Effects of child health on sources of public support.

• Author: Reichman, Nancy E.
• Position: Poor child health directly impacts on the economic welfare of families

1. Introduction

   A growing body of research reveals that not only does low income lead to poor child health, but poor child health can have deleterious effects on family resources that may contribute to health and economic disadvantages over the life course. Corman and Kaestner (1992), Mauldon (1992), Joesch and Smith (1997), and Fertig (2004) found that married couples are more likely to divorce when their child has a serious health problem, and Reichman, Corman, and Noonan (2004) found that one-year-old children with serious health problems are less likely than their healthy peers to live with their fathers. Having a child in poor health reduces mothers' labor force participation (Norberg 1998, Powers 2003, Corman, Noonan, and Reichman 2005), and it also appears to have increased reliance on cash assistance through the former Aid to Families with Dependent Children (AFDC) program (Wolfe and Hill 1995). It is not known whether mothers with unhealthy children are more likely than those with healthy children to rely on welfare in the current public assistance environment. The answer to this question has implications for mothers' ability to make ends meet and to invest in their children's health.

   The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 dramatically restricted eligibility for cash assistance in the United States by establishing time limits on the receipt of welfare, expanding work requirements for those receiving welfare, and allowing states to impose stricter sanctions for noncompliance with work requirements or other guidelines. Reflecting this new paradigm, it replaced the former Aid to Families with Dependent Children (AFDC) program with Temporary Assistance to Needy Families (TANF). Other features of the 1996 legislation included the reimposition of a more stringent definition of child disability for Supplemental Security Income (SSI) benefits (after the criteria had been eased in 1990) and the de-linking of eligibility for Medicaid from that for cash assistance so that nonpregnant mothers can be eligible for Medicaid even if they do not meet their state's new cash assistance requirements.

   In this paper, we estimate the effect of having a young child in poor health on a mother's reliance on TANF and other sources of public support within this new regime. The effects on maternal labor supply found in other studies suggest that having a child in poor health will increase reliance on welfare. However, this may not be the case under TANF because mothers with children in poor health may (1) have difficulty complying with TANF work requirements and therefore choose not to participate (or see their benefits eliminated for this reason); (2) be more likely to delay participating in order to "bank" their lifetime benefit allotment (in states that have such limits); (3) have less incentive to participate in TANF because nonpregnant mothers' eligibility for Medicaid is no longer tied to welfare participation; or (4) be more likely than before PRWORA to substitute SSI for TANF because the former, despite being more difficult to obtain, has higher financial benefits, fewer restrictions, and more permanency than the latter. In addition, having a child in poor health may increase reliance on other sources of public support, such as food stamps or the Supplemental Nutrition Program for Women, Infants, and Children (WIC), which have fewer restrictions, such as work requirements or time limits.

   We estimate the effects of having a child in poor health on the mother's receipt of TANF and cash assistance through SSI and in-kind subsidies in the form of food, health insurance, and shelter (WIC, food stamps, Medicaid, and housing). We control for a rich set of covariates, consider alternative definitions of poor child health, and test for the potential endogeneity of child health. The results contribute to the literature on determinants of welfare participation and further our understanding of how vulnerable families make ends meet under the current welfare regime. They also have implications for our understanding of the processes underlying children's health and income trajectories in low-income families.

2. Background

   In this paper, we estimate the effects of poor child health on participation in TANF and other programs that provide public support. An extensive literature examines the determinants of participation in both TANF and its predecessor, AFDC. Many other researchers have evaluated the effects of policies, including the 1996 PRWORA legislation, on welfare caseloads. (1) Both of these bodies of research include studies relevant to our research question, but few have examined the causal effect of poor child health on welfare participation. We summarize the relevant research, first focusing on pre-welfare reform literature and then reviewing relevant post-welfare reform studies.

   Pre-Welfare Reform Studies

   A seminal study by Blank (1989) examined the relationship between medical need and AFDC participation. In the AFDC era, health insurance through the Medicaid program was strongly linked to AFDC participation. Blank posited that a mother who had medical problems (or had a family member with medical problems) would have an incentive to participate in AFDC for two reasons: a diminished capacity to work (directly, as a result of her own disability, or indirectly, due to the burden of caring for a disabled family member) and to obtain public health insurance through Medicaid. Using the National Medical Care Utilization and Expenditure Survey, Blank compared individuals' likelihood of AFDC participation in states with and without programs that had Medically Needy provisions for Medicaid; such provisions expanded coverage to certain financially or categorically ineligible individuals. She found that poor health of a mother or one of her family members increased the likelihood of AFDC participation among single mothers, but participation was unrelated to whether or not the state had a Medically Needy provision. Thus, poor health increased AFDC participation because it limited the mother's ability to work, not because AFDC provided access to public health insurance.

   Wolfe and Hill (1995) separately analyzed the effects of child disability (a serious activity limitation) and mother's poor or fair health on labor force participation. Using the 1984 panel of the Survey of Income and Program Participation (SIPP), they simulated mothers' eligibility for a number of hypothetical public health insurance plans and found that those that would cover children for health insurance regardless of AFDC participation would have a large positive impact (as much as 22 percentage points) on labor force participation of single mothers with disabled children. They inferred that welfare participation would decrease substantially with increased health insurance coverage for working mothers. Their findings indicate much stronger health policy effects than those found by Blank; the divergent results may reflect the different measures of health/disability that were used. Blank used an average measure of health for the family, whereas Wolfe and Hill used specific and distinct measures of child disability and maternal health status. The effects for children may be smaller today because eligibility for Medicaid has been de-linked from welfare participation for children since the 1980s.

   Two recent studies assessed the effects of poor child health on exits from AFDC. Using data from the 1990 SIPP, Acs and Loprest (1999) found that child disability (defined as a limitation that prevented the child from performing usual activities) increased the probability that a mother of a child under six years of age was able to leave welfare by about 14 percentage points within a short period (one to two and one-half years), but it did not increase the probability that she left welfare to work. This result suggests that mothers may have left welfare to obtain more generous benefits from other sources, such as SSI, for which individuals can be eligible if they are both poor and disabled. Meyers, Brady, and Seto (2000) estimated the likelihood of transitioning from welfare using panel data on participants in the California Work Pays Demonstration Project from 1992 to 1996 (just before implementation of PRWORA). Using a hazard model and holding constant the mother's age, ethnicity, number of children, presence of a partner in the household, county of residence, and own disability status, they found that having a severely disabled child reduced the probability of discontinuing cash assistance at all (AFDC or SSI) but increased the likelihood of leaving AFDC for SSI.

   Two studies examined the effects of AFDC or SSI generosity on child SSI participation. Black, McKinnish, and Sanders (1998) found that states with lower levels of AFDC generosity had higher rates of child SSI participation, holding constant other factors. Garrett and Glied (2000), who also used state-level data, obtained results similar to those of Black, McKinnish, and Sanders and found that the Zebley decision of 1990, which liberalized the definition of child disability until PRWORA made it more stringent in 1996, resulted in a significant increase in child SSI participation. In a related study that used data from the National Health Interview Survey (from 1987 to 1994, covering pre- and post-Zebley decision years), Kubik (1999) found that greater numbers of children were diagnosed with chronic impairments after the Zebley decision. That study also found that children in states with high SSI benefits (compared with AFDC benefits) were more likely to be diagnosed with a disability than those in states with low net SSI benefits. These results indicate that policies that make welfare less generous or less accessible, or that make SSI more generous or more accessible, tend to shift participation from welfare to SSI. In a study that did not focus on children...