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DHHR Deputy Secretary discusses “cliff effect” of people losing benefits

By ANDREA LANNOM

The Register-Herald

CHARLESTON, W.Va.  — The deputy Secretary for the state Department of Health and Human Resources told legislators there are dis-incentives that keep people from getting married or keep them from getting an increase in income for fear of losing benefits.

Jeremiah Samples, deputy secretary for the DHHR, discussed what he called the “Cliff Effect” in Tuesday’s Joint Committee on Children and Families. Samples also addressed potential ways to mitigate this effect but noted the costs that go along with them.

“What happens in terms of DHHR services, are there are disincentives we recognize that keep people from getting employment,” Samples said. “These are rational decisions people make.”

People think twice about taking a raise at work, Samples said, when the additional pay would put their benefits at risk.

“When we talk about these issues, these are not folks who don’t want to be in the workforce or don’t want to improve their station. The system is structured in a way that impedes it.”

Samples said the DHHR was asked by a coalition of stakeholders to look at this effect as it relates to marriage on household benefits.

The programs he and Kent Nowviskie, assistant to the deputy secretary, covered Tuesday were Medicaid, Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF) and the child care subsidy. Samples said many of the programs are federally-funded but said the agency could reach out to the federal government if the state recognizes a problem, even if it’s a federal barrier.

Nowviskie said changes in the Child Care and Development Block Grant Act of 2014 puts the future of West Virginia’s child care subsidy in jeopardy. Currently, West Virginia serves an average of 11,083 children a month and 19,783 children per year.

Nowviskie said the most significant change the act had is requiring an extension of certification period to 12 months instead of West Virginia’s current six months. West Virginia has a waiver from this requirement until September of 2018.

To stay with the current budget, 4,509 families or 7,100 children would be cut from the program, Nowviskie said. He said an additional $72 million is needed to meet the projected need.

Samples explained that the cliff effect occurs when a household experiences an increase in income that places them above the eligibility threshold for a social service program. He said this change in income can prevent people from seeking improved wages in order to keep their level of benefits. Sometimes, he said, it can be a small change that causes this loss of benefits.

“If a household has an increase of income, it can place them above the eligibility requirements,” Samples said. “There are cases where an individual is $8 above the threshold and they were ineligible for services. …We are required to implement the policy as it exists. We can’t fudge it.”

He said some households with co-habitating partners may not accurately report their status as joint members of the household to reduce reported household income. Most federal benefit programs consider combined income of all individuals in a household regardless of marital status but co-habitating partners may avoid marriage out of the belief it will increase household size, according to Samples’ presentation. Co-habitating partners also may misreport residency in order to maintain current benefit levels, he said.

“It incentivizes folks to, frankly, commit fraud and misreport work or work in a black market economy as opposed to getting a job at a restaurant where there are records of your salary,” Samples said. “All that is driven by the fact that if you’re $5 over that threshold, you lose benefits for yourself and your family.”

The poverty level is set by the federal government. For an individual, this is a salary of $12,000. For two people, that’s $16,200. For a family of four, that’s $24,600.

Samples explained the Medicaid program currently uses a tiered co-pay and out-of-pocket maximum structure for certain benefits so as a person’s income increases, so do the cost share requirements.

“The reason we did that is to prepare individuals seeing an increase in their salary for the exchanges,” he said, going on to say, “This provides a ladder for folks so they don’t fall off the cliff and don’t automatically lose their benefits. This model really could be applied to other programs.”

He said an option for mitigation with Medicaid would be a 12-month continuous eligibility option to allow programs to cover adults for 12 months even if there is a change of income that would modify eligibility for the program. However, this would be subject to federal approval and federal funds may not be available to cover individuals resulting in additional state funding needed for the program.

Nowviskie also covered ways to mitigate the cliff effect with SNAP and TANF. He explained for SNAP, West Virginia currently has a waiver from federal rules that allows the agency to act on any reported changes to household income. He said ending the waiver would be a potential way to mitigate issues that would allow the agency to only act on changes that would increase benefits during the 12-month certification period.

This, like the Medicaid option, would require federal approval. He said there also could be a potential for an increase in the SNAP error rate and severe federal financial penalties. However, he said the error rate could balance out in the longterm.

Another option he mentioned was a transitional benefit allowance to allow people to receive five months of SNAP at the level of their TANF benefits. This also would be subject to federal approval.

Stormy Matlick, of Tunnelton, was one of the speakers who shared her story of the cliff effect. She said she has three kids aged 9, 10, and 16. She started her service at Americorps while she finished her bachelor’s degree but said she didn’t feel the cliff effect until she got a job at Starting Points.

“The year I accepted a job at Starting Points, I was pushed right off that cliff,” she said. “Now, I’m reporting my income. I lost my benefits. This was a reality for me but I refuse to let it define me because now I’m fueled to educate others on the importance of creating change necessary so my kids don’t have to know what it’s like living in poverty.”

Email: [email protected]; follow on Twitter @AndreaLannom

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