When federal welfare reform was enacted in 1996, states implemented a  variety of initiatives intended to help families move from welfare to the  workforce. Welfare reform provided states additional flexibility in helping  cash assistance recipients to both find work and achieve family  independence. Transitional Medicaid Assistance Can Provide Continued Insurance Coverage

Because of limitations in the availability of private insurance—especially  for low-paid, part-time workers and those in certain industry sectors that  often characterize jobs available to individuals moving from cash  assistance to work—transitional Medicaid assistance is an important  option for health insurance coverage. However, even with such successful enrollment efforts, many families did  not receive the full transitional Medicaid assistance benefits because they  failed to periodically report their income as required. The Medicaid statute  requires that beneficiaries report their income three times during the 12  months of transitional Medicaid assistance: once in the first 6-month period  and twice in the second 6-month period. Precedent for a full year of coverage in Medicaid has been  provided in other aspects of the Medicaid program. A similar approach could facilitate uninterrupted health  insurance coverage for families that are moving from cash assistance to the  workforce.
What GAO Found

Welfare reform significantly changed federal policy for low-income families with children and established a five-year lifetime limit on cash assistance. Welfare reform also extended transitional Medicaid assistance through 2001. States have implemented various initiatives to help families move from cash assistance to the workforce, including some enhancements to transitional Medicaid. These initiatives likely helped to cut cash assistance caseloads by more than half from 1996 through mid-2001. Low-wage or part-time jobs--which are common for newly working individuals--often do not come with affordable health insurance, thus making transitional Medicaid coverage an important option. The implementation of transitional Medicaid assistance varied across the 21 states that GAO reviewed. State practices enhanced beneficiaries' ability to retain Medicaid coverage. However, many families did not receive their full transitional Medicaid assistance benefits because they failed to report their income three times during the 12-month period of coverage. Amending the Medicaid statute to provide states with greater flexibility to ease income-reporting requirements, as has been done for other aspects of the Medicaid program, could facilitate uninterrupted health insurance coverage for families moving from cash assistance to the workforce.