Improper welfare payments add up to millions

State audit finds $90 million not handled correctly

Jerd Smith, Rocky Mountain News

Published July 3, 2006 at midnight

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Colorado made nearly $90 million in improper welfare payments last year by overpaying some clients, underpaying others and being defrauded by still others, according to a state audit.

The improper payments amounted to:

• Medicaid: $48 million.

• Food stamps: $36 million.

• Temporary Aid to Needy Families: $6 million.

The errors point to a systemic lack of oversight on more than $2.4 billion in public assistance payments made each year through the three programs, according to acting state auditor Sally Symanski.

"There's no question that public dollars are at risk," Symanski said. "It's horrifying. We have a limited number of dollars to serve these people with. It's critical that we get a handle on this."

While all three welfare agencies question the audit's findings, each is participating in surveys and pilot programs with the federal government to establish tighter control.

Charissa Hammer, the audit division head with the Colorado Department of Human Services, said despite staffing cuts, her agency is using new software programs to track improper payments and fraudulent activity.

"Our radar is definitely up," she said. "But we're in the business of helping people. It's not like we're issuing hunting licenses. This is complex stuff."

The audit looked at the payments as part of a 2005 analysis of a new computerized benefits system, and it comes as states face increasing pressure to better track scarce public benefits dollars in order to make them stretch further.

But the task is proving difficult.

Four years after Congress passed a law requiring the tracking of improper payments, neither the Medicaid program nor the needy family program has set up methods to track payments, according to a study released in February by the Government Accountability Office, a federal watchdog agency.

States are key to making sure the money is spent properly, said McCoy Williams, who oversaw the GAO study.

But Colorado welfare officials say they don't have the resources to do precise tracking and that they have no choice but to wait for the federal government to come up with a system everyone can use.

"Right now there is no meaningful data," said Mike Fierberg, spokesman for the Centers for Medicare and Medicaid in Colorado, the federal agency that distributes the money for those programs. "It's very difficult. Coming up with a system that everyone agrees is fair has taken a long time."

Medicaid officials estimate they will be ready to start analyzing erroneous payments next year or the year after once pilot tests are completed.

Officials with the Temporary Aid to Needy Families program said it's not clear when they will be able to comply with the federal law.

Only the food stamp program, which is run by the U.S. Department of Agriculture, tracks improper payments and requires states to keep error rates in check.

Human services agencies say part of the problem lies in staffing cuts they were forced to make as a result of the recession. In 2004, for instance, the audit unit at the Colorado Department of Human Services was cut to five people from 10.

County agencies say similar personnel reductions have forced them to choose between taking care of clients or trying to track money as it flows from federal to state to county agencies.

Lisa Esgar is director of operations and finance for Colorado's Health Care Policy and Finance Administration, which oversees Medicare and Medicaid for the state. She says her agency's error rate doesn't reflect its internal monitoring and fraud oversight efforts.

"Just because we haven't scientifically measured it, doesn't mean that we're not doing anything," Esgar said.

Since welfare reform was implemented 10 years ago, experts said, the federal government has changed the way it operates the benefits programs, opting to give states and counties more management flexibility.

But now the federal government and agencies such as Colorado's state auditor want more precision and accountability.

"States have a responsibility to manage their programs effectively," said Sean Hurley, a Washington, D.C.-based manager with the Office of Family Assistance, which oversees the needy family program.

"But they're being pressed. In any of these programs you have to look at what level of error is tolerable."

Key among the concerns over the improper payments is fraud - and the fact that no one really knows how much fraud is occurring.

Agencies do have some data on how much money they recover through their internal fraud investigations. An analysis by the Colorado Department of Human Services shows it collected $1.4 million in 2005, less than half of the $3.6 million the agency collected in 2000.

Hammer, who heads the audit division for the Colorado Department of Human Services, said the dramatic drop in fraud recoveries is due to budget-related staff cuts and the agency's decision to focus instead on trying to do a better job in getting the money to the right people in the first place.

"The emphasis just hasn't been on collections," she said.

Federal officials hope states can do with Medicaid and the needy family program what the U.S. Department of Agriculture has done with its food stamps program. Since its error-tracking program was revamped nearly 10 years ago, the number of erroneous payments has been cut nearly in half nationwide.

Colorado could likely save millions of dollars and serve more people if it could do the same, federal officials said.

According to the Colorado auditor, state and county agencies made errors in 14 percent, or $35.8 million worth, of food stamp payments.

In the Temporary Aid to Needy Families program, auditors said 12 percent of payments, or $5.88 million, contained errors.

Medicaid had the lowest error rate of the three programs at 3 percent. But because Medicaid is the largest public assistance program, that translates into $48 million during the audit period.

Like other federal overseers, the USDA would like Colorado to do better.

In its own analysis, the USDA found that Colorado had an error rate of 7.42 percent last year. That's well below the 14 percent identified by the Colorado auditor's office, but it is still higher than the national benchmark rate of 5.84 percent.

According to the USDA, Colorado overpaid people in the food stamp program some $15.7 million in 2005, and underpaid others roughly $7.5 million.

That means Colorado could have saved $8.2 million, or served more than 80,125 new clients, assuming an average benefit of $102.34 per month per person.

How long it will take to put error tracking plans in place at Medicaid and the needy family program isn't clear yet.

Part of the complexity lies with the structure of Colorado's welfare system, experts said. Though the state funnels cash to the counties, the counties themselves run the programs and have broad latitude to establish rules, which makes analysis difficult.

In addition, the welfare agencies must track spending and budgets over three different fiscal years: the federal fiscal year, which runs from Oct. 1 through Sept. 30; the state's fiscal year, which runs from July 1 through June 30; and the Jan. 1 through Dec. 31 calendar year.

"The layers of complexity are daunting," said John Witwer, who oversees Colorado's new computerized welfare benefits system.

The system, known as CBMS, has been plagued by glitches and that may have compounded the errors. However, Witwer believes most of the technical problems have been resolved and that future audits will show a much lower overall improper payment rate among the different welfare programs.

But auditor Symanski doesn't buy into that notion, in part because error rates were high even before the new computer system launched in 2004.

"We've done a number of audits over the years and we always find problems," Symanski said. "It's distressing to keep seeing it in audit after audit."

smithj@RockyMountainNews.com or 303-892-5474

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