The pandemic broke welfare. Here’s how states can fix it

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Prohibiting states from requiring work for welfare programs may be contributing to the labor shortage.

The federal COVID public health emergency isn’t ending anytime soon, yet states should start preparing now for that time. Federal pandemic rules, which prohibit states from requiring work or ensuring integrity in welfare programs, will depart with the emergency. As early as October, states will be able to reform welfare to strengthen their economies, protect taxpayers, and better provide for the truly vulnerable. Governors, in particular, must lay the groundwork to act quickly.

Consider food stamps. In March 2020, Congress blocked states from enacting work requirements for able-bodied adults without dependents for the duration of the public health emergency. This policy exempted people ages 18 to 49 from having to find employment, which quickly became indefensible as the recession ended and the economy rebounded. It is now contributing to America’s labor shortage of 11.5 million workers.

While the end of the emergency will lift the federal suspension on work requirements, it will not automatically restore them. That’s a decision states must make. Pre-pandemic, 17 states had full work requirements; the remainder had full or partial federal waivers. While some states will be tempted to use or abuse these waivers, doing so will only stifle their economies and keep the labor shortage going. States instead should devise plans to reimplement work requirements and put able-bodied adults on the path to self-sufficiency.

They also should go a step further with “employment and training” requirements for food stamp recipients. These policies apply to able-bodied adults between 18 and 59 with school-age kids. With children in school during the day, they have greater flexibility to pursue work, but the majority are currently unemployed or under-employed. With an employment and training requirement, they would sign up for job coaching, workforce development initiatives, or similar programs. They also could simply re-enter the workforce. This policy alone could help end the worker shortage.

The Biden administration is likely to oppose such measures. It may offer work requirement waivers to states, despite the clear need for workers. It may encourage states to slow-roll the reimplementation of work requirements. But governors who want to boost their economies and empower constituents should ignore Washington and put work before welfare.

Another needed reform opportunity involves Medicaid, which currently had roughly 77 million enrollees in 2021. At the start of the pandemic, Congress effectively kept states from removing ineligible people from Medicaid rolls by offering them higher payment rates. The result is a loss of integrity in a program that already had an improper payment rate of nearly 25 percent pre-pandemic. If states continue to accept federal funding, they cannot remove these individuals until the public health emergency ends.

Removing ineligible people from Medicaid takes time, which is why governors should begin the administrative preparations now. Ideally, states should begin collecting evidence for removal immediately, if they haven’t already. If they start now, it’s reasonable to expect them to restore Medicaid’s program integrity within three months of the emergency’s lifting. That could begin reeling in the runaway Medicaid program before the end of this year.

Unfortunately, the Biden administration wants to keep ineligible people on Medicaid rolls. On March 3, it issued guidance declaring that states have 12 to 14 months after the public health emergency ends to remove ineligible individuals. If the emergency is lifted this fall, that means states might not restore program integrity until late 2023. The administration casts this as ensuring “continuous coverage,” even though it is a fundamental corruption of Medicaid.

Fortunately, states can ignore this guidance, which has no basis in federal law. They also have a clear financial reason to move ahead with reform. Higher federal payments will disappear with the emergency’s conclusion, meaning states suddenly will be on the hook for ineligible enrollees. That leaves more burden on taxpayers and less money for vulnerable people who need Medicaid. If states don’t want to wait until the emergency is lifted, they can opt out of the higher federal payments and begin removing ineligible recipients immediately.

Washington has forced a dangerous and unprecedented welfare experiment on states for the past two years. It has driven people out of the workforce and into government dependency, while weakening already overburdened welfare programs. When it comes, the end of the public health emergency will provide an opening to restore reason to welfare. States should be prepared to seize this reform opportunity.

Sam Adolphsen is policy director at the Foundation for Government Accountability and previously served as chief operating officer at the Maine Department of Health and Human Services from 2014 to 2017. Follow him on Twitter @SamAdolphsen.

Tags COVID-19 labor shortage Medicaid Welfare reform

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