Part 1 of The Big Beautiful Bill: Feature or Glitch

Leveraging Administrative Burden

Now that the Big Beautiful Bill is the law of the land and has been signed by President Trump, I would like to look to the future and share some insights on important topics and outcomes. Rather than posting a lengthy article, I will share a five-part series on this topic over the next week. You can expect a new article every day at 8:30 a.m. If you want to read the 870-page bill, you can access it here.

Glitch or Feature?

The Big Beautiful Bill cuts spending by targeting the social safety net. Specifically, it will impact Medicaid and SNAP by cutting funding and increasing eligibility requirements. In the case of Medicaid, the Bill is expected to cut federal spending on Medicaid benefits by $1.02 trillion and eliminate at least 10.5 million people from the program by 2034. Medicaid is the single most extensive health insurance program in the US. The public program covers 71 million low-income, disabled, and elderly residents in the US. It pays for half of all US births and the care of six out of ten nursing home residents.

You would be surprised by how many people rely on Medicaid. On Tuesday, I will share more information on Medicaid use by state and local regions.

In addition to direct cuts, the BBB also restricts access by leveraging what public policy refers to as the administrative burden. This burden will impact all participants of the program.

What is Administrative Burden?

Administrative burden is the process of adding friction to program participation or renewal. These burdens introduce friction, hindering smooth and efficient interactions and leading to a decline in the program's use.

Administrative burdens can take various forms:

• Learning Costs: Difficulties in finding information about programs, determining eligibility, or understanding how to apply for and use benefits. For example, the complexities of the Earned Income Tax Credit (EITC) program lead to a significant number of eligible recipients not claiming the benefit due to a lack of awareness or understanding.

• Compliance Costs: The time, effort, and sometimes financial resources needed to complete applications, gather documentation, or navigate bureaucratic procedures. Onerous recertification processes for programs like Medicaid can result in individuals losing coverage even if they remain eligible.

• Psychological Costs: The stress, frustration, anxiety, and sense of stigma that can arise from interacting with government agencies and trying to access benefits.

Why Do Administrative Burdens Matter?

• Impact on individuals: They can limit access to essential services and rights, particularly for individuals with limited resources, and can exacerbate existing inequalities.

• Diminished policy effectiveness: Burdens can undermine the goals and intended outcomes of policies.

• Negative impact on public servants: Navigating burdens can also be stressful and demotivating for frontline staff. Impacting the quality of service provided.

Administrative burdens are often a result of deliberate policy choices, rather than simply unintended consequences of complex systems. Policymakers may use administrative hurdles to limit access to services or rights they oppose. I expect that with the introduction of the BBB, many eligible participants will not receive the care they need because of the administrative burdens introduced.

The Takeaway

Here is what many are missing: adding administrative costs to programs harms everyone. The requirement to prove eligibility, more frequent eligibility checks, or the psychological cost of anticipating whether all will incur these new guidelines will impact everyone equally.

Sadly, this is what most people are missing. Whether you are a legitimate beneficiary of the program or someone abusing the system, you will have to incur the same higher costs to qualify. The increased administrative burden is not an unintended outcome; it is a feature of this new policy.

Tomorrow, I will discuss the impact of the Big Beautiful Bill on higher education and college attainment.

Till then,

-Dr. A

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About the Author

Dr. Abdullah Al Bahrani is an economics professor and an award-winning educator. His research focuses on household finance and economic education. In addition to this newsletter, he has a YouTube channel and an Instagram account to share his economic insights.

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Historical Examples of Administrative Burden Used to Reduce Program Uptake

Work Requirements in Social Safety Net Programs

TANF (Temporary Assistance for Needy Families): When TANF replaced AFDC in 1996, it introduced work requirements that created a "substantial administrative burden on state agencies," requiring documentation, verification, and tracking of enrollees' participation in approved activities for the required number of hours each month. More than 2 million families have lost all TANF support due to work-oriented sanctions since 1997. (Link)

Medicaid Work Requirements: Arkansas implemented Medicaid work requirements in 2018, resulting in over 18,000 people losing their coverage. Research found "no evidence that the policy succeeded in its stated goal of promoting work" and instead found "substantial evidence of harm to health care coverage and access." (Link and Link)

SNAP Work Requirements: For non-disabled adults without dependents (ABAWDs), work requirements result in "many ABAWDs having very low income because SNAP benefits had been their primary source of income." (Link)