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.