Interim Joint Committee on Health and Welfare


Subcommittee on Families and Children


Minutes of the<MeetNo1> 5th Meeting

of the 2002 Interim


<MeetMDY1> December 18, 2002


The<MeetNo2> 5th meeting of the Subcommittee on Families and Children of the Interim Joint Committee on Health and Welfare was held on<Day> Wednesday,<MeetMDY2> December 18, 2002, at<MeetTime> 10:00 AM, in<Room> Room 111 of the Capitol Annex. Senator Katie Stine, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Katie Stine, Co-Chair; Representative Tom Burch, Co-Chair; Senators Daniel Mongiardo; Representatives Joni Jenkins, Mary Lou Marzian, and Jon David Reinhardt.


Guests:† James Ryan, Candace Kalisz, Charlene Daniels, Alice Wilson and Gerald W. Hoppmann for the Auditor of Public Accounts Office; Diane Andrews and Ron Kelien for the Cabinet for Families and Children, Division of Family Support, J. Larry Hood, retired from the Cabinet for Families and Children; Steve Gearheart for the Cabinet for Families and Children, Office of Program Support; Rice Leach for the Department for Public Health; Jason Dunn and Teresa Suter for the Cabinet for Families and Children; James Millard for ETCR; and Prentice Harvey for Norton Healthcare.


LRC Staff:† DeeAnn Mansfield, Murray Wood, and Cindy Smith.


The minutes of the November 13, 2002 meeting were approved without objection.


The first item on the agenda was a discussion relating to food stamps and TANF (Temporary Assistance for Needy Families) recovery of payment errors, by J. Larry Hood, former employee of the Cabinet for Families and Children, Gerald Hoppman, Director, Division of Performance Audit, Charlene Daniels, CPA, Assistant State Auditor, and Director of the Division of Financial Audit, and Dianne Andrews, Director, Division of Family Support in the Cabinet for Families and Children.† Mr. Hood said in anything but food stamps, the Cabinet decided to not identify, establish, or collect any agency errors.† When he was in collections, he tried to tell the Cabinet that this violated program integrity.† This creates a condition where you encourage fraud.† At one time the Cabinet said they didnít have errors in the AFDC program, which is not true because he collected payments for them.† The Cabinet chose not to identify them as agency errors.† In the food stamp you must identify agency errors because it is required by the federal government.†


Senator Stine asked if federal funding is received when Kentucky maintains a certain level of error.† Mr. Hood said for Kentucky to participate in the food stamp program, the Cabinet for Families and Children must continue to identify their own errors and try to collect them.† All the collected money goes to the federal government, but the federal government pours money back into Kentucky also.†


Mr. Hood said there are other programs in the cabinet that give out cash and there is no federal oversight for it, but the Cabinet has decided that there will be no fraud claims.†


Senator Stine asked if the Attorney Generalís office has any obligation to investigate.† Mr. Hood said he doesnít know one way or the other.† He doubts there could much fraud investigations, unless we find them ourselves.†


Representative Burch asked how much money is being talked about versus how much actually comes in.† Mr. Hood said he doesnít know.† The federal government estimated if things were being done correctly in keeping errors down and collecting them, another $4 million a year would be brought in.


Representative Burch asked how much it would cost to correct the error.† Mr. Hood said it would cost almost nothing.† He ran an office that collected $7.4 million in two years, while only spending $1 million dollars.


His issue is that the Cabinet does not want to establish claims.† He said when they finally automated the active claims system, they found they had 1300 claims they had never collected on.†† The federal government was concerned because Kentucky was so late in processing claims.† Part of the reason is because it is a tremendous process between different state agencies.† However, what they proposed as an alternative will cost more money in the long run.†


Senator Stine asked if Mr. Hood was familiar with a Field Service Operations Manual.† Mr. Hood said he was familiar with an operations manual, but most of that information is not manually done anymore; it is automated.† Senator Stine said there is some set of rules in the Field Services Operations Manual that states that the Cabinetís position is to recoup the losses.


Representative Jenkins asked what percentage the three types of errors are.† Mr. Hood said agency error is the smallest area, then client error, then fraud is the highest.† Representative Jenkins asked how many people who deal with clients could be making those errors.† Mr. Hood said he doesnít know.† There are workers in every area of the state that provides benefits.


Next, Charlene Daniels testified.† She described the audit process that is used.† From July to December of each year, they perform the audit of the comprehensive, annual, financial audit of the Commonwealth.† The goals are to determine that the Commonwealthís financial statements are fairly stated, that other areas of the state have good internal controls to safeguard assets, and that the agencies are in compliance with laws and regulations over financial reporting that apply to each agency.† Once this work is complete they begin working on the statewide single audit of Kentucky (SWAK).† This audit is not financial in nature, but focuses on the federal compliance requirements contained in the Office of Management and Budget Circular (A133).† This audit is very specific to each program that is tested and stays within the guidelines of the compliance supplement.† TANF is annually audited as well as the food stamp program.†


Next, Mr. Hoppmann discussed the inquiries, the Auditorís financial audit work, and the current claims and error rate summaries.† The inquiries were as follows: (1) are TANF claims not pursued; (2) are error rates high in the food stamp program; (3) does the Cabinet for Families and Children fail to establish food stamp claims; and (4) should the Cabinet for Families and Children exceed minimal criteria related to food stamp claims.


Regarding current claims and error rate summaries, Mr. Hoffman said for 2002-2003, they are going to do the following: (1) continue testing claims establishment and collection of† TANF and food stamp claims; (2) expand testing of claims due compromised due to hardship; (3) review FY 2002 annual master agreement with the Inspector Generalís Office and the Attorney Generalís Office and core referrals of suspected fraud; and (4) review FY 2003 welfare fraud performance indicators.


In FY 2001 there were 434 new TANF claims, and $532,137 in overpayments.† In FY 2002, there were 447 new claims, and $588,107 in overpayments.† For food stamps in FY 2001 there were 2,218 new claims, and $1,388,309 in overpayments.† For FY 2002 there were 2,659 new claims, and $1,947,530 in overpayments.† In regard to collections, for FY 2001 TANF claims, there was $973,804 collected.† For FY 2002 TANF claims there was $901,738 collected.† For FY 2001 food stamp claims, there was $773,405 collected and for FY 2002 food stamp claims, there was $719,926 collected.† Regarding the error rate, he said in FY 2000, the rate was 5.81 percent, and in FY 2001 the error rate was 7.53 percent.


In conclusion he said the Cabinet for Families and Children (CFC) is establishing more claims for both TANF and food stamps.† CFC should continue efforts to establish claims within 180 days of discovery.† The CFC should pursue inactive claims for collection if it is cost beneficial; otherwise, CFC should write the claims off.† CFC should refer and monitor potentially fraudulent claims.† CFC should seek to reduce errors for TANF and food stamps.


Next, Diane Andrews, Director, Division of Family Support and Ron Keilan, Branch Manager, Claims Section spoke.† Ms. Andrews said Dr. Hood made a number of allegations and there is not enough time to respond to all of them. She said when error rates go above a certain level, states are required to pay back money.† Kentucky has never been sanctioned, but some other states have.


Mr. Keilan said at one time the inactive claims were looked at and there were cases in excess of ten years or older that had no type of collection activity.† When that happens, they are referred to the treasury offset program.† There are also cases three years or more with no collection activity.† They thought about removing them from the system, but after reviewing the options, and regulations, it was decided they would stay in the system provided they were $25 or greater.† Those cases are referred on to the treasury offset program.† As far as mass deletion, that has not happened.† The referral amount at one time was between $1,000 and $2,999.† That was referred to the Office of Inspector General (OIG).† Because of the large number being referred to OIG, the past due rate looked horrible. The federal government suggested that amount be raised to a minimum of $3,000.


Representative Marzian asked what recourse food stamp recipients have if they are found by the Cabinet to be overpaid.† Ms. Andrews said there is a hearing process and the clients have due process.†


Mr. Hood responded by saying he is glad they are doing better, but noted that nothing was done until the federal government came in at the first part of the year.† They have done everything possible to stay minimal.


The next item on the agenda was a reauthorization update on TANF, by Dianne Andrews, Director, Division of Family Support in the Cabinet for Families and Children.† Ms. Andrews said TANF was to be reauthorized by October 1, 2002. The House passed their version in June (HR 4737), and the Senate bill was introduced, but not passed by the House.† Therefore, Congress did not reauthorize TANF, but continued the funding through December 31, 2002.† When they met in December, they continued funding through March 31, 2003, and the Cabinet is hearing that it will be continued through September.


The next item on the agenda was a status report on the Commission for Children with Special Health Care Needs (CCSHCN), by Eric Friendlander, Executive Director of the Commission.† Mr. Friedlander said the Commission has been around since 1924, and there are many offices around Kentucky.† The Commission oversees the statewide system of care for children with developmental delays and with special health care needs.


The last item on the agenda was a discussion on the health risks for children in the event of bioterrism, by Rice Leach, Commissioner, Department for Public Health.† Dr. Leach said the approach to bioterrism threats is to detect the threat, identify the threat, intercept the threat and then neutralize the threat.† He reported that Anthrax, Plague and Tularemia are all caused by bacteria, and antibiotics will treat these diseases.† The defense against these conditions for children and adults is early detection, prompt identification, prompt interception, prompt neutralization, and prompt separation of the infectious agent from susceptible persons.† As far as botulism and Ricin, both are toxins, and there are no drugs against them to kill them.† There is an antitoxin for botulism if there is certainty that is what it is.† Early detection is the key.† In the cases of viral hemorrhagic fevers, there is no vaccine or specific treatment.† The defense for these conditions is the same as for the others, early detection, prompt identification, prompt interception and prompt supportive treatment.† Dr. Leach said the current concern is smallpox.† There is no specific treatment for smallpox, and there is no smallpox disease in the world, but the virus does exist.† The vaccine has serious side effects that are more likely in some people than others.† Children are among those who are more likely to have serious side effects.† If smallpox disease reappears, children should be vaccinated depending on their risk of exposure.† There are risks to vaccinating children, but the risks associated with smallpox are much greater than the risks associated with the vaccine when the disease is present.


The meeting was adjourned at 12:22 p.m.