KidCare is a State program that offers health care coverage to children and pregnant women.

The first phase of KidCare was approved by HCFA on April 1, 1998 with an effective date of January 5, 1998.

Public Aid includes children in their KidCare enrollment figures that are within Medicaid income guidelines but not within the income guidelines of the new Children’s Health Insurance Program.

Public Aid has spent $162 million for KidCare medical expenditures since the program was created in January 1998.

REPORT CONCLUSIONS

The federal Balanced Budget Act of 1997 amended the Social Security Act to establish Title XXI – the State Children’s Health Insurance Program (SCHIP). In response to the establishment of SCHIP at the federal level, Illinois Public Act 90-736 was signed into law on August 12, 1998 establishing the Children’s Health Insurance Program Act (215 ILCS 106/1 et seq.) which is referred to as KidCare.

Public Aid implemented KidCare in two phases. Phase I was approved effective January 1998 and was a Medicaid expansion for children under 19 years of age (Assist Expansion) and an expansion for pregnant women and their babies (Moms & Babies). Phase II was approved effective August 1998 and expanded eligibility further and established two new federal share categories (Share and Premium) and established a State-only program (Rebate).

Public Aid includes children in their KidCare enrollment figures who are enrolled in the regular Medicaid program. These children were eligible under the Medicaid income guidelines in place prior to implementation of SCHIP. Public Aid counts Medicaid children as KidCare because they were enrolled through outreach initiatives and were enrolled through the KidCare Central Bureau. In this report we refer to these Medicaid enrollees who came in through KidCare as Initiative. Fifty-six percent of KidCare enrollees reported as of December 1, 2001 were Initiative enrollees in the regular Medicaid program (97,036 of 174,778).

Public Aid has spent $162 million for KidCare medical expenditures since the program was created in January 1998 through Fiscal Year 2001. An additional $36.8 million has been spent on administrative expenditures of KidCare. Consistent with our discussion of enrollment, these expenditures do not include expenditures for children enrolled in Medicaid through KidCare outreach initiatives. Public Aid’s medical expenditures for Initiative enrollees were $182 million for Fiscal Years 1999 through 2001.

To fund SCHIP, an annual federal allotment was made available to states each year from 1998 through 2007. For Fiscal Year 2002 expenditures Illinois, as well as many other states, was still drawing against its 1999 allotment and had not used any of the 2000 or 2001 allotments.

We found some problems in KidCare case files that we reviewed. Depending on the KidCare category, some case files are maintained by Public Aid and some are maintained by the Department of Human Services. There were eight total exceptions related to determining income for KidCare (8 of 92 cases tested), none of which affected eligibility. We also identified eight exceptions related to redetermination (8 of 61) including six which were not done on time and two cases where income was not determined properly. Although some of these problems were minor, Public Aid and Human Services should assure that KidCare income is properly determined and that redeterminations are done when required.

We identified enrollees in the Moms & Babies category who were neither mothers nor babies. The Moms & Babies category is intended to cover pregnant women and babies for the first year of their lives. Because this category is not eligible for enhanced federal match, it is to the State’s advantage to have children moved into the appropriate children’s category of KidCare as soon as possible.

Applicants failing to provide appropriate verifications with their applications (such as documentation of income) was the second most common reason that KidCare cases were denied. For the 20 month period from July 2000 to February 2002, 34 percent of denials were because applicants failed to provide verifications with their application or in follow-up requests.

Public Aid received federal approval in May 2000 to move from monthly paper eligibility cards to an electronically based system using permanent durable cards, but has not yet implemented a system. Enrollees in the KidCare program receive a new paper eligibility card in the mail each month. The State of Illinois currently mails out around 900,000 KidCare and other medical program cards each month, or about ten million cards each year. Public Aid estimated that the cards cost approximately 38 cents each to produce and mail or about $4 million annually. Public Aid should continue its planned conversion to permanent durable eligibility cards in order to realize cost savings to the State and improved program effectiveness.

Although Public Aid had no formally written or approved plan for marketing KidCare, over time a three-stage strategy developed: Overarching Outreach on a Statewide Basis; Promotions at the Community Level; and KidCare Application Agents. Public Aid had 76 contracts and paid $9.5 million on outreach and advertising efforts for the KidCare program. They also paid $2.9 million to KidCare Application Agents (KCAAs) who are paid $50 for each complete approved application.

Public Aid had structured measurable deliverables into most of the KidCare contracts (71 of 76) but still had some contracts with weaknesses. Without measurable deliverables it is more difficult to monitor vendors and more difficult to determine if contracts were effective.

Public Aid had established a good system for monitoring KidCare marketing and outreach contracts but some improvement was still needed. Most contract monitoring documentation that we reviewed showed that contracts had been well monitored by Public Aid (63 of 70).

Only 45 of the 76 contracts for KidCare outreach services were procured through a competitive bid. However, the Children’s Health Insurance Program Act exempted contracts for KidCare from normal competitive processes established under the Illinois Procurement Code.

As directed by Senate Resolution 152, we prepared demographic profiles of KidCare enrollees. The largest racial categories in KidCare were Caucasian (45%), Hispanic (27%) and African-American (23%). The proportion of Caucasians generally increased as the income thresholds for various KidCare categories increased while the proportion of African-Americans declined. Fifty percent of KidCare enrollees were from two-parent households and the proportion of two-parent households increased with the increasing income thresholds of KidCare categories.

Although it is difficult to compare the overall health of KidCare enrolled children with other children, there are some health measures that can be used to make an attempt. Public Aid identified and reported KidCare data on three conditions that are good measures of children’s health status.

BACKGROUND

On May 24, 2001, the Illinois Senate adopted Senate Resolution 152. The Resolution requires the Auditor General to conduct a program and management audit of the Illinois Department of Public Aid's KidCare program. The Resolution asked us to evaluate:

1. The Department of Public Aid's compliance with federal and State laws, the State of Illinois' Children's Health Insurance Plan submitted to the Health Care Finance Administration, and rules, regulations and policies adopted by the Department of Public Aid;
2. The Department of Public Aid's adherence to eligibility requirements, including evaluating the eligibility of enrolled children, whether or not the Department enrolls children for benefits prior to verification of eligibility for benefits, the Department's practice of allowing for onetime encounter enrollments, and the Department's adherence to income verification procedures;
3. The effectiveness of the Department's marketing strategies, including the effectiveness of bid and no-bid outreach contracts, broadcast and print advertising and other outreach advertising mechanisms targeted to increase enrollment in the program and the correlation between each strategy and the number of children enrolled that are attributed to that specific contract or strategy;
4. The compliance and effectiveness of all KidCare outreach contracts issued by the Department of Public Aid since the creation of the KidCare program including the amounts of the contracts, the bid status of the contracts, the terms of the contracts, the responsibilities outlined in the contracts, the fulfillment of the contractors' responsibilities, and verification of required contract documentation;
5. The application and enrollment process to ensure that the families of enrolled children have properly completed applications, which include all proof of information and documentation required pursuant to the KidCare application;
6. Summarize and compare the socio-economic profile of applicants and enrolled children and their families based on information required on the application form;
7. Evaluate the efficiency of the process by which monthly paper eligibility cards are issued to enrollees;
8. Evaluate the effectiveness and efficiency of the eligibility redetermination process; and
9. Using recognized public health standards, compare the overall health of enrolled children with the overall health of (i) privately insured children of the same socio-economic status and (ii) uninsured children of the same socio-economic status.

A copy of the Senate Resolution is included as Appendix A of the Program and Management Audit.

THE KIDCARE PROGRAM

KidCare is a State program that offers health care coverage to children and pregnant women and helps in paying premiums of employer-sponsored or private insurance plans. KidCare is available to children through age 18 who are Illinois residents, who are U.S. citizens or qualified legal immigrants, and whose family meets the income requirements. Pregnant women who are Illinois residents and meet the income requirements are also eligible.

Income requirements vary by KidCare Plan and are based on family size. Payments made for childcare expenses or child support are subtracted from income. KidCare services are available at no cost or at low cost and how much a family pays depends on whether income qualifies a family for KidCare Assist, KidCare Share, or KidCare Premium.

KidCare covered services for kids include doctor and nursing care, immunizations and preventive care, hospital and clinic care, laboratory tests and x-rays, prescription drugs, medical equipment and supplies, medical transportation, dental care, eye care, psychiatric care, podiatry, chiropractic care, physical therapy, mental health and substance abuse services. Pregnant women receive prenatal care and other medical services.

History of the Program

The federal Balanced Budget Act of 1997 amended the Social Security Act to establish Title XXI – the State Children’s Health Insurance Program (SCHIP). The purpose of SCHIP was to provide funds to the states to expand health insurance coverage to uninsured low-income children. Under SCHIP, states were given the option of expanding Medicaid, establishing a separate stand-alone program, or using a combination of the two approaches.

In response to the establishment of SCHIP at the federal level, Illinois Public Act 90-736 was signed into law on August 12, 1998 establishing the Children’s Health Insurance Program Act (215 ILCS 106/1 et seq.). Public Aid implemented the federal/State Children’s Health Insurance Program Act (SCHIP) in two phases. Phase I was a Medicaid expansion which consisted of an expansion for children under 19 years of age and an expansion for pregnant women and their babies. The initial plan, effective January 5, 1998, was approved April 1, 1998, by the federal Health Care Financing Administration or HCFA (now called the Centers for Medicare & Medicaid Services or CMS.) Illinois was one of the first eight states to have an approved plan in place.

Phase II, which was effective August 1998, expanded Illinois’ SCHIP program for children under 19 years of age with family incomes above 133% of the federal poverty level (FPL) up to 185% FPL. Phase II established, under Title XXI, KidCare Share and KidCare Premium. Although not part of Title XXI, Phase II also established the KidCare Rebate program which is supported by State funds only.

Categories of KidCare

KidCare is made up of five separate categories in which children and pregnant women can be enrolled. The following is a brief description of each of the categories:

Assist - covers children with family incomes at or below 133% of the FPL. Children receive services through the State’s regular Medicaid program under Title XIX or through the Medicaid Phase I expansion under Title XXI. The original Medicaid program is referred to as KidCare Assist Base and the Phase I expansion is referred to as KidCare Assist Expansion. Children in Base are actually enrolled in the regular Medicaid program.

Share - is a Title XXI SCHIP program that allows kids in families with higher income levels (>133% - # 150% of FPL) to be enrolled but requires them to make a co-payment for some services. The Share co-payment is $2 for medical visits or prescriptions.

Premium - is also a Title XXI SCHIP program that allows kids in families with higher income levels to be enrolled but requires them to pay a small premium and to make a co-payment for some services. The premium per month is $15 for one child up to $30 for 3 or more children with a co-payment of $5 for medical visits or brand-name prescriptions, $3 for generic prescriptions, and $25 for non-emergency use of the emergency room.

Rebate - is a State program that reimburses families for all or part of premiums for insurance coverage that they can obtain through their employer or through private policies. The federal government does not reimburse any of the costs of this program.

Moms & Babies - covers pregnant women and their babies with family incomes at or below 200% of the FPL. The mother receives coverage during the pregnancy and for 60 days after birth and the baby receives coverage for a year after birth. Moms & Babies is a federal Title XIX expansion, not a new Title XXI SCHIP program. The Moms & Babies category is similar to Assist in that enrollees below 133% of FPL are actually enrolled in the regular Medicaid program. (pages 4-7)

KIDCARE ENROLLMENT

Public Aid includes children in its KidCare enrollment figures that are within Medicaid income guidelines but not within the income guidelines of the new Children’s Health Insurance Program. Fifty-six percent of enrollees as of December 1, 2001 were actually enrolled in the regular Medicaid program (97,036 of 174,778).

These children were eligible under the Medicaid income guidelines in place prior to implementation of SCHIP. Public Aid counts these children as KidCare enrollees because they were enrolled through the KidCare Central Bureau. Although the federal government encouraged outreach initiatives to find both Medicaid and SCHIP children, the federal government does not include these Medicaid children in its numbers when reporting on SCHIP enrollment.

Public Aid started including these children who came in through the Central Bureau as KidCare in September 1999. We refer to this sixth category as Initiative. Digest Exhibit 1 shows the total KidCare enrollment broken down by category as of December 1, 2001. The Initiative category has children that are in Medicaid based on the old pre-expansion income standards. (pages 7-8)

ENROLLMENT PROCESS

The following narrative and the flow chart shown in Digest Exhibit 3 help to explain the KidCare enrollment process. Applications are received at the KidCare Central Bureau from KidCare Application Agents (KCAAs) or from families by mail. The application must include documentation on income, citizenship status (if applicable), deductible expenses, proof of pregnancy (if applicable), and social security number or proof of application for a social security number.

Next, applications are registered into the system. To register applications Public Aid employees enter information from the application into the client database and three different data checks for eligibility are done automatically by the computer system. The employees that register cases do not determine eligibility, rather they assess whether the application is complete and all required documentation is submitted.

When all the information has been submitted, applications are assigned to caseworkers. The caseworkers calculate the adjusted income to be compared to the standard and also consider all non-financial factors of eligibility determination. When an application is determined eligible, a notification of enrollment is generated by an automated system and mailed to the applicant. All cases that are part of Expansion (KidCare Assist or Moms & Babies) are sent to local Department of Human Services (DHS) offices for case maintenance.

Enrollment at the Department of Human Services

In addition to the eligibility determination process at Public Aid, DHS caseworkers can determine eligibility. The main difference at DHS is that applicants may come in to the local office and actually work with a caseworker from the beginning. Applicants may walk in or mail an application to any of the 130 local DHS offices. At the local offices caseworkers process applications and determine eligibility. If an application is mailed in to DHS, the process works in a similar way as at Public Aid. Missing information will be requested from the applicant and if information is not provided the application is denied and a notice is mailed out. (pages 15-17)

KIDCARE SPENDING

Public Aid has spent $162 million for KidCare medical expenditures since the program was created in January 1998 through Fiscal Year 2001. An additional $36.8 million has been spent on administrative expenditures of KidCare. Consistent with our discussion of enrollment, this does not include expenditures for children enrolled in Medicaid through KidCare outreach initiatives. Digest Exhibit 2 shows KidCare medical and administrative expenditures from Fiscal Years 1998 through 2001. (pages 8-10)

Public Aid should continue its planned conversion to permanent durable eligibility cards.

We found a few problems in KidCare case files that we reviewed. Sixteen exceptions were identified in the 92 case files that we reviewed.

Public Aid had established a good system for monitoring KidCare marketing and outreach contracts.

MONTHLY PAPER ELIGIBILITY CARDS

Public Aid received federal approval in May 2000 to move from monthly paper eligibility cards to an electronically based system using permanent durable cards but has not yet implemented the electronically based system. Enrollees in the KidCare program receive a new paper eligibility card in the mail each month. The State of Illinois currently mails out around 900,000 KidCare and other medical program cards each month, or about ten million cards each year. Public Aid estimated that the cards cost approximately 38 cents each to produce and mail or about $4 million annually. The current system raises concerns including:

• unnecessary operational costs,
• possible restrictions on access to medical care,
• non-durability of the card, and
• potential for fraud and abuse.

Public Aid officials have made plans to switch from monthly paper eligibility cards to permanent durable cards. In May 2000, Public Aid received approval for $8.8 million of federal financial participation to help offset the development costs of the project to the State. As of April 2002, Public Aid had put those plans on hold until its Internet eligibility verification website is completed. Public Aid’s internal documents indicated that switching to a permanent durable card system could save the State $12.8 million in operational costs over five years. We recommended that the Department continue its planned conversion to permanent durable eligibility cards in order to realize significant cost savings to the State as well as improved program effectiveness. (pages 18-21)

OTHER ELIGIBILITY ISSUES

Senate Resolution 152 asked us to look at four other issues related to the KidCare enrollment process. These issues are discussed in the following sections.

Enrollment for Benefits Prior to Verification of Eligibility

There is a situation where individuals can receive benefits prior to verification of eligibility. It is referred to as Presumptive Eligibility and can only be used related to KidCare for pregnant women. The purpose of presumptive eligibility is to encourage early prenatal care to low income pregnant women who otherwise may postpone or do without such care.

One-Time Encounter Enrollment

Under a federal mandate the regular Medicaid and Expansion plans must allow for benefit payments up to 3 months prior to applying for coverage each time an eligible person applies. For the Share and Premium plans retroactive payments are not federally mandated and the Illinois Children’s Health Insurance Program Act allows prior coverage only once. Public Aid limits the one time retroactive benefit payments to only 2 weeks prior to applying for coverage.

Completeness of Applications

Less than half of KidCare applications in the case files that we reviewed were complete as submitted (48% or 33 of 69 case files with applications). We considered an application complete if it was filled out properly with all required elements and all required verifications were provided. If additional information was requested, the application was not considered complete. However, in all of these cases the required information was eventually provided and eligible family members were enrolled.

Denied Cases

Failing to provide appropriate verifications with applications was also a problem with denied cases. It was the second most common reason that KidCare applicants were denied. For the 20 month period of data that we analyzed, from July 2000 to February 2002, 34 percent were denied because applicants failed to provide verifications with their application or in follow-up. Verifications can include items like documentation of income. (pages 21-25)

ENROLLMENT CASE FILE TESTING

There were some problems in KidCare case files that we reviewed. Nine percent of case files tested (8 of 92) had exceptions related to determining income for KidCare. However, none of the exceptions affected eligibility. We also identified eight exceptions related to eligibility redetermination (8 of 61). This included six instances where redetermination was not performed as required at 12 months, and two instances where redetermined income was not determined properly. Although some of these problems were minor, Public Aid and Human Services should assure that KidCare income is properly determined and that redeterminations are done when required.

There were enrollees in the Moms & Babies category who were neither mothers nor babies. The Moms & Babies category is intended to cover pregnant women and babies for the first year of their lives. Because this category is not eligible for enhanced federal match it is to the State’s advantage to have children moved into the appropriate children’s category of KidCare as soon as possible. We recommended that children over age one are transferred out of Moms & Babies into the appropriate KidCare category.

The Assist Expansion category of KidCare included 365 adults when it should have included only children. These adults ranged in age from 19 to 22. The Departments of Public Aid and Human Services should assure that only children are enrolled in KidCare. We recommended when enrollees become too old to be enrolled that they are excluded from the KidCare program. (pages 22-24)

OUTREACH AND ADVERTISING

Although Public Aid had no formally written or approved plan for marketing KidCare, over time a three-stage strategy developed: Overarching Outreach on a Statewide basis; Promotions at the Community Level; and KidCare Application Agents. Public Aid had 76 contracts and paid $9.5 million on outreach and advertising efforts for the KidCare program. Public Aid also paid $2.9 million to KidCare Application Agents (KCAAs) who are paid $50 for each complete approved application.

Public Aid had structured measurable deliverables into most of the KidCare contracts (71 of 76) and had established a good system for monitoring KidCare marketing and outreach contracts, but some improvement was still needed. Sixty-three of the 70 contracts for which we reviewed monitoring documentation had been well monitored by Public Aid.

Of the 65 KidCare contracts which had measurable deliverables for which we reviewed contract monitoring files, 37 contracts met or substantially met deliverables and 28 did not meet all contractual deliverables. Digest Exhibit 4 shows contracts by category including the number of contracts and expenditures for those contracts. The Exhibit also summarizes contracts with deliverables, whether those deliverables were documented, and whether Public Aid monitored the contracts well.

KidCare Application Agents

Because KidCare Application Agents (KCAA) are paid only for complete and approved applications, assuring a relationship between payment and results is simple. Some KCAAs submitted many applications. Fourteen KCAAs had been paid for over 1,000 KidCare applications. In order to become a KCAA an entity must be incorporated under the laws of Illinois, an Illinois subdivision of government, or an insurance company or insurance producer under the Illinois Insurance Code. (pages 27-38)