Analysis of the 2006-07 Budget Bill
Legislative Analyst's Office
The In-Home Supportive Services (IHSS) program provides various services to eligible aged, blind, and disabled persons who are unable to remain safely in their own homes without such assistance. An individual is eligible for IHSS if he or she lives in his or her own home-or is capable of safely doing so if IHSS is provided-and meets specific criteria related to eligibility for the Supplemental Security Income/State Supplementary Program (SSI/SSP). In August 2004, the U.S. Department of Health and Human Services approved a Medicaid Section 1115 demonstration waiver that made virtually all IHSS recipients eligible for federal financial participation. Prior to the waiver, about 25 percent of the caseload were not eligible for federal funding and were served in the state-only “residual” program.
The budget proposes just over $1.3 billion from the General Fund for support of the IHSS program in 2006-07, an increase of $52 million (4.1 percent) compared to estimated expenditures in the current year. Most of the increase is attributable to caseload growth partially offset by increased savings from full implementation of the quality assurance reforms enacted in 2004-05.
Our review of actual expenditures for the first six months of 2005-06 indicates that In-Home Supportive Services costs are overbugeted by $82 million ($26 million General Fund). We recommend that the Legislature recognize a General Fund savings of $26 million for 2005-06.
Current-Year Budget. For 2005-06, the total revised budget for IHSS services excluding administration is estimated at $3,418 million. Based on the number of case-months, which occur during the first half of the year, the budget through December 2005 is about $1,682 million. However, actual expenditures are significantly lower than budgeted. Specifically, expenditures during this time period were $1,618 million, about $64 million less than budgeted. Most of the overbudgeting occurred during the first five months of the fiscal year. In December 2005, expenditures were overbudgeted by just $3 million.
Analyst’s Estimate. Based on the most recent expenditure and caseload data, we project that IHSS services will be overbugeted by a total of $82 million ($26 million General Fund) for the current year. Accordingly, we recommend that the Legislature recognize a General Fund savings of $26 million for 2005-06. Because the December actual expenditures were just slightly below the budget, we cannot at this time project further savings in the budget year. However, we will monitor caseload and expenditure trends and advise the Legislature of any changes at the time of the May Revision.
Current law requires the Department of Social Services (DSS), the Department of Health Services (DHS), and county welfare departments (CWDs) to collaborate in the prevention and detection of fraud in the IHSS program. In order to assure proper coordination of anti-fraud activities, we recommend that the DSS, DHS, and CWDs report jointly at budget hearings on their progress in improving program integrity.
Background. Chapter 229, Statutes of 2004 (SB 1104, Committee on Budget and Fiscal Review) established an IHSS quality assurance initiative designed to improve the accuracy of service needs assessments and program integrity. The initiative included additional funding for state and county staff to implement these changes. With respect to program integrity, Chapter 229 made several changes such as (1) defining the terms “fraud” and “overpayment,” (2) expanding DHS’s fraud prevention authority to the “residual” program, and (3) establishing state level program integrity functions.
Fraud Investigation Workload Shifted from Counties To State. Chapter 229 required CWDs and DSS to refer all suspected IHSS fraud to DHS for investigation, thereby shifting a county workload to the state. Although other DHS staff may assist with fraud investigations, DHS has only two designated investigators assigned to IHSS fraud. There is currently a backlog of about 1,800 IHSS fraud referrals awaiting investigation at DHS. This backlog may result from DHS’s decision to focus its resources on other program areas (such as dentistry) which are perceived to have a greater risk of substantial General Fund loss due to fraud.
Legislative Oversight. To assess progress with the program integrity components of Chapter 229, we asked DHS and DSS a series of questions including (1) how many suspected cases of fraud have been identified, (2) how many have been investigated, (3) what were the results of the investigations, and (4) what is the level of county staffing for IHSS program integrity. At the time this analysis was prepared, DSS and DHS could not answer these questions, in part because the program integrity initiatives were in the early stages of implementation. The DSS indicated that it was in the process of completing its first quarterly program integrity report. This report, beginning with the fourth quarter of 2005, will show for each county the number of fraud investigations, referrals, and their disposition. We understand that DHS is also in the process of compiling data on fraud referrals, investigations, and dispositions.
Analyst’s Recommendation. We recommend that that DSS, DHS, and the CWDs report jointly at budget hearings on the implementation of the program integrity initiatives required by Chapter 229. It is our understanding that the first DSS program integrity quarterly report should be available at the time of budget hearings.