Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
STATE CHILDRENS HEALTH 
INSURANCE PROGRAM 
Ensuring Medicaid Eligibles are not Enrolled in 
SCHIP 
FEBRUARY 2001 
OEI-05-00-00241  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended by Public Law 100-504, is to protect the integrity of the Department of Health and 
Human Services programs as well as the health and welfare of beneficiaries served by them.  This 
statutory mission is carried out through a nationwide program of audits, investigations, 
inspections, sanctions, and fraud alerts.  The Inspector General informs the Secretary of program 
and management problems and recommends legislative, regulatory, and operational approaches to 
correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's Chicago regional office prepared this report under the direction of William Moran, Regional 
Inspector General and Natalie Coen, Deputy Regional Inspector General.  Principal OEI staff 
included: 
REGION  HEADQUARTERS 
Deborah Walden, Team Leader  Joan Richardson, Program Specialist

Nora Leibowitz, Project Leader

Michael Craig, Program Analyst

To obtain copies of this report, please call the Chicago Regional Office at (312) 353-9867. 
Reports are also available on the World Wide Web at our home page address: 
http://www.hhs.gov/oig/oei/  E X E C U T I V E   S U M M A R Y  
PURPOSE 
To evaluate whether States are enrolling Medicaid eligible children in the State Childrens 
Health Insurance Program. 
BACKGROUND 
Many low-income children receive health care coverage through Medicaid and the State 
Childrens Health Insurance Program (SCHIP).  The SCHIP is designed to reduce the 
number of uninsured children by offering health care coverage to previously uninsured 
children.  The program targets children with family income too high for Medicaid and too 
low to afford private insurance. 
The Balanced Budget Refinement Act of 1999 required that the Office of Inspector 
General (OIG) sample States in order to:  (1) evaluate whether States are correctly 
enrolling children in SCHIP or Medicaid; and (2) assess States progress in reducing the 
number of uninsured low-income children.  According to the Act, the OIG was to evaluate 
the States progress on performance goals.  Sampled States were to be selected only from 
States not using SCHIP funds to expand Medicaid. 
This is one of two reports focusing on five of the 15 States administering separate child 
health programs as of October 1, 2000.  Those States are North Carolina, Oregon, 
Pennsylvania, Utah and Vermont.  This report focuses on State efforts to ensure that 
Medicaid eligibles are not enrolled in SCHIP.  In a companion report, we assess States 
efforts to evaluate their SCHIP performance goals. 
FINDINGS 
SCHIP eligible children are enrolled in the proper program 
We found few Medicaid eligible children enrolled in SCHIP in the 100 cases we reviewed

in each of the 5 sample States.  One State had a single case in which a Medicaid eligible

child was enrolled in SCHIP, while two other States had three and five cases, respectively. 

Two States had no Medicaid eligible children enrolled in SCHIP. Three States had no

over-income children in SCHIP.  We found only one over-income case in one of the States

and three such cases in the other.  Based on our 2-stage stratified-cluster sample, we

estimate that at the 90 percent confidence level, between 97.6 percent and 

99.6 percent of SCHIP enrollees were correctly enrolled in the 13 States administering

separate child health programs in fiscal year 1999.  States attribute correct enrollments to

i 
SCHIP - Enrollment  OEI-05-00-00241  review of income information and staff training.  All five States require proof of income to 
determine eligibility for some applicants. 
Four sample States manually determine SCHIP eligibility, while the fifth utilizes an 
electronic eligibility system.  One State is currently developing an electronic eligibility 
system.  Others are interested in such systems but have no plans to implement them. 
States provide a smooth transition between SCHIP and Medicaid 
States have worked to streamline the process of transferring children from one program to 
another.  Four of the 5 States permit 6 to 12 months of continuous eligibility for SCHIP. 
This reduces the burden of frequent income verification for States and relieves families of 
the need to provide frequent income updates to the State. 
In an effort to encourage and simplify SCHIP re-enrollment, States have sent out 
re-enrollment reminder letters to families and allowed applicants to submit shorter re-
application forms.  Medicaid staff often determine both SCHIP and Medicaid eligibility, 
which increases program coordination and staff knowledge about eligibility rules. 
Conclusion 
We believe that Medicaid eligible children are not being enrolled in SCHIP by States who 
administer separate child health programs. 
AGENCY COMMENTS 
The Health Care Financing Administration (HCFA) and the Health Resources and

Services Administration (HRSA) provided formal comments to the draft report. 

Both concur with the findings.  The full text of their comments are included as Appendices

A and B.

ii 
SCHIP - Enrollment  OEI-05-00-00241  T A B L E   O F   C O N T E N T S  
PAGE

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  i

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

FINDINGS

SCHIP eligible children are enrolled in the proper program  . . . . . . . . . . . . . . . .  5

States provide a smooth transition between State CHIP and Medicaid  . . . . . . . .  7

APPENDICES 
A: HCFA Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

B: HRSA Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   12

SCHIP - Enrollment  OEI-05-00-00241  I N T R O D U C T I O N  
PURPOSE 
To evaluate whether States are enrolling Medicaid eligible children in the State Childrens 
Health Insurance Program. 
BACKGROUND 
Many low-income children receive health care coverage through Medicaid and the State 
Childrens Health Insurance Program (SCHIP).1  Both Medicaid and SCHIP are joint 
State-Federal programs that allow States administrative discretion within guidelines 
established by statute and the U.S. Department of Health and Human Services. 
Medicaid, which was established in 1965, is the largest program providing health care 
services to America's poorest people.  Within broad national guidelines set by the Federal 
Government, each State administers its own program, sets its own eligibility standards, 
determines the type, amount, duration and scope of services, and sets payment rates. 
Total non-administrative expenditures for the Medicaid program were $180.9 billion in 
1999 ($102.5 billion in Federal and $78.4 billion in State funds).  The Health Care 
Financing Administration (HCFA) reports that in 1998, 51 percent of all Medicaid 
recipients were children.  In 1998, Medicaid paid an average of $1,150 per child for the 
20.6 million children who received services through the program. 
The State Childrens Health Insurance Program and uninsured children 
Over 10 million children in the United States are uninsured.  SCHIP is designed to help 
reduce the number of uninsured low-income children by providing them with health care 
coverage.  Title XXI of the Social Security Act (SCHIPs enabling legislation) was 
created by the Balanced Budget Act of 1997 (P.L. 105-33).  The law appropriated nearly 
$40 billion over 10 years to help States expand health insurance to children whose families 
earn too much to qualify for Medicaid, yet not enough to afford private insurance. 
Like Medicaid, SCHIP is a State and Federal partnership, but the Federal match for 
SCHIP expenses is greater than the match for Medicaid.  States have three options for 
covering uninsured children under Title XXI:  design a separate childrens health insurance 
program, expand Medicaid eligibility, or a combination of the two strategies.  As of 
October 1, 2000, 15 States administer separate child health programs, 23 run 
1
The Health Care Financing Administration refers to Title XXI-funded programs as State CHIP or SCHIP. 
1 
SCHIP - Enrollment  OEI-05-00-00241  expanded Medicaid, and 18 have combination programs.2  This report focuses on the 
15 States operating separate programs.  These States are Arizona, Colorado, Delaware, 
Georgia, Kansas, Montana, Nevada, North Carolina, Oregon, Pennsylvania, Utah, 
Vermont, Virginia, Washington, and Wyoming. 
Under Title XXI, a State must have an approved State plan for a fiscal year in order to 
receive an allotment that year.  Each State submitted a SCHIP plan to HCFA, outlining 
program structures, use of funds, benefits, strategic objectives, and performance goals. 
Close to 2 million children who would otherwise be without health insurance coverage 
were enrolled in SCHIP in fiscal year 1999.  This is double the number reported enrolled 
in 1998, the first full year of the program.  Of the 56 State and territorial children's health 
insurance programs to date, 53 were operational during fiscal year 1999.  Of the nearly 
2 million children covered as of September 30, 1999, over 1.2 million were enrolled in 
separate children's health insurance programs and almost 700,000 were enrolled in 
Medicaid expansion plans. 
Ensuring correct enrollment in State CHIP and Medicaid 
To encourage States to expand child health insurance eligibility, the Federal match for 
States Title XXI expenditures is greater than the match for Medicaid.  The average 
Federal match for Title XXI is 71 percent, while the average Federal match for Medicaid 
is 57 percent.  Medicaid is an entitlement program and States are required to enroll all 
eligible children.  SCHIP is not an entitlement program and States have the discretion to 
cap enrollment for SCHIP eligibles or create waiting lists.  So that States do not try to 
maximize SCHIP reimbursements by enrolling Medicaid eligibles in SCHIP, Title XXI 
requires States to screen SCHIP applicants for Medicaid eligibility.  Therefore it is 
essential that children found eligible for Medicaid must be enrolled in Medicaid rather than 
in the SCHIP.  States receive only the Medicaid-level match for any child enrolled in 
Medicaid based on the eligibility standards that existed before Title XXI was enacted. 
Due to their effort to enroll children in new Title XXI funded programs, some States have 
noticed the so-called woodwork effect; by conducting outreach for SCHIP, they 
encourage greater numbers of Medicaid eligibles to apply for health care services as well. 
In their SCHIP State plans, States agreed to assess all SCHIP applicants for Medicaid 
eligibility before checking SCHIP eligibility.  Medicaid assessment techniques for some 
States are outlined as follows: 
C	 North Carolina checks the Medicaid information system to see whether the 
applicant has existing Medicaid coverage.  If the child is not currently covered by 
Medicaid, Medicaid eligibility is assessed before SCHIP eligibility is pursued. 
2 
Currently, 50 States, 5 Territories and the District of Columbia administer Title XXI programs. 
3 
SCHIP - Enrollment  OEI-05-00-00241  C	 Nevada checks Medicaid eligibility for all applicants reporting income up to 
25 percent above the Medicaid limit before assessing eligibility for SCHIP. 
C  Delaware uses a common computer eligibility system for Medicaid and SCHIP. 
Legislative Requirement for OIG Studies 
Section 703 of the Balanced Budget Refinement Act of 1999 required that the Office of 
Inspector General (OIG) sample States in order to:  (1) evaluate whether States are 
correctly enrolling children in SCHIP or Medicaid as appropriate; and (2) assess the 
progress made by States to reduce the number of uninsured low-income children.  The Act 
further requires that the OIG evaluate the progress sampled States have made to achieve 
their strategic objectives and performance goals.  Sampled States were to be selected from 
States not using any SCHIP funds to expand Medicaid. 
This is one of two reports focusing on a sample of five States administering separate 
childrens health programs.  This report focuses on State efforts to ensure that Medicaid 
eligibles are not enrolled in SCHIP.  In a companion report entitled State Childrens 
Health Insurance Plan - Assessment of State Evaluation Reports, OEI-05-00-00240, we 
address States evaluations of their performance goals. 
METHODOLOGY 
Based on the requirements outlined in the Balanced Budget Refinement Act of 1999, we 
limited our universe to the 15 States utilizing their Title XXI allotments to operate 
separate childrens health programs.  Two States, Wyoming and Washington, were 
excluded from the population because they began administering SCHIP in December 1999 
and February 2000, respectively, and thus had no enrollees in fiscal year 1999. 
We used a 2-stage stratified-cluster sampling plan to select 5 States from the 13 remaining 
States.  The remaining 13 States were divided among 2 strata.  Pennsylvania was a self-
representing State as illustrated in Strata 1, based on the significantly large number of 
children enrolled in their SCHIP.  From the remaining 12 States, we randomly selected 4 
States, North Carolina, Oregon, Utah, and Vermont, for Strata 2. The chart on the 
following page outlines the number of children enrolled in SCHIP in each of the Strata and 
sample States in Fiscal Year 1999. 
3 
SCHIP - Enrollment  OEI-05-00-00241  Selected Sample States 
STRATA 1 
States Selected  Number of Children Enrolled in  Number of Cases Selected For 
SCHIP in FY 1999  Review 
Pennsylvania  81,758  100 
Totals  81,758  100 
STRATA 2

States Selected  Number of Children Enrolled in  Number of Cases Selected For 
SCHIP in FY 1999  Review 
North Carolina  57,300  100 
Oregon  27,285  100 
Utah  13,040  100 
Vermont  2,055  100 
Totals  99,680  400 
We reviewed the 5 States Title XXI plans and the SCHIP evaluation reports submitted to 
HCFA in March 2000.  We conducted on-site visits and met with staff at the agency 
administering SCHIP in each of the five States. 
We conducted case file reviews and discussed enrollment issues and goal attainment with 
State staff.  We reviewed 100 randomly selected active SCHIP case files in each State in 
order to evaluate whether ineligible children were enrolled in SCHIP.  We provided each 
State with randomly selected case numbers and staff pulled these cases in preparation for 
our visit.  The results of our case file review were analyzed using a statistical analysis 
package that takes into account complex sample designs. 
One part of our discussions with SCHIP staff focused on State efforts to appropriately 
enroll children and safeguards used to ensure proper enrollment.  We also discussed State 
CHIP evaluations.  We collected documentation of State eligibility and enrollment 
practices and of evaluation efforts. 
We conducted our review in accordance with the Quality Standards for Inspections issued 
by the Presidents Council on Integrity and Efficiency. 
4 
SCHIP - Enrollment  OEI-05-00-00241  F I N D I N G S  
SCHIP eligible children are enrolled in the proper program 
We found few Medicaid eligible children enrolled in SCHIP in the 100 cases we reviewed 
in each of the 5 sample States.  One State had a single case in which a Medicaid eligible 
child was enrolled in SCHIP, while two other States had three and five cases, respectively. 
Two States had no Medicaid eligible children enrolled in SCHIP. 
While the focus of our review was on children who were enrolled in SCHIP despite their 
eligibility for Medicaid, we also found a limited number of cases in which family income 
exceeded established limits for SCHIP eligibility.  One State had one such case and 
another had three cases with over-income children.  The other three States had no such 
cases. 
All five States reported a belief that they are enrolling children in the appropriate 
programs.  When asked, States rated how successful they believed they had been on a 
scale of 1 to 10, with 10 being extremely successful, the average rating was 9.  States 
attribute their success to careful analysis of income information and timely training of their 
employees. 
Our case file reviews confirmed the States own assessments.  Using the results of our case 
file reviews in the 5 sampled States, we estimate that at the  90 percent confidence level, 
between 97.6 and 99.6 percent of the children were enrolled correctly in SCHIP in the 13 
States that administered separate child health programs in fiscal year 1999. 
Eligibility is primarily based on income 
All SCHIP programs must evaluate childrens eligibility based on family income. The five 
States we visited require some proof of income to determine program eligibility for most 
enrollees.  Four States require between 1 and 3 months of current payroll information, one 
of which allows families to self-declare income earned through self-employment.  The fifth 
sample State allows most families to self-declare their income but asks for proof of 
income, such as a recent W-2 tax form for children in families with self-employment 
income.  States also verify some reported family income through checks of computerized 
data bases, such as WageMatch or Social Security Administration files. 
States report they are confident that children are enrolled correctly because they have faith 
in families willingness to report income changes.  Several States that utilize continuous 
enrollment report that families contact program staff to report income changes when they 
happen, even though this is not required by the program.  Because families 
5 
SCHIP - Enrollment  OEI-05-00-00241  volunteer information about income changes, States believe that families are honestly

reporting income and other information at enrollment.

Other eligibility factors require children to:

C  be younger than 19 years old;

C  not have other current health insurance;

C  have been without health insurance for a period of time specified by the State

(usually 1 to 6 months); and 
C  be U.S. citizens or legal residents. 
Training helps ensure proper enrollment 
SCHIP administrators reported they train eligibility staff about program rules and 
enrollment practices.  They indicated that training helps ensure enrollment workers 
understand current programs and changes to SCHIP and Medicaid as they occur. 
One State found problems with workers enrolling children with current insurance despite 
SCHIP rules that prohibit this.  As a result, the State retrained all enrollment workers to 
ensure that they understood program rules and now reports that incorrect enrollment of 
insured children has been stopped.  Several States reported that they conduct periodic 
training for staff to ensure their knowledge of program rules and guidelines and to keep 
them informed of any changes in program operation. 
Eligibility mostly determined manually 
Four of the five sample States manually determine SCHIP eligibility.  These States rely on 
enrollment workers to collect and review documentation, calculate eligibility, and ensure 
that applicant children are not Medicaid eligible before enrolling them in SCHIP. 
However, these States store this information electronically.  The fifth sample State utilizes 
an electronic eligibility system that assesses whether the children are eligible for Medicaid. 
If children are found ineligible for Medicaid, the process is repeated to determine SCHIP 
eligibility. 
One State that currently determines eligibility manually is in the process of developing a 
centralized computer system to electronically verify eligibility.  State staff anticipate the 
electronic verification process will enable them to move children between SCHIP and 
Medicaid more easily and will make the transition between programs seamless for the 
recipient.  It also will diminish the possibility of improper program placement.  The other 
three States we visited would like to develop a system to determine eligibility 
electronically but have no immediate plans to do so. 
None of the sampled States conduct systematic checks of eligibility after a child is 
enrolled in SCHIP.  However, several States indicated that they conduct post-enrollment 
checks if they question information a family provides. 
6 
SCHIP - Enrollment  OEI-05-00-00241  Public perception of Medicaid may lead to enrollment challenges 
Two States report that families view SCHIP more favorably than Medicaid because people 
associate Medicaid with public assistance. These two States report they suspect some 
Medicaid eligibles are applying for SCHIP, meaning that State workers must pay close 
attention to income information. 
In the three other States, administrators report that families have not expressed a 
preference for SCHIP over Medicaid.  Applicants may not be aware of a difference 
between SCHIP and Medicaid in these States, as the two programs are similar in structure 
and benefits.  A single agency administers both programs in these States, and the 
distinction between the programs is not publicized. 
States provide a smooth transition between State CHIP and Medicaid 
Families eligible for SCHIP and Medicaid often experience changes in income which effect 
program eligibility.  Since income fluctuations are common, the five sample States have 
worked to streamline the process of transferring children from one program to the other. 
States permit continuous eligibility 
Four of the five sample States allow SCHIP enrollees to remain in the program for a 
specified period even if family income changes enough to warrant transfer to Medicaid or 
out of the program.  The continuous eligibility period begins when the application has 
been approved and lasts between 6 and 12 months, as determined by the State. 
Continuous eligibility helps reduce the burden on States to repeatedly verify income 
information and relieves families of the need to provide frequent income documentation. 
Although States utilizing continuous eligibility allow children to remain on SCHIP as 
family income changes, there can be exceptions to this rule to ensure proper enrollment. 
For instance, one State automatically transfers SCHIP recipients to Medicaid when their 
families begin receiving Temporary Assistance for Needy Families benefits. 
The only sample State that does not practice continuous eligibility requires SCHIP 
enrollees to notify staff of a change in income within 10 days of any change.  After 
notification of a change, enrollees are transferred to the Medicaid program if they meet 
Medicaid eligibility requirements.  Transferred individuals are unaware of a change in 
program enrollment because the transfer is done internally and enrollees see no differences 
in program structures or benefits. 
States have simplified the re-enrollment process 
In an effort to encourage and simplify SCHIP re-enrollment, sampled States have taken 
steps to ease the process.  For example, several States send out reminder letters prior to 
7 
SCHIP - Enrollment  OEI-05-00-00241  the re-enrollment date, no longer require new applications to be completed at re-
enrollment, and allow eligibles to re-enroll by mail or phone. 
Medicaid staff often determine both SCHIP and Medicaid eligibility 
Four of the five States facilitate the transfer of  applicants enrollment information 
between Medicaid and SCHIP by having the Medicaid enrollment staff also determine 
SCHIP eligibility.  This method of partnering the programs allows the person conducting 
the eligibility determinations to become familiar with both programs and reduces the 
likelihood of incorrect program placement.  Four States also automatically refer 
individuals who are not eligible for SCHIP to Medicaid and vice versa.  In some States, 
those SCHIP applicants found to be Medicaid eligible only need to fill out an addendum to 
their completed SCHIP applications. 
Conclusion 
As required by Section 703 of the Balanced Budget Refinement Act of 1999, we evaluated 
whether States administering separate child health programs are enrolling Medicaid 
eligibles in SCHIP.  Based on our random sample, these five States do not appear to be 
doing so. 
Agency Comments 
The Health Care Financing Administration and the Health Resources and Services 
Administration provided formal comments to the draft report.  They concur with the 
findings.  The full text of their comments are included in Appendices A and B. 
The HCFA provided information regarding their continued work with States to ensure 
that effective screening occurs, and acknowledged the importance of State developed 
systems to effectively ensure that children who are screened and found potentially eligible 
for Medicaid are enrolled in Medicaid.  The HCFA also notes they have issued guidance to 
States encouraging simplification of the application and enrollment process to promote 
coordination, and are working with States to examine the redetermination process to 
assure that it promotes ongoing coverage of children who become ineligible for one 
program and eligible for the other. 
The HRSA offered technical comments that included stating the specific date for our 
summary of SCHIP plans, and adding language to clarify that the 15 States in our universe 
had accessed their 1998 SCHIP allotment rather than utilized their entire Title XXI 
allotments. 
8 
SCHIP - Enrollment  OEI-05-00-00241  APPENDIX A 
9 
SCHIP - Enrollment  OEI-05-00-00241  10 
SCHIP - Enrollment  OEI-05-00-00241  11 
SCHIP - Enrollment  OEI-05-00-00241  .

APPENDIX B 
12 
SCHIP - Enrollment  OEI-05-00-00241  13 
SCHIP - Enrollment  OEI-05-00-00241