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Chapter 9 Welfare Reform and Indirect Impacts on Health Marianne P. Bitler and Hilary W. Hoynes B eginning in the early 1990s, many states used waivers to reform their Aid to Families with Dependent Children (AFDC) programs. This state experimentation resulted in landmark legislation that eliminated AFDC in 1996 and replaced it with Temporary Assistance for Needy Families (TANF). TANF—like the earlier AFDC program—provides cash grants to low-income families with children and is a key element of the nation’s economic safety net. The roots of this reform lie in long-time concern that AFDC led to reductions in work, decreases in marriage, and increases in nonmarital births among low-income women. These important policy changes, known collectively as welfare reform, were implemented with a desire to increase work among low-skilled single-parent families , reduce dependency on welfare, reduce births outside marriage, and increase the formation of two-parent families. In the wake of welfare reform, welfare caseloads declined by 50 percent between 1990 and 2000 (U.S. Department of Health and Human Services 2007), and the employment rate of low-skilled single parents with children increased by 13 percentage points, from 74 percent to 87 percent (Eissa and Hoynes 2006). An enormous literature has developed which evaluates the impact of welfare reform on caseloads and labor supply, as well as on income, poverty, fertility, marriage, and family and child well-being.1 Importantly, these goals of welfare reform had little to do with health or health insurance directly. Despite this lack of direct connection to health, however, we argue that welfare reform may have important indirect impacts on health. Understanding if and how welfare reform impacts health is extremely important given the preexisting inverse relationship between income and health. Welfare recipients are worse off than the general population. This both complicates the task of deciphering the effects of welfare reform and makes the possible negative health impacts of welfare a topic of extra concern. For example, Kaplan et al. (2005) show that current and former welfare recipients are more likely to smoke; be obese; have / 231 higher rates of hypertension, diabetes, and elevated glycosylated hemoglobin levels ; and have worse self-reported health status compared to other women of the same age and race. Key policy changes in welfare reform occurred over this period. The central changes in the TANF program include lifetime time limits for receiving cash assistance , work requirements, financial sanctions, and enhanced earnings disregards.2 At the same time, there were concurrent changes in public health insurance for poor families through the expansions of Medicaid and introduction of the State Children’s Health Insurance Program (SCHIP). There are multiple pathways by which welfare reform may affect health-related outcomes. One pathway is through health insurance—reform leads to reductions in welfare participation, which is expected to reduce health insurance coverage (employer-provided coverage may increase but by less than Medicaid coverage declines). The other pathways are more indirect; for example, welfare reform may impact families’ economic resources, time endowment, and levels of stress which may then affect health care utilization and health status. The early studies on this issue documented very low rates of health insurance coverage following federal reform. For example, Bowen Garrett and John Holahan (2000) found that one year after leaving welfare, one-half of women and almost one-third of children are uninsured.3 This “leaver” analysis provides an important profile of the well-being of families departing the welfare rolls. However, an analysis of welfare leavers is largely descriptive and not adequate for identifying the impact of welfare reform. There are many forces that can lead to transitions off welfare (for example, labor market opportunities, changes in living arrangements, and welfare reform). Leaver studies are not designed to separate out these forces and identify the impacts of welfare reform and, therefore, provide largely descriptive evidence. The literature on the impacts of welfare reform on health includes nonexperimental estimates (typically state-panel models using variation in the timing and presence of reform across states) and experimental estimates (randomized experimental evaluations of state waiver programs). These two approaches have important and distinct advantages and disadvantages. Nonexperimental (or observational ) studies have the advantage of measuring impacts on the overall population, but they are subject to concerns about identification due to sample selection and endogenous policies. Experimental studies have the advantage of randomization , but the results apply to the experimental context—typically one state, one set of policies, and one group of...

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