The Regulatory Impact Analysis (Abridged)

National Academies of Sciences, Engineering, and Medicine; Health and Medicine Division; Food and Nutrition Board; Committee to Review WIC Food Packages

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National Academies of Sciences, Engineering, and Medicine; Health and Medicine Division; Food and Nutrition Board; Committee to Review WIC Food Packages. Review of WIC Food Packages: Improving Balance and Choice: Final Report. Washington (DC): National Academies Press (US); 2017 May 1.

Review of WIC Food Packages: Improving Balance and Choice: Final Report.

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10The Regulatory Impact Analysis (Abridged)

This chapter presents an abridged regulatory impact analysis (RIA) for the proposed revisions to the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) food packages. The preceding chapters have explained the nature and need for the food package changes, have provided background on the WIC program, and have described the food package changes proposed and the rationale for each. For brevity, such discussions have been omitted from this chapter and the cost-estimate methodology provided herein is a broad overview. Expanded versions of these sections are provided in the complete RIA (see Appendix U).

An overview of the types of estimates in this RIA is presented in Box 10-1. Throughout this chapter, the committee compares the projected costs of the revised set of food packages (assuming all recommendations are fully implemented) to the projected costs of the status quo, namely the current set of food packages. Estimated costs are based on forecasted program participation levels, estimated redemption of each food package item, and inflated prices of each food package item. Unless otherwise noted, cost differences describe how much more the revised food packages would save or cost across the program, compared to the current food packages.

BOX 10-1

Overview of the Types of Estimates Presented in This Regulatory Impact Analysis.

KEY CONSIDERATIONS

Assumptions underlie this analysis. Some—such as how program participation and prices are projected to change through fiscal year (FY) 2022—pertain to one specific component of the analysis and are described in detail in Appendix U. Other assumptions affect the interpretation of the estimated costs and cost differences. Three such broad considerations are the representativeness of the available data, timing of implementation, and food package nomenclature.

Representativeness of the Available Data

A number of factors affect the total food costs to the WIC program, including interstate variation in food prices, caseload composition, and cost-containment practices (USDA/ERS, 2005). Accurate estimates of total food costs, therefore, should be based on data that capture this variability. To project the cost effects associated with specific changes to the food packages, data should provide insight into how each individual food item within each specific food package contributes to the total food costs. At the present, this level of granularity does not exist in data sources representative of the entire WIC program.

The committee estimated total food costs and cost differences by integrating the various sources of WIC-specific data.^¹ Despite the fact that several of the data sources came from a limited number of state agencies, this analysis necessarily assumes that the data are representative of the WIC-participating population at large because no other data were available to the committee. The committee recognizes, however, that its cost estimates are not identical to costs derived from the U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) administrative data. For FY2015, the committee estimated the per-participant food cost to be $37.09^² per month, based on assumptions about prices per unit, substitutions of allowable options, and redemption of each food package item. USDA-FNS, however, reported the FY2015 per-participant food costs to be $43.37 per month. The committee was unable to discern what component(s) of its analysis led to this difference, because some of the data available to the committee were de-identified and the majority of the data represented only a small portion of states and territories. The estimates presented in this RIA should be interpreted in context of these limitations.

Timing of Implementation

The magnitude of the cost effects and stability of the projections in this analysis are largely defined by the time frame evaluated. The committee assumes that the earliest implementation of the revised food packages could occur would be April 1, 2018, approximately 15 months after the release of this consensus report. Food-cost estimates for both the current and revised food packages are projected through FY2022. This RIA, therefore, encompasses a 54-month period.^³

The committee assumes that, within each state agency, all proposed food package changes will be fully implemented at one time but that, across the WIC program, state agencies may begin offering the revised food packages at different times. As such, two sets of cost projections were generated: unadjusted and phased in. Unadjusted estimates assume that all agencies fully implement the revised food packages on April 1, 2018. Phased-in estimates, in contrast, account for states implementing the revised food packages at different times. The phased-in scenario assumes that states with electronic benefit transfer (EBT) systems operational as of the August 2016 EBT Detail Status Report (USDA/FNS, 2016c) would be early implementers of the proposed food package changes (i.e., those implementing the changes on April 1, 2018).^⁴ The remaining state agencies would have up to 18 additional months to implement the proposed food package changes (i.e., implemented by October 1, 2019). As evidenced by the final implementation dates from the previous food package revision (USDA/FNS, 2012), most state agencies instituted changes on the regulatory deadline, rather than before or after. This analysis assumes the same will occur for these proposed revisions. Accordingly, the phased-in cost differences between the current food packages and proposed revised food packages are 33.3 percent of the unadjusted cost differences for FY2018 (6 months) and FY2019 (12 months), and 100 percent of the unadjusted differences thereafter. The dates and rates of implementation used in this RIA are not intended to be prescriptive or to be the committee's recommended timeline for implementation, but rather they are the committee's informed assumptions necessary for this analysis.

Food Package Nomenclature

The WIC food packages are specific to the age, life stage, physiological state, and, if applicable, breastfeeding status of the participant. Several of the broad food package categories (both current and revised) are actually composed of two or more specific food package types. Both the quantity of foods and the food items prescribed in each specific food package can differ within a broad food package category, and therefore have cost implications.

As Table 10-1 highlights, the proposed revisions largely leave the current structure of the food packages unchanged. There are, however, three important considerations:

TABLE 10-1

Current and Revised Food Packages and Corresponding Participant Categories.

1.: Food package V is currently a single food package prescribed to both pregnant women and partially (mostly) breastfeeding women, up to 1 year postpartum. Under the proposed revisions, it would be split into two distinct food packages, V-A for pregnant women and V-B for partially (mostly) breastfeeding women.
2.: Revised food package I-BF/FF-A (partially [mostly] breastfed infant, age 0 to less than 1 month) is retained as its own food package in this analysis, as the committee expects that recipients of this food package would continue to be prescribed only small quantities of infant formula. Upon implementation of the proposed revisions, however, it may be decided to consolidate this food package with food package I-BF/FF-B (partially [mostly] breastfed infant, age 1 to less than 4 months), because both would have the same maximum prescription (“up to”) amount for infant formula.
3.: Food package “N/A” is listed as a food package because it is included in an assumption about how participation is expected to change with the revised food packages. Women who are minimally breastfeeding and with infants more than 6 months of age that receive more formula than is allowed for a partially breastfeeding infant do not receive a food benefit (referred to herein as “food package N/A”), but are still eligible to continue to receive breastfeeding support, nutrition education, health and social services referrals, and other program benefits (USDA/FNS, 2013). These program participants do not contribute to the total food costs of the program.

SUMMARY OF PROPOSED CHANGES

The food package revisions recommended in this report reflect the consensus of an expert committee and account for the nutritional intake, health status, and cultural needs of the program participant population, while simultaneously considering the efficiency and efficacy of program operations and administration. The proposed changes to the food packages affect a broad range of individuals and entities associated with the WIC program, including, but not limited to, USDA-FNS; the 90 agencies that administer WIC and their associated staff; authorized vendors; food producers, manufacturers, and distributors; and program participants. As summarized in Table 10-2, the committee considered the effect of each key food package revision on these stakeholder groups.

TABLE 10-2

Summary of Key WIC Food Package Revisions.

COST

Proposed Revisions to the Benefit

Unadjusted Estimates of Food Costs and Total Cost Differences

Table 10-3 presents unadjusted food cost estimates for the current and revised food packages. The total unadjusted food costs from FY2018 through FY2022 are estimated to be $17.7 billion (averaging $3.93 billion per year) for the current food packages and $17.4 billion (averaging $3.87 billion per year) for the revised food packages. Over the course of FY2018 through FY2022, the proposed revisions are projected to lead to a total unadjusted cost savings of $263 million, compared to the current food packages.

TABLE 10-3

Estimated Unadjusted Food Costs of the Current and Proposed Food Packages, FY2018 Through FY2022.

Phased-in Cost Differences

Table 10-4 presents the phased-in cost differences between the current and revised food packages, from FY2018 through FY2022. Assuming phased-in implementation across the WIC program inherently decreases the projected total cost savings because, overall, the revised food packages result in a long-term cost savings. The total phased-in cost savings for FY2018 through FY2022 are approximately $42 million less than the total unadjusted cost savings ($220.4 million versus $262.8 million). The estimated cost differences not only reflect changes to the type and quantity of items in the specific food packages, but also the proportion of participants who are prescribed each food package. The cost savings in food package I in FY2021 and FY2022, for example, is driven by the anticipated 5 percent shift of mother–infant dyads from fully formula-fed to the partially (mostly) breastfeeding categories, as a result of the incentives included in the revised food packages (see the “Participation” subsection in the section titled “Cost Estimate Methodology” for additional details about this assumption).

TABLE 10-4

Estimated Phased-in Cost Differences of the Proposed Revised Food Packages Compared to the Current Food Packages, FY2018 Through FY2022.

Sources of Cost Differences

Cost Difference of Each Food Package Item

To determine the source(s) of the projected cost savings of the revised food package, the committee evaluated the total costs of each food package item category within the current and revised food packages. The total costs of each of the food items presented in Table 10-5 include assumptions about substitutions and allowable options within each category and assumptions about changes in redemption rates (see “Cost Estimate Methodology” for additional details). Across the food package items, the total cost savings are larger than the total added costs, which results in estimated total cost savings of the revised food packages compared to the current food packages. Two major sources of cost differences between the current and revised food packages are juice and the cash value voucher (CVV). In the current food packages, all women and children are prescribed juice. The reduction of total juice in the revised food packages results in a total phased-in cost savings of approximately $627 million over the course of FY2018 through FY2022 compared to the current food packages. In contrast, increasing the value of the CVV for all women and children in the revised food package leads to an estimated total phased-in cost increase of approximately $780 million over the course of FY2018 through FY2022.

TABLE 10-5

Phased-in Total Food Cost and Cost Differences (FY2018 Through FY2022) Between the Current and Revised Food Packages by Food Package Item Category, in Descending Order of Additional Costs.

Major Cost Differences of Food Package Items Within Each Food Package

To explore the sources of the cost differences further, the committee evaluated the total phased-in cost differences of each food package item within each food package. Table 10-6 presents each food package item revision that resulted in a total phased-in cost difference of at least $25 million in cost saving or cost increases from FY2018 through FY2022 compared to the total cost of the corresponding item in the current food packages. The major total cost differences summarized in the table not only reflect the specific revisions to the items and the quantity prescribed, but also the distribution of participants across the different food packages. Inasmuch as food package IV-B comprises the largest participant group (approximately 36 percent of food package recipients), relatively small changes lead to more substantial cost differences. For example, the CVV in the revised food package IV-B would increase by $3 per month compared to the current food package,^⁵ leading to an estimated $246-million increase in estimated total phased-in costs compared to the current food package. In contrast, the CVV for fully breastfeeding women (food package VII)—who comprise approximately 3 percent of food package recipients—would increase by $24 per month in the revised food packages, and would only lead to an estimated $200 million increase in estimated phased-in costs.

TABLE 10-6

Revisions to Food Package Items That Lead to Major Total Phased-in Cost Differences from FY2018 Through FY2022, by Food Package.

Cost Differences of Food Package Items Over Time

The preceding sections evaluate the cost implications of each food package item, summed across all projected years. As presented in Table 10-7, the phased-in costs differences during FY2018 through FY2022 reflect the assumptions of the analysis. Cost differences in FY2018 and FY2019 are markedly lower than in subsequent years, for example, because they reflect the phased-in implementation of the revised food package. The values for these 2 years are one-third of the unadjusted value. The cost differences for FY2018 are even less, because the values only encompass a 6-month period.

TABLE 10-7

Phased-in Cost Differences Between the Current and Revised Food Packages by Food Package Item Category, by Fiscal Year (FY).

Some of the variations in cost differences over time result from assumptions about participation. In FY2021 and FY2022, infant formula is projected to cost less and eggs are projected to cost slightly more in the revised food packages compared to the current food packages. The analysis does not assume changes in quantities or the rate of redemption between the current and revised food packages for either food package item. Instead, the cost differences result from the 5-percent shift in fully formula fed mother–infant dyads to partially (mostly) breastfeeding dyads that the committee projects to take place in FY2020 for the revised food packages. The slight increase in egg costs in the revised food packages is attributed to the women shifting from being classified as partially (minimally) breastfeeding at more than 6 months postpartum (i.e., receiving food package N/A) to partially (mostly) breastfeeding (i.e., receiving the revised food package V-B). Partially (mostly) breastfeeding women may receive food package benefits for up to 1 year postpartum.

Most of the projected variations in cost differences over time are the result of a complex interplay among several factors. The CVV serves as a prime example. The proposed revisions add value to the CVV across all food packages for women and children. In FY2020 and FY2022, the CVV for women in the revised food package VII is projected to be adjusted for inflation by $1, increasing to $36 and $37 per month, respectively. Similarly, an inflation adjustment of $1 is projected for the revised food package V-B (for partially [mostly] breastfeeding women), increasing the CVV to $26 per month. Also during FY2021, the committee anticipates a 5 percent shift of fully formula fed dyads to partially (mostly) breastfed dyads, which would shift a portion of postpartum women to the larger CVV in the revised food package V-B (compared to the revised food package VI CVV). These adjustments and assumptions in the revised food packages do not have a dramatic effect on total cost differences because participants in food packages VII and V-B are only a small proportion of the total WIC-participating population. In FY2022, however, the trajectory of the cost difference for the CVV changes, decreasing from +$230 million in FY2021 to +$215 million in FY2022. This is the result of a $1 inflation adjustment that is projected to affect all food packages for women in the current food packages. Although the revised CVV values result in positive cost differences (i.e., cost increases) compared to the CVV values in the current food packages for each fiscal year assessed, the difference across the years is not consistent. Assumptions regarding the CVV are described in the “Cost Effect Methodology” section that follows and in Appendix U. Alternative assumptions and their effects on total cost differences are tested in the “Uncertainty” section later in this chapter.

Cost-Estimate Methodology

This analysis projects costs of each food package in the current and revised sets of food packages through FY2022. The committee estimated the monthly costs of a food package by multiplying the projected number of recipients of the package, the average proportion of each food package item projected to be redeemed, and the estimated prices of each item in the food package and then summing these values within the food package. This process was repeated for each specific food package. Monthly costs were multiplied by 12 to arrive at annual estimates for each fiscal year in the analysis (FY2018^⁶ through FY2022). The sections that follow provide a brief overview of how the committee projected participation, redemption, and prices. Details of the methodology are presented in Appendix U.

Participation

The committee used two data sources to estimate program participation, as described previously in Chapter 7. The 2014 Food Package Report (USDA/FNS, 2016a) was used to determine the distribution of participants across the specific food packages. To estimate the average numbers of participants that are issued each specific food package in a month, the distributions in the Food Package Report were applied to the administrative data posted on FNS's website^⁷ (USDA/FNS, 2016d). The participation estimates the committee derived from these data sources served as the basis for both the current and revised food package cost estimates that were used for the cost analysis presented in Chapter 7 and this chapter. The complete regulatory impact analysis (see Appendix U) includes a detailed explanation of how participation for each food package was determined.

Estimating participation for FY2018 through FY2022 To forecast participation through FY2022, the committee extrapolated the FY2015 WIC participation levels based on the relationship between WIC participation and the general economy (unemployment rates and the forecast of the civilian labor force). During and following the economic recession of 2008–2009, WIC participation grew. As that recession waned, WIC participation declined. With the general economy forecasted to improve moderately and then stabilize, the committee expects that WIC participation levels will decrease initially, then increase slightly and stabilize. The committee forecasts WIC participation to decline by 2.2 percent between FY2015 and FY2018. From FY2018 to FY2022, the committee forecasts WIC participation to increase by 1.5 percent. As a result, the committee forecasts that the FY2022 participation levels will be 0.7 percent lower than the FY2015 levels.

Anticipating a shift in fully formula fed mother–infant dyads under the proposed revisions Participation projections are identical between the current and proposed revised food packages, with one exception. As described in Chapter 7 (and in more detail in Appendix U), the committee incorporated a 5 percent shift of participants from the fully formula-feeding to the partially breastfeeding dyad. The committee anticipates that the 5 percent shift will take place after all the revisions have been implemented in all states and will be sustained over time. Accordingly, the shift has been incorporated in FY2021 participation estimates, which corresponds to the year after full implementation under the phased-in assumption.

Redemption

As described in Chapter 7, USDA-FNS provided the committee with 12 months (August 2013 through July 2014) of price and redemption data from a convenience sample of six WIC state agencies, representing five of the seven regions of the country (hereafter referred to as the FNS redemption dataset). Additional details related to this data source, and the methods applied to calculate redemption rates for the current and revised food packages using this and other sources are presented in Chapter 7 and further detailed in Appendix R. The calculated redemption rates for each food package item served as the quantity multipliers used in the estimation of total food package costs.

Prices

Prices for each food package item were primarily estimated from the FNS redemption dataset, supplemented by data from the 2014 Information Resources, Inc. (IRI) Consumer Network Database as described in Chapter 7 and in Appendix U. Chapter 7 and Appendix U also describe the development of composite prices for certain WIC food categories and the inflation of prices to the base of FY2015.

Projecting prices after FY2015 For years after FY2015, prices for items that are prescribed as a fixed quantity (e.g., 16 quarts of milk) were inflated using the Congressional Budget Office's March 2015 Baseline Thrifty Food Plan estimates (CBO, 2015). The inflation assumptions are presented in Table 10-8.

TABLE 10-8

Inflation Assumption for Food Package Items Prescribed as a Fixed Quantity, FY2016–FY2022.

Inflating the cash value voucher The CVV does not inflate the same way as items prescribed as a fixed quantity. Instead, its inflation depends on an annual average of the Consumer Price Index (CPI) for fresh fruits and vegetables (7 C.F.R. § 246.16). Under the current rule, the average CPI for fresh fruits and vegetables from April 2006 through March 2007 is assigned to FY2008 and considered the baseline CPI. Each subsequent year follows the same pattern (e.g., FY2009 value is the average CPI from April 2007 through March 2008). To inflate the CVV, the average CPI for the fiscal year being considered is divided by the baseline CPI value and multiplied by the base values of each CVV ($8 for children, $10 for women). Participants only receive an increase in value when the inflated CVV crosses a $1 increment. This inflation adjustment recently occurred in the food packages for women, with the $10 CVV increased to $11 beginning in FY2016. Provision of the CVV in dollar increments, rather than prescribing the exact inflated value, is easier from an administrative perspective, as adjustments only have to be made periodically. It also decreases participant burden, as the benefit is provided in a round number and a consistent value month-to-month. This inflation approach was used for estimating the costs of the current food packages in this analysis.

Under the proposed revisions, all women and children receive a CVV of higher value. Had the committee kept FY2008 as the baseline CPI value under the proposed revisions, in FY2018 the $12, $15, $25, and $35 CVVs would already have been inflated to $13, $17, $28, and $39, respectively, because of the inflation that has taken place in the decade between FY2008 and FY2018. Accordingly, the CVV under the proposed revision required a new inflation baseline, which was assumed to be the first year of implementation (FY2018).

The CPI values used in the inflation of the CVV encompass the 6 to 18 months prior to the fiscal year they describe. Accordingly, actual CPI values were used through FY2017 of this analysis. The committee could not identify forecasts for the retail price of fresh vegetables and fruits that extended to FY2022. A forecast for 2017 projected a 1 to 2 percent relative change in price from FY2016 (USDA/ERS, 2016). Therefore, a relative change in average CPI of 1.5 percent was used for FY2018 through FY2022. The cost effect of using alternate baseline years for the CPI inflation values for the revised food packages are tested in the “Uncertainties” section.

UNCERTAINTIES

The estimated costs of the current food packages and proposed revised food packages are sensitive to key assumptions made in the preceding sections. The cost implications of several of these assumptions are tested below. The uncertainty scenarios specifically evaluate changing one or multiple assumptions about the revised food package and evaluating the cost effects. The “primary analysis” refers to the assumptions, food costs, and cost differences presented in the preceding sections of this chapter. “Base assumption” refers to the specific assumption(s) used in the primary analysis.

For each uncertainty scenario tested, the phased-in cost differences are presented. The phased-in cost differences presented for each assumption scenario (i.e., base assumption, each uncertainty scenario) indicate the cost effect as it compares to the current food packages. Negative values (−) indicate that the specific scenario costs less than the current food packages, whereas a positive value (+) indicates that the specific scenario costs more than the current food packages. The cost differences between the base assumption and each uncertainty scenario are also presented. These describe how much the base assumption costs or saves, compared to the tested uncertainty scenario. For these differences, a negative value (−) indicates that the base assumption used in the primary analysis costs less than the uncertainty scenario; a positive value (+) indicates that the base assumption costs more than the uncertainty scenario. This section presents select uncertainties tested by the committee. A broader range of uncertainties is explored in the complete RIA (see Appendix U).

The cost differences presented in this section must be considered in context of estimated overall food costs of the current and revised food packages. Over the course of FY2018 through FY2022, the food packages in this analysis are projected to cost approximately $17 billion, averaging to approximately $3.9 billion per year, both under the current and revised food packages.

Assumptions About the CVV

The CVVs are estimated to cost approximately $780 million more in the revised food packages compared to the CVVs in the current food packages. The proposed revisions allow for a CVV to be a substitution option for juice and jarred infant food vegetables and fruits. Given the CVV's increased prominence in the revised food packages, it is essential to evaluate different aspects of the assumptions underlying the primary cost analysis.

Different CVV Redemption Projections Under the Proposed Revisions

In the primary analysis, CVV redemption was estimated to be 77.2 percent in the current food packages and 75.0 percent in the revised food packages (rationale presented in Appendix U). The cost implications of two alternative redemption scenarios are presented in Table 10-9. Scenario 1 shows that increasing the redemption assumption to 85 percent for the revised food packages would result in the estimated $220.4 million savings projected in the primary analysis becoming $135.1 million in additional costs compared to the current food packages ($355.5 million in additional costs compared to the base assumption). Similarly, scenario 2 shows that lower redemption of the revised CVV (65 percent redemption) results in an additional $355.5 million savings from FY2018 through FY2022, compared to the base assumptions in the primary analysis. This lower redemption assumption for the CVVs in the revised food packages results in a total cost savings of approximately $580 million over the course of FY2018 through FY2022, compared to the current food packages.

TABLE 10-9

Projected Phased-in Cost Difference of WIC Food Package Revisions, Increase or Decrease in Redemption Assumption of Cash Value Voucher.

Different CPI Base Year for the Revised Food Packages

In the revised food packages, FY2018 serves as the base year to which subsequent years are compared for CVV inflation. Table 10-10 explores the cost differences associated with different CPI base years for the revised food packages. In scenario 1, changing the base year to inflate the revised CVV to FY2015 would cost an additional $128 million over the FY2018 through FY2022, compared to using FY2018 as the base year. Both scenarios 2 and 3 demonstrate that there are relatively small costs effects of selecting either FY2016 or FY2017 as the base year for CVV inflation in the revised food packages.

TABLE 10-10

Projected Phased-in Cost Difference of WIC Food Package Revisions, Changing the Base Comparison Year for CVV Inflation.

Assumptions About Use of “Up to” Amounts

The primary analysis assumes that infant formula prescription practices will not change between the current and revised food packages. Table 10-11 projects the cost effects of different formula prescription practices for the revised food packages. In scenario 1, prescribing all infants in food package I-BF/FF-A the maximum “up to” amount of infant formula would result in approximately $20 million in additional costs in the revised food packages over the course of FY2018 through FY2022, compared to the base assumption used in the primary analysis. The revised food packages would still be projected to cost approximately $201 million less than the current food packages, over the course of FY2018 through FY2022. In contrast, if the average amount of infant formula prescribed across all food packages was 95 percent of the maximum “up to” amount for each food package (scenario 2), the total cost savings of the revised food packages would increase by $145 million over the course of the FY2018 through FY2022, compared to the base assumption used in the primary analysis. This would result in an estimated $366 million in total savings compared to the current food packages.

TABLE 10-11

Projected Phased-in Cost Difference of WIC Food Package Revisions, Changing the Maximum Amount of Formula in Food Packages I and II.

Assumptions About Shifts in Fully Formula-Fed Dyads

A key assumption of the primary analysis is that, under the proposed revisions, 5 percent of fully formula fed mother–infant dyads will shift to corresponding fully (mostly) breastfeeding food packages. The committee considered the 5 percent shift conservative, given evidence that the 2009 food package, which allowed women to choose between formula-feeding or fully breastfeeding in the infant's first month of life, resulted in an approximately 7 to 11 percent shift of dyads from breastfeeding to formula-feeding (USDA/FNS, 2011).

Table 10-12 presents the cost effect of this assumption. The cost differences only affect FY2021 and FY2022, because the base assumption is that the shift would occur 1 year after full implementation in all state agencies under the phased-in implementation assumption. Assuming no shift in participants in the revised food packages (scenario 1) would cost approximately $25 million more over the course of FY2018 through FY2022, compared to the assumption of a 5 percent shift. A 3 percent shift of participants would decrease estimated total cost savings by $9.9 million (Scenario 2), whereas an 8 percent shift would increase estimated total cost savings by $14.8 million (Scenario 3), compared to the base assumption in the primary analysis. If the shift only occurs for infants less than 6 months old and women less than 6 months postpartum, the estimated total cost savings of the revised food packages would decrease by $15.1 million over the course of FY2018 through FY2022, compared to the base assumption.

TABLE 10-12

Projected Phased-in Cost Difference of WIC Food Package Revisions, Changing Assumptions About Percent of Fully Formula-Fed Dyads Shift to Partially (mostly) Breastfed Food Packages.

ALTERNATIVES

The committee considered several alternatives to current food package items and amounts that were ultimately rejected. Some of these alternatives and the committee's rationale for not including them in the revised food packages are outlined in the sections that follow. As with the uncertainty scenarios, the “primary analysis” refers to the set of base assumptions that led to a total phased-in cost savings of $220 million for the revised food packages compared to the current food packages, over the course of FY2018 through FY2022.

For each alternative tested, the phased-in cost differences are presented. They indicate the cost effect as it relates to the current food packages. Negative values (−) indicate that the specific scenario costs less than the current food packages, whereas a positive value (+) indicates that the specific scenario costs more than the current food packages. The cost difference between the base assumption and the alternative are also presented. These describe how much the base assumption costs or saves, compared to the tested alternative. For these differences, a negative value (−) indicates the base assumption used in the primary analysis costs less than the alternative; a positive value (+) indicates the base assumption costs more than the alternative. This section presents select alternatives tested by the committee. Additional alternatives are explored in the complete RIA (see Appendix U).

More Canned Fish

To support the Dietary Guidelines for Americans (DGA) recommendation to increase seafood intake, the committee proposes adding canned fish to all children's and women's food packages and offering it as a substitution option for jarred infant-food meat. To maintain cost neutrality and create incentives for partially (mostly) and fully breastfeeding women, different quantities and rotation patterns were created for canned fish. The amount prescribed in food packages IV-A, IV-B, V-A, and VI are relatively low compared to the DGA recommended intake. Table 10-13 shows the cost effects of prescribing additional canned fish to these food packages. Increasing the prescribed amount to 20 ounces every 3 months for these food packages (alternative 1) costs approximately $122 million more than the base assumption. Alternative 1 would be considered cost neutral from FY2018 through FY2022, as the total food package costs would be approximately $99 million less than the projected costs for the current food packages (from FY2018 through FY2022). However, the parameter of cost neutrality the committee was operating under was +/−$0.10 per-participant cost per month, based on FY2015 prices. When 20 ounces of canned fish every 3 months is used in this pricing scenario, the revised food packages would cost $0.37 more per-participant per month than the current food packages. Alternative 2 shows that 10 ounces per month in the food packages would cost approximately $23 million more than the current food packages.

TABLE 10-13

Projected Phased-in Cost Difference of WIC Food Package Revisions, Prescribing Additional Fish to Food Packages IV-A, IV-B, V-A, and VI.

MARKET ANALYSIS

The food package revisions will result in changes in the quantities and types of foods that WIC participants buy with their WIC food benefit. Although the market effects of the changes are difficult to quantify accurately, the committee expects them to be minor.

Based on the assumptions in the primary analysis, the committee estimated the total value of WIC sales for each food item using the quantities in the current and revised food packages for FY2015.^⁸ Figure 10-1 shows the estimated sales for each category prescribed in the current food package side-by-side with estimates for the revised package. Each food item represents the food-item category, which encompasses assumptions about substitutions and allowable options within that category (e.g., yogurt and cheese substitution are included in the milk category). Estimated sales of infant formula using retail prices are presented in Figure 10-2.

FIGURE 10-1

Estimated annual cost of food package item categories, current and revised food packages, FY2015. NOTES: The food package item categories encompass substitutions and allowable options. Estimates for the revised food packages includes the 5 percent participant (more...)

FIGURE 10-2

Estimated annual cost of infant formula, current and revised food packages, FY2015. NOTES: Estimates for the revised food packages includes the 5 percent participant shift from the fully formula-feeding mother–infant dyads to partially (mostly) (more...)

Changes in total sales are estimated to be relatively small for most food categories, with the possible exception of juice, vegetables and fruits, and milk. However, WIC sales of each of these categories are a small portion of the total retail market. The committee did not have access to data that would permit it to estimate the total retail sales of WIC food categories. Instead, the analysis is based on the committee's assessment of likely market effects using aggregate retail data available from the RIA conducted for the Interim Rule (USDA/FNS, 2007). The estimates presented in that RIA are summarized in Table 10-14. WIC sales of juice were estimated to be 2 percent of the total retail juice market in the interim rule. WIC sales of vegetables and fruits were estimated to be 2.7 percent of the retail vegetable and fruit market. In the Interim Rule RIA, sales of milk were estimated to be 4.4 percent of the retail milk market, and cheese sales were estimated to be 2 percent of the retail cheese market. Although it is difficult to gauge accurately how sales of any individual product within that composite will be affected, data for the dairy products examined in the Interim Rule suggest that effects of the proposed revisions will be small. The categories estimated to experience the largest changes in sales under the revised packages represent small shares of their respective total retail markets, and the committee expects minimal market impacts as a consequence of the revision to the food package.

TABLE 10-14

Estimated Percent of the Market Attributed to WIC Sales, as Presented in the Interim Rule Regulatory Impact Analysis.

SUMMARY

The proposed revisions to the WIC food packages are anticipated to have largely beneficial effects across a wide range of stakeholders, including the USDA-FNS, state and local WIC agencies, vendors, industry, and program participants. The committee estimates that the revised food packages save approximately $220 million program-wide over the course of FY2018 through FY2022, compared to the current food packages. Revisions to juice in the food packages are projected to lead to substantial cost savings, allowing for other changes in the food packages, such as increasing the value of the CVV. The projected cost effects of the revised food packages, compared to the current food packages, are contingent on the assumptions made in the analysis. Many of the key assumptions the committee tested maintained or increased the costs savings of the revised food packages. The committee expects the market effects of the revised food packages to be relatively minimal.

REFERENCES

CBO (Congressional Budget Office). Supplemental Nutrition Assistance Program—CBO's March 2015 baseline. 2015. [October 3, 2016]. https://www.cbo.gov/sites/default/files/51312-2015-03SNAP.pdf.
USDA/ERS (U.S. Department of Agriculture/Economic Research Service). Interstate variation in WIC food package costs: The role of food prices, caseload composition, and cost-containment practices. Washington, DC: USDA/ERS; 2005. [October 3, 2016]. http://ageconsearch.umn.edu/bitstream/33811/1/fa050041.pdf?origin=publication_detail.
USDA/ERS. Transition to EBT in WIC: Review of impact and examination of participant redemption patterns: Final report. Washington, DC: Altarum Institute; 2014. [March 2, 2016]. http://altarum.org/sites/default/files/uploaded-publication-files/Altarum_Transition%20to%20WIC%20EBT_Final%20Report_071614.pdf.
USDA/ERS. Food price outlook—Consumer Price Index, changes in food price indexes, 2014 through 2017. Washington, DC: USDA/ERS; 2016. [October 3, 2016]. http://www.ers.usda.gov/data-products/food-price-outlook.aspx.
USDA/FNS (U.S. Department of Agriculture/Food and Nutrition Service). interim rule, 7 C.F.R. § 246. 2007. Special Supplemental Nutrition Program for Women, Infants and Children (WIC): Revisions in the WIC food packages;
USDA/FNS. Evaluation of the birth month breastfeeding changes to the WIC food packages. Alexandria, VA: USDA/FNS; 2011. [March 9, 2016]. http://www.fns.usda.gov/sites/default/files/BirthMonth.pdf.
USDA/FNS. Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) erroneous payments to vendors: Annual estimates for FY2011. Alexandria, VA: USDA/FNS; 2012. [October 3, 2016]. http://www.fns.usda.gov/sites/default/files/WICErroneousPayment_2011.pdf.
USDA/FNS. Breastfeeding promotion in WIC: Current federal requirements. Alexandria, VA: USDA/FNS; 2013. [October 3, 2016]. http://www.fns.usda.gov/wic/breastfeeding-promotion-wic-current-federal-requirements.
USDA/FNS. WIC participant and program characteristics 2014: Food package report. Alexandria, VA: USDA/FNS; 2016a. [August 30, 2016]. http://www.fns.usda.gov/wic-participant-and-program-characteristics-2014-food-package-report.
USDA/FNS. WIC program, state-level participation. Alexandria, VA: USDA/FNS; 2016b. [October 3, 2016]. http://www.fns.usda.gov/pd/wic-program.
USDA/FNS. August 2016 EBT detail status report. Alexandria, VA: USDA/FNS; 2016c. [October 3, 2016]. http://www.fns.usda.gov/sites/default/files/wic/August2016EBTDetailStatusReport.pdf.
USDA/FNS. Monthly data—state level participation by category and program costs. Alexandria, VA: USDA/FNS; 2016d. [October 3, 2016]. http://www.fns.usda.gov/pd/wic-program.

Footnotes

1: WIC data sources used in this analysis include the participation data from the WIC Participant and Program Characteristics 2014: Food Package Report (USDA/FNS, 2016a), national participation levels presented on the USDA-FNS website (USDA/FNS, 2016b), redemption data from six de-identified state agencies provided to the committee by USDA-FNS (see Appendix U for additional details), redemption data provided to the committee from six individual state agencies, and a 2014 report detailing redemption in three states as they transitioned to electronic benefit transfer (EBT) food benefit issuance method (USDA/ERS, 2014).
2: A per-participant cost of $37.27 per month was presented previously in this report. This higher estimate reflects the $1 increase in women's cash value voucher, which was implemented in FY2016 (from $10 to $11). The committee used this monthly per participant cost to assess the cost neutrality of the revised food packages, because it reflects current regulations. The $37.09 estimate, in contrast, reflects the regulations that existed in FY2015.
3: The fiscal year starts October 1. April 1, 2018, is halfway through FY2018.
4: This estimate was calculated by identifying agencies that have implemented EBT statewide as of August 2016 (USDA/FNS, 2016c) and determining what proportion of participants are served by those agencies from total participation administrative data (USDA/FNS, 2016b). For FY2015, EBT states serve 34.3 percent of WIC participants. Given this, the assumption for the phased-in estimate is that one-third of participants would be served by an “early implementer” state agency. This assumption only affects the phased-in estimates, not the unadjusted estimates.
5: Participants do not receive adjustments in the CVV until the inflated value crosses a $1 increment. The CVV for food package IV is currently $8 per month. By 2018, it is expected to cross the next $1 increment and be adjusted to $9 per month. The proposed revisions would increase the CVV for children to $12 per month.
6: FY2018 in this analysis only encompasses 6 months. As such, monthly estimates were multiplied by 6 rather than 12.
7: Administrative data includes all state agencies, Indian Tribal Organizations, and territories.
8: To reflect current regulations, women's CVV in this portion of the analysis is $11 for the current food package. The committee acknowledges that this inflation-based increase in CVV was not effective until FY2016. Using a $10 CVV for women in this portion of the analysis would result in the estimated annual cost of fruits and vegetables to be approximately $483 million for the current food package.

Bookshelf ID: NBK435905

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