Randy Hicks in City Journal Originally published July 1, 2025
House Republicans’ proposed Medicaid reforms have reignited a national conversation about work requirements. The GOP is right to argue that work is part of a good life, and that some program recipients should be required to hold a job.
But work requirements are only a first step. If the One Big Beautiful Bill becomes law, states will quickly discover that their administrative systems are ill-equipped to move recipients from welfare to work. To succeed, states should adopt a more integrated approach—one that provides access to both benefits and job training in a single location. The model for such an approach is Utah’s “One Door” strategy.
Today, nearly one in three Americans relies on some form of government assistance. But instead of helping vulnerable Americans get back on their feet, the safety net often keeps recipients mired in poverty, unable to break out of dependency and into self-reliance.
To understand why, consider the origins of America’s social welfare system. The modern safety net began in 1935 with the Social Security Act, followed by Medicaid, Medicare, food stamps, and cash welfare. Today, the government runs more than 80 assistance programs.
But these programs weren’t designed to operate together. In fact, calling them a “system” is misleading—there’s nothing systematic about them. Policymakers created the programs at different times, in response to different problems. Though the dollars start in Washington, they’re administered unevenly by the states. The result is a patchwork of siloed programs with overlapping goals, duplicative rules, disincentives to work, and little coordination of data or caseloads.
This complex maze dehumanizes millions of Americans in need. It forces low-income individuals to navigate countless forms, offices, and eligibility rules just to receive assistance. Few programs offer a clear path back into the workforce.
Yet work is essential to escaping poverty. Unemployment is a major driver of long-term dependency—and a key reason many people turn to welfare in the first place. Unfortunately, in nearly every state, the federally funded workforce training system operates entirely separate from the safety net.
Randy Hicks is the president and chief executive officer of the Georgia Center for Opportunity and cofounder of the Alliance for Opportunity.
Key Points
Government shutdowns occur when Congress doesn’t pass a set of bills that give federal agencies and services the approval and funding necessary to operate.
Government shutdowns and political wrangling distract from the real issues facing the poor and delay much-needed safety net reforms that would help people move out of government dependency.
There are bipartisan solutions Congress can act on to better serve low-income and marginalized communities.
Government shutdowns occur when Congress doesn’t pass a set of bills that give federal agencies and services the necessary funding to operate. Without this approval, agencies must pause all non-essential activity until Congress takes action. Government shutdowns often go hand-in-hand with political conflicts among federal leaders. When this dynamic takes hold in D.C., government shutdowns become, at best, a distraction from the real issues facing the poor and, at worst, a roadblock to helping people achieve stability and economic opportunity.
Benefits from Social Security, Medicare, and most other need-based programs still go out, but shutdowns often lead to furloughs or reduced staffing levels in federal agencies that administer these programs. As a result, beneficiaries may experience longer processing times for applications, appeals, and inquiries.
Many federal employees are temporarily out of a job. They are instructed not to show up to work and aren’t paid during the shutdown window, though they typically receive back-pay once a shutdown ends.
Essential government employees, such as members of the military, air traffic controllers, and Transportation Security Administration (TSA) agents, are expected to keep working, usually without pay.
Americans may experience delays in government-administered processes, such as permits and passports.
Government shutdowns and safety net programs
For many Americans who currently need assistance from programs like SNAP, WIC, Temporary Assistance for Needy Families (TANF), and Social Security, a government shutdown can be a fearful prospect. The worry of losing essential benefits and facing greater financial hardship can take a significant toll on individuals and families in low-income households and communities.
Impact of a shutdown on SNAP benefits
SNAP, the nation’s second largest safety net program, helps eligible families buy food. Around 42 million Americans currently receive this vital support. The federal government pays for SNAP benefits, and funds are delivered to the states for distribution to the individuals and families who need them.
During a government shutdown, there are typically enough funds available to provide SNAP benefits for about a month. Few shutdowns in American history have gone on that long, so recipients usually don’t notice any change in financial assistance.
But on November 1, 2025, the current government shutdown surpassed the one-month point, and SNAP recipients didn’t receive any benefits for the coming month. To address this critical situation, the federal government will use its emergency funds to provide SNAP support. Unfortunately, this will only be a short-term solution, and it isn’t likely to cover all the SNAP assistance the government would usually distribute during the month.
It’s important to note that a pause in SNAP benefits during a government shutdown hurts not only individuals and families, but also local economies. Food stamps help support the businesses where people spend them, like grocery stores and farmers markets. Every dollar of SNAP benefits generates about $1.54 in economic activity, but this grinds to a halt when the government doesn’t fund this essential public assistance.
Impact of a shutdown on WIC benefits
WIC provides families with free healthy foods, breastfeeding support, nutrition education, and referrals to other services. Almost 7 million pregnant women, new moms, and children up to age 5 currently depend on WIC support.
The 2025 shutdown has put WIC benefits in jeopardy, and federal funding for this crucial assistance becomes more uncertain the longer the government remains closed. In the short term, federal officials are using revenues from other sources to keep the program running.
Government shutdowns can push people struggling with hardships further below the poverty line. Recent data shows that a pause in crucial welfare assistance would cause an additional 2.9 million Americans to fall into poverty in late 2025. This would also put future generations at risk of becoming trapped in long-term cycles of poverty.
During a government shutdown, community support for our neighbors is critical. Churches, food banks, charities, and other nonprofit organizations can increase their efforts to provide food to people in need to help them through the difficult time, and community members can provide urgently needed donations.
There is a solution Congress can act on to create a better pathway out of poverty
A government shutdown may not cut off food stamps, WIC, Social Security, or other safety net benefits immediately. However, low-income and vulnerable communities still suffer.
In the short term, lawmakers need to better serve people living on the margins by being willing to compromise and end the government shutdown. This will make it less likely that the struggles of low-income Americans get lost in political conflicts.
In the longer term, the shutdown is a reminder that we need a better safety net system—one that encourages economic opportunity and stability instead of leaving millions of Americans exposed to the ups and downs of federal government turmoil. By ending the shutdown, Congress could take up the more important priority of One Door reform.
In the current welfare system, recipients are forced to navigate multiple, disconnected programs, eligibility requirements, and caseworkers—a maze that becomes a trap for welfare dependence instead of a secure path out of poverty.
The One Door Model makes it possible for the safety net to be a bridge rather than a barrier to opportunity. It does away with the disconnected programs and integrates human services with work support so beneficiaries who are capable of working have a clear, supportive, and accessible path to personal well-being and meaningful jobs.
The One Door Model provides welfare recipients with a greater sense of direction, dignity, and purpose, empowering people to become self-sufficient and enabling them to truly flourish.
FAQs about the government shutdown
Will SNAP benefits be paid in November 2025?
The federal government plans to use its emergency funds to provide SNAP benefits in November 2025. Unfortunately, these funds aren’t likely to cover all the SNAP assistance the government would usually distribute during the month. The payments will also be delayed because states will have to adjust their automated systems to distribute reduced amounts.
Will WIC benefits be paid in November 2025?
The federal government has currently made funds available to pay WIC benefits for the first few weeks of November 2025.
Are Head Start programs affected by the shutdown?
Head Start programs provide early learning, health, and well-being services to families with young children. The programs receive funding from the federal government, and many are closing due to the shutdown. Some are staying open by providing limited services, reducing staff, or shortening operating hours.
Where can Georgia families go for food assistance?
Foodfinder.usis a free, nonprofit website and mobile app that helps people find nearby food pantries and free food programs. Users can easily search for local support by entering their zip code.
Feeding Georgia is a statewide network of food banks that collaborates to end hunger in Georgia. Its website offers helpful links to local food resources.
Where can Georgians get help to find work quickly?
The Georgia Center for Opportunity’s BETTER WORK program partners with employers and local resources throughout Gwinnett County and the city of Columbus to connect people with training and support services and to help them find meaningful work.
How are government shutdowns related to welfare benefits cliffs?
A benefits cliff occurs when an individual, family, or household loses more in benefits from government assistance programs than it gains from additional earned income. When a person experiences a benefits cliff, they are thrust into serious difficulties: losing housing, going hungry, fearing that their children will be taken by Child Protective Services, and more. A government shutdown can have similar effects to benefits cliffs because it can cause big delays or cuts to essential safety net program payments. This creates significant financial hardship for people who are struggling and can push them deeper into poverty.
What are the political games in D.C. costing communities?
Americans deserve better than having their day-to-day well-being threatened by political dynamics in D.C. Shutdowns result when federal leaders devote energy to political distractions instead of bipartisan opportunities to fix our broken safety net system. This costs millions of people the chance for a more fulfilled, self-sufficient life.
We need a safety net system that gives people hope and independence from D.C. To make that possible, the current government shutdown needs to end so legislators can get back to the work of serving people—truly putting citizens’ needs first and creating policies that allow Americans to escape poverty and flourish.
If it is a bad idea to raise the minimum wage, or even have a minimum wage law to begin with, where does this leave the low-wage worker?
We already examined the empirical evidence showing that minimum wage laws reduce employment among the groups the laws are intended to help. (If you missed it, check out my blog.)
We also looked at the negative impact on small business—that most important job-creation engine. (Check out this blog.)
Now we want to know what we can do to help low wage workers.
A job is better than no job
True. Some workers earning a minimum wage will find themselves better off with a law that increases their pay. However, millions others will be hurt. Some are harmed because their hours might be reduced. Worse, many others will not be able to find a job or lose their job. The nonpartisan Congressional Budget Office predicted this number will be 1.4 million people if the federal $15 minimum wage proposal becomes law.
If you cannot find a job or lose your job, you are not better off. This is especially true for workers starting out in the labor force. They learn things on the job that they cannot learn in a classroom or at home.
They learn the all-important soft skills required to function in the workplace, such as getting along with coworkers, meeting expectations, and showing up on time prepared for work.
Importantly, they also begin building their net worth. At a minimum, they do this by putting away for their future with contributions—matched by their employer—to Social Security and Medicare.
No minimum wage law does not mean no standard
The minimum wage is an arbitrary number with little meaningful relationship to the particulars of a specific job. The United States has nearly 6 million business firms with 7.9 million establishments in thousands of industries in over 3,000 counties, according to the Economic Census. Each has its own characteristics in terms of expectations, skills, and pay.
One of my first jobs was in a machine shop. I still recall how the employer misrepresented the minimum wage when he hired me. He tried passing it off as a pay level sanctioned by the federal government. I did not buy it and was offered higher pay. Later I learned others in the shop fell for his ruse—and were receiving just the minimum wage.
If we would eliminate the minimum wage law, then low-wage workers would look to other standards reflective of the job and industry.
Think of Kelley Blue Book that helps consumers know the value of a car. There are also companies—like PayScale—helping job seekers know what to expect in terms of pay. Moreover, the U.S. Bureau of Labor Statistics conducts 12 surveys on pay and benefits—including wage data for over 800 occupations by area—that can be used as guidance.
It would be better for workers to have knowledge about pay scales based on real factors than rely on arbitrary and artificial standards set by government law.
The Success Sequence provides an outline of how to reverse the cycle of poverty in our communities. GCO uses this as a framework for much of our work.
Career ladders and skill sets
The Georgia Center for Opportunity works with community groups helping job seekers link with employers. Setting career goals, understanding the skill requirements of various occupations, and having realistic expectations of pay are all important components of putting together a plan to help job seekers grow in their career and compensation.
These plans are what will help them the most if they are stuck in a minimum wage job. It gives them a plan of action on how to meet their goals. It also helps employers who often complain they can’t find good help with the skill sets they really need. This solution involves working with individuals on a one-on-one basis.
It also takes time—there is no magic button to push. However, in the end, it will be a win-win situation for both workers and employers. Raising the minimum wage is a win-lose situation—some people will win, but many others, including the overall economy, will lose.
Understanding the needs of employers in the labor market also requires us to do a better job at education in preparing our children for their future. As research has shown, giving parents more choices improves the quality of education—and will ultimately benefit our children and society.
We need to stop coming up with solutions that help some people at the expense of others. It makes little sense to damage the entrance ramp to employment in order to increase the pay for just some workers. Or for the government to have an inflation policy that hurts the poor the most, which I pointed out in this blog.
Instead, let’s focus our attention on solutions that help everyone. If you have comments, especially on what are the best solutions, we would love to hear from you. Be sure to post them in the comments.
*Erik Randolph is Director of Research at the Georgia Center for Opportunity. This blog reflects his opinion and not necessarily that of the Georgia Center for Opportunity.
The Best Administrative Structure for Welfare
By Erik Randolph
When someone needs financial help or workforce training from the government, where do they go?
If we just allowed people to navigate federal programs on their own, the average person would be completely overwhelmed.
Fortunately, states have some control over the process for some of the larger programs, like food stamps and Medicaid, that serve millions of Americans.
Georgia’s Gateway Strategy
Compared to many states, Georgia is ahead. The state government has spent years and $262 million to streamline its eligibility systems of means-tested programs into an integrated system known as the Georgia Gateway.
Here there is just one “door” to enter to qualify for some of the big federal means-tested programs entrusted to the states to administer.
The awarding-winning Gateway allows individuals to apply for ten programs across four state agencies, including food stamps; food packages from the Women, Infants, and Children Program; Medicaid; subsidized childcare; and Temporary Assistance for Needy Families.
The Department of Human Services runs the eligibility system at an annual operating cost of about $62 million, but the department does not administer all the programs themselves. For example, the Department of Community Health administers the Medicaid program, and the Department of Early Care and Learning administers the subsidized childcare program.
Integrated eligibility systems are far more convenient for the customers, requiring them to enter only one door, instead of up to five separate doors in the case of Georgia. It also streamlines the application process for the customer.
On the administrative side, all the hard work is done behind the scenes. The automated systems can share information between programs. Moreover, the technology sets up the state to accomplish future streamlining, consolidation, and reform.
Despite all these advantages of the Gateway, there is still room for improvement. Take Utah’s system, for example.
Utah’s Integrated System
Although Georgia is ahead of many states, Utah may be the furthest ahead.
As explained in a recent American Enterprise Institute report, Utah streamlined 23 workforce programs across six state agencies into a Department of Workforce Services.
The Utah system is clean and easy for the customer. Its “no wrong door” policy allows easy access to help in finding employment and receiving support services. It also sends a clear message that Utah prioritizes work as a solution.
Behind the scenes, Utah works with various federal agencies to make the system work. It is not an easy task. It requires creative solutions and continual effort on part of the state to take on the many hassles that come with dealing with the federal government, including the burdensome task of securing “waiver” approvals to federal law from the federal agencies.
However, the goal is worthwhile. It creates an easier experience for the customers, at overall less administrative cost.
Much More Work Needs to Be Done
Utah is showing the way, but much more work needs to be done.
There are still welfare benefits that the federal government does not allow states to administer. These program benefits are additional doors that people must enter, requiring additional effort to apply for those benefits and hoops to jump through to get assistance.
In other words, while Georgia has integrated eligibility systems, and Utah has gone even further with its integration, there are federal government programs outside the control of the states. These include the Earned Income Tax Credit, the Supplemental Security Income, and public housing.
Furthermore, as we have written about, the rules themselves still need fixing to eliminate welfare cliffs and marriage penalties.
Nevertheless, progress is being made, and the work continues on.
Do you have experience with the Georgia Gateway and other assistance programs? Or perhaps experience in another state? Share your experiences in the comments below. Erik Randolph is Director of Research at the Georgia Center for Opportunity. This blog reflects his opinion and not necessarily that of the Georgia Center for Opportunity.
List of Programs per the Government Accountability Office, Reports GAO-15-516 and GAO-19-200.
21st Century Community Learning Centers
Additional Child Tax Credit
Adoption Assistance
Adult Education Grants to States (Adult Education and Family Literacy Act)
Affordable Care Act Maternal, Infant, and Early Childhood Home Visiting Program
American Indian Vocational Rehabilitation Services
Career and Technical Education – Basic Grants to States
Chafee Foster Care Independence Program
Child and Adult Care Food Program (lower-income components)
Child Care and Development Fund
Child Support Enforcement
Choice Neighborhoods Implementation Grants
Commodity Supplemental Food Program
Community Based Job Training Grants
Community Development Block Grants
Community Service Employment for Older Americans
Community Services Block Grant
Compensated Work Therapy
Consolidated Health Centers
Disabled Veterans’ Outreach Program
Earned Income Tax Credit
Education for the Disadvantaged- Grants to Local Educational Agencies (Title I, Part A)
Emergency Food and Shelter Program
Environmental Workforce Development and Job Training Cooperative Agreements (Brownfield Job Training Cooperative Agreements in 2011report)
Exclusion of Cash Public Assistance Benefits
Family Planning
Federal Pell Grants
Federal Supplemental Educational Opportunity Grants
Federal TRIO Programs
Federal Work-Study
Food Distribution Program on Indian Reservations
Foster Care
Foster Grandparent Program
Fresh Fruits and Vegetables Program
Gaining Early Awareness and Readiness for Undergraduate Programs
Grants to States for Workplace and Community Transition Training for Incarcerated Individuals
H-1B Job Training Grants
Head Start
Higher Education: Aid for Institutional Development programs and Developing Hispanic-Serving Institutions programs
HOME Investment Partnerships Program
Homeless Veterans’ Reintegration Program (Homeless Veterans’ Reintegration Project in 2011 report)
Homeless Assistance Grants
Housing Opportunities for Persons with AIDS
Improving Teacher Quality State Grants
Indian and Native American Program (Native American Employment and Training in 2011 report)
Indian Education – Bureau of Indian Education
Indian Education—Formula Grants to Local Educational Agencies
Indian Health Service
Indian Housing Block Grant
Indian Human Services (Division of Human Services)
Job Corps
Job Placement and Training Program (Indian Employment Assistance in 2011 report)
Job Training, Employment Skills Training, Apprenticeships, and Internships
Legal Services Corporation
Local Veterans’ Employment Representative Program
Low-Income Home Energy Assistance Program
Low-Income Housing Tax Credit
Maternal and Child Health Block Grant
Mathematics and Science Partnerships
d settings.
Medicaid
Medical Care for Low- Income Veterans Without Service-Connected Disability
Migrant and Seasonal Farmworker Program
National Breast and Cervical Cancer Early Detection Program
National Farmworker Jobs Program
National School Lunch Program (free and reduced- price components)
Native American Career and Technical Education Program (Career and Technical Education – Indian Set-Aside in 2011 report)
Native Employment Works (Tribal Work Grants in 2011)
Native Hawaiian Career and Technical Education Program
Nutrition Assistance Program for Puerto Rico
Nutrition Service for the Elderly
Older Americans Act Grants for Supportive Services and Senior Centers
Older Americans Act: National Family Caregiver Support Program
Projects with Industry
Public Housing
Reentry Employment Opportunities (Reintegration of Ex-Offenders in 2011 report)
Refugee and Entrant Assistance – Discretionary Grants (Refugee and Entrant Assistance – Targeted Assistance Discretionary Program from 2011 is now part of this program)
Refugee and Entrant Assistance – Targeted Assistance Grants
Refugee and Entrant Assistance – Voluntary Agencies Matching Grant Program
Refugee and Entrant Assistance State/Replacement Designee Administered Programs ((Refugee and Entrant Assistance – Social Services Program from 2011 is now part of this program)
Registered Apprenticeship
Rental Housing Bonds Interest Exclusion
Rural Education Achievement Program
Rural Rental Assistance Payments
Ryan White HIV/AIDS Program
School Breakfast Program (free and reduced-price components)
Second Chance Act Technology-Based Career Training Program for Incarcerated Adults and Juveniles (Second Chance Act Reentry Initiative in 2011 report)
Section 8 Housing Choice Vouchers
Section 8 Project-Based Rental Assistance
Senior Community Service Employment Program
Social Services and Targeted Assistance for Refugees
Social Services Block Grants
Special Supplemental Nutrition Program for Women, Infants and Children (WIC)
State Children’s Health Insurance Program
State Supported Employment Services Program
State Vocational Rehabilitation Services Program (Rehabilitation Services – Vocational Rehabilitation Grants to States in 2011 report)
Summer Food Service Program
Supplemental Nutrition Assistance Program
Supplemental Security Income
Supportive Housing for Persons with Disabilities
Supportive Housing for the Elderly
Tech Prep Education State Grants
Temporary Assistance for Needy Families
The Emergency Food Assistance Program
Title I Migrant Education Program
Trade Adjustment Assistance for Workers
Transition Assistance Program
Transitional Cash and Medical Services to Refugees
Tribal Technical Colleges (United Tribes Technical College in 2011 report)
Tribally Controlled Postsecondary Career and Technical Institutions
Veterans Pension and Survivors Pension
Veterans’ Workforce Investment Program
Vocational Rehabilitation and Employment (Vocational Rehabilitation for Disabled Veterans in 2011 report)
Voluntary Medicare Prescription Drug Benefit- Low-Income Subsidy
Wagner-Peyser Act Employment Service (Employment Service/Wagner-Peyser Funded Activities in 2011 report)
Water and Waste Disposal Systems for Rural Communities
Weatherization Assistance
Work Opportunity Tax Credit
Workforce Investment Act Adult Activitiesa
Workforce Investment Act Youth Activitiesb
WIOA National Dislocated Worker Grants (WIA National Emergency Grants in 2011)
WIOA Youth Program (WIA Youth Activities in 2011 report)
Women in Apprenticeship and Nontraditional Occupations
Youth Partnership Programs (Conservation Activities by Youth Service Organizations in 2011 report)
YouthBuild
DISINCENTIVES FOR WORK AND MARRIAGE IN GEORGIA’S WELFARE SYSTEM
Based on the most recent 2015 data, this report provides an in-depth look at the welfare cliffs across the state of Georgia. A computer model was created to demonstrate how welfare programs, alone or in combination with other programs, create multiple welfare cliffs for recipients that punish work. In addition to covering a dozen programs – more than any previous model – the tool used to produce the following report allows users to see how the welfare cliff affects individuals and families with very specific characteristics, including the age and sex of the parent, number of children, age of children, income, and other variables. Welfare reform conversations often lack a complete understanding of just how means-tested programs actually inflict harm on some of the neediest within our state’s communities.
Safeguarding the Economy is Paramount for Everyone’s Well-Being
By Erik Randolph
Recent numbers in confirmed COVID-19 cases have been nothing but discouraging, but is it logical to turn back? The resurgence in confirmed cases may tempt our political leadership to reimpose shelter-in-place mandates and business shutdowns, but at this stage it would be a mistake.
The Resurgence
The recent data may be giving credence to those medical experts who have been arguing the lockdowns only delayed the inevitable. We must learn from the mistakes made and the impact the shutdowns have had on already heavily-impacted communities.
The official confirmed cases displayed on the Georgia Department of Health’s COVID-19 Daily Status Report webpage lags 14 days behind. Beyond that 14-day window at the time of this writing, the seven-day moving average of confirmed cases peaked at 763.1 on April 22 and began to decline. However, the average began rising again on May 10, and since May 25 the average has been steadily increasing. On June 24, the average reached nearly 2,000 cases, more than double its prior peak in April. There is good news on the Department’s webpage, reported deaths have been on a downward trajectory since the end of April. However, there is still much we do not know, including the unreported number of Georgians who successfully cleared the virus asymptomatically or otherwise.
Comparison to Other States
Compared to other states, Georgia does not look that bad. For example, deaths attributed to COVID-19 are far fewer in Georgia than in the Northeast.
On the economic front, Georgia’s shelter-in-place orders were far less severe than in other states, such as Michigan, Massachusetts, and Washington State. Recent unemployment numbers suggest a possible negative correlation between the more harsh measures taken by states and employment. Georgia looks good with an unemployment rate better than 72 percent of all states. In some cases, Georgia’s unemployment rate is drastically better. Georgia’s rate is 36.4 percent of Michigan’s rate and less than half of Massachusetts’s rate.
The Economic Situation Overall is Not Good
When Congress first passed legislation addressing the pandemic, the discussion was shutting and locking down for 14 days that might extend to a month’s time. Recall the talk about a “V” shaped recession with the economy quickly rebounding? With the crisis dragging into its fourth month, this is no longer the discussion.
In my last blog, I argued that the official unemployment rates understate the seriousness of the unemployment problem. While Georgia’s rate measured 9.7 percent, I estimated that the real problem was closer to 25 percent . This was just one metric. There are plenty of other metrics indicating potential for some serious economic damage.
First, the economic impact is not shared equally. Some industries—such as restaurants, bars, tourism, live entertainment, and brick-and-mortar retail stores—have been hit especially hard. Many of these businesses are smaller, mom-and-pop operations with lesser capacity to withstand long periods of economic hardship. Workers, too, have been unevenly impacted, with lower income households bearing the brunt of the negative impact.
It’s also been bad financially. About 3,600 companies filed for bankruptcy in 2020 thus far, 26% higher than the first six months in 2019. Cash reserves is a major issue. A Federal Reserve Banks’ survey found that three in 10 small businesses were financially at risk or distressed at the beginning of the pandemic.
We do not yet know the total loss in production due to our response to the coronavirus, but we know it will be bad. Production dropped 5 percent for the first quarter of 2020 nationally and 4.7 percent for Georgia. The loss for the second quarter will not be known until the end of the month when new numbers are released. Assuredly, the numbers will be worse.
Lost production is a great economic concern for all of us. It means lost societal wealth and hardships for many individuals and their families.
The Precarious Federal Fiscal Position
Since March, Congress has poured $3 trillion into the economy to help us sustain the hit. This is an enormous sum greater than the annual federal spending for social security benefits, Medicare, and all other mandatory spending programs. Additionally, the Federal Reserve is making trillions of dollars more available to help the public withstand the economic impact of the pandemic.
In the meantime, U.S. total debt now exceeds $26 trillion and continues to grow. This is more than the total annual production of the United States when last measured.
The temptation to reverse course in reopening the economy and looking to Congress and the Federal Reserve to bail us out with even more spending comes with enormous risks: high inflation, higher taxes, slower economic growth, and less wealth. Poorer communities and persons with lower income typically suffer more from these consequences.
These risks are based on fundamental principles in economics. We cannot spend money without someone, somewhere, at some time paying for it. With all the new money spent by Congress and created by the Federal Reserve, we will have one of two likely non-exclusive ways to pay for it: higher taxes in the future and/or inflation.
The much worse of the two is inflation. It is a hidden tax that everyone—rich and poor alike—must pay. It will erode wealth and opportunities for many.
An uptick in inflation will place the Federal Reserve in a precarious position. The standard tool is to increase interest rates. However, this can jeopardize any economic recovery from the pandemic. It will also exacerbate the federal budget deficit because of the extraordinarily high national debt, while potentially adding even more to the debt. In federal fiscal year 2019, the federal government spent $376 billion in interest payment to service the national debt—an amount equal to 28 percent of discretionary spending. This amount could easily double over the next few years.
The Best Course of Action
We cannot afford to wait for a vaccine. We must find our way to reopen the economy that is well managed and reduces risks to those most vulnerable to the virus.
Low-risk individuals, including almost all children, need to return to their routines as much as practically possible. This is the best way to extend opportunities for everyone and rebuild wealth so everyone can have fulfilling lives.
Our fate lies not only with Congress but also with our governors. Reopening the economy is necessary to avoid greater economic damage. Everyone’s well-being depends on it.
Erik Randolph is Director of Researchat the Georgia Center for Opportunity. This article reflects his calculations, analysis and opinion and does not necessarily reflect that of the Georgia Center for Opportunity.
To learn more about what Georgia Center for Opportunity is doing to help get Georgians back to work check out our Hiring Well, Doing Good initiative.
Imagine being a worker on government assistance because your job doesn’t quite meet your bills. Then, finally, you get that raise to put you over the top and relieve some stress.
The one catch: You lose assistance needed for things like health insurance. Now, you bring home less than before.
This is called the “welfare cliff,” and it’s a situation for far too many people working to get off government assistance.
And the biggest culprit of this “welfare cliff”? Healthcare.
A practical example
Picture a single person earning the equivalent of $8.25 per hour in a full-time job with no health benefits. She would qualify for Medicaid under the Affordable Care Act’s expansion rules. But just by earning a five-cent-per-hour raise would disqualify her entirely from Medicare due to the benefit cliff.
What’s more, the welfare system is also discouraging this single mom from marrying. Only in a situation where the dad earns enough to overcome the loss in benefits would marriage be financially worthwhile.
This example shows the negative impacts of welfare cliffs in preventing people from transitioning off assistance, moving up the economic ladder, and creating better lives for themselves and their families. While well-intentioned, these welfare benefits end up trapping people in a low-income existence.
The real tragedy of welfare cliffs is that hard-working welfare recipients who are striving to get ahead find that becoming independent of public assistance is virtually impossible because of the financial hardship they will have to endure.
Georgia Welfare Cliff
Disincentives for Work and Marriage in Georgia’s Welfare System
Picture a single person earning the equivalent of $8.25 per hour in a full-time job with no health benefits. She would qualify for Medicaid under the Affordable Care Act’s expansion rules. But just by earning a five-cent-per-hour raise would disqualify her entirely from Medicare due to the benefit cliff.
What’s more, the welfare system is also discouraging this single mom from marrying. Only in a situation where the dad earns enough to overcome the loss in benefits would marriage be financially worthwhile.
This example shows the negative impacts of welfare cliffs in preventing people from transitioning off assistance, moving up the economic ladder, and creating better lives for themselves and their families. While well-intentioned, these welfare benefits end up trapping people in a low-income existence.
The real tragedy of welfare cliffs is that hard-working welfare recipients who are striving to get ahead find that becoming independent of public assistance is virtually impossible because of the financial hardship they will have to endure.
Georgia Welfare Cliff
Disincentives for Work and Marriage in Georgia’s Welfare System
We all want a welfare system that truly serves as a safety net, helping those who can’t help themselves while encouraging able-bodied adults to find work, improve their lives, and form stable marriages and families.
Combine programs and reduce confusion and redundancy
Not punish welfare recipients for earning more
Encourage marriage and family formation
For healthcare specifically, our goal is to create a market-driven system that improves healthcare access for everyone by equalizing risk across the entire insured pool (as insurance is supposed to do), driving down prices while enhancing quality, having health insurance follow people rather than employers, and eliminating welfare cliffs and marriage penalties.
For those who are able to work, the ultimate question is this: Should the purpose of government-sponsored, means-tested healthcare programs, like Medicaid, be to get people back on their feet as they transition into the workforce? Or should the purpose be to provide perpetual benefits, with no end in sight?
A look at the correlation between health care insurance coverage and poverty in Georgia reveals some sobering facts:
41 percent of uninsured Georgians have annual incomes at or below $35,535.
Lack of insurance coverage is one of the prime reasons why life expectancy for those in poor neighborhoods is fully 10 years shorter than in the richest areas.
Premiums in the individual health insurance market have more than doubled since passage of the Affordable Care Act (ACA) in 2010.
For low-income families and those stuck at or below the poverty threshold, healthcare is one of the top expenses and plays heavily into the welfare cliff, which keeps folks mired in poverty.
Despite generous government tax credits, premiums for low-income families on the ACA health care exchanges are still unaffordable.
“The health care crisis is a poverty crisis.“
Clearly, America’s failing healthcare system disproportionately impacts the poor. And despite multiple federal and state programs aimed at creating a safety net, the poor still aren’t getting adequate health care. The bottom line is that our health care crisis is a poverty crisis.
A complicated, fragmented system
Imagine going to the doctor and not knowing whether your visit will be covered or what you should expect to pay. That’s the exact scenario that plays out for millions of low-income Americans every week. That’s partly because of rather than receiving health care coverage through one unified plan, low-income families in Georgia frequently cobble together fragmented plans.
For Georgians under the age of 18 living in a family at 138 percent of the poverty level or less, 60 percent have different coverage from their mother and 70 percent have different coverage from their father.
And depending on individual circumstances, health insurance can come through a job, individual markets, ACA exchanges, and government programs such as Medicaid, PeachCare, Medicare, TriCare, VA services, and the Indian Health Service—all with different rules for eligibility.
The time is ripe for meaningful reforms in Georgia
Instead of simply expanding Medicaid and trapping more people in the welfare system, we must explore options that help pull people out of poverty.
The solution is a consumer-directed market system coupled with a reform safety net program that achieves universal coverage for all Georgians by:
Untethering health care from its close association with employment so that people won’t lose their insurance because they lose or change a job.
Making shopping for health insurance just like buying any other insurance product so that consumers can identify coverage and price options—and compare apples to apples.
Providing subsidies from the government—run by the Georgia Gateway—to allow low-income individuals and families to purchase insurance on the private market. This system would be means-tested by an eligibility engine that eliminates welfare cliffs and marriage penalties.
A Hope For Georgians
The good news is that the President’s Administration is encouraging states to come up with their own solutions to the health care crisis through federal waiver applications. This means Georgia has a unique opportunity to enact meaningful health-insurance reform that not only addresses the health care crisis, but also helps pull families out of poverty.
Today, the Georgia Center for Opportunity (GCO) has released two new reports detailing precisely how the Georgia governor and lawmakers should enact federal healthcare waivers that will reform a healthcare system disproportionately impacting the poor.
Randy Hicks, GCO’s President and CEO, said the new reports come at a crucial time for healthcare reform in Georgia. “Due to a federal waiver application process approved by the Trump Administration, Georgia has a narrow window of opportunity to innovate at the local level to solve the healthcare crisis,” Hicks said. “More than 13 percent of Georgians still lack health insurance, and the cost of insurance in the individual markets have more than doubled since the enactment of the Affordable Care Act. We need a real solution to this crisis. This report lays the groundwork.”
The reports recommend the creation of a consumer-directed market system coupled with a reformed safety-net program. Key recommendations include:
Freedom and portability:Just like with other insurances, consumers want the leeway to shop for health insurance on their own terms and to not lose their plan when leaving a job. This solution drives down costs and keeps affordable health coverage long after they leave employment.
Affordability: There is a simple reason why 13.3 percent of Georgians lack any health insurance: affordability. As demonstrated by systems in Switzerland and the Netherlands, the solution is to achieve universal coverage. GCO’s healthcare proposals will create a market-driven program with safety-net subsidies, leading to universal coverage. Pricing will be transparent and consumers will easily shop for the best values.
A unified system: The current healthcare system is a fragmented hodgepodge of programs—Medicaid, PeachCare, Medicare, TriCare, VA services, and government-run exchanges. Contrary to this confusing system, GCO reforms would create a single program with government subsidies for low-income families that eliminate welfare cliffs and marriage penalties.
The safety net: The system still provides a vital safety net for those who aren’t able to afford health insurance on their own. Subsidies are provided through the Georgia Gateway to help low-income families pay their premiums.
The lack of access to affordable care contributes to many individuals going without important services. Uninsured individuals in Georgia are nearly four times less likely than the insured to have had a routine check-up in the past two years[i] and are more likely to experience avoidable hospitalizations for conditions such as pneumonia, diabetes, and asthma.[ii] In 2011, 36 percent of low-income adults in Georgia reported that they went without care because of cost in the past year. Only two states had a higher percentage of individuals going without care.[iii]
Uninsured individuals are financially costly for taxpayers and the insured as well. In 2013, uninsured individuals across the country spent an estimated $25.8 billion out-of-pocket on medical care and received between $74.9 billion and $84.9 billion in uncompensated care. About 60 percent of the uncompensated care spending was provided by hospitals, 26.4 percent by publicly supported community providers, and 14 percent by office-based physicians who provided in-kind services or charity care.[iv]
Providers also attempt to recover their losses from providing uncompensated care to uninsured patients and those covered by government programs that pay below cost, such as Medicare and Medicaid, by increasing charges for those with private insurance. The higher prices charged to private insurance are passed on to families and business through higher premiums.
Estimates vary on how much cost shifting occurs. One study estimates that cost shifting through increased premiums and other similar strategies accounts for about 2.4 percent of private health insurance costs,[v] while another study estimates that uncompensated care cost shifting makes up 7.7 percent of private insurance costs.[vi] If the higher estimates are accurate, the uninsured population is costing the average Georgia individual $330 and the average family $900 per year in higher premiums.[vii]
[i] Patricia Ketsche et al., The Uninsured in Georgia, Georgia Health Policy Center, Issue Brief, November 2008, https://www.issuelab.org/resource/uninsured_in_georgia_2008.
[ii] John O’Looney, Louis Kudon, interand Glenn M. Landers, Avoidable Hospitalizations in Georgia: An Analysis of the Potential for Strategic Action, Georgia Health Policy Center, January 2005, https://ghpc.gsu.edu/sites/default/files/documents/ghpc/community_public_health/Avoidable_Hospitalizations_11-29-07_FINAL.pdf.
[iv] Teresa A. Coughlin et al., “An Estimated $84.9 Billion In Uncompensated Care Was Provided In 2013; ACA Payment Cuts Could Challenge Providers,” Health Affairs 33 (2014): 810, https://content.healthaffairs.org/content/33/5/807.abstract?=right.
[v] Coughlin et al., “An Estimated $84.9 Billion In Uncompensated Care,” 812.
Unfortunately, 19 percent of Georgians lack health insurance, the sixth highest percentage in the country in 2012.[i] Of the nonelderly uninsured, 56 percent live in households that make less than 139 percent of the federal poverty level (FPL), which is $16,221 for an individual and $33,151 for a family of four.[ii]
While it can be difficult for uninsured individuals to find care – particularly those with low-incomes – some uninsured individuals access care through Georgia’s healthcare safety-net. These providers include community health centers, charity clinics, public hospitals, local health departments, and private office-based physicians who provide limited free care.[iii]
Community Health Centers
The state’s community health centers provide primary and preventive care to many uninsured individuals on a sliding fee scale based on patient or family income. In 2011, Georgia’s Federal Qualified Health Centers (FQHCs) – local, non-profit, community-owned healthcare providers – served more than 317,000 patients at 152 delivery sites across the state. Of the FQHC patients, 51 percent were uninsured. The National Association of Community Health Centers estimates that 13 percent of Georgia’s low-income uninsured population was served by an FQHC in 2011.[iv]
Charity Clinics
Uninsured individuals in 90 of Georgia’s 159 counties have access to a charity clinic as another option to help meet their primary care needs. In 2012, the state’s 96 nonprofit, independent charity clinics served 183,625 unique patients, and 62 percent of these patients were below the poverty level.[v] Due to their volunteer nature, clinics are able to provide an average of $7 worth of services for every $1 invested, and the average cost per patient visit is $29.[vi]The total value of the services provided by Georgia’s charity clinics in 2012 was over $200 million.[vii]
Public Hospitals
In addition to community health centers and charity clinics, many uninsured patients seek care in hospital emergency rooms. Since many low-income uninsured individuals can only afford a small portion of the care they receive and hospitals are required to provide emergency healthcare to anyone needing it, providers are often uncompensated for the services they provide. In 2012, Georgia hospitals provided $1.6 billion in uncompensated care, including $936 million in free, indigent, and charity care and $671 million in care for which the patient did not pay his or her bill and was not qualified for the hospital’s indigent or charity care programs.[1],[viii]
