State Policies to Promote Marriage. Preliminary Report.. Transfer Policies

03/01/2002

Policy makers and others have suggested that transfer programs — particularly Medicaid and TANF — create a disincentive to marriage because recipients risk becoming ineligible for benefits if they marry. In fact, the disincentive applies equally to two-parent families with children in common, even if they are cohabiting and not married. With transfer programs, there are at least two issues to consider:36

  • Are two-parent families who are financially eligible for Medicaid or TANF prevented from receiving benefits due to the presence of two parents in the household?  That is, do these families have to meet additional requirements to receive benefits, such as recent work history?
  • How are assistance units defined and income and resources counted for the purpose of determining Medicaid and TANF eligibility?  Under TANF, states have wide flexibility to define who is included or who is excluded from the assistance unit. For example, a state could, if it chose, include a non-custodial parent living elsewhere in the assistance unit, or it could require the needs and income of everyone living together to be one assistance unit, regardless of relationship. Generally, states have not yet used this wide latitude and for the most part have continued practices from the prior AFDC program. Thus, state practices fall into three possible scenarios:
    1. Two parents have children in common. If paternity has been legally established, the incomes of both parents are counted in determining eligibility, regardless of whether the parents are married or cohabiting. The penalty is not a marriage penalty per se but a penalty for living as a two-parent unit.
    2. Cohabitors do not have children in common. Under Medicaid, a federal anti-deeming provision prohibits states from denying benefits to a child based on the income of someone with no legal duty to support the child. Thus, the income of the non-parent is not counted for eligibility purposes, unless the couple marries. In the event of marriage, state family law would determine whether the stepparent was legally responsible for the stepchild. If so, the stepparent’s income would be counted in determining the Medicaid eligibility of the stepchild and a penalty could occur if the stepparent/new spouse’s income pushed the family over the income limit. Under TANF, there are no federal anti-deeming provisions, so it is state policy that determines whether the income of the non-parent/stepparent would be used to determine a child’s eligibility.
    3. Cohabitors have some children in common but not others. Under Medicaid, income would be counted as described in the above scenarios. Under TANF, all children would be considered part of the assistance unit and the income of the non-parent/stepparent would always be counted in determining eligibility.

With regard to state policy, the first general point was easier to address than the second. We examined whether states effectively place additional requirements on two-parent families applying for Medicaid and TANF. We also explored marriage incentives and promotion in the TANF program, and child support arrearage forgiveness. All but two states had an activity in at least one of the areas.37 (Table 7 in the detailed matrices provides additional information on state policies.)

Medicaid eligibility for two-parent families. Medicaid provides medical coverage to categorically eligible individuals, including pregnant women, children, low-income elderly, and individuals with disabilities. Prior to the 1996 welfare reform law, families receiving Aid to Families with Dependent Children (AFDC) were automatically eligible for Medicaid. Two-parent families faced strict eligibility rules, such as recent work history and the “100-hour rule” (the primary wage earner could not work more than 100 hours per month). Following welfare reform, federal policy required states to delink welfare and Medicaid eligibility and create a “family coverage” category, also known as the Section 1931 eligibility group. This includes people who were eligible to receive Medicaid under the old AFDC standard. As noted above, there is concern that the stringent two-parent program rules in Medicaid encouraged single-parent families. However, states can affect Medicaid eligibility for two-parent families in a number of ways. They can eliminate the recent work history and 100-hour rules. They can disregard income and assets, thus expanding Medicaid eligibility by not counting parts of family income. States can also expand eligibility through Section 1115 waivers.

Many states have made it easier for two-parent families to get Medicaid. Thirty-six states base Medicaid eligibility for two-parent families solely on financial circumstances (i.e., the states discarded the recent work history and 100-hour rules and cover two-parent families to the same extent as single parent families). Seventeen states used Section 1931 Medicaid expansion options to increase income disregards.38 Some states disregard a flat dollar amount (e.g., Oklahoma disregards $120). Others disregard a fixed percentage of income (e.g., Pennsylvania and Washington each disregard 50 percent). Still others disregard all income between the old AFDC standard and a specified percent of the federal poverty level. Finally, eight states used Section 1115 waivers to expand coverage to two-parent families.39 Oregon and Delaware used waivers to cover all adults with incomes less than 100 percent of the federal poverty level. Hawaii offers full cost Medicaid buy-in for parents with incomes under 300 percent of the federal poverty level.

Medicaid eligibility for pregnant women. Medicaid will cover pregnant women who are not eligible under Section 1931 and whose incomes fall under a certain threshold. The minimum limit is the higher of the following:  133 percent of the federal poverty level or the level that the state had in place as of December 1989 (up to 185 percent of the poverty level). Women are also covered for 60 to 90 days postpartum. To the extent that a husband (but not a cohabitor) in the household increases family income, a woman would become ineligible for coverage. However, once a pregnant woman becomes eligible for Medicaid, an increase in income (even as the result of marriage) will not cause her to lose eligibility during the pregnancy or postpartum period.

Thirteen states have raised Medicaid income eligibility for pregnant woman above 185 percent of the poverty level.40 The increased thresholds range from 200 percent of the poverty level in seven states to 300 percent in California.

Expanded health care coverage for two-parent families. Although a number of states have taken steps to address marriage penalties in the Medicaid program, some couples will not be eligible for coverage (e.g., their combined income might make them ineligible). Some states cover parents through state-funded programs. Unlike programs partially funded by the federal government, state programs are not bound by federal restrictions regarding eligibility or benefit structures. States can also extend coverage to parents through the State Children’s Health Insurance Program (SCHIP) through a waiver.

Six states cover parents through SCHIP waivers. Arizona, California, Minnesota, and New Jersey cover parents up to 200 percent of the federal poverty level; Rhode Island and Wisconsin cover parents up to 185 percent. Three states also provide coverage through state-only health plans.41

TANF eligibility for two-parent families. The 1996 welfare law gave states flexibility to shape their cash assistance programs, including the populations that could be served. Like Medicaid, states can expand TANF coverage to two-parent families by eliminating the work test and 100-hour rule, which serves to treat one- and two-parent families the same when determining eligibility. Thus, marriage in itself would not disqualify couples from TANF. Thirty-three states now base TANF eligibility solely on financial circumstances.

Marriage incentives in the TANF program. Ten states provide specific marriage incentives to TANF recipients. Alabama, Mississippi, North Dakota and Oklahoma disregard all income from a new spouse (biological parent or stepparent) for three to six months. Tennessee disregards income of a stepparent if it is less than 185 percent of the needs standard for the household, while New Jersey does so if household income does not exceed 150 percent of poverty. Maine offers the option to include or exclude stepparents in the TANF assistance unit, while Minnesota includes stepparents as eligible members in a TANF assistance unit. West Virginia adds a $100 incentive payment to the monthly cash benefit to married-couple families. Mississippi and Washington introduced legislation that aimed to encourage recipients to marry by providing a lump-sum check for four times the monthly benefit level to those who remain married for at least 12 months. The bills died in committee. Finally, Oklahoma combines the income of cohabiting couples when determining eligibility for welfare, perhaps discouraging cohabitation.

Marriage promotion in the TANF program. We found one state where state workers actively promote marriage to the TANF population and other low-income groups. In Oklahoma, state workers are being trained to teach marriage skills and are encouraged to discuss marriage with their clients. According to Jerry Regier, Secretary of Health and Human Services in Oklahoma, policy makers in seven other states contacted him to learn about his state’s policy (not shown in matrix).42

Child support arrearage forgiveness. States can encourage marriage among unmarried parents by forgiving child support arrearages owed by the non-custodial parent to the state. If a custodial parent was on TANF, the non-custodial parent’s child support obligation would be owed to the state.43 If the parents reunited, the state could forgive any back support owed. Two states, Tennessee and Vermont, have such policies. Tennessee forgives arrears owed by the father if he marries the mother of his children and continues to live in the household. Vermont forgives child support arrearages owed to the state if the biological parents are reunited.44