Cost Containment in the WIC Program: Vendor Peer Groups and Reimbursement Rates

Cost containment is a concern for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), a Federal food assistance program providing participants with key foods and beverages. Since WIC is not an entitlement program, the amount of aid available to cover those who are eligible depends on fixed budget appropriations and WIC agency cost containment. This report examines the extent to which cost containment might be improved through changes in the regulations governing WIC vendors and allowable reimbursement levels for foods covered by the program. Using California, the largest U.S. WIC program, as a case study, we analyze data on WIC redemptions—that is, reimbursements to vendors for items bought by WIC participants—and determine the potential for cost savings through changes to the cost-containment practices. Smaller vendors, often with higher operating and procurement costs, are more likely to charge higher prices for WIC products than larger vendors. However, these small vendors comprise only a small percentage of total WIC redemptions. Policies intended to reduce maximum allowable WIC reimbursement rates would have little to no effect on most standard-size supermarkets, where the majority of WIC transactions take place.