November 5, 1998
Assuring That Eligible Families Receive Medicaid When TANF Assistance Is Denied or Terminated
by Liz Schott and Cindy Mann
Table of Contents
II. An Overview of Medicaid Eligibility Rules
III. Ensuring that the TANF Application Process Does Not Result in Eligible Families Losing Access to Medicaid
IV. Ensuring that Medicaid Benefits Continue for Eligible Families Whose TANF Benefits Are Terminated
One of the big stories of welfare reform is the dramatic drop in the number of families receiving cash welfare through the Temporary Assistance for Needy Families block grant. This caseload decline, which began in the Aid to Families with Dependent Children program before the enactment of the federal welfare law, has accelerated since the enactment of that law. Nationally, caseloads have declined 42 percent since 1994 and 31 percent since the signing of the law in August 1996. This caseload decline results not only from more families leaving the welfare rolls, but from fewer families entering as well.
One explanation for the welfare caseload decline is the strength of the economy. Another major factor is a range of welfare policy changes implemented by states. Policies emphasizing immediate employment combined with the strong economy have led to people becoming employed more quickly than might otherwise have occurred. In addition, states now have broad latitude under the TANF block grant to impose new eligibility requirements that may result in denials of applications for aid, diversion of families from ongoing aid, or termination of a family's TANF benefits. Finally, a change in attitude toward welfare receipt may have contributed to caseload declines as fewer families apply for aid.
Recent data suggest that as TANF caseloads drop, the number of people enrolled in Medicaid is declining.(1) The Medicaid caseload drop is troubling because the TANF caseload decline should not necessarily lead to a decline in Medicaid enrollment. The 1996 federal welfare law ended the eligibility link between Medicaid and cash assistance for families. Medicaid eligibility rules not the receipt of welfare should now determine whether a family receives Medicaid. Under these Medicaid rules, most children and parents who are denied welfare and who leave welfare are likely to be eligible for Medicaid at least for some period of time. Moreover, in many states enrollment of children in Medicaid should be rising not declining due to state expansions of Medicaid eligibility for children and new outreach efforts. Yet some states are reporting steep drops in both the number of children and the number of parents enrolled in Medicaid.
For the most part, states have not intended or foreseen that TANF policies and procedures would result in families losing Medicaid. Certainly, policymakers did not intend for the number of uninsured parents to grow as a result of welfare program changes, and many states are devoting considerable resources to outreach efforts specifically designed to identify and enroll eligible children in Medicaid. However, the linked delivery of TANF and Medicaid benefits, combined with new welfare policies and procedures, may have resulted in TANF denials and terminations inappropriately spilling over to Medicaid. This may be due in part to states not having yet developed or fully implemented adequate policies and procedures to ensure that families denied, diverted from, or terminated from TANF-funded benefits are fully considered for Medicaid benefits for which they may qualify.
Many Families that Are Denied or Terminated From TANF
Assistance Also Are Likely to Be Eligible for Food Stamps
The issues discussed in this paper are also relevant in the food stamp context. Nationally, food stamp caseloads have declined more than 31 percent since 1994 and by 24 percent since the signing of the federal welfare law in August 1996. Neither the strong economy nor the food stamp eligibility restrictions in the 1996 welfare law can fully explain the extent of the food stamp caseload decline. At least part of the food stamp caseload decline is likely to be related to TANF caseload declines.*(2) As a result, the proportion of families eligible for food stamps that are receiving them appears to be declining.
Many families that are denied TANF or whose TANF aid is terminated under new state welfare policies still qualify for food stamp benefits. Moreover, as with Medicaid, ensuring that eligible families receive food assistance can bolster states' welfare reform efforts. While this paper considers the steps states can take to avoid erroneously excluding eligible low-income families from the Medicaid program, as states examine their procedures for processing applications for TANF and Medicaid and continuing Medicaid when TANF assistance is terminated, they also should consider the impact of these policies and procedures on receipt of food stamps.
* Abt Associates, What Makes Caseloads Grow or Shrink in the Food Stamp Program?, Testimony before the Senate Committee on Agriculture, Nutrition, and Forestry, April 23, 1998; Congressional Budget Office, The Economic and Budget Outlook: Fiscal Years 1999-2008, Report to Senate and House Committees on the Budget, January 1998, p. 74.
By taking steps to ensure that a greater portion of eligible low-income families receive Medicaid, state and local welfare agencies will bolster their efforts to transform their welfare system. Health insurance is often not available to low-income families through the workplace. Only 43 percent of workers with making $7 an hour or less have employer-based health care coverage.(3) Health care coverage, however, can help low-income working families retain their jobs and avoid entering or re-entering the TANF system. It can help parents and children prevent bouts of illness that might cause parents to miss work, or in more serious cases, to lose a job. In addition, parents are better able to retain jobs if they are not distracted by concerns about family health and how to obtain needed care without any health insurance. Families with medical needs may be forced to turn to TANF cash assistance sooner if they are uninsured and believe that receipt of cash TANF benefits is the only way for the family to receive Medicaid.(4)
Ensuring that families receive the Medicaid coverage for which they qualify also furthers state efforts to increase enrollment of uninsured children in Medicaid. At the same time that states are investing in new outreach strategies to find uninsured children who are eligible for Medicaid but not enrolled, they may be missing important opportunities to enroll or maintain coverage for children already known to and in contact with the state. Outreach efforts may result in little or no net increase in the number of children covered under Medicaid unless states ensure that they are not losing eligible children already in contact with state or local agencies either as applicants for or recipients of TANF and Medicaid benefits.
This paper examines some of the points in state TANF eligibility processes at which low-income families may be at risk for not receiving Medicaid coverage for which they qualify both at the "front end" of the process when a request for assistance is initiated and at the "back end" of the process when TANF benefits are terminated. The paper examines some state welfare policies that may increase the risk of eligible families not receiving Medicaid benefits, as well as requirements of federal law concerning the provision and continuation of Medicaid benefits. It also considers steps that states can take to avoid erroneously excluding eligible low-income families from the Medicaid program.
II. An Overview of Medicaid Eligibility Rules
Until recently, a family's eligibility for Medicaid generally was linked to current eligibility for or recent receipt of cash welfare AFDC recipients were automatically eligible for Medicaid because of their receipt of AFDC. Loss of AFDC often meant loss of a family member's sole basis for Medicaid eligibility, particularly for the parents. The 1996 federal welfare law eliminated the automatic eligibility link between welfare and Medicaid and replaced it with a new Medicaid eligibility category through the addition of section 1931 to the Social Security Act.(5) This represents a major change in how the Medicaid program operates.
Medicaid eligibility under section 1931 is based on certain of the AFDC rules and standards in effect under a state's AFDC state plan on July 16, 1996. Under the new eligibility category, at a minimum, states must provide Medicaid to children and parents:
- whose income and resources are below the state's AFDC income and resource standards, based on the standards and the rules for calculating financial eligibility in effect in the state on July 16, 1996;(6) and
- who meet AFDC family composition requirements as they were in effect on July 16, 1996.(7)
As a result of the new section 1931 eligibility category, a family's receipt or lack of receipt of welfare generally does not determine its eligibility for Medicaid. For example, a family that reaches a welfare time limit remains eligible for Medicaid even though it no longer receives cash assistance, as long as it continues to meet the state's Medicaid section 1931 standards and rules. Similarly, a family whose welfare application is denied but whose income is very low will qualify for Medicaid if it meets the state's section 1931 criteria. Moreover, states have considerable discretion to expand Medicaid coverage beyond the section 1931 minimum requirements (see box on p. 6). Expansions of the new eligibility category will assure that an even larger portion of the families that are denied or terminated from TANF assistance can receive or retain health care coverage through Medicaid.
In addition to eligibility under section 1931, there are other, sometimes overlapping, bases for Medicaid eligibility. Families that lose TANF-funded assistance due to earnings are likely to be eligible for Medicaid for up to 12 months on a transitional basis, and many states extend transitional coverage for a longer period. Under federal law, "Transitional Medical Assistance" is available to families that become ineligible for Medicaid under section 1931 when the family's income rises above the income limit in effect under section 1931 because of an increase in earnings or the lapse of a time-limited "earnings disregard" policy.(8) In addition, Transitional Medical Assistance is available for four months to a family that otherwise would become ineligible for Medicaid under section 1931 due to receipt of child support income.
States Now Can Expand Health Coverage to
Low-Income Working Families Through Medicaid
States have long had the ability to expand Medicaid coverage for children, and many states expanded coverage even before the enactment of the new federal child health block grant. However, until recently, states had little flexibility to provide Medicaid to parents in low-income working families at least not without a section 1115 Medicaid waiver. States now have new options that allow them to expand coverage to all members of low-income families. These options arise primarily from the broad flexibility accorded to states under section 1931 to define what counts as income and resources for purposes of determining Medicaid eligibility. For a full discussion of the new opportunities, see Center on Budget and Policy Priorities, Taking the Next Step: States Can Now Take Advantage of Federal Medicaid Matching Funds to Expand Health Care Coverage to Low-Income Working Parents, August 1998.
By using "less restrictive methodologies" in counting income and resources under section 1931, a state can expand Medicaid coverage to working parents. For example, a state could disregard a portion of earnings so that a family's countable earnings remain below the state's income standard that was in effect on July 16, 1996. Thus, a state could establish an earnings disregard under section 1931 which would result in a family with earnings up to the poverty line or even well above the poverty line being eligible for Medicaid. Rhode Island and the District of Columbia have recently taken advantage of flexibility under section 1931 to expand coverage for parents to 185 percent and 200 percent of the poverty line, respectively.
States also have a new option to provide Medicaid coverage under section 1931 to two-parent families. On August 7, 1998, the Department of Health and Human Services issued a regulation that eliminated a barrier to expanding Medicaid to two-parent families. Prior to this action, all states could use the opportunity contained in the 1996 welfare law to expand Medicaid to low-income working adults in single-parent families, but twenty states and the District of Columbia were barred by an old welfare regulation known as the "100-hour rule" from expanding coverage to such adults in two-parent families. 63 Fed. Reg. 42270-75.
Medicaid also is available to pregnant women and children in families with income substantially above a state's July 1996 income standard under the so-called Medicaid "poverty level" categories. Under federal law, pregnant women and children below age six in families with incomes up to 133 percent of the federal poverty line are eligible for Medicaid, as are children age six through 14 in families with incomes up to 100 percent of the federal poverty line.(9) States can expand Medicaid beyond these federal minimum requirements. For example, as of October 1998, some 44 states and the District of Columbia had expanded coverage for children beyond the federal minimum requirements. Some states have extended Medicaid coverage to all children in families with incomes well above the federal poverty line.(10)
Another reason that eligibility for Medicaid is generally broader than eligibility for TANF is that states can, and in some instances must, impose non-financial eligibility requirements in TANF that they need not, and most often cannot, apply in Medicaid. For example, while states are required to place a time limit on receipt of TANF-funded assistance, they may not impose a time limit on a family's receipt of Medicaid.
Similarly, while failure of an adult to comply with TANF child support cooperation rules, work activities or other so-called conduct requirements can result in an entire family being ineligible for TANF, these TANF requirements cannot result in the entire family becoming ineligible for Medicaid. Federal law prohibits states from terminating Medicaid if a family loses TANF for failure to comply with TANF conduct requirements with one exception. States have the option to terminate the Medicaid coverage of adults who are not pregnant and who lose TANF due to a refusal to comply with TANF work rules.(11) No other TANF conduct requirements can be carried over as a basis for terminating Medicaid.(12) Moreover, federal law prohibits states from terminating Medicaid for children or pregnant women for non-compliance with any TANF conduct requirement, including a work requirement.(13) Thus, the denial or termination of TANF benefits can never automatically mean that all family members are ineligible for Medicaid.
III. Ensuring that the TANF Application Process Does Not Result in Eligible Families Losing Access to Medicaid
Under the old AFDC program, since Medicaid eligibility was linked to eligibility for AFDC, families seeking cash welfare benefits were also automatically applying for Medicaid through the same joint application form. Now that eligibility for Medicaid and TANF are delinked, Medicaid eligibility does not automatically attach to eligibility for TANF. However, all states appear to have maintained a joint application procedure for the two programs.(14) Many states, however, have implemented new welfare policies in their TANF programs that have transformed the process when families seek to apply for cash welfare assistance. In implementing these new welfare policies, some states may not have considered fully the impact of changes in the TANF application process on the agency's disposition of a family's Medicaid application.
Many state TANF programs encourage a family applying for aid first to look elsewhere for other sources of support particularly to earnings from employment and to rely on welfare receipt only as a last resort. These welfare avoidance policies seek to prevent or divert a family from entering the cash welfare system in the first instance by referring families to other sources of assistance or by encouraging immediate job placement, often by requiring immediate job search or providing a lump sum cash payment to overcome a barrier to employment.(15) Job search assistance or a lump sum payment may provide the needed link to obtaining income from employment rather than from public assistance.
In some states, welfare avoidance efforts start when a family first contacts the state agency for TANF assistance and may result in the family not filing an application for such assistance. Under the federal TANF law, states are free to implement almost any type of policy to divert a family from applying for TANF cash assistance.(16) States may adopt formal requirements such as job search efforts that must be met before the family can file an application for TANF-funded assistance or informally may discourage or delay the family from filing an application, for example by suggesting the family pursue other resources first.
When a state combines applications for TANF-funded assistance and Medicaid together on a single form in a joint application process, as most states do, it will need to limit any pre-application requirements to the application for TANF assistance. Whatever policies a state may use to divert families from welfare or defer the filing of an application for TANF-funded benefits, it has no reason to use these policies to divert or delay the filing of a Medicaid application. As discussed above, ensuring that families can receive Medicaid coverage without also receiving TANF cash assistance can bolster states' welfare avoidance efforts. Moreover, the federal Medicaid statute and regulations require that individuals be given the right to apply without delay.(17) Under federal Medicaid rules, this right must be clearly and understandably explained in materials the state agency distributes.(18)
The specific steps a state may need to take to ensure that persons have an opportunity to apply promptly for medical assistance will depend upon the actions the agency takes to divert families from filing applications for TANF cash assistance. For example, if the agency distributes written materials explaining the requirements that must be met before filing of a TANF application (e.g., a set number of job contacts), the written materials should make clear that these conditions do not apply to filing a Medicaid application and that the Medicaid application may be filed promptly. In addition, to the extent that a state is discouraging people orally from applying for TANF because of the lifetime limits (or for any other reason), it should explain that these limits and requirements do not apply to Medicaid and are not a reason to avoid receiving medical assistance.
In many states, welfare avoidance policies more commonly come into play after the application for TANF is filed and before the application is acted upon. Once an application for Medicaid has been filed, federal rules require that a state must act on it promptly and within 45 days in most circumstances.(19) The agency cannot use the 45-day limit as a waiting period or to delay a determination.(20) If a family has jointly applied for TANF and Medicaid and there is a delay in processing the TANF application, the state agency still must meet the timeliness requirements that apply to processing of Medicaid applications. Because Medicaid eligibility is now de-linked from TANF eligibility, the agency does not need first to determine that the family qualifies for TANF in order to determine that the family is eligible for Medicaid.
A state cannot deny the application solely because a TANF eligibility requirement is not met. Once a Medicaid application (including a joint Medicaid and TANF application) has been filed, federal law requires that the agency make a determination that the family is either eligible or ineligible for Medicaid and notify the family of approval or denial.(21) The agency cannot decline to act on the Medicaid application if the application for TANF benefits is denied, withdrawn, or deferred for later action. Nor can the agency require that a new Medicaid application be filed if the TANF application is denied or withdrawn.(22) As HHS has recently emphasized in the context of joint Medicaid and TANF applications, "States are specifically prohibited from denying or terminating Medicaid eligibility unless all possible avenues to Medicaid eligibility have been explored and exhausted."(23)
Federal Funds Available to Help States Redesign Their Medicaid
Enrollment Systems in Light of the New "Delinking" Provision
The provision in the 1996 federal welfare law that delinked eligibility for Medicaid from eligibility for TANF assistance also sets aside $500 million in federal Medicaid Matching funds that states can use for outreach and to revamp their Medicaid enrollment systems. These funds can defray a large share of the cost to states of developing new systems (including worker training and notices to families) that would assure that Medicaid eligibility determinations made when TANF benefits are delayed, denied or terminated. The funds can be drawn down at an enhanced matching rate, ranging from a 75 percent to a 90 percent match rate, depending on the activity, and they are available for the first three years following the state's adoption of a TANF plan.
See, section 1931 (h); Vol. 62, No. 93 Federal Reg., May 14, 1997.
Applying these Medicaid requirements in light of TANF application requirements
The agency should not deny or delay a decision on Medicaid
applications because of TANF applicant job search requirements.
At least 20 states require some or all applicants for TANF benefits to participate in job search while the application for TANF is pending. This is known as "applicant job search." A TANF applicant may be required to attend a job search class or make a requisite number of job contacts, and the application for TANF assistance may be denied if the applicant fails to comply with these requirements. Under federal law, TANF job search requirements imposed on applicants cannot be a basis for delay or denial of a Medicaid application.
If a decision on a family's TANF application is delayed several weeks so the applicant can first comply with TANF job search requirements, the state agency should not delay the Medicaid application.(24) The agency does not need to know whether the applicant will be receiving TANF to make a determination of Medicaid eligibility. Any income the family receives from TANF benefits subsequently awarded generally would not place the family above the Medicaid income limits and thus would not affect the family's Medicaid eligibility. (Situations in which the job search results in earnings from a job are discussed below.)
The agency should not deny the application for Medicaid solely
because the TANF application is denied when the applicant finds a job.
When a job search results in a parent finding a job while the family's TANF application is pending, the earnings from employment may result in denial of the application for TANF. While most states have adopted policies that disregard a substantial portion of the earnings of a TANF recipient in calculating eligibility for TANF benefits, many states do not use these expanded earnings disregards for new applicants. Thus, new applicants may be denied TANF assistance based on earnings modestly above the TANF grant level. When a welfare agency denies an application for TANF based on the applicant's earnings, it is required to make a determination on the Medicaid application that has been filed together with the TANF application.
Even with earnings from a new job, at least some family members are likely to be eligible for Medicaid. The children often will qualify for Medicaid under the "poverty level categories." In addition, depending upon the extent to which the state has expanded Medicaid coverage for low-income parents through options under the new section 1931 Medicaid eligibility category, the parents also may qualify.(25) When applicant job search leads to a parent starting a new job and the family's paycheck will exceed the applicable Medicaid income levels, the family may still be eligible for Medicaid coverage for the month of application and for three months prior to the application. This coverage could allow the family to qualify for time-limited coverage under the Transitional Medical Assistance category.(26)
States should assure that receipt of a lump sum diversion
payment does not result in loss of access to Medicaid.
State welfare diversion programs vary in their details, but in at least 20 states these programs offer TANF applicants a lump sum "diversion payment" in lieu of on-going TANF benefits. These payments typically are in an amount equal to several months of cash assistance benefits. Diversion payments may be provided to help with a short-term crisis, such as a break-down of the car a family member drives to work, a threatened repossession of that car, or an impending eviction or utility shut-off. To qualify for a diversion payment in most states, the family must qualify for, or be likely to qualify for, TANF. The application for ongoing TANF cash assistance is generally denied or withdrawn if a lump sum diversion payment is provided.(27)
There are two major issues affecting receipt of Medicaid for families that receive lump sum diversion payments: whether state Medicaid policies promote state diversion policies by assuring that the lump sum payment does not make the family ineligible for Medicaid and whether state procedures ensure that Medicaid eligibility actually is considered when a family receives a diversion payment.
Eligibility for Medicaid could be affected by receipt of a lump sum diversion payment. However, as long as the state chooses to disregard the lump sum diversion payment as income and as an asset, receipt of the diversion payment will not be a barrier to Medicaid eligibility. All states can choose to do so under the options allowed them by section 1931.(28) In any event, the children would likely qualify for Medicaid. The lump sum payment often will be below the income cut-offs for the "poverty level" category for children, and most states have eliminated the asset tests for some or all children.
The steps a state must take to ensure that Medicaid applications are evaluated will vary depending upon a state's procedures for disposing of the TANF application when the state provides a lump sum diversion payment. In some states, a family is required to complete the TANF application process before a lump sum payment is authorized in lieu of ongoing TANF cash assistance, although the application for TANF may then be denied when the family receives a diversion payment. In other states, the application for TANF is not completed or is withdrawn when a lump sum payment is authorized. Welfare officials in states operating lump sum diversion programs report that the Medicaid application should continue to be processed if the TANF application does not go forward due to receipt of a lump sum diversion payment.(29) However, if the state's procedure for awarding lump sum diversion payments does not require completing the TANF application process, the agency may not have the information it needs to award Medicaid coverage. In such circumstances, the agency may need to request additional information to complete consideration of the Medicaid application.
In some states, a family receiving a lump sum diversion payment may never have filed an application for TANF and thus may never have filed an application for Medicaid.(30) HHS encourages states to make sure that families have an opportunity to apply for Medicaid at the same time they apply for diversion payments, even if a separate Medicaid application is used to initiate the process. In a recent letter to State Medicaid Directors and TANF Administrators, HHS stresses that for this reason "it is critical that states with diversion programs conduct aggressive outreach" to ensure enrollment in Medicaid or programs under the child health block grant.(31) To avoid families having to go to multiple sites to receive Medicaid and the diversion payment, Medicaid applications could be made available at the site where the family applies for a diversion payment. Most states now allow pregnant women and children to apply for Medicaid by mail.
States should ensure that applications for Medicaid
are not withdrawn or abandoned along with an application for TANF.
Families applying for TANF benefits risk losing access to Medicaid when a family withdraws, or fails to pursue, an application for TANF that also serves as the Medicaid application. If an agency encourages some applicants to withdraw their TANF applications, it should ensure that it separates and distinguishes any message it sends about TANF from the messages it sends about Medicaid.
When an application for Medicaid is formally withdrawn by the applicant, the agency need not make a determination of eligibility based on the application. But this requires an explicit withdrawal of the Medicaid application; a general withdrawal of the TANF application is not sufficient. Federal Medicaid rules require the agency to send a notice confirming any voluntary withdrawal of a Medicaid application.(32)
Often, a TANF applicant will not formally withdraw the request for TANF-funded assistance but instead simply will not pursue it. These situations are particularly risky for Medicaid applications because the agency may not have the information it needs to determine Medicaid eligibility. If the agency needs more information to determine Medicaid eligibility, it can hold the application and provide an opportunity for the applicant to furnish the information needed. Federal Medicaid rules prohibit an agency from denying an application for Medicaid just because the time for processing the application has expired.(33) Ultimately, however, if the agency does not receive information it needs to determine that a family is eligible, it can deny the application. The agency could, however, provide an opportunity for re-activating an application denied for lack of information and, if it does so, the denial letter should inform the applicant of the steps to take to re-activate the Medicaid application.(34)
Welfare agencies should ensure that application procedures, staff training, and applicant information are designed to assist informed decision-making by applicants. There are several things that agencies can do:
- Ensure that applicants understand that Medicaid is available to families that do not receive TANF benefits and that applicants may continue to pursue their Medicaid applications even if they decide not to pursue TANF.(35) States' efforts to divert families from entering TANF are furthered by applicants understanding that they do not need to receive TANF in order to receive Medicaid.
- Ensure that any form the agency uses for withdrawal of a TANF application does not constitute a withdrawal of the Medicaid application, and that TANF withdrawals are not automatically assumed to be Medicaid withdrawals as well.
- If an application for Medicaid is denied for failure to provide information, the agency should provide an opportunity for the applicant to re-open the application; in such cases, the denial notice should clearly explain how the applicant can pursue re-opening the application and also that the family may reapply at any time.(36)
IV. Ensuring that Medicaid Benefits Continue for Eligible Families Whose TANF Benefits Are Terminated
When a family qualifies for Medicaid, the agency authorizes benefits on an ongoing or open-ended basis. Federal Medicaid law requires the state agency to continue benefits to each Medicaid recipient until it determines that the individual is no longer eligible for Medicaid under any category, not just the category under which he or she had been receiving benefits.(37) The family is required to report changes in circumstances and to participate in a periodic review of eligibility.(38) So long as the family provides information required by the agency and the family remains eligible, Medicaid coverage must be continued.
Since a state cannot stop Medicaid until it has determined that there is no basis for ongoing Medicaid eligibility, it cannot stop a family's Medicaid solely because the family's TANF benefits have stopped. Because eligibility for Medicaid and TANF are "delinked," loss of TANF benefits should not, in and of itself, have any direct effect on Medicaid eligibility. However, the reason for the loss of TANF (e.g., earnings from employment) may result in a different basis for the family's ongoing Medicaid eligibility or in some, but not all, members of the family losing Medicaid eligibility.
There are some common reasons under states' new welfare policies that families leave the TANF program. Many lose TANF benefits due to increased earnings from employment. Others lose TANF due to a sanction for failing to comply with a program requirement, most often a work requirement. Increasingly, families will lose TANF benefits as they reach time limits. In addition, some families may voluntarily terminate their TANF benefits. In each of these situations, some or all family members losing TANF benefits remain eligible for Medicaid. States need to ensure, however, that their procedures do not lead to inadvertent loss of Medicaid at each of these "risk points."
States Can Help Assure Ongoing Coverage of Children
by Opting to Cover Children for 12-month Continuous Periods
Under the Balanced Budget Act of 1997, states have a new option to cover children in Medicaid for 12-month continuous periods. States can enroll a child into Medicaid and allow that child to remain covered for 12 months without regard to any changes in family circumstances that might otherwise affect Medicaid eligibility. The option was intended to reduce churning in the Medicaid program and assure children continuous coverage and care. If a state opts to cover children for 12-month continuous periods, a TANF case closing need not prompt a Medicaid redetermination at least for the children, since the children would continue regardless of changes in income or other circumstances.
Termination of TANF benefits due to earnings
Families that lose TANF benefits due to earnings should remain eligible for Medicaid under several overlapping bases. The loss of TANF benefits should not, in and of itself, be a basis for loss of Medicaid eligibility, but the earnings that caused the loss of TANF benefits may place the family over the state's income limit for Medicaid eligibility as established under section 1931.(39) When a family loses eligibility for Medicaid under section 1931 due to earnings, the family should qualify for Transitional Medical Assistance for up to 12 months.(40) In any event, the children and pregnant women in the family would most likely still qualify for Medicaid under the state's "poverty level" category.(41)
States need to ensure that they have procedures in place that assure that Medicaid benefits continue for eligible families when they leave TANF. Recent evidence suggests that state systems are not always effectively continuing Medicaid on a transitional basis to families that leave welfare.(42) There are a range of actions that states can take to evaluate current procedures and improve outcomes. To the extent that the TANF and Medicaid eligibility determinations are automated, a state will need to ensure that its computer system will automatically extend Transitional Medical Assistance to all families whose earnings place them over the section 1931 income cut-offs. In addition, recipient education can assist agencies. In some cases, the agency may not have the information it needs to provide Transition Medical Assistance if a recipient has not informed the agency about new employment but has instead simply allowed TANF benefits to lapse. If families understand the importance of reporting this information, the agency can provide Transitional Medicaid benefits, and, at the same time, facilitate its efforts to collect information it may want to know about the earnings of individuals leaving the TANF rolls.
Similarly, the agency may need family income information to evaluate whether to continue Medicaid coverage to children under the so-called poverty level categories. Again, recipient education of the availability of Medicaid for the children can assist the agency to maintain coverage for the children. In addition, staff training and manuals also will need to emphasize that Medicaid cannot be terminated until all other bases of Medicaid coverage including Transitional Medical Assistance and eligibility of children and pregnant women under the so-called poverty level categories are considered.(43)
Termination of TANF benefits when a family reaches a time limit
The federal welfare law generally imposes a 60-month lifetime time limit on assistance provided with federal funds under the Temporary Assistance for Needy Families block grant.(44) Some states have imposed shorter time limits. By contrast, there is no time limit imposed in the Medicaid program. Termination of TANF benefits because a family reaches a state or federal time limit has no direct effect on the family's continued eligibility for Medicaid. This also is true in states that have imposed time limits through AFDC waivers submitted before the 1996 welfare law was enacted.(45) The agency cannot terminate Medicaid coverage because a family has reached a TANF time limit.
While loss of TANF due to a time limit should not lead to loss of Medicaid eligibility, families could risk loss of coverage due to state procedures. For example, if a state schedules a Medicaid eligibility review to coincide with the TANF closure, recipients may not follow through on the Medicaid eligibility review, believing that they cannot continue to receive Medicaid.(46) If a state staggered the Medicaid eligibility review so that it took place some time after the TANF time limit was reached, families would more clearly understand that TANF and Medicaid are delinked. Moreover, staggering the Medicaid redetermination and the TANF closure, would enable the state to learn of changed family circumstances that follow loss of TANF benefits due to a time limit.
Termination of TANF benefits due to a sanction
Many states impose full-family sanctions that result in stopping all TANF aid to the entire family if an adult fails to comply with a program requirement such as participation in work activities or cooperation with child support enforcement efforts. Federal law prohibits states from imposing full-family sanctions in the Medicaid program. Failure of an adult to comply with TANF work requirements, other TANF rules, or Medicaid medical support requirements can never result in the entire family becoming ineligible for Medicaid. Some or all family members will remain eligible.
In general, TANF "conduct" requirements cannot be carried over to Medicaid. If, for example, a family member fails to comply with a TANF school attendance requirement, the violation of the TANF requirement has no bearing on Medicaid. Under federal law, however, states do have the option to terminate the Medicaid benefits of a non-pregnant adult if the adult has been terminated from TANF benefits due to refusal to comply with TANF work requirements.(47) States are prohibited, however, from relying on TANF work requirements as basis for terminating the Medicaid benefits of children (except for a teen who is the head of the household) or pregnant women.
TANF child support cooperation rules also do not apply to Medicaid, although, state Medicaid programs must require cooperation with medical support requirements. In all states, the Medicaid benefits of a non-pregnant parent must be stopped if the parent failed to cooperate with medical support requirements without good cause. Federal law prohibits states from terminating the Medicaid benefits of children or pregnant women for this reason.(48) It is often important to separate the TANF child support requirements from the Medicaid medical support requirement, because in some states the TANF requirements are more extensive than the Medicaid requirements.
If a parent does lose Medicaid for failure to comply with medical support requirements without good cause or because of the loss of TANF benefits due to a work sanction, the notice terminating Medicaid coverage must contain sufficient information to allow the family to understand the basis of the action and to inform them about whose benefits will be affected. This should include the agency's determination that the parent is not pregnant and, in the case of a termination due to a failure to cooperate with medical support requirements, the agency's determination that the parent does not have good cause for the failure to comply. It also should clearly state that the children in the family will continue to receive Medicaid and provide information to the parent on how she or he may requalify for Medicaid.
Families that voluntarily close their TANF case
Families voluntarily terminate their TANF benefits for a variety of reasons. For example, a family may want to avoid using up months on a time clock and wish to save an opportunity to use TANF for a future emergency. This may be particularly true if the TANF assistance is only a small supplement to other income. Some states provide recipients notice of time limits that specifically suggests the family may want to stop receiving benefits voluntarily. Another situation in which a family may choose to voluntarily close its TANF case is when a parent must drop out of vocational training to take an unpaid work slot; such a parent may decide to terminate TANF receipt and attempt to finish school with loans and a part-time job. Many recipients are willing to sever their connection to the TANF program if they can find some other way to meet their family's basic needs.
With no other change in circumstances, these families should remain eligible for Medicaid. Many families leaving TANF, however, may not understand that time limits, restrictions on school or training, and other features of the TANF program do not apply in the Medicaid program. Indeed, many may not know that families that are not receiving cash aid still may be eligible for Medicaid.
Voluntary termination of TANF benefits is a point at which a family may risk loss of Medicaid for which it is eligible even when the agency follows procedures. Although the agency cannot terminate Medicaid just because the parent requested that TANF be terminated, many parents may simply ask to have their "case" closed without making a distinction between the programs. Although states decide what steps recipients must take to stop their TANF benefits, federal Medicaid rules require that any voluntary request to stop Medicaid be in writing and be confirmed in writing by the agency.(49)
Sometimes recipients effectively terminate their cash assistance simply by not taking steps required to maintain ongoing eligibility. For example, a family may choose not to appear for a scheduled appointment to review its eligibility, regarding this as an expedient way to close its TANF case. If this appointment is also a Medicaid eligibility review, the agency could stop the Medicaid benefits along with the TANF benefits when the parent does not appear for the interview. For this reason, it is important to ensure that families understand that they can, and may choose to, receive Medicaid even if they do not want to continue to receive TANF benefits.
Since continued Medicaid could assist the family in remaining independent of welfare and since federal law requires that Medicaid benefits be considered independently of TANF, Medicaid benefits cannot be stopped absent an explicit written request. To avoid uninformed or unintended closures of Medicaid, welfare agencies will need to ensure that case closing procedures, staff training and recipient information are designed to assist informed decision-making by families. There are several things an agency can do:
- Ensure that recipients understand that they may continue to receive Medicaid even if they no longer wish to receive TANF benefits and that TANF requirements such as time limits do not apply to Medicaid.
- Stagger Medicaid redeterminations (and exercise the option to cover children in Medicaid continuously for 12 months; see box on page 17) so that medical redeterminations do not coincide with TANF case closures to assist in distinguishing the TANF closure from a separate determination of ongoing Medicaid eligibility and to enable the agency to obtain any information it needs for to evaluate Medicaid eligibility.
- Ensure that any forms the agency uses for requesting or confirming the voluntary cessation of benefits separately and distinctly address Medicaid and TANF. Such forms also could include a simple explanation of the basic requirements of each program and be reviewed with families seeking to close their cases. It is important that agency staff help recipients limit their requests for voluntary case closure to TANF benefits unless there is an explicit and informed request by a family to terminate other benefits as well. There are many ways to do this including the use of separate forms for the TANF and Medicaid programs. If, however, the state includes all programs on the same voluntary case closing form, it could request separate signatures for voluntary case closure for each program. As a practical matter, however, it is the message the workers provide that will be the key to helping recipients understand they can continue to receive Medicaid benefits when they request closure of their TANF case.
- When a case is closed for procedural reasons for example, because the family has not provided needed information or appeared for a scheduled appointment to review eligibility the agency could allow for re-opening of the case within a reasonable period of time. In such a case, the termination notice should inform the person how she or he may re-open the case and about the right to reapply at any time.(50)
Medicaid provides important support to low-income families, including low-income working families. The dramatic welfare caseload decline of recent years appears to have contributed to a decline in the proportion of families eligible for Medicaid that are using the program. A large share of the families that no longer receive cash welfare probably still qualify for Medicaid, but many appear not to be receiving coverage and are likely to be uninsured. States outreach efforts may be successful in finding some of these families, and particularly the children, but better outcomes in terms of health insurance coverage can be achieved if families that are in contact with the cash assistance system are properly evaluated for Medicaid eligibility.
1. See, Ellwood and Ku, "Welfare and Immigration Reforms: Unwanted Side Effects for Medicaid," Health Affairs, 17:3, May/June 1998.
2. Abt Associates, What Makes Caseloads Grow or Shrink in the Food Stamp Program?, Testimony before the Senate Committee on Agriculture, Nutrition, and Forestry, April 23, 1998; Congressional Budget Office, The Economic and Budget Outlook: Fiscal Years 1999-2008, Report to Senate and House Committees on the Budget, January 1998, p. 74.
3. See, Cooper and Schone, More Offers, Fewer Takers for Employment-Based Health Insurance: 1987 and 1996," Health Affairs, 16:6, November/December 1997.
4. Recent studies support this widely accepted belief. For example, researchers in Minnesota found that expanding access to the state's Medicaid program effectively reduced welfare caseloads by 9.6 percent by deterring families from ever applying for welfare and by making it easier for families to leave welfare once they were enrolled. Gestur Davidson et al, Health Insurance and Welfare Participation: The Effects of MinnesotaCare on AFDC Enrollment, Minnesota Department of Human Services (Presented at the International Health Economics Association, May 21, 1996, British Columbia). For further discussion, see Center on Budget and Policy Priorities, Taking the Next Step: States Can Now Take Advantage of Federal Medicaid Matching Funds to Expand Health Care Coverage to Low-income Working Parents, August 1998.
5. 42 U.S.C. § 1396u-1.
6. Under section 1931, states have the option of raising the income and asset standards within certain limits; they can lower the standards but not below May 1988 levels. In addition, states can vary from the July 16, 1996 rules by continuing certain AFDC waiver policies or adopting "less restrictive methodologies" to calculate income and assets. See box on p. 6 and Center on Budget and Policy Priorities, An Analysis of the AFDC-Related Medicaid Provisions of the New Welfare Law, November 1996.
7. The relevant family composition rules require that the family include a child living with a parent or other "caretaker relative." These requirements also limited eligibility for two-parent families to families in which a parent was incapacitated or "unemployed." While in the past AFDC regulations limited the definition of "unemployed" parent to persons working fewer than 100 hours per month, states are not required to follow the "100-hour" rule in extending Medicaid coverage under section 1931 to two-parent families. A state can cover all two-parent families if it had a statewide waiver of the AFDC "100-hour rule" as 30 states had under the AFDC program. In addition, HHS has published a final rule which gives all states including those that did not have 100-hour rule waivers broad flexibility to extend coverage under section 1931 to two-parent families with an employed parent. 63 Fed. Reg. 42270-75 (August 7, 1998). See Center on Budget and Policy Priorities, Taking the Next Step: States Can Now Take Advantage of Federal Medicaid Matching Funds to Expand Health Care Coverage to Low-income Working Parents, August 1998.
8. Transitional Medical Assistance (TMA) is available automatically for six months and may be extended for an additional six months if a family's gross earnings, after subtracting child care costs, are below 185 percent of the federal poverty line. To qualify for TMA, a family must have been receiving Medicaid under section 1931 for three of the prior six months. Social Security Act, § 1925, 42 U.S.C. § 1396r-6.
Some families lose coverage under section 1931 due to the lapse of an earnings disregard. Under the July 1996 AFDC rules that generally are applied under section 1931, one-third of a family's earnings were disregarded for four months. For states that choose to continue that July 16, 1996 AFDC rule (rather than electing a less restrictive methodology), many families lose Medicaid coverage under section 1931 due to the lapse of the one-third disregard. TMA requires Medicaid coverage for these families to continue for up to 12 months.
9. Mandatory coverage for children under the poverty line is being phased in through a federal requirement that states cover poor children born after September 30, 1983. By September 30, 2002, states will be required to provide Medicaid for all children through age 18 in families with income below the federal poverty line. Social Security Act, § 1902(l), 42 U.S.C. § 1396(a)(l).
10. The Balanced Budget Act of 1997, PL. 105-33, created the Child Health Insurance Program or CHIP, which provides federal funding to states on an enhanced matching basis to cover a broader group of low-income children either by expanding Medicaid for children, establishing a separate state insurance program, or adopting a combination of these approaches. These new federal funds have prompted states to expand Medicaid eligibility and to create new child health programs; further expansions of coverage for children are being planned by many states. It will be important that states denying or terminating TANF assistance determine not only each family member's Medicaid eligibility but also to consider the children's eligibility under a separate child health insurance program if Medicaid is not available.
11. Social Security Act, § 1931(b)(2), 42 U.S.C. § 1396u-i(b)(2).
12. Under federal Medicaid law, state Medicaid programs must require cooperation with medical support requirements; this is separate from the TANF requirement to cooperate with child support enforcement efforts. As a condition of Medicaid eligibility, an applicant must assign to the state the right to collect support for the costs of medical care and generally must cooperate with the state in the collection of medical support from an absent parent. Failure to cooperate, without good cause, can lead to the parent but not the children being denied Medicaid. Medicaid support rules do not apply to pregnant women. Social Security Act, § 1912, 42 U.S.C. § 1396k.
13. Social Security Act, § 1931(b)(2), 42 U.S.C. § 1396u-i(b)(2).
14. States are allowed the option to use a joint application for Medicaid and TANF under section 1931. Social Security Act, § 1931(e)
15. The term "welfare diversion" is sometimes used for the range of strategies to divert a family from entering the cash welfare system. The term "welfare diversion" also is used to describe one specific strategy providing a lump sum payment in lieu of ongoing cash assistance. To avoid confusion, this paper will use the term "welfare avoidance" to refer to the full range of policies and the term "lump sum diversion" payments to refer to the specific strategy of providing a one-time payment in lieu of ongoing cash assistance.
16. The agency cannot implement policies that are arbitrary or discriminatory. Federal law requires states to set forth in their state plan "objective criteria for the delivery of benefits and the determination of eligibility and for fair and equitable treatment, ..." 42 U.S.C. § 602(a)(1)(B)(iii). In addition, the state agency cannot adopt policies that violate civil rights laws or constitutional rights to equal protection and due process of law.
17. Social Security Act, § 1902(a)(8), 42 U.S.C. § 1396a(a)(8); 42 C.F.R. § 435.906. Filing an application immediately is important in the Medicaid program for several reasons. The date of application marks the beginning of the period during which the state agency must determine the applicant's eligibility. It also affects the period of coverage that successful applicants may receive. Medicaid benefits generally start on the first day of the month in which the application is filed, and coverage is available to eligible persons for medical care provided up to three months before the date of application if they were eligible at the time they received the services and on the date of application. Social Security Act, § 1902(a)(34), 42 U.S.C. § 1396a(a)(34); 42 C.F.R. § 435.914.
18. 42 C.F.R. § 435.905.
19. 42 C.F.R. § 435.911(a)(2). Agencies can take longer to process an application only when the basis of Medicaid eligibility arises from a disability that must be medically verified. TANF applicants would rarely need to establish disability to qualify for Medicaid since they are likely to qualify under the income-based Medicaid eligibility categories.
20. 42 C.F.R. §§ 435.911(a)(2) and (e)(1). In addition, the agency must provide assistance for applicants to secure emergency medical care when needed. 42 C.F.R. § 435.930.
21. 42 C.F.R. § 435.913.
22. 42 C.F.R. § 435.909.
23. HHS Letter to State Medicaid Directors and TANF Administrators (June 5, 1998).
24. It is important to communicate these requirements explicitly to front-line staff. For example, the Georgia Department of Human Resources, which requires an extensive TANF job search before TANF benefits can be approved, issued a directive that food stamps, child care and Medicaid "approval must not be delayed pending approval for TANF." Economic Support Services County Letter No. 98-1 (January 30, 1998).
25. States can choose policy options that would provide Medicaid coverage under section 1931 for families that are not eligible for TANF due to earnings. See box on p. 6 and Center on Budget and Policy Priorities, Taking the Next Step: States Can Now Take Advantage of Federal Medicaid Matching Funds to Expand Health Care Coverage to Low-income Working Parents, August 1998.
26. The TMA requirement that families have received Medicaid under section 1931 for three of the prior six months can be satisfied through retroactive coverage.
27. Families receiving lump sum diversion payments generally become ineligible for regular monthly cash assistance for a period of some months or face a repayment penalty if they reapply for TANF during the designated period.
28. Under section 1931, states can adopt less restrictive methodologies for consideration of income or assets. A disregard of lump sum diversion payments would be considered a less restrictive methodology.
29. Maloy and Pavetti, George Washington University, Center for Health Policy Research, A Description and Assessment of State Approaches to Diversion Programs and Activities Under Welfare Reform, August 1998. (Interim Report of Findings From Research Funded by the Administration for Children and Families and the Assistance Secretary of Planning and Evaluation of HHS.)
30. In several states the lump sum diversion payment is approved through an agency other than the welfare agency and the applicant must independently apply for Medicaid.
31. HHS Letter to State Medicaid Directors and TANF Administrators (June 5, 1998).
32. 42 C.F.R. § 435.913.
33. 42 C.F.R. § 435.911.
34. Allowing an applicant to re-open an application that has been denied for lack of information can lessen the burden that requiring re-application would place on the agency and on the recipient. For example, Washington State explicitly authorizes re-opening of an application that has been denied for lack of needed information if the information is provided within 30 days.
35. To avoid uninformed or unintended abandonment of Medicaid applications, it is important for states to make clear exactly what requirements apply to the Medicaid application, as distinguished from the requirements that apply only to the TANF application. For example, an applicant may not complete the TANF application process because he or she is unable to complete a rigorous job search requirement that would interfere with her completion of a vocational training program. The applicant may not understand he or she still is eligible to receive Medicaid benefits and that applicants are not required to complete job search in order to qualify for Medicaid.
36. State agencies also must ensure that failure to comply with application procedures is not due to illiteracy, mental retardation or other disability preventing compliance or due to lack of bilingual notices or services. The Americans with Disabilities Act requires agencies to make reasonable accommodations so that persons with disabilities are not denied access to benefits. 42 U.S.C. § 12132; 28 C.F.R. Part 35. The Civil Rights Act prohibits discrimination based on national origin. 42 U.S.C. § 2000d; 45 C.F.R. Part 80. Courts and agencies have interpreted this prohibition to include failure to provide notices or services in the primary language of persons who have limited English proficiency.
37. 42 C.F.R. § 435.930(b).
38. 42 C.F.R. § 435.916. It is the state agency's responsibility to make a redetermination, although the agency can request that a family provide information and can terminate benefits if the family does not provide information needed for the agency to determine whether the family continues to be eligible.
39. To the extent that a state chooses policy options that would provide Medicaid coverage under section 1931 for a broader group of low-income families, the earnings that place the family over the TANF income cut-off would not place the family over the section 1931 income cut-off. See box on p. 6. For more information, see Center on Budget and Policy Priorities, Taking the Next Step: States Can Now Take Advantage of Federal Medicaid Matching Funds to Expand Health Care Coverage to Low-income Working Parents, August 1998.
40. See discussion of Transitional Medical Assistance at pp. 5-6. Several states have waivers extending TMA beyond 12 months.
41. See discussion above at pp. 6-7. A number of recent studies indicate that families that leave TANF and have earnings typically have earnings levels below the poverty line. For example, a study of recipients who left the welfare rolls in Milwaukee, Wisconsin between December 1995 and September 1996, found that about three-quarters of those working in the last quarter of 1996 earned less than $1,333 per month, roughly the equivalent of the monthly poverty line for a family of four in 1996.
42. Greenberg, Participation in Welfare and Medicaid Enrollment, September 1998, prepared for the Kaiser Commission on Medicaid and the Uninsured. Recent state studies of families that leave TANF support the concern that many families that should qualify for Transitional Medical Assistance are not receiving it. For example, in a recent Washington State survey, 58 percent of the respondents left welfare due to earnings yet only about one-third of the respondents were receiving Medicaid coverage for the parent. Washington State DSHS, Washington's TANF Single Parent Families Shortly After Welfare, July 1998.
43. For example, the North Carolina Department of Health and Human Services recently issued a letter to county social service directors that emphasized that "Medicaid is a vital support to help Work First families transition from welfare to work. Medicaid also helps these families maintain employment. Therefore, Medicaid eligibility must always be evaluated when family members are ineligible for Work First Family Assistance." The memorandum specifically urges the counties to provide refresher training for staff on the evaluation of Medicaid upon ineligibility for Work First and to monitor to ensure that staff are following the redetermination procedures. DHHS letter to County Directors of Social Services, May 27, 1998.
44. A family with an adult is limited to 60 months of federally-funded assistance under TANF with extensions allowed beyond 60 months for up to 20 percent of a state's caseload.
45. Under section 1931 of the Social Security Act, a family's Medicaid eligibility is based on the family meeting income and resource criteria and family composition rules which generally can be no more restrictive than the AFDC standards or rules in effect as of July 16, 1996. Section 1931 allows states to rely on old AFDC waivers submitted before the 1996 federal welfare law was enacted if they want to rely on income, resources and family composition rules that vary from the standard rules in effect on July 16, 1996. States cannot, however, rely on AFDC waivers to impose a time limit on Medicaid receipt. Thus, even in states that had waivers to impose time limits on AFDC receipt prior to July 16, 1996, the family may still qualify for Medicaid under section 1931 when it reaches the time limit in the TANF program.
46. Many states provide information to recipients periodically about the running of the time clock; in some states this includes the specific status of the time clock for each individual family. Such notices are an excellent opportunity for the state to communicate to recipients that time limits do not apply to Medicaid benefits.
47. Social Security Act, § 1931(b)(3), 42 U.S.C. § 1396u-i(b)(3).
48. Social Security Act, § 1912, 42 U.S.C. § 1396k; 42 C.F.R. §§ 435.145-148. The medical support requirement arises under federal Medicaid law to provide reimbursement to state and federal governments from third parties, including non-custodial parents, for the cost of medical care provided through the Medicaid program. It is separate from TANF child support cooperation requirements.
49. 42 C.F.R. § 431.213.
50. State agencies must also ensure that case closure for failure to comply with procedural requirements is not due to illiteracy, mental retardation or other disability preventing compliance or due to lack of bilingual notices or services. See discussion of legal requirements above in footnote. 35.