Children's Health Insurance: Inspector General Reviews Should Be 
Expanded to Further Inform the Congress (29-MAR-02, GAO-02-512). 
								 
Congress created the State Children's Health Insurance Program	 
(SCHIP) in 1997 to reduce the number of uninsured children in	 
families with incomes that are too high to qualify for Medicaid. 
Financed jointly by the states and the federal government, SCHIP 
offers a strong incentive for states to participate by offering a
higher federal matching rate than the Medicaid program. Although 
this incentive encourages  state participation in SCHIP, concerns
were raised that states might inappropriately enroll		 
Medicaid-eligible children in SCHIP and thus obtain higher	 
federal matching funds than allowed under Medicaid. The 	 
Department of Health and Human Services Office of Inspector	 
General (OIG) concluded that Medicaid-eligible children were not 
being enrolled in SCHIP by the 13 states that administer separate
child health care programs. Further, the issue of appropriate	 
enrollment is not limited to states with completely separate	 
child health programs, but also applies to those states with	 
combination programs and Medicaid expansions, which also receive 
the higher SCHIP matching rate. The OIG could not conclude	 
whether states were reducing the number of uninsured children and
in meeting the objectives and goals they established in their	 
SCHIP programs. Furthermore, the OIG found that some states had  
set program goals without considering how they might be measured 
and that states' staffs often lacked adequate evaluation skills. 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-512 					        
    ACCNO:   A02946						        
  TITLE:     Children's Health Insurance: Inspector General Reviews   
Should Be Expanded to Further Inform the Congress		 
     DATE:   03/29/2002 
  SUBJECT:   Federal aid to states				 
	     Federal/state relations				 
	     Health insurance					 
	     Health services administration			 
	     Children						 
	     Child care programs				 
	     Health care programs				 
	     BLS Current Population Survey			 
	     Early and Periodic Screening, Diagnosis,		 
	     and Treatment Program				 
								 
	     State Children's Health Insurance			 
	     Program						 
								 
	     Medicaid Program					 

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GAO-02-512
     
Report to Congressional Committees

United States General Accounting Office GAO

March 2002 CHILDREN'S HEALTH INSURANCE

Inspector General Reviews Should Be Expanded to Further Inform the Congress

GAO- 02- 512

Page i GAO- 02- 512 OIG Child Health Reviews Letter 1 Results in Brief 3
Background 4 OIG?s Assessment of Appropriate Enrollment Would Benefit From
an Expanded Selection of States 11 While States? Evaluations Offered Limited
Results, Future OIG

Reviews May Benefit from Improved Data Sources 14 Conclusions 18
Recommendations to the HHS Inspector General 19 Agency Comments and Our
Evaluation 19 Appendix I Comments from the Department of Health and Human
Services? Office of Inspector General 21

Related GAO Products 24

Tables

Table 1: OIG Sampling Framework for SCHIP Analysis, Fiscal Year 1999 10
Table 2: Enrollment Practice of 12 States from Which the Random

Sample Was Drawn 13 Table 3: States? Design Choices and Percentage of
Nationwide SCHIP Enrollment, Fiscal Year 1999 14 Table 4: Limitations to
Five States? SCHIP Evaluations Identified by the OIG, February 2001 15
Figures

Figure 1: States? Design Choices Under SCHIP, as of February 2002 6 Contents

Page ii GAO- 02- 512 OIG Child Health Reviews Abbreviations

BBRA Medicare, Medicaid and SCHIP Balanced Budget Refinement Act CMS Centers
for Medicare and Medicaid Services CPS Current Population Survey EPSDT Early
and Periodic Screening, Diagnostic, and Treatment

HCFA Health Care Financing Administration HHS Department of Health and Human
Services HRSA Health Resources and Services Administration

OIG Office of Inspector General SCHIP State Children?s Health Insurance
Program

Page 1 GAO- 02- 512 OIG Child Health Reviews

March 29, 2002 The Honorable Max Baucus Chairman The Honorable Charles E.
Grassley Ranking Minority Member Committee on Finance

United States Senate The Honorable W. J. ?Billy? Tauzin Chairman The
Honorable John D. Dingell Ranking Minority Member Committee on Energy and
Commerce

House of Representatives The Congress created the State Children?s Health
Insurance Program (SCHIP) in 1997 to reduce the number of uninsured children
in families with incomes that are too high to qualify for Medicaid. 1 For
SCHIP, the Congress appropriated $40 billion over 10 years, with funds
allocated

annually to the 50 states, the District of Columbia, 2 and the U. S.
commonwealths and territories. Financed jointly by the states and the
federal government, SCHIP offers a strong incentive for states to
participate by offering a higher federal matching rate- that is, the federal
government pays a larger proportion of program expenditures- than the
Medicaid program. 3 While this incentive encourages efforts to reduce the
number of uninsured children through state participation in SCHIP, concerns
existed that states might inappropriately enroll Medicaid- eligible children
in SCHIP and thus obtain higher federal matching funds than

1 Medicaid is a federal- state program that provides health care coverage to
certain categories of low- income adults and children. SCHIP was established
as title XXI of the Social Security Act by P. L. 105- 33 and is classified
to 42 U. S. C. sect. 1397aa et seq.

2 The District of Columbia is considered a state for purposes of this
report. 3 SCHIP offers an ?enhanced? federal matching rate that is derived
from a state?s Medicaid rate. Each state?s match from SCHIP is equal to 70
percent of its Medicaid matching rate plus 30 percentage points, not to
exceed a federal share of 85 percent. While the federal share of
expenditures for Medicaid can range from 50 to 77 percent, federal shares of
SCHIP expenditures can range from 65 to 84 percent. United States General
Accounting Office Washington, DC 20548

Page 2 GAO- 02- 512 OIG Child Health Reviews

allowed under Medicaid. 4 Inappropriate SCHIP enrollment also can affect
what benefits are available for children because the SCHIP statute allows
states to (1) expand their Medicaid programs, thus affording SCHIPeligible
children the same benefits and services that the state Medicaid program
provides, (2) construct separate child health programs distinct from
Medicaid that could provide more limited benefit packages and could

include copayments that are generally not permitted for children in
Medicaid, or (3) use a combination of both approaches. To address concerns
regarding inappropriate enrollment, the SCHIP statute requires states to
screen all SCHIP applicants for Medicaid eligibility and, if they are
eligible, enroll them in Medicaid.

Even with the requirement for Medicaid screening in place, concerns remained
that children who were eligible for Medicaid might have been inappropriately
enrolled in SCHIP. 5 Additionally, there was interest in assessing the
progress states had made to reduce the number of uninsured children,
including the extent to which states had met objectives and goals, which
they established in their SCHIP programs. 6 In the Medicare, Medicaid and
SCHIP Balanced Budget Refinement Act of 1999 (BBRA), the Congress directed
the Department of Health and Human Services (HHS)

Office of Inspector General (OIG) to conduct a series of studies on these
issues. 7 BBRA specified that the OIG should review states that provide
SCHIP coverage separately from their Medicaid programs.

BBRA also directed that we review and report on the OIG?s work. In response,
we assessed the OIG?s efforts to inform the Congress on (1) determining
whether Medicaid- eligible children were improperly enrolled in SCHIP and
(2) assessing states? progress in reducing the number of uninsured children,
including the progress states have made in meeting the

objectives and goals initially established in their SCHIP programs. 4 See U.
S. General Accounting Office, Children?s Health Insurance Program: State
Implementation Approaches Are Evolving, GAO/ HEHS- 99- 65 (Washington, D.
C.: May 14, 1999).

5 See H. R. Rep. No. 106- 199, at 60 (1999). 6 The SCHIP statute includes a
provision requiring states, in establishing their programs, to specify
strategic objectives and performance goals for providing child health
assistance under SCHIP. See 42 U. S. C. sect.1397gg.

7 BBRA amended the Social Security Act to require the HHS OIG to audit a
sample of states beginning in fiscal year 2000 and every third fiscal year
thereafter.

Page 3 GAO- 02- 512 OIG Child Health Reviews

To examine these issues, we reviewed the OIG?s approach and methodology for
selecting its sample of states for the first in its series of studies to
evaluate states? performance in screening SCHIP applicants for

Medicaid eligibility and to assess states? progress in reducing the number
of low- income uninsured children. We examined the OIG?s findings in the
context of other research, including our own work. 8 In some cases, we
reviewed work released after the OIG?s studies were completed and published
to determine the extent to which other research corroborated the OIG?s
findings. Finally, we examined OIG?s recommendations to the Health Care
Financing Administration (HCFA) and the Health Resources and Services
Administration (HRSA), which jointly oversee SCHIP. 9 Our work was conducted
from December 2001 through March 2002 in

accordance with generally accepted government auditing standards. In
responding to the mandate, the OIG published two reports, the first
addressing whether Medicaid- eligible children were enrolled in SCHIP and
the second assessing states? progress in reducing the number of uninsured
children. 10 The scope of the OIG studies included sampling 5 of the 13
states that only enrolled children in separate child health programs during
1999. The OIG concluded that Medicaid- eligible children were not being
enrolled in SCHIP by the 13 states that administer separate child health
programs. However, because of variations in the administration of state
programs, generalizing from the findings in 5 states to the 13 states may

not be appropriate. Furthermore, the issue of appropriate enrollment is not
limited to states with completely separate child health programs, but also
applies to those states with combination programs and Medicaid expansions,
which also receive the higher SCHIP matching rate for state program
expenditures. Because the scope of the study was limited to the 13 states
with separate SCHIP programs, the experience of other states- particularly
the 13 states that operated SCHIP combination programs-

8 See the related products listed at the end of this report. 9 In June 2001,
the secretary of HHS announced that HCFA?s name would be changed to the
Centers for Medicare and Medicaid Services. For this report, we will
continue to refer to

HCFA where our findings apply to the organizational structure and operations
associated with that name. 10 See Department of Health and Human Services,
Office of Inspector General, State Children?s Health Insurance Program:
Ensuring Medicaid Eligibles Are Not Enrolled in SCHIP, OEI- 05- 00- 00241
(Washington, D. C.: Feb. 2001), and Department of Health and Human Services,
Office of Inspector General, State Children?s Health Insurance Program:
Assessment of State Evaluations Reports, OEI- 05- 00- 00240 (Washington, D.
C.: Feb. 2001). Results in Brief

Page 4 GAO- 02- 512 OIG Child Health Reviews

was not addressed. Had the scope of review included the 13 additional states
that offered separate child health programs under combination plans, the
proportion of children represented would have increased from 16.5 percent to
65 percent of SCHIP enrollees in 1999. Future OIG reviews that consider
differences in enrollment practices across states and a wider universe of
states could provide more information on the effectiveness of states?
efforts to ensure appropriate enrollment.

Due to limitations the OIG identified in states? SCHIP evaluations, the OIG
was unable to conclude whether states were making progress in reducing the
number of uninsured children and in meeting the objectives and goals they
established in their SCHIP programs. For example, the OIG found that the 5
states it reviewed generally did not have sound methodologies to determine
reductions in the number of uninsured children, in part because

they did not always take into account other factors- such as changes in the
economy or private insurance coverage- that also may affect the number of
uninsured children. Furthermore, the OIG found that some states had set
program goals without considering how they might be

measured and that states? staffs often lacked adequate evaluation skills.
Based on its findings, the OIG made recommendations to HCFA and HRSA to help
improve states? ability to conduct more rigorous evaluations of their
programs. Because of the limitations identified by the OIG, it may wish to
look beyond states? own evaluations and analyze other sources of analysis
for its next review. Over time, other federal initiatives- such as
improvements in state- level estimates of the number of uninsured- may help
states to improve their measurement of progress under SCHIP.

We are recommending that the HHS inspector general expand the scope of
analysis to include a broader array of states to further inform the Congress
on states? progress in ensuring appropriate SCHIP enrollment. The OIG
concurred with our recommendations, and provided general comments regarding
approaches to designing future reviews. States provide health care coverage
to low- income uninsured children

largely through two federal- state programs- Medicaid and SCHIP. Since 1965,
Medicaid has financed health care coverage for certain categories of low-
income individuals- over half of whom are children. To expand health
coverage for children, the Congress created SCHIP in 1997 for children
living in families whose incomes exceed the eligibility limits for
Background

Page 5 GAO- 02- 512 OIG Child Health Reviews

Medicaid. Although SCHIP is generally targeted at families with incomes at
or below 200 percent of the federal poverty level, each state may set its
own income eligibility limits within certain guidelines. 11 As of February
2002, 16 states have created Medicaid expansion programs, 16 states have
separate child health programs, and 19 states have combination Medicaid
expansions and separate child health components. (See figure 1.)

11 In general, the SCHIP statute targets children in families with incomes
at or below 200 percent of the poverty level, which equates to $36,200 for a
family of four in 2002. The statute allows a state to expand eligibility up
to 50 percentage points above its Medicaid income eligibility standard in
1997. See 42 U. S. C. sect. 1397jj( b)( 1)( B)( ii)( I).

Page 6 GAO- 02- 512 OIG Child Health Reviews

Figure 1: States? Design Choices Under SCHIP, as of February 2002

Note: Since the period reviewed by the OIG (1999), 8 states have altered
their design choices under SCHIP. Seven states- Illinois, Indiana, Maryland,
Mississippi, North Dakota, South Dakota, and Texas- have changed from
Medicaid expansions to combination programs. West Virginia changed from a
combination program to a separate child health program. Source: Centers for
Medicare and Medicaid Services (CMS). SCHIP offers significant flexibility
in program design and benefits provided by allowing states to use existing
Medicaid structures or create

child health programs that are separate from Medicaid. Medicaid expansions
must follow Medicaid eligibility rules and cost- sharing requirements, which
are generally not allowed for children. A Medicaid expansion also creates an
entitlement by requiring a state to continue providing services to eligible
children even when its SCHIP allotment is

Combination program (19) Separate child health program (16)

Medicaid expansion (16) Washington D. C.

Page 7 GAO- 02- 512 OIG Child Health Reviews

exhausted. 12 In contrast, a state that chooses a separate child health
program approach may introduce limited cost- sharing. Additionally, a state
with a separate child health program under SCHIP may limit its own annual
contribution, create waiting lists, or stop enrollment once the funds it
budgeted for SCHIP are exhausted. States choosing combination

programs take both approaches. For example, Connecticut?s combination SCHIP
program has a limited Medicaid expansion- increasing eligibility for 17 to
18 year olds up to 185 percent of the federal poverty level. Additionally,
the state created a separate child health program, which covers all children
in families with incomes over 185 percent, up to 300 percent of the federal
poverty level.

With regard to program benefits, the choices states make in designing SCHIP
have important implications. For example, a state opting for a Medicaid
expansion under SCHIP must provide the same benefits offered under its
Medicaid program. These benefits are quite broad and include Early and
Periodic Screening, Diagnostic, and Treatment (EPSDT) services for most
children. 13 EPSDT services are designed to target health conditions and
problems for which children are at risk, including iron deficiency, obesity,
lead poisoning, and dental disease. These services are also intended to
detect and correct conditions that can hinder a child?s learning and
development, such as vision and hearing problems. 14 In contrast, states
opting for separate child health programs may depart from Medicaid
requirements and provide benefits based on coverage standards

12 However, states that expend their available SCHIP funds may then claim
Medicaid matching rates for benefits and services provided under Medicaid
expansions. 13 EPSDT is optional for the medically needy population, a
category of individuals who generally have too much income to qualify for
Medicaid but have ?spent down? their income by incurring medical and/ or
remedial care expenses. See 42 U. S. C. sect. 1396 (a)( 10)( C). 14 For
additional information on EPSDT, see U. S. General Accounting Office,
Medicaid: Stronger Efforts Needed to Ensure Children?s Access to Health
Screening Services, GAO- 01- 749 (Washington, D. C.: July 13, 2001).

Page 8 GAO- 02- 512 OIG Child Health Reviews

in the SCHIP legislation. 15 SCHIP separate child health programs generally
cover basic benefits, such as physician services, inpatient and outpatient
hospital services, and laboratory and radiological services. Other benefits,
such as prescription drugs and hearing, mental health, dental, and vision
services, may be provided at the states? discretion. States also may place
limits on services provided and require cost- sharing, while Medicaid
generally does not permit cost- sharing for children. In addition to having
flexibility in program design and benefits offered,

states participating in SCHIP have a larger proportion of their program
expenditures paid by the federal government than for Medicaid. A state?s
Medicaid program expenditures are matched by the federal government using a
formula that is based on a state?s per capita income in relationship to the
national average. Federal matching rates for SCHIP are

?enhanced?- they are established under a formula that takes 70 percent of a
state?s Medicaid matching rate and adds 30 percentage points, with an
overall federal share that may not exceed 85 percent. 16 For 2001, federal
shares of SCHIP expenditures ranged from 65 to 84 percent, with the national
average federal share equaling about 72 percent. In contrast, 2001 federal
shares for Medicaid ranged from 50 to 77 percent of expenditures, with the
national average at about 57 percent. The SCHIP statute requires states to
screen all SCHIP applicants for Medicaid eligibility and, if they are
eligible, enroll them in Medicaid. 17 15 In prescribing a package of
benefits, states with separate child health programs choose among four
coverage standards. First, the benchmark standard provides coverage
equivalent to that received by federal employees, state employees, or those
enrolled in a

state?s health maintenance organization with the largest insured commercial
non- Medicaid enrollment. Second, the benchmark equivalent standard provides
basic coverage for inpatient and outpatient hospital care; physicians?
surgical and medical services; laboratory and x- ray services; and well-
baby and well- child care, including age- appropriate immunizations. Third,
existing comprehensive state coverage includes benefit packages for state-
operated children?s health insurance programs in Florida, New York, and
Pennsylvania. Fourth, states may receive approval from the secretary of
health and human

services for benefit packages that provide appropriate coverage for low-
income children but do not match the first three standards. 16 For example,
a state with the minimum 50- percent Medicaid match receives a 65- percent
match under SCHIP. 17 See 42 U. S. C. sect. 1397bb( b)( 3).

Page 9 GAO- 02- 512 OIG Child Health Reviews

BBRA included a mandate that the OIG conduct a study every 3 years,
beginning in fiscal year 2000, to (1) determine the number, if any, of
enrollees in SCHIP who are eligible for Medicaid and (2) assess states?
progress in reducing the number of uninsured low- income children,

including progress in achieving the strategic objectives and performance
goals in their SCHIP plans, which set forth how states intend to use their
SCHIP funds to provide child health assistance. 18 BBRA directed the OIG to
review states with approved SCHIP programs that do not provide health
benefits under Medicaid; 19 consequently, the

OIG focused on the 15 states that in 1999 operated separate child health
programs under SCHIP. 20 Of these 15 states, the OIG excluded 2 states-
Washington and Wyoming- because the delayed start- up of their programs
resulted in no enrollees in fiscal year 1999, the year that the OIG
reviewed. From the remaining 13 states, the OIG used a two- stage sampling
plan to select 5 states for review. The OIG first divided the 13 states into
two strata, selecting Pennsylvania separately as stratum I because it had a
large number of children- 81,758- enrolled in its program in fiscal year
1999. Enrollment across the remaining 12 states ranged from 1,019 in Montana
to 57,300 in North Carolina. The OIG randomly selected 4 of the 12 states
(North Carolina, Oregon, Utah, and Vermont) for inclusion in its study. (See
table 1.)

18 The OIG is charged with protecting the integrity of HHS programs, as well
as the health and welfare of the beneficiaries of those programs. The OIG?s
duties are carried out through a nationwide network of audits,
investigations, inspections, and other missionrelated functions. The OIG
informs the secretary and the Congress of program and management problems
and recommends legislative, regulatory, and operational approaches to
correct them. The OIG may conduct its own evaluations or those mandated by
the Congress. 19 The BBRA mandate provides that ?A state described in this
[mandate] is a state with an

approved state child health plan? that does not, as part of such plan,
provide health benefits coverage under the State?s Medicaid program.? 42 U.
S. C. sect. 1397hh( d)( 2). 20 The 15 states were Arizona, Colorado, Delaware,
Georgia, Kansas, Montana, Nevada,

North Carolina, Oregon, Pennsylvania, Utah, Vermont, Virginia, Washington,
and Wyoming. OIG Studies

Page 10 GAO- 02- 512 OIG Child Health Reviews

Table 1: OIG Sampling Framework for SCHIP Analysis, Fiscal Year 1999 Stratum
State SCHIP enrollment I (Selected by OIG) Pennsylvania 81,758 II (Universe
of states for purposes of random selection) Arizona 26,807

Colorado 24,116 Delaware 2,433 Georgia 47,581 Kansas 14,443 Montana 1,019
Nevada 7,802 North Carolina a 57,300 Oregon a 27,285 Utah a 13,040 Vermont a
2,055 Virginia 16,895

a State was randomly selected for the OIG?s review. Source: CMS enrollment
figures for 1999. For the 5 sample states, the OIG reviewed a variety of
documents the states submitted to HCFA, such as their SCHIP plans and SCHIP

evaluation reports, which are states? assessments of the effectiveness of
their programs. 21 OIG staff conducted site visits and met with officials
responsible for administering SCHIP in all 5 states. The OIG also randomly
selected 100 active SCHIP case files from each of the 5 states in order to
evaluate whether Medicaid- eligible children were incorrectly enrolled in
SCHIP. The OIG did not verify accuracy and completeness of the state case
files; rather, it focused on whether the information in each file supported
the conclusion reached by the state. 21 A state?s SCHIP evaluation was
required to address several areas of analysis, including (1) the quality of
health coverage provided, (2) its choices of health benefits coverage, (3)
activities in coordinating SCHIP with other public and private programs, (4)
changes in trends in the states that affect the provision of health
insurance, and (5) recommendations for improving SCHIP.

Page 11 GAO- 02- 512 OIG Child Health Reviews

In determining whether Medicaid- eligible children were improperly enrolled
in SCHIP, the OIG reported that, based on a sample of 5 states, SCHIP
enrollees in the 13 states with separate child health programs were
generally appropriately enrolled. However, because of variations in the
administration of state programs, generalizing from the 5 states to the 13
states may not be appropriate. In addition, focusing on only those states
with separate SCHIP programs does not capture the experience of the majority
of states or the majority of SCHIP- enrolled children. Ensuring appropriate
enrollment in SCHIP is important regardless of a state?s SCHIP

design, because any child eligible for Medicaid that is incorrectly enrolled
in SCHIP results in a state receiving a higher federal matching rate.
Reviewing states, for example, that operate separate child health programs
as part of a combination program would have increased the proportion of
children under consideration from 16.5 percent to 65 percent of all SCHIP

children enrolled in 1999, and thus provided more comprehensive information
regarding states? enrollment practices. To determine whether states were
improperly enrolling Medicaid- eligible

children in SCHIP, the OIG separated the 13 states with separate child
health programs into two strata. The first stratum was the state of
Pennsylvania, which the OIG intentionally selected because it had the most
children enrolled in SCHIP among the 13 states. Four states were then
randomly selected from the remaining 12 states. Among the 5 states it
reviewed, the OIG identified only a few cases in which Medicaid- eligible

children were inappropriately enrolled. 22 For example, it reported that 1
state had a single case in which a Medicaid- eligible child was enrolled in
SCHIP, while 2 other states had three and five such cases. The report also
found that 2 states did not have any Medicaid- eligible children enrolled in
SCHIP. The OIG concluded from these findings that most SCHIP enrollees were
correctly enrolled in the 13 states administering separate child health
programs.

Variations in states? enrollment practices, however, raise questions about
the extent to which results from a sample of 5 states can be generalized to
13 states. Had the OIG drawn its random sample of active SCHIP cases across
the 13 states in its sampling universe, it would have been better

22 Based on a two- stage stratified- cluster sample, the OIG estimated that,
at a 90- percent confidence level, from 97. 6 to 99. 6 percent of SCHIP
enrollees were correctly enrolled in the 13 states administering separate
child health programs in fiscal year 1999. OIG?s Assessment of

Appropriate Enrollment Would Benefit From an Expanded Selection of States

Alternative Sampling Methodologies May More Fully Account for Variation
among States

Page 12 GAO- 02- 512 OIG Child Health Reviews

able to generalize its results. An OIG official told us that the office
chose to analyze a sample of 5 states rather than all 13 states because of
time and resource constraints. Recognizing that analyzing a pure random
sample of cases across a large number of states may be too resource
intensive, choosing a stratified sample of states may provide more
information on the extent to which accurate enrollment may vary with
different states? practices. Even with a stratified sample, however,
generalization to all states may be problematic.

The OIG did select a stratified sample and chose one characteristic- size of
a state?s SCHIP program- to develop two strata. While dividing states in
terms of size is potentially useful, additional distinctions may be
important

because program characteristics vary considerably from state to state. For
example, states with differing administrative structures (New York uses
health plans to determine eligibility and enroll eligible individuals,
Colorado uses an enrollment contractor, and Oregon uses its Medicaid staff
to determine SCHIP eligibility) could be grouped by certain characteristics
for review. This could help determine whether such

differences in administrative structures have a bearing on appropriate
enrollment in SCHIP.

To examine whether the OIG?s sampling approach reflected variations in
states? administrative structures, we categorized the 12 states in the
second stratum based on whether they had the same program staff determine
eligibility for both the SCHIP and Medicaid programs, which

can help achieve consistency in eligibility decisions. We found that the
random sample of 4 states did not include any states where different
employees were responsible for determining SCHIP and Medicaid

eligibility, thus raising concerns as to whether conclusions could be
generalized. (See table 2.)

Page 13 GAO- 02- 512 OIG Child Health Reviews

Table 2: Enrollment Practice of 12 States from Which the Random Sample Was
Drawn OIG stratum II State

Who determines SCHIP and Medicaid eligibility- same staff or different
staff?

Randomly selected North Carolina Same Oregon Same Utah Same Vermont Same
States not selected Arizona Different Colorado Different Delaware Same
Georgia Different Kansas Same Montana Different a Nevada Different Virginia
Same a Montana generally uses a different staff to determine eligibility for
each program; however, the state?s annual report notes that when children
lose Medicaid coverage due to increases in family income, the Medicaid
eligibility staff can enroll the children in SCHIP. In these circumstances,
the same staff members would enroll children in both Medicaid and SCHIP.
Source: SCHIP annual reports and state evaluations, 1999, 2000 and 2001.
Because the scope of the study was limited to the 13 states with separate
child health programs, the OIG examined 322,534, or 16.5 percent, of the
approximately 2 million children enrolled in SCHIP in fiscal year 1999. A
review that also included separate SCHIP programs in states that opted for a
combination approach under SCHIP would have expanded the available universe
to 26 states and to 65 percent of all SCHIP children enrolled in 1999. 23
Moreover, using the OIG?s general audit authority, the scope of future
reviews could include states with SCHIP Medicaid expansions,

which would provide the Congress with more complete information on the
extent to which states are enrolling low- income children in the appropriate
programs. 24 If this approach had been used in 1999, 23 states

23 Some states have altered their design choices under SCHIP since 1999,
which has resulted in more combination and separate child health programs in
SCHIP (19 states and 16 states, respectively, as of February 2002). If the
OIG were to include in its scope the experience of states with combination
programs for the 2001 SCHIP enrollment of 4.6 million, it would have
selected a sample from 35 states, or 74 percent of all children enrolled.

24 See 5 U. S. C. Appendix 3, sect. 4( a)( 1). Increasing the Number of States
under Consideration

Would Better Inform the Congress

Page 14 GAO- 02- 512 OIG Child Health Reviews

and almost one- fourth of all children enrolled in SCHIP would have been
added. (See table 3.)

Table 3: States? Design Choices and Percentage of Nationwide SCHIP
Enrollment, Fiscal Year 1999

SCHIP design choices States Percentage of total

SCHIP enrollment

Separate child health program (15 states)

Arizona, Colorado, Delaware, Georgia, Kansas, Montana, Nevada, North
Carolina, Oregon, Pennsylvania, Utah, Vermont, Virginia, Washington, and
Wyoming. 16.5 Combination (13 states) Alabama, California, Connecticut,
Florida,

Iowa, Kentucky, Maine, Massachusetts, Michigan, New Hampshire, New Jersey,
New York, and West Virginia. 48.7 a Medicaid

expansion (23 states)

Alaska, Arkansas, District of Columbia, Hawaii, Idaho, Illinois, Indiana,
Louisiana, Maryland, Minnesota, Mississippi, Missouri, Nebraska, New Mexico,
North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota,
Tennessee, Texas, and Wisconsin. 23.3

a States with SCHIP combination programs have both a separate child health
program and a Medicaid expansion component. The 48. 7 percent cited in the
table does not include the 11.1 percent of children who are enrolled in
SCHIP Medicaid expansion components in these states. Source: CMS. The OIG
identified important limitations to states? evaluations that made it unable
to conclude whether states were making progress in reducing the number of
uninsured children and in meeting the objectives and goals that they
established under SCHIP. For example, the OIG found that states made
inappropriate assumptions in reporting data about the relationship of SCHIP
enrollment to the rates of uninsured, which undermined the credibility of
states? results, and that states often had poor baseline data against which
to measure progress. The OIG also found that states set

goals without considering how to evaluate progress, and that little emphasis
was placed on evaluation by the states. As a result, the OIG made
recommendations to both HCFA and HRSA on ways that the federal government
could assist and guide states in making improvements in their analyses.
While the initial OIG reviews were inconclusive due to weaknesses in states?
evaluations, future efforts may benefit from federal initiatives under way
aimed at improving state- level data and analyses of SCHIP. These
initiatives, however, may not have been in place long

enough to benefit the OIG?s next review, since results are due in 2003. As a
While States? Evaluations Offered

Limited Results, Future OIG Reviews May Benefit from Improved Data Sources

Page 15 GAO- 02- 512 OIG Child Health Reviews

result, the OIG may wish to select a different approach- such as identifying
states with more rigorous practices in evaluation, or augmenting its review
with other sources beyond those provided by the states. The OIG identified
limitations to the 5 states? SCHIP evaluations and thus was unable to draw
conclusions about states? progress in reducing the number of uninsured
children or meeting their stated objectives and goals. For example, the OIG
cited concerns regarding the reliability of states? reports of reductions in
the number of uninsured, including inadequate

data and evaluation practices. In cases in which states were unable to
measure objectives that were established at the beginning of their SCHIP
programs, their evaluations generally provided descriptive information on
activities but did not assess the effect that such activities had on
achieving specific goals. (See table 4.) For example, the OIG reported that
none of the 5 states it reviewed attempted evaluations of their outreach
programs or offered explanations of how such programs affected their
measurable

progress in enrollment or the number of uninsured children.

Table 4: Limitations to Five States? SCHIP Evaluations Identified by the
OIG, February 2001 Limitation Description

Data problems and evaluation practices impaired evaluations

 State- collected data were deficient or outdated.

 State- level estimates based on national survey data were unreliable,
particularly for smaller states.

 States assumed that increased SCHIP enrollment meant reductions in
uninsured. State reports were descriptive, not evaluative

 Evaluations described activities without determining whether the
activities were effective.

 Information provided was qualitative and subjective. Goals were set
without evaluation in mind  Goals could not be measured.  Evaluation
practices were not established. Evaluation was not considered a priority 
Administrators were focused on implementing programs rather than evaluating
their success.

Staff members lacked evaluation skills and training

 SCHIP staff members were trained program administrators, but generally
lacked thorough understanding of evaluation concepts and practices.

 SCHIP staffs were small, making it unlikely that additional evaluation
staff members would be hired. Source: HHS OIG, State Children?s Health
Insurance Program: Assessment of State Evaluations Reports, OEI- 05- 00-
00240 (Washington, D. C.: Feb. 2001). Of particular concern were limitations
in measuring how well states are

meeting the primary objective of the SCHIP program- reducing the Weaknesses
in States? SCHIP Evaluations Limited

the OIG?s Ability to Measure Progress

Page 16 GAO- 02- 512 OIG Child Health Reviews

number of uninsured. As noted by the OIG, states- and other researchers-
have been hampered by limited reliable state- level data regarding
children?s insurance status. When SCHIP was enacted, estimates of the number
of low- income uninsured children were derived from the

annual health insurance supplement to the Current Population Survey (CPS),
the only nationwide source of information on uninsured children by state.
CPS is based on a nationally representative sample and is considered

adequate to produce national estimates. 25 However, CPS data have
wellrecognized shortcomings, particularly with regard to state- level
estimates, which can be unreliable and exhibit volatility from year to year
because of small samples of uninsured low- income children, particularly in
states

with smaller populations. For example, using the 1994 through 1996 CPS data,
estimates of the number of uninsured children in Delaware ranged from 12,000
to 32, 000. In part because of these data limitations, some states-
including 3 of the states sampled by the OIG- moved to special surveys or
studies that were conducted locally in an effort to develop more precise
estimates of the number of uninsured children.

Despite efforts by states to better estimate the number of uninsured
children, the OIG cited concerns regarding states? analyses. For example,
the OIG reported that some states estimated reductions in the number of
uninsured children by subtracting the number of SCHIP enrollees from their
original baseline estimates. However, such an approach does not

ensure that increases in SCHIP lead to reductions in the number of uninsured
because increases in SCHIP enrollment can result from children moving from
private insurance coverage to public insurance under SCHIP, an effect known
as ?crowd- out.? Additionally, changing economic factors can further
complicate assessments of a state?s progress in reducing the number of
uninsured children. For example, a state may significantly increase
enrollment in SCHIP but- because of declines in the economy and increased
unemployment- continue to see an increase in the number of uninsured. Under
these circumstances, ?progress? in reducing the

number of uninsured may be more difficult to identify. Based on its
findings, the OIG recommended that HCFA identify a core set of evaluation
measures that will enable all SCHIP states to provide useful

25 CPS is a monthly survey of about 50, 000 households. It is the primary
source of information on the labor force characteristics of the U. S.
population, and estimates obtained from CPS include employment,
unemployment, earnings, and hours of work.

Page 17 GAO- 02- 512 OIG Child Health Reviews

information. 26 It further recommended that HCFA and HRSA provide guidance
and assistance to states in conducting useful evaluations of their programs.
The OIG noted that SCHIP staffs would benefit from assistance and training
regarding the type of data to collect and how to conduct evaluations. HCFA
concurred with these recommendations and cited

efforts under way to improve states? evaluations of their SCHIP programs. 27
Several federal efforts are under way that should help improve states? data
sources and their evaluations of the extent to which their SCHIP programs
are reducing the number of uninsured children. If implemented on a timely

basis, efforts such as the following should help inform the OIG?s subsequent
evaluations.

 The Congress appropriated $10 million each year beginning in fiscal year
2000 to increase the sample size of CPS. Beginning in 2001, larger sample
sizes are being phased into CPS, which should help improve the accuracy of
state- level CPS estimates of uninsured children. 28  CMS is working with
states to develop consistent performance measures for SCHIP, with a focus on
ensuring appropriate methodology and

consistency of data.

 As a condition of their state SCHIP plans, some states are required to
assess whether the SCHIP program is ?crowding out? private health insurance
in their states. These studies could help assess the extent to which SCHIP
is drawing its enrollment from uninsured children- or from children who were
previously insured.

 BBRA requires HHS to conduct an evaluation of SCHIP to determine the
effectiveness of the program and to provide information to guide future
federal and state policy. To comply with BBRA, HHS plans a series of reports
addressing a variety of major topic areas, ranging from program

design to access and utilization; the first report is expected in spring
2002. HHS plans to use multiple research strategies, including case studies,
surveys, and focus groups, to address questions of interest.

26 HHS OIG, State Children?s Health Insurance Program: Assessment of State
Evaluation Reports, OEI- 05- 00- 00240 (Washington, D. C.: Feb. 2001). 27
HRSA did not comment on the recommendations made by the OIG. 28 Data from
the expanded sample are expected to appear in all CPS- based reports
beginning in 2002. Subsequent OIG Reviews May Benefit from Efforts

to Improve Data Sources

Page 18 GAO- 02- 512 OIG Child Health Reviews

As the OIG continues to analyze states? progress in SCHIP, its future
reviews are likely to benefit from improvements in state- level estimates of
the number of uninsured children and evaluations of program implementation.
Moreover, improvements in states? analyses and available

data should help the OIG identify and address areas in need of additional
review. However, to the extent that these improvements are not in place by
the time the OIG undertakes its second analysis due in 2003, it may benefit
from expanding its scope of work to identify and assess states with more
rigorous analyses. The OIG may also wish to review other sources

that have assisted states in making evaluation improvements. For example,
while some states have received private grant funds to help with SCHIP
enrollment, they have also received technical assistance for the purpose of
conducting evaluations on the success of their enrollment strategies. 29
Other states have paired with universities or research organizations to
improve their information on the uninsured. By also drawing on the
experience of states with strong evaluations or data sources, the OIG will
be better able to identify approaches that could

further strengthen federal and states? approaches and inform the Congress on
progress in implementing SCHIP.

Through its periodic evaluations of states? efforts to ensure appropriate
SCHIP enrollment and to reduce the number of uninsured children, the OIG is
in a position to provide objective information to the Congress and others
about the program?s operation and success. To better capture the experience
of all states, regardless of the design of their SCHIP programs, the OIG
should expand its scope beyond the 13 states in its first review to also
include states that operate separate child health programs within SCHIP
combination programs and consider including Medicaid expansion

programs as well. This would provide a broader base for understanding how
well states are screening for Medicaid eligibility and identifying issues
related to reducing the number of uninsured children. Such an expansion

of scope may also help identify states with more rigorous evaluations of
their SCHIP programs, and thus provide information on effective approaches
to SCHIP evaluation as well as more complete information for the Congress.

29 For example, the Robert Wood Johnson Foundation funds initiatives that
assist states and others to expand health insurance coverage. Among other
things, the foundation has published an evaluation tool to guide
policymakers throughout the evaluation process. Conclusions

Page 19 GAO- 02- 512 OIG Child Health Reviews

In order to better inform the Congress on states? efforts to implement
SCHIP, we recommend that the HHS inspector general

 expand the scope of the statutorily required periodic reviews to include
all states with separate child health programs, including those with
combination programs, and

 consider using its general audit authority to explore whether issues of
appropriate SCHIP enrollment also exist among states that have opted for
Medicaid expansions under SCHIP, and should therefore be included in future
OIG reviews.

We provided the inspector general of HHS an opportunity to comment on a
draft of this report. In its comments, the OIG concurred with our
recommendations, and agreed that expanding the scope of its inspections to
include combination programs that include separate child health programs
would give a greater breadth of information. It also agreed that

including SCHIP Medicaid expansions would broaden the perspective and
present more conclusive information regarding the status of states? SCHIP
programs.

The OIG also provided general comments regarding its approach and possible
approaches to designing future reviews. For example, the OIG stated that it
would consider including differing state processes as a factor in its next
sample design. The OIG also noted the importance of focusing on states?
measurement of their own program performance. We agree with the OIG that
properly conducted state evaluations serve a vital function and we believe
that continued review of these efforts by the OIG is an important
contribution to better understanding states? progress under

SCHIP. In response to the OIG?s oral and written comments, we revised the
report to better clarify the scope of the BBRA mandate. The full text of the
OIG?s written comments is reprinted in appendix I.

We are sending copies of this report to the inspector general of the
Department of Health and Human Services and other interested parties.
Recommendations to the HHS Inspector

General Agency Comments and Our Evaluation

Page 20 GAO- 02- 512 OIG Child Health Reviews

We will also make copies available to others on request. If you or your
staffs have questions about this report, please contact me on (202) 5127118
or Carolyn Yocom at (202) 512- 4931. JoAnn Martinez- Shriver and Behn Miller
also made contributions to this report. Kathryn G. Allen

Director, Health Care- Medicaid and Private Health Insurance Issues

Appendix I: Comments from the Department of Health and Human Services?
Office of Inspector General

Page 21 GAO- 02- 512 OIG Child Health Reviews

Appendix I: Comments from the Department of Health and Human Services?
Office of Inspector General

Appendix I: Comments from the Department of Health and Human Services?
Office of Inspector General

Page 22 GAO- 02- 512 OIG Child Health Reviews

Appendix I: Comments from the Department of Health and Human Services?
Office of Inspector General

Page 23 GAO- 02- 512 OIG Child Health Reviews

Related GAO Products Page 24 GAO- 02- 512 OIG Child Health Reviews

Medicaid and SCHIP: States? Enrollment and Payment Policies Can Affect
Children?s Access to Care. GAO- 01- 883. Washington, D. C.: Sept. 10, 2001.

Children?s Health Insurance: SCHIP Enrollment and Expenditure Information.
GAO- 01- 993R. Washington, D. C.: July 25, 2001.

Medicaid and SCHIP: Comparisons of Outreach, Enrollment Practices, and
Benefits. GAO/ HEHS- 00- 86. Washington, D. C.: April 14, 2000.

Children?s Health Insurance Program: State Implementation Approaches are
Evolving. GAO/ HEHS- 99- 65. Washington, D. C.: May 14, 1999. Related GAO
Products (290038)

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