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A Study of the Relationship of Health Coverage to Welfare Dependency

Prepared by Sarah C. Shuptrine, Vicki C. Grant & Genny G. McKenzie
Southern Institute on Children and Families

March 1994

Executive Summary

According to Welfare Recipients . . . .

When you work, they take everything away. The more you try to do on your own, the more they hold you back. You're constantly being pulled back when you try to take a step ahead. It gets real frustrating at times.

I could keep a job if I had child care for my children.

Help me out - I am trying. Medicaid is the biggest thing, especially if you have small children.

Give people incentives. Don't take everything away once they get a job because it makes the struggle that much harder.

Listening to the views of persons who are most affected by proposed changes is essential to the development of sound public policy. This is especially important with welfare reform since changes to the current system will have a profoundly personal impact on the lives of disadvantaged families across the nation.

This report presents the views of those on the front line of the welfare reform debate - the recipients themselves, as well as persons in the public and private sectors who labor daily to prepare recipients for jobs and to link them to employment opportunities. The report is the result of an exploratory study conducted in Charlotte, North Carolina, and Nashville, Tennessee, during the fall of 1993. The study was designed to examine the impact of the potential or actual loss of Medicaid on welfare dependency. In this context, other needs such as child care, housing and transportation also are examined.

During on-site visits to Charlotte and Nashville, personal interviews were conducted with 34 recipients of Aid to Families With Dependent Children (AFDC) and 35 recipients of Transitional Mediciaid benefits. In addition, discussion sessions were held with agency staff, advocates and employers. The report is described below:


The study found evidence that Medicaid is a major factor in recipient decisions regarding work, but it also identified child care as the benefit recipients ranked first in importance related to their ability to leave welfare for work.

The most often cited suggestions made by recipients for improving the welfare system were that benefits should be gradually reduced as a family moves from welfare to work and that more support services are needed to better prepare recipients for employment.

A disturbing finding is that far too many study recipients and organizations that worked with them did not have an adequate understanding of Medicaid and AFDC eligibility rules related to working parents. If staff and advocates lack an understanding of how Medicaid and AFDC benefits are affected when a parent begins working, they are unable to help recipients with decisions regarding work. Recipients who do not have adequate information or, even worse, who have wrong information, are unable to correctly weigh the cost benefit of going to work. It is especially troublesome that parents of young children are unaware that their children can be eligible for Medicaid, even if the parent's salary is well above the minimum wage. A major factor contributing to eligibility misconceptions held by recipients, advocates, staff and others is the complexity of eligibility rules across AFDC, Medicaid and Food Stamps.

To examine the cost benefit of leaving AFDC for work, family budget examples are displayed to compare income and expenses for a family without earnings, a family with income at $8,840 (full time minimum wage) and a family with $15,000 annual income. The family budget comparisons demonstrate why many AFDC parents feel that it doesn't pay to work. Even though the combined benefits received from AFDC and Food Stamps fall short of lifting the family out of poverty, the increased expenses incurred as a result of employment significantly erode the gains of increased income due to earnings.

Additionally, information gained during the study indicates that the building of self-esteem, often considered a "soft" approach, is an important strategy in helping recipients to give up the security of public assistance for the risks of employment. The following comments were made by staff and advocates who attended the discussion sessions:

People who try to succeed get a lot of pressure to stay like they are - from mothers, sisters, brothers and friends who they grew up with.

Boyfriends don't want them to be independent.

They need self dignity. A lot would do more if they felt better about themselves.

Finally, it must be noted that the slow pace at which the Family Support Act has been implemented by some states has resulted in limiting opportunities for AFDC parents who want to acquire the skills necessary to become gainfully employed.


  1. Assure Understanding of Eligibility Rules. State social services officials should take actions to determine whether recipients, staff, advocates and employers are adequately informed on basic eligibility rules and, if not, should implement aggressive information outreach initiatives.
  2. Simplify Federal Eligibility Rules. The President and Congress should work together to enact simplification of the program rules across AFDC, Medicaid and Food Stamps
  3. Support and Build Upon the 1988 Family Support Act. Governors and state legislative leaders should take action to fully implement the education, training and support service opportunities made available by passage of the 1988 Family Support Act.
  4. Help Families Maintain the Transition from Welfare to Work. State and federal policymakers should enact policies to extend assistance to parents who have moved from welfare to work by making child care and health coverage available on a sliding scale basis once transitional benefits expire.
  5. Support Special Initiatives to Build Self-Esteem. Local, state and federal policymakers should make self-esteem initiatives a central component of welfare reform efforts.

Copies of the full report are available for $10 each. To order, call the Southern Institute at 803.779.2607 or email us at