Depafiment  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
VULNERABILITIES  IN  MEDICAID  ASSET 
VERIFICATION  OFFICE OF INSPECTOR GEIW3W 
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 ne~ork  of audits, investigations, and 
inspections conducted  by three OIG operating components:  the Office of Audit Semic=,  the 
Office of Investigations, and the Office of Evaluation and Inspections.  The OIG also informs 
the Secreta~  of HHS of program and management problems and recommends courses to 
correct them. 
OFFICE OF AUDIT  SERVICES 
The OIGS 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 efficienq  throughout  the Department. 
OFFICE OF INVESTIGATIONS 
The OIGS Office of Investigations (01) 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 01 lead to criminal convictions, 
administrative sanctions, a  civil money penalties.  The 01 afso oversees State Medicaid fraud 
control units which investigate and prosecute fraud and patient  abuse in the Medicaid program. 
OFFICE OF EVALUA~ON  AND  INSPECTIONS 
The OIGS 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 these inspection 
reports generate  rapid, accurate, and up-to-date information on the efllciency, vulnerability, 
and effectiveness of departmental  programs.  The report was prepared  in the Kansas City 
regional office under  the direction of Jim Wolf, Regional Inspector  General.  Project staff 
include: 
KansasCity  Headquarters 
Dennis Tharp, Project  Leader
 Penny Thompson, Branch Chief 
Tim DoId, Team Leader
 Jennifer btico,  Program Specialist 
Perry Seaton, Team Leader

Linda Paddock, Program Assistant

To obtain a copy  of this repo~  call the Kansas City Regional Offi=  at (816) 426-3697.  EXECUTIVE  SUMMARY 
PURPOSE 
To  describe  States  Medicaid  long term  care  eligibility systems,  asset  verification 
processes  and  their  fraud  referral  techniques,  and  identify  potential  vulnerabilities  in 
these  systems. 
BACKGROUND 
Within  the  Health  Care  Financing  Administration  (HCFA)  guidelines,  each  State  has

its own Medicaid  rules  and  provisions  governing  Medicaid  long  term  care  eligibility.

The  States  submit  a State  Plan  that,  when  approved  by HCF~  provides  the  basis  for

payment  of Federal  funds  to cover  at least  half of the  expenditures  incurred  by the

State  in providing  medical  assistance  and  administering  programs.

Medicaid  coverage  of long term  care  costs is based  upon  a needs  test  where  an

individual  has limited  assets.  Some  individuals  may be motivated  to transfer  their

assets  to other  family members  to avoid the  requirement  to use  them  to finance  their

long term  care  expenses.

To  determine  what  States  are  doing to determine  eligibility  and  detect  fraud  regarding

assets, we conducted  a mail  survey of the  50 State  Medicaid  agencies  in late  1993.  We

also selected  five States  in the  spring  of 1994 to visit based  on information  and

materials  received  from  the  mail  survey and  our analysis  of that  information.  At  these

States  we intemiewed  Medicaid  policy staff and State  fraud  investigators  to

supplement  information  from  the  surveys.

FINDINGS 
Most States Rely  Only on Readily Available Sources for Asset Verification 
We found  nearly  all States  veri~  checking  and  savings accounts,  pay stubs  and 
insurance  policies  of the  Medicaid  long term  care  applicant,  but  States  vary  on 
requesting  income  tax returns  and  other  types  of financial  information.  Medicaid 
eligibility staff  allege  they  do not  have  adequate  time  to effectively  ascertain  the  extent 
of all potential  assets  of Medicaid  applicants. 
Thirty  of 50 States  have  Medicaid  fraud  hotlines.  Although  most  States  do not 
routinely  check  applications  against  hot  line complaints,  half  the  States  who  have  them 
believe  that  they  may facilitate  an initial  investigation  to verfi  the  validity  of a 
possible  transfer  or concealment. 
Thirty-eight  States  have  specific  Medicaid  long term  care  fraud  penalties  for  the  non-
reporting  of resources.  In general,  we found  that  prosecution  of medical  assistance 
,  fraud  is a low priority  for States,  and  that  Medicaid  applicant/beneficiary  fraud  is 
identified  in less than  1 percent  of cases.  This is due  to  consideration  of the 
applicants  age,  the  difficulty  of proving  intent,  and  the  low dollar  amounts  involved. 
HCFA  Has Worked  in Partnership with State Medicaid  Agencies  to Improve  Asset 
Verification 
The  HCFA  has  assisted  States  in improving  asset verification.  The  HCFA  has  actively 
monitored  States  activities  and  progress  in identifying  assets  and  sharing  best  practices 
of asset  verification. 
RECOMMENDATIONS 
HCFA  should  continue  to work  in partnership  with States  to promote: 
Comprehensive  Asset  Verification  Techniques 
States  should  enhance  investigative  skills and  request  more  detailed  applicant 
information.  Information  which paints  an inconsistent  picture  of the  applicants 
financial  past  or which  appears  questionable,  should  be  investigated  further. 
Identification  and Sharing of Useful Best Practices among States 
HCFA  should  continue  to promote  the  sharing  of technical  assistance  among  States, 
especially  asset  verification  processes,  fraud  identification  techniques,  and  other 
effective  procedures  that  have  proven  to be predictable  and  reliable  indicators  for 
States  in identi&ing  undisclosed,  concealed  or transferred  assets. 
AGENCY  COMMENTS 
The  HCFA  concurs  with our  recommendations  to promote  better  asset  verification 
among  State  Medicaid  agencies.  At the  same  time,  the  agency  notes  the  limitations  of 
the  study, including  lack  of information  on what  practices  are  most  effective,  limited 
discussion  of the  Income  Eligibility  Verification  System,  and  timing  of data  collection. 
We  generally  agree  with HCFAS  comments.  Our  goal was to  obtain  a preliminary 
description  of what  States  were  doing to come  to grips with what  is essentially  a very 
complex  administrative  problem.  It ~eems to us, though,  that  some  States  were  doing 
more  than  others  and  that  they  could well learn  from  one  another  how to  approach 
this situation.  The  HCFA  also provides  suggestions  and  ideas  about  practical 
problems  that  are  likely to be  encountered  in implementing  the  recommendations. 
We  encourage  the  reader  to carefully  review  all of HCFAS  comments  which  are 
included  in their  entirety  in Appendix  A.  We have  made  several  revisions  to our 
report  in response  to them. 
ii  TABLE  OF  CONTENTS

PAGE

EXECUTIVE  SUMMARY

INTRODLK7H0  N. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3

Readily  Available  Asset  Verification  Sources  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3

HCFAin  Partnership  with States  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...5

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6

APPENDI.X  A  AGENCY  COMMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  A-1
 INTRODUCTION

PURPOSE 
To  describe  States  Medicaid  long term  care  eligibility systems,  asset  verification 
processes  and  their  fraud  referral  techniques,  and  identify  potential  vulnerabilities  in 
these  systems. 
BACKGROUND 
Eli@ili~  for Medicaid  Long  Term  Care 
Each  State  has  its own Medicaid  rules  and  provisions  governing  Medicaid  long  term 
care  eligibility.  These  include  the  guidelines  and limitations  established  by Part  430 of 
Grants  to States  for Medical  Assistance  Programs  in Title  XIX  of the  Social  Security 
Act  and  implementing  Medicaid  eligibility regulations  (42 Code  of Federal  Regulations 
430). 
Medicaid  coverage  of long term  care  is intended  for those  individuals  with  inadequate 
resources  to provide  for themselves.  As such, persons  with substantial  assets  are  not 
eligible.  However,  in determining  eligibility for Medicaid  long term  care,  States  may 
count  only income  and  assets  that  are  available  to the  applicant  or beneficiary,  i.e., 
those  funds  under  the  applicants  control.  Certain  assets  and  resources  (which  can 
often  be  of any value)  are  exempt,  including  the  home  (in many  cases),  burial  policies, 
small  savings accounts,  and  funds  to maintain  the  spouse  in the  home.  There  is also  a 
provision  for coverage  of persons  with a higher  dollar  amount  of assets  who  have 
incurred  long term  care  expenses.  Once  these  individuals  have  depleted  their  excess 
resources,  they  may  qualify for Medicaid.  In addition,  they  must  also reduce  their 
excess income  each  month  in order  to remain  eligible. 
Because  of these  rules,  some  individuals  may be motivated  to transfer  their  assets  to 
other  family members  to avoid  the  requirement  to use them  to finance  their  long term 
care  needs. 
METHODOLOGY 
Mail  Survey 
The  inspection  was conducted  in two phases.  In phase  one,  we conducted  a mail 
survey of the  50 State  Medicaid  agencies.  Topics  addressed  include  eligibility  policy, 
asset verification,  Medicaid  beneficiary  fraud  referrals,  estate  recoveries  by type  and 
amount,  Medicaid  liens,  death  and  spousal  information,  and  trusts  and  other  influences 
on estate  recovery.  While  the  survey was comprised  of many  closed-ended  questions, 
we also used  some  open-ended  questions  that  provided  more  in-depth  information  to 
explain  and  expand  upon  close-ended  responses. 
1
 Thesumeys  were  submitted  to State  Medicaid  agencies  in October  1993.  We  received 
our  final State  responses  in late  May  1994. 
Five  State  Sample 
In phase  two, we selected  a judgmental  sample  of five States  based  on the  information 
obtained  from  phase  one.  We  chose  Massachusetts,  Minnesota,  Missouri,  Oregon  and 
Wisconsin  because  of information  completed  on their  surveys.  We visited  each  State 
to conduct  intetiews  with State  Medicaid  agency  staff and  State  Medicaid  fraud 
investigators.  We  used  questionnaires  to follow up  on responses  reported  in the 
surveys. 
Anazysis 
The  inspection  team  summarized  and  tabulated  the  responses  to all the  survey 
questions.  The  responses  were  quantified  to determine  such  issues  as how many  State 
Medicaid  agencies  have  eligibility verification  programs  to identify  and  prevent 
transfers  of assets,  the  outcomes  from  these  identification  systems,  how many  States 
make  Medicaid  fraud  referrals,  what  those  referrals  entail,  and  whether  States  have 
fraud  penalties  and  hotlines. 
Stop 
This  report  is one  of two related  national  reports.  An  earlier  companion  repofi 
described  States  efforts  in implementing  Medicaid  long term  care  estate  recovery 
programs. 
We  conducted  our  review  in accordance  with the  Standar&  for  Inspections  issued  by 
the  Presidents  Council  on Integrity  and  Efficiency. 
2
 FINDINGS

Most States Rely  Only on Readily Available  Sources for Asset  Verification 
We found  that  nearly  all States  verify checking  and  savings account  amounts,  pay 
stubs, and  insurance  policies  of the  Medicaid  applicant.  Most  States  also verify 
Certificates  of Deposit,  Individual  Retirement  Accounts  and  other  investments  by 
directly  contacting  banks  and  other  financial  institutions.  Some  States,  however,  use  a 
variety  of methods  to verify financial  information  (See  chart  below  for States 
self-reported  techniques.) 
When  inquiring  why State  techniques  vary, a major  reason  given by Medicaid  eligibility 
staff (often  referred  to as Medicaid  caseworkers)  was that  workloads  do not  permit 
adequate  time  to  effectively  ascertain  the  extent  of all potential  assets  of a Medicaid 
applicant.  Types  of hidden  or unreported  assets  or resources  include  bank  accounts, 
Certificates  of Deposit,  or stocks  and  other  financial  investments. 
While  there  is a Federal  mandate  for States  to implement  and  operate  IEVS,  whereby 
States  are  required  to conduct  computer  matches  with State  and  federal  agencies  to 
verify reported  income  and  resource  (asset)  information,  States  vary in abilities  and 
3  commitment  to match  with all of the  required  data  sources.  States  often  do not  use 
all of the  data  match  information  because  of State  perception  of the  ineffectiveness  of 
some  IEVS  data  matches  and  shrinking  State  budgets  and  resources.  These  findings 
corroborate  our  July  1994 report  Reforms Are  Needed  in State Income  and Eligibility 
Verification  Systems,  0EI-06-92-OO080.  That  report  addresses  issues with  State  IEVS 
and  makes  recommendations  for  improving  the  efficiency  of the  IEVS  requirements. 
A Federal  IEVS  interagency  work  group  is working  with the  OIG  and  States  to 
implement  these  recommendations. 
In addition,  44 States  utilize  the  IRS tape  match.  Five,&~,t@&e  States  say that  its 
effective,  27 say that  its somewhat  effective  or of limitei$l%$he, while  9 States  say its 
ineffective.  Three  States  did not  respond.  At least  one-fburth  of the  States  report 
that  the  information  is too  old to be  useful. 
Thirty  States  have  Medicaid  or general  fraud  hotlines  at the  State  or county  level 
which individuals  may  call to report  an applicant  who may have  transferred,  hidden  or 
sheltered  assets.  Although  only two States  routinely  check  applications  against  hotline 
complaints,  these  hotlines  may facilitate  an initial  investigation  to verify the  validity  of 
a possible  transfer  or  concealment.  Almost  one-half  of the  States  said that  leads  and 
tips from  relatives  or neighbors  are  sometimes  effective  in discovering  unreported 
property  or assets  of a Medicaid  long term  care  applicant. 
State  Medicaid  applications  usually  have  a generic  fraud  statement  explaining  possible 
penalties  for intentional  concealment  or misreporting  of resources.  An  example  is 
shown below. 
Section 1128 of the Social  Securi~ Act  (as amended  by Public Law  100-93) 
provides  Federal penalties for jiaudulent  acts and false  reporting in connection 
with my application for  or receipt of Medicaid  benefits.  I may  be prosecuted  in 
Federal  Court for deliberate statements  which I know  to be false  and  which  affect 
my eligibility for  any benefit  or payment  under the Medicaid  program.  I may  also 
be prosecuted  for  concealing  or failing  to disclose any event  of which I have 
knowledge  which  affects  my right to any benefit  or payment...  
Caseworkers  explain  penalty  provisions  during  the  standard  applicant  intewiew

process.  Thirty-eight  States  have  Medicaid  long term  care  fraud  penalties  for the  non-

reporting  of resources;  12 do not.  All States  have  general  statutory  penalties  for theft.

h. 
Prosecution  of medical  assistance  fraud  on the  part  of the  applicant/beneficiary  occurs 
in less than  one  percent  of cases.  During  our  onsite  visits, we learned  that  prosecuting 
a Medicaid  beneficia~s  fraudulent  activity is a very low priority.  This  is due  in part 
to consideration  of the  applicants  age, the  difficulty of proving  intent,  and  the  low 
dollar  amounts  involved. 
4
 HCFA  Has Worked  in Partnership  with State Medicaid  Agencies  to Improve  Asset 
Verification 
The  HCFA  has taken  responsibility  to assist States  in improving  asset  verification.  In 
November  1994, HCFA  released  a resource  guide  for States  in collaboration  with the 
American  Public  Welfare  Association.  The  HCFA  has  also conducted  numerous 
training  conferences  with Medicaid  State  representatives. 
The  HCFA  has  actively  monitored  States  activities  and  progress  in identifying  assets 
and  improving  asset  verification.  The  HCFA  plans  to continue  to survey  States  and 
identify  and  share  best  practices  of asset verification. 
5
 RECOMMENDATIONS

HCFA  should  continue  to work  in partnership  with States  to promote: 
Comprehensive  Asset  Verification  Techniques 
Although  most  States  verify checking  and  savings account  information,  some  States  are 
not  going beyond  this basic  analysis.  States  should  enhance  investigative  skills and 
request  more  detailed  applicant  information.  For  example,  Departments  of Motor 
Vehicles,  employer  identification  numbers,  Veterans  Affairs  offices  and  other  local 
avenues  are  excellent  resources. 
During  the  intake  process,  eligibility  staff should  always ask long term  care  applicants 
about  the  existence  of any trusts,  annuities,  burial  policies,  funeral  plans  and  business 
partnerships.  Gathering  a more  comprehensive  synopsis of an applicants  financial 
background  is beneficial.  Information  which paints  an inconsistent  picture  of the 
applicants  financial  past  or which  appears  questionable  should  be  investigated  further. 
Identification  and Sharing of Useful  Best Practices Among  States 
HCFA  should  continue  to promote  the  sharing  of technical  assistance  among  States, 
especially  asset  verification  processes,  fraud  identification  techniques,  and  other 
effective  procedures  that  have  proven  to be predictable  and  reliable  indicators  for 
States  in identifying  undisclosed,  concealed,  or transferred  assets. 
Asset  verification,  at its best,  should  be  exhaustive.  The  process  of identifying  possible 
hidden  or illegal  transfers  of assets  is a critical  step  in preventing  Medicaid  long term 
care  eligibility  fraud.  Although  asset  verification  can be  an  arduous  task  for Medicaid 
caseworkers,  it is an  essential  part  of the  eligibility process  that  should  not  be 
overlooked. 
The  HCFA  should  ensure  that  States  utilize  the  most  efficient  and  practical  methods 
when  performing  asset  verification.  To  uncover  undisclosed,  concealed  or transferred 
assets  requires  considerable  attention  to minute  details  of a Medicaid  applicants 
financial  and  property  holdings. 
AGENCY  COMMENTS 
The  HCFA  concurs  with our  recommendations  to promote  better  asset  verification 
among  State  Medicaid  agencies.  At  the  same  time,  the  agency  notes  the  limitations  of 
the  study, including  lack  of information  on what  practices  are  most  effective,  limited 
discussion  of the  Income  Eligibility  Verification  System,  and  timing  of data  collection. 
6
 We generally  agree  with HCFAS comments.  Our  goal was to obtain  a preliminary 
description  of what  States  were  doing  to come  to grips with what  is essentially  a very 
complex  administrative  problem.  It seems  to us, though,  that  some  States  were  doing 
more  than  others  and  that  they  could well learn  from  one  another  how to  approach 
this situation.  The  HCFA  also provides  suggestions  and  ideas  about  practical 
problems  that  are  likely to be  encountered  in implementing  the  recommendations. 
We  encourage  the  reader  to carefully  review  all of HCFAS comments  which  are 
included  in their  entirety  in Appendix  A.  We have  made  several  revisions  to  our 
report  in response  to them. 
7
 APPENDIX  A 
AGENCY  COMMENTS 
A-1  Jg
,JE?A.i:,}IEAT  OF IiE.lL~H  & HUMAN  SERVICES 
.  Health  Care Financing  Admini
-. 
b
%>,,a
Office  of the Administrator 
Washington,  D.C.  20201 
DATE  W.*
FROM  Bruce  C  Vladec 
Administrator 
SUBJECr  Office  of Inspector  General  (OIG)  Draft  Report:  Vulnerabilities  in 
Medicaid  Asset  Verification,  (OEI-07-92-00882) 
TO  June  Gibbs  Brown 
Inspector  General 
We  reviewed  the  above-referenced  report  which  describes  States  Medicaid 
long-term  care  eligibility  systems,  asset verification  processes  and  their 
fraud  referral  techniques,  and  identifies  potential  vulnerabilities  in these 
systems.  Attached  are  our  com.ment.s on  the  report  findings. 
Thank  you for  the  opportunity  to review  and  comment  on this  report. 
Attachment 
A-2  Comments  of the  Health  Care  Financing  Administration  (HCFA}

on Office  of Inspector  General  (OIGj

Draft  Repofi  Vulnerabilities  in Medicaid  Asset  Verification,

[OEI-07-92-00882~

OIG  Recommendation

HCFA  should  continue  to work in partnership  with  States  to promote  comprehensive

asset  verification  techniques;  establishment  of Medicaid  fraud  hotlines  and  penalties;  and

identification  and  sharing  of useful  best  practices  among  States.

HCFA  Res~onse

We concur  with  the  report  recommendation  as it offers  very  basic  suggestions  for

improvingthe  efficiency  of State  Medicaid  programs.

HCFA  has  continued  to work with  States  to  encourage  asset  verification  by pointing  out

that  good  verification  at the  time  of Medicaid  application  results  in  Medicaid  coverage

for those  who  are  tn.dy eligible.  In addition,  some  asset  verification  is required  by

legislation  such  as the  Lncome and  Eligibility  Verification  System  (lEVS)  which  requires

States  to conduct  matches  with the  Lptemal  Revenue  Semite  (IRS),  the  Social  Security

Administration  (SSA),  and  State  wage  and  unemployment  compensation  agencies.

Even  with  Federal  mandates  for asset  verification,  when  State  budgets  and  staffs are

shi-inking, States  often  cut comers  in the  eligibility  verification  process.  For  example,  if

a State  conducts  IEVS  matches,  but  fails to verify  the  leads. identified  in the  match,  an

incorrect  eligibility  dete~ination  could  result.  Pmother  obstacle  to  resource  verification

is that  Federal  regulations  require  that  States  process  a Medicaid  application  within

45 days.  Bank  verification  often  takes  more  than45  days so States  will  often  put  the

applicant  on  the  Medicaid  rolls at  the  end  of 45 days and  not  utilize  the  banks

infofiation  when  it arrives.  lvfany States  also  limit  the  number  of  asset  verifications

because  financial  institutions  require  reimbursement.

Data  based  on  Medicaid  Eligibility  Quality  Control  reviews  indicate  that  incorrect

resource  development  continues  to be  the major  cause  of dollar  error.  However,  the

number  of transfers  of resource  case  errors  that  effect  the  error  rates  is very  small.  So,

while  transfer  cases  continue  to be  a slight problem,  they  do not  significantly  effect  the

total  number  of resource  errors.

We also  note  that  one  of the most  effective  techniques  for  asset  verification  of ap#cants

for long-term  care  is the  use  of eligibility  staff  who specialize  in long-term  care  cases.

Some  States  find  it very cost-effective  to provide  special  training  and  even  higher  salaries

for workers  who  can  become  knowledgeable  about  the  kinds  of assets  likely  to be  owned

but  not  reported  by long-term  care  applicants.

A-3

.  Page  2 
In general,  the  report  fails  to distinguish  between  two  distinct  aspects  of the  Medicaid 
program:  State  asset  verification  activities,  which  affect  all Medicaid  applicants/  -
recipients;  and  asset  policies  affecting  only persons  seeking  Medicaid  for  their  long-term 
care  expenses  (specifically,  m ies regarding  uncompensated  transfers  of assets  and 
recoveries  from  estates  of deceased  long-term  care  recipients). 
Activities  that  the  report  recommends  for all States  -- establishing  Medicaid  fraud 
hotlines,  and  more  extensive  data  matching  with  other  information  sources  -- typically 
apply  across  the  board,  not just  to persons  seeking  assistance  for  long-texm  care.  1%e 
recommendations  are  not  persuasive  because  they are  not  accompanied  by any  detailed 
descriptions  beyond  the  number  of States  that  use  the  techniques,  nor  is any  evidence 
given  as to  the  effectiveness  for either  all Medicaid  applicants  or the  subset  of people 
seeking  long-term  care  assistance.  In fact,  the  report  notes  that  while  three  in five States 
have  a fraud  hotline  (page  4), only  two States  identified  hotlines  as  a source  that  they 
actually  use  (page  3), strongly  suggesting  that  hotlines  are  not very effective.  If, on  the 
other  hand,  hotlines  are  inexpensive,  they may  nevertheless  be cost-effective  even  if they 
provide  leads  in just  a few cases.  If this is the  case,  the  report  would  be  more  effective 
by saying SO. 
The  report  also  recommends  that  HCFA  work  to ensure  that  all States  establish 
penalties  for  false  reporting  in connection  with  a Medicaid  application.  We  note  several 
problems  with  this  recommendation.  Firs~  the  statntory  citation  provided  in  the  report 
is no longer  valid.  Section  1909 was  amended  and  redesignated  as section  1128 of the 
Social  Securi~  Act  by public  Law  100-93, the  1987 antifraud  amendments.  Second,  this 
statite  provides  for  Federal  prosecution  of people  who misrepresent  information  about 
themselves.  State  penalties  are permitted  at  the  option  of the  State  but  only  to persons 
who  have  been  convicted  under  these  provisions.  Nothing  in this  Ianguage  suggests  that 
such  penalties  may  be  applied  only  against  long-term  care  applicants.  Third,  as the 
report  notes,  such  cases  are  seldom  pursued  because  of the  expense  of prosecution 
relative  to the  dollars  involved.  me  report  should  note  whether  the  States  that  have 
such  penalties  think  they  are  worth  having  because  of the  detement  effect.  Finally,  the 
report  would  be  clearer  if it included  a brief  description  of how fraud  penalties  and 
Medicaid  rules  on  transferred  assets  and  estate  recoveries  differ  from,  and  cornplemen$ 
each  other. 
Finally,  we note  that  the  sumey  of States  was conducted  shortly  after  the  effective  date 
of the  Omnibus  Budget  Reconciliation  Act  of 1993 provisions  effecting  transfers  of 
assets  and  estite  recoveries.  ~is  causes  us to question  whether  State  responses  from 
this  unstable,  transitional  period  of ttie  accurately  reflect  todays  circumstances. 
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Technical  Comments 
Page  i - Background  - This  section  includes  a synopsis of the  procedures  for  transferring 
assets in order  to  meet  the  Medicaid  income  and  resource  requirements.  However,  the 
synopsis fails  to point  out  that  individuals  who  transfer  assets  for less  than  fair  market 
value  may  be  subject  to certain  penalties  in the  form  of denied  Medicaid  coverage  for  a 
certain  period  of time  (i.e.,  a penalty  period). 
The  penalty  period  is determined  by first ensuring  that  the  transfer  of assets  for  less  than 
fair market  value  took  place  within  the  look-back  period.  The  look-back  period  is the 
period  of time. during  which  a penalty  for transferring  assets  for less  than  fair  market 
value  can  be  asseised  and  can  range  from 36 to 60 months.  Penalties  cannot  be  assessed 
for transfers  tald.ng place  before  this  period. 
Provided  a transfer  of assets  took  place  during  an individuals  look-back  period,  a 
penal~  period  is calculated  by taking  the value  of all assets  transferred  for  Iess than  fair 
market  value  and  dividing  it by the  average  monthly  cost  to a private  patient  for  care  in 
a nursing  facili~  in the  State. 
The  above  comment  also  applies  to  the background  section  on page  1. 
Page  ii - Last  Findin  g - There  should  be a reference  in this section  to  the  Federal 
mandate  for  States  to use  IEVS  for  veri&ing  reported  assets.  Suggested  language: 
While  there  is a Federal  mandate  for States  to implement  and  operate  Income 
and  Eligibility  Verification  Systems  (IEVS),  whereby  States  are  required  to 
conduct  computer  matches  with  State  and  Federal  agencies  to veri&  reported 
income  and  resource  (asset)  information,  States  vary  in abilities  and  commitment 
to match  with  all  of the  required  data  sources.  States  often  do  not use  all  of the 
data  match  information  because  of State  perception  of the  effectiveness  of the 
IEVS  data  matches  and  shrinking  State  budgets  and  resources.  An  earlier  OIG 
repo~  released  in July  1994, addresses  the  issues  with  State  IEVS  and  makes 
recommendations  for  improving  the  efficiency  of the  IEVS  requirements.  A 
Federal  IEVS  interagency  work  group  is working  with  the  OIG  and  States  to 
implement  these  recommendations. 
Page ii - First  Recommendation  - There  should  be a reference  to  the  Federal 
requirement  to  conduct  data  matches  under  the  IEVS  requirements.  It should  be 
stressed  that  States  have  the  flefibility  to design  IEVS  to target,  or  selectively  use,  the 
most productive  leads  for  identi~ng  unreported  assets. 
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 Page  4 
Page  1- Income  Verification  - This  section  is misleading  because  it seems  to  indicate 
that  a State  IEVS  is for  the  purpose  of identifying  beneficiary  fraud  rather  than  a tool  to 
assist States  in making  more  accurate  eligibility  determinations  for  all  categories  of  -
applicants  and  recipients  of benefit  assistance  programs.  The  requirement  that  a 
beneficiary  be  terminated  from  receiving  assistance  if he/she  fails  to  report  all  income 
and/or  resources  is a very broad  requirement,  and not  one  that  is tied  to  the  IEVS 
requirements.  As  with  any violation  of reporting  assetsdresources,  if a beneficiary  fails  to 
report  information,  benefits  will be  terminated. 
We also believe  it would  be  helpful  to include  more  detailed  information  about  the 
IEVS,  some  of which  is included  in the July  1994 IEVS  report.  For  example,  States.are 
required  to match  with  SSA to obtain  benefit  information  with  the  IRS  for unearned 
income  information,  and  with  the  State  wage  and unemployment  agencies  for wage  and 
compensation  information.  Some  of the data  matches  are  indeed  found  to  be  mg,re 
useful  than  others,  particularly  for  different  categories  of beneficiaries.  For. example,  the 
Aid  to Families  with  Dependent  Children  program  would  find the  wage  and 
unemployment  benefit  data  matches  more  effective,  while  the  Medicaid  program  would 
find the  IRS  and  SSA data  matches  more  effective. 
Through  the  targeting  (selective  use)  option  offered  States  in the  JEVS  regulations, 
States  can  focus  the  data  matches  to the most  effective  matches.  While  the  IRS  data 
might  be  a year  old,  it is often  found  useful  as simply a lead to possible  unearned 
income  (bank  accounts,  dividends,  real  estate  sales,  etc:}. 
Further,  the  July  1994 IEVS  report  made  recommendations  for the  I%l!ler!!!!agencies 
responsl%le  for  the  lEVS  regulations  to make  adjustments  to the  requirem@.s  that 
would  enhance  State  flexibility  and  efficiency  of the IEV!3. 
Pazes  3-4- We  agree  that  States  techniques  vary widely  for asset  and  resource 
verification  because  of workload  constraints  and  priorities.  States  have  to  adjust 
workload  priorities  to address  verification  techniques  that  have proved  to be  effective. 
States  have  the  experience  and knowledge  to base  any priorities  established  to  the  most 
productive  methods.  States  are given  the flexibility by the  FederaI  I13VS regulations  to 
target  followup  efforts  to  the  most  productive  sources.  We  strongly  believe  if States  use 
the  flexibility  currently  offered  under  the IEVS  requirements  to focus  on productive 
folIowup  infor&ation,  more  errors  can be prevented. 
States  need  to  analyze  and  target  the  use of information  obtained  through  the  IEVS, 
particularly  leads  from  the  IRS  and  SSA for long-term  care.  Our  contact  with  States,  in 
the majority  of cases,  indicates  these  leads  are  useful  and  that  States  want  more  access 
to Federal  data  sources.  The  statements  made  on page  4 are  too  vague  to  be  useful. 
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 Page  5 
While  there  is some  question  about  the  usefulness  of some  of the  IEVS  data  sources; 
e.g., the  Beneficiary  Earnings  and  Data  Exchange  with  the  SSA and  the  IRS  data  match 
for some  categories  of beneficiaries,  other  data  matches  are  routine,  required  data 
matches  for  the  States;  e.g., the  SSA benefit  match  and  the  wage  and  unemplopnent 
compensation  matches. 
This  report  seems  to imply  that  States  do not  conduct  routine  data  matches  with  the 
lEVS  components.  We  do not  believe  that  the  fiidings  and  recommendations  of the 
July  1994 OIG  report  on 155VSreflect  this.  Those  findings  and  recommendations  were 
directed  to making  the  existing  data  match  requirements  more  useful  and  efficient  for 
States. 
We  also want  to  add  that  the  IEVS  interagency  work  group,  with  the  Administration  for 
Children  and  Families  as the  lead  componen4  is currentIy  working  with  the  OIG  and 
%tates  in assessing  the  modifications  needed  to make  the  INS  more  cost-effective  and 
efficient.  The  work  group  has  also  been  worting  with  five pilot  States  to  access  and 
analyze  the  usefulness  of Veterans  Administration  benefit  data.  States  seem  encouraged 
by the  pilot  results,  and  these  data  should  be  especially  helpful  for  eligibfity 
determinations  for  long-texm  care  beneficiaries. 
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