Balancing Food Costs with Nutrition Goals in WIC

Tight budgets and increased demand for government services make the efficiency of Federal programs more critical than ever. However, simultaneously controlling costs and serving clients is often a difficult task—a balancing act—requiring innovative research combined with novel applications. The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) has marshaled the creativity and problemsolving acumen of the providers on the front lines—the States—as well as their partners at the Federal level—USDA.

A case study of six States found that WIC agencies, using a variety of food restrictions, reduced food costs by an average of 15 percent without diminishing participant use and satisfaction. And, amid concerns voiced by Congress and others that restrictions on food items and authorized stores may reduce access to and availability of WIC foods, these cost-containment practices appear to have had few adverse outcomes for participants.

Cost-Containment Raises Concerns

Since its inception, the number of participants in WIC (see box, “WIC Facts”) has expanded dramatically, from an average of 88,000 participants per month in 1974 to 7.5 million in 2002. Strong congressional support, bolstered by highly favorable evaluations of WIC’s cost-benefit performance, has increased funding for the program. This increased funding, along with cost-reducing efficiencies, has resulted in record participation levels in WIC.

WIC’s supplemental food benefits are crucially important to the health and development of low-income newborns, young children, and new mothers at nutritional risk. But because it reaches a large share of the Nation’s infants and children, it also serves as a gateway for many low-income families into the public health system. Therefore, an accessible and effective WIC program can have an important influence on the health of needy Americans.

In the past, States with rapidly growing numbers of WIC participants initiated practices to reduce food costs to maintain participant benefits. Exclusive manufacturer agreements for infant formula have become the most important cost-containment practice, providing an additional $1.5 billion in savings in 2001, sufficient to support about 28 percent of WIC participants. In addition, many States have employed a variety of restrictions on authorized retail stores and food items in order to reduce program costs (see box, “State Cost-Containment Practices Vary”).

However, these restrictions, known as cost-containment practices, have raised concerns by Congress and others about potential dissatisfaction and adverse consequences among WIC participants. Congress requested that ERS conduct an in-depth study of State retailer and food item restrictions, focusing on seven outcomes:

• Program participation
• Access and availability of prescribed foods
• Voucher redemption rates and actual food selections by participants
• Participants on special diets or with specific food allergies
• Participant use of and satisfaction with prescribed foods
• Achievement of positive health outcomes
• Program costs, including food and administrative costs

Congress explicitly excluded infant formula rebates from consideration in the ERS study due to their well-documented cost savings and acceptance by participants.

The six States selected for this study—California, Connecticut, North Carolina, Ohio, Oklahoma, and Texas—provided researchers with the range of cost-containment practices used by WIC agencies. By design, all States, except North Carolina, had practices thought to be “binding,” or restrictive enough to affect participant behavior. The six States were classified as “restrictive” or “nonrestrictive” depending on their practices. State-imposed food restrictions varied depending on the category, so, a State may be labeled “restrictive” for cereals, say, but not for cheese.

Throughout the study, States with restrictive practices were compared with those without restrictions using statistical difference tests. Researchers applied a rigorous, systematic approach to measure the effect of cost-containment practices on WIC food costs. First, WIC purchases in nonrestrictive States were used to simulate what items and quantities WIC participants in restrictive States would have purchased in the absence of the restriction. Next, the cost of those purchases was calculated, using prices in the restrictive State. Finally, the cost of the simulated purchases were compared with the costs of the actual purchases in the restrictive States to determine food cost savings.

A variety of information sources were used, including surveys of WIC participants, WIC food price and availability surveys, and collection of WIC purchase records from supermarkets (see box, “Surveys and Supermarkets Provide Details”). Data from these sources were analyzed to understand how restrictions affected participant purchases of, satisfaction with, and consumption of WIC foods; to gauge access to WIC stores and availability of allowed brands; to analyze price differences of restricted foods; and to measure indirect health effects on infants and children.

Cost Savings Significant…

Four of the six study States (California, Connecticut, Oklahoma, and Texas) imposed restrictions on many WIC foods in an effort to reduce food costs. Food cost savings from item restrictions were $2.66 per participant per month (PPM) in California, $3.65 PPM in Connecticut, $6.43 PPM in Oklahoma, and $7.33 PPM in Texas. North Carolina and Ohio, States that imposed few item restrictions, had cost savings of $0.51 PPM and $0.05 PPM.

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The large savings in Oklahoma and Texas were due primarily to restrictions on juice and cereal. Oklahoma required purchase of store or private-label brands for most allowed juice and cereal products, and restricted many juice purchases to 46-ounce cans, a less expensive form than bottled juice. Texas allowed a large number of cereal types and brands, but—as befits Texas—its specified minimum package sizes were generally larger than in the other States. For juice, Texas limited the number of allowed types, required purchase of the least expensive brand available, and restricted most juice containers to 46-ounce cans.

Food-item restrictions reduced average food costs (excluding costs for infant formula, tuna, and carrots) by an estimated 6.9 percent in California, 9.4 percent in Connecticut, 21.0 percent in Oklahoma, 21.4 percent in Texas, 1.9 percent in North Carolina, and 0.2 percent in Ohio. In California and Texas, the States with the largest WIC caseloads, estimated annual savings from cost-containment practices were nearly $40 million and $66 million in 2001. Even in Oklahoma, a State with a relatively small WIC caseload, estimated annual savings in 2001 were $6.7 million. Restrictions contributed to savings of $2.2 million in Connecticut, $1.2 million in North Carolina, and $148,000 in Ohio.

…With Few Adverse Effects on Participants

Most WIC participants surveyed for this study indicated they were “very satisfied” with the brands of food and package sizes allowed on their State’s list of approved foods, with some exceptions (only about 50 percent were very satisfied with allowed brands of cereal, while less than 66 percent were very satisfied with allowed peanut butter). Differences in satisfaction levels between States with and without restrictions are small and statistically insignificant, an indication that States were often able to implement specific practices with little impact on participants.

There was little evidence that food-item restrictions caused participants to buy less food, and food purchased in States with food-item restrictions was usually just as likely to be eaten as food purchased in States without restrictions. Some WIC families reported a preference for food items that were restricted by the State, but approved under Federal WIC regulations. The share of participants varied, depending on the State and the WIC food category. Less than 0.5 percent of WIC participants were unhappy with the allowed brands of infant cereal, while 10 percent of WIC families preferred disallowed breakfast cereal brands.

Survey respondents in States with food-item restrictions were less likely to drink all the milk they had purchased (82 percent vs. 90 percent in nonrestrictive States), less likely to eat all the eggs purchased (71 vs. 83 percent), and less likely to eat all the dried beans or peas purchased (57 vs. 72 percent). State brand restrictions and minimum/maximum package sizes may have affected consumption of WIC foods in these instances. The share of families consuming all purchased infant cereal was significantly greater in the restrictive States, in part due to the classification of North Carolina as nonrestrictive, despite the low availability of barley cereal in stores there. Among cheese, cereal, juice, and peanut butter, differences in consumption were not statistically significant between restrictive and nonrestrictive States. For these foods, the share of WIC families consuming all purchased food ranged from 61.6 percent (peanut butter), to 96.7 percent (juice). For all six States, an average of 74 percent of WIC participants ate all the food they purchased.

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Some of these differences in consumption of WIC foods were likely due to reasons unrelated to cost-containment practices. For example, participants cited “too much” or “too many” as reasons for not consuming milk, eggs, and dried beans or peas. Other reasons for not consuming a WIC food included “don’t normally eat” and “don’t like.”

States’ costs to administer food-item and retailer restrictions were found to be relatively low. The estimated administrative costs—to gather price data, authorize retailers, construct lists of WIC-authorized foods, inform WIC participants and retailers about restrictions, enter into infant cereal rebate contracts, and claim rebates—ranged from $0.01 PPM in Oklahoma to $0.10 PPM in Connecticut. In some instances, activities supporting cost-containment practices were so integral to other administrative and monitoring processes that State officials could not isolate the cost-containment portion of the activity. In the four States with substantial food-item restrictions, administrative costs averaged less than 1.5 percent of estimated food cost savings.

Cost-Containment Practices Have Varied Outcomes

One of the goals of the study was to link State cost-containment practices to participant and program outcomes as specified by Congress. Four of the six study States (all but North Carolina and Ohio) set maximum prices that WIC stores could charge as a way to control food costs. Congress was concerned that restrictions on authorized retailers may result in stores’ being located far from WIC participants’ homes or workplaces. However, States reported they rarely denied vendor authorization based on prices. Instead, in order to receive authorization, stores with high prices were required to reduce their pricing for WIC purchases. As a result, no evidence indicated that this retailer restriction affected WIC participants’ access to nearby stores, the availability of WIC foods, or continuing participation in WIC.

Food-item restrictions—requiring least expensive brand, restricting brands or types, limiting the package form, and providing exclusive manufacturer agreements (for foods other than infant formula)—had differing impacts on participant purchase, satisfaction, and use of WIC foods. Compared with nonrestrictive States, most of these restrictions did not reduce voucher redemptions in stores or the availability of WIC foods. Nor did State focus groups cite cost-containment practices as reasons for dropping out of WIC.

The restriction affecting the greatest number of food categories was the requirement that participants purchase the least expensive brand that met package size and other specified requirements. Milk, eggs, and cheese—foods with little differentiation by brand—were the most common foods subject to this requirement. Comparing responses of participants in States with and without this requirement revealed that the practice was not associated with reduced purchase of foods subject to the restrictions. In all cases except dried beans/peas, respondents who did not eat all the purchased food cited factors unrelated to food-item restrictions as the main reason.

State practices to reduce food costs by limiting approved brands ranged from allowing store brands only to allowing selected store and national brands. These restrictions also varied depending on food category. Oklahoma was the only State that required purchase of private-label or store-brand items for both cereals and juice. Texas also limited brands of juice, but allowed selected national brands. Although Oklahoma’s restrictions on national brands of cereal saved an estimated $2.72 PPM, the restrictions were associated with lower levels of participant satisfaction along with reduced cereal purchases and consumption. In response to participant preferences, Oklahoma has since added some national-brand cereals to its list of approved foods.

All States except Ohio limited some types of WIC foods on their approved lists. One concern with limiting food types is that participants may have difficulty finding the approved foods in smaller grocery stores. The study’s survey of WIC-authorized stores in each State found no significant differences in the availability of approved foods between restrictive and nonrestrictive States. Neither was there any significant difference in the amount of cereal purchased or consumed between States with and without restrictions on cereal type. California had the most restrictive policies for breakfast cereals based on the number of allowed types, yet participant satisfaction there was the highest among study States, with 94 percent saying they were “very” or “somewhat” satisfied with allowed breakfast cereals. By selecting popular brands, California was able to maintain satisfaction and consumption of cereals, while generating additional savings.

California, Connecticut, and Texas received manufacturer rebates on sales of infant cereal through contracts that specified a single allowed brand. Because the three States selected major brands for exclusive agreements, infant cereal rebates did not affect the availability of allowed brands. In addition, the participant survey revealed that differences in brand restrictions were not related to levels of brand satisfaction, amount purchased, or amount consumed.

Food-item restrictions appeared to have no impact on WIC participants with special diets or food allergies. Analysis of allowed WIC foods found that most special diets—such as high fiber, low sugar, low cholesterol, and low calorie—could be maintained. Less than 3 percent of surveyed participants followed a religious or vegetarian diet.

The percentages of respondent families with a food allergy varied from 4.6 percent in Texas to 13.4 percent in North Carolina. For example, lactose or milk intolerance was reported by 10.8 percent of respondents in the six States, with a particularly high percentage in Oklahoma (21.7 percent). Cost-containment practices should not affect participants with lactose or milk intolerance because, through food package tailoring, States provide special WIC vouchers to purchase alternatives such as soy milk or lactose-free milk.

Implications for Other States

The cost-containment practices implemented by the six study States were relatively inexpensive to manage and operate, reduced food package costs, and had few adverse impacts on WIC participants. Through careful application of restrictions and a willingness to make adjustments, States were able to strike a balance between reduced food costs and participant satisfaction. Selecting and managing appropriate cost-containment practices requires ongoing attention to local conditions, such as retail prices, availability of federally and State-approved food items, and participant preferences.

Cost-containment practices are not the only issues associated with administering a program of WIC’s size, complexity, and goals. The composition of the WIC food package, program accessibility, eligibility standards, and means to reduce fraud and abuse in the program are also potentially contentious topics. Addressing such issues affects not only the women, infants, and children who participate in the program, but also food retailers, food manufacturers, and farmers. Health issues such as WIC’s effect on breastfeeding rates and childhood obesity deserve attention as well.

While some of these issues have been studied, others have not. Future research on these and other questions facing the WIC program will improve its ability to balance cost-cutting efficiencies with nutrition and health goals.