Dynamics of Children's Movement Among the AFDC, Medicaid, and Foster Care Programs Prior to Welfare Reform: 1995–1996. Implications


It is quite clear from our findings that Medicaid is used quite differently as a safety net program in each of the three states.  It is unlikely that the differences we see in these indicators are completely determined by the post-AFDC earnings from employment, although that is likely a factor.  In other words, it seems unlikely that the earnings differences for AFDC exiters across the three states would explain the differences in the percent of children exiting AFDC to TMA.  The differences in how aggressive these three states were in ensuring that children were covered by Medicaid after AFDC exit may make the most difference in AFDC exit outcomes.  During the 1995-1996 time period, North Carolina and California were making special efforts to enroll children in TMA.  Again, the fact that duration of AFDC receipt are longer in California and Illinois, due to policies that allow greater income before exit from AFDC, accounts for some of the results around the safety net program.

With its dual emphasis on work and time limits, welfare reform is likely to result in more and earlier exits from cash assistance to Medicaid-only.  Families entering the workforce are offered continued health coverage through Medicaid for a transitional period after finding employment.  Clients who reach stipulated time limits without first securing employment will continue to be eligible for Medicaid.  Furthermore, extended Medicaid coverage under the new Children's Health Insurance Program (CHIP) will likely mean that more families will be eligible for Medicaid at higher income thresholds.  Thus, because more TANF families will join the ranks of the working poor, and because time limits and stiffer sanctions for noncompliance with work requirements have been mandated, we expect a higher percentage of TANF recipients to transition to receiving Medicaid assistance without a cash grant.

It is more difficult to predict the effect of reform on movement from cash assistance to system exit.  Families in which parents find jobs with health benefits or incomes above the Medicaid and CHIP thresholds may leave cash assistance and Medicaid simultaneously.  We anticipate, however, that, on average, we will see a greater increase in transitions from cash assistance to Medicaid-only for those families that leave either because of employment or sanctions.  Families that were receiving cash assistance prior to welfare reform and who decide to leave TANF before reaching a time limit, incurring a sanction, or because of increased earnings may be more likely to exit the system completely.