants meet their immediate needs without receiving ongoing cash assistance. The successful implementation of efforts to link TANF applicants with alternative resources requires a broader understanding of community resources and more sophisticated interviewing skills than has traditionally been required of caseworkers determining eligibility for cash assistance. Thus, staff training and caseworker qualifications are likely to have a substantial impact on how efforts to link TANF applicants with alternative resources play out in practice. With the exception of Wisconsin, states generally offer applicants the opportunity rather than requiring them to take advantage of alternative resources that may be available to them. Consequently, in most states, efforts to link applicants with alternative resources are likely to affect only those applicants who have a relatively minor, short-term need which can be met through means other than providing ongoing cash assistance. Applicants in need of ongoing assistance to address more serious needs are as likely to progress through the application process and receive TANF benefits as they would have prior to the shift to an approach involving a more concerted effort to assess applicant needs and link applicants with the appropriate alternative resources.

MANDATORY APPLICANT JOB SEARCH

A. Introduction

Recent efforts to reform the welfare system have been more comprehensive than many previous reforms, emphasizing such diverse policy changes as family caps and immunization, school attendance and more stringent work requirements. Although broad in scope, the primary emphasis of these reforms has been on increasing participation in work or work-related activities.⁽¹⁾ In contrast to earlier work-related reforms that emphasized participation in longer term education or training activities, many current reform efforts are focused on encouraging or requiring TANF or potential TANF recipients to find employment as quickly as possible. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) requires recipients to participate in a work activity within two years of receiving TANF benefits but states have the option to require work sooner if they choose to do so.

As noted in Chapter 1, 16 of the 48 states included in this analysis require at least some TANF applicants to begin to look for work as a condition of eligibility, an indication that states are expecting recipients to work much sooner than the two years set forth under PRWORA. An additional twelve states, while not having specific job search requirements, do require attendance at a work orientation, work registration or both as a condition of eligibility. (See Table IV-1.) California, Maine, Michigan, Montana and Texas require work orientation only; Iowa, Kentucky, New Jersey, and Utah require work registration only; and the District of Columbia and Wyoming require work orientation and work registration. In South Dakota, TANF applicants considered ready to work must go to the Department of Labor instead of the Department of Social Services to apply for TANF assistance and must complete a Personal Responsibility Plan that could, at the discretion of the DOL employment specialists, require the applicant to engage in a variety of work-related activities including job training and job search. While all of these activities have the potential to divert families from the TANF rolls, mandatory applicant job search is the only work-related activity that meets our criteria for a formal diversion program activity.

TABLE IV-1.
WORK-RELATED REQUIREMENTS
FOR TANF APPLICATION APPROVAL
(n=29)
State	Job Search	Other Work Requirements³
Alabama	ü
Arizona	ü
Arkansas	ü
California		ü
District of Columbia		ü
Florida		ü
Georgia	ü
Idaho	ü
Indiana	ü²
Iowa		ü
Kansas	ü
Kentucky		ü²
Maine		ü
Maryland	ü²
Michigan		ü
Missouri	ü
Montana		ü
Nevada	ü
New Jersey		ü
New York	ü
Ohio	ü
Oklahoma	ü
Oregon	ü
South Carolina	ü
South Dakota¹		ü
Texas¹		ü
Utah		ü
Wisconsin	ü
Wyoming¹		ü
Total	16	13

In general, mandatory applicant job search programs are intended to accomplish two related goals: (1) to emphasize and reinforce the shift from a cash assistance to employment-focused program and (2) to help potential recipients find employment as quickly as possible. If mandatory applicant job search works as intended, it will both send a clear message that receipt of cash assistance is dependent on one's efforts to work or find work, and encourage some potential applicants to find employment sooner than they would have without such a requirement in place. Where jobs are plentiful, applicants may find employment very quickly, possibly even before their application for TANF benefits has been completed or approved. Depending on their earnings, these applicants may be completely diverted from TANF assistance or they may be eligible for TANF benefits only for a very limited period of time, possibly for as little as one month. If potential TANF recipients perceive the job search requirements as too onerous or beyond their abilities they may choose not to follow through with the requirements, potentially jeopardizing their eligibility for TANF assistance.

In contrast, mandatory work orientation and/or work registration requirements are designed primarily to emphasize the shift to an employment-focused program and not to help potential recipients find employment prior to the approval of their application for TANF. Thus, to the extent that these requirements divert families from TANF they are likely to do so informally rather than formally.

Although mandatory applicant job search programs are becoming an increasingly common component of state efforts to reform their welfare systems, there is very little known about what is expected of families who are required to look for employment as a condition of eligibility, who is subject to those requirements, how much discretion workers have in modifying job search requirements to take into account individual circumstances, and how much assistance is provided to applicants who are required to look for work. As all of these factors are likely to contribute to the extent to which mandatory applicant job search requirements divert potential TANF recipients from receiving cash assistance, in this chapter we present an initial analysis of how states have structured these programs.

Mandatory applicant job search programs differ in a number of important ways. While some states require all adults to search for work, others limit this requirement to a smaller group of families such as two-parent families. Similarly, while some states exempt large numbers of applicants from this requirement, others have no or very limited exemptions. Additionally, while workers in some states have considerable discretion to grant exceptions to the exemption criteria set by the state in some states, in other states they are required to apply the established exemption criteria much more rigidly. The specific job search requirements also vary substantially across the states, ranging from as few as two to as many as 40 employer contacts within a month. Finally, states vary in the level of job search assistance that they provide to applicants who are required to look for work with some states providing considerable assistance and monitoring, and other states leaving applicants mostly on their own to find employment.

B. Target Populations for Mandatory Applicant Job Search

As Table IV-2 shows, most states that require applicants to look for work impose this requirement on nearly all adult applicants. In general, states have used a traditional separation of cash assistance cases into three broad categories based on family structure and the relationship of the children in the household to the case head (single and two-parent families and families headed by a caretaker/relative) to define who is and is not required to look for work before their application for assistance is approved. Only two states, Missouri and South Carolina, limit this requirement to two-parent families. Alabama does not require caretaker/relatives to look for work, but does extend this requirement to both two-parent and single-parent families. Twelve states require the adults in single-parent, two-parent and caretaker/relative cases to look for work as a condition of eligibility. In Oregon and Ohio, the scope and nature of who is required to look for work is determined at the local level.

**TABLE IV-2. APPLICANT JOB SEARCH REQUIREMENTS: WHO IS EXEMPT (n=16)**
State	Target populations	Exemptions	Exceptions
Alabama	One and two parent families	A family with a child under 1 year of age; disabled; not job ready	ü
Arkansas	One and two parent families, caretaker/guardian	Not job ready	ü
Arizona	Two-parent families	Not job ready; disabled; caring for disabled	ü
Georgia	One and two parent families, caretaker/guardian	A one parent family with a child under 1 year of age; not job ready	ü
Idaho	One and two parent families, caretaker/guardian
Indiana	One and two parent families, caretaker/guardian	A family with a child under 1 year of age;⁽¹⁾ disabled; caring for disabled
Kansas	One and two parent families, caretaker/guardian	A one parent family with child under 1 year of age, disabled; caring for disabled child; not job ready
Maryland	One and two parent families, caretaker/guardian	A family with a child under 1 year of age; disabled; caring for disabled	ü
Missouri	Two parent families, caretaker/guardian	Not job ready	ü
Nevada	One and two parent families, caretaker/guardian	A family with a child under 1 year of age; a family without access to child care for a child under 6 years of age; caring for disabled; not job ready
New York	One and two parent families, caretaker/guardian	Disabled	ü
Ohio⁽²⁾
Oklahoma	One and two parent families, caretaker/guardian	Not job ready	ü
Oregon	The scope and nature of who is required to job search and who is exempt is determined at the county level.		ü
South Carolina	One and two-parent families, caretaker/guardian	A one parent family with child under 1 year of age; disabled; caring for disabled	ü
Wisconsin	One and two parent families, caretaker/guardian	Not job ready

Exemptions from the Mandatory Applicant Job Search Requirement

All states, except Idaho, exempt some applicants within the target population from the applicant job search requirement. As Table IV-2 shows applicants may be exempted on the basis of the age of the youngest child in the household, a disability (of the adult applicant or a household member) or job-readiness. Although the criteria for exemptions are generally determined at the state or county level, the actual decision as to whether or not someone in the target population will be subject to a job search requirement is often made on a case by case basis by individual workers. While some criteria such as age of the youngest child are entirely objective, others such as disability or job-readiness are much more subjective, making it difficult to specify with much precision how many potential applicants are likely to be required to look for work before their application for assistance is approved.

Seven states (Alabama, Georgia, Indiana, Kansas, Maryland, Nevada, and South Carolina) explicitly exempt applicants from job search on the basis of a child=s age. All seven states exempt applicants with a child under one year of age, presumably following the criteria set forth in PRWORA for defining the pool of families on which the state=s performance on meeting the work participation targets will be measured. The states that have deviated from the one year exemption criteria have done so in opposite directions. Indiana is planning to narrow its exemption based on the child's age to 12 weeks effective in December 1998. In Nevada, the exemption extends to families with children under 6 years of age if the family does not have access to child care.

Exemptions for applicants with a disability or who are caring for a disabled household member are somewhat more common than exemptions based on the age of the youngest child in the household. Eight states (Alabama, Arizona, Indiana, Kansas, Maryland, Nevada, New York, South Carolina) made some allowances for disability, although each state defines disability somewhat differently. In South Carolina, persons who are incapacitated by physical or mental impairments are exempted from job search. In Kansas, a disability must be supported by a written doctor=s statement.

In eight states (Alabama, Arkansas, Arizona, Georgia, Missouri, Nevada, Oklahoma and Wisconsin) applicants are exempted from the mandatory job search requirement if they are not job ready. Since there are no universally established criteria for determining whether someone is job ready or not, each state has developed its own criteria and/or system for determining whether an applicant should be exempted from job search based on this criteria. While some states have attempted to develop objective criteria that workers can use to make this determination, in many states, this determination is made by workers based on their evaluation of an individual applicant=s current circumstances and previous job history.

In Missouri, all TANF applicants are assessed at the initial interview for Alevel of job-readiness.@ There are three levels of job-readiness and only Level 1 persons must look for work at the point of application. Missouri defines a Level 1 person as someone who indicates an interest and ability to work and has some recent work history, a particular occupational license or certification that will allow her to work, or is receiving unemployment compensation. Levels 2 and 3 persons face greater barriers and do not have to complete applicant job search. Instead, Level 2 and 3 persons complete job search after they receive TANF. A level 1 person who is unsuccessful at finding a job at the end of four weeks is recategorized into Level 2 or 3 and they are authorized to receive TANF benefits. In Arkansas, a TANF applicant determined to be job ready is someone with a recent work history or at least a 10th grade education level, and someone with transportation and no child care needs. Georgia is currently developing an assessment tool for caseworkers to help them determine whether an applicant should be required to conduct a job search. Georgia recognizes that some circumstances may prohibit eligible applicants from immediately pursuing a job. For example, an applicant might have low education levels and poor literacy, transportation problems, or child care issues that need to be resolved before the applicants engage in mandatory job search.

In some states, worker discretion extends beyond determining whether or not an applicant is a part of the target population and meets any of the exemption criteria. In 10 of the 16 states with applicant job search requirements, workers have the discretion to make exceptions to the formal exemptions.⁽²⁾ Exceptions may include situations such as a non-disabling injury, illiteracy and other barriers that prevent individuals from actively engaging in mandatory job search.

Although the specified target population for most applicant job search programs is all adult applicants, exemptions and exceptions granted through worker discretion are likely to considerably reduce the number of applicants subject to this requirement. Substantial worker discretion could also result in considerable variation from one office to the next.

C. Job Search Requirements

Once workers have determined that an applicant is required to fulfill a job search requirement in order to be eligible for assistance, they must then determine exactly what the applicant must do in order to meet that job search requirement. In some states, the requirements are determined by the worker or by county officials in the local offices, and in other states these requirements specified by state officials with consideration given to the conditions of the labor market in the local areas.

Table IV-3 shows that the length of mandatory job search and the definition of what constitutes job search vary considerably across the states. The length of time that applicants are required to engage in job search activities ranges from as little as 2 weeks in South Carolina and Idaho to as many as 6 weeks in Georgia. Many states define the job search requirement as a specific number of contacts per specified time period, usually until the application is approved. Contacts range from as few as two over a 40-45 day period in Alabama to as many as 10 per week for four weeks in Missouri, Indiana, and Nevada.

TABLE IV-3.
SCOPE OF APPLICANT JOB SEARCH REQUIREMENTS (n=16)
State	Scope of Job Searches	Exceptions
Alabama	The job search is 1) a minimum of two documented contacts with employers over 40-45 days; and 2) registration with local employment service. Depending on the geographic area, and whether jobs are available, the number of required contacts for individuals could be increased.	ü
Arkansas	Applicants are required to engage in job search activities for at least 10 days following the application interview. The number and type of job contacts are determined at the county level (based on the opportunities available in the county).	ü
Arizona	Two-parent families are required to participate for a minimum of 3 days in work activities before the Department authorizes issuance of the initial TPEP cash assistance payment.
Georgia	Depending on where the applicant lives, between 12 to 24 job searches could be required for a maximum of 6 weeks with the average length of job search being 3 to 4 weeks.
Idaho	Two weeks of job search are required. Case workers have some discretion on the scope of the job search.	ü
Indiana	Ten job searches per week for 4 weeks.	ü
Kansas	Applicants who must job search are required to make at least 10 employer contacts a week until approved.	ü
Maryland	All local departments require documented job searches. However, the number of searches varies by department (20 - 30 per month).	ü
Missouri	Those who are in job search must make at least 10 employer contacts per week for a 4-week period.
Nevada	Job ready applicants must make 10 job search contacts/week until application is approved. The application process takes, on average, 26 days to process.	ü
New York	Most counties have job search requirements. The number of job contacts is up to the counties.
Ohio⁽¹⁾
Oklahoma	There are 2 weeks of job search. Case workers may require a structured job search (e.g., specific number of employer contacts per week) or an unstructured (e.g., clients are instructed to search the newspaper on their own) job search.	ü
Oregon	There are no state requirements with regard to the number of job searches or a particular period of time. In East Oregon (a rural area) the state may require a person to look for work for only 1 week. In Portland, however, the state may require a person to search for work for 2-3 weeks (or longer). Generally, persons must be engaged in work search full-time (i.e., at least 20 hours/week).	ü
South Carolina	Individuals must conduct two weeks of job search (at 5 employer contacts per week).
Wisconsin	The state does not set a required number of job searches individuals must conduct. Local welfare offices determine the number of job searches.	ü

Arizona, Arkansas, Missouri, Indiana, Kansas, Nevada, and South Carolina apply the same job search requirements statewide. In the remaining states, counties and local offices are given broad discretion to determine exactly what will be required of applicants. In Arkansas, non-exempt TANF applicants are required to engage in job search activities for at least 10 days following the initial application interview. However, determination of the number and type of job contacts are based on the opportunities available in the county. In Oregon, caseworkers must follow state guidelines that non-exempt persons must be engaged in work search full-time (i.e., at least 20 hours/week) for a period not to exceed 30 days. Beyond these broad requirements, local offices are free to define their own job search requirements. Thus, in East Oregon (a rural area) the local office requires a person to look for work for only 1 week. In Portland, the local office requires applicants to search for work for 2-3 weeks (or longer).

Good Cause Exceptions to Completing Job Search Requirements

As with the process for determining who must job search and who is exempt, states can allow exceptions for individuals who have failed to complete job search requirements. Good cause exceptions are given to applicants who are required to look for work but may be unable to complete the requirement because of unforeseen circumstances. Ten states provide good cause exceptions to applicants who are willing, but unable to complete their job search requirements. Good cause exceptions are generally considered for unavoidable, unexpected, or insurmountable barriers to securing or maintaining a job. Such good cause reasons for granting exceptions may include transportation or child care problems or illness. For example, in Arizona, illness, court-ordered appearance, lack of transportation and child care, a family crisis, severe weather, and incidence of domestic violence are considered good cause. If an applicant who is required to look for work but has not done so can show good cause, the TANF application will continue to be processed and will not be denied or withdrawn due to failure to meet job search requirements.

D. Job Search Assistance and Job Search Documentation

The type and intensity of job search assistance provided to applicants who are required to look for work varies substantially across the states. Ten of sixteen states (Alabama, Arkansas, Georgia, Kansas, Maryland, Missouri, Nevada, New York, Oklahoma, and Oregon) provide applicants with some assistance to help them find employment. However the type of assistance varies considerably across the states and in most states, across local offices. In Georgia, the county Departments of Family and Children Services as well as the state Department of Labor help applicants by providing them with employment contacts. In Nevada, the welfare staff is outstationed at employment security offices to offer job leads. In Idaho, applicants have access to a community resource room. In Missouri, each local welfare office has staff from the state employment securities agency available to help applicants with job search activities and provide resource information.

Wisconsin and all local offices in Oregon provide extensive job search assistance. This assistance includes classes on how to complete an employment application and write a resume, and how to prepare for a job interview. In addition, TANF applicants looking for employment are eligible for a variety of assistance including case management services, transportation, child care, Medicaid, food stamps, job search and emergency assistance. Caseworkers determine what services are provided. In Wisconsin, job ready individuals who indicate an emergency financial need to maintain or obtain employment may be eligible for a job access loan which can range from $25 to $1600.

Seven states (Alabama, Georgia, Kansas, Maryland, Nevada, New York, and Oklahoma) specifically note that they require documentation to verify that applicants are actively engaged in job searches. For example, in Alabama TANF applicants are required to register with the employment services and must report the number of job applications they submitted and to whom they applied to the TANF eligibility workers prior to completing the application. In Oklahoma, TANF applicants must submit their activities and the number of hours for each day that they do job search to their caseworker. Oklahoma is also unique in the fact the state pays a "participant allowance" which can be from $3 to $6 a day (for more than 4 hours of activity) while applicant is engaged in job search. Applicants must submit a "time sheet" so that they can be paid the allowance.

E. Applicant Job Search As Formal and Informal Diversion

In contrast to lump sum payment programs where many of the decisions regarding the structure of the programs are made at the state level and the rules are relatively well defined, applicant job search programs are characterized by considerable devolution of decision making to local offices and by substantial worker discretion. Given the amount of discretion associated with determining who might be excepted from applicant job search, what the specific scope of the job search will be, and who might be excused from completing their job search requirements, it is difficult to determine the extent to which mandatory applicant job search programs are likely to divert applicants from TANF. Nonetheless, it is possible to identify the characteristics of these programs that seem most likely to result in diversion.

To the extent that job search assistance increases the likelihood that an applicant will find employment, one would expect programs that provide more job search assistance to result in higher levels of employment and therefore higher levels of formal diversion. With considerable assistance available, fewer applicants may be discouraged from applying for assistance, potentially reducing the number of applicants who are diverted informally. On the other hand, informal diversion may be higher in programs where little job search assistance is provided, particularly if applicants might be easily discouraged by relatively demanding job search requirements, particularly if they have failed in previous efforts to find employment.

The intensity of the job search requirements could affect whether and how TANF applicants are diverted in several different ways. If the likelihood of finding employment is directly related to the number of employer contacts one makes, then the likelihood of applicants finding employment and being formally diverted would be higher in programs with more intense job search requirements. However, if the number of job searches required is beyond what many TANF applicants believe they can reasonably accomplish in the specified time period, then applicants may apply for jobs randomly, paying little attention to whether or not they are likely to be qualified or be considered for the job. If this occurs, a higher number of job contacts will not necessarily translate into a higher probability of finding employment. In addition, the more difficult the requirements are to meet, the more likely applicants may be to either give up or not apply for assistance in anticipation that they will be unable to meet the requirement. To the extent that such circumstances occur frequently, there is potential for mandatory applicant job search programs to create substantial informal rather than formal diversions.

How workers use their discretion with respect to exceptions may also affect the extent to which mandatory applicant job search requirements result in formal or informal diversion from the welfare system. If workers do a good job at accommodating applicants who are unable to meet the job search requirement, applicants will be less likely to either give up on meeting or fail to meet the job search requirements. In addition, potential applicants may be less likely to avoid applying for TANF because they do not feel they can meet the expected job search requirements.

In sum, mandatory job search requirements are likely to divert potential TANF recipients both formally and informally. In well-designed programs providing the assistance that applicants need to look for work, applicants will be diverted formally because they find employment. On the other hand, if programs provide minimal support and require relatively stringent job search activities that are unrealistic in terms of the abilities of most potential TANF applicants, mandatory applicant job search programs may result in substantial, and possibly undesirable, informal diversion.

Notes

^1. Department of Health and Human Services. (1997). Setting the Baseline: A Report on State Welfare Waivers. Washington, D.C.: U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, June. Pavetti, L., P. Holcomb, & Duke, A. (1995). State Welfare Reform Efforts: Increasing Participation in Work and Work-Related Activities Washington, D.C.: The Urban Institute, September.

^2.This may also be true in Ohio where counties have the discretion to determine the parameters of their program.

Footnotes to Table IV-1

¹ South Dakota, Texas and Wyoming do not require job search for TANF application approval. However, these states are unique in the fact they encourage (but do not require) TANF applicants to conduct job search while their TANF applications are pending.

² In Indiana and Maryland, the work requirements are implemented on less than a statewide basis. In Indiana, job search is implemented in two counties. In Kentucky, the work registration requirement is in effect in 25 counties where there is an on-site employment office. In Maryland, most local departments require that applicants attend a work orientation.

³ Other work requirements include work orientation and/or work registration activities only. Twelve states, while not having specific job search requirements, do require work orientation, work registration, or both as a condition of eligibility for TANF. (States with job search requirements frequently include work registration and/or work orientation as part of the job search requirements.) California, Maine, Michigan, Montana, and Texas require work orientation only; Iowa, Kentucky, New Jersey, and Utah require work registration only; and the District of Columbia, Florida, and Wyoming require work orientation and work registration. In a thirteenth state, South Dakota, TANF applicants considered ready to work must go to the Department of Labor as opposed to the Department of Social Services to complete their TANF applications and must complete a Personal Responsibility Plan (PRP) that could, at the discretion of the DOL employment specialist, require the applicant to engage in a variety of work-related activities including job training and job search.

Footnotes to Table IV-2

¹ In Indiana, the exemption related to the age of the child will become narrower in 1998. On June 1, 1998, only families with a child under the age of six months will be exempt; on December 12, 1998, only families with a child under age of 12 weeks will be exempt.

² In Ohio, all 88 counties have substantial flexibility in designing their mandatory applicant job search diversion program.

Footnotes to Table IV-3

¹ In Ohio, all 88 counties have substantial flexibility in designing their mandatory applicant job search diversion program.

POTENTIAL IMPACT OF DIVERSION PROGRAMS ON ELIGIBILITY FOR MEDICAID

A. Introduction

Changes made under the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 have direct and indirect consequences on the Medicaid program. PRWORA not only provided states with considerable flexibility to design their welfare programs but also de-linked eligibility for Medicaid from cash assistance provided through state TANF programs. Thus, persons must be found eligible for Medicaid independent of their receipt of cash assistance. This change and existing rules governing Medicaid eligibility have important consequences for recipients who are diverted from the welfare rolls through formal diversion programs or who are diverted indirectly as a result of program changes that discourage families from applying for assistance.

In this section we explore in depth the potential impact on Medicaid coverage of the two most common formal diversion activities: (1) providing an option to persons to receive a lump sum cash payment in lieu of a TANF benefit; and (2) requiring persons to conduct job search prior to authorizing TANF benefits. We also briefly discuss how eligibility for Medicaid would be affected for families who are diverted through state efforts to link them with alternative resources and those who choose not to apply for TANF because they find the new program rules too onerous and/or expect that they may not be eligible for benefits. Before doing so, it is essential to examine fully the changes made to Medicaid under the 1996 welfare law and the consequences of these actions for determining eligibility for Medicaid.

B. Medicaid Changes under PRWORA

Prior to the passage of PRWORA, persons who were eligible for cash assistance under the former Aid to Families with Dependent Children (AFDC) program were enrolled automatically in Medicaid. However, under PRWORA individuals and families become eligible for Medicaid independent of their eligibility for cash assistance under a state's TANF program. In other words, receipt of TANF no longer entitles persons to Medicaid coverage and ineligibility for TANF benefits does not necessarily make persons ineligible for Medicaid.

The Creation of Section 1931 of the Social Security Act

While the 1996 welfare law de-linked eligibility for Medicaid from TANF, the law also created a new mandatory Medicaid eligibility group of low-income families with children by adding Section 1931 to the Social Security Act. Section 1931 requires that all persons who meet the basic requirements of the states' AFDC programs in effect on July 16, 1996 (with certain options described below) be considered eligible for Medicaid. Thus, persons who meet the AFDC family composition rules (i.e., deprivation requirements) and the income and resource standards using the methodologies in place in a state as of July 16, 1996 should be eligible for Medicaid. Section 1931 was created to ensure that persons who would have been eligible for benefits prior to the passage of PRWORA would continue to be eligible for Medicaid, especially if states adopted more restrictive eligibility standards for TANF than had been in place for their AFDC programs.

Continued Reliance on AFDC Income and Resource Standards and Methodologies

While the 1996 welfare law repealed AFDC, replacing it with TANF, certain references to the AFDC program remain intact with respect to determining eligibility for Medicaid. In particular, the 1996 welfare law retained AFDC income and resource standards and methodologies for purposes of determining Medicaid eligibility.

Section 1931 requires states to establish income and resource standards for Medicaid eligibility at the levels in effect as of July 16, 1996, with certain options. The state may lower its standards to May 1, 1988 levels, an option available to states since passage of the Family Support Act of 1988 (PL 100-485). The law also permits states to increase standards by a percentage no greater than the percentage increase in the consumer price index for all urban consumers. These income and resource standards are used to determine whether a family would have received an AFDC payment as of July 16, 1996.

Section 1931 also permits the state to use less restrictive AFDC income and resource methodologies than the methodologies used under the State plan in effect as of July 16, 1996. Income and resource methodologies are the methods (e.g., disregards, exclusions, allocations) used to establish the amount of a family's countable income and resources. The Health Care Financing Administration (HCFA) has defined a methodology as less restrictive if additional individuals are made eligible for Medicaid and no individuals who are otherwise eligible are made ineligible.⁽¹⁾ Thus, although Section 1931 requires states to use the AFDC income and resource standards in effect on July 16, 1996, this section also gives the states considerable flexibility in defining Medicaid much more liberal eligibility criteria due to the states' unfettered ability to use less restrictive income and resource methodologies. For example, states could choose to disregard 50 percent of all earned income or to disregard the total value of one car when determining Medicaid eligibility.⁽²⁾

Authority to Continue Certain IV-A Waiver Provisions

Under Section 1931(d), states also have the option to continue indefinitely certain provisions of IV-A waivers, which had been previously approved as part of the states' Section 1115 welfare reform demonstration projects, that affect Medicaid eligibility. These IV-A waivers must have been submitted prior to August 22, 1996 and approved by July 1, 1997. As interpreted by HCFA in a February 1997 letter to the states, the allowable waivers provisions to be continued are income and resources standards and methodologies, deprivation requirements (e.g., the 100-hour rule), and caretaker requirements. While states can also change the income and resources standards and methodologies through the state Medicaid plan amendments, the only mechanism for changing the deprivation and caretaker requirements is by continuing these provisions of existing IV-A waivers.

Transitional Medicaid Linked to Section 1931 Eligibility

Since 1990 states have been required to provide transitional Medicaid benefits of up to one year to persons who lost AFDC eligibility as a result of increased hours of, or increased income from, employment. To be eligible for transitional Medicaid benefits, a person must have received AFDC in at least three of the preceding six months. With passage of the 1996 welfare law de-linking Medicaid eligibility from TANF, the trigger for transitional Medicaid benefits became the receipt and loss of 1931 Medicaid eligibility due to an increase in hours or earnings rather than the receipt and loss of eligibility for cash benefits under TANF; eligibility now depends upon receipt of Medicaid under Section 1931 in at least three of the preceding six months. Prior to the enactment of PRWORA, many states had used the IV-A waiver process associated with the welfare reform demonstrations to extend the availability of transitional Medicaid benefits to 24 months and to change the eligibility requirement of three months to one month. These waivers are known as Title XIX waivers. Unlike the IV-A waivers, Section 1931 does not give states the authority to continue their Title XIX waivers. States may, however, seek new Title XIX waivers in order to continue expanded transitional Medicaid benefits and the relaxed eligibility standard for recipients of cash assistance.

Medicaid Eligibility Outside of Section 1931

In addition to Section 1931 there are other eligibility routes to Medicaid for low-income families, the most significant of which are the so-called poverty-level pathways. The 1996 welfare law did not alter these pathways. The poverty-level pathways provide Medicaid coverage to pregnant women and children based solely on their income, and in a few states, resources; there are no family composition requirements. Federal Medicaid law specifies certain minimum income standards for these populations although states may exceed the federal requirements at their option. At a minimum, states must provide Medicaid to pregnant women and children up to age six with incomes up to 133 percent of the federal poverty level. Children between six and 19 born after September 30, 1983 with incomes up to 100 percent of the federal poverty level also qualify for Medicaid on a mandatory basis. Additionally, states have the option to provide Medicaid coverage to pregnant women and infants up to age one with incomes at or below 185 percent of the federal poverty level. In general, these additional pathways provide considerable access to Medicaid for poor children,⁽³⁾ but with the exception of pregnant women, provide no expanded access for adults.

Seventeen states have implemented "comprehensive health care reform demonstrations" by using the Section 1115 waiver process to gain HCFA approval for reorganizing their state Medicaid programs into mandatory managed care programs for most Medicaid beneficiaries. As part of this waiver process, six states have expanded Medicaid eligibility to include a portion of low-income adults up to the federal poverty level in both single parent and intact families.⁽⁴⁾ The approach to expanding Medicaid eligibility through 1115 waivers, however, involves a very challenging and demanding process for states as well as substantial financial considerations and it is not likely that many states will use the 1115 waivers as a mechanism to expand Medicaid eligibility. Thus, Medicaid eligibility for adults as parents and caretaker relatives will continue to be tied primarily to the requirements set forth under Section 1931.

The provisions of Section 1931 are intended to ensure that, at a minimum, families who would have been eligible for Medicaid prior to the implementation of PRWORA will continue to be eligible for Medicaid post-PRWORA. Section 1931 also grants to the states considerable flexibility to modify their income and resources methodologies - states are free to use this new flexibility to expand access to Medicaid by, in effect, liberalizing the eligibility criteria. (Table V-1 provides an outline of the states' post-PRWORA options for affecting Medicaid eligibility.) With respect to formal diversion programs, states must consider two questions: 1) how do their formal diversion programs affect Medicaid eligibility for families, and 2) what changes in states' Medicaid policies might be necessary to counteract the negative effects of diversion programs. Our preliminary analysis of state efforts to divert families from the welfare system indicates that the implementation of diversion programs is likely to make numerous families, primarily the adult members, ineligible for Medicaid unless the states decide to take advantage of their flexibility under Section 1931 to expand resource and income disregards.⁽⁵⁾

**Table V-1: State Options to Affect Medicaid Eligibility Post-PRWORA**
OPTION	AUTHORIZING AUTHORITY	REQUIREMENTS	FLEXIBILITY	DURATION
1. Modify income and resource standards and methodologies.	Section 1931(b) of the PRWORA Nominal HCFA Approval of State Medicaid Plan Amendment	Must apply uniformly to all populations with type of income or resource	May target certain income/resources for disregards (e.g., lump sum diversion payment; first three months of earned income)	Indefinite
2. Continue Title IV-A waivers terms affecting Medicaid eligibility.	Section 1931(d) of the PRWORA Nominal HCFA Approval	Waiver submitted prior to 8/22/96 and approved on/before 7/1/97 Limited to waivers of: income and resource standards and methodologies; deprivation requirements; and caretaker relative requirements	Individuals subject to IV-A waivers in some states retain Medicaid eligibility if they would have been eligible in the absence of the demonstration - in this case state must continue welfare reform demonstration on exactly same terms	Indefinite - even though welfare reform demonstration may expire or be terminated by state, IV-A waiver terms affecting Medicaid eligibility can continue indefinitely
3. Continue Title XIX waivers. Seek new Title XIX waivers.	Section 1115 of the Social Security Act HCFA Approval for both continuation and new	Existing waiver is not required to meet budget neutrality test New waiver approved after 8/22/96 must comply with budget neutrality requirements		Expire at end of IV-A demonstration
4. Continue existing Section 1115 Medicaid waivers. Seek new Section 1115 Medicaid waivers.	Section 1115 of the Social Security Act HCFA approval	Waiver must comply with budget neutrality requirements	May expand eligibility to near poor	Waivers usually limited to 5 years
5. Expand eligibility for pregnant women and children	Section 1902r(2) of the Social Security Act		May apply more liberal income and resource methodologies for pregnant women and children	Indefinite

C. Potential Impact of Lump Sum Diversion Programs on Medicaid Eligibility

To date, 19 states have implemented lump sum payment diversion programs as components of their TANF programs, with several additional states anticipating implementation of lump sum payment programs this year. (See Table I-1 and the discussion in Chapter 2) Thus, the opportunity to affect Medicaid eligibility for a substantial number of persons is significant.

In general, states that have implemented lump sum payment diversion programs do not view these diversion programs as interfering with continued access to Medicaid. In fact, interviews with state officials revealed quite to the contrary. States reported that they were ensuring Medicaid coverage for families who would be eligible under Section 1931 or through one of the other eligibility pathways. All but one of the states use joint TANF/Medicaid application forms.⁽⁶⁾ In addition, several states reported that they have retained categorical eligibility for Medicaid. (A state may provide categorical eligibility if a state is able to adopt policies under Section 1931 that match its TANF program.) In these cases, persons who are eligible for TANF are automatically eligible for Medicaid. The states generally reported that persons diverted under lump sum payment programs must have been found eligible for TANF.

Despite assurances from states that Medicaid eligibility has not been impacted adversely by diversion programs, issues associated with lump sum payment diversion programs were uncovered that suggest potential areas where problems may arise. Further analysis also exposed uncertainty and lack of clarity about to use the provisions of Section 1931 to address these potential problems. To explore these issues further this section describes how a lump sum payment diversion program may impact Medicaid in general, reviews federal guidance on Medicaid in light of changes made under the 1996 welfare law, considers one state (Utah) that has addressed Medicaid issues in light of its diversion program, and examines one state (Arizona) that is weighing available options against the impact of a lump sum payment program on Medicaid eligibility before proceeding with the implementation of its diversion program.

The Importance of Rules Affecting the Treatment of Lump Sum Diversion Payments

In designing lump sum payment diversion programs, states may choose to provide families with a cash payment, voucher, or both. In the review of states with lump sum payment programs, 18 of 22 states have opted to provide primarily cash payments directly to families. In these cases, a state must then subject the lump sum diversion income paid to families to the income standards and methodologies authorized under Section 1931 of the 1996 welfare law. While a state must count all earned and unearned income, including a lump sum payment, in determining eligibility for Medicaid vis-à-vis a states July 16, 1996 AFDC income and resource standards (i.e., 1931 Medicaid eligibility), a state has greater flexibility in establishing less restrictive income methodologies. Thus a state may choose to disregard completely a lump sum diversion payment and do so by indicating this income methodology in their state Medicaid plan.

Generally a lump sum payment is counted as income in the month in which it was received. While income standards vary significantly by state, a lump sum diversion payment is likely to exceed the states July 16, 1996 AFDC income standards, thereby making an individual and/or family receiving lump sum diversion payments ineligible for Medicaid under Section 1931. As just noted, to prevent these losses, a state must decide to disregard the lump sum diversion payment as income and show this disregard in its state Medicaid plan. Parents and caretaker relatives, the majority of whom are women, are the most likely to be affected adversely by the states' failure to disregard lump sum diversion payments; they are left without an alternative route to Medicaid. In addition, older adolescents in the household who do not fall within the age limits for the poverty-level pathways could also lose their only basis of Medicaid eligibility.⁽⁷⁾ Therefore, the states can assure that individuals who opt to participate in a lump sum payment diversion program do not forego eligibility for Medicaid for themselves or members of their families by using the state plan amend approach.

The Potential Loss of Transitional Medicaid

Possibly of even greater long-term consequence for diversion recipients is the potential loss of transitional Medicaid. For example, assume that an individual accepts a lump sum diversion payment during the first month and finds a job during the second month. The income earned during the second month must be counted toward Section 1931 Medicaid eligibility. This earned income is likely to exceed Section 1931 income standards, thereby rendering the adult (usually a mother) ineligible for Medicaid; the children (except older adolescents) would likely be eligible for Medicaid under one of the poverty-level pathways. Additionally, because the adult/caretaker relative secured employment during the second month and became ineligible for 1931 Medicaid due to excess income, he/she also would not be eligible for transitional Medicaid benefits having failed to be 1931-eligible for at least three of the six preceding months, as required to qualify for transitional Medicaid benefits. As will be discussed below, many states may not be fully aware of their options under Section 1931 to remedy these problems.

Federal Guidance on Structuring State Medicaid Programs

The Health Care Financing Administration (HCFA), the agency with responsibility for administering the Medicaid program, has not issued any guidance to states specifically addressing diversion programs in general or lump sum payment programs in particular. Rather, HCFA has issued guidance to states on the implementation of Section 1931 of the Social Security Act and the continuation of AFDC demonstrations conducted under Section 1115 of the Social Security Act.⁽⁸⁾ While not directly related to diversion programs this guidance is instructive.

With regard to determining Medicaid eligibility under Section 1931, HCFA interprets the requirements of this section to mean that states must use the income and resource standards and methodologies, which were in effect on July 16, 1996, unless they choose one of the following three options.⁽⁹⁾ States can lower income standards to those in effect on May 1, 1988; states can raise income and resource standards in accordance with increases in the consumer price index

since July 16, 1996; and states can choose more liberal methods to determine the amount of a family's countable income and resources. A fourth option for states is to continue certain provisions of existing welfare reform demonstration 1115 AFDC waivers, provisions that affect deprivation requirements as well as income and resource methodologies. As noted above, however, HCFA recently promulgated a regulation that gives all states the option under Section 1931 to waive the deprivation requirements.⁽¹⁰⁾

For the small number of states that started their lump sum diversion payments under a welfare reform demonstration waiver, HCFA's policy regarding the continuation of these IV-A waiver terms may be especially important. HCFA issued a letter to states clarifying that states may continue to use IV-A waivers only for three purposes: states may continue waivers of 1) income and resource standards and methodologies, 2) deprivation requirements,⁽¹¹⁾ and 3) requirements that a child live with a specified relative.⁽¹²⁾ States may not, therefore, continue waivers that fall outside one of these three categories. For example, a state may not continue a waiver that deems a person to be an AFDC recipient. According to HCFA's interpretation, the AFDC program has been repealed - except for purposes of determining Medicaid eligibility. Thus, IV-A waivers are allowed to continue only to the extent that they affect eligibility criteria.

HCFA also has stated that the 1996 welfare law does not provide states with the authority to continue Title XIX waivers indefinitely as is the case for IV-A waivers. For example, if a state wishes to continue to provide an additional 12 months of transitional Medicaid benefits to individuals who lose cash assistance because of earnings from employment, or continue to disregard the three-month requirement, the state must contact their HCFA project officer and seek approval for implementing such a continuation. The continuation is effective only until the expiration of the welfare reform/AFDC demonstration and the state would not be required to demonstrate budget neutrality. However, any new Title XIX waivers, post-August 22, 1996, will be subject to the budget neutrality test usually associated with Section 1115 waivers.

State Options to Address Impact of Diversion Programs on Medicaid Eligibility

States can ameliorate the potential losses of Medicaid eligibility by applying less restrictive income methodologies to income received by a family. A state's willingness to utilize such methodologies probably depends on the cost to its Medicaid budget. Addressing the potential losses in Medicaid eligibility - for traditional and extended benefits - has various financial consequences, depending on the number of persons rendered newly eligible for Medicaid as a result of the disregard. To reduce the loss of traditional Medicaid eligibility for persons who accept a lump sum diversion payment, a state may disregard a specific type of income (i.e., lump sum diversion payment). Most states with lump sum payment diversion programs have specified maximum lump sum payment amounts. With the maximum amount of the disregard known, a state could estimate the cost to its Medicaid budget by forecasting the number of persons who would be made newly eligible for Medicaid by the disregard. This disregard may have greater appeal because the scope of the disregard is limited, both by the amount and by the population, i.e., only persons electing a lump sum diversion payment would be eligible for the disregard. Using the income disregards in this manner is perhaps the easiest and simplest way to address the Medicaid eligibility problems associated with lump sum payment diversion programs.

On the other hand, the use of the income disregards to address Medicaid eligibility issues associated with obtaining a job immediately, either before receiving TANF assistance or shortly after receiving a lump sum payment, presents a more complicated solution. States may be more likely to resist addressing the potential losses in transitional Medicaid for employed persons because of the greater financial exposure likely to result from such an action. The challenge here is to ensure that an individual retains Medicaid eligibility for three months in order to qualify for transitional Medicaid. A state wishing to apply a more liberal income methodology for employment-related income must apply it uniformly across all potentially Medicaid-eligible persons. In other words, a state that disregards a certain amount of earned income to alleviate the loss in transitional Medicaid benefits for persons participating in a lump sum diversion payment program, e.g., disregarding entirely the first three months of earned income, must allow all persons to disregard that amount of earned income in determining eligibility for Medicaid under 1931. An alternative approach to income disregards could involve the continuation of the Title XIX waivers changing the three-month requirement to one month.⁽¹³⁾ In order to use Title XIX waivers to benefit diverted TANF applicants, the states may need to apply for new Tittle XIX waivers. This approach is discussed in more detail below. Table V-2 provides an outline of state options for preserving Medicaid eligibility within the context of state formal diversion programs.

As the following discussion about the experiences of two states with their lump sum payment diversion programs illustrates, states have a range of choices to make about how to assure continued Medicaid eligibility under formal diversion programs. Table V-2 represents the range of these choices. This discussion also illustrates that HCFA's guidance with respect to how states can structure their Medicaid programs since the implementation of welfare reform may have important implications for lump sum payment diversion programs and recipients' eligibility for Medicaid.

Table V-2:
State Options to Assure Medicaid Eligibility for Traditional and Transitional Medicaid Benefits for Persons Who Are Diverted
OPTION	LUMP SUM DIVERSION PAYMENT		PRE-APPROVAL JOB SEARCH
	Traditional Medicaid	Transitional Medicaid	Traditional Medicaid	Transitional Medicaid
1. Modify income and resource standards and methodologies.	Disregard lump sum diversion payment in first month		Exclude first three months of earnings
2. Continue Title IV-A waivers affecting Medicaid eligibility.	Modify how to count/disregard lump sum diversion payment		Modify how to count/disregard earned income
3. Continue Title XIX waivers. Seek new Title XIX waivers.		Provide Medicaid eligibility for persons with less than 3 months of eligibility in previous 6 months Provide additional 12 months of Medicaid eligibility		Provide Medicaid eligibility for persons with less than 3 months of eligibility in previous 6 months Provide additional 12 months of Medicaid eligibility
4. Continue existing Section 1115 Medicaid waivers. Seek new Section 1115 Medicaid waivers.	Expand Medicaid eligibility to near poor adults		Expand Medicaid eligibility to near poor adults
5. Expand Medicaid eligibility for pregnant women and children.	Modify how to count/disregard lump sum diversion payment		Modify how to count/disregard earned income

D. States' Experiences with Lump Sum Payment Diversion: Consequences for Medicaid

With the exception of Utah and Virginia, which have operated lump sum diversion programs for several years, the experiences of most states with implementing lump sum payment programs are quite recent. Because of its relatively long history with lump sum payment diversion programs, this section explores how Utah has addressed Medicaid eligibility issues within context of their lump sum payment diversion programs. In addition, this section explores how one state - Arizona - has reassessed its lump sum payment diversion program in consideration of its consequences on Medicaid coverage. Additionally, Arizona's approach to its lump sum payment diversion program is examined because of its proactive consideration of the impact on Medicaid eligibility.

To understand how a state with a lump sum payment diversion program has addressed the Medicaid eligibility problems that may result from providing diversion payments, project staff examined the state with the first and longest-standing lump sum payment diversion program. Utah's lump sum payment diversion program dates to 1993.

Utah: Initially Utah secured an AFDC waiver under Section 1115 of the Social Security Act to provide a one-time diversion payment to cover three months of assistance to meet basic or special needs. In return for a diversion payment, applicants agreed to have their application for AFDC denied. Without a waiver, this action would likely result in a denial of Medicaid as well.⁽¹⁴⁾ Because states cannot deny Medicaid to persons who would otherwise qualify for Medicaid in the absence of a welfare reform demonstration, the state sought a waiver to assure continued Medicaid eligibility. More specifically, Utah requested that the lump sum diversion payment be considered an AFDC payment and that recipients of these payments be deemed to be AFDC recipients for three months. In other words, Utah sought to treat persons who elected to receive a diversion payment as if they were AFDC eligible for three months, and, therefore, otherwise eligible for Medicaid, because of the categorical eligibility requirements in effect at the time. If recipients are employed or find employment within this three month window, this would also make them eligible for transitional Medicaid benefits. Utah also received a Title XIX waiver to extend the availability of transitional Medicaid benefits from 12 to 24 months. Thus, Utah evidently has chosen to promote going to work with the decision to enhance the availability of transitional benefits.

Shortly before the enactment of PRWORA in the summer of 1996, Utah received approval for a five year extension of its AFDC 1115 waiver. Utah continues to operate its lump sum payment diversion program and to guarantee transitional Medicaid by treating persons who receive diversion payments as if they were qualified for Medicaid, instead of AFDC, for three months, i.e., continuing the terms of its original IV-A waiver with the adjustment for the delinking of Medicaid and cash assistance/AFDC. For example, a person who receives a diversion payment in January would remain eligible for Medicaid during the months of January,

February, and March. If a person finds employment by the third or fourth month (e.g., March or

April) then he/she would be eligible for transitional Medicaid benefits. (Given that Utah's lump

sum diversion program is targeted to employed or immediately employable persons, most recipients are likely to meet this criteria and be eligible for transitional Medicaid.) If a person has no earned income by the fourth month then his/her continuing eligibility for Medicaid would be determined under Section 1931 rather than transitional Medicaid benefits rules.

Given HCFA's subsequent interpretation of the statutory provisions regarding the continuation of AFDC waivers as described above, it is not clear whether other states can use this approach to ensure eligibility for Medicaid and transitional Medicaid assistance for persons receiving assistance under lump sum diversion programs. The use of this "deeming" strategy may not be consistent with current HCFA policy that has limited the continuation of IV-A waiver terms to the three provisions described above. States may, instead, have to consider other options, such as a Title XIX waiver of the three-month eligibility requirements, in order to continue to guarantee transitional Medicaid benefits for recipients of lump sum diversion payments. However, as also noted above, the conditions of continuing availability of these Title XIX "waivers" are not clear either. State will probably have to seek guidance on an individual basis from HCFA regarding their efforts to make Medicaid eligibility criteria complementary to participation in diversion programs.

Arizona: Arizona has decided to reconsider implementation of its lump sum payment diversion program because of the expected adverse consequences on Medicaid eligibility for persons receiving lump sum diversion payments. While Arizona passed a state law authorizing the implementation of a lump sum payment program, the state has not implemented the program because of two unresolved issues: 1) how to ensure Medicaid eligibility for recipients of lump sum diversion payments, and 2) how to ensure eligibility for transitional Medicaid benefits, which Arizona has extended from 12 to 24 months, for recipients of lump sum diversion payments.

The state envisions a person receiving a lump sum diversion payment would also qualify for Medicaid by virtue of the state choosing to disregard the entire lump sum diversion income in the month of receipt. However, if the lump sum recipients is successful in securing or retaining a job (the primary goal of the lump sum payment diversion program), his/her earned income may exceed 1931 eligibility levels and lead to the immediate loss of Medicaid thus jeopardizing eligibility for transitional Medicaid. The state does not wish in effect to penalize persons diverted through a lump sum payment program by creating the scenario whereby transitional Medicaid benefits are not accessible. According to one state official, while the state wants to move persons to work, achieving this goal through the lump sum payment diversion program could be "the worst thing to do [in terms of their eligibility for transitional] Medicaid."

To address this issue, federal and state interviewees suggested that Arizona may be considering at least three options: 1) the continuation of certain terms of the IV-A waiver provisions, 2) the submission of a Title XIX waiver to HCFA to provide transitional Medicaid benefits for persons who are diverted and have less than 3 months of receiving Medicaid, and 3) the submission of an 1115 waiver expanding the Medicaid coverage groups for the near poor. In effect, the state appears to be considering a choice between providing more Medicaid benefits for a smaller group of beneficiaries and providing some Medicaid benefits to a larger group of new beneficiaries. HCFA guidance suggests that it may be difficult for the state to achieve its desired outcomes with respect to transitional Medicaid benefits under the first two options. The third option would provide Medicaid coverage to additional persons (primarily working poor families), including persons who may elect to be diverted with lump sum diversion payment assistance, but would not necessarily assure eligibility for 24 months of transitional Medicaid benefits.

E. Potential Impact of Other Formal Diversion Programs - Mandatory Applicant Job

Search and Alternative Resources - on Medicaid Eligibility

As the advent of welfare reform has meant an increased emphasis on work, required work participation rates for TANF recipients, and more stringent lifetime limits on TANF benefits, states have devised new ways to encourage work among TANF applicants and to avoid enrolling applicants in TANF. Sixteen states require applicants to complete job search requirements prior to authorizing TANF benefits. (See foregoing discussion in Chapter Four.) The requirements of the mandatory applicant job searches vary from three days of work activities for applicants to several weeks of job search. Another approach adopted by seven states involves aggressive efforts to link TANF applicants with resources other than TANF assistance, i.e., alternative resources, sufficient to meet the needs that prompted the TANF application. (See foregoing discussion in Chapter Three.) This section examines the potential impact of both mandatory applicant job search requirements and alternative resources approaches on Medicaid eligibility.

While states may impose job search requirements on applicants as a condition of eligibility for TANF assistance, the states must immediately proceed to determine Medicaid eligibility for the applicant and members of her family. While all but two states use a joint TANF/Medicaid application it is not clear that persons who apply for benefits would complete the joint application before fulfilling their job search requirements. It is frequently true that their TANF applications are not processed until their job search responsibilities have been fulfilled. In addition, a TANF applicant may be discouraged by the job search requirements and simply drop out of the program without fully pursuing her eligibility for Medicaid. All of these characteristics of mandatory applicant job searches create numerous circumstances whereby a family's Medicaid application could "fall through the cracks," i.e., not be processed in a timely matter, not be processed at all, or not even be completed.

Similar to the above-described losses in transitional Medicaid eligibility potentially faced by persons who participate in lump sum payment diversion programs, persons who secure jobs fairly quickly will likely jeopardize their eligibility for Medicaid. By requiring job search activities at a much earlier stage in the TANF application process,⁽¹⁵⁾ increased numbers of applicants are probably finding work before they are able to accumulate three months of Medicaid eligibility. In most cases earnings from a job would disqualify an applicant from eligibility for Medicaid under 1931 unless the state has considered taking advantage of its ability to choose more liberal income disregards. Given that few states appear to be aware of the value of so structuring their income and resource disregards, the likely effects of mandatory applicant job search programs will be to reduce the number of persons who would otherwise have received Medicaid. It is also likely that current state policies requiring work-related activities during the TANF application process will reduce the number of persons able to qualify for transitional Medicaid benefits as TANF recipients will accumulate fewer months of Medicaid eligibility before finding a job.

The use of alternative resources as a method for formally diverting TANF applicants could have much the same effect on eligibility for Medicaid and transitional Medicaid as the above-described job search requirements. It is likely that a family receiving alternative resources assistance will shortly, if not immediately, become ineligible for Medicaid, particularly in states with relatively low income and resource standards for Medicaid eligibility. The families whose short-term needs can be met appropriately through alternative resources will almost certainly have an already-employed or about-to-be-employed head of household. On the other hand, assessing the appropriateness of alternative resources for a family in lieu of TANF assistance may likely involve a more comprehensive assessment of Medicaid eligibility for all family members and result in Medicaid enrollment for at least the children.

F. Potential Impact of Informal or Indirect Diversion on Medicaid Eligibility

Informal or indirect diversion refers to the situations where families do not even apply for TANF assistance because either they think that they are not eligible or they believe that they would be unable to comply with program's work-related requirements. The unwillingness to apply for TANF assistance will likely foreclose applying for Medicaid for many persons. In all but two states, a joint application form is used for both programs; a few states reported that they may be developing both joint and separate applications. Persons suspicious or fearful about applying for TANF assistance may be unlikely to go to the same office and complete the same application form to apply for Medicaid as they would have to complete to apply for TANF. In addition, given the potential for diverging eligibility criteria between TANF and Medicaid, as well as the poverty-level eligibility options for pregnant women and children, there will be an increasing number of persons eligible for Medicaid but ineligible for TANF. The ripple effects of informal or indirect diversion may also cause these persons to be reluctant to go to the welfare office and complete a Medicaid application with the result that more otherwise-eligible adults and children will remain unenrolled in Medicaid.

Few data about the effects of informal diversion were collected during the state interviews and it is difficult to speculate about how many people might be affected or what the characteristics of these families might be. People who are informally or indirectly diverted face the same Medicaid-related issues as TANF applicants formally diverted by job search requirements. Because informally-diverted families may include large numbers of Medicaid-eligible but unenrolled children, the potential size of this phenomenon merits further inquiry.

G. Medicaid Linkage and Diversion: Implementation and Policy Issues

In nearly all of the states contacted for this study, the question of ensuring the linkage between diverted TANF applicants and Medicaid was not perceived to be a major issue. There may be several explanations for the widespread perception that maintaining this linkage does not present a problem.

First, as noted above, all but two states reported the use of a joint application form for TANF and Medicaid, and all states reported that the Medicaid applications are completely processed notwithstanding a denial, or delay in the processing, of the TANF applications. Second, many states reported aggressive efforts to maintain a commitment to Medicaid by training staff to recognize the linkages for TANF applicants and otherwise emphasizing the importance of Medicaid.

Third, the potential Medicaid eligibility problems for participants in lump sum payment diversion programs, i.e., whether and how the lump sum diversion payment may be counted as income, have not been clearly understood or documented. This widespread lack of awareness may reflect the failure of the state agencies or entities responsible for administering the TANF and Medicaid programs to assess and resolve potential conflicts between the requirements of these two programs. Notably, only one state - Arizona - appeared to be grappling with the issue of Medicaid eligibility problems potentially associated with the implementation of their lump sum payment programs. Fourth, states may not have fully recognized the substantial flexibility created by Section 1931 that allows them to liberalize relatively easily the criteria for Medicaid eligibility.

Finally, the consequences for Medicaid eligibility of requiring TANF applicants as well as TANF recipients to find employment more quickly have likely not been carefully considered. The fact that there will now be greater numbers of low-wage workers who are uninsured because they could not access Medicaid or transitional Medicaid prior to becoming employed is probably obscured by the larger problem of the growing numbers of low-income workers with no access to health insurance. Indeed, the importance of Medicaid as a source of health insurance coverage for low-income working persons transitioning from cash assistance has been well documented. It appears that the current trend toward diverting TANF applicants has the potential to negate substantially the goal of this policy. As states consider how to address Medicaid eligibility for diverted persons, they will have to assess and prioritize their desired health policy goals: whether to offer extended Medicaid coverage for a few beneficiaries or to increase Medicaid coverage for large groups of low-income people.

This review of diversion programs and their effects on Medicaid eligibility has raised both implementation and policy issues. First, the question of whether diverted TANF applicants, both formal and informal, will "fall through the cracks" with respect to their Medicaid eligibility depends upon how well diversion efforts are implemented and how aggressively the states promote the availability of Medicaid eligibility independent of TANF eligibility. Implementation- related questions would include: 1) are Medicaid applications processed immediately and without delay notwithstanding the status of the TANF application, 2) are Medicaid applications completed for diverted persons who do not complete TANF applications, 3) has there been sufficient outreach about the fact of Medicaid eligibility independent of TANF eligibility, and 4) are separate Medicaid applications available for persons who do not wish to apply for TANF assistance. At this point, it is difficult to assess how well diversion programs are being implemented with respect to these implementation issues.

Second, the question of whether certain diverted TANF applicants, e.g., lump sum payment recipients, will be able to establish or retain their eligibility for Medicaid, especially transitional Medicaid, depends upon how well-informed state policymakers are with respect to the relationship between TANF policy and Medicaid policy and their options with respect to affecting Medicaid eligibility as outlined in Tables V-1 and V-2. Policy-related questions would include: 1) how have the states taken advantage of their ability to liberalize the income and resource methodologies under Section 1931 and targeted these changes toward diversion recipients, 2) whether and how states have sought to continue allowable IV-A waivers with an understanding that such IV-A terms might ensure Medicaid eligibility for diversion recipients, and 3) whether states have sought to continue or seek new Title XIX waivers with an understanding that these existing waivers can ensure eligibility for additional transitional Medicaid benefits but probably only for recipients of TANF assistance. At this point, however, it appears that most states are not aware of these compelling policy issues and choices, and it is not clear how this lack of awareness will be addressed by the states or what the effects will be on recipients of diversion assistance.

The implications of these policy and implementation issues are discussed in more detail in the final chapter of this report.

Notes

^1.HCFA has issued two letters to the state Medicaid directors, dated February 1, 1997 and September 22, 1997, that provide substantial guidance to the states about how to establish the new eligibility groups under Section 1931.

^2.States now have the option to terminate Medicaid for adults and heads of households who fail to meet the TANF work requirement. Poverty-level pregnant women and children who are not heads of household are specifically exempted from this option.

^3.The recently-enacted federal Children's Health Insurance Program (CHIP) helps states provide health insurance for children under 19 in families whose income does not exceed 200 percent of federal poverty level.

^4.States with implemented 1115 waivers: Alabama, Arizona, Arkansas, Delaware, Hawaii, Kentucky, Maryland, Massachusetts, Minnesota, New Jersey, New York, Ohio, Oklahoma, Oregon, Rhode Island, Tennessee, Vermont. Not all of these waiver programs are statewide. Delaware, Hawaii, Minnesota, Oregon, Rhode Island, and Tennessee have expanded eligibility to certain categories of low-income adults.

^5.On August 7, 1998, a final regulation, sponsored by HCFA and ACF, was published that revised the existing "100 hour rule" and thereby allowed states the option of providing Medicaid coverage to two parent families in which the principal wage earner was working more than 100 hours per month. In an August 17, 1998 letter to state Medicaid directors, Sally Richardson noted that this regulatory change gives states another tool to coordinate the two programs (i.e., Medicaid and TANF) and that this change allows states to provide Medicaid to virtually all TANF recipients and to continue that health coverage after a parent has found employment.

^6.Louisiana is the only state with only a separate application for Medicaid. Rhode Island, and perhaps Massachusetts, Mississippi, and some California counties, have developed both a joint and separate application.

^7.This would be true in states that have opted not to cover either older poverty-level children or Ribicoff kids.

^8.HCFA letters to state Medicaid directors dated February 5, 1997 and September 22, 1997.

^9.HCFA letter to state Medicaid directors dated February 5, 1997.

^10. See Note 5.

^11.One of the commonly-waived deprivation requirements is the so-called "100 hour rule." Thirty states had waived this requirement under their existing welfare reform demonstrations and, to the extent that states choose to continue this waiver under their TANF programs, such states would have greater flexibility to expand Medicaid eligibility under Section 1931. Now all states can, if they so choose, provide Medicaid to two parent families in which the principal wage earner works more than 100 hours per month by virtue of the federal regulation promulgated on August 7, 1998.

^12.HCFA letter to state Medicaid directors dated September 22, 1997

^13.It is possible, however, that existing Title XIX waivers will not benefit persons who have not received TANF assistance as the terms of these waiver refer to receipt and loss of cash assistance as the trigger for transitional Medicaid. Existing Title XIX waivers and Section 1931 may provide guarantees of transitional Medicaid to two different populations. Conversations with Cindy Mann at the Center for Budget and Policies Priorities in May 1998 and Joan Peterson, Health Care Financing Administration, May 1998.

^14. At the time the waiver was submitted, Medicaid was provided categorically to persons who received cash assistance under AFDC. Failure to receive AFDC would terminate categorical eligibility.

^15.Prior to the 1996, persons were not required to participate in the JOBS program until they became recipients.

WHAT HAVE WE LEARNED ABOUT DIVERSION AND WHAT DO WE NEED TO KNOW

A. Introduction

The broad goal of this research project is to develop a better understanding about state efforts to divert families from the welfare system and the potential implications of these efforts for eligibility of diverted families for Medicaid. This report presents the results of the first phase of this project involving the collection and analysis of descriptive data about diversion programs and activities in all fifty states and the District of Columbia. In this concluding chapter, we review our findings and assess the implications for current policymaking and further research on diversion programs and activities, discuss state efforts to assess the success of their intentional diversion activities, and discuss the implications of our efforts for phase two of this research, the case studies.

B. Summary of Findings and Implications - What We Have Learned About Diversion

The inclusion of diversion programs and activities as part of states= welfare reform efforts is relatively widespread. Thirty-one states have implemented at least one of the three formal diversion programs. Twenty states are operating lump sum payment programs to meet the short term needs of TANF applicants; seven states are using an aggressive approach to help potential TANF recipients identify alternative resources that may ameliorate their need for TANF benefits, and sixteen states require TANF applicants to engage in active job searches before their application for assistance is approved. Twenty-two of these states have implemented only one formal diversion program and three states have implemented all three formal diversion programs. For the remaining six states implementing two of the three diversion programs, the states= choices are distributed evenly among potential combinations of these programs.

The single most common choice for formal diversion programs among the states are lump sum diversion programs. However, because mandatory applicant job search programs apply to a larger potential pool of TANF applicants, they are likely to affect the largest number of families. Mandatory applicant job search programs also have the greatest potential to divert informally potential TANF recipients from applying for assistance. Overall, formal diversion programs are concentrated most heavily in states in the west and south; very few states in the northeast have established these formal diversion programs.

The lump sum payment programs represent the most prescriptive formal approach to diverting potential TANF recipients even though participation in this program is voluntary for TANF applicants in all states. Lump sum payment programs are very complex in their structure. States must make decisions about several components of lump sum payment diversion including: the eligibility criteria, i.e., for which TANF applicants is this diversion program intended; what is required to verify eligibility for lump sum payments, which can be less than what is required for verifying TANF eligibility; how much eligible applicants can receive in lump sum payments for what purpose and in what form; and what types of costs/trade-offs are associated with receiving lump sum payments.

States have taken a variety of approaches to structuring their lump sum payment diversion programs and there are no evident patterns or common approaches in terms of the combinations of components. States can be characterized as making it easy for TANF applicants to be diverted where the lump sum payment program policies use relatively broad eligibility criteria, allow lump sum payments to be used for more than just work-related needs, and do not impose onerous repayment requirements or other penalties on lump sum payment recipients. States can also be seen as deliberately limiting the number of participants in their lump sum payment programs when the program policies use very specific eligibility criteria, limit the use of lump sum payments to work-related needs, and impose onerous repayment requirements and automatic penalties.

The particular components of lump sum payment programs may indicate that the states view such programs primarily as supports for obtaining or maintaining employment, or suggest that the states view their program as means to expand emergency assistance for short-terms needs of families without reducing these families= lifetime TANF limits. This level of variability among the states with respect to the structure of lump sum payment programs suggests a number of questions that should be addressed including: 1) which lump sum payment programs are particularly effective for what types of TANF applicants, 2) how well can caseworkers manage the implementation of these relatively discretionary and multifaceted programs, and 3) what types of lump sum payment programs are best suited for the goals of formal diversion.

Linking TANF applicants with alternative resources represents the least common form of intentional diversion activities. In many ways, this form of diversion represents an extension of efforts to divert applicants from TANF through lump sum payments. It also represents a bridge to future expectations regarding work in that it encourages applicants to think broadly about how they can meet their needs without the receipt of ongoing cash assistance in both the short and long-term.

Like lump sum payments, alternative resources are primarily targeted to applicants who have relatively minor short-term needs. These programs are also viewed as voluntary and are not intended to prevent applicants from applying for TANF. In contrast to lump sum payments that are guided by a relatively complex set of policies and procedures, the process of linking applicants with alternative resources occurs primarily on a case by case basis through a one-on-one interaction between a caseworker and the applicant. Although relatively uncommon at the current time, as time limits approach, the exploration of alternative resources may become a more common feature of state practices.

There are a number of unanswered questions regarding efforts to divert applicants from TANF by linking them with alternative resources that are primarily concerned with the staff and/or community resources that need to be in place to make the use of alternative resources a viable option: 1) what type of training allows staff to adequately assess whether alternative resources can resolve an applicant=s need for ongoing assistance, 2) how much knowledge of and access to community resources is needed to link TANF applicants with appropriate alternative resources, 3) what incentives need to be in place to encourage workers to explore alternative resources with applicants for assistance, 4) how do applicants respond to the exploration of alternative resources.

Even though case workers in most states have broad discretion to make exceptions to established job search criteria, because mandatory applicant job search programs are targeted to a much larger pool of applicants, they are likely to affect the lives of many more families than efforts to divert applicants through lump sum payments or linkages with alternative resources. In addition, because applicant job search programs are mandatory, applicants do not have the choice to forego immediate participation in job search activities in favor of receiving ongoing assistance. The mandatory nature of applicant job search programs also increases the possibility that some applicants will be discouraged from applying for assistance and will be informally diverted from TANF.

While mandatory job search programs appear to be increasingly common, it is clear from this analysis that there is substantial variation in how states have designed their applicant job search programs. Differences exist in the fraction of potential applicants who are required to participate in program activities, the extent to which case workers have discretion to grant exceptions to established rules, and the scope of activities in which applicants are required to participate. Some states require minimal job search activity for a small target population while others require substantial job search activity for nearly all applicants.

Although mandatory applicant job search programs have the potential to affect large numbers of families, they have received minimal scrutiny. Questions of particular importance include: 1) how do workers determine who is and is not required to look for work as a condition of eligibility, 2) what fraction of applicants find employment before their application for assistance is processed, 3) how do the non-cash benefits available to families differ depending on whether an applicant finds employment before or after his or her application for assistance is approved, 4) what is the relationship between the level of job search activity required and/or the amount of job search assistance provided and the proportion of applicants who find employment, 5) what happens to applicants who get discouraged and do not complete the application process.

The Adelinking@ of Medicaid and welfare benefits/cash assistance has created concerns that the consequences of this delinking will be an increase in the numbers of otherwise-eligible children and families who are not enrolled in Medicaid. State efforts to divert families from ever receiving welfare benefits could also increase the likelihood that otherwise-eligible families may fail to be enrolled in Medicaid. In nearly all of the states contacted for this study, however, the question of ensuring the linkage between diverted TANF applicants and Medicaid was not perceived to be a major issue. The primary reasons for this lack of concern probably include the states= almost universal use of a joint application process for TANF and Medicaid, and the limited experience of most states with formal diversion programs.

Our findings with respect to Medicaid and diversion programs, however, suggest the potential for important implementation and policy issues. The question of whether diverted TANF applicants, both formal and informal, will Afall through the cracks@ with respect to their Medicaid eligibility depends upon how well such diversion efforts are implemented. While examining the implementation process was beyond the scope of this descriptive phase of the project, the fact that so many of the states= formal diversion programs are new and relatively complex indicates that quality of the implementation process for diversion program is likely to be an important issue. The question of whether certain diverted TANF applicants, e.g., lump sum payment recipients, will be able to retain their eligibility for Medicaid, especially transitional Medicaid, depends upon how well-informed state policymakers are with respect to the requirements of the TANF programs and post-PRWORA options under the Medicaid program. As discussed in Chapter Five, Arizona represents an example of a state temporarily halting the implementation of this diversion program as state officials attempt to determine how to operate a lump sum payment diversion program and not jeapordize recipients' eligibility for Medicaid as well as transitional Medicaid benefits. In general, however, the extent to which states are purposefully addressing the issues associated with Medicaid eligibility for recipients of lump sum payments or for other diverted TANF applicants is not clear.

While losses in Medicaid eligibility may be inevitable as states encourage employment very early in the TANF application process and/or divert TANF applicants with lump sum payment programs, some of these losses may be avoidable if states consider the options available to them under Section 1931 of the Social Security Act and as outlined in Tables V-1 and V-2. States have considerable discretion in establishing more generous income and resource methodologies in determining eligibility for Medicaid. As discussed in Chapter Five, however, the level of states= awareness about these complex Medicaid policy issues within the context of formal diversion programs is unclear - although it is difficult not to conclude that the level of awareness about these issues is low.

C. What States Know About The Effects of Their Diversion Programs

Our conversations with state officials included questions concerning the kinds of data collection efforts associated with the formal diversion programs that are being undertaken, and whether the states have any empirical indicators of the success of their diversion programs and activities. Although these conversations primarily focused on lump sum payment programs as the most structurally formal of these diversion activities, their comments were sufficient to provide a general sense about data collection and data issues.

Most States Have Only Recently Implemented Diversion Programs

As discussed above in Chapters Two, Three, and Four, most states have only recently implemented their formal diversion programs. For example, of the twenty states with lump sum payment programs, sixteen states have implemented their programs within the last four to sixteen months. Similarly, most mandatory applicant job search programs have been gradually implemented since the passage of TANF in 1996. Perhaps because of this, most state officials were not able to report many details about their data collection or management information systems designed to facilitate data collection and analysis of the effects of their diversion programs. Notwithstanding the lack of detail and/or capacity with respect to state data systems, these officials were certainly aware of the need for data collection to: 1) determine whether lump sum diversion program are successful in keeping families off the TANF rolls, 2) measure the effects of other formal diversion programs, and 3) monitor how well these programs and activities are being implemented.

Data Needed to Assess Effects of Diversion Programs

A common set of data elements necessary to document and analyze the effects of diversion programs can be identified. These elements include size of the diverted household including the number of children, general demographic and socioeconomic data, the reasons for eligibility for diversion, the type of diversion assistance provided, what was provided in alternative resources, how much was provided in a lump sum payment, what the lump sum payment was used for, method of lump sum payment (cash or vendor), whether the diverted applicants were receiving other types of assistance, what kinds of employment were secured, with what assistance and how quickly, and how long these families remained off TANF. Data regarding the state's Medicaid program must also be collected including: eligibility criteria,

number of diverted applicants receiving Medicaid, number of joint Medicaid/TANF and Medicaid-only applications, and trends in the Medicaid rolls.

A Wide Range of Data Collection Efforts

State officials described a wide range of data collection efforts that varied from relatively minimal to relatively comprehensive. Where data systems do exist they are most likely to capture information regarding lump sum payments but not necessarily alternative resources or mandatory applicant job search. For example, both Minnesota and Washington report having data management systems in place capable of collecting all of the data elements related to lump sum payments listed in the previous paragraph. Both states will use these data to monitor closely the implementation of their programs and to initiate improvements. Both states are also under a mandate from their legislatures to report to them in 1999 and provide empirical evidence about how their lump sum payment diversion programs are working. On the other hand, Kentucky and South Dakota report somewhat less comprehesive approaches to data collection. South Dakota collects data such as household size, reasons for diversion, the amount pf the lump sum payment and for what purpose, and whether employment was secured. Kentucky collects enough information to monitor the 12-month period of ineligibility but after that period, the records of diverted families may or may not remain in the system. In both of these states, as in many others, it is not clear whether the TANF application of a diverted individual is ever entered into the data system or whether the application is consistently considered denied, incomplete, withdrawn, or "other."

Potential Data Issues and Problems

Several data issues and potential problems became apparent as we reviewed our results. The first involves whether and how the TANF applications of diverted families and individuals are documented and kept in a data system. Recording the existence of a diverted TANF applicant is an essential starting point for data collection efforts sufficient to support analyses of diversion efforts. For numerous states, there was little knowledge or clarity at the administrative level about how these TANF applications are processed. Even if the application is documented, there are different approaches to characterizing the application with implications for how the effects of diversion might be understood, e.g., an application could be categorized as incomplete, denied, complete, or applicant never returned. Another issue concerns how consistently counties within a state are documenting and keeping track of diverted applicants. To the extent that counties are inconsistent in their approaches to documenting diversion efforts, statewide analysis is not possible.

Another issue involves how long a diverted person is kept in the state data system. Many states report removing diverted individuals from their systems as soon as the period of ineligibility expires, which could be as short as three or four months. Such an approach would make it impossible to follow diverted families to determine if they ever returned for TANF assistance. In a similar vein, South Dakota's approach to administering its lump sum payment program presents a potential problem that could occur in other states as the emphasis on work is increased. In this state, the TANF applicant usually must interact with both a DHS caseworker and a Department of Labor (DOL) specialist who could each document the diversion events differently or not at all although both workers share the same computer system in terms of data entry.

Measures of Success for Diversion Programs - Too Early To Tell

For many states, the measures of success for diversion programs appear to include either how many applicants were diverted as a percent of total applications and/or how long applicants stay off the TANF rolls, or whether they ever returned for assistance. In most states, however, there are few data available regarding success. The reasons for this lack of data include: 1) states have not yet begun to collect data, 2) state do not have the capacity to collect, or 3) states have only recently implemented their diversion programs.

For example, both West Virginia and Idaho began implementing their lump sum payment programs in mid-1997 and have seen too few cases to assess success. The Kentucky official reported "having a sense" that the state=s lump sum payment program was working well and that diverted families were more likely to request a series of payments as opposed to one payment; there are currently no systematic efforts to collect data. On the other hand, the South Dakota official expressed pessimism about how frequently that state=s lump sum payment program would be used since this program is seen exclusively as job-support assistance and job prospects are bleak in South Dakota.

Two states, Utah and Virginia, are able to document the success of their lump sum payment diversion programs - it is not a coincidence that these states have the longest-running programs, established in 1993 and 1995 respectively.

Utah has established a strong management information system that supports the tracking of diverted applicants. Utah estimates that 3,000 persons been diverted since January 1993 and that this number represents between 15 and 40 percent of TANF applicants depending upon the site. Utah=s program has been examined and the results suggest that approximately 85 percent of diverted persons do not ever reapply for TANF assistance. Virginia has also established a strong management information. This system supports the collection of data on the number of diverted people by county and the analysis of data to determine how many diverted persons return for TANF assistance and how long after receiving diversion assistance. The state reports that during the first two years of the program 1,004 families received lump sum cash payments and 81 percent of those cases have not reapplied for TANF assistance. The greatest use of lump sum payments in Virginia has been for payment of rent.

Montana implemented its Job Support Program (JSP) in February, 1996 and, as the third oldest lump sum diversion program, collects data on persons participating in this program. Information is collected on household size, income, and other characteristics of diverted applicants. The state is also able distinguish between lump sum payments and alternative resources diversion by virtue of how the data are entered and organized in Montana's computer system.

Most of the states have little empirical evidence about how their formal diversion program are working. While most states have only recently implemented their programs, inadequate data systems also contribute to a lack of empirical evidence. Consequently, it not possible to draw any conclusions about the effectiveness, or effects, of the states' formal diversion programs and activities.

D. What Do We Want To Know Now- Next Steps for Research

The first phase of this project developed baseline knowledge about current state formal diversion programs and activities. In the second phase, we will conduct two additional analyses, case studies in five local communities and a follow-up survey to states with lump sum payment and/or mandatory applicant job search programs to gather more detailed information on how criteria for Medicaid eligibility are developed and defined. The second-phase research will build on the information gathered for the first phase of this study and will address these four major goals: 1) describe and examine the actual implementation of diversion programs and identify potential consequences of diversion for low-income families, particularly with respect to entry into the job market and access to Medicaid; 2) describe state policies regarding Medicaid eligibility for applicants diverted through lump sum payments and mandatory applicant job search, 3) examine whether and how the potential changes in Medicaid enrollment rates associated with diversion efforts might affect traditional health care safety net providers, and 4) examine potential strategies for monitoring changes in Medicaid enrollment rates as well as the effects of these changes over time.

Case Studies

Case studies will be conducted in five states for the purpose of determining exactly what has been happening with respect to the implementation of diversion programs and activities in these states. In selecting the state case study sites, we will consider the following characteristics of the states' diversion programs: 1) the range and types of state diversion programs/activities, 2) the diversion programs/activities that are most common, 3) the diversion programs/ activities that appear to present greater or fewer barriers to providing support services and maintaining links to Medicaid, 4) the programs/activities that are likely to be the most and least successful in promoting work, and 5) the length of time since implementation.

Collection of data during site visits will involve semi-structured interviews with welfare administrators, welfare benefits field staff, families participating in diversion, community-based welfare rights groups, safety net providers, and community-based providers; focus groups with families participating in diversion; field observation; and review of selected case records. Review of the availability and quality of state administrative databases will be conducted prior to or subsequent to the site visits. The site visits will be designed to develop a broad understanding of how diversion activities are implemented on a day to day basis and the impact they have on potential TANF recipients and service providers.

Formal Diversion Programs and Medicaid Eligibility Study

Given the complex policy and implementation issues associated with assessing the effects of formal diversion programs, i.e., lump sum payment and mandatory applicant job search, on Medicaid eligibility, as well as the general lack of knowledge about the effects of diversion activities on Medicaid, we will also include a more in-depth examination of how states have addressed issues of Medicaid eligibility in designing and implementing their lump sum payment and mandatory applicant job search programs. Project staff will conduct telephone interviews with all 31 states that have implemented either one or both of these diversion programs to understand more specifically what decisions about Medicaid eligibility criteria have been made and how Medicaid linkages are being addressed for diverted TANF applicants. There will be a particular emphasis on examining state officials' knowledge about their options to affect Medicaid eligibility post-PRWORA. Project staff also will have an opportunity to explore Medicaid issues in more detail in the case studies planned during the next phase of the project. This research is essential to consider fully the impact of diversion programs on Medicaid eligibility.

Formal efforts to divert potential TANF recipients from receiving ongoing assistance represent one of many approaches states have implemented to shift to a more work-oriented, transitional system. These programs are clearly in their infancy but have the potential to affect large numbers of families. Thus, it is essential to begin to build a knowledge base that can provide a foundation for additional evaluation and monitoring of these program and activities.

Topics

Welfare, Welfare Reform, & TANF | Health Insurance | Employment & Self-Sufficiency

Populations

Low-Income Populations

Location- & Geography-Based Data

State Data

Program

Temporary Assistance for Needy Families (TANF) | Medicaid

Description and Assessment of State Approaches to Diversion Programs and Activities Under Welfare Reform

Acknowledgments

AN OVERVIEW OF THE DIVERSION STUDY: CONCEPTUAL AND METHODOLOGICAL ISSUES

A. Introduction

B. A Conceptual Framework for Examining Diversion Programs

C. Study Methods

D. Overview of States' Formal Efforts to Divert Families from TANF

E. Roadmap to the Rest of the Report

Notes

Footnotes to Table I-1

Footnotes to Table I-3

LUMP SUM PAYMENT PROGRAMS

A. Introduction

B. Twenty States Currently Operate Lump Sum Payment Diversion Programs

C. Who Is Eligible for Lump Sum Payments

D. What is Required for the Application Process

E. The Lump Sum Payment

F. Cost/Trade-offs Associated with Receiving Lump Sum Payments

G. State Approaches to Lump Sum Payment Programs As Formal Diversion

Notes

Footnotes to Table Il-I

LINKING TANF APPLICANTS WITH ALTERNATIVE RESOURCES

A. Introduction

B. Examples of State Approaches to Alternative Resources Diversion

C. Implications for Cash Assistance Eligibility Procedures

MANDATORY APPLICANT JOB SEARCH

A. Introduction

B. Target Populations for Mandatory Applicant Job Search

C. Job Search Requirements

D. Job Search Assistance and Job Search Documentation

E. Applicant Job Search As Formal and Informal Diversion

Notes

POTENTIAL IMPACT OF DIVERSION PROGRAMS ON ELIGIBILITY FOR MEDICAID

A. Introduction

B. Medicaid Changes under PRWORA

C. Potential Impact of Lump Sum Diversion Programs on Medicaid Eligibility

D. States' Experiences with Lump Sum Payment Diversion: Consequences for Medicaid

E. Potential Impact of Other Formal Diversion Programs - Mandatory Applicant Job

F. Potential Impact of Informal or Indirect Diversion on Medicaid Eligibility

G. Medicaid Linkage and Diversion: Implementation and Policy Issues

Notes

WHAT HAVE WE LEARNED ABOUT DIVERSION AND WHAT DO WE NEED TO KNOW

A. Introduction

B. Summary of Findings and Implications - What We Have Learned About Diversion

C. What States Know About The Effects of Their Diversion Programs

D. What Do We Want To Know Now- Next Steps for Research

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