Trapped in America's Safety Net

Medicaid and CHIP, have an eligibility cliff: earn one more dollar in income, and you lose eligibility for public health insurance altogether. This is the essence of the “means test” imposed by all social assistance programs: as your means rise, you fail the test. These benefit phaseouts and falloffs are essentially huge marginal taxes on those exiting social assistance for work. They provide a powerful disincentive, because the effective cost of working is so very high.