Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

D C
ETERMINING IF  HILDREN 
E S
NROLLED IN  EPARATE 
SCHIP E
S WERE  LIGIBLE FOR 
M
EDICAID 
Inspector General 
June 2005 
OEI-07-03-00220  Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs. This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The OIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout the department. 
Office of Evaluation and Inspections 
The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management 
and program evaluations (called inspections) that focus on issues of concern to the 
department, the Congress, and the public. The findings and recommendations contained 
in the inspections reports generate rapid, accurate, and up-to-date information on the 
efficiency, vulnerability, and effectiveness of departmental programs.  The OEI also 
oversees State Medicaid fraud control units, which investigate and prosecute fraud and 
patient abuse in the Medicaid program. 
Office of Investigations
The OIG's Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations. The OCIG imposes program exclusions and 
civil monetary penalties on health care providers and litigates those actions within the 
department. The OCIG also represents OIG in the global settlement of cases arising 
under the Civil False Claims Act, develops and monitors corporate integrity agreements, 
develops compliance program guidances, renders advisory opinions on OIG sanctions to 
the health care community, and issues fraud alerts and other industry guidance.    E X E C U T I V E   S U M M A R Y   
OBJECTIVE 
To determine whether children enrolled in separate State Childrens 
Health Insurance Programs (SCHIP) were eligible for Medicaid. 
BACKGROUND 
The Balanced Budget Act of 1997, Public Law 105-33, established the 
SCHIP under Title XXI of the Social Security Act.  To encourage States 
to expand child health insurance eligibility, the Federal match rate for 
States SCHIP expenditures is greater than the rate for Medicaid.  This 
creates a financial incentive for States to enroll children in SCHIP.  
Children may be eligible for SCHIP or Medicaid, but not both.  To 
ensure States are not enrolling Medicaid-eligible children in SCHIP, the 
Balanced Budget Refinement Act of 1999 mandates the Office of 
Inspector General to sample States that administer separate SCHIPs 
every 3 years to determine the number of SCHIP enrollees, if any, who 
are eligible for Medicaid benefits.   
Federal regulations require States to maintain an accounting system 
and supporting financial records to assure proper SCHIP enrollment 
and must include in each record facts to support the States 
determination of SCHIP eligibility.  
For a simple random sample of 386 cases from 34 States that 
administer a separate SCHIP, we reviewed case-file documentation 
according to each States criteria to determine whether each child was 
eligible for SCHIP or Medicaid.   
FINDINGS 
Only 1 percent of children enrolled in separate SCHIPs were eligible for 
Medicaid. We definitively determined that 4 of the 386 children whose 
cases we reviewed were not eligible for SCHIP, but were eligible for 
Medicaid. This result echoes our finding from our February 2001 report 
on this same subject, which found only 9 of 500 children were enrolled in 
error, indicating that enrollment errors continue to be low.   
  OEI-07-03-00220  DETERMINING IF CHILDREN ENROLLED IN SEPARATE SCHIPS WERE ELIGIBLE FOR MEDICAID  i  EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY
However, inconsistent income calculations and lack of 
documentation create vulnerabilities. Thirteen percent of childrens 
case files contained income calculations that were inconsistent with 
State guidelines or we could not duplicate the analysis using available 
case-file documentation. In addition, more than 7 percent of case files 
lacked documentation to support States determinations of separate 
SCHIP eligibility. Based on our own calculations, other case-file 
documentation and information that States provided at our request, we 
found no reason to challenge State determinations for a majority of 
these cases. 
CONCLUSION 
Enrollment of Medicaid-eligible children in separate SCHIPs continues 
to be low. However, inconsistent income calculations and lack of 
documentation create vulnerabilities that, if not addressed, could lead 
to children being enrolled in separate SCHIPs despite being eligible for 
Medicaid, a result more likely true for children whose families incomes 
are near the lower SCHIP income limit. 
To keep errors low, the Centers for Medicare & Medicaid Services 
(CMS) may want to remind States of the need to maintain information 
in each case to support eligibility determinations and provide additional 
guidance to States regarding practices to ensure proper SCHIP 
enrollment. 
AGENCY COMMENTS 
CMS concurred with our findings and conclusions and noted that 
regulations currently in place support our suggestion that the agency 
work closely with States to ensure that States maintain sufficient 
information in each applicants record to support the eligibility 
determination. The Health Resources and Services Administration 
expressed concern with what it believed was an inappropriately 
negative tone in light of the fact that very few children were erroneously 
enrolled in SCHIP. We agree that the finding of only 1 percent of 
children enrolled in separate SCHIP were eligible for Medicaid is 
positive. However, vulnerabilities we identified, if not addressed, could 
lead to children being enrolled in separate SCHIPs despite being eligible 
for Medicaid. We describe these vulnerabilities as a means to ensure 
that future error rates remain low. 
OEI-07-03-00220  DETERMINING IF CHILDREN ENROLLED IN SEPARATE SCHIPS WERE ELIGIBLE FOR MEDICAID  ii    T A  B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY ......................................... i 

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

FINDINGS ....................................................... 9 

Only 1 percent of children enrolled in separate SCHIPs were   
eligible for Medicaid.......................................... 9 

However, inconsistent income calculations and lack of 

documentation create vulnerabilities ......................... 11 

CONCLUSION .................................................. 17 

APPENDIXES .................................................. 18 

A: States Verification and Quality Assurance Practices ........ 18 

B: Separate SCHIP Universe and Sample..................... 20 

C: Worksheets Used in Case Review.......................... 21 

D: Confidence Intervals for Projections ....................... 23 

E: Agency Comments ....................................... 24 

ACKNOWLEDGMENTS ......................................... 28 
   II NN TT RR OO DD UU CC  TT  II OO NN   
OBJECTIVE 
To determine whether children enrolled in separate State Childrens 
Health Insurance Programs (SCHIP) were eligible for Medicaid. 
BACKGROUND 
The Balanced Budget Act of 1997, Public Law 105-33, established the 
SCHIP under Title XXI of the Social Security Act (the Act).  Congress 
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 health insurance.  The 
SCHIP is designed to help reduce the number of uninsured low-income 
children by providing them with health care coverage. 
To cover uninsured children under Title XXI, States can design a 
separate SCHIP and/or expand their existing Medicaid program. The 
option for a separate SCHIP permits States to adopt programs that 
closely resemble private health insurance and allows States 
considerable flexibility in defining eligibility and coverage options. 
This inspection addresses those 36 States that administer a separate 
program. As of January 1, 2003, 19 States administered only a separate 
SCHIP and 17 States administered both a separate and an expansion 
SCHIP. At the end of the third quarter of Federal fiscal year 2003, 
2.9 million children were enrolled in separate SCHIPs in these 
36 States.1 
Enhanced Federal Match Rates and Legislative Requirement for Office of 
Inspector General Studies. 
To encourage States to expand child health insurance eligibility, the 
Federal match rate for States SCHIP expenditures is greater than the 
rate for Medicaid.  The average match rate for SCHIP is 72 percent,  
1 The Centers for Medicare & Medicaid Services third quarter fiscal year 2003 enrollment 
population is similar to the timeframes of our review period.  [Fiscal Year] 2003 Third 
Quarter - Program Enrollment Last Day of Quarter by State- Total SCHIP.  Retrieved 
June 3, 2004, from http://www.cms.hhs.gov/schip/enrollment/2003pit3qt.pdf. 
  OEI-07-03-00220  DETERMINING IF CHILDREN ENROLLED IN SEPARATE SCHIPS WERE ELIGIBLE FOR MEDICAID  1  II NN TT RR OO DD
 UU CC TT II OO NN
while the average rate for Medicaid is 60 percent.2 This creates a 

financial incentive for States to enroll children in SCHIP. 

Based on a variety of factors, such as a familys countable income and 
childs age, children may be eligible for Medicaid or SCHIP, but never 
both. Title XXI of the Act requires States to screen SCHIP applicants 
for Medicaid eligibility to prevent States from inappropriately 
maximizing Federal matching funds by enrolling Medicaid-eligible 
children in SCHIP. 
Furthermore, the Balanced Budget Refinement Act of 1999 mandates 
the Office of Inspector General (OIG) to sample States that administer 
separate SCHIPs every 3 years to determine the number of SCHIP 
enrollees, if any, who are eligible for Medicaid. This study addresses 
this section of the mandate. In February 2001, OIG released the first 
mandated report on separate SCHIPs entitled Ensuring Medicaid 
Eligibles are not Enrolled in SCHIP, OEI-05-00-00241. For that 
inspection, we selected 5 States and reviewed 100 cases per State to 
determine if Medicaid-eligible children were enrolled in separate 
SCHIPs. We identified 9 enrollment errors in the sample of 
500 children. 
Although the mandate does not require examination of the 
Medicaid-expansion SCHIPs, discussions with Congress indicated that 
interest existed in collecting information on these programs. Therefore, 
Medicaid-expansion programs will be addressed in a separate report. 
The mandate also requires OIG to assess States progress in reducing 
the number of uninsured children through their State-identified 
performance goals and strategic objectives. In August 2004, OIG issued 
a report addressing this portion of the mandate entitled SCHIP: 
States Progress In Reducing the Number of Uninsured Children, 
OEI-05-03-00280. 
Screening SCHIP Applicants for Medicaid. 
Federal regulations require States to screen all SCHIP applicants for 
Medicaid eligibility.3 The screening must, at a minimum, identify those 
2 Federal Register, November 30, 2001. Retrieved June 2, 2004, from 
http://www.aspe.hhs.gov/health/fmap03.htm. 
3 42 CFR  457.350(a). 
OEI-07-03-00220  DETERMINING IF CHILDREN ENROLLED IN SEPARATE SCHIPS WERE ELIGIBLE FOR MEDICAID  2  I N T R O D
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children who are potentially eligible for Medicaid based on such factors 
as their age and family income falling below a percentage of the Federal 
Poverty Level (FPL).4  Those children found to be eligible for Medicaid 
must be enrolled in Medicaid.  When determining Medicaid eligibility, 
some States use resource or asset tests.  These tests are based upon 
predetermined amounts, set by the State, that limit the amount of 
valuable material possessions (e.g., cash, cars, stocks, and bonds) a 
family can have in order for a child to be eligible for Medicaid.  For 
instance, if a family owns a vehicle worth in excess of $3,000, they may 
not qualify for Medicaid because the value of their resources exceeds the 
States resource limit. This could directly impact SCHIP enrollment 
because children who are found ineligible for Medicaid due to resource 
or asset tests may be determined eligible for SCHIP even if their 
familys countable income would otherwise make them eligible for 
Medicaid. 
Determining SCHIP Eligibility. 
If the Medicaid screening finds the child ineligible for Medicaid, then 
the State determines whether the child is eligible for SCHIP.  States 
can establish their own criteria for SCHIP eligibility in accordance with 
Federal regulations.  States SCHIP criteria are broadly based on such 
factors as the familys countable income and the childs age.5  The lower 
income limit for SCHIP, as a percentage of the FPL, is essentially the 
upper income limit for Medicaid, meaning that a child could be eligible 
for SCHIP or Medicaid, but not both.  The SCHIP also has an upper 
income limit, as a percentage of the FPL, which a familys income 
cannot exceed.  The upper and lower income limits for SCHIP vary by 
State. 
To determine what percentage of the FPL a familys countable income 
represents, States first determine the familys gross income.  Each State 
establishes its own procedure for calculating gross income.  States 
generally take either an actual or averaged weekly income amount and 
multiply by 4 or 4.3, or an actual or averaged bi-weekly income amount 
and multiply by 2 or 2.15 to calculate a gross monthly income. Some 
4 42 CFR  457.350(b). 

5 42 CFR  457.310 and 42 CFR  457.320. 

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States, however, use annual income amounts to determine eligibility 

rather than using monthly figures.   

Generally, income disregards are amounts that are subtracted from the 
familys gross income. In most States, income disregards of $90 for each 
working parent and $50 for child support payments received, and a 
deduction of $175-$200 for childcare expenses are permitted by State 
policy. Not all States, however, have policies allowing the application of 
income disregards.  
When applicable, the appropriate income disregards are subtracted 
from the familys gross income to arrive at the familys countable 
income.  The familys countable income and the number of people in the 
household are then used to determine what percentage of the FPL the 
familys countable income represents, based on the Federal Poverty 
Guidelines published yearly in the Federal Register.  If the familys 
countable income falls within the eligibility range the State established 
for the childs age group, the child is determined income eligible for 
SCHIP. States must redetermine enrolled childrens eligibility at least 
every 12 months.6 
States Documentation Requirements. 
Federal regulations require States to maintain an accounting system 
and supporting financial records to assure proper SCHIP enrollment, 
and the State must include facts to support the determination of SCHIP 
eligibility in each record.7  States choose the documentation that they 
require from families who apply and the processes they use to verify 
information. (See Appendix A for a listing of the States verification and 
quality assurance practices.)  Some of the common documentation found 
in a case file includes the following: 
o 	 application for SCHIP; 
o 	 copies of pay stubs or tax forms; 
o 	 proof of other income, such as Social Security or 

unemployment benefits; 

o 	 dependent care expenses; 
6 42 CFR  457.320(e)(2). 

7 42 CFR  457.226(a) and 42 CFR  457.965. 

  OEI-07-03-00220  DETERMINING IF CHILDREN ENROLLED IN SEPARATE SCHIPS WERE ELIGIBLE FOR MEDICAID  4  I N T R O D
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o 	 caseworker notes; 
o 	 calculation sheets the State used, which detail how gross and 
countable income were calculated; and 
o 	 the familys countable income used, and the corresponding 
FPL percentage. 
States may choose to allow families to self-declare income information.8 
Self-declaration of income permits a family to state the amount of 
income grossed over a period of time (e.g., daily, weekly, monthly, or 
quarterly) without providing documentation, such as pay stubs or tax 
records.  Fourteen States have chosen to allow some form of 
self-declaration.  As such, State records may lack documentation to 
support family income, but Federal regulations require that the records 
must still contain facts to support their eligibility determinations 
(e.g., calculations, disregards).  
SCOPE 
The information obtained for this study is restricted to those States that 
were administering a separate SCHIP as of January 1, 2003.  For a 
simple random sample of children enrolled in separate SCHIPs as of 
June 1, 2003, we determined whether a child was eligible for SCHIP, 
based on the childs age, familys countable income, and household 
composition. For those children whom we determined that their 
familys countable income fell below the lower income limit for SCHIP, 
we determined whether they were eligible for Medicaid or the reasons 
why they were appropriately enrolled in SCHIP. We did not evaluate 
eligibility determinations for pregnant women or adults enrolled in 
SCHIPs. Additionally, this report did not evaluate the Medicaid-
expansion programs administered by States under Title XXI. 
METHODOLOGY 
Sample Selection 
From each of the 36 States that administers a separate program, we 
requested the universe of children who were enrolled in separate 
SCHIPs as of June 1, 2003.  The separate population in Rhode Island 
8 42 CFR  457.380(b). 
  OEI-07-03-00220  DETERMINING IF CHILDREN ENROLLED IN SEPARATE SCHIPS WERE ELIGIBLE FOR MEDICAID  5  I N T R O D U C T I O N  
consisted only of pregnant women.  Michigan administers both a 
separate SCHIP and Medicaid-expansion.  Michigan had difficulties 
providing us information about their program populations timely.  We 
intend to explore challenges States face in providing program 
population information in a separate study.  Both States were dropped 
from the study.  We received information from 34 States and aggregated 
the State universes into a single population of 2.8 million. (See 
Appendix B.) From the population representing the 34 States, we 
selected a simple random sample of 400 cases for review.  Due to their 
relatively small separate SCHIP populations, Indiana, Maine, 
Maryland, New Hampshire, North Dakota, and South Dakota did not 
have any cases selected as part of our sample.  
Some of the children in our separate SCHIP sample from New Jersey 
were actually enrolled in Medicaid-expansion.  After removal of nine of 
those cases, we were left with two cases in New Jersey.  A similar 
problem occurred in Kentucky, resulting in five sampled cases that were 
selected from that State actually being enrolled in Medicaid-expansion.  
Since our sample population for this report was only separate SCHIP 
cases, we excluded these five cases from our analysis as well, which left 
no cases in Kentucky.  This resulted in the exclusion of a total of 
14 cases, bringing our total usable sample to 386. 
Data Collection.  
The case-file documentation we requested consisted of the SCHIP 
application or the most recent redetermination information, supporting 
income documentation (if appropriate), calculation sheets States used to 
calculate income, and any notes indicating family circumstances or 
explaining how eligibility was determined.  States that allow families to 
self-declare income information were not required to provide income 
documentation.  We reviewed this documentation to determine if 
children enrolled in separate SCHIPs were eligible for SCHIP based on 
each States separate SCHIP income-eligibility criteria.  For those 
children who were not eligible for SCHIP, we determined if they were 
instead Medicaid-eligible. 
In each State, we collected information on the States guidelines for 
their separate SCHIP, which included, but was not limited to, 
requirements for proof of income, age requirements, and the FPL limits. 
We analyzed the following elements of each case in accordance with 
each States criteria for separate SCHIP eligibility: 
  OEI-07-03-00220  DETERMINING IF CHILDREN ENROLLED IN SEPARATE SCHIPS WERE ELIGIBLE FOR MEDICAID  6  I N T R O D U C T I O N  
o 	 date of application or redetermination; 
o 	 age of the child at the time of the SCHIP eligibility 
determination;  
o 	 household composition (or number of people in the family); 
o 	 documentation used to support family income, which could 
include pay stubs, tax forms, or income information from State 
databases; 
o 	 familys gross income prior to any income disregards; 
o 	 familys countable income after any income disregards 
(calculated by OIG based on the case-file documentation as 
well as the caseworkers when this figure was available); and 
o 	 the FPL percentage represented by the familys countable 
income (calculated by OIG based on case-file documentation, 
as well as the caseworker).9 
When the household composition, age, and countable family income 
were within the FPL and State program guidelines, we determined 
children income eligible for separate SCHIP, and therefore, we did not 
attempt to determine if these children were eligible for Medicaid.  When 
it appeared that these factors were not within State program guidelines, 
we contacted the State to provide the State an opportunity to support 
the enrollment of the child.  The States responded in one of three ways: 
(1) they provided additional information that we accepted as support for 
separate SCHIP enrollment; (2) they confirmed that an error in 
enrollment had been made; or (3) they were unable to provide 
documentation to support the eligibility determination, in which case 
we concluded that an error had occurred. An example of the worksheet 
we used in reviewing each case is found in Appendix C.   
Separate SCHIP Administrators. 
We gathered background information (such as how each program is 
administered, who determines eligibility, how States ensure proper 
enrollment, and unique programmatic features within each State) from 
9 OIG FPL percentage calculations were based on the date of application.  Annual poverty 
level guidelines for 2003 were effective on February 7, 2003.  Therefore, in reviewing 
applications dated prior to March 1, 2003, we used 2002 FPL guidelines.  For applications 
dated on or after March 1, 2003, we used 2003 FPL guidelines. 
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SCHIP directors and administrators for the 36 States with separate 
SCHIPs. To gain additional information about individual State 
SCHIPs, we obtained each States eligibility criteria and a description of 
its eligibility determination process. 
Onsite Visits. 
Prior to our case-file analysis, we conducted onsite visits with eligibility 
staff in California, Texas, New York, and Georgia.  These four States 
represent 59 percent of the total separate SCHIP population.  While 
onsite, we had caseworkers demonstrate the process of making an 
eligibility determination, reviewed both paper processes and electronic 
systems used in determining eligibility, and observed what procedures 
were in place to ensure proper enrollment. 
This inspection was conducted in accordance with the Quality 
Standards for Inspections issued by the Presidents Council on 
Integrity and Efficiency. 
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Section 2102(b)(3)(B) of the Act 
Only 1 percent of children enrolled in separate
requires that children who apply for 
 SCHIPs were eligible for Medicaid 
SCHIP but are found eligible for 
Medicaid, must be enrolled in Medicaid.  Out of 386 randomly sampled 
separate SCHIP cases, we definitively determined that 4 children were 
not eligible for SCHIP, but were eligible for Medicaid.  Therefore, 
1 percent of children enrolled in separate SCHIPs were eligible for 
Medicaid. (See Appendix D for confidence intervals for all point 
estimates.) The four cases, all from different States, are illustrated in 
Table 1. 
Table 1: Medicaid-Eligible Children Enrolled in SCHIP* 
Federal Poverty 
Age Range  Income Range 
Level Range 
State Criteria  Under age 1  200-250%  $2,020.00 - $2,525.00 
Case 1  Family  Child is under 
125%  $1,263.12 
(2 members total)  age 1 
State Criteria  6-19 years  100-200%  $1,271.67 - $2,543.34 
Case 2  Family  Child is 14 
73%  $923.95 
(3 members total)  years old 
State Criteria  0-6 years  134-185%  $2,755.94 - $3,804.84 
Case 3  Family  Child is 4 years 
126%  $2,555.46 
(6 members total)  old 
State Criteria  1-5 years  134-200%  $1,677.23 - $2,503.33 
Case 4  Family Child is 3 years 
118%  $1,480.12 
 (3 members total)  old 
Source: 2004 OIG analysis of case-file documentation for sampled SCHIP cases                               
*The FPL changes each fiscal year and is adjusted for family size.  Thus, 100% FPL in 2002 is 
different from 100% FPL in 2003, and 100% FPL for a family of three is different from 100% FPL for 
a family of four. 
The SCHIP administrators in three States agreed that the children 
were eligible for Medicaid; however, the fourth State SCHIP 
administrator could not provide documentation to support the States 
eligibility determination. The following paragraphs provide a detailed 
description of the error in each case. 
Case 1:  The caseworker incorrectly interpreted an employer letter and 
overstated the familys monthly income, making the child appear to be 
eligible for separate SCHIP, although the child was actually eligible for 
Medicaid. 
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 S  
Case 2: The application indicated that one parent worked between 
24 and 40 hours per week and earned $10 per hour.  The parent 
submitted two pay stubs to verify her income, but these pay stubs were 
not representative of her normal wages.  Although there was a 
discrepancy between the number of hours the parent reported that she 
worked and what the income documentation showed, the caseworker 
failed to clear up the discrepancy before determining eligibility.  The 
caseworker used wage information listed on the redetermination form 
rather than the income substantiated by the employer.  This resulted in 
the familys income appearing to be higher than what was actually 
documented. 
Case 3: State officials could not determine the cause, but agreed that an 
error had been made. The child was enrolled in separate SCHIP despite 
the familys income being more than $500 below the minimum for 
SCHIP eligibility in the childs State. 
Case 4: After repeated requests, State officials did not provide any 
documentation for the eligibility determination that supported the child 
being enrolled in separate SCHIP. The only documentation the State 
provided was for an eligibility determination that found the child 
eligible for Medicaid. 
One child was ineligible for separate SCHIP because the familys income 
exceeded eligibility limits. 
Federal regulation (42 CFR  457.320) allows States to establish income 
limits for SCHIP eligibility.  If a familys countable income is in excess 
of the maximum income limit in their State, they should be found 
ineligible. Although it was not the objective of this inspection, we 
identified one child who was ineligible for separate SCHIP because the 
familys income exceeded the maximum income limit for the State.  
Therefore, the child was ineligible. A detailed description of the error is 
described in Table 2. 
Table 2:  Child Ineligible for Separate SCHIP 
Federal Poverty 
Age Range  Annual Income Range* 
Level Range 
State Criteria  6-19 years  100-200%  $18,100 - $36,200 
Case 5 
Family  Child is 10 years 
248%  $68,920 
(4 members total)  old 
Source: 2004 OIG analysis of case-file documentation for the sampled SCHIP case                             

*The State in which case 5 occurred uses annual income, rather than monthly income, to determine 

SCHIP eligibility.

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Case 5: The caseworker used only the familys income from 
self-employment, although they also had income from other 
employment.  Counting only the self-employment income, the familys 
countable income appeared to be $34,000 annually.  This was the 
income used to determine separate SCHIP eligibility.  Based on State 
criteria, counting all the income sources, the familys actual countable 
income was $68,920, which is above the maximum for separate SCHIP 
eligibility in this State. 
Thirteen percent of childrens 
However, inconsistent income calculations 
case files contained inconsistent 
and lack of documentation create 
income calculations or calculations 
vulnerabilities 
that we could not duplicate using 
available case-file documentation.  
Under Federal statute, States have the discretion to tailor the 
administration of their SCHIPs to the unique characteristics of their 
State. States can implement policies that provide varying means for 
averaging and projecting income, determining what income to include or 
exclude, and calculating which expenses can be disregarded (e.g., work 
expenses and childcare expenses).  We reviewed all cases in accordance 
with each individual States criteria. Based on our review, 13 percent of 
separate SCHIP cases contained income calculations that were 
inconsistent with State guidelines or contained calculations that we 
could not duplicate using available case-file documentation.  Also worth 
mentioning is that States did not provide the familys countable income 
totals arrived at by the caseworker for 131 of the 386 sampled cases. 
Therefore, we could not compare our countable income calculations to 
those that the State used to determine eligibility.  Thus, it is possible 
that the number of cases that contained inconsistent income 
calculations could be higher. 
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Eight percent of childrens case 
Table 3:  Differences Between Income 
files exhibited inconsistencies in 
Calculated by State and Income 
calculated income. In cases for 
Calculated by OIG* 
8 percent of children, income 
No. of Cases  Amount of Difference 
was calculated in ways that  14  $0.01 - $1.00 
diverged from documented  5  $1.00 - $10.00 
3  $10.00 - $50.00 
State guidelines, and as a 
1  $50.00 - $100.00 
result, the countable incomes 
8  $100.00 - $500.00 
we calculated differed from the  *In two cases, annual incomes have been 
amounts the State reported.   converted to monthly incomes. 
Source: 2004 OIG analysis of case-file 
However, for these cases, we 	
information
were able to follow what the 
caseworker did that led to the differences in countable incomes.  These 
inconsistencies consisted of variations in how caseworkers applied State 
guidelines regarding income disregards, multiplication methods, and 
rounding.  Some caseworkers also used incorrect income information. 
The differences between the income amounts we calculated and the 
income the State reported to us ranged from $0.01 to approximately 
$500. (See Table 3.)   
The inconsistencies identified did not result in the children being 
ineligible for separate SCHIP, and therefore we agreed with the States 
that these children were indeed eligible for separate SCHIP.  However, 
if not addressed, these inconsistencies show that there is a potential 
that some children could be enrolled in separate SCHIPs, but be eligible 
for Medicaid, especially in instances where families countable income is 
close to the income limits between Medicaid and SCHIP or SCHIP and 
ineligibility. We had 21 sampled children whose family countable 
income was within 5 percent of the lower income limit for SCHIP 
(i.e., within 5 percent of being eligible for Medicaid).10 Projected to our 
universe of children enrolled in separate SCHIPs, this represents 
5.4 percentof all children enrolled.  Thus, minor income calculation 
errors for these families could result in children being enrolled in 
separate SCHIPs despite being eligible for Medicaid.  Examples of the 
10 Cases for 32 children from 1 State were excluded from this calculation because this State 
did not provide the date on which their determinations were made.  While we do not 
dispute the States determinations, we were unable to identify which years FPL 
guidelines to use in assessing proper enrollment in this State.   
  OEI-07-03-00220  DETERMINING IF CHILDREN ENROLLED IN SEPARATE SCHIPS WERE ELIGIBLE FOR MEDICAID  12  F I N D I N G
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inconsistencies found in our sample are provided in the following 
descriptions and tables.   
Income Disregards. In some cases, income disregards were applied in 
ways that contradicted State guidelines.  For example, a caseworker 
gave a family with two working parents only one earned income 
disregard when they should have been given two, as Table 4 illustrates. 
Table 4:  Income Calculations:  Incorrectly Applied 
Disregards 
OIG  Caseworker 
Parent 1  Parent 2  Parent 1  Parent 2 
Average Income  314.75  434.89  314.75  434.89 
Multiply By  4.33  2.17  4.33  2.17 
Monthly Income  1,362.87  943.71  1,362.87  943.71 
Disregards  120.00  120.00  0.00  120.00 
Countable Income  1,242.87  823.71  1,362.87  823.71 
Total Countable 
Income  2,066.58  2,186.58 
Total Countable 
Income Difference  120.00 
Multipliers. In these cases, caseworkers used methods for calculating 
countable income that differed from State guidelines.  For example, a 
caseworker multiplied the average bi-weekly income by 4 instead of 
4.33, as State guidelines specify.  
Table 5:  Income Calculations:  Incorrect Use 
of Multipliers 
OIG  Caseworker 
Average Income  340.20  340.20 
Multiply By  4.33  4.00 
Monthly Income  1,473.07  1,360.80 
Disregards  120.00  120.00 
Countable Income  1,353.07  1,240.80 
Total Countable 
Income Difference  112.27 
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Rounding. In some instances, caseworkers rounded income amounts to 
the next whole dollar, while income amounts in other cases from the 
same State were not rounded.  As Table 6 illustrates, a caseworker 
rounded earned and unearned income amounts up to the nearest whole 
dollar, while other caseworkers from this State did not. 
Table 6:  Income Calculations:  Rounding 
OIG  Caseworker 
Earned Income  1,636.84  1,637.00 
Unearned Income  630.64  631.00 
Monthly Income  2,267.48  2,268.00 
Disregards  90.00  90.00 
Countable Income  2,177.48  2,178.00 
Total Countable 
Income Difference  0.52 
Incorrect Numbers. In these cases, caseworkers also used incorrect 
numbers in income calculations.  Income figures on calculation sheets 
contradicted the countable income totals as documented in the case 
files. As Table 7 illustrates, a caseworker appears to have incorrectly 
written $656.22 as $626.47.  
Table 7:  Income Calculations:  Caseworker 
Errors 
OIG  Caseworker 
Pay Stub 1  656.22  626.47 
Pay Stub 2  585.15  585.15 
Total Income  1,241.37  1,211.62 
Divide By  2.00  2.00 
Average Income  620.69  605.81 
Multiply By  2.15  2.15 
Monthly Income  1,334.47  1,302.49 
Disregards  90.00  90.00 
Countable Income  1,244.47  1,212.49 
Total Countable 
Income Difference  31.98 
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Approximately 5 percent of childrens case files contained income 
calculations that we could not duplicate. In cases for 4.9 percent of 
children, we were unable to arrive at the same income amount that the 
State calculated. However, both the States and the OIGs calculations 
resulted in the child being eligible for separate SCHIP.  For example, 
one case file contained documentation of weekly income in the amounts 
of $268.25, $280.94, $344.38, and $295.44.  According to State 
guidelines, these four amounts should have been totaled to determine 
the familys monthly gross income ($1,189.01).  However, the case-file 
documentation lists the familys monthly gross income as $1,758.20.  
There is no other documentation of income in the case file, nor is there 
any indication of the calculations the caseworker made to arrive at the 
documented monthly income.  This example represents the problem in 
all the cases where we identified similar concerns.  Although the 
caseworkers calculations could not be duplicated, our calculated 
countable income supported the childrens enrollment in separate 
SCHIP. As a result, we agreed with the States determinations of 
eligibility. 
More than 7 percent of case files lacked documentation to support the 
States determinations of separate SCHIP eligibility. 
Pursuant to 42 CFR  457.965, States are required to include facts to 
support the determination of eligibility for SCHIP on each child.  In 
3.9 percent of cases, the States did not provide documentation to 
support the familys countable income calculated by the caseworker and 
used to determine eligibility.  These cases were either from States that 
did not allow self-declaration of income, or the case did not meet the 
States criteria for self-declaration of income. Undocumented 
information included wages (where required), unearned income, and 
documentation of childcare expenses.  Based on other information 
contained in the case files, these children appeared to be properly 
enrolled.  However, without the missing documentation, we could not be 
sure that the States determinations of eligibility were correct. 
For another 2.3 percent of cases, States determined children were not 
eligible for Medicaid, but the documentation we received did not fully 
support the States determinations. For example, documentation for 
some cases indicated that the children were enrolled in separate SCHIP 
because their families had assets in excess of the Medicaid limit.  
However, the case files lacked documentation to support the amount of 
  OEI-07-03-00220  DETERMINING IF CHILDREN ENROLLED IN SEPARATE SCHIPS WERE ELIGIBLE FOR MEDICAID  15  F I N D I N G S  
or proof of the families assets and only indicated the children were 
enrolled due to assets.  In the remaining few cases, SCHIP officials 
explained that household composition rules for Medicaid and SCHIP 
differ in their State.  Fewer people were counted in the household to 
determine Medicaid eligibility than were counted to determine separate 
SCHIP eligibility. Therefore, the families countable incomes were too 
high for Medicaid, yet appeared too low for separate SCHIP.  The 
available documentation did not allow us to definitively determine 
proper enrollment, although we did not dispute the States 
determinations.  
Finally, 1.3 percent of cases appeared to have countable income that 
would support Medicaid eligibility, although SCHIP officials claimed 
that the children had been found ineligible for Medicaid because their 
families countable incomes were too high.  For these cases we could not 
definitively determine proper enrollment. 
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States Verification and Quality Assurance Practices 
The following chart illustrates the responses States gave when surveyed 
about their verification and quality assurance practices.  All of the 
States except one reported that they use an electronic system to assist 
caseworkers in their eligibility determinations.  Additionally, all States 
except North Dakota reported some type of systematic training of staff 
regarding eligibility determinations. North Dakota reported that they 
have only one person responsible for making SCHIP-eligibility 
determinations, and that person has been in the same position since the 
establishment of the program in that State.  We were unable to identify 
any relationship between quality assurance activities and the likelihood 
of errors being made by the States. 
State ID  AL  AZ  CA  CO  CT  DE  FL  GA  IA  IL  IN  KS  KY  MA  MD  ME  MI  MS 
Proof of Income 
[  [  [  [  ,  [  ,  ,  [  [  [  [  [  [  ,  [  ,  [ 
Required 
Self-Declaration 
,  [  [  ,  [  ,  [  [  ,  ,  [  ,  ,  [  [  ,  [  , 
Allowed 
Proof of Other 
Eligibility Criteria  ,  ,  [  [  ,  ,  ,  [  [  ,  ,  ,  ,  ,  ,  ,  ,  , 
Required 
Information 
,  ,  ,  ,  [  [  ,  [  [  [  [  [  [  [  ,  [  ,  [ 
Verified 
Written Policies 
for Verification of  ,  NR  NR  NR  [  [  NR  [  [  [  ,  [  [  [  [  [  ,  [ 
Enrollment 
Redetermination 
Information 
Verified  [  [  ,  ,  [  [  NR  NR  [  [  NR  [  [  [  ,  [  [  [ 
Same as at 
Enrollment 
Determinations 
Reviewed  [  [  [  [  [  [  [  [  [  [  ,  [  [  [  [  [  [  , 
Periodically 
Medicaid-Eligible 
Children 
Identified as  ,  ,  [  ,  [  ,  ,  ,  [  ,  NR  [  [  ,  ,  [  [  [ 
Result 
of Review 
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State ID  MT  NC  ND  NH  NJ  NV  NY  OR  PA  RI  SD  TX  UT  VA  VT  WA  WV  WY 
Proof of Income 
,  [  [  [  [  [  [  [  [  [  [  [  ,  [  ,  [  [  , 
Required 
Self-Declaration 
[  ,  ,  ,  ,  [  ,  ,  ,  ,  ,  ,  [  ,  [  ,  ,  [ 
Allowed 
Proof of Other 
Eligibility Criteria  ,  ,  [  [  [  ,  [  ,  ,  [  ,  [  ,  ,  ,  [  ,  , 
Required 
Information 
,  [  ,  [  [  [  ,  [  [  [  [  [  [  ,  [  [  [  [ 
Verified 
Written Policies 
for Verification of  [  [  NR  [  [  [  [  [  [  [  [  [  [  NR  [  [  [  [ 
Enrollment 
Redetermination 
Information 
Verified  [  [  [  NR  [  [  ,  [  [  [  NR  [  ,  ,  [  [  [  [ 
Same as at 
Enrollment 
Determinations 
Reviewed  [  [  ,  [  [  [  [  [  [  [  [  [  [  [  ,  [  ,  [ 
Periodically 
Medicaid-Eligible 
Children 
Identified as a  [  ,  NR  ,  [  ,  [  NR  [  [  [  NR  NR  [  NR  [  NR  , 
Result 
of Review 
Key 
[  Indicates States response was Yes 
, Indicates States response was No 
NR Indicates State did not respond 
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Separate SCHIP Universe and Sample 
The following Table shows the total number of children enrolled in each 
States separate SCHIP and the total number of children selected in our 
sample in each State. 
Separate Percent of  Separate  Percent of 
State 
Universe  Universe  Sample  Sample 
AL  59,991  2.14  16.00  4.15 
AZ  49,717  1.77  8.00  2.07 
CA  656,696  23.39  93.00  24.09 
CO  48,671  1.73  8.00  2.07 
CT  14,799  0.53  1.00  0.26 
DE  4,920  0.18  1.00  0.26 
FL  316,882  11.29  47.00  12.18 
GA  183,986  6.55  32.00  8.29 
IA  14,996  0.53  1.00  0.26 
IL  21,090  0.75  1.00  0.26 
IN  13,803  0.49  0.00  0.00 
KS  30,133  1.07  3.00  0.78 
KY  20,193  0.72  0.00  0.00 
MA  16,051  0.57  1.00  0.26 
MD  6,018  0.21  0.00  0.00 
ME  4,624  0.16  0.00  0.00 
MS  56,656  2.02  6.00  1.55 
MT  9,530  0.34  2.00  0.52 
NC  100,916  3.59  10.00  2.59 
ND  2,094  0.07  0.00  0.00 
NH  5,389  0.19  0.00  0.00 
NJ*  94,581  3.37  2.00  0.52 
NV  23,319  0.83  5.00  1.30 
NY  311,826  11.11  44.00  11.40 
OR  18,697  0.67  2.00  0.52 
PA  116,615  4.15  21.00  5.44 
SD  1,872  0.07  0.00  0.00 
TX  511,810  18.23  71.00  18.39 
UT  24,232  0.86  2.00  0.52 
VA  33,358  1.19  4.00  1.04 
VT  2,986  0.11  1.00  0.26 
WA  6,219  0.22  1.00  0.26 
WV  21,543  0.77  2.00  0.52 
WY  3,113  0.11  1.00  0.26 
Total  2,807,326  99.98**  386.00  100.02** 
* Recent information suggests that New Jerseys separate universe is actually 61,245. 
**The totals do not equal 100 percent due to rounding. 
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Worksheets Used in Case Review 
The following pages show examples of the case review and calculation 
sheets we used in reviewing the sampled cases.  The example is not 
meant to represent any specific State or case, but rather to illustrate the 
process used in assessing proper enrollment. 
OEI-07-03-00220  DETERMINING IF CHILDREN ENROLLED IN SEPARATE SCHIPS WERE ELIGIBLE FOR MEDICAID  21  A P P E N D I X ~ C  

Source:  OIG worksheet used in case-file review 
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Confidence Intervals for Projections 
 
The following chart shows projections to the separate SCHIP universe 
based on the errors and inconsistencies identified in our review.  The 
projections are made at the 95% confidence level. 
Confidence Intervals - Errors and Inconsistencies Found
Type of Error or Inconsistency Point Estimate Confidence Interval
Improperly Enrolled Because Eligible for 
1.0% 0.3 - 2.6%
Medicaid
Income Calculations Not Supported by State 
13.0% 9.6 - 16.3%
Guidelines*
Calculations Inconsistent with 
8.0% 5.5 - 11.2%
Documented State Guidelines
Cases Within 5 Percent of Being Eligible 
5.4% 3.4 - 8.2%
for Medicaid
OIG Could Not Duplicate Caseworker's 
4.9% 3.0 - 7.6%
Calculations
Lacked Documentation to Support Eligibility 
7.5% 5.1 - 10.6%
Determinations
Lacked Documentation of Countable 
3.9% 2.2 - 6.3%
Income
Lacked Documentation to Support  2.3% 1.1 - 4.4%
States' Determinations of Separate 
SCHIP Eligibility 1.3% 0.4 - 3.0%
*This confidence interval uses the normal distribution; all others use the binomial distribution.
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 EAAA NPCC PDKK E NN NNOO ODWWTILLXEEE SDD~  GG  BMM  EE NN TT SS  
This report was prepared under the direction of Brian T. Pattison, 
Regional Inspector General for Evaluation and Inspections in the 
Kansas City regional office, and Gina C. Maree, Assistant Regional 
Inspector General.  Other principal Office of Evaluation and Inspections 
staff who contributed include: 
Mike Craig, Project Leader
Dennis Tharp, Program Analyst 
Elander Phillips, Program Analyst 
Michala Walker, Program Analyst 
Brian Whitley, Program Analyst 
Linda Hall, Program Specialist 
Elise Stein, Director, Public Health and Human ServicesBranch 
Barbara Tedesco, Mathematical Statistician 
OEI-07-03-00220  DETERMINING IF CHILDREN ENROLLED IN SEPARATE SCHIPS WERE ELIGIBLE FOR MEDICAID  28