APPENDIX 1
FEDERAL SOCIAL ASSISTANCE
Note by Assistant Clerk
The social security system in America, prior to the reforms
which have taken place since 1996, is well described in DSS Research
Report No. 47, Social Assistance in OECD Countries: Country
Reports. In 1997, major changes in the system were implemented
at a federal level following the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996. From 1993 onwards, States
could obtain waivers from federal rules to facilitate experimental
programmes in welfare administration, the key brief being to be
more successful at getting people from welfare into work. The
most successful elements of these experimental programmes were
put together to form the Act, which represents a core federal
framework, around which States retain flexibility to develop their
own welfare strategies.
The federal welfare system in America comprises several elements,
including the Earned Income Tax Credit, which is based on a sliding
scale according to income and number of dependent children (the
EITC is described separately in Appendix 2), cash benefits, and
benefits in kind such as Medicaid and the Food Stamps scheme.
Under the previous system, there had been an entitlement to receive
both types of benefit, the 1996 reform ended automatic entitlement
to cash benefits, imposing strict time limits and requirements
to participate in work or training. This represents a shift in
focus from welfare dependency to personal responsibility, which
is mirrored in the second key change introduced by the Act, which
made States accountable for their achievements in getting people
from welfare to work. States are obliged to adhere to the core
of rules imposed by the framework of federal law, and face penalties
if they fail to do so, or if they fail to meet participation levels
and targets set at federal level. Major changes in how States
receive funding were also introduced. Previously, under the Aid
for Families with Dependent Children (AFDC), Emergency Assistance,
and Job Opportunity and Basic Skills (JOBS) schemes, States had
received funding on a demand-led basis. This system was replaced
in 1996 by Temporary Assistance for Needy Families (TANF), a single
block grant to be used for any reasonable purpose. The Act introduced
several other changes, which are summarised below.
Social Assistance in the USA Following The Personal
Responsibility And Work Opportunity Reconciliation Act 1996 (Effective
from 1 July 1997)
Temporary Assistance for Needy Families (TANF)
- Ended automatic entitlement: Poor families
are no longer automatically entitled to receive cash benefits.
STATE FUNDING
AND SPENDING
- TANF Block Grant: The separate AFDC, EA and
JOBS allocations, which provided separate funding for family benefits,
emergency assistance and training programmes, were replaced by
the single TANF block grant to be used for any reasonable purpose.
Each State is allotted a fixed amount based on past expenditure.
The total TANF block grant is $16 billion for each year from financial
year 1996 to financial year 2001.
STATE ACCOUNTABILITY
- Penalties: States are held accountable for
the administration of social assistance through penalties which
reduce funding. States may be fined varying amounts for failing
to: submit required reports; satisfy participation level requirements;
participate in the income and eligibility system; comply with
paternity establishment and child support enforcement requirements;
repay a federal loan on time; meet State maintenance of effort
requirements; comply with the five year limit on assistance, or
maintain assistance when parents cannot find child care for a
child under age six.
Total penalties cannot exceed 25 per cent of the block grant.
States may avoid penalties if they enter into a corrective compliance
plan to correct the violation of regulations within six months.
Participation Levels: States must ensure 25 per cent
of their eligible welfare population is participating in approved
work activities in financial year 1997. That level rises to 30
per cent in 1998, 35 per cent in 1999, and 50 per cent in financial
year 2002. States must ensure that 75 per cent of their eligible
two-parent welfare population is participating in approved work
programmes by financial year 1997, rising to 90 per cent thereafter.
Maintenance of Effort (MOE): States must retain their
welfare spending at at least 75 per cent of financial year 1994
level. Payments counting towards MOE must be to families including
a child or expectant mother.
STATE FLEXIBILITY
Prior to the enactment of the new welfare law, State innovations
for welfare reform were facilitated through waivers of federal
requirements. This allowed States to develop their own welfare
to work strategies, notably in Wisconsin. To maintain this flexibility,
the new law allowed States which had received approval for welfare
reform waivers before 1 July1997 to have the option to operate
their cash assistance programme under some or all of these waivers.
For States choosing this option, some provisions of the new law
which are inconsistent with the waivers do not take effect until
the expiration of the applicable waivers. Inconsistency rules
are applied in a way which maintains the federal participation
requirements, and waivers may not be used to limit these requirements.
ADDITIONAL FUNDS
AVAILABLE
Social Services Block Grant (SSBG): In Financial Year
1997, $2.5 billion in federal funds was provided to the States
for social services under the annual SSBG. States are responsible
for determining what services will be provided, eligibility for
services, and the distribution method. Funds are used, for example,
for social services to achieve economic self-sufficiency, and
to prevent or remedy neglect, abuse or exploitation of children
or adults. The 1996 welfare reform set the SSBG at $2.38 billion
in financial years 1996-2002, and $2.8 billion from 2003 onwards.
Empowerment Zones: There are nine empowerment zones,
targeted by the Government in 1993. Each urban zone receives 100
million in flexible SSBGs, and tax breaks for zone businesses.
Each rural zone receives $40 million in assistance and tax breaks.
In addition, 95 enterprise communities are designated to receive
$2.95 million each in SSBGs and tax exempt bond financing for
businesses.
Low Income Home Energy Assistant Programme: The federal
government provides grants to States, territories, Native American
tribes, and tribal organisations that wish to assist low-income
households in meeting the costs of home heating and cooling needs.
In financial year 1997, $1.21 billion grants were made to all
50 States, the District of Columbia, 124 Indian tribes and tribal
organisations.
Community Service Programmes: The federal government
provides annual Community Services Funds, which include the Community
Services Block Grant (CSBG). These funds are primarily used to
meet employment, education, housing, income, management, energy,
health and emergency needs of the poor. In financial year 1997,
$489 million was available.
Developmental Disabilities Programmes: These programmes
serve nearly 4 million Americans. Developmental disabilities are
defined as severe, chronic disabilities which manifest before
age 22 and are likely to continue indefinitely. Federal grants
support programmes which protect the rights and promote the self-sufficiency
of Americans with developmental disabilities and their families.
In financial year 1997, $114 million in grants supported programmes
including: the development of co-ordinated systems of services
through State-wide plans, the establishment of protection and
advocacy systems to assist individuals in exercising their human
and legal rights, and projects focusing on the most pressing national
issues affecting people with developmental disabilities and their
families.
Contingency Fund: States must maintain spending at
100 per cent of 1994 levels in order to access a maximum 20 per
cent increase in State allocation from a $2 billion capped contingency
fund designed to assist States affected by high population growth
or economic downturn. States must maintain 100 per cent of 1994
or 1995 spending on child care (whichever is greater) to access
additional childcare funds beyond their initial allotment.
Federal Loan Fund: $1.7 billion is allocated, and
loans must be repaid within three years.
Job Subsidies: States can create jobs by using money
previously used for welfare payments to create community service
jobs or to provide income subsidies or hiring incentives for potential
employers.
Supplemental Funds: Supplemental funds are available
for up to 2.5 per cent of federal dollars, to correct for population
growth. State spending per poor person must be less than the national
average to apply.
Performance Bonus to Reward Work: $1 billion will
be available between financial years 1999 2003 for performance
bonuses to reward States for moving welfare recipients into jobs.
States also have access to a $100 million appropriation if they
manage to reduce out-of-wedlock birth and abortion rates.
Head Start: Head Start is a national programme which
provides comprehensive developmental services for Americas low-income,
pre-school children ages three to five and social services for
their families. Approximately 1,400 community-based non-profit
organisations and school systems develop unique and innovative
programmes to meet specific needs. Grants to conduct Head Start
programmes are awarded to public or private non-profit agencies.
In financial year 1997, the enrolment of approximately 800,000
pre-school children from low-income families was facilitated by
grants of almost $4 billion.
CONDITIONS FOR
RECEIPT OF
WELFARE
Five year limit: Life-time welfare receipt is limited
to five years. States are permitted to set stricter limits. Up
to 20 per cent of families on welfare caseloads can be exempted
because of hardship, for example mothers with infant children.
States have the option of providing non-cash assistance and vouchers
to families that reach the time limit using Social Services Block
Grant or State Funds.
Requirements: Able-bodied welfare recipients must
work within two years of being on benefits or families will lose
the aid. After two years of receiving cash benefits, adults who
have not found regular employment must perform community service.
States can choose not to have a community service requirement,
but at their own fiscal risk.
Single parents must work for at least 20 hours per week in
the first year, increasing to at least 30 hours per week by financial
year 2000. Two-parent families must work at least 35 hours per
week by July 1 1997.
Work Activities: To count towards State work requirements,
recipients are required to participate in unsubsidised or subsidised
employment, on-the-job training, work experience, community service,
12 months of vocational training, or provide child care services
to individuals who are participating in community service. Up
to six weeks of job search (no more than four consecutive weeks)
may count towards the work requirement. The State can count no
more than 30 per cent toward the work requirement based on vocational
training.
Caretaker exemption: Originally, mothers of children
under age six were exempt from work and training requirements.
States now have power to reduce the age from under six to three
months, so that only parents caring for very young children are
exempt from training and work requirements.
Personal Employability Plan: States are required to
make an initial assessment of recipients skills. States can also
develop personal responsibility plans for recipients identifying
the education, training, and job placement services needed to
move into the workforce.
Lifetime ineligibility: People convicted of a drug-related
felony are permanently ineligible for cash benefits and the food
stamp scheme under TANF. States may limit or opt out of this ban.
Medicare
Medicare is a federal health insurance programme. People
aged over 65, disabled people under age 65 who have been entitled
to Social Security disability benefits for at least 24 months,
and certain chronic renal disease patients are eligible for Medicare
benefits.
Medicare is divided into two parts: Hospital Insurance (HI)
and Supplementary Medical Insurance (SMI). HI is primarily funded
by Social Security taxes paid by employees, employers and the
self-employed. SMI is financed by a combination of monthly premiums
paid by the beneficiaries ($43.80 in 1997), and Federal General
revenues. The income for the programmes is held in two trust funds,
which are managed in the same manner as the Old Age, Sickness
and Disability Insurance (OASDI) trust funds described below.
Under HI, inpatient services are provided for hospital stays
up to 90 days. If more than 90 days are required, each beneficiary
has a lifetime reserve of 60 days at a reduced cost.
SMI pays 80 per cent of approved physician service costs,
outpatient costs (i.e., emergency room visits where the patient
is treated and released), diagnostic tests, and clinical laboratory
services. Patients must pay the first $100, and then 20 per cent
of further costs. It also helps pay for outpatient physical therapy
and speech pathology, additional home health services, and a variety
of other medical services and supplies.
Medicare does not cover long-term of custodial care, outpatient
prescription drugs, spectacles, hearing aids, or, with a few exceptions,
preventive care services.
Medicaid
The 1996 reform did not remove entitlement to receive medical
assistance. In 1997, approximately 37 million people received
health care from the various State Medicaid programmes. States
are obliged to run a Medicaid programme according to a core of
rules set at federal level, however States are free to develop
the details of their own programme. States must provide Medicaid
to anyone who would have qualified for AFDC under pre-1996 law.
States also have the option to extend coverage to others. The
programme supplements Medicare. States are required to provide
cover through Medicaid for a variety of services, including in-
and out-patient hospital services, prenatal care, certain dental
services, family planning services and supplies, and screening
and diagnostic services for people aged under 21. Medicaid also
plays a major role in funding long term care.
States may establish uniform standards of Medicaid eligibility
and welfare, but Medicaid standards may not be more restrictive
than those existing on 1 July 1996. States must also provide Medicaid
coverage for one year for families that lose eligibility for cash
welfare because of increased earnings. Medicaid can be withdrawn
if an adult refuses to work without good reason.
The programme is funded jointly by the federal government
and the States, with the federal government paying a larger proportion
to poorer States. An additional fund was established to reimburse
States for increased administrative cost due to the dual eligibility
system of TANF and Medicaid.
Supplemental Security Income (SSI) Provisions
Benefits for disabled individuals were cut by $9.5 billion
over six years.
Definition and Eligibility Rules for Children: Definition
and eligibility rules were changed by the 1996 reform. Previously
no formal definition for childhood disability had existed, and
eligibility had been based on a statutory definition referring
to impairments of comparable severity leading to work disablement.
This definition had been implemented using a listing of impairments,
and if a child did not meet the Listings, an Individual Functional
Assessment of whether the child could perform age-appropriate
activities. The reform clarified and restricted the definition:
An individual under 18 is considered disabled and thus eligible
for SSI if he/she has a medically determinable physical or mental
impairment, which results in marked and severe functional limitations
and which is expected to result in death or last for not less
than 12 months. Where the Listing of Impairments includes domains
of functioning, no less than two marked limitations be used as
the standard. The use of the Individual Functional Assessment
was discontinued.
Double-counting of maladaptive behaviour was eliminated in
the Listings by deleting it from the medical criteria for evaluation
of mental and emotional disorders.
Continuing Disability Reviews (CDRs): The reform tightened
the rules regarding the frequency of CDRs. CDRs must be conducted
every three years for children unless their condition is not expected
to improve. During the review parents must provide evidence that
appropriate treatment is being received. Eligibility must be re-determined
within one year of turning 18. A review must be conducted 12 months
after the birth of a child whose low birth weight was a factor
in eligibility.
Child Support and Child Care
FUNDING
A single Maternal and Child Health (MCH) block grant was
established. Funding consists of a discretionary and mandatory
element.
Up to 30 per cent of TANF funds can be transferred to the
MCH grant, which covers child welfare, family preservation, and
foster care, provided the families served have incomes below 200
per cent of the federal poverty line.
At least 4 per cent of all funds must be used to provide
education, activities to increase parental choice, and activities
to improve quality and availability of childcare.
At least 70 per cent of mandatory funds must be used for
families receiving assistance under a State programme, attempting
to transition off public assistance, or at risk of becoming dependent.
The $50 pass-through which required States to disregard the
first $50 of monthly child support payments when determining an
AFDC familys benefit or eligibility status was eliminated.
The Act provided $14 billion in childcare funding, an increase
of almost $4 billion.
States have the option of denying additional benefits to
claimants who have babies while in receipt of welfare.
States can sanction families if children are not attending
school.
Teen Parents: States can choose to end benefits to
unmarried teenage mothers (minors). Unmarried minor parents are
required to live with a responsible adult or in an adult- supervised
setting and participate in educational and training activities
in order to receive assistance. States are responsible for locating
or assisting in locating adult-supervised settings.
Teen Pregnancy Prevention: Starting in financial year
1998, $50 million a year in mandatory funds will be added to the
appropriations of the Maternal and Child Health (MCH) block grant
for abstinence education. In addition, the Secretary of HHS will
establish and implement a strategy:
(1) to prevent non-marital teen births; and
(2) to ensure that at least 25 per cent of communities
have teen pregnancy prevention programmes.
The Attorney General established a programme to study the
link between statutory rape and teen pregnancies, and to educate
law enforcement officials on the prevention and prosecution of
statutory rape.
COMPREHENSIVE CHILD
SUPPORT REINFORCEMENT
Each State must operate a child support enforcement programme
meeting federal requirements in order to be eligible for TANF
block grants. Provisions include:
- National New Hire Reporting System. A
Federal Case Registry and National Directory of New Hires was
established to track delinquent parents across State lines. Employers
must report all new hires to State agencies for transmittal to
the National Directory. The law expanded and streamlined procedures
for direct withholding of child support from wages.
- Streamlined Paternity Establishment: The
legal process for paternity establishment was streamlined, making
it easier and faster to establish paternities. The voluntary in-hospital
paternity establishment programme was also expanded to require
a State form for voluntary paternity acknowledgement. The law
mandated that States publicise the availability and encourage
the use of voluntary paternity establishment processes. Individuals
who fail to co-operate with paternity establishment must have
their monthly cash assistance reduced by at least 25 per cent,
and States can deny the family any cash assistance under the TANF.
- Uniform Interstate Child Support Laws: Adoption
of the Interstate Family Support Act became mandatory. This instituted
uniform laws in all 50 States, limiting control of a single child
support case to one State by 1 January 1998.
- Computerised State-Wide Collections: The
new law required States to establish central registries of child
support orders and centralised collection and disbursement units.
It also required expedited State procedures for child support
enforcement.
- Tough New Penalties: States may implement
tough child support enforcement techniques. Wage garnishment,
asset seizure, community service requirements, and driving, professional
and recreational licence removal can be used against parents who
owe child support.
- Work Requirements for Non-Custodial Parents:
States were given authority to impose a work activity requirement
on non-custodial parents who have children receiving TANF and
owe past due child support.
- Families First: Families no longer receiving
assistance have priority in the distribution of child support
arrears, bringing families who have left welfare for work an estimated
$1 billion in the first six years.
- Access and Visitation Programmes: The law
included grants to help States establish programmes that support
and facilitate non-custodial parents visitation with and access
to their children.
Restricting Public Assistance for Immigrants
- Benefits cut by $23.8 billion from 1998 to 2004.
- Illegal Immigrants: Continue to be denied
federal public benefits with few exceptions, such as emergency
medical services. Illegal immigrants are ineligible for all State
and local public benefits, with a few exceptions.
- Legal Immigrants: Became ineligible for SSI
and Food stamps until they attain citizenship. States may also
restrict access to federal cash welfare and Medicaid. Those who
have worked for at least 10 years are exempted from these restrictions.
With some exceptions, States are allowed to restrict eligibility
of legal immigrants for State and local public benefits. Legal
immigrants are restricted from federal means-tested benefits for
five years.
Food Stamps
The food stamps programme, which is administered nationally
through the US Department of Agriculture, and operates through
welfare offices, aims to make it easier for people to have nutritious,
adequate diets and to help individuals or families who have little
money to buy food. The monthly amount received depends on family
size and income. Households with no income receive the determined
monthly costs of a nutritionally adequate diet for the household
size, which is updated annually according to food price increases.
Prior to the 1996 Act, recipients were obliged to join a work
programme in order to receive the benefits.
The 1996 reform made the following changes to the food stamp
programme:
Provided an earnings disregard for an elementary or secondary
student until their 18th birthday.
- Related persons living together must apply as
a single household, regardless of the previous exception for children
living with their parents and their own children at the same time.
- State or local energy assistance is counted as income.
- Disqualification: Previous rules made individuals
refusing to register for work, refusing to participate in employment
or training when required to do so, or refusing a job offer without
good cause, ineligible for food stamps. The 1996 Act added further
disqualification rules: individuals who refuse to provide information
about job status or availability, and individuals who voluntarily
reduce working hours to less than 30 a week without good cause
are ineligible for food stamps.
- Childless adults between the ages of 18 and 50 may
not receive food stamps for more than three months in a three
year period if they do not work.
Old Age, Surviors, and Disability Insurance (OASDI)
- The OASDI social security system works on a
similar principle to National Insurance in the UK. It is based
on the principle that during working years, employees, employers
and the self-employed pay Social Security Taxes. When the workers
earnings stop or are reduced due to retirement, disability or
death, monthly cash benefits are paid to replace part of the earnings
the worker and family have lost.
FUNDING
- The OASDI programme is mainly funded by Social
Security Taxes. In 1997, employers and employees contributed 7.65
per cent of the employees wages for Social Security and Medicare
hospital insurance. The self-employed contributed 15.30 per cent.
The upper earnings limit in 1997 was $65,400, a figure which is
altered by a formula relating to changes in average earnings.
Other sources of income include federal income tax revenues and
interest from government interest-bearing assets.
- Of the 7.65 per cent contributions, 6.2 per cent
is earmarked for the OASDI trust fund. The programme has historically
been operated on a pay-as-you-go system, with current contributions
funding current benefits. Currently, the programme operates on
a partial advance funding basis, and the trust funds operate as
a safety net for periods when income is not sufficient to meet
benefits payments.
ELIGIBILITY
- Almost all types of paid work are covered by
OASDI. Approximately 145 million people worked in employment covered
by social security in 1997, and about 43.7 million people received
a total of over $29.4 billion per month in OASDI cash benefits.
Excluded workers include some civil employees hired before 1984,
who are covered by the Civil Service Retirement System some part-time
and irregular workers; most railroad workers, who are provided
with protection under the Railroad Retirement Act (RRA). In cases
where RRA protection is insufficient, payments can be combined
with OASDI payments.
- To qualify for benefits under OASDI, workers must
have credit for a required amount of work, measured in quarters
of coverage. This amount is adjusted annually under a formula
related to changes in average earnings. In 1997, a quarter of
coverage was acquired for each $670 income, with a maximum four-quarters
of coverage per year. The number of quarters of coverage required
to receive benefits depends on a workers age at the time of death,
retirement or disability. The minimum requirement is 6 quarters
of coverage, and the maximum requirement is 40. A worker who has
acquired the required number of quarters of coverage is considered
to be fully insured and eligible for most types of benefits. Fully
insured workers are eligible to receive benefits from the age
of 62. An additional insurance status test must be met by workers
in order to gain access to Disability Insurance Benefits. This
relates to the number of years worked prior to the disability.
- There are separate eligibility rules and amounts
of benefits available to the children, spouse, divorced spouse,
widow / widower and dependent parent of the worker. Amounts are
calculated in relation to the workers Primary Insurance Amount
(PIA). The PIA is calculated using a formula relating to the worker's
covered earnings. Benefits are limited to a statutory maximum
relating to the worker's PIA. Earnings tests limit the amount
of benefits payable to beneficiaries under age 70 who have significant
earnings. In 1997, claimants aged 65-69 could earn up to $13,500
a year without losing any benefits.
ORGANISATION OF
THE SOCIAL
SECURITY ADMINISTRATION
- The administration is organised on a nation-wide
basis with a staff of approximately 64,000 employees. The central
office is in Baltimore, Maryland. and handles central records
maintenance, operations and data processing. There are ten regional
offices, each of which is directed by a regional commissioner.
There are also several programme service centres. These are large
stand-alone facilities which perform data processing input and
output functions to handle new claims and beneficiary post entitlement
changes.
The Financial Year 1998 Balanced Budget
- Provided $12 billion to restore some of the
health and disability benefits for legal immigrants eliminated
in the 1996 Act, and a further $3 billion over five years to help
States to move welfare recipients into long lasting and unsubsidised
jobs, in the Welfare to Work Jobs Challenge Fund.
January 1998
| 
