Federal Cost of Running Welfare Soars

The cost of running welfare programs is rising more than twice as fast as the number of people on the rolls, according to federal investigators who blame an overly complex and bloated bureaucracy.

A draft report by the inspector general at the Department of Health and Human Services says the federal government spends $6 billion to $8 billion a year helping states deliver food stamps, Medicaid and monthly cash benefits under the Aid to Families with Dependent Children program.

The HHS investigators said federal administrative costs increased by 43% between 1987 and 1991, from about $3.4 billion to $4.9 billion, while the number of recipients in the three programs increased on average by 18%, from 53.3 million to 62.5 million.

“The data do not support the contention that rising administrative costs are the result of expanded program responsibilities,” the investigators say in their report, obtained by the Associated Press under the Freedom of Information Act.

The report also found that the federal government’s share of benefit payments under AFDC, Medicaid and food stamps is growing quickly: from $45 billion in 1987 to $79 billion in 1991, an increase of 74%.

The states and federal government generally split the administrative costs of welfare programs in half. The investigators say, however, the federal government cannot determine what it is paying for at the state and local level without a considerable investment in auditing and monitoring, and those costs would be prohibitive.

In a separate report, the inspector general’s office says the system the states use to charge the federal government for those administrative costs has “degenerated into a highly technical accounting and allocation maze.”

That report also suggests that consultants are taking advantage of outdated federal policies to reap bigger payments for the states.

The investigators say the system must be changed or administrative costs will continue their “accelerated growth and remain burdensome and costly to audit.”