Order Code RS22035
January 27, 2005
CRS Report for Congress
Received through the CRS Web
Coverage of the TANF Population Under
Medicaid and SCHIP

Elicia J. Herz
Specialist in Social Legislation
Domestic Social Policy Division
Summary
Health insurance is an important support for individuals receiving, leaving or
diverted from the Temporary Assistance for Needy Families (TANF) welfare or cash
assistance program for low-income families. Medicaid and SCHIP (State Children’s
Health Insurance Program) are key vehicles for providing such coverage. While there
is no formal link between TANF and either Medicaid or SCHIP, some TANF-eligibles,
especially children, are likely to qualify for one of these programs. But state eligibility
rules can be complex and often differ for parents versus children, leaving some parents,
in particular, without coverage. Finally, transitional medical assistance (TMA) for
families losing Medicaid coverage for work-related reasons is set to expire at the end of
March 2005.
Background
Medicaid provided access to medical services for approximately 51.4 million people
in 2002 (the latest official enrollment figure). To qualify, applicants’ income and
resources (also called assets) must be within program financial standards. These
standards vary considerably among states, and different standards apply to different
population groups within a state. Medicaid eligibility is also subject to categorical
restrictions — generally, it is available only to low-income persons who are aged, blind,
disabled, members of families with dependent children, and certain other pregnant women
and children.
The Temporary Assistance for Needy Families (TANF) program provided cash
assistance to 2.2 million families in FY2003. TANF is structured as a flexible block grant
to states, and it was the centerpiece of the 1996 welfare reform law, replacing previous
entitlements to cash assistance. Under TANF, eligibility thresholds and benefit levels are
established by states, but federal law imposes work requirements and time limits on
benefits.
Congressional Research Service ˜ The Library of Congress

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Prior to TANF, families qualifying for cash assistance under the former Aid to
Families with Dependent Children (AFDC) program were automatically eligible for, and
in most states, automatically enrolled in, Medicaid. In contrast, there is no direct link
between eligibility for TANF and eligibility for Medicaid. Although TANF eligibility
does not confer automatic Medicaid eligibility, Medicaid entitlement was retained for
those individuals who meet the requirements of the former AFDC program as in effect
on July 16, 1996. These old state-specific AFDC-related income standards are typically
well below the federal poverty level (FPL). However, states may modify (i.e., liberalize
or further restrict) these criteria for determining Medicaid eligibility for low-income
families like those receiving TANF. Anecdotal evidence suggests that some states have
chosen to align income rules for TANF and Medicaid, thus facilitating Medicaid coverage
for some TANF recipients. While some states also provide Medicaid to higher-income
adults under waivers of program rules, the AFDC-related rules are the main pathway into
Medicaid for low-income, working parents.
For families who lose Medicaid due to increased hours of work, earnings, or child
support payments, transitional medical assistance (TMA) for a period of 4 to 12 months
is available. TMA can be particularly important for low-income parents, since there are
few other ways through which such adults can maintain Medicaid coverage or private
health insurance. However, over the years, Congress has created several other mandatory
and optional coverage categories for children that are tied to income levels at or above the
poverty line (up to 185% of the FPL for infants at state option).
Another pathway for low-income children in particular is the SCHIP. Established
in 1997, SCHIP builds on Medicaid by providing health insurance to uninsured children
in families with income above applicable Medicaid income standards. TANF children
ineligible for Medicaid due to income are likely to qualify for SCHIP if they meet other
eligibility rules. Each state defines the group of children who may enroll in SCHIP using
factors such as geography, age, income and resources, residency, disability status, access
to other health insurance, and duration of SCHIP eligibility. As of July 2003, 39 states
covered at least some groups of children in families with income at or above 200% FPL.
States provide SCHIP children with health insurance that meets specific standards for
benefits and cost-sharing, or through their Medicaid programs, or through a combination
of both.
Coverage for adults under SCHIP is restricted to special circumstances. As of
September 2004, 10 states (Arizona, California, Colorado, Illinois, Minnesota, New
Jersey, New Mexico, Oregon, Rhode Island, and Wisconsin) have been granted approval
specifically to enroll one or more categories of adults with children, typically parents of
Medicaid/SCHIP children, caretaker relatives, legal guardians, and/or pregnant women;
four states also cover childless adults. Parents may also be covered through SCHIP
programs providing premium assistance with employer-sponsored health insurance for
eligible SCHIP children.
Concerns about under-utilization of SCHIP were raised early in the program and are
still voiced by some today. But enrollment is growing. In FY2003, the number of
children ever enrolled in SCHIP during that year reached 5.9 million. During that same
year, nearly 484,000 adults were enrolled in the program.

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The Medicaid picture is more complicated. Analyses of program administrative data
show that, between 1995 and 1998 — during the early years of the newly established
TANF program — the number of able-bodied adults and children on Medicaid fell, while
the number of aged beneficiaries stayed roughly constant, and the number of persons of
all ages with disabilities rose slightly. For adults and children, reductions were greatest
among those eligible for Medicaid via AFDC-related pathways, perhaps due to confusion
about the relationship between TANF and Medicaid eligibility. These losses were only
partially offset by enrollment gains through other eligibility routes, especially among
children. In the late 1990s, enrollment declines were also affected by a strong economy,
high employment rates, and rising income; lack of awareness of continuing eligibility;
cultural/language barriers and immigration issues (e.g., five-year ban on Medicaid
enrollment for certain aliens entering the U.S. after August 22, 1996); Medicaid’s
historical ties to welfare and its associated stigma; the often arduous enrollment process
itself; and agency errors.
A different enrollment picture emerged at the beginning of the 2000 decade.
Program administrative data for the FY2000 through FY2002 period show steady
increases in enrollment in Medicaid overall and for all types of beneficiaries. The highest
rates of growth were observed for adults (10-14% per year) and children (6- 9% per year).
Increases in enrollment were smaller for the aged (3-8% per year) and persons with
disabilities (3-5% per year). In FY2002, the number of adults and children ever enrolled
in Medicaid during that year reached 13.2 million and 25.4 million, respectively. Reasons
for the increased enrollment among children and adults include the economic downturn
that began in 2001, a drop in employer-sponsored insurance, and new or expanded
Medicaid eligibility pathways through waivers and liberalization of income requirements
for the AFDC-related group.
Future Considerations
Both Medicaid and SCHIP have eligibility rules that leave some members of low-
income families without coverage, most notably parents. Without further congressional
action, TMA under Medicaid will expire at the end of March 2005. Some states have
used waiver authority to cover childless adults and parents under Medicaid and SCHIP.
As Congress considers reauthorization of SCHIP (currently authorized through FY2007),
the definition of the core, eligible population may be refined (e.g., limited to children
only, or children and their caretaker relatives such as parents).
In general, further simplification of program rules, streamlining of enrollment
processes, and additional outreach have been deemed necessary for improving coverage
rates for TANF eligibles and other groups. Even though states received some fiscal relief
from the federal government in FY2003 and FY2004 to help offset Medicaid and other
shortfalls, expanded coverage of the TANF population under both Medicaid and SCHIP
may be affected by continuing federal and state budget constraints that have surfaced
recently.
For More Information
CRS Report RS20552, Welfare Reform and Medicaid: Brief Overview, by Vee Burke.

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CRS Report RL32277, How Medicaid Works: Program Basics, by Elicia Herz, Jean
Hearne, Julie Stone, Karen Tritz, Evelyne Baumrucker, Christine Scott, Chris Peterson,
and Richard Rimkunas.
CRS Report RL31698, Transitional Medical Assistance (TMA) Under Medicaid, by April
Grady.
CRS Report RL32389, A State-by-State Compilation of Key State Children’s Health
Insurance Program (SCHIP) Characteristics, by Elicia Herz, Evelyne Baumrucker, and
Peter Kraut.

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