States Should Fully Embrace the One, Big, Beautiful Bill’s Welfare Reforms

Overview

President Trump and congressional Republicans included the most consequential welfare reform in the country’s history in the One, Big, Beautiful Bill.¹ The law adds work requirements to the Medicaid program for the first time ever, requires more frequent eligibility reviews for expansion enrollees, incentivizes states to reduce their improper payment rates, and more.² The law expands food stamp work requirements to include even more able-bodied adults, prohibits illegal aliens from accessing food stamps, and requires states to manage their error rates or pay for a portion of food stamp costs.³

Failure to implement these reforms would be catastrophic for states and their citizens. It could lead to a significant loss of funding and increased costs, and it would also be a missed opportunity for impactful reform. Missing this chance would fail to ensure that taxpayers’ dollars for welfare programs go only to the truly needy. Multiple states realized this and have started Medicaid work requirements before the federal deadline.^4-5

Besides compliance with federal law, there are other opportunities states should take to enhance program integrity, reduce the burden on state taxpayers, and ensure funding only goes to eligible individuals.

The One, Big, Beautiful Bill brings accountability to welfare programs

The One, Big, Beautiful Bill reformed the largest welfare programs, Medicaid and food stamps, which have both seen their costs skyrocket. Since 2000, Medicaid costs have soared from $206 billion to $964 billion, while food stamps have risen from $17 billion to $110 billion.^6-8

The reforms included in the One, Big, Beautiful Bill will slow the programs’ growth and help to transition able-bodied adults from welfare to work, saving precious taxpayer resources for the truly needy.

Work requirements have been a part of food stamps for decades, but the One, Big, Beautiful Bill brings them to the Medicaid program for the first time.⁹ Medicaid work requirements moved tens of thousands of able-bodied adults from welfare to the workforce when implemented on a limited basis by Arkansas and Tennessee.¹⁰

The law also rolls back efforts by Presidents Obama and Biden to limit how often states can conduct eligibility reviews.¹¹ States must now redetermine eligibility for Medicaid expansion enrollees at least once every six months.¹²

Illegal aliens, especially under President Biden, gained access to Medicaid through immigration status loopholes.¹³ The One, Big, Beautiful Bill closed these loopholes by limiting Medicaid to citizens; Green Card holders; Cuban and Haitian refugees; and certain individuals from Micronesia, the Marshall Islands, and Palau.¹⁴

The law also incentivizes states to reduce their Medicaid improper payment rates. It prohibits states from receiving federal reimbursement if their eligibility-related improper payments exceed three percent.¹⁵ If states do not enact program integrity measures and their eligibility errors are excessive, state taxpayers will be on the hook for the bill.

All told, the Medicaid reforms in the One, Big, Beautiful Bill are expected to save federal taxpayers nearly $1 trillion by removing waste from the program.¹⁶

The One, Big, Beautiful Bill also expands work requirements in food stamps to include even more able-bodied adults. Able-bodied adults 64 years old or younger and those with children older than 13 will now be subject to work requirements.¹⁷

The law also matches Medicaid in restricting food stamp access to citizens; Green Card holders; Cuban and Haitian refugees; and certain individuals from Micronesia, the Marshall Islands, and Palau.¹⁸

In response to President Biden’s unlawful adjustment to the Thrifty Food Plan that resulted in the largest permanent increase in food stamp spending in program history, the One, Big, Beautiful Bill also limits future re-evaluations from increasing the cost of this plan.^19-20

Finally, states are incentivized to reduce their payment error rates in food stamps. The law requires that states with an error rate of six percent or greater cover five to 15 percent of benefit costs, depending on their error rate percentage.²¹

The food stamp reforms in the One, Big, Beautiful Bill are expected to save federal taxpayers more than $175 billion.²²

States that fail to act face harsh consequences

Members of the Left at both the federal and state levels have slammed these commonsense reforms.^23-25 Blue states have also sued the Trump administration to try to stop Medicaid work requirements from taking effect.²⁶ But failure to enact the reforms would create devastating consequences for state taxpayers and the truly needy.

Any state not enacting these reforms could lose federal funding of food stamps and Medicaid. Historically, federal taxpayers have paid for all food stamp benefits, roughly $100 billion annually, and between roughly half and three-quarters of Medicaid costs, roughly $630 billion annually.^27-30 Covering these costs shares would be unsustainable at the state level.

The Trump administration has shown that it takes the crackdown on fraud seriously, from establishing a task force to eliminate fraud to withholding federal funds from high-fraud programs.³¹

It has already frozen $10 billion in childcare and family assistance funding to five states and deferred more than $350 million in Medicaid payments to Minnesota alone.^32-34 A federal judge allowed the Medicaid deferrals to stand, giving the administration the green light to continue its crackdown.³⁵ States that refuse to do what the One, Big, Beautiful Bill requires are not just gambling with taxpayer dollars, they are gambling with the federal funding the programs depend on.

Even if a state was not denied matching funds, without implementing the required reforms, it would face the continuation of skyrocketing costs due to waste, fraud, and abuse. Even more so now with the cost-sharing and improper payment penalties meant to incentivize states to clean up their programs.

States should take full advantage of this opportunity for reform

Rather than fighting the reasonable reforms in the One, Big, Beautiful Bill, states should embrace the opportunity to enact strong program integrity measures to help reduce, or even avoid, any extra burden on their taxpayers. Thankfully, there are plenty of reforms states can enact to do just this.

To help better ensure that only eligible individuals can enroll in Medicaid and food stamps, states should prohibit agencies from accepting self-attestation for key eligibility criteria and require agencies to verify eligibility prior to enrollment. States should also strengthen hospital presumptive eligibility standards for Medicaid.

To remove those who become ineligible after enrolling in a welfare program, states should require agencies to conduct more frequent eligibility determinations than required, especially for able-bodied adults. They should also require agencies to redetermine eligibility whenever an agency receives information indicating a change in circumstances for an enrollee.

States should also require agencies to use the already available databases to help catch eligibility errors. Agencies should be required to check state wage, hiring, tax records, and lottery winnings to verify income. They should be required to check returned mail, change of address information, and out-of-state EBT transactions to identify individuals who have moved out of the state. They should check state vital statistics and the Death Master File to identify deceased enrollees. Finally, corrections data should be checked to identify incarcerated enrollees. These cross-checks should be required to occur at least monthly.

States should also close the loopholes and exemptions that agencies have used to increase enrollment.³⁶ States should prohibit agencies from waiving work requirements without legislative approval and from using no-good-cause exemptions.^37-38 States should also ban the use of broad-based categorical eligibility in food stamps that has expanded eligibility and costs beyond food stamps’ intended population.³⁹

The Bottom Line:

States face severe consequences for not implementing the reforms in the One, Big, Beautiful Bill. But smart states will go further to ensure their taxpayers get the most out of this generational opportunity.

The One, Big, Beautiful Bill enacted generational welfare reform to address the skyrocketing spending in Medicaid and food stamps.

The legislation requires states to implement new and updated work requirements and program integrity measures. Failure to do so would be financially burdensome for states and potentially catastrophic for the truly needy.

States should see this federal reform for what it is—a great opportunity to improve their administration of welfare programs by implementing program integrity measures. States should require more frequent eligibility determinations and cross-checks of easily available data, prohibit self-attestation, and verify eligibility before enrollment.

Taking these steps will improve program integrity to help ensure that only eligible individuals are able to enroll and remain in Medicaid and food stamps. This will both save taxpayers money and preserve resources for only the truly needy.

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