Many households have felt the weight of persistent high inflation and rising interest rates, as well as the easing of pandemic-related government assistance programs. In turn, people are more pessimistic about their financial situations and how they may evolve. In a recent Gallup poll, 50% of respondents said they were “worse off” financially compared to a year ago — the highest level reported since 2009.

Negativity around household finances is likely influenced by the end of temporary, COVID-related expansions of public funds available for childcare, nutritional and housing assistance. As many people have felt the crunch of price inflation over the past year, some households were still relying on expanded assistance programs. The rapid reversal of public economic support may only increase financial uncertainty and anxiety.

Some consumer behavior trends are beginning to show cracks in the foundation of household finances. For example, the delinquency rate on consumer loans has sharply increased in recent quarters. Meanwhile, the share of consumers paying their full credit card balances each month continues to fall. A recent survey of consumers also found more than half (58%) reported plans to cut to discretionary household spending due to inflation concerns.

Increased benefits program enrollment may be on the horizon

Looking back to the Great Recession, studies show the downward economic trend led to increased enrollment in government benefits programs between 2007 and 2011 (SNAP enrollment increased 76% and Medicaid increased 25%). Though likely not as severe as 2008, the present situation should have benefits program administrators heeding previous lessons by preparing for a potential uptick in demand for services as more Americans experience financial difficulties.

State agencies wanting to prepare for a possible economic downturn should examine their unique funding stream requirements, technology considerations and other resource needs now to ensure swift, equitable responses later. As new households may need to enroll in benefits, states should also lay out plans to conduct proactive outreach and distribute the education constituents may need on eligibility, enrollment and utilization.

Prepare for outreach before increased enrollments can overwhelm

The Federal Emergency Management Agency (FEMA) conducts outreach to educate at-risk communities about the benefits of flood insurance months before hurricanes may make landfall. Other government agencies can take a similar approach, identifying households that may soon face financial difficulties and bringing awareness regarding programs that can help. In addition to identifying at-risk households now, communications leaders can start developing messaging and determining strategic channels to engage with population segments.

Our experience with COVID-19 showed when many constituents needed to apply for benefits at once, agency response and claims backlogs compounded hardship. Long wait times at call centers, claims processing delays or unanswered inquiries can quickly erode constituent trust and agency reputation, and postpone benefits for those who may need them at an urgent inflection point. Program leaders should take precautions now to ensure smooth interactions during times of high stress. Leveraging risk-detecting technology to distinguish well-intended constituents from fraudsters can help authenticate inbound callers quickly to improve contact center call times and reduce manual call reviews. For outbound calls, agencies can ensure their phone numbers are properly registered and their brands are identified so fewer calls get improperly tagged as spam, increasing consumer confidence about answering the phone.

Getting benefits to those who will need them

An important aspect of a constituent’s ability and likelihood to enroll in and access benefits is the user experience. Strict identity proofing procedures are necessary to combat fraud, but may present barriers to critical services when they’re needed most. When constituents apply online, a ‘friction-right’ process can streamline enrollment using behind-the-scenes device and behavioral intelligence to detect fraudulent applicants while allowing a path for successful enrollment to those who need it.

Agencies must act now

Administrators of public benefits programs should meet the evolving economic situation with a proactive response. Consumers are showing significant signs of strain, and the expected trajectory of prices and interest rates suggests more crunch to come. Agencies can position themselves to best serve constituents by identifying at-risk households, educating them on critical programs before access becomes an urgent issue, and eliminating unnecessary frictions in enrollment processes. The data and technology to do this exists — but agencies should consider how to implement them now before it’s too late.

Greg Schlichter is the director of research and consulting for TransUnion’s Public Sector business. Greg brings over a decade of analytics experience in advising government leaders on emerging trends and providing data-driven insights to state and federal agencies, with a focus on improving inclusivity and efficiency in government service delivery.

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