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United States General Accounting Office: 
GAO: 

Testimony: 

Before the Subcommittee on Health, Committee on Energy and Commerce, 
House of Representatives: 

For Release on Delivery: 
Expected at 3:00 p.m. 
Tuesday, April 23, 2002: 

Medicaid: 

Transitional Coverage Can Help Families Move from Welfare to Work: 

Statement of William J. Scanlon: 
Director, Health Care Issues: 

GAO-02-679T: 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today as you consider the role of Medicaid in 
helping families' transition from welfare to the workforce. Since 
1988, the Medicaid program has offered transitional Medicaid 
assistance, which provides certain families who are losing Medicaid as 
a result of employment or increased income up to 1 year of additional 
Medicaid health insurance coverage. Transitional Medicaid assistance 
was originally enacted for a 10-year period, and has twice been 
extended to help provide continued health insurance coverage to 
families moving into employment.[Footnote 1] 

The enactment of federal welfare reform in August 1996 significantly 
changed federal welfare policy for low-income families with children 
in several ways, including establishing a 5-year lifetime limit on 
cash assistance.[Footnote 2] The welfare reform law also extended 
transitional Medicaid assistance through 2001, thus continuing an 
important link to health insurance coverage for individuals as their 
economic circumstances changed. States have implemented a variety of 
initiatives intended to help families move from cash assistance to the 
workforce, including some enhancements to transitional Medicaid. These 
initiatives have likely contributed to a drop in cash assistance 
caseloads of more than 50 percent from 1996 through mid-2001.[Footnote 
3] 

Because the transitional Medicaid provision is due to expire in 
September 2002 and you are considering its extension, you asked us to 
provide information on the role this program plays in supporting 
transitions from welfare to work. Accordingly, my remarks today will 
focus on how: 

* transitional Medicaid assistance provides low-income working 
families an option to maintain health insurance coverage and; 

* states have used transitional Medicaid to provide health insurance 
coverage to families. 

My comments are based largely on our previously issued reports and 
testimony on Medicaid and welfare reform.[Footnote 4] 

In summary, transitional Medicaid assistance is a key protection 
offered to families at a critical juncture in their efforts to move 
from welfare to work. Employment in low-wage or part-time positions—
which is common for these newly working individuals—frequently does 
not provide adequate access to affordable health insurance, whether 
through employer-sponsored or individually purchased health insurance, 
thus making transitional Medicaid coverage an important option. Our 
earlier work showed that, for the 21 states we reviewed, the 
implementation of transitional Medicaid assistance varied across the 
states and that certain state practices had enhanced beneficiaries' 
ability to retain Medicaid coverage. For example, some states reported 
increasing training for state eligibility determination workers to 
better inform beneficiaries of this entitlement and how to access it. 
We also found, however, that many families did not receive their full 
transitional Medicaid assistance benefits because they failed to 
report their income three times, as required, throughout the 12-month 
period of coverage. Amending the Medicaid statute to provide states 
with additional flexibility to ease income-reporting requirements for 
the coverage period of transitional Medicaid assistance, as has been 
done for other aspects of the Medicaid program, could further 
facilitate uninterrupted health insurance coverage for families moving 
from cash assistance to the workforce.[Footnote 5] 

Background: 

Transitional Medicaid assistance offers families moving from cash 
assistance to employment the opportunity to maintain health insurance 
coverage under Medicaid, a joint federal-state health insurance 
program. Medicaid spent about $216 billion in fiscal year 2001 on 
coverage for certain low-income individuals.[Footnote 6] Transitional 
Medicaid assistance provides certain families losing Medicaid as a 
result of employment or increased income with up to 1 year of Medicaid 
coverage.[Footnote 7] Families moving from cash assistance to work are 
entitled to an initial 6 months of Medicaid coverage without regard to 
the amount of their earned income, and 6 additional months of coverage 
if family earnings, minus child care costs, do not exceed 185 percent 
of the federal poverty level.[Footnote 8] To qualify for either 6-
month period, a family must have received Medicaid in 3 of the 6 
months immediately before becoming ineligible as a result of increased 
income.[Footnote 9] 

When federal welfare reform was enacted in 1996, states implemented a 
variety of initiatives intended to help families move from welfare to 
the workforce. Welfare reform provided states additional flexibility 
in helping cash assistance recipients to both find work and achieve 
family independence. As a result, states have expanded and intensified 
their provision of work support services such as those for job search, 
job placement, and job readiness.[Footnote 10] Many individuals in 
this population had low skills and faced a number of barriers to 
maintaining work and independence. For example, our work has shown 
that factors such as limited English proficiency, poor health, and the 
presence of a disability were some of the factors that affected the 
extent to which former cash assistance recipients were able to find 
and keep employment.[Footnote 11] 

Maintaining health insurance coverage is important to persons entering 
the workforce because there are important adverse health and financial 
consequences to living without health insurance. The availability of 
health insurance enhances access to preventive, diagnostic, and 
treatment services as well as provides financial security against 
potential catastrophic costs associated with medical care. Research 
has demonstrated that uninsured individuals are less likely than 
individuals with insurance to have a usual source of care, are more 
likely to have difficulty in accessing health care, and generally have 
lower utilization rates for all major health care services. Uninsured 
individuals are more likely than those insured to forgo services such 
as periodic check-ups and preventive services, well-child visits, 
prescription drugs, dental care, and eyeglasses. As a result, 
individuals not covered by health insurance may need acute, costly 
medical attention for conditions that might have been preventable or 
minimized with early detection and treatment. 

Transitional Medicaid Assistance Can Fill Gaps in Accessibility of 
Private Health Insurance for Low-Income Workers: 

Limitations in private sources of coverage underscore the importance 
of transitional Medicaid assistance as an option for those moving from 
cash assistance to employment. Private health insurance is not 
accessible to or affordable for everyone. Although most working 
Americans and their families obtain health insurance through 
employers, many workers do not have coverage because their employers 
do not offer it or the coverage offered is limited or unaffordable. 
Lack of insurance is more common among certain types of workers, 
employers, and industries and may disproportionately represent 
individuals transitioning from cash assistance to work. For example, 
individuals who work part-time or are employed in low-wage jobs are 
less likely to have access to affordable employer-sponsored coverage. 
Furthermore, those who do not have employer-sponsored coverage may 
find alternative sources of coverage, such as the individual insurance 
market, expensive or altogether unavailable. Without continued access 
to Medicaid, some of these individuals, who are often in low-wage 
jobs, will have limited or no access to alternative coverage and could 
end up uninsured. 

Private Sources of Health Insurance Are Not Universally Available and 
May Have Coverage Limitations: 

Employment-based coverage is the primary means for nonelderly 
Americans to obtain health insurance, and over two-thirds of 
nonelderly adults obtained their coverage through an employer in 2000. 
However, a significant number of workers do not have health insurance 
because either their employers do not offer it or they choose not to 
purchase it. In 2000, 30 million nonelderly adults were uninsured, 
even though 75 percent worked for some period during the year. (See 
figure 1.) 

Figure 1: Percentage of Uninsured Nonelderly Adults That Were 
Employed, 2000: 

[Refer to PDF: pie-chart] 

Full-time: 43.4%; 
Part-time: 32.5%; 
Nonworker: 24.1%. 

Source: GAO analysis of the March 2001 Supplement, Current Population 
Survey of nonelderly adults (18- to 64-year-olds). 

[End of figure] 

Lack of insurance coverage is more common among certain types of 
workers, employers, and industries. Part-time employees and employees 
of small firms (fewer than 10 employees) are more likely to be 
uninsured than employees who work full-time or for a large company. 
Individuals working in certain industries are less likely to be 
offered health insurance. For example, in 1999, more than 30 percent 
of workers in the construction, agriculture, and natural resources 
(for example, mining, forestry, and fisheries) industries were 
uninsured, as were about 25 percent of workers in wholesale or retail 
trade. In contrast, 10 percent or less of workers in the finance, 
insurance, real estate, and public employment sectors were uninsured. 
These patterns may disproportionately affect individuals leaving cash 
assistance because they often work in low-wage jobs, part-time, or in 
industries such as retail that often do not provide health coverage. 

Young adults, aged 18 to 24, are more likely than any other age group 
to be uninsured, largely because certain characteristics of their 
transition to the workforce—working part-time or for low wages, 
changing jobs frequently, and working for small employers—make them 
less likely to be eligible for employer-based coverage. Among those 
aged 18 to 24, 27 percent were uninsured, and among those aged 25 to 
34, 21 percent were uninsured in 2000. (See figure 2.) 

Figure 2: Uninsured Population By Age Group, 2000: 

[Refer to PDF for image: vertical bar graph] 

Age: 0-17; 
Percentage uninsured: 12%. 

Age: 18-24; 
Percentage uninsured: 27%. 

Age: 25-34; 
Percentage uninsured: 21%. 

Age: 35-44; 
Percentage uninsured: 16%. 

Age: 45-54; 
Percentage uninsured: 12%. 

Age: 55-64; 
Percentage uninsured: 14%. 

Source: GAO analysis of the March 2001 Supplement, Current Population 
Survey of nonelderly (under 65 years). 

[End of figure] 

Even when employer-sponsored coverage is available, its costs may be 
prohibitive or its benefits very limited. Employer-sponsored health 
plans may not subsidize coverage for dependents, may restrict or 
exclude certain benefits, or may subject participants to out-of-pocket 
costs either through premium contributions or cost-sharing provisions 
that low-wage workers may find unaffordable. For example, a 2001 
survey by Mercer/Foster Higgins found that, on average, large 
employers (500 or more employees) require employees enrolled in 
preferred provider organizations (PPO) to contribute $56 each month 
for employee-only coverage, or $191 each month for family coverage. 
[Footnote 12] For lower-wage workers, such as individuals leaving cash 
assistance and entering the workforce, even coverage that is 
affordable for a worker may be too expensive for covering the rest of 
the family members. 

Those without access to employer-sponsored coverage may look to the 
individual insurance market to obtain coverage, and in 2000, 5 percent 
of nonelderly Americans (or 12.6 million individuals) relied on 
individual health insurance as their only source of coverage. However, 
restrictions on who may qualify for coverage and the premium prices 
charged can have direct implications for consumers. For example, 
depending on their health status and demographic characteristics such 
as age, gender, and geographic location, individuals in the majority 
of states may be denied coverage in the private insurance market or 
have only limited benefit coverage available to them. In addition, 
while all members of an employer-sponsored group health plan typically 
pay the same premium for employment-based insurance regardless of age 
or health status, in most states individual insurance premiums are 
higher for older or sicker individuals than for younger or healthier 
individuals, potentially making this option unaffordable.[Footnote 13] 
For example, a recent study examined individual insurers' treatment of 
applicants with certain preexisting health conditions, such as hay 
fever. The study of insurers in eight localities found that for 
applicants with hay fever, 8 percent would decline coverage; 87 
percent would offer coverage with a premium increase, benefit limit, 
or both; and 5 percent would offer full coverage at the standard 
rate.[Footnote 14] Cost differences are often exacerbated by the fact 
that individuals must absorb the entire cost of their health coverage, 
whereas employers usually pay for a substantial portion of their 
employees' coverage. 

Transitional Medicaid Assistance Can Provide Continued Insurance 
Coverage: 

Because of limitations in the availability of private insurance—
especially for low-paid, part-time workers and those in certain 
industry sectors that often characterize jobs available to individuals 
moving from cash assistance to work—transitional Medicaid assistance 
is an important option for health insurance coverage. Individuals with 
lower incomes have a much higher than average probability of being 
uninsured. (See figure 3.) Typically, former welfare recipients 
entering the workforce work part-time or in low-wage jobs that are 
less likely to provide health coverage or only provide coverage at a 
prohibitive cost. For example, we noted in our 1999 report on states' 
experiences in implementing transitional Medicaid assistance that one 
state found that out of nearly 1,600 former welfare recipients 
surveyed, 43 percent of the heads of households worked fewer than 32 
hours per week and did not have health insurance, and 32 percent held 
low-wage jobs, such as in retail stores, hotels, restaurants, and 
health care establishments. 

Figure 3: Uninsured Population, by Income as a Percentage of Poverty 
Level, 2000: 

Income as a percentage of federal poverty level ($17,050 for a family 
of four in 2000): <100%; 
Percentage uninsured: 33%. 

Income as a percentage of federal poverty level ($17,050 for a family 
of four in 2000): 100-149%; 
Percentage uninsured: 30%. 

Income as a percentage of federal poverty level ($17,050 for a family 
of four in 2000): 150-199%; 
Percentage uninsured: 25%. 

Income as a percentage of federal poverty level ($17,050 for a family 
of four in 2000): 200-299%; 
Percentage uninsured: 18%. 

Income as a percentage of federal poverty level ($17,050 for a family 
of four in 2000): 300-399%; 
Percentage uninsured: 13%. 

Income as a percentage of federal poverty level ($17,050 for a family 
of four in 2000): >400%; 
Percentage uninsured: 7%. 

Source: GAO analysis of the March 2001 Supplement, Current Population 
Survey of nonelderly individuals (under 65 years). 

[End of figure] 

In addition, although some employers of former cash assistance 
recipients may not offer health insurance, numerous studies have shown 
that a significant number of these individuals have access to employer 
coverage but choose not to accept it. For example, a recent study 
showed that although about 50 percent of individuals transitioning 
from cash assistance to employment had access to employer coverage, 
only about one-third opted to participate in the employer-sponsored 
plan.[Footnote 15] The relatively low "take-up" rate is due largely to 
the high costs of many employer health plans. Transitioning workers, 
who commonly earn between $7 and $8 an hour, may simply be unable to 
afford their share of the premium, since their annual earnings range 
from 73 percent to 111 percent of the federal poverty level. (See 
table 1.) 

Table 1: Hourly Wages as a Percentage of the Federal Poverty Level for 
a Family of Three, 2002: 

Hourly wage: $5.15[A]; 
Hours per week: 30; 
Annual earnings: $8,034; 
Salary as a percentage of the federal poverty level: 53%. 

Hourly wage: $5.15[A]; 
Hours per week: 40; 
Annual earnings: $10,712; 
Salary as a percentage of the federal poverty level: 71%. 

Hourly wage: $7.00; 
Hours per week: 30; 
Annual earnings: $10,920; 
Salary as a percentage of the federal poverty level: 73%. 

Hourly wage: $7.00; 
Hours per week: 40; 
Annual earnings: $14,560; 
Salary as a percentage of the federal poverty level: 97%. 

Hourly wage: $8.00; 
Hours per week: 30; 
Annual earnings: $12,480; 
Salary as a percentage of the federal poverty level: 83%. 

Hourly wage: $8.00; 
Hours per week: 40; 
Annual earnings: $16,640; 
Salary as a percentage of the federal poverty level: 111%. 

[A] Represents the minimum wage, which was last increased on September 
1, 1997. 

Source: GAO analysis of salaries in relation to the 2002 federal 
poverty level of $15,020 for a family of 3. 

[End of table] 

States' Efforts Encouraged Use of Transitional Medicaid, but Not All 
Eligible Families Received Assistance: 

While the Medicaid statute provides families moving from welfare to 
work with up to 12 months of transitional Medicaid coverage, we have 
reported that certain states had obtained waivers from HCFA to extend 
the length of coverage provided, and that the share of eligible 
families that actually received this entitlement varied significantly 
by state. States offered from 1 to 3 years of transitional Medicaid 
assistance in 1999. In the several states that were able to provide 
data on participation in transitional Medicaid assistance, we found 
that participation rates among newly working Medicaid beneficiaries 
ranged from 4 to 94 percent. Several states had made efforts to 
facilitate beneficiaries' participation in transitional Medicaid. For 
example, nine states reported developing outreach and education 
materials to inform families and eligibility determination workers 
about transitional Medicaid assistance. While such approaches helped 
make transitional Medicaid more available, beneficiaries' failure to 
report income as required often resulted in their losing eligibility 
after the first 6 months. 

Length of Coverage and Program Participation Was Mixed Among States: 

States' implementation of transitional Medicaid coverage varied, 
resulting in differing lengths of time for which coverage was provided 
and differing rates of family participation. As of 1999, the most 
current national data reported, 10 states—Arizona, Connecticut, 
Delaware, Nebraska, New Jersey, Rhode Island, South Carolina, 
Tennessee, Utah, and Vermont—provided over 1 year of coverage, while 
the remaining states provided 1 year of coverage. (See fig. 4.) In the 
several states that were able to provide such data, transitional 
Medicaid participation rates ranged from about 4 percent of the 
families moving from cash assistance in one state to 94 percent of 
such cases in another. However, low participation rates in 
transitional Medicaid assistance did not always indicate that families 
had lost Medicaid coverage altogether. For example, officials in the 
state with a 4 percent participation rate said that most families 
losing cash assistance were still enrolled in Medicaid through other 
eligibility categories for low-income families. 

Figure 4: Number of Months States Provided Coverage for Transitional 
Medicaid Assistance, 1999: 

[Refer to PDF for image: map of the United States] 

12 months' eligibility (40 states and the District of Columbia): 
Alabama: 
Alaska: 
Arkansas: 
California: 
Colorado: 
District of Columbia: 
Florida: 
Georgia: 
Hawaii: 
Idaho: 
Illinois: 
Indiana: 
Iowa: 
Kansas: 
Kentucky: 
Louisiana: 
Maine: 
Maryland: 
Massachusetts: 
Michigan: 
Minnesota: 
Mississippi: 
Missouri: 
Montana: 
Nevada: 
New Hampshire: 
New Mexico: 
New York: 
North Carolina: 
North Dakota: 
Ohio: 
Oklahoma: 
Oregon: 
Pennsylvania: 
South Dakota: 
Texas: 
Virginia: 
Washington: 
West Virginia: 
Wisconsin: 
Wyoming: 

24 months' eligibility (7 states): 
Arizona: 
Connecticut: 
Delaware: 
Nebraska: 
New Jersey: 
South Carolina: 
Utah: 

Other time period for eligibility (3 states): 
Rhode Island[A]: 
Tennessee[A]: 
Vermont:  

[A] Rhode Island and Tennessee provided 18 months' eligibility, and 
Vermont provided 36 months. 

Source: Department of Health and Human Services, Administration for 
Children and Families, Annual Report to Congress (Washington, D.C.: 
1999). 

[End of figure] 

States' Initiatives Facilitated Beneficiary Use of Transitional 
Medicaid Assistance, but Not All Families Maintained Coverage: 

We found that several states had initiatives in place to facilitate 
beneficiaries' access to transitional Medicaid assistance. The 
following are examples of such initiatives. 

* Nine states reported developing specific materials regarding 
transitional Medicaid assistance in easy-to-understand language for 
eligibility determination workers and beneficiaries. 

* One state revised its computer systems so that eligible families 
leaving cash assistance due to employment were automatically 
transferred to transitional Medicaid assistance coverage. In addition, 
this state's eligibility workers randomly contacted families who were 
leaving cash assistance to determine their health insurance status and 
to ensure that they obtained the additional months of Medicaid 
coverage for which they were eligible. As a result of this state's 
efforts, about 70 percent of the families leaving cash assistance or 
Medicaid received transitional Medicaid coverage. 

* Officials in three other states encouraged increased participation 
in transitional Medicaid assistance by contacting families with closed 
cash assistance cases to determine whether these families had obtained 
the additional months of Medicaid coverage if so entitled. One of 
these states, which also provided 24 months of transitional Medicaid 
assistance, reported that 77 percent of eligible families were 
receiving this benefit. 

However, even with such successful enrollment efforts, many families 
did not receive the full transitional Medicaid assistance benefits 
because they failed to periodically report their income as required. 
The Medicaid statute requires that beneficiaries report their income 
three times during the 12 months of transitional Medicaid assistance: 
once in the first 6-month period and twice in the second 6-month 
period. Failure to report income status in either of these 6-month 
periods results in termination of transitional Medicaid benefits. 

In 1999, we reported that families' failure to periodically submit 
required income reports often resulted in their not receiving 
transitional Medicaid coverage for the full period of eligibility. For 
example, officials in three states we reviewed told us that families 
typically received only 6 months of transitional Medicaid, generally 
because they failed to submit the required income reports—and not 
because of a change in income that made them ineligible for 
transitional Medicaid. In contrast, the state that had a 94 percent 
participation rate for transitional Medicaid offered coverage for 24 
months and had received HCFA approval to waive the periodic income-
reporting requirements. Overall, we found that states that waived 
income-reporting requirements reported higher participation rates than 
states that did not. 

In implementing public programs such as Medicaid, difficult trade-offs 
often exist between ease of enrollment for eligible individuals and 
program integrity efforts to ensure that benefits are provided only to 
those who are eligible. The experience of some states in easing 
statutory periodic income-reporting requirements proved successful in 
increasing participation for eligible beneficiaries. In view of 
concerns that beneficiary reporting requirements were limiting the use 
of the transitional Medicaid benefit, HCFA proposed legislation to 
eliminate beneficiary reporting requirements for the full period of 
eligibility (up to 1 year). To date, no action has been taken on this 
proposal. In our earlier report we recommended that the Congress may 
wish to consider allowing states to lessen or eliminate periodic 
income-reporting requirements for families receiving transitional 
Medicaid assistance, provided that states offer adequate assurances 
that the benefits are extended to those who are eligible. Precedent 
for a full year of coverage in Medicaid has been provided in other 
aspects of the Medicaid program. For example, the Balanced Budget Act 
of 1997 allowed states to guarantee a longer period of Medicaid 
coverage for children, such as 12 months, regardless of changes in a 
family's financial status.[Footnote 16] As of July 2000, 14 states had 
implemented this option.[Footnote 17] A similar approach could 
facilitate uninterrupted health insurance coverage for families that 
are moving from cash assistance to the workforce. 

Concluding Observations: 

Transitional Medicaid assistance can play an important role in helping 
individuals move successfully from cash assistance to employment, thus 
further advancing the goals of welfare reform. Without access to 
Medicaid coverage, these individuals, who are often in low-wage jobs, 
might have limited or no alternative health coverage and join the 
ranks of the uninsured. While our earlier work demonstrated that 
states varied in the extent to which families were participating in 
transitional Medicaid assistance, states that worked to minimize 
obstacles—particularly by reducing or eliminating income-reporting 
requirements—had higher participation rates. Removing periodic 
reporting requirements would help further increase the use of 
transitional Medicaid assistance, provided that sufficient safeguards 
remained in place to ensure that only qualified individuals receive 
the benefits. 

Mr. Chairman, this concludes my prepared statement. I will be happy to 
answer any questions that you or Members of the Subcommittee may have. 

Contacts And Acknowledgment: 

For more information regarding this testimony, please contact William 
J. Scanlon at (202) 512-7114 or Carolyn L. Yocom at (202) 512-4931. 
Susan Anthony, Karen Doran, JoAnn Martinez-Shriver, and Behn Miller 
made key contributions to this statement. 

[End of section] 

Related GAO Products: 

Welfare Reform: States Provide TANF-Funded Work Support Services to 
Many Low-Income Families Who Do Not Receive Cash Assistance. GAO-02-
615T. Washington, D.C.: April 10, 2002. 

Health Insurance: Proposals for Expanding Private and Public Coverage. 
GAO-01-481T. Washington, D.C.: March 15, 2001. 

Welfare Reform: Moving Hard-to-Employ Recipients Into the Workforce. 
GAO-01-368. Washington, D.C.: March 15, 2001. 

Welfare Reform: Progress in Meeting Work-Focused TANF Goals. GAO-
01522T. Washington, D.C.: March 15, 2001. 

Health Insurance: Characteristics and Trends in the Uninsured 
Population. GAO-01-507T. Washington, D.C.: March 13, 2001. 

Medicaid Enrollment: Amid Declines, State Efforts to Ensure Coverage 
After Welfare Reform Vary. GAO/HEHS-99-163. Washington, D.C.: 
September 10, 1999. 

[End of section] 

Footnotes: 

[1] The Family Support Act of 1988 created the transitional Medicaid 
assistance program as § 1925 of the Social Security Act, and was 
scheduled to expire on September 30, 1998. See Pub. L. No. 100-485, § 
303(a), 102 Stat. 2343, 2385, and 2391. The Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996 extended states' 
obligation to provide transitional Medicaid assistance through 2001. 
See Pub. L. No. 104-193, § 114(c), 110 Stat. 2105, 2180. The Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
extended the sunset provision to September 30, 2002. See Pub. L. No. 
106-554, Appendix F, § 707, 114-2763A-463, 114-2763A-577. 

[2] See The Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996, Pub. L. No. 104-193, § 103, 110 Stat. 
2105, 2137. 

[3] See U.S. General Accounting Office, Welfare Reform: States Provide 
TANF-Funded Work Support Services to Many Low-Income Families Who Do 
Not Receive Cash Assistance, [hyperlink, 
http://www.gao.gov/products/GAO-02-615T] (Washington, D.C.: April 10, 
2002). 

[4] See GAO related products at the end of this statement. 

[5] See U.S. General Accounting Office, Medicaid Enrollment: Amid 
Declines, State Efforts to Ensure Coverage After Welfare Reform Vary, 
GAO/HEHS-99-163 (Washington, D.C.: Sept. 10, 1999). In this report, we 
recommended that the Congress consider allowing states to lessen or 
eliminate requirements for beneficiary income reporting in 
transitional Medicaid assistance. We also recommended that the 
Administrator of the Health Care Financing Administration (HCFA) (1) 
determine the extent to which transitional Medicaid is reaching the 
eligible population and (2) provide states with guidance regarding 
best approaches for implementing this benefit. Since that time, HCFA, 
now the Centers for Medicare and Medicaid Services, has acted on the 
second recommendation but not the first. 

[6] States administer Medicaid within broad federal guidelines that 
specify the categories of low-income individuals that states must 
cover and the categories that are optional. However, not all low-
income individuals are eligible for Medicaid; for example, most 
childless adults are not eligible. In fiscal year 1999 (the most 
recent enrollment data available), Medicaid financed coverage for 
nearly 41 million individuals. 

[7] Prior to welfare reform, some states received waiver authority 
under § 1115 of the Social Security Act to extend Medicaid benefits 
beyond the 12 months allotted in § 1925 of the Social Security Act. 
After August 22, 1996, this waiver became subject to a budget 
neutrality test, which meant that the cost of extending coverage had 
to be offset by transitional coverage. 

[8] In 2002, the federal poverty level for a family of three was 
$15,020, or about $1,252 per month. 

[9] [hyperlink, http://www.gao.gov/products/GAO/HEHS-99-163], 
September 10, 1999. 

[10] [hyperlink, http://www.gao.gov/products/GAO-02-615T], April 10, 
2002. 

[11] See U.S. General Accounting Office, Welfare Reform: Moving Hard-
to-Employ Recipients Into the Workforce, [hyperlink, 
http://www.gao.gov/products/GAO-01-368] (Washington, D.C.: March 15, 
2001). 

[12] Mercer/Foster Higgins, National Survey of Employer-sponsored 
Health Plans 2001: Report on Survey Findings (New York: William H. 
Mercer, 2002), p. 13. The Mercer/Foster Higgins survey is 
representative of all employers in the United States with at least 10 
employees. 

[13] The Health Insurance Portability and Accountability Act of 1996 
(HIPAA) guarantees some individuals leaving employer-sponsored group 
health plans access to continued coverage or to a product in the 
individual market. See 29 USC § 1181 (2000), 42 USC § 300gg (Supp. II 
1996). Although individuals leaving public insurance programs, such as 
Medicaid, are not eligible for this HIPAA protection, they may obtain 
coverage in most states from high-risk pools that provide coverage for 
applicants denied individual coverage due to health status. These 
policies tend to cost 25 to 100 percent more than rates charged to 
healthy individuals. 

[14] Georgetown University Institute for Health Care Research and 
Policy and K.A. Thomas and Associates, How Accessible is Individual 
Health Insurance for Consumers in Less-Than-Perfect Health? 
(Washington D.C.: The Kaiser Family Foundation, 2001), [hyperlink, 
http://www.kff.org] (downloaded on August 14, 2001). The authors 
examined underwriting treatment of hypothetical applicants by 19 
insurers in eight markets around the country. 

[15] Gregory Acs, Pamela Loprest, and Tracy Roberts, Final Synthesis 
Report of Findings from ASPE "Leavers" Grant (Washington, D.C.: The 
Urban Institute, 2001). To conduct studies of families that had left 
welfare, the Office of the Assistant Secretary for Planning and 
Evaluation of the Department of Health and Human Services awarded 
competitive grants to select states and large counties in September 
1998. This report synthesizes the findings from 15 of these studies. 

[16] See Pub. L. No. 105-33, § 4731, 11 Stat. 251, 519 (1997). 
According to an official from the Centers for Medicare and Medicaid 
Services (CMS), the transitional Medicaid assistance reporting 
requirements override other Medicaid provisions, such as continuous 
eligibility. Thus, according to CMS' interpretation, a state's use of 
continuous eligibility does not eliminate the periodic income-
reporting requirements for transitional Medicaid assistance. 

[17] Donna Cohen Ross and Laura Cox, Making It Simple: Medicaid for 
Children and CHIP Income Eligibility Guidelines and Enrollment 
Procedures, Individual State Profiles (Washington, D.C.: The Kaiser 
Commission on Medicaid and the Uninsured, October 2000). 

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