Report to Congressional Committees 

United States General Accounting Office 

GAO

March 2002 CHILDREN'S HEALTH 

INSURANCE 

Inspector General 

Reviews Should Be 

Expanded to Further 

Inform the Congress 

GAO-02-512 
Page i GAO-02-512 OIG Child Health Reviews 

Letter 1

Results in Brief 3

Background 4

OIG’s Assessment of Appropriate Enrollment Would Benefit From 

an Expanded Selection of States 11

While States’ Evaluations Offered Limited Results, Future OIG 

Reviews May Benefit from Improved Data Sources 14

Conclusions 18

Recommendations to the HHS Inspector General 19

Agency Comments and Our Evaluation 19

Appendix I Comments from the Department of Health and 

Human Services’ Office of Inspector General 21 

Related GAO Products 24 

Tables 

Table 1: OIG Sampling Framework for SCHIP Analysis, Fiscal 

Year 1999 10

Table 2: Enrollment Practice of 12 States from Which the Random 

Sample Was Drawn 13

Table 3: States’ Design Choices and Percentage of Nationwide 

SCHIP Enrollment, Fiscal Year 1999 14

Table 4: Limitations to Five States’ SCHIP Evaluations Identified by 

the OIG, February 2001 15

Figures 

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

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

Abbreviations 

BBRA Medicare, Medicaid and SCHIP Balanced Budget 

Refinement Act 

CMS Centers for Medicare and Medicaid Services 

CPS Current Population Survey 

EPSDT Early and Periodic Screening, Diagnostic, and 

Treatment 

HCFA Health Care Financing Administration 

HHS Department of Health and Human Services 

HRSA Health Resources and Services Administration 

OIG Office of Inspector General 

SCHIP State Children’s Health Insurance Program 
Page 1 GAO-02-512 OIG Child Health Reviews 

March 29, 2002 

The Honorable Max Baucus 

Chairman 

The Honorable Charles E. Grassley 

Ranking Minority Member 

Committee on Finance 

United States Senate 

The Honorable W.J. “Billy” Tauzin 

Chairman 

The Honorable John D. Dingell 

Ranking Minority Member 

Committee on Energy and Commerce 

House of Representatives 

The Congress created the State Children’s Health Insurance Program 

(SCHIP) in 1997 to reduce the number of uninsured children in families 

with incomes that are too high to qualify for Medicaid.1

 For SCHIP, the 

Congress appropriated $40 billion over 10 years, with funds allocated 

annually to the 50 states, the District of Columbia,2

 and the U.S. 

commonwealths and territories. Financed jointly by the states and the 

federal government, SCHIP offers a strong incentive for states to 

participate by offering a higher federal matching rate—that is, the federal 

government pays a larger proportion of program expenditures—than the 

Medicaid program.3

 While this incentive encourages efforts to reduce the 

number of uninsured children through state participation in SCHIP, 

concerns existed that states might inappropriately enroll Medicaid-eligible 

children in SCHIP and thus obtain higher federal matching funds than 

 1

Medicaid is a federal-state program that provides health care coverage to certain 

categories of low-income adults and children. SCHIP was established as title XXI of the 

Social Security Act by P.L. 105-33 and is classified to 42 U.S.C. § 1397aa et seq. 

2

The District of Columbia is considered a state for purposes of this report. 

3

SCHIP offers an “enhanced” federal matching rate that is derived from a state’s Medicaid 

rate. Each state’s match from SCHIP is equal to 70 percent of its Medicaid matching rate 

plus 30 percentage points, not to exceed a federal share of 85 percent. While the federal 

share of expenditures for Medicaid can range from 50 to 77 percent, federal shares of 

SCHIP expenditures can range from 65 to 84 percent. 

United States General Accounting Office 

Washington, DC 20548 
Page 2 GAO-02-512 OIG Child Health Reviews 

allowed under Medicaid.4 Inappropriate SCHIP enrollment also can affect 

what benefits are available for children because the SCHIP statute allows 

states to (1) expand their Medicaid programs, thus affording SCHIPeligible children the same benefits and services that the state Medicaid 

program provides, (2) construct separate child health programs distinct 

from Medicaid that could provide more limited benefit packages and could 

include copayments that are generally not permitted for children in 

Medicaid, or (3) use a combination of both approaches. To address 

concerns regarding inappropriate enrollment, the SCHIP statute requires 

states to screen all SCHIP applicants for Medicaid eligibility and, if they 

are eligible, enroll them in Medicaid. 

Even with the requirement for Medicaid screening in place, concerns 

remained that children who were eligible for Medicaid might have been 

inappropriately enrolled in SCHIP.5

 Additionally, there was interest in 

assessing the progress states had made to reduce the number of uninsured 

children, including the extent to which states had met objectives and 

goals, which they established in their SCHIP programs.6

 In the Medicare, 

Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (BBRA), the 

Congress directed the Department of Health and Human Services (HHS) 

Office of Inspector General (OIG) to conduct a series of studies on these 

issues.7

 BBRA specified that the OIG should review states that provide 

SCHIP coverage separately from their Medicaid programs. 

BBRA also directed that we review and report on the OIG’s work. In 

response, we assessed the OIG’s efforts to inform the Congress on (1) 

determining whether Medicaid-eligible children were improperly enrolled 

in SCHIP and (2) assessing states’ progress in reducing the number of 

uninsured children, including the progress states have made in meeting the 

objectives and goals initially established in their SCHIP programs. 

 4

See U.S. General Accounting Office, Children’s Health Insurance Program: State 

Implementation Approaches Are Evolving, GAO/HEHS-99-65 (Washington, D.C.: May 14, 

1999). 

5

See H.R. Rep. No. 106-199, at 60 (1999). 

6

The SCHIP statute includes a provision requiring states, in establishing their programs, to 

specify strategic objectives and performance goals for providing child health assistance 

under SCHIP. See 42 U.S.C. §1397gg. 

7

BBRA amended the Social Security Act to require the HHS OIG to audit a sample of states 

beginning in fiscal year 2000 and every third fiscal year thereafter. 
Page 3 GAO-02-512 OIG Child Health Reviews 

To examine these issues, we reviewed the OIG’s approach and 

methodology for selecting its sample of states for the first in its series of 

studies to evaluate states’ performance in screening SCHIP applicants for 

Medicaid eligibility and to assess states’ progress in reducing the number 

of low-income uninsured children. We examined the OIG’s findings in the 

context of other research, including our own work.8

 In some cases, we 

reviewed work released after the OIG’s studies were completed and 

published to determine the extent to which other research corroborated 

the OIG’s findings. Finally, we examined OIG’s recommendations to the 

Health Care Financing Administration (HCFA) and the Health Resources 

and Services Administration (HRSA), which jointly oversee SCHIP.9

 Our 

work was conducted from December 2001 through March 2002 in 

accordance with generally accepted government auditing standards. 

In responding to the mandate, the OIG published two reports, the first 

addressing whether Medicaid-eligible children were enrolled in SCHIP and 

the second assessing states’ progress in reducing the number of uninsured 

children.10 The scope of the OIG studies included sampling 5 of the 13 

states that only enrolled children in separate child health programs during 

1999. The OIG concluded that Medicaid-eligible children were not being 

enrolled in SCHIP by the 13 states that administer separate child health 

programs. However, because of variations in the administration of state 

programs, generalizing from the findings in 5 states to the 13 states may 

not be appropriate. Furthermore, the issue of appropriate enrollment is 

not limited to states with completely separate child health programs, but 

also applies to those states with combination programs and Medicaid 

expansions, which also receive the higher SCHIP matching rate for state 

program expenditures. Because the scope of the study was limited to the 

13 states with separate SCHIP programs, the experience of other states—

particularly the 13 states that operated SCHIP combination programs—

 8

See the related products listed at the end of this report. 

9

In June 2001, the secretary of HHS announced that HCFA’s name would be changed to the 

Centers for Medicare and Medicaid Services. For this report, we will continue to refer to 

HCFA where our findings apply to the organizational structure and operations associated 

with that name. 

10See Department of Health and Human Services, Office of Inspector General, State 

Children’s Health Insurance Program: Ensuring Medicaid Eligibles Are Not Enrolled in 

SCHIP, OEI-05-00-00241 (Washington, D.C.: Feb. 2001), and Department of Health and 

Human Services, Office of Inspector General, State Children’s Health Insurance Program: 

Assessment of State Evaluations Reports, OEI-05-00-00240 (Washington, D.C.: Feb. 2001). 

Results in Brief 
Page 4 GAO-02-512 OIG Child Health Reviews 

was not addressed. Had the scope of review included the 13 additional 

states that offered separate child health programs under combination 

plans, the proportion of children represented would have increased from 

16.5 percent to 65 percent of SCHIP enrollees in 1999. Future OIG reviews 

that consider differences in enrollment practices across states and a wider 

universe of states could provide more information on the effectiveness of 

states’ efforts to ensure appropriate enrollment. 

Due to limitations the OIG identified in states’ SCHIP evaluations, the OIG 

was unable to conclude whether states were making progress in reducing 

the number of uninsured children and in meeting the objectives and goals 

they established in their SCHIP programs. For example, the OIG found 

that the 5 states it reviewed generally did not have sound methodologies to 

determine reductions in the number of uninsured children, in part because 

they did not always take into account other factors—such as changes in 

the economy or private insurance coverage—that also may affect the 

number of uninsured children. Furthermore, the OIG found that some 

states had set program goals without considering how they might be 

measured and that states’ staffs often lacked adequate evaluation skills. 

Based on its findings, the OIG made recommendations to HCFA and HRSA 

to help improve states’ ability to conduct more rigorous evaluations of 

their programs. Because of the limitations identified by the OIG, it may 

wish to look beyond states’ own evaluations and analyze other sources of 

analysis for its next review. Over time, other federal initiatives—such as 

improvements in state-level estimates of the number of uninsured—may 

help states to improve their measurement of progress under SCHIP. 

We are recommending that the HHS inspector general expand the scope of 

analysis to include a broader array of states to further inform the Congress 

on states’ progress in ensuring appropriate SCHIP enrollment. The OIG 

concurred with our recommendations, and provided general comments 

regarding approaches to designing future reviews. 

States provide health care coverage to low-income uninsured children 

largely through two federal-state programs—Medicaid and SCHIP. Since 

1965, Medicaid has financed health care coverage for certain categories of 

low-income individuals—over half of whom are children. To expand 

health coverage for children, the Congress created SCHIP in 1997 for 

children living in families whose incomes exceed the eligibility limits for 

Background 
Page 5 GAO-02-512 OIG Child Health Reviews 

Medicaid. Although SCHIP is generally targeted at families with incomes at 

or below 200 percent of the federal poverty level, each state may set its 

own income eligibility limits within certain guidelines.11 As of February 

2002, 16 states have created Medicaid expansion programs, 16 states have 

separate child health programs, and 19 states have combination Medicaid 

expansions and separate child health components. (See figure 1.) 

 11In general, the SCHIP statute targets children in families with incomes at or below 200 

percent of the poverty level, which equates to $36,200 for a family of four in 2002. The 

statute allows a state to expand eligibility up to 50 percentage points above its Medicaid 

income eligibility standard in 1997. See 42 U.S.C. § 1397jj(b)(1)(B)(ii)(I). 
Page 6 GAO-02-512 OIG Child Health Reviews 

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

Note: Since the period reviewed by the OIG (1999), 8 states have altered their design choices under 

SCHIP. Seven states—Illinois, Indiana, Maryland, Mississippi, North Dakota, South Dakota, and 

Texas—have changed from Medicaid expansions to combination programs. West Virginia changed 

from a combination program to a separate child health program. 

Source: Centers for Medicare and Medicaid Services (CMS). 

SCHIP offers significant flexibility in program design and benefits 

provided by allowing states to use existing Medicaid structures or create 

child health programs that are separate from Medicaid. Medicaid 

expansions must follow Medicaid eligibility rules and cost-sharing 

requirements, which are generally not allowed for children. A Medicaid 

expansion also creates an entitlement by requiring a state to continue 

providing services to eligible children even when its SCHIP allotment is 

Combination program (19)

Separate child health program (16)

Medicaid expansion (16)

Washington D.C.
Page 7 GAO-02-512 OIG Child Health Reviews 

exhausted.12 In contrast, a state that chooses a separate child health 

program approach may introduce limited cost-sharing. Additionally, a 

state with a separate child health program under SCHIP may limit its own 

annual contribution, create waiting lists, or stop enrollment once the funds 

it budgeted for SCHIP are exhausted. States choosing combination 

programs take both approaches. For example, Connecticut’s combination 

SCHIP program has a limited Medicaid expansion—increasing eligibility 

for 17 to 18 year olds up to 185 percent of the federal poverty level. 

Additionally, the state created a separate child health program, which 

covers all children in families with incomes over 185 percent, up to 300 

percent of the federal poverty level. 

With regard to program benefits, the choices states make in designing 

SCHIP have important implications. For example, a state opting for a 

Medicaid expansion under SCHIP must provide the same benefits offered 

under its Medicaid program. These benefits are quite broad and include 

Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) 

services for most children.13 EPSDT services are designed to target health 

conditions and problems for which children are at risk, including iron 

deficiency, obesity, lead poisoning, and dental disease. These services are 

also intended to detect and correct conditions that can hinder a child’s 

learning and development, such as vision and hearing problems.14 In 

contrast, states opting for separate child health programs may depart from 

Medicaid requirements and provide benefits based on coverage standards 

 12However, states that expend their available SCHIP funds may then claim Medicaid 

matching rates for benefits and services provided under Medicaid expansions. 

13EPSDT is optional for the medically needy population, a category of individuals who 

generally have too much income to qualify for Medicaid but have “spent down” their 

income by incurring medical and/or remedial care expenses. See 42 U.S.C. § 1396 

(a)(10)(C). 

14For additional information on EPSDT, see U.S. General Accounting Office, Medicaid: 

Stronger Efforts Needed to Ensure Children’s Access to Health Screening Services, 

GAO-01-749 (Washington, D.C.: July 13, 2001). 
Page 8 GAO-02-512 OIG Child Health Reviews 

in the SCHIP legislation.15 SCHIP separate child health programs generally 

cover basic benefits, such as physician services, inpatient and outpatient 

hospital services, and laboratory and radiological services. Other benefits, 

such as prescription drugs and hearing, mental health, dental, and vision 

services, may be provided at the states’ discretion. States also may place 

limits on services provided and require cost-sharing, while Medicaid 

generally does not permit cost-sharing for children. 

In addition to having flexibility in program design and benefits offered, 

states participating in SCHIP have a larger proportion of their program 

expenditures paid by the federal government than for Medicaid. A state’s 

Medicaid program expenditures are matched by the federal government 

using a formula that is based on a state’s per capita income in relationship 

to the national average. Federal matching rates for SCHIP are 

“enhanced”—they are established under a formula that takes 70 percent of 

a state’s Medicaid matching rate and adds 30 percentage points, with an 

overall federal share that may not exceed 85 percent.16 For 2001, federal 

shares of SCHIP expenditures ranged from 65 to 84 percent, with the 

national average federal share equaling about 72 percent. In contrast, 2001 

federal shares for Medicaid ranged from 50 to 77 percent of expenditures, 

with the national average at about 57 percent. The SCHIP statute requires 

states to screen all SCHIP applicants for Medicaid eligibility and, if they 

are eligible, enroll them in Medicaid.17

 15In prescribing a package of benefits, states with separate child health programs choose 

among four coverage standards. First, the benchmark standard provides coverage 

equivalent to that received by federal employees, state employees, or those enrolled in a 

state’s health maintenance organization with the largest insured commercial non-Medicaid 

enrollment. Second, the benchmark equivalent standard provides basic coverage for 

inpatient and outpatient hospital care; physicians’ surgical and medical services; laboratory 

and x-ray services; and well-baby and well-child care, including age-appropriate 

immunizations. Third, existing comprehensive state coverage includes benefit packages for 

state-operated children’s health insurance programs in Florida, New York, and 

Pennsylvania. Fourth, states may receive approval from the secretary of health and human 

services for benefit packages that provide appropriate coverage for low-income children 

but do not match the first three standards. 

16For example, a state with the minimum 50-percent Medicaid match receives a 65-percent 

match under SCHIP. 

17See 42 U.S.C. § 1397bb(b)(3). 
Page 9 GAO-02-512 OIG Child Health Reviews 

BBRA included a mandate that the OIG conduct a study every 3 years, 

beginning in fiscal year 2000, to (1) determine the number, if any, of 

enrollees in SCHIP who are eligible for Medicaid and (2) assess states’

progress in reducing the number of uninsured low-income children, 

including progress in achieving the strategic objectives and performance 

goals in their SCHIP plans, which set forth how states intend to use their 

SCHIP funds to provide child health assistance.18

BBRA directed the OIG to review states with approved SCHIP programs 

that do not provide health benefits under Medicaid;19 consequently, the 

OIG focused on the 15 states that in 1999 operated separate child health 

programs under SCHIP.20 Of these 15 states, the OIG excluded 2 states—

Washington and Wyoming—because the delayed start-up of their 

programs resulted in no enrollees in fiscal year 1999, the year that the OIG 

reviewed. From the remaining 13 states, the OIG used a two-stage 

sampling plan to select 5 states for review. The OIG first divided the 13 

states into two strata, selecting Pennsylvania separately as stratum I 

because it had a large number of children—81,758—enrolled in its 

program in fiscal year 1999. Enrollment across the remaining 12 states 

ranged from 1,019 in Montana to 57,300 in North Carolina. The OIG 

randomly selected 4 of the 12 states (North Carolina, Oregon, Utah, and 

Vermont) for inclusion in its study. (See table 1.) 

 18The OIG is charged with protecting the integrity of HHS programs, as well as the health 

and welfare of the beneficiaries of those programs. The OIG’s duties are carried out 

through a nationwide network of audits, investigations, inspections, and other missionrelated functions. The OIG informs the secretary and the Congress of program and 

management problems and recommends legislative, regulatory, and operational 

approaches to correct them. The OIG may conduct its own evaluations or those mandated 

by the Congress. 

19The BBRA mandate provides that “A state described in this [mandate] is a state with an 

approved state child health plan...that does not, as part of such plan, provide health 

benefits coverage under the State’s Medicaid program.” 42 U.S.C. § 1397hh(d)(2). 

20The 15 states were Arizona, Colorado, Delaware, Georgia, Kansas, Montana, Nevada, 

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

OIG Studies 
Page 10 GAO-02-512 OIG Child Health Reviews 

Table 1: OIG Sampling Framework for SCHIP Analysis, Fiscal Year 1999 

Stratum State SCHIP enrollment 

I (Selected by OIG) Pennsylvania 81,758 

II (Universe of states for purposes of 

random selection) 

Arizona 26,807 

 Colorado 24,116 

 Delaware 2,433 

 Georgia 47,581 

 Kansas 14,443 

 Montana 1,019 

 Nevada 7,802 

 North Carolinaa 57,300 

 Oregona 27,285 

 Utaha 13,040 

 Vermonta 2,055 

 Virginia 16,895 

a

State was randomly selected for the OIG’s review. 

Source: CMS enrollment figures for 1999. 

For the 5 sample states, the OIG reviewed a variety of documents the 

states submitted to HCFA, such as their SCHIP plans and SCHIP 

evaluation reports, which are states’ assessments of the effectiveness of 

their programs.21 OIG staff conducted site visits and met with officials 

responsible for administering SCHIP in all 5 states. The OIG also randomly 

selected 100 active SCHIP case files from each of the 5 states in order to 

evaluate whether Medicaid-eligible children were incorrectly enrolled in 

SCHIP. The OIG did not verify accuracy and completeness of the state 

case files; rather, it focused on whether the information in each file 

supported the conclusion reached by the state. 

 21A state’s SCHIP evaluation was required to address several areas of analysis, including (1) 

the quality of health coverage provided, (2) its choices of health benefits coverage, (3) 

activities in coordinating SCHIP with other public and private programs, (4) changes in 

trends in the states that affect the provision of health insurance, and (5) recommendations 

for improving SCHIP. 
Page 11 GAO-02-512 OIG Child Health Reviews 

In determining whether Medicaid-eligible children were improperly 

enrolled in SCHIP, the OIG reported that, based on a sample of 5 states, 

SCHIP enrollees in the 13 states with separate child health programs were 

generally appropriately enrolled. However, because of variations in the 

administration of state programs, generalizing from the 5 states to the 13 

states may not be appropriate. In addition, focusing on only those states 

with separate SCHIP programs does not capture the experience of the 

majority of states or the majority of SCHIP-enrolled children. Ensuring 

appropriate enrollment in SCHIP is important regardless of a state’s SCHIP 

design, because any child eligible for Medicaid that is incorrectly enrolled 

in SCHIP results in a state receiving a higher federal matching rate. 

Reviewing states, for example, that operate separate child health programs 

as part of a combination program would have increased the proportion of 

children under consideration from 16.5 percent to 65 percent of all SCHIP 

children enrolled in 1999, and thus provided more comprehensive 

information regarding states’ enrollment practices. 

To determine whether states were improperly enrolling Medicaid-eligible 

children in SCHIP, the OIG separated the 13 states with separate child 

health programs into two strata. The first stratum was the state of 

Pennsylvania, which the OIG intentionally selected because it had the 

most children enrolled in SCHIP among the 13 states. Four states were 

then randomly selected from the remaining 12 states. Among the 5 states it 

reviewed, the OIG identified only a few cases in which Medicaid-eligible 

children were inappropriately enrolled.22 For example, it reported that 1 

state had a single case in which a Medicaid-eligible child was enrolled in 

SCHIP, while 2 other states had three and five such cases. The report also 

found that 2 states did not have any Medicaid-eligible children enrolled in 

SCHIP. The OIG concluded from these findings that most SCHIP enrollees 

were correctly enrolled in the 13 states administering separate child health 

programs. 

Variations in states’ enrollment practices, however, raise questions about 

the extent to which results from a sample of 5 states can be generalized to 

13 states. Had the OIG drawn its random sample of active SCHIP cases 

across the 13 states in its sampling universe, it would have been better 

 22Based on a two-stage stratified-cluster sample, the OIG estimated that, at a 90-percent 

confidence level, from 97.6 to 99.6 percent of SCHIP enrollees were correctly enrolled in 

the 13 states administering separate child health programs in fiscal year 1999. 

OIG’s Assessment of 

Appropriate 

Enrollment Would 

Benefit From an 

Expanded Selection 

of States 

Alternative Sampling 

Methodologies May More 

Fully Account for Variation 

among States 
Page 12 GAO-02-512 OIG Child Health Reviews 

able to generalize its results. An OIG official told us that the office chose 

to analyze a sample of 5 states rather than all 13 states because of time and 

resource constraints. Recognizing that analyzing a pure random sample of 

cases across a large number of states may be too resource intensive, 

choosing a stratified sample of states may provide more information on 

the extent to which accurate enrollment may vary with different states’

practices. Even with a stratified sample, however, generalization to all 

states may be problematic. 

The OIG did select a stratified sample and chose one characteristic—size 

of a state’s SCHIP program—to develop two strata. While dividing states in 

terms of size is potentially useful, additional distinctions may be important 

because program characteristics vary considerably from state to state. For 

example, states with differing administrative structures (New York uses 

health plans to determine eligibility and enroll eligible individuals, 

Colorado uses an enrollment contractor, and Oregon uses its Medicaid 

staff to determine SCHIP eligibility) could be grouped by certain 

characteristics for review. This could help determine whether such 

differences in administrative structures have a bearing on appropriate 

enrollment in SCHIP. 

To examine whether the OIG’s sampling approach reflected variations in 

states’ administrative structures, we categorized the 12 states in the 

second stratum based on whether they had the same program staff 

determine eligibility for both the SCHIP and Medicaid programs, which 

can help achieve consistency in eligibility decisions. We found that the 

random sample of 4 states did not include any states where different 

employees were responsible for determining SCHIP and Medicaid 

eligibility, thus raising concerns as to whether conclusions could be 

generalized. (See table 2.) 
Page 13 GAO-02-512 OIG Child Health Reviews 

Table 2: Enrollment Practice of 12 States from Which the Random Sample Was 

Drawn 

OIG stratum II State 

Who determines SCHIP and 

Medicaid eligibility—same 

staff or different staff? 

Randomly selected North Carolina Same 

 Oregon Same 

 Utah Same 

 Vermont Same 

States not selected Arizona Different 

 Colorado Different 

 Delaware Same 

 Georgia Different 

 Kansas Same 

 Montana Differenta

 Nevada Different 

 Virginia Same 

a

Montana generally uses a different staff to determine eligibility for each program; however, the 

state’s annual report notes that when children lose Medicaid coverage due to increases in family 

income, the Medicaid eligibility staff can enroll the children in SCHIP. In these circumstances, the 

same staff members would enroll children in both Medicaid and SCHIP. 

Source: SCHIP annual reports and state evaluations, 1999, 2000 and 2001. 

Because the scope of the study was limited to the 13 states with separate 

child health programs, the OIG examined 322,534, or 16.5 percent, of the 

approximately 2 million children enrolled in SCHIP in fiscal year 1999. A 

review that also included separate SCHIP programs in states that opted for 

a combination approach under SCHIP would have expanded the available 

universe to 26 states and to 65 percent of all SCHIP children enrolled in 

1999.23 Moreover, using the OIG’s general audit authority, the scope of 

future reviews could include states with SCHIP Medicaid expansions, 

which would provide the Congress with more complete information on the 

extent to which states are enrolling low-income children in the 

appropriate programs.24 If this approach had been used in 1999, 23 states 

 23Some states have altered their design choices under SCHIP since 1999, which has resulted 

in more combination and separate child health programs in SCHIP (19 states and 16 states, 

respectively, as of February 2002). If the OIG were to include in its scope the experience of 

states with combination programs for the 2001 SCHIP enrollment of 4.6 million, it would 

have selected a sample from 35 states, or 74 percent of all children enrolled. 

24See 5 U.S.C. Appendix 3, § 4(a)(1). 

Increasing the Number of 

States under Consideration 

Would Better Inform the 

Congress 
Page 14 GAO-02-512 OIG Child Health Reviews 

and almost one-fourth of all children enrolled in SCHIP would have been 

added. (See table 3.) 

Table 3: States’ Design Choices and Percentage of Nationwide SCHIP Enrollment, 

Fiscal Year 1999 

SCHIP design 

choices States 

Percentage of total 

SCHIP enrollment 

Separate child 

health program 

(15 states) 

Arizona, Colorado, Delaware, Georgia, 

Kansas, Montana, Nevada, North Carolina, 

Oregon, Pennsylvania, Utah, Vermont, 

Virginia, Washington, and Wyoming. 16.5 

Combination 

(13 states) 

Alabama, California, Connecticut, Florida, 

Iowa, Kentucky, Maine, Massachusetts, 

Michigan, New Hampshire, New Jersey, 

New York, and West Virginia. 48.7a

Medicaid 

expansion 

(23 states) 

Alaska, Arkansas, District of Columbia, 

Hawaii, Idaho, Illinois, Indiana, Louisiana, 

Maryland, Minnesota, Mississippi, Missouri, 

Nebraska, New Mexico, North Dakota, Ohio, 

Oklahoma, Rhode Island, South Carolina, 

South Dakota, Tennessee, Texas, and 

Wisconsin. 23.3 

a

States with SCHIP combination programs have both a separate child health program and a Medicaid 

expansion component. The 48.7 percent cited in the table does not include the 11.1 percent of 

children who are enrolled in SCHIP Medicaid expansion components in these states. 

Source: CMS. 

The OIG identified important limitations to states’ evaluations that made it 

unable to conclude whether states were making progress in reducing the 

number of uninsured children and in meeting the objectives and goals that 

they established under SCHIP. For example, the OIG found that states 

made inappropriate assumptions in reporting data about the relationship 

of SCHIP enrollment to the rates of uninsured, which undermined the 

credibility of states’ results, and that states often had poor baseline data 

against which to measure progress. The OIG also found that states set 

goals without considering how to evaluate progress, and that little 

emphasis was placed on evaluation by the states. As a result, the OIG 

made recommendations to both HCFA and HRSA on ways that the federal 

government could assist and guide states in making improvements in their 

analyses. While the initial OIG reviews were inconclusive due to 

weaknesses in states’ evaluations, future efforts may benefit from federal 

initiatives under way aimed at improving state-level data and analyses of 

SCHIP. These initiatives, however, may not have been in place long 

enough to benefit the OIG’s next review, since results are due in 2003. As a 

While States’

Evaluations Offered 

Limited Results, 

Future OIG Reviews 

May Benefit from 

Improved Data 

Sources 
Page 15 GAO-02-512 OIG Child Health Reviews 

result, the OIG may wish to select a different approach—such as 

identifying states with more rigorous practices in evaluation, or 

augmenting its review with other sources beyond those provided by the 

states. 

The OIG identified limitations to the 5 states’ SCHIP evaluations and thus 

was unable to draw conclusions about states’ progress in reducing the 

number of uninsured children or meeting their stated objectives and goals. 

For example, the OIG cited concerns regarding the reliability of states’

reports of reductions in the number of uninsured, including inadequate 

data and evaluation practices. In cases in which states were unable to 

measure objectives that were established at the beginning of their SCHIP 

programs, their evaluations generally provided descriptive information on 

activities but did not assess the effect that such activities had on achieving 

specific goals. (See table 4.) For example, the OIG reported that none of 

the 5 states it reviewed attempted evaluations of their outreach programs 

or offered explanations of how such programs affected their measurable 

progress in enrollment or the number of uninsured children. 

Table 4: Limitations to Five States’ SCHIP Evaluations Identified by the OIG, 

February 2001 

Limitation Description 

Data problems and 

evaluation practices 

impaired evaluations 

• State-collected data were deficient or outdated. 

• State-level estimates based on national survey data were 

unreliable, particularly for smaller states. 

• States assumed that increased SCHIP enrollment meant 

reductions in uninsured. 

State reports were 

descriptive, not 

evaluative 

• Evaluations described activities without determining 

whether the activities were effective. 

• Information provided was qualitative and subjective. 

Goals were set without 

evaluation in mind 

• Goals could not be measured. 

• Evaluation practices were not established. 

Evaluation was not 

considered a priority 

• Administrators were focused on implementing programs 

rather than evaluating their success. 

Staff members lacked 

evaluation skills and 

training 

• SCHIP staff members were trained program administrators, 

but generally lacked thorough understanding of evaluation 

concepts and practices. 

• SCHIP staffs were small, making it unlikely that additional 

evaluation staff members would be hired. 

Source: HHS OIG, State Children’s Health Insurance Program: Assessment of State Evaluations 

Reports, OEI-05-00-00240 (Washington, D.C.: Feb. 2001). 

Of particular concern were limitations in measuring how well states are 

meeting the primary objective of the SCHIP program—reducing the 

Weaknesses in States’

SCHIP Evaluations Limited 

the OIG’s Ability to 

Measure Progress 
Page 16 GAO-02-512 OIG Child Health Reviews 

number of uninsured. As noted by the OIG, states—and other 

researchers—have been hampered by limited reliable state-level data 

regarding children’s insurance status. When SCHIP was enacted, estimates 

of the number of low-income uninsured children were derived from the 

annual health insurance supplement to the Current Population Survey 

(CPS), the only nationwide source of information on uninsured children by 

state. CPS is based on a nationally representative sample and is considered 

adequate to produce national estimates.25 However, CPS data have wellrecognized shortcomings, particularly with regard to state-level estimates, 

which can be unreliable and exhibit volatility from year to year because of 

small samples of uninsured low-income children, particularly in states 

with smaller populations. For example, using the 1994 through 1996 CPS 

data, estimates of the number of uninsured children in Delaware ranged 

from 12,000 to 32,000. In part because of these data limitations, some 

states—including 3 of the states sampled by the OIG—moved to special 

surveys or studies that were conducted locally in an effort to develop 

more precise estimates of the number of uninsured children. 

Despite efforts by states to better estimate the number of uninsured 

children, the OIG cited concerns regarding states’ analyses. For example, 

the OIG reported that some states estimated reductions in the number of 

uninsured children by subtracting the number of SCHIP enrollees from 

their original baseline estimates. However, such an approach does not 

ensure that increases in SCHIP lead to reductions in the number of 

uninsured because increases in SCHIP enrollment can result from children 

moving from private insurance coverage to public insurance under SCHIP, 

an effect known as “crowd-out.” Additionally, changing economic factors 

can further complicate assessments of a state’s progress in reducing the 

number of uninsured children. For example, a state may significantly 

increase enrollment in SCHIP but—because of declines in the economy 

and increased unemployment—continue to see an increase in the number 

of uninsured. Under these circumstances, “progress” in reducing the 

number of uninsured may be more difficult to identify. 

Based on its findings, the OIG recommended that HCFA identify a core set 

of evaluation measures that will enable all SCHIP states to provide useful 

 25CPS is a monthly survey of about 50,000 households. It is the primary source of 

information on the labor force characteristics of the U.S. population, and estimates 

obtained from CPS include employment, unemployment, earnings, and hours of work. 
Page 17 GAO-02-512 OIG Child Health Reviews 

information.26 It further recommended that HCFA and HRSA provide 

guidance and assistance to states in conducting useful evaluations of their 

programs. The OIG noted that SCHIP staffs would benefit from assistance 

and training regarding the type of data to collect and how to conduct 

evaluations. HCFA concurred with these recommendations and cited 

efforts under way to improve states’ evaluations of their SCHIP 

programs.27

Several federal efforts are under way that should help improve states’ data 

sources and their evaluations of the extent to which their SCHIP programs 

are reducing the number of uninsured children. If implemented on a timely 

basis, efforts such as the following should help inform the OIG’s 

subsequent evaluations. 

• The Congress appropriated $10 million each year beginning in fiscal year 

2000 to increase the sample size of CPS. Beginning in 2001, larger sample 

sizes are being phased into CPS, which should help improve the accuracy 

of state-level CPS estimates of uninsured children.28

• CMS is working with states to develop consistent performance measures 

for SCHIP, with a focus on ensuring appropriate methodology and 

consistency of data. 

• As a condition of their state SCHIP plans, some states are required to 

assess whether the SCHIP program is “crowding out” private health 

insurance in their states. These studies could help assess the extent to 

which SCHIP is drawing its enrollment from uninsured children—or from 

children who were previously insured. 

• BBRA requires HHS to conduct an evaluation of SCHIP to determine the 

effectiveness of the program and to provide information to guide future 

federal and state policy. To comply with BBRA, HHS plans a series of 

reports addressing a variety of major topic areas, ranging from program 

design to access and utilization; the first report is expected in spring 2002. 

HHS plans to use multiple research strategies, including case studies, 

surveys, and focus groups, to address questions of interest. 

 26HHS OIG, State Children’s Health Insurance Program: Assessment of State Evaluation 

Reports, OEI-05-00-00240 (Washington, D.C.: Feb. 2001). 

27HRSA did not comment on the recommendations made by the OIG. 

28Data from the expanded sample are expected to appear in all CPS-based reports 

beginning in 2002. 

Subsequent OIG Reviews 

May Benefit from Efforts 

to Improve Data Sources 
Page 18 GAO-02-512 OIG Child Health Reviews 

As the OIG continues to analyze states’ progress in SCHIP, its future 

reviews are likely to benefit from improvements in state-level estimates of 

the number of uninsured children and evaluations of program 

implementation. Moreover, improvements in states’ analyses and available 

data should help the OIG identify and address areas in need of additional 

review. However, to the extent that these improvements are not in place 

by the time the OIG undertakes its second analysis due in 2003, it may 

benefit from expanding its scope of work to identify and assess states with 

more rigorous analyses. The OIG may also wish to review other sources 

that have assisted states in making evaluation improvements. For 

example, while some states have received private grant funds to help with 

SCHIP enrollment, they have also received technical assistance for the 

purpose of conducting evaluations on the success of their enrollment 

strategies.29 Other states have paired with universities or research 

organizations to improve their information on the uninsured. By also 

drawing on the experience of states with strong evaluations or data 

sources, the OIG will be better able to identify approaches that could 

further strengthen federal and states’ approaches and inform the Congress 

on progress in implementing SCHIP. 

Through its periodic evaluations of states’ efforts to ensure appropriate 

SCHIP enrollment and to reduce the number of uninsured children, the 

OIG is in a position to provide objective information to the Congress and 

others about the program’s operation and success. To better capture the 

experience of all states, regardless of the design of their SCHIP programs, 

the OIG should expand its scope beyond the 13 states in its first review to 

also include states that operate separate child health programs within 

SCHIP combination programs and consider including Medicaid expansion 

programs as well. This would provide a broader base for understanding 

how well states are screening for Medicaid eligibility and identifying issues 

related to reducing the number of uninsured children. Such an expansion 

of scope may also help identify states with more rigorous evaluations of 

their SCHIP programs, and thus provide information on effective 

approaches to SCHIP evaluation as well as more complete information for 

the Congress. 

 29For example, the Robert Wood Johnson Foundation funds initiatives that assist states and 

others to expand health insurance coverage. Among other things, the foundation has 

published an evaluation tool to guide policymakers throughout the evaluation process. 

Conclusions 
Page 19 GAO-02-512 OIG Child Health Reviews 

In order to better inform the Congress on states’ efforts to implement 

SCHIP, we recommend that the HHS inspector general 

• expand the scope of the statutorily required periodic reviews to include all 

states with separate child health programs, including those with 

combination programs, and 

• consider using its general audit authority to explore whether issues of 

appropriate SCHIP enrollment also exist among states that have opted for 

Medicaid expansions under SCHIP, and should therefore be included in 

future OIG reviews. 

We provided the inspector general of HHS an opportunity to comment on 

a draft of this report. In its comments, the OIG concurred with our 

recommendations, and agreed that expanding the scope of its inspections 

to include combination programs that include separate child health 

programs would give a greater breadth of information. It also agreed that 

including SCHIP Medicaid expansions would broaden the perspective and 

present more conclusive information regarding the status of states’ SCHIP 

programs. 

The OIG also provided general comments regarding its approach and 

possible approaches to designing future reviews. For example, the OIG 

stated that it would consider including differing state processes as a factor 

in its next sample design. The OIG also noted the importance of focusing 

on states’ measurement of their own program performance. We agree with 

the OIG that properly conducted state evaluations serve a vital function 

and we believe that continued review of these efforts by the OIG is an 

important contribution to better understanding states’ progress under 

SCHIP. In response to the OIG’s oral and written comments, we revised 

the report to better clarify the scope of the BBRA mandate. The full text of 

the OIG’s written comments is reprinted in appendix I. 

We are sending copies of this report to the inspector general of the 

Department of Health and Human Services and other interested parties. 

Recommendations to 

the HHS Inspector 

General 

Agency Comments 

and Our Evaluation 
Page 20 GAO-02-512 OIG Child Health Reviews 

We will also make copies available to others on request. If you or your 

staffs have questions about this report, please contact me on (202) 512-

7118 or Carolyn Yocom at (202) 512-4931. JoAnn Martinez-Shriver and 

Behn Miller also made contributions to this report. 

Kathryn G. Allen 

Director, Health Care—Medicaid 

 and Private Health Insurance Issues 
Appendix I: Comments from the Department of Health and Human Services’ Office of 

Inspector General 

Page 21 GAO-02-512 OIG Child Health Reviews 

Appendix I: Comments from the Department 

of Health and Human Services’ Office of 

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

Inspector General 

Page 22 GAO-02-512 OIG Child Health Reviews 
Appendix I: Comments from the Department of Health and Human Services’ Office of 

Inspector General 

Page 23 GAO-02-512 OIG Child Health Reviews 
Related GAO Products 

Page 24 GAO-02-512 OIG Child Health Reviews 

Medicaid and SCHIP: States’ Enrollment and Payment Policies Can 

Affect Children’s Access to Care. GAO-01-883. Washington, D.C.: Sept. 10, 

2001. 

Children’s Health Insurance: SCHIP Enrollment and Expenditure 

Information. GAO-01-993R. Washington, D.C.: July 25, 2001. 

Medicaid and SCHIP: Comparisons of Outreach, Enrollment Practices, 

and Benefits. GAO/HEHS-00-86. Washington, D.C.: April 14, 2000. 

Children’s Health Insurance Program: State Implementation Approaches 

are Evolving. GAO/HEHS-99-65. Washington, D.C.: May 14, 1999. 

Related GAO Products 

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