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