Programs Developing a Reduction Strategy
The following four high-error programs are either developing their reduction strategy or have limited information related to current improper payment rates or historical trends at this time. The Office of Management and Budget (OMB) is working with the Department of Treasury, Department of Health and Human Services (HHS) and the Federal Communications Commission (FCC) to develop and implement measurement methodologies for these programs. When completed, these programs will report annual measurements for improper payment rates, similar to the other high-error programs.
- Children's Health Insurance Program (CHIP)
- High Cost Program of the Universal Service Fund
- Earned Income Tax Credit (EITC)
Children’s Health Insurance Program (CHIP)
Department of Health and Human Services
Agency Accountable Official: Ellen Murray, Assistant Secretary for Financial Resources
Program Accountable Official: Peter Budetti, Deputy Administrator for Program Integrity Centers for Medicare and Medicaid Services
The Children's Health Insurance Program (CHIP) is a state and federal partnership that provides low-cost health insurance coverage for children in families who earn too much income to qualify for Medicaid but cannot afford to purchase private health insurance coverage. States have considerable flexibility to establish income eligibility rules for the program, but children enrolling must be otherwise uninsured. Within federal guidelines, each state determines the design of its individual program, including eligibility parameters, benefit packages, payment levels for coverage, and administrative procedures. States have flexibility in designing the benefit package, but states are required to cover routine check-ups, immunizations, dental, inpatient and outpatient hospital care, and laboratory and x-ray services. Preventive care must be provided at no cost to the family; but premiums and other cost-sharing may be required for other services, within certain limits.
Fee for service (FFS) claims and eligibility portions of the program contributed most to the error rate in 2008. Fee for service claim errors were mainly due to provider non-response to documentation requests within these service categories/types: (1) prescribed drugs, (2) outpatient hospital, physicians, other practitioners/clinics, and (3) inpatient psychiatric/mental health facility services. Eligibility errors were mainly due to caseworker error and lack of internal controls
The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) prohibits HHS from calculating or publishing error rates for the program until six months after a final rule is published. The Department of Health and Human Services published a final rule in the summer of 2010 and is expected to report an improper payment estimate in 2012.
High Cost Program of the Universal Service Fund
Federal Communications Commission (FCC)
Accountable Official: Julius Genachowski, Chairman of the Federal Communications Commission
The High Cost Program of the Universal Service Fund (USF) ensures that consumers in all regions of the nation have access to and pay rates for telecommunications services that are reasonably comparable to those services and rates paid in urban areas. The Federal Communications Commission administers the program pursuant to section 254 of the Communications Act of 1934, as amended by the Telecommunications Act of 1996. The program provides subsidies to telecommunications carriers to defray the costs of serving customers in areas where the cost to provide service is high due to factors such as low population density or topography. The High Cost Program is administered by the Universal Service Administrative Company (USAC), an independent, not-for-profit corporation that was created in 1997 to administer the Universal Service Fund.
While the High Cost Program of the Universal Service Fund is considered a high-error program, a baseline error rate for the program has not yet been established. The Federal Communications Commission has established an improper payment assessment plan to examine the program and develop a baseline error rate. The assessment plan will be administered by Universal Service Administrative Company, under the oversight of the FCC’s Office of the Managing Director.
Earned Income Tax Credit (EITC)
Department of the Treasury
Agency Accountable Official: Dan Tangherlini, Chief Financial Officer and Chief Performance Officer
Program Accountable Official: Beth Tucker, Deputy Commissioner for Operations Support, Internal Revenue Service
The Earned Income Tax Credit (EITC) provides a refundable federal income tax credit to low and moderate income Americans who work. For tax year 2009, more than 26 million taxpayers received almost $60 billion in EITC — making the credit one of the largest anti-poverty programs in the country. The maximum credit is approximately $5,600 for a family with three qualifying children. EITC beneficiary claims are not pre-certified for eligibility as in other traditional benefit programs.
The current improper payment rate for EITC is estimated to be between 21% and 26% of all program payments — roughly $15.2 billion. The estimate accounts for the increase in the credit for the EITC provisions in the American Recovery and Reinvestment Act of 2009, which expanded the EITC for families with three children. The primary source for this estimate is the National Research Program study. The study includes audits of a statistically valid subset sample of credit returns to determine accuracy of the claim.
A number of factors unique to the program trigger errors. The complexity of the law contributes to confusion around eligibility requirements, mainly qualifying child relationship and residency rules. Other factors include high program turnover of one-third annually, return preparer errors and fraud.
Unlike other traditional benefit programs where a caseworker model results in high administrative costs and low error, the program's administrative costs are less than 1% of the program benefits. IRS screens EITC claims against certain criteria and also conducts approximately 500,000 audits of claims annually.
Because paid tax return preparers have prepared two-thirds of EITC claims submitted, the Department of Treasury plans to reduce the number of improper payments through licensing, training, education, enforcement and oversight of tax return preparers over the next three years.
Additional information on the program is also provided annually in the Department's Performance and Accountability Report.