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