Children's Health Insurance: Inspector General Reviews Should Be Expanded to Further Inform the Congress
Released: 2002-03-29T00:00:00

Letter

Background

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 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. 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.)

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 exhausted. 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. 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. In contrast, states opting for separate child health programs may depart from Medicaid requirements and provide benefits based on coverage standards in the SCHIP legislation. 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. 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.

OIG Studies

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.

BBRA directed the OIG to review states with approved SCHIP programs that do not provide health benefits under Medicaid; consequently, the OIG focused on the 15 states that in 1999 operated separate child health programs under SCHIP. 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.)

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. 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.

OIG’s Assessment of Appropriate Enrollment Would Benefit From an Expanded Selection of States

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.

Alternative Sampling Methodologies May More Fully Account for Variation among States

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. 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 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.)

Increasing the Number of States under Consideration Would Better Inform the Congress

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. 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. If this approach had been used in 1999, 23 states and almost one-fourth of all children enrolled in SCHIP would have been added. (See table 3.)

While States’ Evaluations Offered Limited Results, Future OIG Reviews May Benefit from Improved Data Sources

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 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.

Weaknesses in States’ SCHIP Evaluations Limited the OIG’s Ability to Measure Progress

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.

Of particular concern were limitations in measuring how well states are meeting the primary objective of the SCHIP program—reducing the 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. However, CPS data have well- recognized 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 information. 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.

Subsequent OIG Reviews May Benefit from Efforts to Improve Data Sources

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.

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.

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. 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.

Conclusions

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.

Recommendations to the HHS Inspector General

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.

Agency Comments and Our Evaluation

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.

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.

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

Related GAO Products

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.