Fact Sheet

pennsylvania welfare state

Pa’s Wayward Welfare State

Summary

  • Policies that expanded Medicaid eligibility to healthy, working-aged people and do not require the verification of eligibility have expanded the size and complexity of a program designed to focus on helping our most vulnerable citizens.
  • Pennsylvania’s 2015 Medicaid expansion added more than 600,000 participants between 2015 and 2017. Pennsylvania’s 2020 suspension of requirements to verify program eligibility resulted in an additional 600,000 program recipients.
  • Today, more than 500,000 Medicaid recipients are ineligible for the program. New Biden administration rules that limit eligibility verification are expected to increase program costs nationally by $100 billion over five years. Pennsylvania’s share could top $2 billion.
  • While Medicaid enrollment soars more than ten thousand disabled Pennsylvanians remain on a waiting list for community services. Pennsylvania should promptly restore verification and enact policies that help people transition from Medicaid to work.

Regulatory Changes

Joe Biden stated in September that “the pandemic is over,” yet subsequently extended his emergency powers and continued “emergency” expansions of welfare programs.[1] Recently, the administrations of President Biden and Governor Wolf announced regulatory changes that would permanently expand these programs.

These expansions are contributing to excessive inflation, worker shortages, and an unprecedented decline in labor force participation.

Medicaid Expansion and Eligibility Waivers

  • In 2015, Pennsylvania expanded Medicaid to healthy, low-income adults.
    • From 2015 to 2017, Pennsylvania added 631,797 adults to Medicaid.[2]
    • The annual state costs for this expansion population is around $5 billion.[3]
  •  In 2020, Pennsylvania suspended Medicaid income verification requirements to secure additional federal funding offered under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
    • Medicaid enrollment grew by more than 600,000 again between March 2020 and September 2022.[4]
    • The Department of Human Services (DHS) estimates over 500,000 Pennsylvanians enrolled in Medicaid since March 2020 are now ineligible.[5]
  • In August, the Biden administration proposed new Medicaid rules—effectively eliminating many basic eligibility checks.[6]
    • The administration estimates the proposed rule will increase Medicaid enrollment by nearly three million people per year and increase taxpayer costs by an additional $100 billion from 2023 to 2027,[7] with states taking on nearly $40 billion. Using the current distribution of Medicaid funds,[8] that’s the equivalent of an additional $2 billion in state spending.
    • The rule is an attempt to limit state flexibility, preventing more frequent attempts to verify eligibility.
    • The current “emergency” suspension of eligibility confirmations and proposed permanent rules represent steps in the wrong direction, away from a targeted and customized safety net, towards an expansive Welfare for All with complete federal control.

Burden of Medicaid

  • In September, Pennsylvania Medicaid enrollment hit 3.58 million. More than a quarter of Pennsylvanians use Medicaid.
    • In December 2014, there were 2.6 workers for every Pennsylvanian on Medicaid.
    • By the end of 2021, the worker-to-recipient ratio was 1.7.[9]
  • While Medicaid enrollment normally increases as unemployment goes up, Pennsylvania’s Medicaid rolls have continued to grow even as the unemployment rate has fallen to record lows due to federal restrictions on removing ineligible recipients.
  • One-third of the Pennsylvania state budget goes toward Medicaid.[10]
    • State general fund Medicaid spending in 2022–23 is about $14 billion, not including more than $1.2 billion in one-time federal funding.[11]
    • Total Pennsylvania Medicaid spending reached $39 billion, or 36 percent of all spending. Medicaid is the largest program in the state budget.

SNAP Expansion

  • Pennsylvania Gov. Tom Wolf recently expanded eligibility for the Supplemental Nutrition Assistance Program (SNAP), also known as Food Stamps.[12]
    • Wolf took this action unilaterally, without legislative approval.
    • Simultaneously, SNAP benefit amounts have, since 2020, increased to maximum amounts for all recipients, for the duration of the public health emergency. Typically, the state calculates a household’s benefit by deducting 30 percent of the family net income from the maximum amount.
  • Under the emergency, the federal government also suspended any phaseout of benefits. This means recipients will face significant cliffs.
    • For a family of two, this means they can earn up to $3,052 a month and receive $516 per month in SNAP benefits. However, if they make $1 more in income, they become ineligible and lose $6,000 in annual benefits.
    • Before this change, a family would lose $30 in benefits for every additional $100 in earned income.
  • This cliff creates significant disincentives to work more hours, take a higher-paying job, or return to work. At the same time, SNAP work requirements for healthy adults are also suspended.

Workforce Challenges

  • Eligibility expansion and policies that discourage working have contributed to a shrinking workforce and a shortage of available workers, even as wages and prices rise.
  • The Independent Fiscal Office (IFO) forecasts that Pennsylvania won’t fully recover to pre-pandemic employment levels until 2025.[15]
  • Research finds that a key feature of income mobility is a gradual benefit phase-out.
    • A vertical cliff provides a strong disincentive for household members to seek employment, work more hours or accept promotions.
    • Consequently, the workforce in Pennsylvania shrunk while SNAP benefits and Medicaid eligibility have expanded.

Solutions

  • Pennsylvania should restore work requirements for healthy adults utilizing SNAP and restore gradual benefit phase-outs as soon as the emergency ends.
  • Pennsylvania should promptly restore Medicaid verification, like Texas’s 6 month plan.[16]
  • Pennsylvania should consider ways to end the Medicaid benefit cliff where an individual’s total income declines even as their earned income increases.[17]
    • Graduated co-pays, premiums, or allowing enrollees to set aside resources in a Health Savings Account (HSA) could address these perverse incentives.

[1]Joseph Clark, “Biden extends COVID public health emergency after declaring pandemic ‘over’,” Washington Times, October 13, 2022, https://www.washingtontimes.com/news/2022/oct/13/joe-biden-extends-covid-19-public-health-emergency/.

[2]Pennsylvania Department of Human Services, Medical Assistance, Food Stamps and Cash Assistance Statistics Reports, “Eligible Adults and Children” (Archives 2017–22), accessed September 30, 2022, http://listserv.dpw.state.pa.us/ma-food-stamps-and-cash-stats.html.

[3]Medicaid Assistance Enrollment, Open Data PA; Pennsylvania Office of the Budget, “Executive Budget 2022–2023,” (Harrisburg: Office of the Governor, February 8, 2022), 514(E27-18), https://www.budget.pa.gov/Publications%20and%20Reports/CommonwealthBudget/Documents/2022-23%20Proposed%20Budget/Budget%20Book%202022-23_Web%20Version.pdf; see also Elizabeth Stelle, “Medicaid’s Endless Expansion,” the Commonwealth Foundation, July 5, 2022, https://www.commonwealthfoundation.org/research/medicaid-endless-expansion/#_edn4.

[4]Pennsylvania Department of Human Services, Medical Assistance, Food Stamps and Cash Assistance Statistics Reports, “Eligible Adults and Children” (Archives 2017–22), accessed August 30, 2022, http://listserv.dpw.state.pa.us/ma-food-stamps-and-cash-stats.html.

[5]Rep. Stan Saylor, “Key Takeaways from House Appropriations Hearings,” Pennsylvania House Appropriations Committee. March 9, 2022, https://www.pahousegop.com/News/27444/Latest-News/Key-Takeaways-from-House-Appropriations-Hearings.

[6]Centers for Medicare and Medicaid Services, “Streamlining the Medicaid, Children’s Health Insurance Program, and Basic Health Program Application, Eligibility Determination, Enrollment, and Renewal Processes,” proposed rule, September 7, 2022, https://www.regulations.gov/document/CMS-2022-0134-0002.

[7]Gary Alexander, “Biden’s Medicaid Expansion Ignores the Program’s Problems and Opens It to Abuse,” Washington Examiner, September 24, 2022, https://www.washingtonexaminer.com/restoring-america/faith-freedom-self-reliance/bidens-medicaid-expansion-ignores-the-programs-problems-and-opens-it-to-abuse.

[8]National Association of State Budget Officers, “2021 State Expenditure Report: Fiscal Years 2019–2021,” (2021), https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/SER%20Archive/2021_State_Expenditure_Report_S.pdf.

[9]Current Employment Statistics, Bureau of Labor Statistics, June 2021, https://www.bls.gov/sae/data/; Medicaid Assistance Enrollment, Open Data PA, accessed May 2022, https://data.pa.gov/Human-Services/Medical-Assistance-Enrollment-July-2003-Current-Mo/2ght-hfn9/data.

[10]National Association of State Budget Officers, “2021 State Expenditure Report: Fiscal Years 2019–2021,” 8.

[11]Pennsylvania Office of the Budget, Executive Budget 2022–2023,”58 (B3).

[12]Independent Fiscal Office, “Do SNAP Changes Impact Work Incentives?” Research Brief, September 2022, http://www.ifo.state.pa.us/download.cfm?file=Resources/Documents/RB_2022_09_SNAP_Changes.pdf.

[13]U.S. Bureau of Labor Statistics, “Graphics for Economic News Releases: Employment & Unemployment,” accessed October 25, 2022, https://www.bls.gov/charts/.

[14]U.S. Bureau of Labor Statistics, Local Area Unemployment Statistics, https://www.bls.gov/lau/

[15]Independent Fiscal Office (IFO), “Initial Revenue Estimate FY 2022–23,” May 23, 2022, http://www.ifo.state.pa.us/releases/562/Initial-Revenue-Estimate-FY-2022-23/.

[16]Texas Department of Health and Human Services, “Ending Continuous Medicaid Coverage,” July 2022, https://www.hhs.texas.gov/sites/default/files/documents/jul-2022-iddsrac-agenda-item-5.pdf.

[17]Pennsylvania Department of Human Services, “What is the Benefits Cliff?” accessed October 25, 2022, https://www.dhs.pa.gov/about/Pages/Benefits-Cliff.aspx.