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

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## Record

- **Collection:** Congressional research report
- **Document type:** CRS Report
- **Published:** November 25, 2003
- **Citation:** RL32233

## Text

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)
(name redacted)
(name redacted)
Laura Monagle
(name redacted)
Garrine Laney
Sharon Coleman
Laura Monagle
Dennis Snook
(name redacted)
(name redacted)
(name redacted)
(name redacted)
Laura Monagle
Laura Monagle
Laura Monagle
Laura Monagle
(name redacted)
(name redacted)
(name redacted)
(name redacted)
Laura Monagle
(name redacted)
(name redacted)
(name redacted)
Sharon Coleman
(name redacted)
(name redacted)
Richard Bourdon
(name redacted)
(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)
(name redacted)
(name redacted)
(name redacted)
(name redacted)
(name redacted)
(name redacted)
(name redacted)
(name redacted)
(name redacted)
(name redacted)
(name redacted)
Carol O’Shaughnessy
Laura Monagle
(name redacted)
(name redacted)
(name redacted)
(name redacted)
Evelyne Baumrucker
Laura Monagle
(name redacted)
Laura Monagle
Alexa Matthews
(name redacted)
(name redacted)
(name redacted)
(name redacted)
(name redacted)
(name redacted)
Sharon Coleman
(name redacted)
(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.

1

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
85
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

2
3

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
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

0
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
0
0
0
89
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
na
1973
17,117
21,770
na
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
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
2,954
1,658
1,962
2,747
2,827
2,750
2,888
na
533
761
705

Education
benefits
na
na
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
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
0
0
0
na
na
na
na
na
na
28
45
75
52
82
331
271
263
172
150
113
89
93
96
84
72
87
92
89
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
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
0
0
0
89
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

5.4

7.9

7.8

Services

12.1

10.1

13.9

12.7

18.9

18.9

22.2

Energy aid

.8

3.1

2.3

1.4

1.5

2.2

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

4

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].

5

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%
No
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

Xa

Xb

2. Veterans’ medical care (no
service disability)
3. S-CHIP

Xc
Xd

X

Xe

X
Xb

4. General assistance (medical)
5. Indian health services

X

6. Maternal and child health
services

Xf

7. Consolidated health centers

Xg

8. Title X family planning

Xg

Xh

9. Medical aid for refugees,
asylees, others

Xb
Cash aid

10. SSI

Xi

11. EITC (refunds)

X

Xj

12. TANF

Xb

13. Foster care

Xb

14. Child tax credit

X

Xc

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

X
Xb

16. General assistance
Xk

17. Adoption assistance

Xb

18. General assistance to Indians

Xb

19. Cash aid — refugees,
asylees, others

Xb

20. DIC (vets’ parents)

Xc,k

X
Food benefits

21. Food stamps

X

Xl

22. School lunch (free/reduced
price)

X

Xm

23. WIC

X

Xn

24. Child and adult care food
program

X

25. School breakfast
(free/reduced price)

X

Xm

26. Nutrition program for the
elderly

Xo

27. The emergency food
assistance program
28. Summer food service

Xb
X

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

X

X

X

31. Farmers’ market nutrition
programs

X

32. Special milk (free)

X

X

Housing benefits
33. Section 8 lower-income
housing assistance

X

34. Public housing

X

35. Rural housing loans

X

36. HOME

X

37. Housing for special groups
(aged/disabled)

X

38. Rural rental assistance
(section 521)

X

39. Section 236 interest
reduction payments

X

40. Housing for people with
AIDS

X

41. Rural rental housing loans
(section 515)

X

X

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

X

43. Farm labor housing loans
and grants

X

44. Section 101 rent supplements

X

45. Rural self-help grants and
site loans

X

46. Indian housing improvement
grants

X
X

47. Section 235 homeownership

X

48. Rural housing preservation
grants

X

49. HOPE

X

X

Education
Xp

50. Pell grants
51. Head Start

X

52. Stafford and Stafford/Ford
loans

Xp

53. Federal work-study

Xp

54. TRIO programs
55. Supplemental educ.
opportunity grants

Area of
residence

Enrollment/eli
gibility for
other program

X
Xp

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

Xq

56 Chapter 1 migrant education
57. Perkins loans

Xp

58. Leveraging educ. assistance
(LEAP)

Xb

59. Health professions student
loans and scholarships

Other

Xr

Xs

60. Fellowships for
grad./professional study

Xp

61. Migrant high school
equivalency

Xt
Xt

62. College assistance migrant
program
Xu

63. Close Up fellowships
Services
Xv

64. Child care and development
block grant

Xw

65. TANF services (other than
child care)

X

66. Social services (Title XX)

Xx

67. TANF child care
68. Homeless assistance

Xb
X
Xb
Xb

X
Xy

CRS-21
Limit related to:

Program*

Official
poverty
measure

69. Community services block
grant

X

70. Legal services

X

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

Xb
Xy

72. Emergency food and shelter
Jobs and training
73. TANF work activities
74. Job Corps
75. Youth training

X
X

z

X

z

X

z

X

X

z

X
Xaa

76. Adult training
77. Senior community service
employment

X

X

78. Welfare-to-work

X

79. Food stamp
employment/training

X

80. Foster grandparents

X

81. Senior companions

X

82. Targeted aid for refugees,
asylees, others

Xb

83. Native employment. works

Xb

X

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

X

X

Other

Energy aid
84. Low-income home energy
aid

Xbb

85. Weatherization assistance

X

X

X

* 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

1

$ 8,980

$11,210

$10,330

2

12,120

15,140

13,940

3

15,260

19,070

17,550

4

18,400

23,000

21,160

5

21,540

26,930

24,770

6

24,680

30,860

28,380

7

27,820

34,790

31,990

8

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
1

$11,674

$16,613

2

15,756

22,422

3

19,838

28,231

4

23,920

34,040

5

28,002

39,849

6

32,084

45,658

7

36,166

51,467

8

40,248

57,276

Add for each additional member

+4,082

+5,809

Alaska
1

$14,573

$20,739

2

19,682

28,009

3

24,791

35,280

4

29,900

42,550

5

35,009

49,821

6

40,118

57,091

7

45,227

64,362

8

50,336

71,632

Add for each additional member

+5,109

+7,271

Hawaii
1

$13,429

$19,111

2

18,122

25,789

3

22,815

32,468

4

27,508

39,146

5

32,201

45,825

6

36,894

52,503

7

41,587

59,182

8

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.

1

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.

2

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

3

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).

4

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.

CRS-31
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

5

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.

CRS-32
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-

6

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.

7

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

8

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.

9

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

10

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.

10

(...continued)
2004, by P.L. 108-173.
11

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.

CRS-37
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

12

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
1

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.

2

All but 10% of the veterans served by VA receive their care free (but most do not have to
satisfy a needs test).

3

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.

4

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

1

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.

2

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.
3

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

4

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%.
5

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.

6

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
7

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.

8

[http://www.cms.gov/schip/1115waiv.pdf].

9

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.
10

[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.

11

42 CFR. §447.52 (2002)

12

42 CFR. §447.54 (2002)

13

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

14

42 CFR. §457.560(b) (2002)

15

Centers for Medicare and Medicaid Services (formerly known as HCFA)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3ARL32233. Public record. Not legal advice.