Department of Health and Human Services 


OFFICE OF 

INSPECTOR GENERAL 

DETERMINING IF CHILDREN 

ENROLLED IN SEPARATE 

SCHIPS WERE ELIGIBLE FOR 

MEDICAID 

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 Investiga ions t

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 Children’s 

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 State’s 

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 State’s 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. 

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EXECUTIVE SUMMARY

However, inconsistent income calculations and lack of 

documentation create vulnerabilities. Thirteen percent of children’s 

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 applicant’s 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. 

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∆ 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 
∆ INTRODUCTION I N T R O D U C T I O N 

OBJECTIVE 

To determine whether children enrolled in separate State Children’s 

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. 

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INTROD UCTION

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 family’s countable income and 

child’s 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). 

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INTROD UCTION 

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 

State’s 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 

family’s 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 family’s countable income and the child’s 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 family’s income 

cannot exceed. The upper and lower income limits for SCHIP vary by 

State. 

To determine what percentage of the FPL a family’s countable income 

represents, States first determine the family’s 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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INTROD UCTION 

States, however, use annual income amounts to determine eligibility 

rather than using monthly figures. 

Generally, income disregards are amounts that are subtracted from the 

family’s 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 family’s gross income to arrive at the family’s countable 

income. The family’s countable income and the number of people in the 

household are then used to determine what percentage of the FPL the 

family’s countable income represents, based on the Federal Poverty 

Guidelines published yearly in the Federal Register. If the family’s 

countable income falls within the eligibility range the State established 

for the child’s age group, the child is determined income eligible for 

SCHIP. States must redetermine enrolled children’s 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. 

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INTROD UCTION 

o caseworker notes; 

o calculation sheets the State used, which detail how gross and 

countable income were calculated; and 

o the family’s 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 child’s age, family’s countable income, and household 

composition. For those children whom we determined that their 

family’s 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 Medicaidexpansion 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). 

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INTRODUCTION 

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 State’s 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 State’s 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 State’s criteria for separate SCHIP eligibility: 

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INTRODUCTION 

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 family’s gross income prior to any income disregards; 

o family’s 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 family’s 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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INTRODUCTION 

SCHIP directors and administrators for the 36 States with separate 

SCHIPs. To gain additional information about individual State 

SCHIPs, we obtained each State’s 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 President’s Council on 

Integrity and Efficiency. 

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∆ FINDINGS 

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* 

Age Range Federal Poverty 

Level Range Income Range 

Case 1 

State Criteria Under age 1 200-250% $2,020.00 - $2,525.00 

Family 

(2 members total) 

Child is under 

age 1 125% $1,263.12 

Case 2 

State Criteria 6-19 years 100-200% $1,271.67 - $2,543.34 

Family 

(3 members total) 

Child is 14 

years old 73% $923.95 

Case 3 

State Criteria 0-6 years 134-185% $2,755.94 - $3,804.84 

Family 

(6 members total) 

Child is 4 years 

old 126% $2,555.46 

Case 4 

State Criteria 1-5 years 134-200% $1,677.23 - $2,503.33 

Family

 (3 members total) 

Child is 3 years 

old 118% $1,480.12 

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 State’s 

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 family’s monthly income, making the child appear to be 

eligible for separate SCHIP, although the child was actually eligible for 

Medicaid. 

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FINDING 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 family’s 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 family’s income being more than $500 below the minimum for 

SCHIP eligibility in the child’s 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 family’s income 

exceeded eligibility limits. 

Federal regulation (42 CFR § 457.320) allows States to establish income 

limits for SCHIP eligibility. If a family’s 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 

family’s 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 

Age Range Federal Poverty 

Level Range Annual Income Range* 

Case 5 

State Criteria 6-19 years 100-200% $18,100 - $36,200 

Family 

(4 members total) 

Child is 10 years 

old 248% $68,920 

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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FINDINGS 

Case 5: The caseworker used only the family’s income from 

self-employment, although they also had income from other 

employment. Counting only the self-employment income, the family’s 

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 family’s actual countable 

income was $68,920, which is above the maximum for separate SCHIP 

eligibility in this State. 

Thirteen percent of children’s 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 State’s 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 family’s 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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FINDINGS 

Eight percent of children’s case 

files exhibited inconsistencies in 

calculated income. In cases for 

8 percent of children, income 

was calculated in ways that 

diverged from documented 

State guidelines, and as a 

result, the countable incomes 

we calculated differed from the 

amounts the State reported. 

Table 3: Differences Between Income 

Calculated by State and Income 

Calculated by OIG* 

No. of Cases Amount of Difference 

14 $0.01 - $1.00 

5 $1.00 - $10.00 

3 $10.00 - $50.00 

1 $50.00 - $100.00 

8 $100.00 - $500.00 

*In two cases, annual incomes have been 

converted to monthly incomes. 

However, for these cases, we Source: 2004 OIG analysis of case-file 

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 percent of 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 State’s determinations, we were unable to identify which year’s FPL 

guidelines to use in assessing proper enrollment in this State. 

 O E I - 0 7 - 0 3 - 0 0 2 2 0 DETERMINING IF CHILDREN E NROLLED IN S EPARATE SCHIP S WERE E LIGIBLE FOR MEDICAID 12 
FINDING S 

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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FINDINGS 

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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FINDING S 

A p oximately 5 p r en re p r e c t of child n’s 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 State’s and the OIG’s 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 family’s monthly gross income ($1,189.01). However, the case-file 

documentation lists the family’s 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 children’s 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 family’s 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 

State’s 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 

 O E I - 0 7 - 0 3 - 0 0 2 2 0 DETERMINING IF CHILDREN E NROLLED IN S EPARATE SCHIP S WERE E LIGIBLE FOR MEDICAID 15 
FINDINGS 

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. 

 O E I - 0 7 - 0 3 - 0 0 2 2 0 DETERMINING IF CHILDREN E NROLLED IN S EPARATE SCHIP S WERE E LIGIBLE FOR MEDICAID 16 

∆ APPENDIX ~ A 

State’s 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 

Enrollment 

, NR NR NR [ [ NR [ [ [ , [ [ [ [ [ , [ 

Redetermination 

Information 

Verified 

Same as at 

Enrollment 

[ [ , , [ [ NR NR [ [ NR [ [ [ , [ [ [ 

Determinations 

Reviewed 

Periodically 

[ [ [ [ [ [ [ [ [ [ , [ [ [ [ [ [ , 

Medicaid-Eligible 

Children 

Identified as 

Result 

of Review 

, , [ , [ , , , [ , NR [ [ , , [ [ [ 

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APPENDIX A

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 

Enrollment 

[ [ NR [ [ [ [ [ [ [ [ [ [ NR [ [ [ [ 

Redetermination 

Information 

Verified 

Same as at 

Enrollment 

[ [ [ NR [ [ , [ [ [ NR [ , , [ [ [ [ 

Determinations 

Reviewed 

Periodically 

[ [ , [ [ [ [ [ [ [ [ [ [ [ , [ , [ 

Medicaid-Eligible 

Children 

Identified as a 

Result 

of Review 

[ , NR , [ , [ NR [ [ [ NR NR [ NR [ NR , 

Key 

[ Indicates State’s response was Yes 

, Indicates State’s response was No 

NR Indicates State did not respond 

OEI-07-03-00220 DETERMINING IF CHILDREN E NROLLED IN S EPARATE SCHIP S WERE E LIGIBLE FOR MEDICAID 19 
∆ APPENDIX ~ B

Separate SCHIP Universe and Sample 

The following Table shows the total number of children enrolled in each 

State’s separate SCHIP and the total number of children selected in our 

sample in each State. 

State Separate 

Universe 

Percent of 

Universe 

Separate 

Sample 

Percent of 

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 Jersey’s separate universe is actually 61,245. 

**The totals do not equal 100 percent due to rounding. 

OEI-07-03-00220 DETERMINING IF CHILDREN E NROLLED IN S EPARATE SCHIP S WERE E LIGIBLE FOR MEDICAID 20 
∆ APPENDIX ~ A APPENDIX ~ B APPENDIX ~ C 

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 E NROLLED IN S EPARATE SCHIP S WERE E LIGIBLE FOR MEDICAID 21 
APPENDIX~C 

Source: OIG worksheet used in case-file review 

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OEI-07-03-00220 DETERMINING IF CHILDREN E NROLLED IN S EPARATE SCHIP S WERE E LIGIBLE FOR MEDICAID 23 

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. 

Δ APPENDIX ~ D 

Confidence Intervals for Projections

Point Estimate Confidence Interval

1.0% 0.3 - 2.6%

13.0% 9.6 - 16.3%

8.0% 5.5 - 11.2%

5.4% 3.4 - 8.2%

4.9% 3.0 - 7.6%

7.5% 5.1 - 10.6%

3.9% 2.2 - 6.3%

2.3% 1.1 - 4.4%

1.3% 0.4 - 3.0%

Confidence Intervals - Errors and Inconsistencies Found

Improperly Enrolled Because Eligible for 

Medicaid

Lacked Documentation to Support Eligibility 

Determinations

Income Calculations Not Supported by State 

Guidelines*

Calculations Inconsistent with 

Documented State Guidelines

OIG Could Not Duplicate Caseworker's 

Calculations

Cases Within 5 Percent of Being Eligible 

for Medicaid

Lacked Documentation to Support 

States' Determinations of Separate 

SCHIP Eligibility

*This confidence interval uses the normal distribution; all others use the binomial distribution.

Type of Error or Inconsistency

Lacked Documentation of Countable 

Income
∆ APPENDIX ~ E 

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APPENDIX~E 

OEI-07-03-00220 DETERMINING IF CHILDREN E NROLLED IN S EPARATE SCHIP S WERE E LIGIBLE FOR MEDICAID 25 
AGENCY COMMENTS

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AGENCY COMMENTS

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∆ END NOTES ACKNOWLEDGMENTS APPENDIX ~ B ACKNOWLEDGMENTS 


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, Proj er ect Lead

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 Services Branch 

Barbara Tedesco, Mathematical Statistician 

OEI-07-03-00220 DETERMINING IF CHILDREN E NROLLED IN S EPARATE SCHIP S WERE E LIGIBLE FOR MEDICAID 28