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Graham held up the landmark shift in welfare policy in 1996 as an example of the federal government successfully turning an entitlement program over to states. The changes redirected the money spent on federal aid for low-income families to a block grant for the states, giving them flexibility on how to spend the money, so long as it went toward programs to reduce poverty. Graham said this shift in funding “worked like a charm.”

Santorum, who received a Geppetto Checkmark from the Fact Checker for claiming he was a key architect of the 1996 welfare restructuring bill, initially proposed the idea of block grants for health care to Graham. During Senate testimony on the bill on Monday, Santorum said the block-grant concept was a “novel idea” that “worked for those on welfare.”

After more than two decades, whether the welfare shift was a success is still hotly debated. But one fact is clear: The changes dramatically reduced the number of people receiving cash assistance.

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To some extent, this sounds like apples and oranges. Can a program that reduced the number of people receiving benefits serve as a blueprint for health-care policy that backers claimed would expand the number of people with health-insurance? And is Graham correct that the 1996 law held states accountable?

The Facts

The Personal Responsibility and Work Opportunity Act of 1996 established a new aid program for low-income families: Temporary Assistance for Needy Families. TANF replaced three federal programs: Aid to Families with Dependent Children, Job Opportunities and Basic Skills Training, and Emergency Assistance.

The federal government set aside $16.5 billion, which does not increase with inflation, for states to create programs that would help people transition from welfare to work. To qualify for the maximum allotment, states must also make a financial commitment to TANF programs. Under the revised system, states were free to spend the money as needed, provided they met several federal guidelines, such as maintaining minimum levels of state funding, meeting work participation requirements, and reporting data on the programs to the federal government.

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Like the welfare overhaul, Graham’s bill is designed to give states flexibility in creating their own health-care programs. Under the Cassidy-Graham bill, Affordable Care Act tax subsidies are replaced by a block grant, which states could use to continue the subsidy payments or set up new systems to help people pay for insurance. Medicaid spending is also capped to a per capita amount starting in 2020.

Graham’s key argument is that turning money over to the states will help create a better, more efficient, health-insurance system, much like he believes the welfare law did. When Graham said block-granting welfare “worked like a charm,” he is pointing out many people who said changing welfare would “have disastrous effects,” according to Kevin Bishop, Graham’s spokesman. But instead of creating a disaster, each state restructured the program based on its unique needs.

“Graham-Cassidy is built upon the same principle,” Bishop said in an email. “No two health care populations in a state are exactly the same. And what health care reforms that work in Arkansas may not work in California. Vermont has discussed and wanted to go single-payer. They can use the money from Graham-Cassidy to do so.”

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Graham’s logic raises the question: When the federal government block-granted welfare, did states create better, more accountable programs?

Reducing the welfare rolls

According to a report released in 2015 by the Congressional Budget Office, over time, states dramatically reduced the amount of funding for cash assistance. “Most TANF funding was initially spent on cash assistance,” the report found. “Between 1998 and 2008, however, the share of funding spent on cash assistance fell from about 65 percent to about 30 percent.”

The CBO cites several reasons for this decline in spending, including a decrease in the number of people receiving cash assistance from TANF. In 1995, 5 million people received cash assistance; by 1998, that number fell to 3 million; and by 2000, just 2.2 million families received cash assistance, according to the report.

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Many conservatives point to the decline in caseloads as a success of the 1996 law. Robert Rector, a senior research fellow at the Heritage Foundation, a conservative policy organization, says reducing the welfare rolls was one of the main goals of the 1996 changes.

“It is not just that people left welfare,” he said. “A lot of people never went on the rolls in the first place. With the work provision, there was a substantial increase in employment in never-married mothers, one of the main groups the reform intended to help, which persists to this day.”

In a 2016 report on welfare restructuring and extreme poverty, Rector notes that the poverty rate for single-parent families declined from 38 percent in 1996 to 35 percent in 2014. He also notes that when factoring in income from welfare, the percent of single-parent families living in poverty declined from 27.5 percent to 22.9 percent. His post-welfare income calculations includes other aid programs such as food stamps, supplemental security income, and the earned-income tax credit.

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Yet the CBO report points out that even though the number of people receiving welfare declined, many families who were eligible for aid did not receive it. “By 2013, for every 100 families in poverty, there were about 25 families receiving cash assistance,” according to the CBO.

From 2000 to 2008, as economic growth slowed, the number of families living below the poverty line increased by 24 percent, increasing the number of families who were eligible to qualify for TANF, according to the CBO. But from 2000 to 2008, the number of families receiving cash assistance fell by 28 percent. Overall, from 1994 to 2013, the number of families receiving assistance through TANF “fell by nearly 70 percent,” according to the report, even though the number of families living below the poverty threshold was nearly the same.

A major reason for the dwindling rolls was the newly implemented work requirements, which Rector says was the key aspect of the 1996 law. To receive TANF funding, states had to show that at least 50 percent of the people on welfare were working or engaged in a work-prep program. According to the CBO report, very few states can claim that 50 percent of the families on cash assistance are working. The national average is roughly 17 percent, the CBO found. Still, states rarely lose funding because they are able to take advantage of several loopholes.

Accountability and oversight

To make up for the low work-participation rates, states can reduce the number of people receiving cash assistance, spend more of their own money on TANF, or take corrective action.

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A 2012 report from the Government Accountability Office found that states increasingly count spending by nonprofits and other nongovernmental agencies toward their annual spending requirements. While this is allowed, the GAO found that many states reported the nongovernmental income to help meet work participation requirements after their caseloads increased following the 2008 recession.

A 2015 GAO report notes that states are not required to report performance information for families receiving services other than cash assistance — in other words, families engaged in work-prep programs. In addition, the GAO notes that there is little incentive for states to evaluate their welfare-to-work programs and that they “are not required to so.”

Spending on these programs has increased over the years, the GAO found. “In December 2012 GAO found that nationwide, in fiscal year 1997, states spent about 23 percent of TANF funds on services other than cash assistance, such as child welfare or child care. In contrast, states spent more than 66 percent of TANF funds for these purposes in fiscal year 2013.”

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The report says the Department of Health and Human Services has taken some efforts to address the GAO’s findings with respect to states’ reporting of expenditure, but have not yet suggested measures to prod states to evaluate their programs.

Still, Graham’s camp believes sending money to the states would yield a more efficient health-care system.

“The point on welfare reform and health care reform is to move the money and power out of Washington, return it to the states, and give them flexibility to get better outcomes,” Bishop said. “They know what works best at the local level, not Washington, DC.”

The Pinocchio Test

Likening welfare block grants to health care is a bit facile. For one, the 1996 law was designed to reduce the number of people on welfare, but a successful health-care plan keeps people enrolled.

Graham said block-granting welfare “worked like a charm” because states had more flexibility to create programs as they saw fit. With the new flexibility, states used funding for a variety of services other than cash assistance or work preparedness. Despite Graham’s claim, states are not actually held accountable.

The number of people receiving cash assistance declined, but poverty did not; the CBO says many families in need were not covered by the TANF safety net. Additionally, many conservatives also argue that extreme poverty did not surge, as many critics of the changes cautioned it would. That’s true, but avoiding a disaster is not necessarily a success.

Graham’s statement skips too lightly past the actual impact of the 1996 law while sugarcoating its promise of accountability. He earns Two Pinocchios.

Two Pinocchios

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