Medicaid wasn’t the only welfare program that received significant reforms in the One Big Beautiful Bill (OBBB). The Supplemental Nutrition Assistance Program (SNAP), otherwise known as food stamps, will similarly be seeing major changes very soon.
For Missouri, perhaps the biggest change will be the cost of SNAP going up. Unlike Medicaid, the federal government has historically paid for 100% of the SNAP benefit, with states only on the hook for 50% of its administrative costs. The OBBB increases the share of administrative costs borne by states to 75%, and has the potential to start charging states for some program benefit costs as well.
There’s a noticeable focus in the OBBB on improving program integrity in America’s welfare programs. With Medicaid, the focus was on checking program recipients’ eligibility more frequently. For SNAP, the focus is on reducing state payment error rates. Last year, the national rate of overpayment for SNAP (awarding benefits to people who don’t qualify or offering more benefits than the recipient was eligible for) approached 10%, with Missouri not much behind at 8.16%. Perhaps the most surprising thing about the payment errors is that they’re almost entirely overpayments. The error rate for underpayments barely exceeds 1%.
To be clear, there could be myriad reasons for the errors, but it shouldn’t be controversial to say that the government needs to do better. One possible explanation is that states tend toward overpayments because they aren’t responsible for the cost. The OBBB tries to address this misaligned incentive by requiring states to get their error rates below 6% by 2028; states that fail to meet this goal will need to start paying for a portion of the cost, with the share scaling by how far away the state is from the 6% goal.
All told, the SNAP changes contained in the OBBB could have a greater impact on Missouri’s budget than the changes to Medicaid. According to the Tax Foundation, these new costs could reach up to $400 million per year for Missouri if the state isn’t able to sufficiently reduce its payment error rate. It’s important to remember that the only guaranteed increase in cost for states is the higher share required for administrative services. If Missouri can find efficiencies in how it administers the program, the state’s cost might not need to go up much at all.
In the coming weeks, I’ll explain more about the OBBB’s changes to SNAP (no, these aren’t all of them), but these are the two that could have the largest impact on Missouri’s budget. Now that the federal government has finally gotten around to tackling the many broken incentives in America’s welfare system, it’s time for Missouri to step up and follow through on enacting comprehensive reform.
