Hey, Conservatives: Before Gutting Medicaid, Read This Report

by Jonathan Cohn | July 21, 2011

Republicans and their allies continue to advocate transforming Medicaid into a block-grant program. The original House Republican budget called for it explicitly; the Cut, Cap, and Balance plan, which passed the House two days ago, called for it implicitly. And for those who don't remember, turning Medicaid into a block grant would be a major change: Under such a scheme, federal contributions to Medicaid would no longer rise automatically as more people become eligible for the program. Instead, those federal contributions would rise according to a pre-determined formula. States could then figure out how best to spend the money.

Conservatives insist that states would use the opportunity to make Medicaid more efficient, thus addressing the same level of need with a lot less government money. As proof, they frequently point to welfare reform, which entailed a similar change. The old Aid to Families with Dependent Children program was an entitlement, with federal contributions rising to match eligibility. Temporary Assistance to Needy Families, AFDC's replacement, is a block grant. Upon enactment, critics predicted dire consequences. But the dire consequences didn't ensue, at least in any obvious way. If it worked for TANF, conservatives now say, why couldn't it work for Medicaid?

Well, one reason is that the circumstances are a lot different: The economy was unusually strong when TANF became law, easily absorbing new workers and reducing the demand for cash assistance. The real test is how TANF performs when the economy is in trouble, like it has been for the last few years. And a report from the Center on Budget and Policy Priorities suggests it hasn't responded well at all.

The report, by LaDonna Pavetti and Liz Schott, finds that TANF caseloads increased by only 13 percent between December 2007 and December 2009, a time during which the number of unemployed people doubled. It's not a given that TANF should rise proportionally to unemployment, but that's a huge gap. The food stamp program, which remains a federal entitlement, grew by 45 percent during that time. The caseload levels have not varied uniformly across the country. But even many states that expanded their programs in the last two years are now contracting them, in part because extra assistance that the federal government had provided through the Recovery Act is now gone.

From the report:

At least four states have cut their already-low monthly cash assistance benefits, which will push hundreds of thousands of families and children below — or further below — half of the poverty line. Several states have also shortened lifetime time limits on TANF benefits (which already were 60 months or less) and others have cut TANF-funded support for low-income working families. ...
TANF now provides a safety net for very few families, even though the need for assistance is large. In 1995, AFDC assisted 75 families with children for every such 100 families in poverty. By 2009, TANF assisted just 28 families for every 100 in poverty. ...
In 1995, AFDC lifted 62 percent of children who would otherwise have been below half the poverty line out of severe poverty. By 2005, this figure for the TANF program was just 21 percent. The result has been a steady increase in the number of children living in severe poverty. The number of children living below half of the poverty line rose from 1.4 million in 1995 to 1.7 million in 2000 and 2.4 million in 2005, nearly a 75 percent increase.

To be clear, the question of whether to finance welfare as a block grant as opposed to a federal entitlement is separate from the question of whether to impose work requirements for cash assistance. I'm also perfectly willing to believe the full story of TANF in this recession is more complicated than the paper, or my crude summary of it, suggests. But the findings certainly make sense, intuitively, and gibe with what many social scientists have been telling me for a while.

Among them is Harold Pollack, a professor at the University Chicago and regular contributor to this blog. Via e-mail, he writes:

Until 2008, I believed that welfare reform was much less harmful than many of us predicted or feared it would be. The program's failure to address the worst recession in decades--indeed its recent retrenchment--leads me to have a much more negative view.

(I've also emailed some conservative friends to see if they have a different view. I will update as I hear back from them.)

Note that that the Center's report, if correct, suggests that block-granting is a poor policy choice in two distinct ways. It's bad welfare policy: In many instances, states are cutting back by reducing funding for precisely the sorts of supports (like child care) that single mothers need in order to return to the workplace. It's also bad economic policy: When poor people get cash assistance, they tend to spend it quickly on basic necessities. That makes it a particularly effective way to stimulate economic growth.

 

Source URL: http://www.newrepublic.com//blog/jonathan-cohn/92411/welfare-reform-tanf-medicaid-block-grant-recession