e-Texas e-Texassmaller smarter faster governmentDecember, 2000
Carole Keeton Rylander
Texas Comptroller of Public Accounts

Recommendations of the Texas Comptroller

Chapter 8: Health and Human Services

Improve the Medicaid Eligibility Determination Process


More than 600,000 Texas children are eligible for but not enrolled in Medicaid. Lacking health insurance, many of these children use hospital emergency rooms as their primary source of health care. Their health is suffering as a consequence, while the hospitals that deliver uncompensated care are placed under an increasing financial burden. To reduce the financial strain of uncompensated care and obtain health insurance for more Texas children, the state should improve its Medicaid eligibility system.


Texas spent more than $4.7 billion on health care for the uninsured in fiscal 1998.[1] Of nearly 4.9 million Texas residents without health insurance, almost 1.5 million are children.[2] Public hospitals provided $1.4 billion in uncompensated health care for indigent patients in fiscal 1998. When uncompensated care by private hospitals is added in, the 1998 total rose to $2.1 billion.[3]

Source: Carole Keeton Rylander, Texas Comptroller of Public Accounts, Texas Estimated Health Care Spending on the Uninsured.

Uncompensated health care is adding to the financial difficulties of hospitals already short on funds due to rising costs, the widespread adoption of managed care, and cuts in Medicare reimbursements made by the federal Balanced Budget Amendment (BBA). The BBA reduced Texas hospital funding by nearly $6 billion, and the subsequent Balanced Budget Refinement Act of 1999 restored only 12 percent of this funding.

To make ends meet, Dallas’ Parkland Hospital recently laid off 200 workers and asked area voters for a 50 percent rate increase in local taxes. A tax increase also is expected in Houston to bail out the Harris County Hospital District. Houston’s Methodist Health System has cut 100 jobs; the Baptist Health System in San Antonio has laid off 290 workers; and the Santa Rosa Children's Hospital in San Antonio lost $42 million in 1999.[4]

Such cases, which are far from isolated instances, illustrate a deepening financial crisis due in part to the continuing problem of the uninsured. As Ed Berger, a vice president of the Seton Healthcare Network, has said, “The cost of health care for everyone is [affected] when uninsured persons access the health care system. Hospitals—and physicians—must shift at least some of those costs to other payers or face the prospect of reducing services, or as a last resort, simply close their doors.”[5] And, unfortunately, studies indicate that the number of uninsured will continue to rise, due to rising insurance costs relative to family income, the impact of welfare reform, and other factors.[6]

Access to Medicaid is Difficult

About 600,000 children in Texas are eligible for health insurance through Medicaid but are not enrolled in the state’s Medicaid program.[7] Instead, such children generally rely on high-cost emergency rooms in public hospitals for health care. According to David Lopez, a senior executive with the University of Texas Medical Branch hospitals, “Only 30 to 35 percent of emergency room visits are true emergency cases. Many [others] are for routine medical services that should be provided in a clinic setting.”[8]

The Texas Hospital Association and Texas Medical Association have stated that the current state system for determining Medicaid eligibility discourages eligible families from enrolling. The eligibility determination process is extremely time-consuming for the vast majority of eligible families who work for hourly wages. In some urban welfare offices, applicants must wait for hours to see a caseworker, even if they have appointments.[9] In many cases, applicants must take time off from work for several trips to the eligibility office, placing their jobs or wages in jeopardy.

More than 80 percent of eligible persons surveyed by the George Washington University Medical Center described Medicaid enrollment and participation as confusing. According to the George Washington study, many potential applicants do not know where to apply; some are confused about who can apply; and still others are afraid that applying will jeopardize their immigration status or that of a family member.[10] Yet immigrant children who are legal permanent residents and meet income eligibility criteria can enroll in Medicaid.

In a national survey of low-income families, 72 percent of Medicaid applicants said that difficulties in obtaining the required documents prevented them from completing the application; 66 percent also cited the overall inconvenience of the enrollment process.[11] As Ed Berger of the Seton Healthcare Network has noted, “Most persons know they can get health care through a hospital emergency room, [so] there’s little if any incentive for them to put up with the hassle just so the providers can get paid.”[12] It is important to note that such “free” emergency room care ends up driving up the cost of health care for those with health insurance, and it limits the availability of local tax dollars for education and other purposes.

Welfare Reform Creates Confusion in Medicaid

Before the passage of the 1996 federal welfare reform legislation, any family receiving welfare was automatically eligible for Medicaid as well. After welfare reform, this link was severed, to ensure that people losing welfare benefits due to time limits do not also lose their Medicaid coverage. A new category of Medicaid eligibility was created for low-income families; Texas was allotted $27 million in federal funds to help redesign its eligibility system and inform low-income families of the delinking of welfare and health care benefits.

Despite the federal legislation, however, Texas has not yet “delinked” its eligibility system, and has taken no steps to create a separate eligibility category for low-income Texans who qualify for Medicaid regardless of their welfare status.

In a Washington State survey of former welfare recipients, nearly a quarter of families who had recently left welfare thought Medicaid counted as part of welfare, which has a five-year lifetime limit; more disturbingly, many of the state’s eligibility workers thought so as well.[13] A 1999 survey of patients at community health centers in 10 states indicated that almost a third of the respondents incorrectly believed that welfare work requirements also apply to Medicaid.[14]

In addition to the confusion concerning Medicaid eligibility, welfare reform has created additional inefficiencies in Texas’ eligibility process for people seeking temporary financial assistance. Texas welfare and food stamp applicants who are seeking assistance and help with employment services must begin by applying for benefits at one of more than 450 welfare offices run by the Texas Department of Human Services (DHS). Under DHS’s “Texas Works” program, a DHS worker directs the applicant to the welfare office’s Employment Resource Center, which contains a computer with Internet access to job listings, job search and interview tips, lists of available child care and transportation, and names of organizations that provide work clothes. DHS staff members provide employment counseling as well eligibility determinations for assistance. After visiting a Texas Works center, the applicant must then visit a local workforce center for the same type of orientation on employment assistance and child care services. This requirement wastes applicants’ time and represents an unnecessary duplication of limited state resources.

It is not necessary to shuffle clients from one state office to another for eligibility and employment services. Modern information technology can create a system of open networks that would allow local workforce centers to determine eligibility, provide eligible families with temporary financial assistance, and help in finding a job, child care, and Medicaid services, all in one stop. Utah already has such a system, and according to a recent study by the US General Accounting Office:

Clients in workforce centers in Utah...see a single case manager for all intensive services, including [welfare] services, food stamps, and Medicaid, despite the program or combination of programs that fund the services. All case managers in Utah are trained to provide services for every program offered through the center, minimizing the burden on the client who, in an unintegrated system, might have had to go through several assessment and intake processes.[15]

DHS workers based at local workforce centers could eliminate the duplication in the current system that requires state employees of more than one agency to provide employment assistance and eligibility determination. With DHS eligibility workers located at local workforce centers, employment services could begin as soon as eligibility is determined. DHS workers at the workforce centers could advise clients of their transitional Medicaid benefits when they become employed.

Call Centers

In a report on integrating welfare services, the US General Accounting Office identified several key success factors for such efforts. One was the use of telephone call centers to help determine initial eligibility for welfare.[16]

Using call centers to determine eligibility for DHS programs would allow some individuals to apply for benefits without visiting the local welfare office. (Due to federal requirements, those applying for food stamps still would have to undergo a face-to-face interview to complete the eligibility process.)

Accurate financial information can be obtained easily without face-to-face interviews. Texas already uses several automated resources to verify client applications; available data covers wages, work histories, unemployment compensation claims, pensions, self-employment and other income, vehicle registrations, and property ownership. Such data can be accessed electronically by the staff of call centers to control fraud and ensure the integrity of Texas’ programs. According to Timothy Westmoreland, the chief Medicaid official for the federal government, most Medicaid fraud is not the result of enrollment procedures, but medical equipment that isn’t delivered, or home health services that never materialize.[17]

Moreover, call centers could be used to boost local economic development. In areas enjoying low unemployment, finding and retaining qualified eligibility workers has proven to be a major problem. DHS recently reported that:

The number of qualified applicants has steadily decreased as competitors’ salaries have increased. It has become increasingly difficult, and in some areas almost impossible, to create adequate applicant pools from which to select staff. Turnover in Austin and Houston for direct delivery workers is 38%, and in the Dallas-Ft. Worth metropolitan area it is 32%. In these same metropolitan areas, unemployment rates range from 2.1% to 4.6%. As turnover occurs, the level of service to clients diminish.[18]

Moving the bulk of the state’s application screening and eligibility determination functions to call centers in areas of higher unemployment, such as the Rio Grande Valley and rural areas, would improve local economies while providing a ready workforce. The Wall Street Journal recently reported that “For smaller cities, call centers are an economic-development bonanza.”[19]

Several Texas programs and agencies already use call centers to provide efficient and effective services.

  • The state’s Children’s Health Insurance Program (CHIP) provides health insurance to uninsured children who do not qualify for Medicaid due to family income. Unlike Medicaid, the application process for CHIP is relatively easy; CHIP applicants can apply over the phone and mail in their applications. According to Health and Human Services Commissioner Don Gilbert, his agency plans on implementing Internet enrollment for CHIP-eligible candidates. Currently, eligibility is handled through a single call center in Austin. Applicants call or mail in a single-page application with 10 questions that takes about 15 minutes to answer. The applicant then signs and mails the form back to the provider, who in turns sends an enrollment package. If one or more children on the application appear to be Medicaid-eligible, the parents are told they must make a trip to a DHS welfare office to enroll that child in Medicaid.

  • DHS uses call centers with Automated Voice Response functions to answer inquiries on the Electronic Benefit Transfer card used for welfare cash assistance and food-stamp transactions. Call centers are used in DHS offices in Beaumont, San Antonio, and Houston to process changes to client files and perform case maintenance functions over the phone instead of through in-person interviews. DHS surveys in San Antonio indicated that 98 percent of DHS clients prefer to use the phone to report changes.[20] This survey contrasts favorably with a recent finding by the Center for Public Policy Priorities that customer service at DHS offices is rated poorly by more than 75 percent of parents seeking enrollment.[21]

  • The Texas Workforce Commission (TWC) recently shifted its Unemployment Insurance application process, previously provided through local offices around the state, to seven call centers. Individuals applying for unemployment now enter a claim over the telephone. Joe Adams, TWC’s Director of Planning, has said that in previous local office settings, it was not uncommon for customers to wait for one or even two hours to receive service. Customer expectations are higher and the nature of service is markedly different in a telephone-based service environment. Call centers provide significantly reduced wait times and more specialized service, even at peak workload hours of the day. The new system directs the more complex calls to staff who have more in-depth knowledge of program services and allows TWC to handle the complicated calls more quickly and effectively. Previously, according to Adams, in smaller offices where staff had to be generalists, customized information was rarely readily available without delays and transfers.[22]

Eligibility Determination Via the Internet

The use of the Internet for a variety of transactions has become widespread in the business world, and it is beginning to make dramatic changes in government as well. As reported in a recent issue of Governing Magazine,

The incentives for government to do more on the Net are only getting stronger: Nearly half of all adult Americans now have access to the Internet from home. That increasingly Web-savvy population is coming to expect information and services to be available “24-7,” as the current business cliché puts it. And as every government finance officer knows, any information or service that can be made available over the Web will be provided at a fraction of the cost of transactions taking place between human beings over a government counter.[23]

Texas could develop a Web-based enrollment and eligibility system to screen, refer, and provide services. While the Internet cannot offer all of the advantages of personal interviews, it can be a useful enhancement to call centers and interviews at local offices. Consumers could use the Internet from home, schools, community centers, libraries, or local workforce centers to learn about state health and human services and fill in and submit forms. Any required documentation could be mailed or faxed to the appropriate office. Eventually, when the use of digital signatures becomes more widespread, individuals should be able to conduct the entire application process online. As a first step, Texas could place eligibility information regarding welfare, Medicaid, and food stamps online.


A. The Texas Department of Human Services (DHS) should drop its requirement for face-to-face interviews with Medicaid applicants during the initial application process.

Federal law does not require in-person interviews to determine Medicaid eligibility, and 38 states have eliminated the “face-to-face” requirement. DHS recently eliminated the face-to-face requirement for those already enrolled in Medicaid but needing re-certification. Low-income parents enrolling in the Children’s Health Insurance Program (CHIP) are allowed to apply over the phone and mail in their applications. The same standard should apply for low-income parents applying for Medicaid. For those preferring in-person assistance with the application process, eligibility specialists, community-based providers, and volunteers can be made available to help families fill in and mail applications or to begin the application process via the Internet.

B. Texas should station more DHS eligibility staff in locations such as hospitals, clinics, and local workforce centers.

Federal law already requires states to provide enrollment assistance at health clinics and hospitals that provide health care to a disproportionate number of uninsured persons, and DHS has about 330 advisors, supervisors and clerical workers stationed in hospitals and clinics around the state. These workers allow uninsured families receiving medical care at a hospital or clinic to have their eligibility for Medicaid determined on site. This useful service has been popular with applicants and should be expanded. DHS staff also should be stationed at local workforce centers.

C. Texas should use call centers and Internet applications to improve its eligibility processes and reduce their cost.

Call centers and the Internet would allow DHS to take full advantage of new technology that could be integrated with the new Texas Integrated Eligibility Redesign System (TIERS), a new computer-based eligibility system due to be introduced at DHS starting in June 2002. Call centers could be established during the TIERS pilot stages.

D. Texas should “delink” its Medicaid and welfare eligibility processes by creating a separate eligibility category for low-income Texans who qualify for Medicaid regardless of their welfare status, as required by federal law. Texas should take full advantage of $27 million in federal funds set aside for the state to change its eligibility system and expand Medicaid coverage of its uninsured population.

Other states have successfully used federal funding to delink welfare and Medicaid eligibility and cover the costs of activities designed to help low-income families stay on Medicaid when they lose welfare benefits. Texas can use the funding to set up call centers or station DHS staff in workforce centers, hospitals, health clinics, and local workforce centers.

The federal Health Care Financing Administration has advised that state efforts aimed at enrolling low-income families in Medicaid under the new “delinked” provisions qualify for federal reimbursement at an enhanced rate (75 percent to 90 percent versus 50 percent).[24] Other states have used enhanced matching funds to station employees at various health care centers; develop customer assistance telephone centers; develop a common Medicaid/CHIP application; update computer systems; and coordinate Medicaid and child care enrollment. Texas should use the enhanced match rate to cover up to 90 percent of the initial startup costs of its call centers and/or to base additional DHS eligibility personnel in the field.

Fiscal Impact

A more efficient process for determining eligibility for state services would generate savings for the state as well as greater convenience for families seeking services.

Based on figures from the Legislative Budget Board (LBB), eliminating the state requirement for face-to-face interviews in the initial application process with Medicaid applicants would reduce the number of state employees needed to determine eligibility by 46 full-time equivalents (FTEs) in fiscal 2002 and 50 FTEs in fiscal 2003. The LBB further estimates that the average number of individual Medicaid insurance premiums purchased by the state each month will increase by 7,992 in fiscal 2002 and 8,624 in fiscal 2003.25

Of DHS’s current eligibility workers stationed in the field, 248 are fully supported by federal and local funding; no general revenue is used to fund these positions.26 The estimate assumes that the number of DHS workers supported by the hospitals and clinics could be increased to 480 positions at no additional cost to the state. Based on LBB estimates of the impact of dropping the face-to-face requirement for Medicaid, the Comptroller’s office estimates that the average number of individual Medicaid insurance premiums purchased by the state each month would increase by 3,996 in fiscal 2002 and 4,312 in fiscal 2003 by adding additional outstationed workers.

According to estimates made by a Health and Human Services Interagency Committee in fiscal 1999, the use of call centers would eliminate the need for 1,181 FTEs in fiscal 2002 and 2,422.5 FTEs in fiscal 2003.27 The estimate assumes that 80 percent of individuals applying for benefits would use call centers; 10 percent would use the mail or the Internet; and 10 percent would apply in person. Estimated savings accrued by call center technology are based on a cost-benefit analysis performed by an interagency management team under the direction of the Health and Human Services Commission in 1998.

The enhanced federal match available to Texas to delink Medicaid and welfare eligibility would reduce the one-time costs associated with establishing the call centers. The cost of additional Medicaid enrollees would be offset by the savings generated from the increased efficiency of call-center technology.

To achieve the savings of personnel reductions, DHS’s 2002-03 general revenue appropriation should be reduced by $61,890,960. Texas Department of Health’s (TDH’s) general revenue Medicaid appropriation for the 2002-03 biennium should be increased by $14,850,000 to account for increased participation in the Medicaid program.

Savings to the General Revenue Fund
Savings to Federal Funds
Cost to the General Revenue Fund
Cost to Federal Funds
Net Savingsto the General Revenue Fund
Net Savings toFederal Funds

Fiscal Year
Change in FTEs

[1 ] Texas Comptroller of Public Accounts, Texas Estimated Health Care Spending on the Uninsured (Austin, Texas, June 2000) (http://www.window.state.tx.us/uninsure/). (Internet document.)

[2 ] Telephone interviews with Edli Coldberg, Texas Health and Human Services Commission, Austin, Texas, August 2000.

[3 ] Texas Comptroller of Public Accounts, Texas Estimated Health Care Spending on the Uninsured.

[4 ] Interview with Marsha Jones, Texas Hospital Association, Austin, Texas, June 2000; and interview with Richard Wayne, M.D., medical director and chief executive officer, Christus Santa Rosa Children’s Hospital, San Antonio, Texas, March 9, 2000.

[5 ] Testimony of Ed Berger, vice president for Advocacy & Public Policy of the Seton Healthcare Network, before the Committee on Human Services, Texas House of Representatives, Austin, Texas, April 26, 2000.

[6] Institute of Medicine, America’s Health Care Safety Net: Intact but Endangered, edited by Marion Ein Lewin and Stuart Altman (Washington, DC: National Academy Press, 2000), p. 5.

[7 ] Presentation by Texas Health and Human Service Commissioner Don Gilbert at an e-Texas public hearing, Dallas, Texas, April 27, 2000.

[8] Presentation by David Lopez, senior executive, University of Texas Medical Branch Hospitals, to the Texas Conservative Coalition Task Force on Health and Human Services, Austin, Texas, March 17, 2000.

[9 ] The Center for Public Policy Priorities and Orchard Communications, Inc., Every Child Equal—What Parents Want from Children’s Medicaid: A Report to the Texas CHIP Coalition, by Anne Dunkleberg and Cathy Schechter (Austin, Texas, September 2000), p. 55.

[10] George Washington University School of Public Health and Health Services, “Beyond Stigma: What Barriers Actually Affect the Decisions of Low-Income Families to Enroll in Medicaid?,” by Jennifer P. Stuber, Kathleen A. Maloy, Sara Rosenbaum, and Karen C. Jones, July 2000, p. 8.

[11 ] US Department of Health and Human Services, Administration for Children and Families, Access to and Participation in Medicaid and the Food Stamp Program (Washington, DC, March, 2000), p. 7.

[12 ] Testimony of Ed Berger, vice-president for Advocacy & Public Policy, Seton Healthcare Network, to the Committee on Human Services, Texas House of Representatives, Austin, Texas, April 26, 2000.

[13 ] National Center for Public Analysis, “What Happens to Families Leaving Welfare? And Medicaid?” (http://www.ncpa.org/pi/health/pd111299f.html). (Internet document.)

[14 ] US Department of Health and Human Services, Administration for Children and Families, Access to and Participation in Medicaid and the Food Stamp Program, p. 7.

[15] US General Accounting Office, Workforce Investment Act: Implementation Status and the Integration of TANF Services (Washington, DC, June 2000), p. 18.

[16] US General Accounting Office, Workforce Investment Act: Implementation Status and the Integration of TANF Services, p. 21.

[17] Nina Bernstein, “Experts Cast Doubt on Worth of New York Plan to Fingerprint for Medicaid,” New York Times (August 30, 2000), p. 1.

[18] Texas Department of Human Services, FY 2001 Operating Budget and FY2002-2003 Appropriation Request Including Exceptional Items (Austin, Texas, July 21, 2000), p. 1.

[19 ] Brad Reagan, “Call Centers Are Booming in Small Cities,” Wall Street Journal (March 1, 2000).

[20] Texas Integrated Enrollment and Services Interagency Management Team, House Bill 2777 Plan (Austin, Texas, December 1998), p. II – 4.

[21 ] Anne Dunkleberg and Cathy Schechter, Every Child Equal—What Parents Want from Children’s Medicaid, p. 56.

[22 ] E-mail from Joe Adams, director of Planning, Texas Workforce Commission, August 15, 2000.

[23 ] John Martin, “Waiting for E-Com,” Governing Magazine (April 2000), p. 51.

[24 ] Center on Budget and Policy Priorities, “Congress Lifts the Sunset on the ‘500 Million Fund,’” by Donna Cohen Ross and Jocelyn Guyer (December 1999) (http://www.cbpp.org/12-1-99wel.htm). (Internet document.)

25 Legislative Budget Board Staff, “Cost-Outs of Medicaid Eligibility Simplification for House Committee on Human Services and House Public Health Committee Workgroup on Medicaid Eligibility and Enrollment,” April 6, 2000.

26 Texas Department of Human Services, fax from Governmental Relations, June 26, 2000.

27 Texas Department of Health and Human Services Commission, memo to TIES’ Agency CEOS, CFOs, and sponsors from HHSC, March 1, 1999.

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