Officials See Health Plan as Shot in the Arm for Welfare Reform : White House says universal coverage will allow many to seek work. But critics say the proposal may backfire.

President Clinton’s health care reform plan will reap more than health benefits because the universal coverage in the proposal will encourage hundreds of thousands of people to get off welfare and get jobs, Administration officials say.

“I will not even apply for a job without a health care plan that includes my children,” said Rosemary Arrington, who has supported her four children with welfare off and on for 13 years.

Arrington stopped receiving Aid for Families with Dependent Children about a year ago when she got a temporary job, but she was able to extend her Medicaid coverage for a year. Now that extension is running out, and she is out of a job again.

She said she may have no choice but to apply for the AFDC benefits again so she can continue her family’s medical coverage, but she would rather support her family on her own.

Anecdotal evidence suggests that one of the major reasons people remain on welfare is to get medical coverage for their children and themselves, coverage they are now unable to obtain because of existing medical conditions or because prospective employers do not offer health benefits at all.

The Administration’s plan would require all employers to provide health coverage for their employees and would ensure that everyone qualifies for coverage no matter what their health status.

“We want people to be able to become independent and go to work,” First Lady Hillary Rodham Clinton said earlier this fall, answering a question from a woman receiving public assistance. “And one of the things that this (health care reform) will do is to begin to break that welfare lock so that you and others can go out and become employed, but not have to worry about losing your health care.”

But the belief that health care reform could help solve the welfare problem is not universal.

Some economists and Republican welfare-reform advocates in Congress argue that by requiring employers to pay medical benefits, the President’s plan will decrease the supply of low-skill jobs, forcing more people to seek public assistance.

Even some of the 5.6 million people receiving AFDC benefits are skeptical about the plan.

“I now have free health care for my children. I don’t pay a deductible and I don’t pay co-payments,” said Sherry Smith, 24, a single mother in San Pedro, Calif., who supports her three preschool-age children solely with public assistance. “Under the Clinton plan, if I got a job, I’d have to pay my deductible and co-payments. That’s not an incentive to go to work, that’s a disincentive.”

The Clinton plan would eventually abolish Medicaid, which covers medical expenses for people on welfare. People on public assistance would pay a discounted co-payment to go to the doctor and would not have to pay a share of the premium.

If they went to work, however, they probably would have to pay a larger co-payment and a share of the premium. Some say that would raise costs enough to discourage them from seeking jobs.

There is little statistical data on the subject. Alice Rivlin, deputy budget director, told a congressional hearing that “the anecdotal data is very persuasive, and the number of welfare mothers who stay on welfare because they have a sick child (is) a persistent anecdote.”

Barbara Wolfe, a professor of economics and preventive medicine at the University of Wisconsin in Madison, has studied the impact of medical coverage on welfare participation. She said the Administration’s estimates of the probable impact of health care reform are consistent with her research.

Her analysis of Census Bureau material showed that 18% of the people receiving AFDC funds gave up the welfare benefit when they were assured that their job provided medical insurance, even if the coverage was inferior to Medicaid.

Since that data was collected, welfare rules have changed and publicly funded medical insurance is available for children in low-income families that are not eligible for AFDC. Taking that into consideration, welfare participation should drop by about 15%, or by 840,000 people, with the introduction of the President’s health care reform proposal, she said.

Most likely to leave the welfare system would be people who have higher than average medical expenses, she added, such as families with lots of children or those with a parent or child who has a chronic medical condition.

Such a person is Marie Kostos-Weber, one of Clinton’s most poignant examples in his speeches promoting his health care reform plan.

Kostos-Weber, a divorced mother, quit her $50,000-a-year job and depleted her savings to get Medicaid--the only way to pay for her terminally ill child’s $100,000-a-month medical expenses.

“Who would insure a burning building? That’s what the insurance companies said about her,” said Kostos-Weber, whose daughter died in July at age 10.

The repercussions of that forced decision five years ago have lingered.

“I’m going to have to take something for a lot less because I’ve been out of the work force for so long,” said Kostos-Weber, who previously worked as a headhunter for managerial positions. “Not only have I lost my daughter, but I’ve lost everything that made me feel good about myself.”

The Clinton plan would allow people like Kostos-Weber to keep working and be confident that their children’s medical needs will be met, said David Ellwood, a co-chairman of the Administration’s welfare reform task force.

Predicting the size of the exodus from welfare if the health care plan is enacted is difficult because most people who rely on welfare do so for a mix of reasons.

Xzavia White, who has three children, has received public assistance checks, food stamps and Medicaid for the last three years since he lost his job restoring fire-damaged homes.

Even with the guarantee of medical coverage, he said, many people like himself still will not be able to give up public support.

“Health care probably isn’t enough,” White, 24, said as he was waiting for a friend outside a public assistance office in Washington, D.C. “We have a lot of people who don’t want to be on welfare but don’t have a choice.”

The Administration plans to address this problem by radically overhauling the welfare system. The plan, which is expected to be released early next year, will stress job training and enforcement of child-support payments as well as put a two-year limit on receiving public assistance checks for most people.

Bruce Reed, the other co-chairman of Clinton’s welfare reform task force, said he believes that the combination of those reforms, guaranteed medical coverage and earned income tax credits for low-wage workers will turn the welfare system from one that often fosters a lifetime of dependency into a temporary safety net that pushes people into the work force.

“If they refuse to work, we will require them to work,” Reed said.

Rep. Rick Santorum (R-Pa.), who leads the GOP welfare reform initiative in the House, said the Administration is moving too slowly on its plans to redesign welfare and is using its health care reform plan as an excuse for the delay.

Furthermore, he said he expects the President’s health care reform plan to increase welfare rolls because it requires employers to provide coverage, which will force staff cuts.

“I think you’re going to see massive unemployment from what the President proposed,” he said.

William Custer, an economist for the Employment Benefits Research Institute, agreed: “The supply of workers may increase, but the demand for workers may decrease.”

Some Republicans in Congress, however, concede that making affordable health care available to all Americans is an important element of welfare reform.

“It would have some effect, but I’m not sure it would be a huge, measurable change,” said Rep. Fred Grandy, (R-Iowa), a co-author of an alternative health care reform plan that would offer government subsidies for low-income families. “But I think we’re going to need more than that to get people off welfare.”