Blog Post: Solving OBBBA Implementation Gaps with Modern Income Reporting

Last year, Congress passed the One Big Beautiful Bill Act (OBBBA) with the stated intent to strengthen the program integrity and fiscal accountability of the Supplemental Nutrition Assistance Program (SNAP) and Medicaid programs through new work requirements for those who are eligible to receive their benefits. The bill’s implementation is, however, raising serious technical questions: Burdensome paperwork associated with work requirements reporting could affect healthcare and food benefits for millions of eligible Americans while cash-strapped state governments are facing new, unfunded implementation costs and SNAP cost-sharing liabilities that could total hundreds of millions of dollars.

The clock is ticking to implement these systems and address these major implementation gaps. States are subject to severe penalties by January 1, 2027 if their Medicaid and SNAP work requirement systems are not in compliance with federal regulations. They must also automate and modernize eligibility and compliance tracking for work requirements to ensure that Medicaid enrollment is strictly limited to eligible individuals.

New SNAP cost-sharing obligations take effect on October 1, 2027, and will require states with payment error rates of 6% or higher to fund up to 15% of SNAP. Last month, Arizona’s payment error rate was reported to be in line with the national average of nearly 11%, despite more than 450,000 people being removed from the program since enactment. If Arizona doesn’t lower the error rate by next year, the state will have to pay up to $208 million to comply with new regulations.

One approach that states are considering to address these implementation challenges is modern income verification.

Here’s how it works: Under the Social Security Act, employers currently submit quarterly wage reports directly to state unemployment agencies, who can then share the data with other agencies for safety-net program eligibility checks. However, under OBBBA, this quarterly data reporting may not be timely enough to automate the work requirement data needed to keep all Medicaid and SNAP beneficiaries enrolled. As a result, some states are actually buying monthly wage data from costly third-party vendors.

But there’s a better way. By shifting employer reporting from a quarterly schedule to a per-pay-period cadence (i.e. twice per month) and adding a field for hours worked, states could get the data needed to keep people on the rolls, securely sharing it across agencies. Many businesses already record this information, which could ease the administrative burden of automation without creating a new set of challenges for employers. Even better? This is a tried-and-tested model, successfully utilized in the United Kingdom.

With this new modern income verification model, states would:

• Strengthen program integrity: Ensure benefits like Medicaid and SNAP go only to those who qualify while improving accuracy in unemployment benefits;
• Save taxpayer dollars: Eliminate the need to pay for private wage data contracts and reducing Unemployment Insurance overpayments; and,
• Serve eligible Americans as the law intended: Eligible Americans would maintain coverage while creating a streamlined administrative process for any future changes in the law.

A law is only as good as its implementation. Whether states adopt modern income verification systems may significantly affect both program integrity and the original intent of OBBBA. Modern income verification is a common-sense system upgrade that balances efficiency, cost, and access, helping to ensure our public systems actually deliver for our citizens.

The Institute for Responsive Government provides nonpartisan research and analysis to help government leaders navigate complex administrative challenges and pass impactful policy. If you are interested in exploring modern income verification solutions in your state, please contact Marisa Bremer at marisa@responsivegov.org.