The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) replaced the individual entitlement to benefits under the 61-year-old Aid to Families with Dependent Children (AFDC) program with TANF block grants to states and emphasized the transitional nature of assistance and the importance of reducing welfare dependence through employment. Administered by HHS, TANF provides states with $16.5 billion each year, and in fiscal 2002, the total TANF caseload consisted of 5 million recipients. PRWORA provides states with the flexibility to set a wide range of TANF program rules, including the types of programs and services available and the eligibility criteria for them. States may choose to administer TANF directly, devolve responsibility to the county or local TANF offices, or contract with nonprofit or for-profit providers to administer TANF. Some states have also adopted “work first” programs, in which recipients typically are provided orientation and assistance in searching for a job; they may also receive some readiness training. Only those unable to find a job after several weeks of job search are then assessed for placement in other activities, such as remedial education or vocational training. While states have great flexibility to design programs that meet their own goals and needs, they must also meet several federal requirements designed to emphasize the importance of work and the temporary nature of TANF aid. For example, TANF established stronger work requirements for those receiving cash benefits than existed under AFDC. Furthermore, to avoid financial penalties, states must ensure that a steadily rising specified minimum percentage of adult recipients are participating in work or work-related activities each year. To count toward the state’s minimum participation rate, adult TANF recipients in families must participate in a minimum number of hours of work or a work-related activity a week, including subsidized or unsubsidized employment, work experience, community service, job search, providing child care for other TANF recipients, and (under certain circumstances) education and training. If recipients refuse to participate in work activities as required, states must impose a financial sanction on the family by reducing the benefits, or they may opt to terminate the benefits entirely. States must also enforce a 60-month limit (or less at state option) on the length of time a family may receive federal TANF assistance, although the law allows states to provide assistance beyond 60 months using state funds. The TANF caseload includes, as did AFDC, low-income individuals with physical or mental impairments considered severe enough to make them eligible for the federal SSI program. Administered by SSA, SSI is a means- tested income assistance program that provides essentially permanent cash benefits for individuals with a medically determinable physical or mental impairment that has lasted or is expected to last at least 1 year or to result in death and prevents the individual from engaging in substantial gainful activity. To qualify for SSI, an applicant’s impairment must be of such severity that the person is not only unable to do previous work but is also unable to do any other kind of substantial gainful work that exists in the national economy. Work is generally considered substantial and gainful if the individual’s earnings exceed a particular level established by statute and regulations. SSA also administers the Disability Insurance program (DI), which uses the same definition of disability, but is not means-tested and requires an individual to have a sufficient work history. For both DI and SSI, SSA uses the Disability Determination Service (DDS) offices to make the initial eligibility determinations. If the individual is not satisfied with this determination, he or she may request a reconsideration of the decision with the same DDS. Another DDS team will review the documentation in the case file, as well as any new evidence, and determine whether the individual meets SSA’s definition of disability. If the individual is not satisfied with the reconsideration, he or she may request a hearing before an Administrative Law Judge (ALJ). The ALJ conducts a new review and may hear testimony from the individual, medical experts, and vocational experts. If the individual is not satisfied with the ALJ decision, he or she may request a review by SSA’s Appeals Council, which is the final administrative appeal within SSA. Despite recent improvements to the process, going through the entire process, including all administrative appeals, can average over 2 years. In most states, SSI eligibility also entitles individuals to Medicaid benefits. TANF recipients may apply for Medicaid benefits and are likely to qualify, but receipt of TANF benefits does not automatically qualify a recipient for Medicaid. While SSA has recently expanded policies and initiated demonstration projects aimed at helping DI and SSI beneficiaries enter or return to the workforce and achieve or at least increase self-sufficiency, its disability programs remain grounded in an approach that equates impairment with inability to work. This approach exists despite medical advances and economic and social changes that have redefined the relationship between impairment and the ability to work. The disconnect between SSA’s program design and the current state of science, medicine, technology, and labor market conditions, along with similar challenges in other programs, led GAO in 2003 to designate modernizing federal disability programs, including DI and SSI, as a high-risk area urgently needing attention and transformation. The Ticket to Work and Work Incentives Improvement Act of 1999 amended the Social Security Act to create the Ticket to Work and Self- Sufficiency Program (Ticket Program). This program provides most DI and SSI beneficiaries with a voucher, or “ticket,” which they can use to obtain vocational rehabilitation, employment, or other return-to-work services from an approved provider of their choice. The program, while voluntary, is only available to beneficiaries after the lengthy eligibility determination process. Once an individual receives the ticket, he or she is free to choose whether or not to use it, as well as when to use it. Generally, disability beneficiaries age 18 through 64 are eligible to receive tickets. The Ticket Program has been implemented in phases and is to be fully implemented in 2004. The Social Security Advisory Board (Advisory Board) has questioned whether Social Security’s definition of disability is appropriately aligned with national disability policy. The definition of disability requires that individuals with impairments be unable to work, but then once found eligible for benefits, individuals receive positive incentives to work. Yet the disability management literature has emphasized that the longer an individual with an impairment remains out of the workforce the more likely the individual is to develop a mindset of not being able to work and the less likely the individual is to ever return to work. Having to wait for return-to-work services until determined eligible for benefits may be inconsistent with the desire of some individuals with impairments who want to work but still need financial and medical assistance. The Advisory Board, in recognizing that these inconsistencies need to be addressed, has suggested some alternative approaches. One option they discussed in a recent report is to develop a temporary program, which would be available while individuals with impairments were waiting for eligibility determinations for the current program. This temporary program might have easier eligibility rules and different cash benefit levels but stronger and more individualized medical and other services needed to support a return to work. SSA has also realized that one approach may not work for all beneficiaries, and in recent years it has begun to develop different approaches for providing assistance to individuals with disabilities. One example of these efforts is the proposed Temporary Allowance Demonstration, which would provide immediate cash and medical benefits for a specified period to individuals who meet SSA’s definition of disability and who are highly likely to benefit from aggressive medical care. SSA is also in the process of developing the Early Intervention Demonstration. This demonstration project will test alternative ways to provide employment-related services to disability applicants. Although both of these demonstration projects only cover the DI program, SSA also has the authority to conduct other demonstration projects with SSI applicants and recipients. Estimates from our nationwide survey of county TANF offices indicated that almost all offices reported that they refer at least some recipients with impairments to apply for SSI. But the level of encouragement these individuals receive from their local TANF office to apply for SSI varies, with many offices telling the individual to apply for SSI and some offices helping the recipient complete the application. Because TANF offices are referring individuals to SSI, these referrals will have some effect on the SSI caseload. However, findings regarding the impact that these SSI referrals from TANF have on SSI caseload growth are inconclusive, due to data limitations. Based on estimates from our survey, 97 percent of all counties refer at least some of their adult TANF recipients with impairments to SSA to apply for SSI. As table 1 shows, 33 percent of county TANF offices said that it is their policy to refer to SSI only those adults whose impairments are identified as limiting or preventing their ability to work. However, another 32 percent of county TANF offices said that it is their policy to refer all TANF recipients identified with impairments to SSI for eligibility determinations. TANF offices reported that they rely on several methods to identify an individual’s impairment and assess whether the individual could work or should be referred to SSI. Estimates from our survey indicated that all county offices rely on the applicant to disclose his or her impairment. In addition, 96 percent of all counties rely on caseworker observation, about 57 percent use a screening tool, and about 60 percent use an intensive assessment. Once recipients are identified as having impairments, TANF offices need to decide which individuals to refer to SSI. As table 2 shows, many counties rely on multiple forms of documentation or other information to make this decision, rather than referring all individuals with impairments. Specifically, 94 percent of all counties reported that they use documentation from a recipient’s physician, and 95 percent reported that they use self-reported information from the recipient.