Eligibility Decision Error Rate

Performance Evaluation and Research Division
Building 1, Room W-314
State Capitol Complex

(304) 347-4890


Medicaid was created in 1965 as Title XIX of the Social Security Act of 1965. It is a federal/state program, administered by states and funded from federal, state and in some states, local revenues. Federal funds are made available contingent on a state match that varies among states from year to year. West Virginia has the second most favorable match rate in the nation, at an approximate 74 per cent federal and 26 per cent state match. The match rate is determined by a formula that takes into account the State's per capita income compared to the national average. After rising steadily between 1980 and 1992, the match rate began to decline in 1993. The decrease in the match rate alone required State funding increases of $11 million in State Fiscal Year (SFY) 1995 and $16 million in SFY 1996. Medicaid covered 36 million people on any given day in 1995, representing about 13 per cent of all Americans. Even with this substantial coverage, an estimated 43 million Americans remain uninsured. Today, one in five West Virginians receives health care benefits through the Medicaid program, it is a $1.4 billion dollar program, with an approximate $322 million state match, serving approximately 431,000 citizens.

Health care services for the aged and disabled account for nearly two-thirds of all Medicaid expenditures. Medicaid and Medicare together have an enormous economic impact in West Virginia. Almost seventy per cent of nursing home revenue is attributable to Medicaid and more than 60 per cent of all hospital revenue in West Virginia is attributable to these two programs.

Nationally, the Medicaid program consumed nearly 20 per cent of state expenditures in 1995, up from an average of 10 per cent in 1987. In West Virginia, Medicaid consumed 15.2 per cent of the state budget for fiscal year 1995. Medicaid is essentially three programs in one: first, it is a health insurance program for low income parents and children; secondly, it is a long term care program for the elderly; and lastly, it is a funding source for services to people with disabilities. Medicaid is one of the largest expenditures within the Department of Health and Human Resources.

The Department of Health and Human Resources is one of the seven Cabinet-level departments of state government created under legislation enacted in 1989. As its name indicates, the Department brings together health-related programs and human resource programs, which include public assistance and social service programs. Although the Department provides services to individuals in institutional settings, emphasis is placed on community-based service delivery.

Programs within the Department are categorized by similarity of service and function into four bureaus:

Bureau for Children and Families. This Bureau manages public assistance programs, social service programs, and child support enforcement and collections. A citizen might have contact with this Bureau's programs in such matters as eligibility determination for Temporary Assistance to Needy Families, Food Stamps and Medicaid, subsidized work programs, child and adult abuse concerns, and child day care, foster care and adoptions.

Bureau for Community Support. This Bureau provides health and behavioral health services to vulnerable citizens with a particular focus on adults and the aging. Services are provided in the home, community, hospitals, residential facilities and long-term care facilities operated by the state or by other providers.

Bureau for Medical Services. This Bureau is the single state agency charged with administering the state's Medicaid program, which provides medical coverage for eligible clients. The Bureau provides administration and reimbursement for medical services to eligible individuals, such as inpatient and outpatient hospital care, physician services, laboratory, x-ray, behavioral health services, prescription drugs, nursing home and care and several in-home services which keep individuals out of institutional services.

Bureau for Public Health. This Bureau administers and coordinates programs that protect the health of the public and promotes "Healthy People in Healthy Communities." These programs include: emergency health services, environmental health services, specialized laboratory services, enforcement of licensure and certifications for hospital and long-term care facilities, and the state's medical examiner. A citizen might have contact with this Bureau's programs in such matters as county health department concerns, maternal and child health programs, information about communicable or sexually-transmitted diseases, birth and death certificates, emergency ambulance service, food service sanitation or water and sewage permits, community tobacco coalitions, family planning or services to children with special needs.

As stated above, the Bureau for Medical Services is responsible for the overall administration of the Medicaid Program. The Bureau for Children and Families manages public assistance programs, social service programs and child support enforcement and collection. Each of the county offices falls under the supervision of the Bureau of Children and Families.

The county offices have two distinct branches: Economic Services and Social Services. Social Services are responsible for child and adult abuse concerns, child day care, foster care and adoptions. Economic Services are responsible for public assistance. Public assistance services provide access to financial assistance for eligible West Virginians to help meet their basic needs and reach a level of self-sufficiency and well-being.

Public assistance services include eligibility determination, case management and other client services for Aid to Families with Dependent Children (AFDC), Food Stamps, Job Opportunities and Basic Skills (JOBS), Medicaid, Title IV-A Emergency Assistance, Low-Income Energy Assistance Program (LIEAP), Indigent Burial Program, Transportation Remuneration Incentive Program (TRIP), and the Donated Foods Program.

Congressional proposals in 1995 and 1996 to make substantial changes to Medicaid stimulated debate at all levels of society and government. A variety of proposals received serious consideration, but key congressional leaders and the president could not reach a compromise for any major program changes. Key proposals that shaped the debate and may serve as foundations for future deliberations include the "Medigrant" bill that passed Congress and was vetoed by the president in December 1995; the Clinton administration proposal; the proposal adopted by the National Governors' Association in February 1996; and the Medicaid Restructuring Act of 1996. The National Conference of State Legislatures also has several policies related to reforming Medicaid.

The recent welfare reform legislation (the Personal Responsibility and Work Opportunity Reconciliation Act of 1996), signed August 22, 1996, affects Medicaid in several ways:

This report contains references to Aid to Families with Dependant Children (AFDC) and its links to Medicaid eligibility. In general, however, people who meet AFDC eligibility criteria that were in effect on and prior to July 16, 1996 will be eligible for Medicaid. Accordingly, references to AFDC in this report should by read as references to the "frozen" July 1996, AFDC criteria.

Federal statutes and regulations largely dictate who is eligible for coverage in the Medicaid program. Over the past thirty years Medicaid eligibility standards have been progressively broadened to cover the medical costs of more groups of individuals who are aged, blind, or disabled, and members of low-income families with dependent children. Federal regulations specify a broad range of groups that must be covered (coverage groups) by the Medicaid program if the state chooses to participate in the Medicaid program. A few groups may be included or excluded at state option. The basis for Medicaid coverage is classified as either Categorical Need or Medical Need.

The groups referred to as the Categorically Needy include:

Within both the Categorically Needy and Medically Needy categories, some coverage groups are mandatory and others are optional.

More than 261,000 West Virginians received Medicaid benefits in January 1995. Among these recipients, about 245,000 (94%) were classified as Categorically Needy. The remaining six (6%) per cent are classified as Medically Needy. The State of West Virginia has provided the optional Medicaid coverage to the Medically Needy group since 1976.

Starting in 1988, federal mandates began requiring states to expand coverage to include new classes of eligible individuals. For federal fiscal year (FFY) 1994, there were 47,800 recipients (thirteen (13%) per cent of the total recipients) who were covered under the federally mandated expansions since 1988. Of this total, over 27,400 were either caretaker relatives of covered recipients or pregnant women. The cost to provide care to this group for FFY 1994 was $203.7 million, or sixteen (16%) per cent of the total $1.3 billion budget.

As related to the specific issue addressed in this report, a sample of 455 active Medicaid cases were taken from recipients deemed eligible to receive benefits on October 31, 1995. The date was chosen because it predates initial RAPIDS implementation. This guaranteed that case files would be available for review in paper form. Certain eligibility categories were excluded from the study because the eligibility decision is not made by an economic services caseworker in the county office. Aged, blind and disabled SSI cases were excluded because the eligibility determinations are made at the federal level. Boarding Care or Foster Children cases were excluded because the decision is made by social service caseworkers. Cases with the deprivation factor of Not Medical (NM) were excluded because these cases do not actually receive a medical card, this designation is a bookkeeping code used under the OBRA system.

The cases were evaluated based on Federal guidelines as set forth in the Income Maintenance Manual. Eligibility was distilled into three basic components: characteristics; income; and assets. Characteristics are the causal elements which qualify an individual for aid. Characteristics include, but are not limited to, age, absence, disability and pregnancy. Income refers to the applicable income limits for specific coverage groups. Assets refer to the applicable asset limit for specific coverage groups which require an asset test.

The Office of Quality Assurance, within the Department of Health and Human Resources, conducts internal evaluations of the Medicaid program and calculates the sanction rate. Quality Assurance bases the sanction rate on the amount of dollars in error, while this study examines cases in error. This means that if a case reviewed by Quality Assurance is in error, but the client has not consumed benefits, then the error is not reflected in the sanction rate. However, this study was developed to test the accuracy with which eligibility rules are followed at the county level, not to impose federal sanctions. Therefore, all cases in which errors were made in the eligibility determination are included in the results. Quality Assurance has the legal authority to investigate Medicaid cases in greater detail. Unlike the Legislative Auditor, they have the authority to make visitations to the homes of recipients and examine bank records, in order to verify eligibility.

The 455 case files were obtained from county offices and reviewed to determine if the eligibility decision, which rendered the recipient eligible to consume benefits on October 31,
1995, was correct. The determination was made with an instrument designed by the Legislative Auditor to test cases for compliance with state, federal and program guidelines. Audit staff attended Kanawha County eligibility training sessions. These sessions are the standard instructions provided to county caseworkers. Case reviews conducted in county offices were discussed with supervisors.


West Virginia maintains a consolidated eligibility manual which contains the policy and procedures for the State's public assistance programs. The Manual was consolidated in the late 1970's as the Economic Services Manual. In 1995, the entire Manual was rewritten and titled the Income Maintenance Manual. This Manual serves as the authority for all eligibility decisions. It is updated periodically as required by changes in federal or state laws, clarifications, and other administrative modifications.

To determine whether eligibility decisions are made correctly, a sample of 455 cases was drawn. The cases were sampled from cases determined to be eligible to receive benefits on October 31, 1995. Therefore, the cases were evaluated based on policy that was in place prior to the advent of TANF (Temporary Assistance for Needy Families) and West Virginia Works Programs. These cases were evaluated based on Federal and State guidelines as laid forth in the Income Maintenance Manual. Medicaid Eligibility can be distilled into three basic components: characteristics, income and assets. Characteristics are the properties that qualify someone to receive benefits. These characteristics include, but are not limited to, absence, age, disability and pregnancy. Income refers to the applicable income limits for each coverage group. Assets refer to the applicable asset limit for each coverage group (for coverage groups with an asset test).

Of the 455 cases sampled, 75 cases (or 16.5%) were found to contain errors. Errors include: incorrect eligibility decisions (10 cases representing 13.3% of the total errors); lack of verification such that a proper determination of eligibility could not be made (51 cases representing 68% of the total errors); or the entire file or relevant application had been lost (14 cases representing 18.7% of the total errors;. In cases where an incorrect eligibility decision was made, the most common mistake was that the client's income exceeded the allowable income limit. The remainder of cases which make up this type of error are listed as miscellaneous errors and include: the client's review completed late; client not completing the application; the client moving out of state and the case was not closed on time; and the client not satisfying the necessary qualifications for a particular aid category.

The errors characterized by lack of verification include no verification of client's reported income, and the largest error type, no verification of client's reported assets. The rest of the errors include missing files, applications, or sections of the case record. Of the 75 errors contained in the sample, 81 per cent or 61 cases were the result of a misapplication of eligibility policy (all errors except for lost cases; see Table 1).

Table 1
Summary of Errors by Type
Type of ErrorNumber of Cases% of the 455 Cases Sampled
No verification of client reported income71.5%
No verification of client reported bank accounts439.5%
Client's income exceeded program limits61.3%
File or relevant application was lost or missing143.1%
Miscellaneous errors51.1%
Total Errors7516.5%


Decentralized and Inconsistent Policy Training

Errors in the sample such as no verification of income, no verification of assets or the client was over income, may be the direct result of insufficient training, especially when each worker is required to handle such a large number of cases. In a letter from the former Acting Commissioner of the Bureau for Children and Families, policy knowledge of the field staff was addressed. The former Commissioner stated that "there has been a lack of centralized, consistent policy training offered to field staff over several years that has created an additional burden on field supervisors."
One reason why training is inconsistent is the lack of a statewide consolidated training manual. Each trainer would have instructed each worker with their own interpretation of the Income Maintenance Manual. In 1995 two regional trainers were in place. Region I has had a regional trainer since 1992, Region II since 1991. For the remaining two regions, Region III and Region IV, each of the supervisors were responsible for training in their respective offices. Since training was the responsibility of individual supervisors, over twenty-seven (27) different people (two regional trainers and 25 supervisors for Regions III and IV) would have been charged with the training of their staffs. In 1995 there were 468 workers. This means that each individual would have been in charge of training an average of 17 individuals, each instructor teaching a different format of the 35 entrances into the Medicaid program. Interpretation of the Income Maintenance Manual varies from supervisor to supervisor. A policy survey was conducted among the Economic Service Supervisors. This survey was faxed to each of the supervisors in the county offices. The survey contained a question regarding the verification of assets (the single largest source of errors). The question dealt with the necessity of verifying bank accounts. The policy states that for programs which have an asset test, all bank accounts must be verified at application and when a change is reported. This is regardless of the amount contained in the bank account. Of the 39 supervisors responding to the survey 14 (36%) posted responses that were inconsistent with policy. Table 2 contains a sample of responses to the survey questionnaire.

Table 2
Supervisor's Responses from Policy Survey
"We do not verify bank accounts reported to be below $100."
"Unless there are other assets beside checking and savings we normally do not verify the assets if the customer states that these accounts are for depositing their monthly checks and for paying their monthly bills and the current balance is below $100."
"Verification of assets is being done at the workers discretion depending on the amount and the client involved. The workers verify all questionable assets."
"If the combined assets are near the maximum asset level and the worker questions the amount in the bank accounts, it can be verified."
"Bank accounts of this nature are not routinely verified. However, if the worker believes there may be a problem then verification is requested. Also if there are other assets involved which are near the asset maximum, then bank verification may be needed."
"We verify the bank accounts if the assets are close to the countable assets for the program for which they are applying. We verify all Nursing Home bank accounts and Medicaid Waiver bank accounts."
"We have always verified any information that we question. We have verified bank accounts much lower than $100 if we question the validity of a customer's statements."
"For medical coverage groups with an asset test and a small bank account may need verified because if it puts the case over the asset limit then the case would be ineligible and the customer would not get the benefit of the Medical help."

Income Maintenance Manual difficult to understand

Errors in the sample such as no verification of income, no verification of assets or income over the allowable limit, may be caused by a confusing reference tool. Medicaid policies are inherently complex and difficult to understand. This was one reason why the Income Maintenance Manual was compiled in 1995. The Income Maintenance Manual is designed to be a ready- reference tool. This Manual is two volumes and 23 chapters. Each volume is three inches thick. It has had 75 updates since 1995. The former Director of the Policy Unit stated that the Manual needs to be updated whenever eligibility changes are required due to changes in laws, clarifications, or other administrative modifications.

The policy contained in the Income Maintenance Manual is not in a format that is user friendly. To determine if someone would have been eligible for AFDC, one would need to refer to the following chapters: