State Approaches to Diversion Programs and Activities under Welfare Reform

A. Introduction

The broad goal of this research project is to develop a better understanding about state efforts to divert families from the welfare system and the potential implications of these efforts for eligibility of diverted families for Medicaid. This report presents the results of the first phase of this project involving the collection and analysis of descriptive data about diversion programs and activities in all fifty states and the District of Columbia. In this concluding chapter, we review our findings and assess the implications for current policymaking and further research on diversion programs and activities, discuss state efforts to assess the success of their intentional diversion activities, and discuss the implications of our efforts for phase two of this research, the case studies.
 

B. Summary of Findings and Implications - What We Have Learned About Diversion

The inclusion of diversion programs and activities as part of states= welfare reform efforts is relatively widespread. Thirty-one states have implemented at least one of the three formal diversion programs. Twenty states are operating lump sum payment programs to meet the short term needs of TANF applicants; seven states are using an aggressive approach to help potential TANF recipients identify alternative resources that may ameliorate their need for TANF benefits, and sixteen states require TANF applicants to engage in active job searches before their application for assistance is approved. Twenty-two of these states have implemented only one formal diversion program and three states have implemented all three formal diversion programs. For the remaining six states implementing two of the three diversion programs, the states= choices are distributed evenly among potential combinations of these programs.

The single most common choice for formal diversion programs among the states are lump sum diversion programs. However, because mandatory applicant job search programs apply to a larger potential pool of TANF applicants, they are likely to affect the largest number of families. Mandatory applicant job search programs also have the greatest potential to divert informally potential TANF recipients from applying for assistance. Overall, formal diversion programs are concentrated most heavily in states in the west and south; very few states in the northeast have established these formal diversion programs.

The lump sum payment programs represent the most prescriptive formal approach to diverting potential TANF recipients even though participation in this program is voluntary for TANF applicants in all states. Lump sum payment programs are very complex in their structure. States must make decisions about several components of lump sum payment diversion including: the eligibility criteria, i.e., for which TANF applicants is this diversion program intended; what is required to verify eligibility for lump sum payments, which can be less than what is required for verifying TANF eligibility; how much eligible applicants can receive in lump sum payments for what purpose and in what form; and what types of costs/trade-offs are associated with receiving lump sum payments.

States have taken a variety of approaches to structuring their lump sum payment diversion programs and there are no evident patterns or common approaches in terms of the combinations of components. States can be characterized as making it easy for TANF applicants to be diverted where the lump sum payment program policies use relatively broad eligibility criteria, allow lump sum payments to be used for more than just work-related needs, and do not impose onerous repayment requirements or other penalties on lump sum payment recipients. States can also be seen as deliberately limiting the number of participants in their lump sum payment programs when the program policies use very specific eligibility criteria, limit the use of lump sum payments to work-related needs, and impose onerous repayment requirements and automatic penalties.

The particular components of lump sum payment programs may indicate that the states view such programs primarily as supports for obtaining or maintaining employment, or suggest that the states view their program as means to expand emergency assistance for short-terms needs of families without reducing these families= lifetime TANF limits. This level of variability among the states with respect to the structure of lump sum payment programs suggests a number of questions that should be addressed including: 1) which lump sum payment programs are particularly effective for what types of TANF applicants, 2) how well can caseworkers manage the implementation of these relatively discretionary and multifaceted programs, and 3) what types of lump sum payment programs are best suited for the goals of formal diversion.

Linking TANF applicants with alternative resources represents the least common form of intentional diversion activities. In many ways, this form of diversion represents an extension of efforts to divert applicants from TANF through lump sum payments. It also represents a bridge to future expectations regarding work in that it encourages applicants to think broadly about how they can meet their needs without the receipt of ongoing cash assistance in both the short and long-term.

Like lump sum payments, alternative resources are primarily targeted to applicants who have relatively minor short-term needs. These programs are also viewed as voluntary and are not intended to prevent applicants from applying for TANF. In contrast to lump sum payments that are guided by a relatively complex set of policies and procedures, the process of linking applicants with alternative resources occurs primarily on a case by case basis through a one-on-one interaction between a caseworker and the applicant. Although relatively uncommon at the current time, as time limits approach, the exploration of alternative resources may become a more common feature of state practices.

There are a number of unanswered questions regarding efforts to divert applicants from TANF by linking them with alternative resources that are primarily concerned with the staff and/or community resources that need to be in place to make the use of alternative resources a viable option: 1) what type of training allows staff to adequately assess whether alternative resources can resolve an applicant=s need for ongoing assistance, 2) how much knowledge of and access to community resources is needed to link TANF applicants with appropriate alternative resources, 3) what incentives need to be in place to encourage workers to explore alternative resources with applicants for assistance, 4) how do applicants respond to the exploration of alternative resources.

Even though case workers in most states have broad discretion to make exceptions to established job search criteria, because mandatory applicant job search programs are targeted to a much larger pool of applicants, they are likely to affect the lives of many more families than efforts to divert applicants through lump sum payments or linkages with alternative resources. In addition, because applicant job search programs are mandatory, applicants do not have the choice to forego immediate participation in job search activities in favor of receiving ongoing assistance. The mandatory nature of applicant job search programs also increases the possibility that some applicants will be discouraged from applying for assistance and will be informally diverted from TANF.

While mandatory job search programs appear to be increasingly common, it is clear from this analysis that there is substantial variation in how states have designed their applicant job search programs. Differences exist in the fraction of potential applicants who are required to participate in program activities, the extent to which case workers have discretion to grant exceptions to established rules, and the scope of activities in which applicants are required to participate. Some states require minimal job search activity for a small target population while others require substantial job search activity for nearly all applicants.

Although mandatory applicant job search programs have the potential to affect large numbers of families, they have received minimal scrutiny. Questions of particular importance include: 1) how do workers determine who is and is not required to look for work as a condition of eligibility, 2) what fraction of applicants find employment before their application for assistance is processed, 3) how do the non-cash benefits available to families differ depending on whether an applicant finds employment before or after his or her application for assistance is approved, 4) what is the relationship between the level of job search activity required and/or the amount of job search assistance provided and the proportion of applicants who find employment, 5) what happens to applicants who get discouraged and do not complete the application process.

The Adelinking@ of Medicaid and welfare benefits/cash assistance has created concerns that the consequences of this delinking will be an increase in the numbers of otherwise-eligible children and families who are not enrolled in Medicaid. State efforts to divert families from ever receiving welfare benefits could also increase the likelihood that otherwise-eligible families may fail to be enrolled in Medicaid. In nearly all of the states contacted for this study, however, the question of ensuring the linkage between diverted TANF applicants and Medicaid was not perceived to be a major issue. The primary reasons for this lack of concern probably include the states= almost universal use of a joint application process for TANF and Medicaid, and the limited experience of most states with formal diversion programs.

Our findings with respect to Medicaid and diversion programs, however, suggest the potential for important implementation and policy issues. The question of whether diverted TANF applicants, both formal and informal, will Afall through the cracks@ with respect to their Medicaid eligibility depends upon how well such diversion efforts are implemented. While examining the implementation process was beyond the scope of this descriptive phase of the project, the fact that so many of the states= formal diversion programs are new and relatively complex indicates that quality of the implementation process for diversion program is likely to be an important issue. The question of whether certain diverted TANF applicants, e.g., lump sum payment recipients, will be able to retain their eligibility for Medicaid, especially transitional Medicaid, depends upon how well-informed state policymakers are with respect to the requirements of the TANF programs and post-PRWORA options under the Medicaid program. As discussed in Chapter Five, Arizona represents an example of a state temporarily halting the implementation of this diversion program as state officials attempt to determine how to operate a lump sum payment diversion program and not jeapordize recipients' eligibility for Medicaid as well as transitional Medicaid benefits. In general, however, the extent to which states are purposefully addressing the issues associated with Medicaid eligibility for recipients of lump sum payments or for other diverted TANF applicants is not clear.

While losses in Medicaid eligibility may be inevitable as states encourage employment very early in the TANF application process and/or divert TANF applicants with lump sum payment programs, some of these losses may be avoidable if states consider the options available to them under Section 1931 of the Social Security Act and as outlined in Tables V-1 and V-2. States have considerable discretion in establishing more generous income and resource methodologies in determining eligibility for Medicaid. As discussed in Chapter Five, however, the level of states= awareness about these complex Medicaid policy issues within the context of formal diversion programs is unclear - although it is difficult not to conclude that the level of awareness about these issues is low.
 

C. What States Know About The Effects of Their Diversion Programs

Our conversations with state officials included questions concerning the kinds of data collection efforts associated with the formal diversion programs that are being undertaken, and whether the states have any empirical indicators of the success of their diversion programs and activities. Although these conversations primarily focused on lump sum payment programs as the most structurally formal of these diversion activities, their comments were sufficient to provide a general sense about data collection and data issues.
 

Most States Have Only Recently Implemented Diversion Programs

As discussed above in Chapters Two, Three, and Four, most states have only recently implemented their formal diversion programs. For example, of the twenty states with lump sum payment programs, sixteen states have implemented their programs within the last four to sixteen months. Similarly, most mandatory applicant job search programs have been gradually implemented since the passage of TANF in 1996. Perhaps because of this, most state officials were not able to report many details about their data collection or management information systems designed to facilitate data collection and analysis of the effects of their diversion programs. Notwithstanding the lack of detail and/or capacity with respect to state data systems, these officials were certainly aware of the need for data collection to: 1) determine whether lump sum diversion program are successful in keeping families off the TANF rolls, 2) measure the effects of other formal diversion programs, and 3) monitor how well these programs and activities are being implemented.
 

Data Needed to Assess Effects of Diversion Programs

A common set of data elements necessary to document and analyze the effects of diversion programs can be identified. These elements include size of the diverted household including the number of children, general demographic and socioeconomic data, the reasons for eligibility for diversion, the type of diversion assistance provided, what was provided in alternative resources, how much was provided in a lump sum payment, what the lump sum payment was used for, method of lump sum payment (cash or vendor), whether the diverted applicants were receiving other types of assistance, what kinds of employment were secured, with what assistance and how quickly, and how long these families remained off TANF. Data regarding the state's Medicaid program must also be collected including: eligibility criteria,

number of diverted applicants receiving Medicaid, number of joint Medicaid/TANF and Medicaid-only applications, and trends in the Medicaid rolls.
 

A Wide Range of Data Collection Efforts

State officials described a wide range of data collection efforts that varied from relatively minimal to relatively comprehensive. Where data systems do exist they are most likely to capture information regarding lump sum payments but not necessarily alternative resources or mandatory applicant job search. For example, both Minnesota and Washington report having data management systems in place capable of collecting all of the data elements related to lump sum payments listed in the previous paragraph. Both states will use these data to monitor closely the implementation of their programs and to initiate improvements. Both states are also under a mandate from their legislatures to report to them in 1999 and provide empirical evidence about how their lump sum payment diversion programs are working. On the other hand, Kentucky and South Dakota report somewhat less comprehesive approaches to data collection. South Dakota collects data such as household size, reasons for diversion, the amount pf the lump sum payment and for what purpose, and whether employment was secured. Kentucky collects enough information to monitor the 12-month period of ineligibility but after that period, the records of diverted families may or may not remain in the system. In both of these states, as in many others, it is not clear whether the TANF application of a diverted individual is ever entered into the data system or whether the application is consistently considered denied, incomplete, withdrawn, or "other."
 

Potential Data Issues and Problems

Several data issues and potential problems became apparent as we reviewed our results. The first involves whether and how the TANF applications of diverted families and individuals are documented and kept in a data system. Recording the existence of a diverted TANF applicant is an essential starting point for data collection efforts sufficient to support analyses of diversion efforts. For numerous states, there was little knowledge or clarity at the administrative level about how these TANF applications are processed. Even if the application is documented, there are different approaches to characterizing the application with implications for how the effects of diversion might be understood, e.g., an application could be categorized as incomplete, denied, complete, or applicant never returned. Another issue concerns how consistently counties within a state are documenting and keeping track of diverted applicants. To the extent that counties are inconsistent in their approaches to documenting diversion efforts, statewide analysis is not possible.

Another issue involves how long a diverted person is kept in the state data system. Many states report removing diverted individuals from their systems as soon as the period of ineligibility expires, which could be as short as three or four months. Such an approach would make it impossible to follow diverted families to determine if they ever returned for TANF assistance. In a similar vein, South Dakota's approach to administering its lump sum payment program presents a potential problem that could occur in other states as the emphasis on work is increased. In this state, the TANF applicant usually must interact with both a DHS caseworker and a Department of Labor (DOL) specialist who could each document the diversion events differently or not at all although both workers share the same computer system in terms of data entry.
 

Measures of Success for Diversion Programs - Too Early To Tell

For many states, the measures of success for diversion programs appear to include either how many applicants were diverted as a percent of total applications and/or how long applicants stay off the TANF rolls, or whether they ever returned for assistance. In most states, however, there are few data available regarding success. The reasons for this lack of data include: 1) states have not yet begun to collect data, 2) state do not have the capacity to collect, or 3) states have only recently implemented their diversion programs.

For example, both West Virginia and Idaho began implementing their lump sum payment programs in mid-1997 and have seen too few cases to assess success. The Kentucky official reported "having a sense" that the state=s lump sum payment program was working well and that diverted families were more likely to request a series of payments as opposed to one payment; there are currently no systematic efforts to collect data. On the other hand, the South Dakota official expressed pessimism about how frequently that state=s lump sum payment program would be used since this program is seen exclusively as job-support assistance and job prospects are bleak in South Dakota.

Two states, Utah and Virginia, are able to document the success of their lump sum payment diversion programs - it is not a coincidence that these states have the longest-running programs, established in 1993 and 1995 respectively.

Utah has established a strong management information system that supports the tracking of diverted applicants. Utah estimates that 3,000 persons been diverted since January 1993 and that this number represents between 15 and 40 percent of TANF applicants depending upon the site. Utah=s program has been examined and the results suggest that approximately 85 percent of diverted persons do not ever reapply for TANF assistance. Virginia has also established a strong management information. This system supports the collection of data on the number of diverted people by county and the analysis of data to determine how many diverted persons return for TANF assistance and how long after receiving diversion assistance. The state reports that during the first two years of the program 1,004 families received lump sum cash payments and 81 percent of those cases have not reapplied for TANF assistance. The greatest use of lump sum payments in Virginia has been for payment of rent.

Montana implemented its Job Support Program (JSP) in February, 1996 and, as the third oldest lump sum diversion program, collects data on persons participating in this program. Information is collected on household size, income, and other characteristics of diverted applicants. The state is also able distinguish between lump sum payments and alternative resources diversion by virtue of how the data are entered and organized in Montana's computer system.

Most of the states have little empirical evidence about how their formal diversion program are working. While most states have only recently implemented their programs, inadequate data systems also contribute to a lack of empirical evidence. Consequently, it not possible to draw any conclusions about the effectiveness, or effects, of the states' formal diversion programs and activities.
 

D. What Do We Want To Know Now- Next Steps for Research

The first phase of this project developed baseline knowledge about current state formal diversion programs and activities. In the second phase, we will conduct two additional analyses, case studies in five local communities and a follow-up survey to states with lump sum payment and/or mandatory applicant job search programs to gather more detailed information on how criteria for Medicaid eligibility are developed and defined. The second-phase research will build on the information gathered for the first phase of this study and will address these four major goals: 1) describe and examine the actual implementation of diversion programs and identify potential consequences of diversion for low-income families, particularly with respect to entry into the job market and access to Medicaid; 2) describe state policies regarding Medicaid eligibility for applicants diverted through lump sum payments and mandatory applicant job search, 3) examine whether and how the potential changes in Medicaid enrollment rates associated with diversion efforts might affect traditional health care safety net providers, and 4) examine potential strategies for monitoring changes in Medicaid enrollment rates as well as the effects of these changes over time.
 

Case Studies

Case studies will be conducted in five states for the purpose of determining exactly what has been happening with respect to the implementation of diversion programs and activities in these states. In selecting the state case study sites, we will consider the following characteristics of the states' diversion programs: 1) the range and types of state diversion programs/activities, 2) the diversion programs/activities that are most common, 3) the diversion programs/ activities that appear to present greater or fewer barriers to providing support services and maintaining links to Medicaid, 4) the programs/activities that are likely to be the most and least successful in promoting work, and 5) the length of time since implementation.

Collection of data during site visits will involve semi-structured interviews with welfare administrators, welfare benefits field staff, families participating in diversion, community-based welfare rights groups, safety net providers, and community-based providers; focus groups with families participating in diversion; field observation; and review of selected case records. Review of the availability and quality of state administrative databases will be conducted prior to or subsequent to the site visits. The site visits will be designed to develop a broad understanding of how diversion activities are implemented on a day to day basis and the impact they have on potential TANF recipients and service providers.
 

Formal Diversion Programs and Medicaid Eligibility Study

Given the complex policy and implementation issues associated with assessing the effects of formal diversion programs, i.e., lump sum payment and mandatory applicant job search, on Medicaid eligibility, as well as the general lack of knowledge about the effects of diversion activities on Medicaid, we will also include a more in-depth examination of how states have addressed issues of Medicaid eligibility in designing and implementing their lump sum payment and mandatory applicant job search programs. Project staff will conduct telephone interviews with all 31 states that have implemented either one or both of these diversion programs to understand more specifically what decisions about Medicaid eligibility criteria have been made and how Medicaid linkages are being addressed for diverted TANF applicants. There will be a particular emphasis on examining state officials' knowledge about their options to affect Medicaid eligibility post-PRWORA. Project staff also will have an opportunity to explore Medicaid issues in more detail in the case studies planned during the next phase of the project. This research is essential to consider fully the impact of diversion programs on Medicaid eligibility.
 
Formal efforts to divert potential TANF recipients from receiving ongoing assistance represent one of many approaches states have implemented to shift to a more work-oriented, transitional system. These programs are clearly in their infancy but have the potential to affect large numbers of families. Thus, it is essential to begin to build a knowledge base that can provide a foundation for additional evaluation and monitoring of these program and activities.