Setting the Baseline: A Report on State Welfare Waivers. Section 6: Child Care and Medical Coverage


AFDC Requirement: Under the AFDC program, recipients were entitled to one year of transitional Medicaid and one year of transitional child care (TCC) when they lost AFDC eligibility due to increased earnings from work. Families who lost eligibility due to collection of child or spousal support were entitled to four months of transitional Medicaid. In order to prevent families from going on welfare for a short period of time in order to become eligible for these transitional benefits, only families who had been on AFDC for at least three of the preceding six months were eligible for transitional assistance. During the first six months of transitional Medicaid coverage, states were required to provide the same coverage the family had received while on AFDC, and could not charge premiums. During the second six months, states were allowed to limit the scope of coverage or to impose premiums (limited to 3 percent of gross income) on families.

Waivers: A total of 22 states received waivers expanding eligibility for the transitional child care program, and 23 states received waivers expanding eligibility for transitional Medicaid. As shown on Table VI, the most common provision was to increase the length of time during which a former recipient could receive transitional assistance. States applied for these waivers because the loss of health and child care benefits were seen as major problems which often forced poor families back on to welfare. One year was simply not long enough for many former recipients to get established in jobs that offer medical benefits and pay enough that workers can afford unsubsidized child care. Other waivers removed the three of six months requirement, in order to encourage families to begin seeking employment immediately, rather than choosing to remain on welfare for long enough to qualify for transitional benefits. With the adoption of time limits on assistance, a few states also received waivers to provide transitional assistance to families who lost eligibility for reasons other than earnings, but who needed child care or medical benefits in order to work.

TANF Provision: There are no changes in the transitional Medicaid program. States that wish to provide extended transitional Medicaid benefits for beyond 12 months must receive (or continue) a federal waiver in order to do so.

The new law removes the entitlement to child care assistance, both for current TANF recipients and for people transitioning from TANF to work. The funds previously restricted to these populations are combined with the Child Care and Development Block Grant to create a pool of funding that may be used to provide child care to welfare recipients, people transitioning off welfare, and the working poor. Since in most states the demand for subsidized child care exceeds the funding available, states will have to develop priorities for determining which populations receive assistance. At least 70 percent of the funds from the source that used to fund child care for current and former AFDC recipients must be spent on current or former TANF recipients or on low-income working families at risk of become TANF recipients. States may spend TANF funds on child care directly and may also transfer a portion of their TANF into the child care funding pool; when funds are transferred, they are no longer subject to TANF restrictions (e.g. on the duration of assistance), but become subject to child care requirements (e.g. on standards for the quality of child care provided).