Cash and Noncash Benefits for Persons with Limited Income: Eligibility Rules, Recipient and Expenditure Data, FY2000-FY2002

Congressional research reportNov 25, 2003

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Order Code RL32233

CRS Report for Congress

Received through the CRS Web

Cash and Noncash Benefits for Persons with

Limited Income: Eligibility Rules, Recipient and

Expenditure Data, FY2000-FY2002

November 25, 2003

Compiled by: /name redacted/

Specialist in Income Maintenance

Domestic Social Policy Division

Congressional Research Service ˜ The Library of Congress

Cash and Noncash Benefits for Persons With

Limited Income: Eligibility Rules, Recipient and

Expenditure Data, FY2000-FY2002

Summary

More than 80 benefit programs provide aid — in cash and noncash form — that

is directed primarily to persons with limited income. Such programs constitute the

public “welfare” system, if welfare is defined as income-tested or need-based

benefits. This definition omits social insurance programs like Social Security and

Medicare.

Income-tested benefit programs in FY2002 cost $522.2 billion: $373.2 billion

in federal funds and $149 billion in state-local funds (Table 1). Welfare spending

represented almost 19% of all federal outlays, with medical aid accounting for 8%

of the budget. Total welfare spending equaled 5% of the gross domestic product and

set a new record high, up $45.3 billion (9.5%) from the previous peak of FY2001.

In current dollars, spending increased during the year for all forms of aid except jobs

and training. Higher medical spending accounted for $32.8 billion of the net

increase, and 54 cents of every welfare dollar went for medical assistance. Expressed

in constant FY2002 dollars (Table 2), welfare spending increased by 7.9% from the

2001 level.

The composition of welfare spending differed by level of government (Tables

3 and 4). Medical aid consumed 80% of state-local welfare funds, but 43.9% of

federal welfare dollars.

Most income-tested programs provide benefits, in the form of cash, goods, or

services, to persons who make no payment and render no service in return. However,

in the case of the job and training programs and some educational benefits, recipients

must work or study. Further, the block grant program of Temporary Assistance for

Needy Families (TANF) requires adults to start work after a period of enrollment, the

food stamp program imposes work and training requirements, and public housing

requires residents to engage in “self-sufficiency” activities or perform community

service. Finally, the Earned Income Tax Credit (EITC) is available only to workers.

An unduplicated count of welfare beneficiaries is not available. Enrollment in

TANF and food stamps remained far below 1994/1995 peak levels during 20002002, but Medicaid enrollment set a new record high. Average 2002 monthly

numbers: Food stamps, 20.2 million; TANF, 5.1 million; and Supplemental Security

Income (SSI), 6.9 million. During the year 50.9 million persons received Medicaid

services, and in 2001, EITC payments went to an estimated 16.8 million tax filers.

Census Bureau data indicate that 5.4 million families with children were poor in

2002 before receiving cash aid from TANF, General Assistance (GA) or the EITC,

compared with 6.7 million in 1996 (last full year of the pre-TANF welfare program).

Among these families, the EITC was received by 53.7% of those with a female head

and by 71.7% of those with a male present (Figure 3).

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Trends in Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Composition of Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Noncitizen Eligibility for Major Federal Benefits . . . . . . . . . . . . . . . . . . . . . . . . 12

Aid Received by Poor Families With Children . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Income Tests of the Benefit Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Medical Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

1. Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

2. Medical Care For Veterans Without Service-Connected Disability . . . . . . . . 39

3. State Children’s Health Insurance Program (SCHIP) . . . . . . . . . . . . . . . . . . . 42

4. General Assistance (Medical Care Component) . . . . . . . . . . . . . . . . . . . . . . . 48

5. Indian Health Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

6. Consolidated Health Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

7. Maternal and Child Health Services Block Grant . . . . . . . . . . . . . . . . . . . . . . 54

8. Title X Family Planning Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

9. Medical Assistance to Refugees, Asylees, Other Humanitarian Cases . . . . . . 57

Cash Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

10. Supplemental Security Income (SSI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

11. Earned Income Tax Credit (EITC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

12. Temporary Assistance for Needy Families (TANF) . . . . . . . . . . . . . . . . . . . 67

13. Foster Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

14. Child Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

15. General Assistance (Nonmedical Care Component) . . . . . . . . . . . . . . . . . . 77

16. Pensions for Needy Veterans, their Dependents, and Survivors . . . . . . . . . . 81

17. Adoption Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

18. Dependency and Indemnity Compensation (DIC) and Death

Compensation for Parents of Veterans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

19. General Assistance to Indians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

20. Cash Assistance to Refugees, Asylees, Other Humanitarian Cases . . . . . . . 87

Food Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

21. Food Stamps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

22. School Lunch Program (Free and Reduced-Price Components) . . . . . . . . . . 96

23. Special Supplemental Nutrition Program for Women, Infants, and

Children (The WIC Program) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

24. Child and Adult Care Food Program (Lower-Income Components) . . . . . 100

25. School Breakfast Program (Free and Reduced-Price Components) . . . . . . 103

26. Nutrition Program for the Elderly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

27. The Emergency Food Assistance Program (TEFAP) . . . . . . . . . . . . . . . . . 107

28. Summer Food Service Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

29. Commodity Supplemental Food Program (CSFP) . . . . . . . . . . . . . . . . . . . 110

30. Food Distribution Program on Indian Reservations (FDPIR) . . . . . . . . . . . 112

31. Farmers’ Market Nutrition Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

32. Special Milk Program (Free Segment) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Housing Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

33. Section 8 Low-Income Housing Assistance . . . . . . . . . . . . . . . . . . . . . . . . 119

34. Low-Rent Public Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

35. Rural Housing Loans (Section 502) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

36. Home Investment Partnerships Program (HOME) . . . . . . . . . . . . . . . . . . . 127

37. Housing For Special Populations (Elderly and Disabled) . . . . . . . . . . . . . . 129

38. Rural Rental Assistance Payments (Section 521) . . . . . . . . . . . . . . . . . . . . 132

39. Section 236 Interest Reduction Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 133

40. Housing Opportunities for People with AIDS Program (HOPWA) . . . . . . 135

41. Rural Rental Housing Loans (Section 515) . . . . . . . . . . . . . . . . . . . . . . . . 137

42. Rural Housing Repair Loans and Grants (Section 504) . . . . . . . . . . . . . . . 139

43. Farm Labor Housing Loans (Section 514) and Grants (Section 516) . . . . . 140

44. Section 101 Rent Supplements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

45. Rural Housing Self-Help Technical Assistance Grants (Section 523)

and Rural Housing Site Loans (Sections 523 and 524) . . . . . . . . . . . . . . . 144

46. Indian Housing Improvement Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

47. Section 235 Homeownership Assistance for Low-Income Families . . . . . 148

48. Rural Housing Preservation Grants (Section 533) . . . . . . . . . . . . . . . . . . . 150

49. Homeownership and Opportunity for People Everywhere (HOPE)

Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

Educational Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

50. Federal Pell Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

51. Head Start . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

52. Subsidized Federal Stafford and Stafford/Ford Loans . . . . . . . . . . . . . . . . 160

53. Federal Work-Study Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

54. Federal TRIO Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

55. Supplemental Educational Opportunity Grants . . . . . . . . . . . . . . . . . . . . . 167

56. Title 1 Migrant Education Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

57. Perkins Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

58. Leveraging Educational Assistance Partnerships (LEAP) . . . . . . . . . . . . . 172

59. Health Professions Student Loans and Scholarships . . . . . . . . . . . . . . . . . 174

60. Fellowships for Graduate and Professional Study . . . . . . . . . . . . . . . . . . . 177

61. Migrant High School Equivalency Program (HEP) . . . . . . . . . . . . . . . . . . 180

62. College Assistance Migrant Program (CAMP) . . . . . . . . . . . . . . . . . . . . . 181

63. Close Up Fellowships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

64. Child Care and Development Block Grant . . . . . . . . . . . . . . . . . . . . . . . . . 184

65. TANF Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187

66. Social Services Block Grant (Title XX) . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

67. TANF Child Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190

68. Homeless Assistance Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192

69. Community Services Block Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194

70. Legal Services (LSC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196

71. Social Services for Refugees, Asylees, Other Humanitarian Cases . . . . . . 198

72. Emergency Food and Shelter Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200

Job and Training Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

73. TANF Work Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203

74. Job Corps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

75. Youth Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207

76. Adult Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

77. Senior Community Service Employment Program (SCSEP) . . . . . . . . . . . 211

78. Welfare-to-Work Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213

79. Food Stamp Employment and Training Program . . . . . . . . . . . . . . . . . . . . 215

80. Foster Grandparents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217

81. Senior Companions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218

82. Targeted Assistance to Refugees, Asylees, Other Humanitarian Cases . . . 219

83. Native Employment Works Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

Energy Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222

84. Low-Income Home Energy Assistance (LIHEAP) . . . . . . . . . . . . . . . . . . . 223

85. Weatherization Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225

List of Figures

Figure 1. Expenditures for Income-Tested Benefits, FY1975-FY2002

(millions of constant 2002 dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Figure 2. Composition of Income-Tested Benefits . . . . . . . . . . . . . . . . . . . . . . . 11

Figure 3. Cash and Noncash Welfare Benefits Received by Poor Families

with Children, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

List of Tables

Table 1. Expenditures of Major Need-Tested Benefit Programs, by Form

of Benefit and Level of Government, FY2000-FY2002 . . . . . . . . . . . . . . . . 3

Table 2. Total Expenditures for Need-Based Benefits, FY1968-FY2002 . . . . . . 4

Table 3. Federal Spending for Income-Tested Benefits by Form of Benefit,

FY1968-FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Table 4. State-Local Spending for Income-Tested Benefits by Form of

Benefit, FY1968-FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Table 5. Total Spending for Income-Tested Benefits by Form of Benefit,

FY1968-FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Table 6. Outlay Trends by Form of Benefits, FY1978-FY2002 . . . . . . . . . . . . . 11

Table 7. Income Eligibility Tests Used by Benefit Programs . . . . . . . . . . . . . . . 16

Table 8. Bureau of the Census Poverty Thresholds for 2002 . . . . . . . . . . . . . . . 24

Table 9. 2003 Federal Poverty Income Guidelines . . . . . . . . . . . . . . . . . . . . . . . 24

Table 10. Eligibility Levels for Free and Reduced Price Meals for the

Period of July 1, 2003-June 30, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Table 11. Lower Living Standard Income Level (LLSIL) for a Family of

Four - Effective May 30, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Table 12. EITC Parameters for Tax Years 2001-2003 . . . . . . . . . . . . . . . . . . . . 66

Table 13. Maximum Monthly Food Stamp Allotments (October 2003

through September 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Table 14. Need-Based Benefits: Expenditures and Enrollment Data,

by Programs and Form of Benefits FY2000-FY2002 . . . . . . . . . . . . . . . . 227

Contributors

This alphabetical list of programs provides the names of Congressional Research

Service (CRS) staff members who contributed program data and rules to this report. Each

is a member of the Domestic and Social Policy Division of CRS except for (name redacted)

(Resources, Science, and Industry Division).

Adoption assistance

Adult activities

Cash assistance to refugees, asylees, entrants, others

Chapter I migrant education program

Child and adult care food program

Child care and development block grant

Child tax credit

College assistance migrant program (CAMP)

Commodity supplemental food program

Community services block grant program

Consolidated health centers

Close up fellowships

Dependency and indemnity compensation (DIC) for parents of veterans

Earned income tax credit (EITC)

Emergency food and shelter program

Farmers’ market nutrition programs

Farm labor housing loans and grants

Federal Pell grants

Federal TRIO programs

Federal work-study program

Fellowships for graduate and professional study

Food distribution program on Indian reservations

Food stamps

Food stamp employment and training program

Foster care

Foster grandparents

General assistance (medical care and cash components)

General assistance to Indians

Head start

Health professions student loans and scholarships

Home investment partnerships (HOME)

Homeless assistance grants

Homeownership and opportunity for people everywhere (HOPE)

Housing for special populations (elderly/disabled)

Housing opportunities for people with AIDS (HOPWA)

Indian health services

Indian housing improvement grants

Job corps

Legal services

Leveraging educational assistance partnerships (LEAP)

Low-income home energy assistance program (LIHEAP)

(name redacted)

Laura Monagle

(name redacted)

Laura Monagle

(name redacted)

Laura Monagle

(name redacted)

Garrine Laney

Sharon Coleman

Laura Monagle

Dennis Snook

(name redacted)

Laura Monagle

(name redacted)

Laura Monagle

(name redacted)

Sharon Coleman

(name redacted)

Richard Bourdon

(name redacted)

Donna Vogt

(name redacted)

Laura Monagle

(name redacted)

Laura Monagle

(name redacted)

Low-rent public housing

Maternal and child health services block grant

Medicaid

Medical assistance to refugees, aslyees, others

Medical care for veterans without service- connected disability

Migrant high school equivalency program (HEP)

Native employment works program

Nutrition program for the elderly

Pensions for needy veterans, their dependents and survivors

Perkins loans

Rural housing loans (Section 502)

Rural housing repair loans and grants (Sec. 504)

Rural rental assistance (Section 521)

Rural rental housing loans (Section 515)

Rural housing preservation grants (Section 533)

Rural housing self-help technical assistance grants (Section 523) and rural

housing site loan (Sections 23 & 524)

School breakfast program (free/reduced price meals)

School lunch program (free/reduced price meals)

Section 8 low-income housing assistance

Section 101 rent supplements

Section 235 homeownership assistance

Section 236 interest reduction payments

Senior community service employment program

Senior companions

Social services block grant (Title XX)

Social services for refugees, aslyees, entrants, others

Special milk program

Special supplemental food program for women, infants, and children (WIC)

State child health insurance program (SCHIP)

Subsidized federal Stafford and Stafford/Ford loans

Summer food service

Supplemental educational opportunity grants

Supplemental security income (SSI)

Temporary assistance for needy families (TANF)

TANF child care

TANF services

TANF work activities

Targeted assistance to refugees, asylees, others

The emergency food assistance program

Title X family planning services

Weatherization assistance

Welfare-to-work grants

Youth activities

(name redacted) prepared

Figure 3.

(name redacted)

Sharon Coleman

Lisa Herz

(name redacted)

Dennis Snook

Laura Monagle

(name redacted)

Carol O’Shaughnessy

Dennis Snook

Laura Monagle

(name redacted)

Carol O’Shaughnessy

Laura Monagle

(name redacted)

Evelyne Baumrucker

Laura Monagle

(name redacted)

Laura Monagle

Alexa Matthews

(name redacted)

Sharon Coleman

(name redacted)

Laura Monagle

Cash and Noncash Benefits for Persons

With Limited Income: Eligibility Rules,

Recipient and Expenditure Data,

FY2000-FY2002

Introduction

More than 80 benefit programs provide cash and noncash aid that is directed

primarily to persons with limited income. These benefit programs cost $522.2 billion

in FY2002, a record high. This sum was up $45.3 billion (9.5%) from the previous

peak of FY2001, and it equaled 5% of the gross domestic product (GDP). Federal

funds provided 71.5% of the total. Higher medical spending accounted for $32.8

billion of the year’s net increase, and 54 cents out of every welfare dollar went for

medical benefits. Federal welfare outlays represented 18.6% of the federal budget,

with 8% attributed to medical assistance. See Table 1 for FY2000-FY2002

summary.

After adjustment for price inflation, 2002 welfare spending was up $38.2 billion

(7.9%) from that of 2001, the previous peak. Real spending increases (2002 dollars)

were dominated by medical assistance (up $29.1 billion). Other increases were:

education benefits,$ 4.1 billion; food benefits, $3.3 billion; housing, $2.3 billion; and

services, $1.2 billion. Outlays for cash aid dropped by $1.2 billion; and for jobs and

training, by $0.5 billion.

Spending for “human capital” programs (ones providing education and

employment and training activities) accounted for 7.3% of all welfare dollars

(compared with 19.6% for cash assistance).

This report consists of a catalog of 85 need-based programs.1 For each program

the report provides the funding formula, eligibility requirements, and benefit levels.

At the back of the report, summary Table 14 gives expenditure data (federal and

state/local) and recipient data for FY2000-FY2002 by program. Two programs are

new to this series of reports: farmers’ market nutrition programs (formerly treated

as a component of the food stamp program) and housing assistance for special

populations — elderly and disabled. Historical tables have been revised to account

for these additions.

The number of programs in this report is somewhat arbitrary. For example, General

Assistance, listed under both cash and medical aid, could be viewed as a single program.

CRS-2

Most of these programs base eligibility on individual, household, or family

income, but some use group or area income tests (see Table 7 — page 16); and a

few offer help on the basis of presumed “need.” Most provide income “transfers.”

That is, they transfer income, in the form of cash, goods, or services, to persons who

make no payment and render no service in return. However, in the case of the job

and training programs and some educational benefits, recipients must work or study

for wages, training allowances, stipends, grants, or loans. Further, the TANF block

grant program requires adults to commence work (defined by the state) after a period

of enrollment, the Food Stamp program imposes work and training requirements,

and public housing programs require recipients to engage in “self-sufficiency”

activities or to perform community service. Finally, the Earned Income Tax Credit

(EITC.) is available only to workers.

This report excludes income maintenance programs that are not income-tested,

including social insurance and many veterans’ benefits, and all but two tax-transfer

programs. Thus, it excludes Social Security cash benefits, unemployment

compensation, and Medicare. Outlays for the Old-Age, Survivors, and Disability

Insurance programs (Social Security cash benefit programs) in FY2002 totaled $456

billion, financed primarily from payroll tax collections. The report also excludes

payments, even though financed with general revenues, that may be regarded as

“deferred compensation,” such as veterans’ housing benefits and medical care for

veterans with a service-connected disability.

The report includes two tax-transfer programs, the EITC for low-income

workers with children and the child tax credit. The EITC reduces the taxes of

working families with gross income below specified limits and makes direct

payments (“refunds”) to those whose income is below the tax threshold or whose tax

liability is smaller than their credit. Before the 2001 tax law, the child tax credit was

refundable only to some taxpayers with three or more children, but it now is

refundable (up to certain limits) for those with earnings above $10,000. This report

treats the direct payment component of these credits, but not the reduction in tax

liability, as a welfare expenditure. Other tax benefits are excluded from the report

because they are not refundable (make no direct payments). Further, in most cases

they impose no income test for eligibility. Examples of these other tax benefits are

the deductibility of mortgage interest and property taxes on owner-occupied homes

(equivalent to outlays of $63.3 billion and $21.8 billion, respectively, in 2002).

These tax transfers increase families’ disposable income by reducing their tax

liability and are known as “tax expenditures.” (The standard deduction and personal

exemption in the income tax code also decrease families’ taxable income.)

CRS-3

Table 1. Expenditures of Major Need-Tested Benefit Programs, by Form of Benefit and Level of Government,

FY2000-FY2002

(millions of current dollars)

Medical care

Cash aid

Food benefits

Housing aid

Education

Services

Jobs/training

Energy aid

Total

Federal expenditures

FY2000

FY2001

FY2002

130,461

145,076

163,760

74,974

82,600

82,476

31,983

33,177

36,824

30,656

32,070

34,861

14,936

24,401

28,783

14,278

16,566

17,525

6,392

6,978

6,893

1,979

2,009

2,030

305,659

342,877

373,152

State-local expenditures

FY2000

FY2001

FY2002

94,411

104,594

118,708

19,433

19,242

19,681

2,165

2,313

2,482

509

750

705

1,372

1,617

1,701

3,776

4,130

4,690

1,146

1,222

915

118

122

122,897

133,986

149,004

Source: Table prepared by the Congressional Research Service (CRS).

Note: Program data on which this table is based are found in summary table (Table 14) at the back of the report.

Total expenditures

FY2000

FY2001

FY2002

224,872

249,670

282,468

94,407

101,842

102,157

34,148

35,490

39,306

31,165

32,820

35,566

16,308

26,018

30,484

18,054

20,696

22,215

7,538

8,200

7,808

2,064

2,127

2,152

428,556

476,863

522,156

CRS-4

Trends in Spending

Annual Spending Data

Total expenditures on cash and noncash welfare programs multiplied many

times between 1968 and 2002 (Table 2). Even after allowance for price inflation,

spending sextupled (rising 523%) over the 34 years, a period when the U.S.

population rose by an estimated 43%.2 Measured in constant 2002 dollars,3 the

annual rate of growth in spending over the whole period was 5.5%. However, the

growth pattern was uneven. Real spending almost tripled in the first 10 years,

declined in some years (1982, 1996. and 1997), and in the last 5 years rose at an

annual rate of 3.9%. Total per capita welfare spending grew in real terms (constant

FY2002 dollars) from $416 in FY1968 to a peak above $1,800 in FY2002.

Table 2. Total Expenditures for Need-Based Benefits,

FY1968-FY2002

(in millions of dollars)

Fiscal year

1968

1973

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

Federal

current

dollars

11,406

27,294

40,208

50,506

56,187

64,432

71,336

81,403

89,408

90,543

95,495

100,837

107,267

109,476

115,608

126,098

136,254

153,673

180,494

211,121

227,325

250,405

262,905

268,823

Total spending

State-local

current

Constant

dollars

Current dollars

dollars

4,710

16,116

83,861

10,054

37,348

153,493

14,753

54,961

185,940

16,990

67,496

214,820

18,892

75,079

225,174

20,151

84,583

236,991

21,304

92,640

235,282

24,633

106,036

237,093

29,045

118,453

238,425

31,706

122,249

229,345

33,982

129,477

234,471

36,191

137,028

238,350

38,230

145,497

244,087

40,811

150,287

246,077

43,364

158,972

253,071

46,580

172,678

263,990

51,587

187,841

274,145

61,065

214,738

298,497

73,933

254,427

336,689

88,146

299,267

384,425

88,683

316,008

393,991

102,421

352,826

428,633

108,210

371,115

438,553

107,213

376,036

432,261

Based on the resident U.S. population.

Current dollars were translated into FY2002 constant value dollars by use of the Consumer

Price Index (CPI) for all urban consumers.

CRS-5

Fiscal year

1997

1998

1999

2000

2001

2002

Federal

current

dollars

274,980

280,965

291,798

305,659

342,877

373,152

Total spending

State-local

current

Constant

dollars

Current dollars

dollars

110,312

385,292

431,398

114,554

395,519

437,997

117,389

409,187

442,318

122,897

428,556

448,985

133,986

476,863

484,005

149,004

522,156

Source: Table prepared by the Congressional Research Service (CRS). FY1968 and FY1973 data

are from: Income Security for Americans: Recommendations of the Public Welfare Study. Report

of the Subcommittee on Fiscal Policy of the Joint Economic Committee. December 5, 1974. Table

4, p. 28 of Joint Economic Committee study, (1968 federal total has been increased by $54 million

to correct a typographical error in that table, and the 1973 federal total has been increased by $101

million to include Title X family planning, previously omitted from this report series). Data for

FY1975-FY1999 are from previous editions of this report (revised to incorporate public housing

capital fund costs, to account for new estimates of some program outlays, and to provide historical

data for some newly added programs ). Data for FY2000-FY2002 are from Table 1 of this report.

Figure 1 shows the course of expenditures for income-tested benefits from

FY1975-FY2002. The upper line shows total real spending (federal and state-local

spending); the bottom line shows state-local spending alone; the space between

represents federal spending. Throughout this period federal expenditures accounted

for more than 70% of the total. The federal share rose above 76% in 1978-1980, then

began a general decline. In the 1993-2002 decade it averaged 71.4%.

Figure 1. Expenditures for Income-Tested Benefits, FY1975-FY2002

(millions of constant 2002 dollars)

600,000

500,000

400,000

300,000

Total

200,000

State-local

100,000

1975

1980

1985

1990

1995

Source: Figure prepared by the Congressional Research Service (CRS)

2000

CRS-6

Major Welfare Policy Changes (1968-2002). During 1968-1976,

Congress liberalized some old welfare programs and established new ones. Some of

the major expansions follow. Effective in 1969, Congress gave a work incentive

bonus to all mothers who received Aid to Families with Dependent Children (AFDC)

checks; the bonus, virtually repealed in late 1981, was the right to a welfare

supplement even after their earnings rose above the state standard of need. In 1969,

minimum rents for public housing were abolished (reinstituted, at a lower level, in

1974). By 1970 amendment, the Food Stamp program was converted into a federal

income guarantee in participating counties. By 1972 amendment, basic educational

opportunity grants were adopted for all needy college students (extended to “middle income” students by 1978 law and renamed Pell grants in 1980). In 1972, effective

in 1974, a federal cash income guarantee — Supplemental Security Income (SSI) —

was enacted for the aged, blind, and disabled, and Congress established the Special

Supplemental Food Program for Women, Infants, and Children (WIC). Effective in

1974, food stamps were extended to all counties, providing a national income

guarantee in the form of food stamps. In 1975, a rebatable tax credit was adopted for

low-income workers with children.

In 1981, Congress moved to restrict eligibility for some programs and to lower

some benefits. For example, it imposed gross income eligibility limits for AFDC and

food stamps, reduced AFDC and food stamp benefits for families with earnings,

raised public housing rents, and reduced subsidies for school lunches. Effective in

FY1983, it temporarily reduced the food stamp guarantee. Thereafter, Congress

restored food stamp benefit rules for workers (1985), expanded Medicaid eligibility

for some needy persons not enrolled in cash welfare, sharply expanded the EITC (and

gave it inflation protection) (1986), and required all states to offer AFDC to needy

two-parent families in which the primary earner is unemployed or underemployed

(1988). It also established the Job Opportunities and Basic Skills (JOBS) program

for AFDC recipients and expanded federal matching funds for work and training and

for related child care. In 1993 (P.L. 103-66), Congress again expanded the EITC,

with the goal of ending poverty for a family of four with a parent who works full time

at the minimum wage (counting food stamps toward the antipoverty goal). At the

same time, it established a small EITC for childless workers.

In 1996, effective July 1, 1997 at the latest, Congress repealed AFDC, JOBS,

and Emergency Assistance, replacing them with a fixed annual block grant for

Temporary Assistance for Needy Families (TANF), through FY2002. It specified

that state TANF programs must condition eligibility on work, impose a lifetime limit

(5 years at most) on federally funded basic ongoing aid (traditional cash aid), and

achieve prescribed work participation rates for full funding. The 1996 law (P.L. 104193) also ended eligibility for most welfare benefits for non-citizens, added to the

Food Stamp program a stringent work requirement for childless persons aged 18-50,

and sharply expanded federal funding for child care, consolidating the funds in the

Child Care and Development Block Grant. In 1997, Congress added special welfareto-work grants to TANF (for FY1998 and FY1999 years only), moderated some of

the rules affecting non-citizens (see later section on Non-Citizen Eligibility for Major

Federal Benefits), established a new program of State-Children’s Health Insurance

(S-CHIP), and created a child tax credit (made refundable, by the 2001 tax act) for

taxpayers with more than $10,000 in annual earnings.

CRS-7

Spending Trends by Level of Government. Tables 3, 4, and 5 present

1968-2002 welfare spending in constant 2002 dollars, by form of benefit; Table 3

displays federal outlays, Table 4, corresponding state-local data, and Table 5, total

welfare spending amounts. Measured in constant 2002 dollars, federal spending for

income-tested benefits climbed from $59.4 billion in FY1968 to $373.2 billion in

FY2002, an increase of 529%. State-local welfare spending (constant dollars) rose

from $24.5 billion to $149 billion over the same period, an increase of 508%. Total

welfare outlays increased from $83.9 billion to $522.2 billion in these years, an

increase of 523%.

Cash aid was the leading form of federal welfare until 1980, when it was

overtaken by medical benefits. Two years later, in 1982, federal welfare spending

declined for all forms of aid except subsidized housing, in which case outlays

reflected earlier commitments, and education benefits. However, beginning in 1983,

real federal welfare outlays climbed steadily before declining in FY1996 and

FY1997. After 1979, state-local outlays rose in all years except 1993 and 1996.

Both federal and state-local outlays set successive new record highs in FY1998FY2002.

Medical Benefits. Since 1979, medical spending has accounted for more than

50 cents out of every welfare dollar spent by state-local governments. In 1989, the

share climbed to 60%, and since 1979 it has exceeded 70%. Medical assistance has

accounted for a much smaller share of federal welfare outlays: about 25% until the

mid-80s, above 30% in the 1990s, and an average of 43% in 2000-2002.

Welfare Share of Federal Budget. As a component of the federal budget,

welfare spending averaged 13% from 1975-1979, dropped to 12% in the 1980s, and

since 1994 has equaled or exceeded 17% each year. In 2001 it rose above 18%, and

in 2002 reached 18.6%.

Refundable Income Tax Credits. The earned income tax credit has

become the nation’s largest program of income-tested cash benefits for families with

children. In FY2002, the U.S. Treasury paid out $27.8 billion in refundable earned

income tax credits (chiefly for earners with children) and $5.7 billion in child tax

credits. The total almost equaled federal SSI payments for the aged, blind and

disabled ($33.9 billion) and was five times as much as cash assistance from TANF

federal dollars ($6.5 billion). (TANF expenditures for work activities, child care, and

other services exceeded TANF cash aid. See Table 14 — page 227.)

CRS-8

Table 3. Federal Spending for Income-Tested Benefits by Form of Benefit, FY1968-FY2002

(millions of constant FY2002 dollars)

Fiscal

year

1968

1973

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Medical

benefits

14,263

27,367

32,427

34,835

39,529

40,812

41,680

43,376

44,791

43,224

42,686

43,214

46,772

48,751

55,946

59,045

61,893

69,817

82,643

101,069

106,041

113,818

119,841

119,464

120,685

122,824

129,364

136,680

147,249

163,760

Cash aid

26,211

35,242

43,098

47,489

47,078

44,962

43,003

42,434

42,189

40,476

40,562

41,369

41,078

43,109

43,713

46,344

48,400

50,661

55,939

62,578

66,516

77,018

80,266

80,479

80,446

80,777

80,385

78,548

83,837

82,476

Food benefits

4,647

15,843

21,784

24,593

23,261

23,841

26,355

29,267

31,579

29,405

32,767

32,555

32,482

31,343

31,668

30,906

30,408

33,182

37,060

42,149

43,357

43,871

43,492

42,729

39,615

36,743

35,237

33,508

33,674

36,824

Source: Table prepared by the Congressional Research Service (CRS).

a. Rows may not add to total shown because of rounding.

Housing

benefits

4,074

15,519

17,190

18,657

21,336

21,880

24,440

24,520

24,820

25,043

25,611

25,258

27,372

24,505

22,261

24,060

25,466

27,394

28,454

31,815

34,513

34,224

34,729

35,362

35,431

34,544

32,094

32,117

32,550

34,861

Education

benefits

4,475

7,484

7,375

11,757

10,428

11,395

12,219

10,934

9,635

14,605

13,441

13,935

15,964

16,464

15,550

17,042

18,220

19,129

19,669

17,473

17,845

17,782

17,888

17,729

18,485

18,809

18,680

15,648

24,766

28,783

Jobs/

training

3,689

3,793

7,270

14,660

16,264

27,178

23,533

19,285

15,128

7,484

8,161

9,353

6,534

5,937

6,021

5,730

5,568

5,525

5,808

6,446

5,948

5,905

5,467

4,644

4,250

4,624

5,164

6,697

7,083

6,893

Services

1,993

6,925

6,885

8,667

9,711

9,697

9,278

8,351

7,776

5,821

5,983

5,982

5,957

5,551

5,742

6,863

6,525

5,677

6,889

7,503

7,291

9,260

7,104

7,256

7,472

11,426

13,085

14,959

16,814

17,525

Energy aid

906

765

668

3,848

4,044

3,805

3,705

3,733

3,793

3,594

3,138

2,789

2,377

2,230

2,390

2,164

1,913

2,329

1,892

1,355

1,503

1,392

1,415

2,073

2,039

2,030

Total aida

59,352

112,173

136,029

160,746

168,514

180,531

181,176

182,015

179,963

169,863

172,916

175,399

179,952

179,254

184,039

192,778

198,857

213,614

238,852

271,197

283,424

304,207

310,679

309,018

307,885

311,140

315,424

320,230

348,013

373,152

CRS-9

Table 4. State-Local Spending for Income-Tested Benefits by Form of Benefit, FY1968-FY2002

(millions of constant FY2002 dollars)

Medical

Fiscal

year

benefits

Cash aid

Food benefits

1968

10,725

12,957

1973

17,117

21,770

1975

22,366

22,840

1,891

1976

24,838

24,411

2,015

1977

26,660

24,518

2,438

1978

27,349

23,541

2,446

1979

28,283

21,776

1,003

1980

29,515

21,792

1,022

1981

31,460

22,135

1,167

1982

32,936

20,959

1,349

1983

34,192

21,385

1,418

1984

35,712

21,546

1,652

1985

36,169

22,061

1,726

1986

37,771

23,123

1,806

1987

39,172

23,592

1,858

1988

41,515

23,533

1,741

1989

45,264

24,065

1,696

1990

50,870

24,757

1,717

1991

62,790

25,608

1,736

1992

73,443

27,113

1,854

1993

72,253

26,745

1,952

1994

82,311

27,847

2,150

1995

86,521

27,977

2,163

1996

85,075

25,800

2,207

1997

87,640

23,775

2,210

1998

91,588

20,626

2,146

1999

94,448

20,797

2,200

2000

98,912

20,359

2,268

2001

106,161

19,530

2,348

2002

118,708

19,681

2,482

Source: Table prepared by the Congressional Research Services (CRS).

a. Rows may not add to total shown because of rounding.

na=not available

Housing

benefits

2,954

1,658

1,962

2,747

2,827

2,750

2,888

533

761

705

Education

benefits

484

497

555

664

637

639

588

505

547

525

762

811

813

832

795

874

724

789

955

1,097

1,129

1,098

1,149

1,259

1,286

1,437

1,641

1,701

Jobs/ training

224

230

132

124

171

177

198

181

169

141

143

136

120

113

110

142

371

581

611

701

795

958

740

199

792

945

1,201

1,240

915

Services

604

2,203

2,199

2,190

2,318

2,284

2,210

1,930

2,943

3,564

3,803

3,305

3,229

3,111

3,152

3,210

3,065

6,122

6,249

6,351

6,215

8,171

6,283

5,413

5,718

7,469

7,126

3,956

4,192

4,690

Energy aid

331

271

263

172

150

113

120

122

Totala

24,509

41,320

49,911

54,074

56,660

56,461

54,107

55,079

58,463

59,482

61,532

62,952

64,135

66,823

69,032

71,211

75,289

84,884

97,837

113,228

110,568

124,427

127,873

123,243

123,512

126,857

126,894

128,755

135,993

149,004

CRS-10

Table 5. Total Spending for Income-Tested Benefits by Form of Benefit, FY1968-FY2002

(millions of constant FY2002 dollars)

Fiscal year

1968

1973

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Medical

benefits

24,988

44,485

54,793

59,673

66,189

68,161

69,962

72,890

76,252

76,160

76,886

78,926

82,941

86,522

95,119

100,560

107,156

120,687

145,433

174,512

178,294

196,129

206,362

204,539

208,325

214,412

223,812

235,591

253,410

282,468

Cash aid

39,168

57,011

65,937

71,901

71,596

68,503

64,779

64,226

64,324

61,435

61,953

62,915

63,138

66,232

67,305

69,877

72,465

75,417

81,547

89,691

93,260

104,865

108,243

106,279

104,221

101,403

101,182

98,907

103,367

102,157

Food benefits

4,647

15,843

23,675

26,607

25,700

26,287

27,358

30,288

32,747

30,754

34,188

34,208

33,149

33,526

32,647

32,104

34,899

38,796

44,002

45,309

46,021

45,654

44,936

41,825

38,890

37,437

35,776

36,022

39,306

Source: Table prepared by the Congressional Research Services (CRS).

a. Rows may not add to total shown because of rounding.

Housing aid

4,074

15,519

17,190

18,657

21,336

21,880

24,440

24,520

24,820

25,043

25,614

25,258

27,372

24,505

22,261

24,060

25,466

27,394

28,454

34,769

36,171

36,186

37,477

38,188

38,181

37,432

32,094

32,651

33,312

35,566

Education

benefits

4,475

7,484

7,859

12,253

10,983

12,059

12,856

11,573

10,223

15,110

13,989

14,460

16,726

17,274

16,363

17,873

19,015

20,003

20,392

18,261

18,800

18,879

19,016

18,827

19,633

20,068

19,967

17,085

26,408

30,484

Jobs/training

3,913

4,024

7,402

14,784

16,435

27,355

23,731

19,466

15,297

7,624

8,305

9,489

6,670

6,057

6,134

5,840

5,709

5,897

6,389

7,057

6,649

6,700

6,425

5,384

4,450

5,416

6,109

7,897

8,323

7,808

Services

2,597

9,128

9,084

10,856

12,030

11,981

11,487

10,281

10,718

9,386

9,786

9,287

9,187

8,662

8,894

10,073

9,590

11,799

13,138

13,854

13,506

17,431

13,388

12,669

13,190

18,896

20,211

18,915

21,006

22,215

Energy aid

906

765

668

3,848

4,044

3,833

3,750

3,808

3,845

3,676

3,469

3,059

2,640

2,402

2,539

2,278

2,001

2,422

1,988

1,439

1,574

1,479

1,507

2,162

2,159

2,152

Totala

83,861

153,493

185,940

214,820

225,174

236,991

235,282

237,093

238,425

229,345

234,471

238,350

244,087

246,077

253,071

263,990

274,145

298,497

336,689

384,425

393,991

428,633

438,553

432,261

431,398

437,997

442,318

448,985

484,005

522,156

CRS-11

Composition of Spending

The dramatic change since 1978 in the composition of total spending for

income-tested benefits is shown in Figure 2 and in Table 6. In FY1978 spending for

cash relief and medical aid was about equal. Each accounted for 29% of total welfare

spending covered by this report. Thereafter, outlays for medical benefits rapidly

overtook cash aid, topping 50% in FY2000 and reaching 54% in 2002.

Figure 2. Composition of Income-Tested Benefits

FY1978

FY2002

medical 54.1%

food 11.1%

medical 28.8%

other 5.4%

cash 28.9%

other 4.7%

food 7.5%

education 5.8%

education 5.1%

work/training 11.5%

work/training 1.5%

cash 19.6%

housing 6.8%

housing 9.2%

Figure prepared by the Congressional Research Service (CRS).

Table 6. Outlay Trends by Form of Benefits, FY1978-FY2002

(billions of constant 2002 dollars)

FY1978 FY1988 FY1992

FY1996

FY1998

FY2000

FY2002

Medical aid

$68.2

$100.6

$174.5

$204.5

$214.4

$235.6

$282.5

Cash

68.5

69.9

89.7

106.3

101.4

96.9

101.2

Food aid

26.3

32.6

44.0

44.9

38.9

35.8

39.3

Housing

21.9

24.1

34.5

38.2

37.4

32.7

35.6

Education

12.1

17.9

18.3

18.8

20.1

17.1

30.5

Jobs/training

27.4

5.8

7.1

5.4

7.9

7.8

Services

12.1

10.1

13.9

12.7

18.9

22.2

Energy aid

3.1

2.3

1.4

1.5

2.2

$237.0

$264.0

$384.0

$432.3

$438.0

$449.0

$522.2

Total

Source: Table prepared by the Congressional Research Service (CRS).

CRS-12

Noncitizen Eligibility for Major Federal Benefits

The eligibility of noncitizens for major federal means-tested benefit programs

largely depends on their immigration status and whether they arrived in the United

States, or were enrolled in a benefit program, before enactment of the 1996 welfare

law (P.L. 104-193) on August 22, 1996. That law sharply restricted welfare

eligibility for noncitizens, though it has since been modified. For noncitizens

entering after August 22, 1996, many of the restrictions imposed by the 1996 law

remain essentially unchanged. However, for persons who legally resided in the

United States before enactment of the new law, provisions have been significantly

revised by 1997, 1998, and 2002 amendments. The most significant recent change

(made in the 2002 farm bill, P.L. 107-171) opened up food stamp eligibility to all

legal permanent resident (LPR) children, regardless of date of entry or length of

residence, and to legal permanent residents (LPRs) who meet a 5-year residence test.

Those LPRs who were admitted to the United States as refugees and asylees are

treated differently from other LPRs, as follows:

Refugees and asylees. Eligible for SSI benefits, Medicaid, and food stamps for

7 years after arrival, and for 5 years for TANF. After this term, they generally are

ineligible for SSI, but states may extend federally aided TANF and Medicaid to them.

Legal permanent residents (LPRs)

! Who have a work history or military connection. If they have (a) a substantial

work history, generally 10 years (40 quarters) of work documented by Social

Security or other employment records, or (b) a military connection (active

duty military personnel, veterans, and their families), LPRs are eligible for

major benefits;

! Who were legally resident as of August 22, 1996. If they received SSI as of

August 22, 1996, these LPRs continue to be eligible for SSI. If they are

disabled, they are eligible for SSI and, as a result, for food stamps (regardless

of the date of disability). If they were elderly (65+) as of August 22, 1996,

they are eligible for food stamps. If they were children (under 18) as of

August 22, 1996, they are eligible for food stamps until they become 18;

! Who are qualified SSI recipients. If they meet SSI noncitizen eligibility tests,

these LPRs must receive Medicaid; and

! Who entered the United States after August 22, 1996. These LPRs are barred

from TANF, food stamps, and Medicaid for 5 years. Thereafter, the state may

extend federally-aided TANF, food stamps, and Medicaid to them. (A notable

exception is that LPR children are eligible for food stamps no matter when

they entered the country or how long they have lived here.)

CRS-13

Aid Received by Poor Families With Children

The Census Bureau reports that 7.2 million families (including 5.4 million with

children) in 2002 had total pre-tax money income — after counting any cash from the

welfare programs of TANF, Supplemental Security Income (SSI), and General

Assistance (GA) — that was below their poverty threshold.4 The Bureau found that

the money income poverty rate among related children in families was 16.3%, the

highest since 1999 (16.6%).

Overall, 34.6 million persons were classified as poor on the basis of 2002 pretax money income (compared with 31.1 millions in 2000). Of these persons, 66.6%

were in households that received means-tested aid from at least one of eight programs

(TANF, SSI, GA, school lunch, food stamps, Medicaid, subsidized housing, lowincome home energy assistance). By race and ethnicity, the following percentages

of poor persons were in households that received pre-tax aid from one or more of the

eight programs: non Hispanic whites, 53.5%, blacks, 80%, and persons of Hispanic

origin, 78.6%.

Figure 3 depicts income-tested aid provided to families with children who were

poor before receiving any cash aid from TANF, GA, or the EITC. In 2002, these

families totaled 5.7 million (compared with 5.1 million in 2000): 3.4 million with

a female householder and 2.3 million with a male householder (chiefly two-parent

families). These numbers, based on CRS estimates, include unrelated subfamilies

(the Bureau excludes these subfamilies from its “family” counts). As the chart

shows, all but 8.9% of the female-headed families and 11.8% of the male-present

families whose pre-tax, pre-welfare money income fell short of the poverty threshold

received means-tested aid. For male-present families, the EITC, which goes only to

persons with earnings, was the dominant form of aid. In all, 71.7% of male-present

families who were poor before transfers received the EITC (compared with 75.2%

in 2000); for 25.4% it was the only aid. Among female-headed families who were

poor before transfers, 53.7% received the EITC (compared with 59.6% in 2000); for

11.7% it was the only aid. Various combinations of cash assistance (TANF, GA,

EITC) and noncash aid (food stamps, housing subsidies, Medicaid or coverage under

the State Children’s Health Insurance Program (S-CHIP), went to 23.5% of femaleheaded families and to 10.6% of male-present families.5

U.S. Bureau of the Census, Poverty in the United States: 2002. Current Population

Reports, Series P-60, no. 222, Sept. 2003, and unpublished tables available through

[http://ferret.bls.census.gov].

These combinations are shown in four slices of the pie charts, labeled as:(1) EITC and

(other) cash benefits, (2) TANF or GA, food stamps, and Medicaid or SCHIP; (3) TANF or

GA, food stamps, and Medicaid or SCHIP and housing assistance; and (4) other

combinations of cash and noncash aid.

CRS-14

Figure 3. Cash and Noncash* Welfare Benefits Received

by Poor** Families with Children, 2002

Female-Headed Families

Male-Present Families

-TANF or GA, Food Stamps, and

Medicaid or S-CHIP ... and Housing Assistance

EITC and

noncash

only--32.4%

Other combos.

cash and

noncash

1.0

EITC and

cash

5.7%

benefits

9.6%

6.7%

1.4%

8.9%

EITC

only

11.7%

EITC and cash benefits

Noncash

only--23.5%

means-tested

benefits

* Cash welfare benefits shown are:

Temporary Assistance to Needy Families (TANF)

and General Assistance (GA).

Noncash benefits shown are: Food Stamps,

Medicaid, State Children's Health Insurance Program (S-CHIP)

and Housing Assistance.

**Poor before receiving cash welfare.

Chart based on CRS analysis of March 2003 Current Population Survey data.

0.4%2.2%

7.1%

EITC and

noncash

only--39.2%

11.8%

Noncash

only

13.0%

EITC only

25.4%

Receives Earned Income Tax Credit

CRS-15

Income Tests of the Benefit Programs

More than 90% of the programs in this report have an explicit test of income.

The others base eligibility on area of residence, enrollment in another welfare

program, or other factors that presume need. The explicit income tests are of five

kinds: Income ceiling related to (1) one of the federal government’s official poverty

measures (federal poverty income guidelines or Census Bureau poverty thresholds);

(2) state or area median income; (3) the lower living standard income level of the

Bureau of Labor Statistics; (4) an absolute dollar standard; (5) level deemed to

indicate “need.” Table 7 classifies the programs in this report by type of income test.

Tables 8-11 present, respectively, Census Bureau poverty thresholds for 2002,

federal poverty income guidelines for 2003, income eligibility limits for subsidized

meals, July 2003-July 2004, and lower living standard income levels, effective in

May 2003.

CRS-16

Table 7. Income Eligibility Tests Used by Benefit Programs

Limit related to:

Program*

Official

poverty

measure

Lower living

income level

State/ area

median

income

Dollar

amount

Income

deemed

needy

Area of

residence

Enrollment/eli

gibility for

other program

Other

Medical Benefits

1. Medicaid

2. Veterans’ medical care (no

service disability)

3. S-CHIP

4. General assistance (medical)

5. Indian health services

6. Maternal and child health

services

7. Consolidated health centers

8. Title X family planning

9. Medical aid for refugees,

asylees, others

Cash aid

10. SSI

11. EITC (refunds)

12. TANF

13. Foster care

14. Child tax credit

CRS-17

Limit related to:

Program*

Official

poverty

measure

Lower living

income level

State/ area

median

income

15. Veterans’ pensions

Dollar

amount

Income

deemed

needy

Area of

residence

Enrollment/eli

gibility for

other program

Other

16. General assistance

17. Adoption assistance

18. General assistance to Indians

19. Cash aid — refugees,

asylees, others

20. DIC (vets’ parents)

Xc,k

Food benefits

21. Food stamps

22. School lunch (free/reduced

price)

23. WIC

24. Child and adult care food

program

25. School breakfast

(free/reduced price)

26. Nutrition program for the

elderly

27. The emergency food

assistance program

28. Summer food service

CRS-18

Limit related to:

Program*

Official

poverty

measure

Lower living

income level

State/ area

median

income

Dollar

amount

Income

deemed

needy

29. Commodity supplemental

food

30. Food distribution for Indians

Area of

residence

Enrollment/eli

gibility for

other program

31. Farmers’ market nutrition

programs

32. Special milk (free)

Housing benefits

33. Section 8 lower-income

housing assistance

34. Public housing

35. Rural housing loans

36. HOME

37. Housing for special groups

(aged/disabled)

38. Rural rental assistance

(section 521)

39. Section 236 interest

reduction payments

40. Housing for people with

AIDS

41. Rural rental housing loans

(section 515)

Other

CRS-19

Limit related to:

Program*

Official

poverty

measure

42. Rural housing repair loans

and grants

Lower living

income level

State/ area

median

income

Dollar

amount

Income

deemed

needy

43. Farm labor housing loans

and grants

44. Section 101 rent supplements

45. Rural self-help grants and

site loans

46. Indian housing improvement

grants

47. Section 235 homeownership

48. Rural housing preservation

grants

49. HOPE

Education

50. Pell grants

51. Head Start

52. Stafford and Stafford/Ford

loans

53. Federal work-study

54. TRIO programs

55. Supplemental educ.

opportunity grants

Area of

residence

Enrollment/eli

gibility for

other program

Other

CRS-20

Limit related to:

Program*

Official

poverty

measure

Lower living

income level

State/ area

median

income

Dollar

amount

Income

deemed

needy

Area of

residence

Enrollment/eli

gibility for

other program

56 Chapter 1 migrant education

57. Perkins loans

58. Leveraging educ. assistance

(LEAP)

59. Health professions student

loans and scholarships

Other

60. Fellowships for

grad./professional study

61. Migrant high school

equivalency

62. College assistance migrant

program

63. Close Up fellowships

Services

64. Child care and development

block grant

65. TANF services (other than

child care)

66. Social services (Title XX)

67. TANF child care

68. Homeless assistance

CRS-21

Limit related to:

Program*

Official

poverty

measure

69. Community services block

grant

70. Legal services

Lower living

income level

State/ area

median

income

71. Social services for refugees,

asylees, others

Dollar

amount

Income

deemed

needy

Area of

residence

Enrollment/eli

gibility for

other program

Other

72. Emergency food and shelter

Jobs and training

73. TANF work activities

74. Job Corps

75. Youth training

Xaa

76. Adult training

77. Senior community service

employment

78. Welfare-to-work

79. Food stamp

employment/training

80. Foster grandparents

81. Senior companions

82. Targeted aid for refugees,

asylees, others

83. Native employment. works

CRS-22

Limit related to:

Program*

Official

poverty

measure

Lower living

income level

State/ area

median

income

Dollar

amount

Income

deemed

needy

Area of

residence

Enrollment/eli

gibility for

other program

Other

Energy aid

84. Low-income home energy

aid

Xbb

85. Weatherization assistance

* Short titles and abbreviations are used in this table. See table of contents for full titles.

a. States must extend Medicaid to certain persons whose income is below the federal poverty income guideline (or a multiple of it) but who do not receive cash aid.

These persons are pregnant women, children born since September 30, 1983, the aged, the blind, and the disabled.

b. Need is decided by state, locality, Indian tribe (or Alaskan Native village).

c. Eligible for Medicaid, foster care, and adoption assistance are persons who do not qualify for TANF cash assistance but who would be income-eligible for AFDC

under the terms of July 16, 1996 (with some modifications allowed) if that program had not been replaced by TANF. Also eligible for Medicaid in most states

are persons eligible for SSI.

d. Veterans receiving veterans’ pensions or eligible for Medicaid are automatically eligible for free VA medical care.

e. If a state’s Medicaid limit for children is at or above 200% of the poverty guideline, it may give S-CHIP to children whose family income is within 150% of the

Medicaid limit (thus, up to 50% above the Medicaid limit).

f. The stated purpose of the Maternal and Child Health (MCH) Services Block Grant law is to enable states to assure access to quality MCH services to mothers and

children, particularly those with low income (or limited availability of health services). The law defines low income in terms of the federal poverty income

guidelines. This block grant, which took effect in FY1981, includes funding for crippled children’s services.

g. The law limits free care to those below the federal poverty income guidelines.

h. All residents of the area served are eligible, but fees must be charged the nonpoor.

i. For basic federal SSI payment.

j. States decide need for an optional state supplement to SSI.

k. A blind or disabled child who is eligible for SSI also is eligible for adoption assistance.

l. Households composed wholly of recipients of SSI or GA or of recipients of TANF cash or services automatically meet food stamp assets and income tests but their

benefits must be calculated by food stamp rules.

m. Food stamp eligibility is accepted as documentation of eligibility for the free school lunch and free school breakfast programs.

n. States may give automatic eligibility to public assistance recipients.

CRS-23

o. The law requires preference for those with greatest economic or social need.

p. Need is decided by a system known as the federal needs analysis methodology, which is set forth in Part F of Title IV of the Higher Education Act (HEA) as

amended.

q. There is no income test. Migratory children are presumed to be needy.

r. For forgiveness of loans made to needy students who fail to complete studies.

s. Need for loans is decided by the educational institution, by use of a needs analysis system approved by the Secretary of Education “in combination with other

information” about the student’s finances. For all health professional scholarships and for loans to students of medicine and osteopathy, federal regulations define

the required “exceptional financial need.”

t. Regulations require the educational institution to determine that migratory students need the financial assistance provided.

u. Law makes eligible middle school and secondary students who are “economically disadvantaged.”

v. Federal income ceiling is 85% of state median for family of same size

w. Under the law, at least 70% of entitlement Child Care Development Block Grant (CCDBG) funds must be used for families receiving TANF, trying to leave welfare

through work, or at risk of becoming eligible for TANF.

x. Applies to families aided with TANF dollars transferred to Title XX (their income cannot exceed 200% of the federal poverty guidelines).

y. Need is decided by agencies administering the benefits.

z. The federal poverty income guideline is used if higher than 70% of the lower living standard income level of the Department of Labor.

aa. The law requires preference for “low-income” persons if funds are limited.

bb. States have the option of setting limits below outer federal ceilings (but cannot set a ceiling below 110% of the federal poverty income guideline).

CRS-24

Table 8. Bureau of the Census Poverty Thresholds for 2002

1 person (unrelated individual) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,182

Under 65 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,360

65 years and over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,547

2 persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,752

Householder under 65 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,108

Householder 65 years and over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,884

3 persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,351

4 persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,390

5 persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,743

6 persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,578

7 persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,952

8 persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,111

9 persons or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,860

Source: U.S. Department of Commerce, Bureau of the Census (Jan. 23, 2003).

Table 9. 2003 Federal Poverty Income Guidelines

Size of family unit

Forty-eight

contiguous

states and DC

Alaska

Hawaii

$ 8,980

$11,210

$10,330

12,120

15,140

13,940

15,260

19,070

17,550

18,400

23,000

21,160

21,540

26,930

24,770

24,680

30,860

28,380

27,820

34,790

31,990

30,960

38,720

35,600

For each additional

person, add

3,140

3,930

3,610

Source: Federal Register, v. 68, no. 26, Feb. 7, 2003, pp. 6456-6458.

CRS-25

Table 10. Eligibility Levels for Free and Reduced Price Meals

for the Period of July 1, 2003-June 30, 2004

Maximum annual income levels

Family size

Free meals: 130%

federal poverty income

guidelines

Reduced price meals:

185% federal poverty

income guidelines

Forty-eight Contiguous United States, District of Columbia, Guam and Territories

$11,674

$16,613

15,756

22,422

19,838

28,231

23,920

34,040

28,002

39,849

32,084

45,658

36,166

51,467

40,248

57,276

Add for each additional member

+4,082

+5,809

Alaska

$14,573

$20,739

19,682

28,009

24,791

35,280

29,900

42,550

35,009

49,821

40,118

57,091

45,227

64,362

50,336

71,632

Add for each additional member

+5,109

+7,271

Hawaii

$13,429

$19,111

18,122

25,789

22,815

32,468

27,508

39,146

32,201

45,825

36,894

52,503

41,587

59,182

46,280

65,860

Add for each additional member

+4,693

+6,679

Source: Federal Register, v. 68, no. 49, Mar. 13, 2003. P. 12030.

CRS-26

Table 11. Lower Living Standard Income Level (LLSIL) for a

Family of Foura — Effective May 30, 2003

(For use in programs under the Workforce Investment Act and the

Work Opportunity Tax Credit)b

2003 adjusted

LLSILc

70% of

LLSILd

Northeast

Metropolitan

$31,750

$22,230

Non-Metropolitan

30,870

21,610

Midwest

Metropolitan

29,220

20,450

Non-Metropolitan

27,520

19,270

South

Metropolitan

Non-Metropolitan

27,580

26,100

19,310

18,270

West

Metropolitan

Non-Metropolitan

31,650

30,550

22,150

21,390

Alaska

Metropolitan

Non-Metropolitan

38,750

38,350

27,130

26,850

Hawaii/Guam

Metropolitan

Non-Metropolitan

39,360

40,950

27,560

28,670

Anchorage, AK

38,750

27,130

Atlanta, GA

27,890

19,520

Boston-Brockton-Nashua, MA/NH/ME

Chicago-Gary-Kenosha, IL/IN/WI

Cincinnati-Hamilton, OH/KY/IN

Cleveland-Akron, OH

35,060

30,790

29,290

30,000

24,540

21,550

20,500

21,000

Dallas-Ft Worth, TX

26,850

18,800

Denver-Boulder-Greeley, CO

Detroit-Ann Arbor-Flint, MI

Honolulu, HI

31,630

28,970

39,360

22,150

20,280

27,560

Houston-Galveston-Brazoria, TX

25,480

17,840

Kansas City, MO/KS

Los Angeles-Riverside-Orange County, CA

Milwaukee-Racine, WI

28,520

32,210

29,270

19,970

22,550

20,490

Minneapolis-St Paul, MN/WI

29,540

20,680

Area

Metropolitan Statistical Area (MSA)

CRS-27

2003 adjusted

LLSILc

70% of

LLSILd

New York-Northern New Jersey-Long Island

33,210

23,250

Philadelphia-Wilmington-Atlantic City,

Pittsburgh, PA

30,780

29,350

21,540

20,550

St. Louis, MO-IL

San Diego, CA

San Francisco-Oakland-San Jose, CA

27,670

34,820

34,440

19,370

24,380

24,110

Seattle-Tacoma-Bremerton, WA

34,920

24,450

Washington-Baltimore, DC/MD/VA/WA

33,610

23,530

Area

Source: Federal Register, v. 68, no. 104, May 30, 2003. PP. 32552-32554.

a. For LLSILs for other family sizes, see Federal Register entry noted above.

b. The LLSIL is used for several purposes under the Workforce Investment Act (WIA). WIA defines

“low income individual” for eligibility purposes in terms of the LLSIL or the poverty line. For

purposes of state formula allotments, it defines the terms “disadvantaged adult” or

“disadvantaged youth” in terms of the LLSIL or the poverty line.

c. To assess whether employment will lead to “self-sufficiency,” WIA sets 100% of the LLSIL as the

minimum pay needed.

d. WIA provides that the terms “low-income” person and “disadvantaged adult” may be defined as

a member of a family that received total family income that, in relation to family size, does not

exceed 70% of the LLSIL. Further, the Internal Revenue Code provides that the term

“economically disadvantaged” may be defined as 70% of the LLSIL for purposes of the Work

Opportunity Tax Credit (WOTC).

CRS-28

Medical Aid

CRS-29

1. Medicaid1

Note: Effective on July 1, 1997 (earlier in most states), P. L. 104-193 ended

Aid to Families with Dependent Children (AFDC), a cash assistance program under

which recipients were automatically eligible for Medicaid. The replacement block

grant program of Temporary Assistance for Needy Families (TANF) does not entitle

all TANF recipients to Medicaid coverage. However, those who meet the income,

resource, and categorical eligibility criteria of the former AFDC program, as in effect

in their state on July 16, 1996 (and subsequently modified, if applicable), are entitled

to Medicaid. The description below summarizes Medicaid as it operated after AFDC

was replaced by TANF.

Funding Formula

The federal government shares in the cost of Medicaid services by means of a

variable matching formula. The formula is inversely related to a state’s per capita

income and is adjusted annually. For FY2000-FY2002, the federal matching rate for

services averaged about 57% for the Nation as a whole. The federal share of

administrative costs generally is 50%, but as high as 100% for certain items.

Preliminary data indicate that federal outlays in FY2002 totaled $146.2 billion.

The federal share of a state’s medical vendor payments is called the federal

medical assistance percentage (FMAP). The FMAP is higher for states with lower

per capita incomes and lower for states with higher per capita incomes. If a state’s

per capita income is equal to the national average per capita income, its FMAP would

be 55%. The law establishes a minimum FMAP of 50% and a maximum of 83%2

(though the highest rate in FY2003 was 76.62% for Mississippi). Federal matching

for the territories is set at 50%, but a dollar ceiling also applies. The statutory

formula for determining the FMAP follows:

FMAP = 100% — state share (with a minimum of 50%

and a maximum of 83%)

State share = (state per capital income)2 x 45%

(national per capita income)2

The percentages are based on the average per capita income of each state and

the United States for the three most recent calendar years for which satisfactory data

are available from the Department of Commerce.

Regulations governing Medicaid are found in 42 CFR. Parts 430-456 (Oct. 2002). This

program is No. 93.778 in the Catalog of Federal Domestic Assistance. It is codified at 42

U.S.C. 1396 et seq.

In FY2003, federal funds paid exactly 50% of medical vendor payments in the 12 states

with the highest per capita income (CA, CO, CT, DE, IL, MD, MA, MN, NH, NJ, NY, and

WA) and 70% or higher in the 10 states with the lowest per capita income (AL, AR, ID, LA,

MS, MT, NM, OK, UT and WV). Effective in FY1998, a special provision of P.L. 105-33

raised the federal share of Medicaid costs in DC from 50% to 70%.

CRS-30

The law provides one exception to the FMAP for benefits. Family planning

services (instruction in contraceptive methods and family planning supplies) are

federally matched at a 90% rate.

To provide fiscal relief to states, federal matching rates were changed

temporarily by the Jobs and Growth Tax Relief Reconciliation Act (P.L. 108-27),

which altered the rates for certain expenditures for the last two quarters of FY2003

and the first three quarters of FY2004. For these 5 quarters, the federal matching rate

for each state is held harmless for declines from the prior fiscal year, and then is

increased by 2.95 percentage points. A state is eligible for an increase in its FMAP

for any of the specified quarters only if eligibility under Medicaid in effect for that

quarter is no more restrictive than eligibility in effect on September 2, 2003.

Program costs totaled $258 billion in FY2002, with $147 billion (57%) from federal

funds.

Eligibility Requirements

The requirements of federal law, coupled with the decisions of individual states

in structuring their Medicaid programs, determine who is actually eligible for

Medicaid in a given state. Some groups are mandatory, meaning all states must cover

them; others are optional. In general, federal law places limitations on the categories

of individuals that can be covered and establishes specific eligibility rules for groups

within those broad categories. Traditionally, Medicaid eligibility was limited to the

following categories: low-income families with dependent children (in which one

parent was absent, incapacitated or unemployed), low-income persons with

disabilities, and low-income elderly. In addition, certain individuals with higher

income, especially those facing large costs for medical care, were eligible as

“medically needy.” Beginning in the 1980s, additional coverage groups were added

to Medicaid for higher income children and pregnant women. Other coverage groups

are identified in statute as needing special protection against the high cost of medical

care.3 Over 50 distinct population groups are identified in federal law. Some are

mandatory groups that all states must cover; some are optional eligibility groups.

Contributing to the complexity of the Medicaid program are financial criteria.

Medicaid is a means-tested entitlement program. To qualify, applicants’ income and

resources4 must be within certain limits, most of which are determined by states,

again within federal statutory parameters. States have flexibility in defining

countable income and assets. Consequently, income and resource standards vary

considerably among states, and different standards apply to different population

An example of such a group is uninsured women diagnosed with breast or cervical cancer

through a special Centers for Disease Control (CDC) program that provides screening

services to those with modest income (up to 250% of the federal poverty level). This

optional coverage group was added by the Breast and Cervical Cancer Prevention and

Treatment Act of 2000 (P.L. 106-354).

Resources may include bank accounts and similar liquid assets, as well as real estate,

automobiles, and other personal property for which the value may not exceed specified

limits. Certain resources, such as an individual’s home, are excluded when determining

eligibility.

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groups within a state. In general, individuals in similar circumstances may be

automatically eligible for coverage in one state, but required to assume a certain

portion of their medical expenses before they can obtain coverage in another state,

and not eligible at all in a third state.

Families, Pregnant Women, and Children. Medicaid-eligible families,

pregnant women, and children fall into two basic groups: those meeting AFDC

standards as of July 16, 1996, and those qualifying under a series of targeted

Medicaid expansions that began in the 1980s.

AFDC-Related Groups. Medicaid eligibility for AFDC-related groups was

affected significantly by both the Personal Responsibility and Work Opportunities

Reconciliation Act of 1996 (PRWORA, P.L. 104-193), which replaced the AFDC

cash assistance program with the Temporary Assistance for Needy Families (TANF)

block grant program, and the Balanced Budget Act of 1997 (BBA 97, P.L. 105-33).

Mandatory. Members of families that meet the eligibility requirements of the

old AFDC programs in effect in their states on July 16, 1996 must be covered under

Medicaid. States may modify their rules governing income and resource standards

for such AFDC-related groups. These modifications can be made by raising

income/resource standards up to the percentage increase in the Consumer Price Index

(CPI) after July 16, 1996, or by lowering income standards to applicable levels no

lower than those in effect on May 1, 1988, or by using income/resource

methodologies that are less restrictive than those in effect on July 16, 1996.

States must provide Medicaid assistance for recipients of adoption assistance

and foster care under Title IV-E of the Social Security Act. Transitional or extended

benefits are available to families who lose Medicaid eligibility because of increased

hours of employment, increased earnings, loss of a time-limited earned income

disregard, or increased child or spousal support payments. If the family loses

Medicaid eligibility because of increased earnings or hours of employment, Medicaid

coverage is extended for 6 to 12 months.5 (During the second 6 months, a premium

can be imposed, the scope of benefits might be limited, or alternate delivery systems

might be used.) If the family loses Medicaid because of increased child or spousal

support, coverage is extended for 4 months. Pregnant women and children are

exempt from TANF work requirements and retain their Medicaid eligibility.

Optional. States are permitted to cover additional AFDC-related groups. States

may provide Medicaid to former foster care recipients ages 18, 19 and 20, and can

limit such coverage to those eligible for Title IV-E before turning 18. States may

also extend Medicaid to children up to age 21 in families whose income and

resources are within AFDC standards (as of July 16, 1996), but who do not meet the

definition of a dependent child (also known as Ribicoff children), and may limit this

coverage to reasonable subgroups, such as children in two-parent families, those in

The requirement for 6 months of transitional Medicaid, which originally applied to

families who lost AFDC eligibility because of work, was carried over in the 1996 TANF

law. It has been extended beyond September 30, 2002 (along with basic TANF grants) by

several laws, most recently by P.L. 108-89 — through March 31, 2004.

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privately subsidized foster care, or those who live in certain institutional settings.6

Finally, states may deny Medicaid benefits to nonpregnant adults and heads of

households who lose TANF benefits because of refusal to work.

Poverty-Related7 Pregnant Women and Children. Beginning in 1984,

Congress gradually extended Medicaid coverage to groups of pregnant women and

children who are defined in terms of family income and resources, rather than in

terms of their ties to cash welfare programs.

Mandatory. States must cover pregnant women and children under age 6 with

family incomes below 133% of the federal poverty income guidelines. (The state

may impose a resource standard that is no more restrictive than that for SSI, in the

case of pregnant women, or AFDC as of July 16, 1996, in the case of children.)

Coverage for pregnant women is limited to services related to the pregnancy or

complications of the pregnancy through 60 days postpartum. Children receive full

Medicaid coverage.

States are also required to cover all children under age 19 who were born after

September 30, 1983, and whose family income is below 100% of the federal poverty

level.

Optional. States may cover pregnant women and infants under age 1 with

family incomes up to 185% of the federal poverty level (FPL). In addition, through

other provisions of Medicaid law, states are permitted to cover additional pregnant

women and children with incomes above applicable federal mandatory minimum

levels. Such key provisions include waivers of eligibility rules (through Section

1115), use of more liberal methods for calculating income and resources for some

categories of eligibles (through Section 1902(r)(2)), as well as through Medicaid

expansions under the State Children’s Health Insurance Program (SCHIP; program

no. 3 in this report). For example, under SCHIP, most states now cover at least some

groups of children under age 19 in families with income at or above 200% of the

federal poverty level.

Finally, states have the option of continuing Medicaid eligibility for current

child beneficiaries for up to 12 months without a redetermination of eligibility.

States are also allowed to extend Medicaid coverage to pregnant women and children

under 19 years of age on the basis of “presumptive” eligibility until formal

determinations are completed.

Aged and Disabled Persons. In general, Medicaid provides coverage to

certain groups of individuals receiving (or qualifying for) cash assistance through the

Supplemental Security Income (SSI) program. It also covers the Medicare cost-

This group will become largely obsolete as states are required to phase in coverage of

children under age 19 with incomes below poverty. However, some states might still choose

to cover Ribicoff children aged 19 and 20.

In 2003, the poverty guideline in the 48 contiguous states and DC was $18,400 for a family

of four.

CRS-33

sharing obligations for certain individuals. In addition, Medicaid covers certain

individuals needing institutional care or other types of long-term care services.

SSI-Related Groups. The SSI program was established in 1972, replacing

previous federal-state cash assistance programs for the aged, blind, and disabled.

Income and resource standards are defined in federal law. For 2003, individuals

applying for SSI could not have countable monthly income in excess of $552, and

their countable resources could not exceed $2,000. Similar criteria for couples were

$829 in monthly income and $3,000 in resources. However, states have the option

of supplementing SSI payments (SSP) for aged persons living independently, and

using the resulting higher income levels as the applicable financial standard for

determining Medicaid eligibility.

Mandatory. States are generally required to cover SSI recipients under their

Medicaid programs. However, states may use more restrictive eligibility standards

for Medicaid than those for SSI if they were using those standards on January 1, 1972

(before the implementation of SSI), as authorized under Section 209(b) of the Social

Security Act. There were 11 such Section 209(b) states in 2001.8 States using more

restrictive income standards must allow applicants to “spend down” — deduct

incurred medical expenses from income before determining eligibility. For example,

if an applicant has a monthly income of $600 (not including any SSI or state

supplement payment) and the state’s maximum allowable income is $500, the

applicant would become eligible for Medicaid after incurring $100 in medical

expenses in that month.

States must continue Medicaid coverage for several defined groups of

individuals who lose SSI or SSP eligibility. The “qualified severely impaired” are

disabled persons who return to work and lose SSI eligibility because of earnings, but

still have the condition that originally rendered them disabled and who meet all

nondisability criteria for SSI except income. Medicaid must be continued for these

persons if they need on-going medical assistance to continue working and their

earnings are not sufficient to provide the equivalent of SSI, Medicaid, and attendant

care benefits for which they would qualify in the absence of earnings. States must

also continue Medicaid coverage for persons who were once eligible for both SSI and

Social Security payments and who lose SSI because of a cost-of-living adjustment

(COLA) in their Social Security benefits. Similar Medicaid continuations have been

provided for certain other persons who lose SSI as a result of eligibility for or

increases in Social Security or veterans’ benefits. Finally, states must continue

Medicaid for certain SSI-related groups who received benefits in 1973, including

“essential persons” (persons who care for a disabled individual).

Optional. States are permitted to provide Medicaid to individuals who are not

receiving SSI but are receiving state-only supplementary cash payments. Effective

in August of 1997, under provisions of the Balanced Budget Act of 1997 (BBA 97),

states may make Medicaid available to disabled SSI beneficiaries with incomes up

to 250% of the FPL. These individuals may “buy into” Medicaid by paying a

premium based on income as determined by the state. The 1999 Ticket to Work

These 11 states are CT, HI, IL, IN, MN, MO, NH, ND, OH, OK, and VA.

CRS-34

legislation (P.L. 106-170) further allows states to cover employed, disabled persons

at higher income and resource levels (i.e., income over 250% of the FPL and

resources exceeding $2,000 for an individual or $3,000 for a couple). States may

also cover financially eligible working individuals whose medical condition has

improved such that they no longer meet the SSI definition of disability. Such

individuals may have to buy into Medicaid by paying premiums or other cost-sharing

charges on a sliding fee scale based on income, as established by the state. Finally,

states have the option of extending Medicaid to certain additional elderly or disabled

persons. These include individuals eligible for SSI but not receiving it, and elderly

and disabled persons whose income does not exceed 100% of the FPL and whose

resources do not exceed the SSI standard.

Qualified Medicare Beneficiaries and Related Groups. Certain lowincome individuals who are aged or have disabilities as defined under SSI and who

are eligible for Medicare are also eligible to have some of their Medicare cost-sharing

expenses paid for by Medicaid. There are four categories of such persons:

! Qualified Medicare Beneficiaries (QMB). Qualified Medicare beneficiaries

are aged or disabled Medicare beneficiaries with incomes no greater than

100% of the FPL and assets no greater than $4,000 for an individual and

$6,000 for a couple. States are required to cover, under their Medicaid

programs, the costs of Medicare premiums, deductibles, and coinsurance for

Medicare covered benefits for such persons. Other Medicaid covered

services, such as nursing facility care, prescription drugs and primary and

acute care services, are not covered for these individuals unless they qualify

for Medicaid through other eligibility pathways (e.g., via SSI, medically

needy, or the special income rule for institutionalized persons described

below).

! Specified Low-Income Medicare Beneficiaries (SLMB). Specified low-income

Medicare beneficiaries meet QMB criteria, except that their income is greater

than 100% of the FPL but does not exceed 120% of the FPL. Under this

Medicaid pathway, states are required to cover only the monthly Medicare

Part B premium. Other Medicaid services are not covered for these

individuals unless they qualify for Medicaid through other eligibility

pathways.

! Qualifying Individuals (QI-1). The QI-1 eligibility pathway9 applies to aged

and disabled Medicare beneficiaries whose income is between 120% and

135% of the FPL. For these individuals, states are required to pay the monthly

Medicare Part B premium, only until the federal allotment for this purpose is

depleted.10 These individuals are not otherwise eligible for Medicaid.

The program known as Qualifying Individuals-2 (QI-2) ended on Dec. 31, 2002.

In general, Medicaid payments are shared between the federal government and the states

according to the matching formula described above. However, expenditures under the QI-1

program are paid 100% by the federal government (from the Part B trust fund) up to the

state’s allocation level. A state is only required to cover the number of persons which would

bring its spending on these population groups in a year up to its allocation level. This

temporary program, originally slated to end Sept. 30, 2002, was extended through Sept.

(continued...)

CRS-35

! Qualified Disabled and Working Individuals (QDWIs). States are required to

pay the Medicare Part A premiums for persons who were previously entitled

to Medicare on the basis of a disability, who lost their entitlement based on

earnings from work, but who continue to have a disabling condition. Such

persons may only qualify if their incomes are below 200% of the FPL, their

resources are below 200% of the SSI limit ($4,000), and they are not

otherwise eligible for Medicaid.

Persons Receiving Institutional or Other Long-Term Care and

Related Groups (all optional). States may provide Medicaid to certain otherwise

ineligible groups of persons who are in nursing facilities (NFs) or other institutions,

or who would require institutional care if they were not receiving alternative services

at home or in the community.

States may establish a special income standard for institutionalized persons, not

to exceed 300% of the maximum SSI benefit that would be payable to a person living

at home and with no other resources ($1,656 per month in 2003). In states without

a medically needy program (described below), this “300% rule” is an alternative way

of providing NF coverage to persons with incomes above SSI or State Supplementary

Payment (SSP) levels.11

Both the medically needy and those becoming eligible under the “300% rule”

must contribute their available income to the costs of their care. Medicaid has

distinct post-eligibility rules to determine how much of a beneficiary’s income must

be applied to the cost of care before Medicaid makes its payment. Special rules exist

for the treatment of income and resources of married couples when one of the

spouses requires nursing home care and the other remains in the community. These

rules are referred to as the “spousal impoverishment” protections of Medicaid law,

because they are intended to prevent the impoverishment of the spouse remaining in

the community.

A state may obtain a waiver under Section 1915(c) of the Act to provide home

and community-based services to a defined group of individuals who would

otherwise require institutional care. The waiver coverage may include persons who

would be eligible under the “300%” rule if they were in an institution, or those

eligible through a medically needy program.

(...continued)

2004, by P.L. 108-173.

Until OBRA-93, persons with incomes in excess of these limits could not qualify for

Medicaid coverage for their nursing home care, even if their income was insufficient to

cover the costs of such care. OBRA-93 included provisions that allow individuals to deposit

excess income above the 300% limit into a trust, sometimes referred to as a “Miller Trust,”

and receive Medicaid coverage. The funds in the trust are recoverable by the state after the

person’s death. This arrangement, which is essentially a delayed spend-down, has reduced

access barriers that may have been encountered by persons in states that do not otherwise

permit spend-down under Medicaid.

CRS-36

A state may also provide Medicaid to several other classes of persons who need

the level of care provided by an institution and would be eligible if they were in an

institution. These include children who are being cared for at home, persons of any

age who are ventilator-dependent, and persons receiving hospice benefits in lieu of

other covered services. States electing these options must cover all persons who are

in the class and living in the state.

The Medically Needy. In 2002, 35 states and the District of Columbia

provided Medicaid to at least some groups of “medically needy” persons. These are

persons who meet the nonfinancial standards for inclusion in one of the groups

covered by Medicaid, but who do not meet the income or resource requirements for

such coverage. Under medically needy programs, individuals can spend down to the

medically needy standard set by the state by incurring medical expenses, in the same

way that SSI recipients in Section 209(b) states may spend down to Medicaid

eligibility.

Under medically needy programs, states may set income standards at any level

up to 133 and 1/3% of the standard used for the most closely related cash assistance

program. For families with children, the maximum applicable medically needy

income standard would be up to one-third more than that which was in effect for a

similar family under the state’s former AFDC program. For individuals who have

a disability or are elderly, it would be up to one-third more than the SSI income

standard. States may limit the groups of individuals who receive medically needy

coverage. If the state provides any medically needy coverage, however, it must

include all children under 18 who would qualify under one of the welfare-related

groups, and all pregnant women who would qualify under either a mandatory or

optional group, if their income or resources were lower.

Individuals Qualifying Under Demonstration Waivers. Demonstration

waivers available under the authority of Section 1115 (of the Social Security Act)

enable states to experiment with new approaches for providing health care coverage

that promote the objectives of the Medicaid program. Section 1115 allows the

Secretary of HHS to waive a number of Medicaid rules — including many of the

federal rules relating to Medicaid eligibility. The Health Insurance Flexibility and

Accountability (HIFA) Initiative, introduced by the Bush Administration in 2001, is

an explicit effort to encourage states to seek Section 1115 waivers to extend

Medicaid and SCHIP to the uninsured, with a particular emphasis on statewide

approaches that maximize private health insurance coverage options and target

populations with incomes below 200% of the FPL. Some states have used such

waivers to enact broad-based and sometimes statewide health reforms although

demonstrations under Section 1115 need not be statewide. Some states have

extended comprehensive health insurance coverage to low-income children and

families who would not otherwise be eligible for Medicaid.

Aliens. Legal immigrants arriving in the United States after August 22, 1996

are ineligible for Medicaid for their first 5 years in this country. Coverage of these

persons after the 5-year ban is a state option. States are required to provide Medicaid

to legal immigrants who resided in the country and were receiving benefits on August

22, 1996 (and who continue to meet the criteria) and to those residing in the country

as of that date who become disabled in the future.

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States are also required to provide coverage to: (1) refugees for the first 7 years

after entry into the United States, (2) asylees for the first 7 years after asylum is

granted, (3) individuals whose deportation is being withheld by the Immigration and

Naturalization Service (INS) for the first 7 years after grant of deportation

withholding, (4) lawful permanent aliens after they have been credited with 40

quarters of coverage under Social Security, and (5) lawful permanent aliens who are

honorably discharged U.S. military veterans or active duty military personnel, and

their spouses and unmarried dependent children who otherwise meet the state’s

financial eligibility criteria.

States are required to provide emergency Medicaid services to all legal and

undocumented non-citizens who meet the financial and categorical eligibility

requirements for Medicaid.

Medicaid Purchase of COBRA Coverage. COBRA12 provides that

employees or dependents who leave an employee health insurance group in a firm

with 20 or more employees must be offered an opportunity to continue buying

insurance through the group for 18 to 36 months (depending on the reason for leaving

the group). The employer may charge a premium of no more than 102% of the

average plan cost (150% for months 19 to 29 for certain disabled persons). Under

OBRA 90, state Medicaid programs may pay the premiums for COBRA continuation

coverage when it is cost-effective to do so, and the individual otherwise meets the

state’s eligibility requirements.

Benefits

States are required to offer the following services to most groups of recipients:

inpatient and outpatient hospital services; rural health clinic services; laboratory and

X-ray services; nursing facility services for those over age 21; home health services

for those over age 21 and to those under 21 if entitled to nursing facility care; the

early and periodic screening, diagnostic and treatment program (EPSDT) for those

under age 21; family planning services and supplies; federally qualified health center

services; nurse-midwife, certified family and pediatric nurse-practitioner services;

and physicians’ services and medical and surgical dental services furnished by a

dentist. States must also assure transportation of any Medicaid-eligible individual

to and from providers of medical care.

Federal law includes two basic coverage requirements for the medically needy.

First, if a state provides medically needy coverage to any group, it must provide

ambulatory services to children under 18 and individuals entitled to institutional

services, prenatal and delivery services for pregnant women (as well as 60 days of

postpartum care for those eligible for and receiving pregnancy-related services), and

home health services to individuals entitled to nursing facility services. Second, if

the state provides medically needy coverage for persons in institutions for mental

diseases or intermediate care facilities for the mentally retarded (ICFs/MR), it must

offer to all groups covered in its medically needy program all of the mandatory

services required for the categorically needy (except services provided by pediatric

COBRA is the Consolidated Omnibus Budget Reconciliation Act of 1985 (P.L. 99-272).

CRS-38

and family nurse practitioners), or alternatively, any of seven categories of care and

services listed in Medicaid law defining covered benefits.

Finally, states may also choose to provide one or more optional services to

categorically and medically needy beneficiaries. These additional services include,

for example, prescription drugs, eyeglasses, other dental services, physical therapy,

and inpatient psychiatric care for individuals under age 21 or over 65.

States may limit the amount, duration and/or scope of care provided under any

mandatory or optional service category (such as limiting the number of days of

covered hospital care or number of physical therapy visits). Federal law permits

states to impose nominal cost-sharing charges on some Medicaid beneficiaries and

for some services.

In FY2000, the most recent year for which enrollment data are available, 44.3

million persons were covered by Medicaid. The aged, blind and disabled represented

25% of Medicaid enrollment but accounted for 70% of program spending. Nondisabled children and adults, in contrast, comprised 67% of enrollment but only 26%

of spending. Between FY2000 and FY2002, total federal and state Medicaid

spending increased by about 25% from $206.1 billion to $258.2 billion. In FY2002,

Medicaid outlays from federal funds totaled $146.2 billion. Total FY2003 Medicaid

expenditures are expected to reach roughly $278 billion, with federal outlays

estimated at $158 billion.

Note: For more information, see CRS Report RS20245, Medicaid: A Fact

Sheet, CRS Report RS21071, Medicaid Expenditures, FY2000 and FY2001, and

2003 Green Book, Section 15: Other Programs, U.S. House of Representatives,

Committee on Ways and Means (forthcoming).

CRS-39

2. Medical Care For Veterans Without ServiceConnected Disability

Funding Formula

Medical care from the Department of Veterans Affairs (VA) is funded by the

federal government. VA medical services are defined as discretionary in the federal

budget. Appropriations requests are guided by estimates of the expected caseload,

and for FY2003, Congress provided $23.9 billion, for an expected caseload of nearly

4.9 million “unique” patients. VA is also authorized to use proceeds of the Medical

Care Collections Fund (MCCF)1 for medical care, an amount estimated to be $1.836

billion in FY2003.

In addition to care provided in VA facilities and under contract, the VA provides

per diem payments to states for care of eligible veterans in state facilities. The VA

also provides for medical care to certain spouses and children of certain serviceconnected disabled and other veterans under the Civilian Health and Medical

Program (CHAMPVA). The amount of FY2002 appropriations used to provide free

care to veterans who qualified because of having low income and/or low assets is

estimated at $8.1 billion.2

Eligibility Requirements3

Unlike other medical benefit entitlements such as Medicare or Medicaid,

eligibility for medical benefits from VA conveys varying degrees of rights. In

principle, all veterans are eligible to receive services from VA medical facilities,

although the potential total amount of services available to all veterans is contingent

on appropriations. Veterans with high-priority rights under VA law are generally

assured a full array of services, and those with lower-priority are provided services

if space and resources are available. Highest priority for the full range of medical

services is granted to veterans with severe, service-connected disabilities. Other

veterans have varying degrees of access for the different types of medical services,

with distinctions based on the severity of the condition, whether or not it is serviceconnected, level of income, and type of medical service provided.

In practice, there is no evidence that any veterans were denied services at any

VA facility in FY2002, and no denials are expected during FY2003 (except for

nursing home care, which is provided only on a space-available basis, regardless of

priority status). As a general rule, no veteran is denied medical services upon

The MCCF receives reimbursements from medical insurers with some responsibility for

care provided by VA to veterans enrolled in those insurer’s health plans, and copayments

and deductibles paid by about 10% of veterans receiving care whose eligibility obligates

them for such cost sharing.

All but 10% of the veterans served by VA receive their care free (but most do not have to

satisfy a needs test).

Eligibility rules are set forth in 38 CFR. Part 17.47 (2002). This program is no. 64.009 in

the Catalog of Federal Domestic Assistance.

CRS-40

presenting a health complaint to qualified personnel at a VA medical facility. For

administrative purposes, and to best manage the medical needs of individual patients,

veterans are encouraged to enroll in regional VA health care plans (enrollment for

veterans who do not have a service-connection, whose enrollments are above the

threshold for means-tested services, or who are not already enrolled has been

temporarily halted). There are 23 of these Veterans Integrated Service Networks

(VISNs) nationwide.

The largest category of veterans provided free medical care by VA consists of

persons who qualify for that care because their assets and income are below certain

annually adjusted standards (in 2003: single person, $24,644; with one dependent,

$29,576; for each additional dependent, $1,586), with possible additional adjustments

for regional differences in medical costs. VA estimates that out of 25 million

veterans, about 7 million would qualify for free care because they meet the lowincome standards. Veterans whose incomes in the previous calendar year were no

higher than the pension of a veteran in need of regular aid and attendance (in 2003:

single person, $16,169; with one dependent, $19,167; for each additional dependent,

$1,653) are also eligible for free medications; others pay copayments of $7 monthly

for prescriptions filled in VA pharmacies, up to a maximum of $840 per year. A

veteran applying for care under the low-income eligibility test is advised that reported

income is subject to verification by matching the amount shown on the application

with income reported to the Internal Revenue Service (IRS). Once eligible under the

income rules, a veteran remains eligible until determined upon (annual) reevaluation

to no longer meet the income standard. VA has estimated that about 38% of the

applications for medical services are from veterans entitled to free care because of

meeting the income standards.4

Benefit Levels

Benefits in VA facilities include inpatient hospital care, nursing home care,

domiciliary care, and outpatient care. The VA contracts with other facilities to

provide care to veterans in areas where VA medical facilities are unavailable. VA

is the largest provider of inpatient psychiatric services, specializes in treatments for

spinal injuries and prosthetics, and conducts or sponsors research in numerous

medical fields, with special emphasis on conditions traceable to a period of military

service. The VA offers medical care to the nation’s 25 million veterans, although a

relatively few (about 15%) of those eligible avail themselves of the services. In

FY2002, the VA provided care for 4.7 million persons, through 732 thousand

inpatient episodes and 47 million outpatient visits.

Data from VA show that about 38% of veterans who applied for care since the inception

of enrollment in VA health care plans at the start of FY1999 qualified as a result of meeting

the means-tested requirements for VA health care or qualified because of being eligible for

other means-tested programs such as VA pensions or Medicaid.

CRS-41

During FY2003, the Veterans Health Administration (VHA) operated 172

hospitals, 137 nursing homes, 843 outpatient clinics, 43 domiciliaries, and an

extensive pharmaceutical supply apparatus. Veterans’ medical care appropriations

were $21.3 billion in FY2002, $23.5 billion in FY2003 and are projected to reach

$24.8 billion in FY2004.

CRS-42

3. State Children’s Health Insurance Program

(SCHIP)

Funding Formula

The Balanced Budget Act of 1997 (BBA 97, P.L. 105-33) established the State

Children’s Health Insurance Program (SCHIP) under Title XXI of the Social Security

Act.1 The program offers federal matching funds for states and territories to provide

health insurance to targeted low-income children. In the original law, Congress

appropriated $39.7 billion in SCHIP federal matching grants for 10 years, FY1998

through FY2007.2 For each year from FY1998 through FY2001, total federal funding

available to states and territories was approximately $4.3 billion. For each of

FY2002, FY2003, and FY2004, federal funding equals $3.2 billion. State matching

funds for FY2002 are estimated at $1.6 billion.

Allotment of funds among the states is determined by a formula set in law. This

formula is based on a combination of the number of low-income children and lowincome, uninsured children in the state, and includes a cost factor that represents

average health service industry wages in the state compared to the national average.

All states have submitted SCHIP program plans to the Centers for Medicare and

Medicaid Services (CMS) (formerly known as the Health Care Financing

Administration). States have 3 fiscal years in which to draw down a given year’s

funding. Under SCHIP law as enacted in 1997, allotments not spent by the end of

the applicable 3-year period will be redistributed — by a method to be determined

by the Secretary of Health and Human Services (HHS) — to states that have fully

spent their original allotments for that year. Redistributed funds not spent by the end

of the fiscal year in which they are reallocated will officially expire.3

Like Medicaid, SCHIP is a federal-state matching program. For each dollar of

state spending, the federal government makes a matching payment, up to the state’s

The program number for SCHIP in the Catalog of Federal Domestic Assistance is 93.767.

It is codified at 42 U.S.C. 1397aa et seq. The final rule governing SCHIP was published on

January 11, 2001(42 CFR Parts 431, 433, 435, etc.) and was revised by an interim final rule

published June 25, 2001 (42 CFR Parts 431, 433, et al.), which took effect on August 24,

2001.

The law set aside 0.25% of SCHIP funds for territories and commonwealths (Puerto Rico,

Guam, Virgin Islands, American Samoa, and the Northern Marianas). It also set aside $60

million annually for Special Diabetes Grants for FY1998 through FY2002 only.

The Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000

(BIPA-2000), incorporated by reference into P.L. 106-554, created a special rule for the

redistribution and availability of unused FY1998 and FY1999 SCHIP allotments. The rule

allowed states that had not spent all of their allotments to retain a portion of their unspent

funds, thus decreasing the amount available for redistribution to states that had spent all of

their allotments. Unspent funds from FY1998 and FY1999 were made available through the

end of FY2002. For a more detailed discussion on SCHIP financing issues, see CRS Report

RL31977, SCHIP Financing Issues in the 108th Congress.

CRS-43

allotment. The state’s share of program spending is equal to 100% minus the

enhanced federal medical assistance percentage (the enhanced FMAP). The

enhanced FMAP is equal to the state’s Medicaid FMAP (for the regular FMAP

formula, see program no. 1 of this report), increased by the number of percentage

points that is equal to 30% multiplied by the number of percentage points by which

the FMAP is less than 100%.4,5

There is a limit on spending for SCHIP administrative expenses, which include

activities such as data collection and reporting, as well as outreach and education.

For federal matching purposes, a 10% cap applies to state administrative expenses.

It is imposed on the dollar amount that the state actually draws down from its

allotment to cover benefits under SCHIP, as opposed to 10% of its total allotment for

a given year.

Eligibility Requirements

Each state defines the group of targeted low-income children who may enroll

in SCHIP. The law allows states to use these factors in determining eligibility:

geography, age, income and resources, residency, disability status, access to other

health insurance and duration of eligibility for SCHIP. In general, funds cannot be

used for children who are eligible for the state’s Medicaid program or for children

covered by a group health plan or other insurance.

Under SCHIP states may cover children in families with incomes that are either:

(1) above the state’s applicable Medicaid eligibility standard under the rules in effect

in the state on March 31, 1997, but less than 200% of the federal poverty guideline,6

or (2) in states with Medicaid income levels for children already at or above 200%

of the poverty line, within 50 percentage points over the state’s Medicaid income

eligibility limit for children. Many states cover at least some groups of children in

families with income at or above 200% FPL.

In addition, several states have sought approval for special waivers of SCHIP

rules to use SCHIP funds to cover new groups, including some categories of adults.

Under Section 1115 of the Social Security Act, the Secretary of HHS has broad

For example, if a state has a Medicaid FMAP of 60%, under Medicaid a state must spend

40 cents for every 60 cents that the federal government contributes. The enhanced FMAP

would be equal to the Medicaid federal matching percentage increased by 12 percentage

points, (60%+[30% multiplied by 40 percentage points]=72%.) The state share would be

equal to 100%-72%=28%. Compared with Medicaid FMAPs, which range from 50% to

76.62% in FY2003 (a maximum of 83% is allowed in statute), the enhanced FMAP for the

SCHIP programs ranges from 65% to 83.63%. The enhanced FMAP is subject to a ceiling

of 85%.

On May 28, 2003, the Jobs and Growth Tax Relief Reconciliation Act of 2003 (P.L. 10827) was enacted and included a temporary increase in the Medicaid FMAP for the last 2

quarters of FY2003 and the first 3 quarters of FY2004.

In 2003, 200% of the federal poverty guideline was $24,240 for a family of two, $30,520

for a family of three, and $36,800 for a family of four (higher guidelines apply in Alaska and

Hawaii).

CRS-44

statutory authority to conduct research and demonstration projects under six

programs, including Medicaid and SCHIP. Using waiver authority, the Health

Insurance Flexibility and Accountability (HIFA) Initiative, announced by the Bush

Administration in August 2001, encourages states to develop statewide projects that

coordinate Medicaid and SCHIP with private health insurance coverage and targets

uninsured individuals with income below 200% of the federal poverty level, just as

SCHIP does. Later, the Administration indicated that unspent SCHIP funds could

be used to finance the HIFA initiative.7 As of June 12, 2003, CMS approved 14

SCHIP 1115 waivers (6 others were in review). Seven of the 14 approved waivers

are SCHIP HIFA demonstrations.8 Several of the approvals allow states to use

SCHIP funds to cover new groups of individuals such as pregnant women, parents

of SCHIP and Medicaid-eligible children, and childless adults.

Benefit Levels

States may choose from three options when designing their SCHIP programs.

They may expand their existing Medicaid program,9 create a new “separate state”

insurance program, or devise a combination of both approaches. As of July 8, 2003,

20 jurisdictions implemented Medicaid expansions (ME), 19 created separate state

programs (SSP), and the remaining 17 developed a combination approach

(COMBO).10

States that choose to cover targeted low-income children under Medicaid must

provide the full range of mandatory Medicaid benefits, as well as all optional services

specified in their state Medicaid plans. In creating a new separate state insurance

program, states may choose any of three benefit options: (1) a benchmark benefit

package, (2) benchmark equivalent coverage, or (3) any other health benefits plan

that the Secretary determines will provide appropriate coverage to the targeted

population of uninsured children.

A benchmark benefit package is one of the following three plans: (1) the

standard Blue Cross/Blue Shield preferred provider option plan offered under the

Federal Employees Health Benefits Program (FEHBP), (2) the health coverage that

Department of Health & Human Services, Centers for Medicare and Medicaid Services,

Report on the Health Insurance Flexibility and Accountability (HIFA) Initiative: State

Accessibility to Funding for Coverage Expansions, Oct. 4, 2001.

[http://www.cms.gov/schip/1115waiv.pdf].

Under Medicaid, states may cover targeted low-income children in one or more of the

following three ways: (1) by establishing a new optional eligibility group for such children

as authorized in BBA-97; (2) by liberalizing the financial rules for any of several existing

Medicaid eligibility categories using Section 1902(r)(2) authority, or (3) by liberalizing the

income standards or methodologies applicable to family coverage under Section 1931.

When states use the second or third approach (rather than creating a new optional coverage

group) services provided to the subset of targeted low-income children without other health

insurance are paid for out of the SCHIP allotments at the enhanced SCHIP FMAP rate.

Services delivered to the remaining children with other health insurance are paid for by

Medicaid at the regular FMAP rate.

[http://www.cms.hhs.gov/schip/statemap.asp].

CRS-45

is offered and generally available to state employees in the state involved, or (3) the

health coverage that is offered by an HMO with the largest commercial (nonMedicaid) enrollment in the state involved.

Benchmark equivalent coverage is defined as a package of benefits that has the

same actuarial value as one of the benchmark benefit packages. A state choosing to

provide benchmark equivalent coverage must cover each of the benefits in the “basic

benefits category.” The benefits in the basic benefits category are inpatient and

outpatient hospital services, physicians’ surgical and medical services, lab and x-ray

services, and well-baby and well-child care, including age-appropriate

immunizations. Benchmark equivalent coverage must also include at least 75% of

the actuarial value of coverage under the benchmark plan for each of the benefits in

the “additional service category.” These additional services include prescription

drugs, mental health services, vision services, and hearing services. States are

encouraged to cover other categories of services not listed above. Abortions may not

be covered, except in the case of a pregnancy resulting from rape or incest, or when

an abortion is necessary to save the mother’s life.

Title XXI gives states authority to determine the amount, duration and scope of

the services covered unless the state chooses to provide a benchmark plan.

Benchmark equivalent plans may limit their benefit packages in any way they choose

as long as the entire package is certified to be an actuarial equivalent of the

benchmark plan.

While federal law permits states to impose cost-sharing for some beneficiaries

and services, cost-sharing is not permitted for well-baby or well-child care services,

and American Indian and Alaskan Native children are exempt from all cost sharing.

Apart from these general exceptions, states that choose to cover targeted low-income

children under Medicaid must follow the cost-sharing rules of the Medicaid program.

Generally, Medicaid does not allow cost sharing for medical services (e.g.,

deductibles, co-payments, and co-insurance), and cost sharing associated with

program participation (e.g., enrollment fees, and premiums) is limited to nominal

amounts. If the state implements SCHIP through a separate state program, premiums

or enrollment fees may be imposed, but they are subject to limits.

Under separate state programs, for families with incomes under 150% of the

federal poverty line, income-related charges (i.e., enrollment fees, premiums, or

similar charges tied to the total gross family income) may not exceed the amounts set

forth in federal Medicaid regulations.11 For children whose family income is at or

below 100% FPL, service-related cost-sharing is limited to nominal amounts as

defined in Medicaid regulations.12 For children whose family income is between

101% and 150% FPL, service-related cost-sharing must meet “adjusted nominal

amounts.”13 These adjusted amounts reflect the enrollees’ increased ability to pay.

42 CFR. §447.52 (2002)

42 CFR. §447.54 (2002)

42 CFR. §457.555 (2002).

CRS-46

Cumulative cost-sharing maximums for each 12-month enrollment period must not

exceed 5% of the family’s annual income.14

For families with income above 150% of the federal poverty line, service-related

cost sharing may be imposed in any amount, provided cost-sharing for higher income

children is not lower than cost-sharing for lower income children. However, the total

annual aggregate cost-sharing (including premiums, deductibles, co-payments and

any other charges) for all targeted low-income children in the family may not exceed

5% of total family income for the year. Regardless of the family’s cumulative costsharing maximum, states must: (1) inform families of these limits; (2) provide a

mechanism for families to stop paying once the cost-sharing limits have been

reached; and (3) provide reasonable notice of any missed payments prior to

disenrollment.

Early in the program, enrollment rates were low, but by FY2002, the pace of

enrollment had increased. Estimates from CMS15 indicated that as of December

1998, nearly 1 million children (982,000) were enrolled in SCHIP under 43

operational state programs, and by the end of FY1999, nearly 2 million children

(1,979,459) were enrolled under 53 operational state programs.16 Preliminary data

show that total SCHIP enrollment reached 5.3 million children in FY2002. Of this

total, 1.3 million were targeted low-income children covered under Medicaid

expansions, and 4.0 million children were covered in separate state programs.17

Preliminary data show that total SCHIP enrollment for adults reached 349,118 in

FY2002.

SCHIP spending during the first 4 years of the program, (FY1998-FY2001), was

well below federal appropriations, but has increased over time.18 For FY1998,

SCHIP program federal expenditures totaled $122 million; for FY1999, $922

million; for FY2000, $1.93 billion, and for FY2001 federal expenditures increased

to $2.62 billion. In FY2002, federal SCHIP expenditures equaled $3.78 billion.

FY2002 is the first fiscal year in which state spending of available SCHIP funds

exceeded the SCHIP program appropriations for that year. This trend is likely to

continue as additional states spend all of their available funds and are eligible for

redistributions of unspent funds from earlier annual allotments. However, while

more states will be eligible for redistributions there will be fewer funds available for

42 CFR. §457.560(b) (2002)

Centers for Medicare and Medicaid Services (formerly known as HCFA), A Preliminary

Estimate of the Children’s Health Insurance Program Aggregate Enrollment Numbers

Through December 31, 1998 (background only), Apr. 20, 1999.

Health Care Financing Administration, The State Children’s Health Insurance Program,

Annual Enrollment Report, October 1, 1998-September 30, 1999. (no date)

Centers for Medicare and Medicaid Services, Fiscal Year 2002 Number of Children Ever

Enrolled in SCHIP — Preliminary Data Summary, Jan. 30, 2003.

For each of FY1998 through FY2001, total federal funding available to states and

territories was approximately $4.3 billion. For each of FY2002, FY2003, and FY2004,

federal funding available to states and territories equals $3.2 billion.

CRS-47

redistribution to such states. In the absence of statutory changes to SCHIP financing

provisions, CMS projects shortfalls for some states over the second half of the

program (FY2003-FY2006). In its March 2003 baseline, CBO projected that total

federal SCHIP spending will grow to $5.0 billion in FY2007.

Note: For more information about SCHIP, see CRS Report RL30473, The State

Children’s Health Insurance Program (SCHIP): A Brief Overview; CRS Report

RL30642, The State Children’s Health Insurance Program: Eligibility, Enrollment,

and Program Funding; and CRS Report RL31977, SCHIP Financing Issues for the

108th Congress.

CRS-48

4. General Assistance (Medical Care Component)1

Funding Formula

No federal funds are available for this program.

As of mid-1998, medical assistance for recipients of non-federally funded cash

aid (generally known as General Assistance (GA)) and for other persons ineligible

for Medicaid2 was offered in 32 states, including the District of Columbia (D.C.). In

13 jurisdictions, this aid was fully state funded;3 in seven states, costs generally were

paid by a combination of state and local funds;4 in seven states, medical benefits were

wholly paid with local funds.5 In five states, even though they were not in categories

usually eligible for federally-funded medical assistance, recipients of GA cash

received Medicaid.6 This aid was allowed under waivers from Medicaid law, and

costs were paid by federal and state funds. In the remaining 19 states, ongoing

medical benefits generally were not offered to persons ineligible for federally-funded

aid.7 Estimated GA medical payments (state-only dollars) in FY2002 totaled $5

billion.

Eligibility Requirements

To receive GA medical assistance, a person generally must be deemed needy

and live where the program is available. In 1998, most of the 32 states offering this

aid made eligible all recipients of GA cash payments, but several specified that

persons had to be in medical need and some imposed special medical income

eligibility requirements. Thus, Ohio offered medical assistance to all GA recipients

and to needy able-bodied persons who would become incapacitated without

medication. However, some jurisdictions set more liberal eligibility rules for GA

medical and than for GA cash benefits.

Most data reported here are based on the most recent national study of state general

assistance programs (State General Assistance Programs, 1998, conducted by the Urban

Institute) and subsequent information from some states.

Using waivers from federal law, some states provide Medicaid to all recipients of GA cash

benefits, even if they are not in categories usually eligible.

AL, CO, KS, MD, MI, MN, MO, NE (program for the disabled), PA, RI, UT, VT, and WA.

IL, ME, NJ, NY, OH, VA (some counties) and WI (some counties).

CA, ID, MT (some counties), NV, NH, NC (some counties) and SD. (Not counted here

in NE program for the nondisabled, which provides medical aid at county expense.)

DE, DC, HI, MA, and OR. In addition, TN, which has no GA cash program, offered

medical aid to a wide range of needy persons under a Medicaid waiver.

Ten of these states had no statewide GA program (AL, AK, LA, MS, OK, SC, TN, TX,

WV, and WY). AZ, CO, and NM offered uniform statewide cash GA but no GA medical

assistance; in some of their counties, FL, GA, KY, and ND offered GA cash aid, but no

medical benefits; Indiana and Iowa offered GA cash aid statewide, but not medical benefits.

CRS-49

Benefit Levels

Using waivers from federal law, some states in mid-1998 made all GA

recipients eligible for Medicaid and its comprehensive services: Delaware (for its

Diamond State Health Plan), Hawaii (for QUEST), and Oregon (for the Oregon

Health Plan). D.C. and Massachusetts also offered Medicaid to all GA cash

recipients. Among the other 27 states with medical assistance for recipients of GA

cash, benefits generally were less comprehensive than those of Medicaid. Five

states8 offered inpatient and outpatient hospital care, physician services, and

prescription drugs; another six9 added nursing home care to the foregoing list of

benefits. Some restricted GA medical benefits to physician services and prescription

drugs, and some offered aid only in emergencies. Maryland’s programs of Primary

Care for the Medically Indigent and Maryland Pharmacy Assistance (for GA disabled

adults and others who meet medical income eligibility limits) provided only basic

physician services and a limited list of prescription drugs. The Urban Institute study

noted that most of the states and counties without a medical component in their GA

program have alternative medical assistance available to at least some GA cash

recipients. Examples include indigent health care programs or charity hospital

systems.

Data from the Centers for Medicare and Medicaid Services (Office of the

Actuary, National Health Statistics Group) indicate that state-local outlays for GA

medical assistance in FY2002 totaled $4,955.8 million, up 5% from FY2001, but

down 10.4% from the FY1992 record high of $5,531.7 million. These data exclude

premiums paid by welfare agencies for Medicare and for health maintenance

organizations (HMOs) and health insurance, which presumably are reimbursed by

Medicaid. Composition of FY2002 GA medical spending: hospital care, 37.5%;

prescription drugs, 43.4%; payments to medical professionals, 12.4% (physician and

clinical services, 10.2%; dentists, 0.9%; and other professionals, 1.2%); nursing

homes, 3.9%; home health care, 0.5%; other care, 2%; and durable medical

equipment, 0.2%.

The composition of GA medical outlays changed over the 1993-2003 decade.

Spending on prescription drugs rose from $901 million to $2.2 billion; but outlays

for hospitals dropped from $3.2 billion to $1.9 billion. The share of expenditures

attributed to prescription drugs more than doubled; the hospital share dropped by

40%.

CA (Los Angeles County); CT; IL (Chicago), prescription drugs only if required for life

maintenance or to avert a life-threatening condition; MN; and MO.

ID (Ada County); KS; NE; NV (Clark County); SD (Minnehaha Country); and WA.

CRS-50

5. Indian Health Services

Funding Formula

Indian Health Service (IHS) appropriations are allocated among its 12 service

areas through a “historical,” or “program continuity” basis, under which each area

can expect to receive its recurring base budget from the previous year, plus an

increase in certain mandatory cost categories. Using a Resource Allocation

Methodology (RAM), the Service distributes a small portion of its appropriation to

areas and tribes based on documented health deficiencies. Tribes may assume from

the IHS the administration and operation of health services and programs in their

communities, and about 52% of IHS funds are used by Indian tribes to deliver IHS

services to their own communities. The Service collects reimbursements from the

Medicare and Medicaid programs for services that it provides to members of its

eligible population who are also eligible for those programs. In FY2001, IHS

collected $484 million in reimbursements, while in FY2002, this number increased

to $514 million. For FY2002, total program appropriations were $2.824 billion, up

$135 million from the FY2001 appropriation of $2.689 billion.

Eligibility Requirements1

Eligible under Public Health Service regulations are persons of American Indian

or Alaskan Native (AI/AN) descent who: (1) are members of a federally recognized

Indian tribe; (2) reside within an IHS Health Service Delivery Area (HSDA); or (3)

are the natural minor children (18 years old or younger) of such an eligible member

and reside within an IHS HSDA. The program imposes no income test; any eligible

AI/AN can receive health services. The program serves Indians living on federal

reservations, Indian communities in Oklahoma and California, and Indian, Eskimo,

and Aleut communities in Alaska. According to the 2000 census, more than 57% of

AI/AN reside in urban areas. Under the Indian Health Care Improvement Act of

1976, P.L. 94-437, as amended, the IHS contracts with 34 urban Indian organizations

to make health services more accessible to 605,000 urban Indians. Combined, all

IHS programs serve between 1.6 million AI/AN.

Benefit Levels

The IHS provides hospital, medical, and dental care and environmental health

and sanitation services as well as outpatient services and the services of mobile

clinics and public health nurses, and preventive care, including immunizations and

health examinations of special groups, such as school children. All services are

provided free of charge to beneficiaries. If the eligible AI/AN has private insurance,

IHS will be reimbursed for the services provided. Benefits are provided through 155

service units, 49 IHS hospitals, 5 school health centers, 231 health centers, and over

309 smaller health stations and satellite clinics; Alaskan village clinics; contracts

Regulations are found at 42 CFR. Part 136 (2002). This program is no. 93.228 in the

Catalog of Federal Domestic Assistance.

CRS-51

with non-federal hospitals, clinics, private physicians and dentists; and contractual

arrangements with state and local health organizations.

CRS-52

6. Consolidated Health Centers

Funding Formula

The Health Care Safety Net Amendments of 2002, P.L. 107-251, amended the

Public Health Service Act (PHS Act) to reauthorize the health centers grant program

through FY2006. The health centers program includes community health centers,

migrant health centers, health centers for the homeless, and health centers for

residents of public housing. They are codified under Section 330 of the PHS Act.

The program does not have a statutory formula. The grant applicant must assume

part of the project costs, which are determined on a case-by-case basis.

Centers receive grant money to provide primary care services to groups that are

determined to be medically underserved. Grants are awarded through the Bureau of

Primary Health Care of the Health Resources and Services Administration (HRSA)

of the U.S. Department of Health and Human Services (HHS). Centers are required

to seek third-party reimbursement from other sources, such as Medicare and

Medicaid. State and local governments may also contribute. Centers may receive

one or more of the following types of grants: (1) planning grants, to plan and

develop health centers or a comprehensive service delivery network; (2) operating

grants, to assist with operation costs of a center; and (3) infant mortality grants, to

assist in the reduction of infant mortality and morbidity among children less than 3

years of age and to develop and coordinate service and referral arrangements between

health centers and other entities for the health management of pregnant women and

children. FY2002 appropriations were $1.3 billion.

Eligibility Requirements1

A health center is an entity that provides health care services to a medically

underserved population, or a special medically underserved population comprised of

migratory and seasonal agricultural workers, the homeless, and residents of public

housing by providing required primary health services and additional health services

as may be appropriate for particular centers. By regulation, medically underserved

areas are designated by the HHS Secretary on the basis of such factors as: (1) ratio

of primary care physicians to population, (2) infant mortality rate, (3) percentage of

population aged 65 and over, and (4) percentage of population with family income

below the poverty level. Profit-making organizations are not eligible for health

center grants.

All residents of an area served by a health center are eligible for its services.

Benefit Levels

Regulations limit free service to families with income at or below the federal

poverty income guidelines. The 2003 federal poverty income guideline in the 48

Regulations for community health centers are found at 42 CFR Subpart 51c (2002). This

program is no. 93.224 in the Catalog of Federal Domestic Assistance.

CRS-53

contiguous states is $18,400 for a family of four. Nominal fees may be collected

from these individuals and families, under certain circumstances. Individuals and

families with annual incomes greater than the poverty guideline but below 200% of

it are required to pay for services from a fee schedule adjusted on the basis of the

patient’s ability to pay. Full payment is required from those with income that

exceeds twice the poverty level.

The centers provide a range of primary health services on an ambulatory basis,

including diagnostic, treatment, preventive, emergency, transportation, and

preventive dental services. They can arrange and pay for hospital and other

supplemental services in certain circumstances if approved by the Secretary.

Funding for the health centers for FY2003 was $1.5 billion (appropriations), and

the annual service population was an estimated 9.6 million persons.

Note: For more information, see CRS Report 97-757, Federal Health Centers

Program.

CRS-54

7. Maternal and Child Health Services Block Grant1

Funding Formula

The Maternal and Child Health (MCH) Services Block Grant supports activities

to improve the health status of mothers and children. Most of the funds are

distributed to state governments to pay for services; however, some funds are set

aside for use by the federal government to finance special projects of regional and

national significance (SPRANS) and the community integrated service systems

program (CISS). State allocations are based on: (1) a state’s share of FY1981 levels

of funding for programs that were combined into the block grant when it was

authorized in 1981; and (2) the number of low-income children in the state. States

must contribute $3 for every $4 of federal funds awarded. States are required to use

at least 30% of their block grant allocations for preventive and primary care services

for children and 30% for services for children with special needs. States may use the

remaining 40% for services for either of these groups or for other appropriate

maternal and child health services, including preventive and primary care services for

pregnant women, mothers, and infants up to age 1. States may use no more than 10%

of their allocations for administrative costs.

Federal law requires that 15% of the appropriation for the block grant up to

$600 million be set aside for SPRANS activities in categories that include research,

training, genetic disease programs and newborn genetic screening, hemophilia

programs, and maternal and child health improvement, especially infant mortality.

When the appropriation for the block grant exceeds $600 million, the law

authorizes that 12.75% of the amount over $600 million be set aside for CISS

projects. Funds from this set-aside are used for initiatives that include case

management, projects to increase the participation of obstetricians and pediatricians

in both the block grant program and Medicaid, integrated delivery systems, rural or

hospital-based MCH projects, and community-based programs including day care for

children who usually receive services on an inpatient basis. FY2002 appropriations

were $731 million, and non-federal matching funds were estimated at $548 million.

(The FY2003 appropriation declined to $730 million.)

P.L. 97-35, the Omnibus Budget Reconciliation Act of 1981, established a Maternal and

Child Health (MCH) Services Block Grant under Title V of the Social Security Act. The

block grant replaced the previous programs of Maternal and Child Health Services and

Crippled Children’s Services, also in Title V, and included the following other existing

federal programs: supplemental security income services for disabled children, lead-based

paint poisoning prevention, genetic diseases, sudden infant death syndrome, hemophilia

centers, and adolescent pregnancy prevention.

CRS-55

Eligibility Requirements2

States determine eligibility criteria for MCH block grant services. The law

provides that block grant funds are to be used by the states “to provide and to assure

mothers and children (in particular those with low income or with limited availability

of health services) access to quality maternal and child health services.” Low-income

mothers and children are those with family income below 100% of federal poverty

guidelines — $18,400 per year for a family of four in 2003 (higher in Alaska and

Hawaii).

Benefit Levels

States determine the level of services provided under the block grant. These

services may include prenatal care, well-child care, dental care, immunization, family

planning, and vision and hearing screening services. They may also include inpatient

services for children with special health care needs, screening services for lead-based

poisoning, and counseling services for parents of sudden infant death syndrome

victims.

States are allowed to charge for services; however, they may not charge mothers

and children whose family incomes are below federal poverty guidelines. Charges

must be based on a sliding scale that reflects the income, resources, and family size

for those with family incomes above poverty.

In FY2002 Title V provided services to 2.2 million pregnant women, 3.7

million infants, almost 1 million children with special health care needs, and 2.2

million other women of child-bearing age.

Note: For more information, see CRS Report 97-350, Maternal and Child Health

Block Grant.

Regulations are found at 45 C.F.R. Part 96 (2002). This program is no. 93.994 in the

Catalog of Federal Domestic Assistance. It is codified at 42 U.S.C.701 et seq.

CRS-56

8. Title X Family Planning Services

Funding Formula

Grants are provided for voluntary family planning services through the family

planning program, established by Title X of the Public Health Service Act. There is

no requirement that grantees match federal funds at a specified rate, but regulations

specify that no family planning clinic project may be fully supported by Title X

funds. Congress has continued to appropriate money for the program even though

Title X has not been reauthorized since FY1985. Grants for family planning clinics

are made to states and territorial health departments, hospitals, universities and other

public and nonprofit agencies. Appropriations for FY2003 were $273 million.

Eligibility Requirements1

The law requires that priority for clinic services go to persons from low-income

families. Clinics must provide family planning services to all persons who request

them, but the priority target group has been women aged 15-44 from low-income

families who are at risk of unplanned pregnancy. Clinics are required to encourage

family participation.

Clinics must provide services free of charge (except to the extent that Medicaid

or other health insurers cover these services) to persons whose incomes do not

exceed 100% of the federal poverty income guidelines ($18,400 for a family of four

in the 48 contiguous states in 2003). A sliding payment scale must be offered for

those whose incomes are between 100% and 250% of the poverty guideline.

Benefit Levels

Participating clinics must offer a broad range of family planning methods and

services. Required services include natural family planning methods and supplies,

counseling services, physical examinations (including testing for cancer and sexually

transmitted diseases), infertility services, services for adolescents, pregnancy tests,

periodic follow-up examinations, referral to and from other social and medical

service agencies, and ancillary services. The law forbids use of any Title X funds in

programs where abortion is a method of family planning.

In FY2002, approximately 4.8 million persons received family planning services

through 4,600 clinic sites supported by 85 service grantees. The clinics administered

more than 3 million cervical cancer screenings, 2.8 million breast cancer screenings,

and 600,000 HIV tests. An estimated one-third of all clients served at Title X clinics,

1.6 million per year, are adolescents.

Note: For more information, see CRS Report 98-1048, The Title X Family Planning

Program.

Regulations governing Title X family planning services are found in 42 CFR Part 59

(2002). This program is no. 93.217 in the Catalog of Federal Domestic Assistance.

CRS-57

9. Medical Assistance to Refugees, Asylees, Other

Humanitarian Cases

Funding Formula

The Immigration and Nationality Act (INA) authorizes 100% federally funded

medical assistance for needy refugees and asylees during their first 3 years in the

United States, and other legislation authorizes similar assistance for certain Cuban

and Haitian entrants1 and for certain Amerasians.2 However, since FY1992, funding

has been appropriated to provide medical care only for the first 8 months after entry.

These benefits are administered by the Department of Health and Human Service’s

Office of Refugee Resettlement (ORR). For refugee medical assistance (RMA),

ORR expenditures amounted to an estimated $74 million in FY2002.3

Eligibility Requirements4

A person must (a) have been admitted to the United States as a refugee or asylee

under the Immigration and Nationality Act or have been paroled as a refugee or

asylee under the Act, (b) be a Cuban or Haitian paroled into the United States

between April 15 and October 20, 1980, and designated a “Cuban/Haitian entrant,”

or be a Cuban or Haitian national paroled into the United States after October 10,

1980, (c) be a person who has an application for asylum pending or is subject to

exclusion or deportation and against whom a final order of deportation has not been

issued, or (d) be a Vietnam-born Amerasian immigrant fathered by a U.S. citizen.

If a needy person in one of the above groups meets the income and assets tests

prescribed by his state for Medicaid eligibility but does not otherwise qualify for that

program because of its categorical requirements, such as family composition, the

person is eligible for RMA. Under the Personal Responsibility and Work

Opportunity Reconciliation Act of 1996 (P.L. 104-193), as amended by P.L. 105-33,

these persons are now eligible for 7 years after entry (earlier law gave permanent

eligibility). After 7 years their continued participation is at state option, as it is with

other legal permanent residents.5

Benefit Levels

Medical benefits consist of payments made on behalf of needy refugees to

doctors, hospitals, and pharmacists. Federal law requires state Medicaid programs

Title V of the Refugee Education Assistance Act (P.L. 96-422)

Section 584 of the FY1988 Foreign Operations Appropriations Act (P.L. 100-202).

Estimate, based on 1998-1999 proportion of combined medical and cash refugee

expenditures attributed to medical services.

Regulations governing this program are found in 45 CFR Parts 400-401 (2002). This

program is no. 93.566 in the Catalog of Federal Domestic Assistance.

Wyoming has opted to limit noncitizens, including legal permanent residents, to emergency

Medicaid only.

CRS-58

to offer certain basic services, but authorizes states to determine the scope of services

and reimbursement rates, except for hospital care.

CRS-59

Cash Aid

CRS-60

10. Supplemental Security Income (SSI)

Funding Formula

Since its January 1974 beginning, Supplemental Security Income (SSI) has

provided a minimum income floor, financed by U.S. general revenue and

administered by the Social Security Administration (SSA), to persons eligible under

federal rules. Some states chose to provide additional payments to SSI recipients at

their own expense. In addition, a “grandfather” clause requires states to provide

supplements to a small number of persons, previously enrolled in the pre-SSI

programs of federal-state cash aid for needy aged persons and blind or disabled

adults, whose income otherwise would fall below what it was in December 1973.1

If a state chooses to have the federal government administer its supplements, it

must agree to provide supplements for all federal SSI recipients of the same class and

pay an administration fee to SSA for the service.2 If states administer their own

supplements, they are generally free to design their own supplementary programs and

may adopt more restrictive eligibility rules than those of SSI. As of January 2003,

the federal government administered supplements for 15 jurisdictions.

Total SSI outlays in FY2002 were $38.5 billion, with $33.9 billion (87% of the

total) from federal funds. The federal share of maximum SSI benefits ranged from

50% in Alaska to 100% in the seven jurisdictions where no recipient received a

supplement (Arkansas, Georgia, Kansas, Mississippi, Tennessee, West Virginia, and

the Northern Mariana Islands).

Eligibility Requirements3

Title XVI of the Social Security Act entitles to SSI payments persons who are

(1) aged 65 and over, blind or disabled (adults and children of any age); (2) whose

counted income and resources fall within limits set by law and regulations, and (3)

who live in one of the 50 states, the District of Columbia, or the Northern Mariana

Islands. Also eligible is a child who lives overseas with a parent who is on military

assignment, provided the child received SSI before the parent reported for overseas

duty.

The U.S. Social Security Administration (SSA) reported the number of recipients of

mandatory state supplementary payments at 1,220 in March 2003.

Since FY1994, Congress has required states to pay for federal administration of state

supplementary payments. Fees began at $1.67 per monthly payment in FY1994 and reached

$8.50 in FY2002. P.L. 105-33 provided that after FY2002, the rate was to be adjusted for

changes in the Consumer Price Index or set at a level determined by the Commissioner of

Social Security. For FY2003, the fee is $8.59.

Federal regulations governing SSI are found in 20 CFR Part 416 (2002). Income and

resources rules are in Subparts K and L, respectively. This program is no. 96.006 in the

Catalog of Federal Domestic Assistance. SSI is codified in 42 U.S.C. Section 1381 et seq.

CRS-61

To be eligible for SSI on grounds of disability, an adult must be unable to

engage in any “substantial gainful activity”4 because of a medically determined

physical or mental impairment expected to result in death or that has lasted, or can

be expected to last, for at least 12 months. Under terms of the 1996 welfare reform

law (P.L. 104-193) a child under age 18 may qualify as disabled if he or she has an

impairment that results in “marked and severe” functional limitations. Previously a

child could qualify if his impairment were of “comparable severity” to that of an

eligible adult.

In addition, to qualify for SSI a person must be (1) a citizen of the United States

or (2) if not a citizen, (a) an immigrant who was enrolled in SSI on August 22, 1996

or who entered the United States by that date and subsequently became disabled; (b)

a refugee or asylee who has been in the country or granted asylum, respectively, for

fewer than 7 years, (c) a person who has worked long enough to be insured for Social

Security, usually 10 years (work test gives credit to work by spouse or parent of an

alien child); or (d) a veteran or active duty member of the armed forces (spouses or

unmarried dependent children of veterans/military personnel also qualify).

For basic federal benefits, countable income limits in 2003 are $582 monthly

per individual and $829 per couple. These income ceilings equal maximum federal

benefits of the program (see below for benefit details and for rules about what

income is disregarded). For states with supplementary SSI benefits, countable

income limits are higher, ranging in 2002 up to $907 monthly per individual (living

independently) in Alaska.

Since 1989, the countable resource limit has been $2,000 per individual and

$3,000 per couple. Excluded assets include a home; the first $2,000 in equity value

of household goods and personal effects; the full value of an auto if needed for

employment or medical treatment, or if modified for use by a handicapped person,

otherwise, the first $4,500 in market value of the auto; and a life insurance policy not

exceeding $1,500 in cash surrender value and burial plots and funds, subject to a

limit.

P.L. 98-21 requires the Social Security Administration (SSA), when notifying

Social Security beneficiaries aged 64 about their approaching eligibility for Medicare,

to inform them also about SSI.

Benefit Levels

The Social Security Act establishes benefit levels and requires that whenever

Social Security benefits are increased because of an automatic cost-of-living

adjustment (COLA), SSI benefits be increased at the same time and by the same

percentage.

Defined by regulation as monthly earnings, net of impairment-related expenses, of $800,

effective January 1, 2003. The amount is to be adjusted annually.

CRS-62

SSI basic monthly guarantees:5

1996

1997

1998

1999

2000

2001

2002

2003

Individual

$470

$484

$494

$500

$512

$530

$545

$552

Couple

705

726

741

751

769

796

817

829

From 1975 through 1982, COLAs were paid each July. In passing the Social

Security Amendments of 1983, Congress accepted President Reagan’s proposal to

delay the 1983 COLA for 6 months, to January 1984, and thereafter to adjust benefits

each January. At the same time it voted an increase of $20 monthly in SSI benefits

($30 per couple), payable in July 1983.

States that supplement SSI benefits are required to “pass through” to recipients

an increase in the federal basic benefit.6 However, when Congress deferred the 1983

COLA and instead enacted the $20 benefit increase (about 7%), it required states to

pass through only about half this amount (the 3.5% increase that the regular COLA

would have yielded). As of January 2002, state supplements for aged persons living

independently were offered in 25 states and ranged from $1.70 in Oregon to $362 in

Alaska.

To assure some gain from work, SSI disregards a portion of recipients’ earnings;

namely, $65 per month, plus 50% of the balance.7 Because of this rule, aged SSI

recipients without Social Security benefits or other unearned income who work

remain eligible for a declining SSI payment until gross earnings equal double their

basic benefit plus $85 monthly.8 In a state that does not supplement the basic federal

benefit, the gross income limit in 2003 for an aged SSI recipient with only wage

income is $1,189 monthly in earnings. The gross income limit is higher in states that

supplement the federal benefit.

The law requires a one-third SSI benefit reduction for those who live in another person’s

household and receive support and maintenance in kind from him.

The requirement for passthrough can be satisfied by either of these conditions: (1) if a

state’s total spending for SSI supplements during the relevant 12-month period is not below

that for the preceding 12 months (P.L. 94-585) or (2) if state SSI supplementary payment

levels equal those in effect in March 1983 (P.L. 98-21).

For blind or disabled recipients, the law provides additional deductions from earnings.

Blind: disregard the first $65 earned, plus one-half of the rest, plus reasonable work

expenses. Disabled: disregard the first $65 earned, work and living expenses caused by the

disability, plus one-half of the rest. For both blind and disabled SSI recipients, income

needed for the fulfillment of a self-support plan approved by the SSA Commissioner also

is disregarded. (The special expense deduction for the disabled was enacted in June 1980

as a provision of P.L. 96-265.)

The $85 disregard consists of the first $20 of any income plus $65 in earnings.

CRS-63

In all but 11 states,9 SSI recipients automatically are eligible for Medicaid. In

the 11 states with more restrictive eligibility rules, states must deduct medical

expenses of SSI recipients in determining their countable income.

Disabled SSI recipients whose counted monthly earnings exceed the $800

“substantial gainful activity” test that determines disability status are eligible for

special cash benefits (calculated as though they still had disability status), as long as

their gross earnings are below the regular SSI ceiling ($1,189 in 2003 in a state

without supplementation). The special cash benefit preserves Medicaid eligibility for

the disabled worker.10 In 1996 (P.L. 104-121), Congress ended SSI (and Social

Security Disability Insurance) benefits for persons disabled because of their addiction

to drugs or alcohol.

In December 2002, federally administered SSI benefits went to 6,787,867

persons,11 including 914,821 children. Benefits averaged $322 to aged recipients,

$439 to the blind, $418 to the disabled (and $488 for children). About 36% of the

Nation’s SSI recipients of federally administered payments also receive Social

Security, and 4.1% have earnings (December 2002 data). As of that date, SSI checks

were supplementary to Social Security benefits for 58% of aged SSI recipients, 34%

of blind recipients, and 30% of disabled recipients. In December 2001, income was

earned by about 2% of aged recipients and by 7% and 5%, respectively, of blind and

disabled recipients. Social Security benefits of dual recipients averaged $414.

Earnings of SSI recipients averaged $318 monthly.12

FY2002 SSI expenditures totaled $38.5 billion (federal funds, $33.9 billion;

state funds, $4.7 billion). Federal SSI spending represented 1.7% of all federal

outlays.

Note: See also CRS Report 94-486, Supplemental Security Income (SSI): A

Fact Sheet.

CT, HI, IL, IN, MN, MO, NH, ND, OH, OK, and VA.

The Balanced Budget Act of 1997 permitted states to provide Medicaid to disabled

persons who lost SSI eligibility because of earnings, provided their incomes did not exceed

250% of the federal poverty guidelines. P.L. 106-170, enacted in December 1999, allows

states to provide Medicaid to disabled working persons with incomes above 250% of the

poverty guidelines.

In December 2002, 151,989 other persons received only state-administered supplementary

SSI benefits.

Social Security Administration, Annual Statistical Supplement, 2002.

CRS-64

11. Earned Income Tax Credit (EITC)1

Funding Formula

This benefit is 100% federally funded and is provided through the tax system.

FY2002 outlays (tax year 2001) totaled $27.8 billion. (Another $4.5 billion in credits

was used to offset taxes and is not included in this report.)

Eligibility Requirements

Unlike most tax credits, the EITC is a “refundable” credit. A person need not

owe or pay any income tax to receive the EITC. However, an eligible worker must

apply for the credit by filing an income tax return at the end of the tax year. A person

may receive advance payment of the credit by filing an earned income eligibility

certificate with his or her employer.2 To be eligible for the EITC, married couples

generally must file a joint income tax return. The EITC is a percentage of the

person’s earnings, based on the number of children, up to a maximum earned income

amount. Beginning at the phase-out income level, the EITC is reduced by the phaseout percentage for every dollar of earnings (or adjusted gross income [AGI],

whichever is greater) above the phase-out income level. Persons with earnings above

the level at which the EITC is reduced to $0 are not eligible for the EITC.

The Earned Income Tax Credit (EITC) is available to a parent (or parents) with

earnings and a qualifying child. A qualifying child must be: (1) a son, daughter,

grandson, granddaughter, stepson, stepdaughter or foster child of the tax filer; (2) be

less than age 19 (24 if a full-time student); and reside with the tax filer for more than

one-half of the tax year (all year if a foster child). The tax filer does not have to meet

a financial support test for the child and the child does not need to be claimed by the

tax filer as a dependent to qualify for the earned income credit. The tax filer must be

a U.S. citizen or resident alien and live in the United States for more than one-half

of the tax year, unless the tax filer is in the U.S. military and on duty overseas.

The EITC also is available to workers ages 25 through 64 who have no eligible

children and whose AGI is less than $11,060 ($12,060 for married couples) in tax

year 2002.3

In 1995, Congress established a limit on investment income for EITC

eligibility.4 The 1996 welfare reform law changed filing procedures to make it less

likely that undocumented workers could gain access to the EITC by requiring both

Called Earned Income Credit (EIC) by the Internal Revenue Service (IRS) in tax forms

and literature.

The option for advance payments by an addition to paychecks is not available for childless

couples or individuals.

The EITC became available for adults with no eligible children in 1994.

P.L. 104-7 set a limit of $2,350 in annual income from interest and dividends. P.L. 104193 changed this “disqualifying income” limit, setting it at $2,200 in 1996 dollars and

applied it to net capital gains and net passive income as well as interest and dividends.

CRS-65

the tax filer and qualifying children to have social security numbers. In 1996 and

1997, Congress broadened the definition of income used to phase out the EITC for

filing units above the phase-out income threshold.5

In response to an Internal Revenue Service (IRS) study indicating a high

incidence of unwarranted claims from tax filers, Congress enacted provisions against

fraud in the Taxpayer Relief Act of 1997 (P.L. 105-34). A tax filer found to have

claimed the credit fraudulently is barred from claiming the EITC for 10 years; one

who claimed the credit by reckless or intentional disregard of EITC rules is barred

for 2 years. The law also imposes a $100 penalty on paid preparers who fail to fulfill

“due diligence requirements” (as specified by IRS) in filing EITC claims.

Benefit Levels

The EITC was enacted in 1975 as a temporary measure to return a portion of the

employment taxes paid by lower income workers with children. The EITC became

permanent in 1978, with a maximum benefit of $500 and no adjustment for family

size. In the 1990s, Congress increased the credit, provided expansion of the credit

based on family size and extended the credit to childless workers.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 10716), contained changes to the EITC with respect to married tax filers filing jointly.

The law increased the beginning and ending of the EITC phase-out range for married

couples filing jointly by $1,000 in taxable years beginning in 2002-2004; by $2,000

in taxable years 2005-2007; and by $3,000 in years after 2007 (adjusted annually for

inflation after 2008). The law also simplified the definition and calculation of the

credit: tax filers no longer must include nontaxable income from employment (for

example, excludable dependent care or education assistance benefits) and may use

adjusted gross income (AGI n a prominent line on all tax returns) rather than

modified adjusted gross income (which required a number of additions and

subtractions to AGI).

EITC Treatment by Other Means Tested Programs. Before 1996, the

federal rules for treatment of the

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