Answering "What If" Questions About Welfare Costs and Caseloads

Estimating | Understanding | Assessing | Identifying | Forecasting

Federal welfare reform gave states new freedom as well as new challenges. To balance these factors and design an effective program, a state must be able to predict how proposed reforms will affect costs and caseloads. Mathematica Policy Research offers a fast and inexpensive tool, the MATH^® microsimulation model, for making these predictions. MATH, initially used to estimate how changes in AFDC, food stamps, and SSI would affect federal costs and caseloads, can also help states simulate programs under TANF, including the impact of time limits on costs and caseloads.

Estimating Costs and Caseloads

For more than two decades, we have estimated the impact on costs and caseloads of hundreds of program and policy options for welfare and food stamps. These estimates have proved useful and effective for policymakers; in fact, federal legislative provisions have been based directly on MATH model results.

Understanding the Impact of Time Limits

One of the key provisions of current welfare law is time limits. These limits include a community service time limit, a work time limit, and a termination time limit. Furthermore, states have the option to set their own time limits, within federal constraints. We have experience developing prototype models to help predict the cost and caseload impacts of different time limits.

Assessing Program Interactions

Welfare reform has affected many welfare programs—AFDC (now TANF), food stamps, SSI, Child Support Enforcement, and Title XX programs. These simultaneous reforms produce complex interactions among programs, with changes to one program influencing the effectiveness of reforms to others. MATH integrates TANF, food stamps, and SSI into a single model, so states can predict the impact on costs and caseloads of program interactions.

Identifying Winners and Losers

A frequently overlooked aspect of policy analysis involves predicting the impact of a reform on individual families. Two policy options with similar aggregate cost and caseload impacts might have quite different impacts on “winners,” families better off after reform, and “losers,” families worse off after it. The winner/loser aspect of a reform may also determine its political feasibility. Microsimulation is virtually the only way to estimate the winner/loser impacts of a reform option.

Forecasting Costs and Caseloads

Traditionally, states have forecast their welfare caseloads using a trend analysis of historical caseload data. Some have used a simple trend analysis, while others have used a sophisticated econometric model. Because of the unprecedented changes in the welfare system, historical caseload data is no longer a good guide for predicting future caseloads. The only way for traditional econometric forecasting models to be useful in the current environment is to adjust their forecasts for the impacts of welfare reform. The MATH model provides a way of making this adjustment.

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