sionals in headquarters and about 45 in the regions spend some time each year in direct consultation with State public assistance program

staff.

Mr. ROYBAL. Do you send people out to the State offices to talk with them about the regulations?

Mr. NORTON. Yes. Most of the State office visits are made by our regional staff. Many of our headquarters staff also visit State offices because it is a two-way street with both learning more about administering the law. We also believe that our management publications are a significant technical assistance.

Mr. ROYBAL. What evidence can you cite that the technical assistance has helped reduce the error rate?

Mr. NORTON. The error rates have decreased substantially since we intensified providing special assistance.

AFDC POPULATION

Mr. ROYBAL. How many persons do we have on AFDC?

Mr. NORTON. At last report there were about 11,400,000 persons receiving AFDC payments.

Mr. ROYBAL. We have heard that people in AFDC tend to produce children who subsequently wind up on some public assistance program. Are there any statistics on this point?

Mr. NORTON. No.

QUALITY CONTROL

Mr. ROYBAL. You indicate that HEW using its quality control data base will implement disallowance by requesting States to make adjustments to expenditure reports for next quarter. Explain your quality control data base.

Mr. WORTMAN. The data base from which the disallowances in AFDC will be calculated consists of the rates of error that were found in individual State programs for the period of July to December of 1975. The information that goes into this data base is generated by a review of a statistical sample of AFDC cases; this sample size is 44,000 cases for the State reviews and 8,500 cases for the Federal rereviews.

Mr. ROYBAL. You indicate that there has been some improvement in the error rate. However, the error rate is still very high. Have you established any goals with respect to what an acceptable error rate should be?

Mr. WORTMAN. There has been dramatic improvement in error rates since the inception of the quality control program in 1973. Error rates have dropped from 41 percent in 1973 to the present level of 25 percent (6.5 percent ineligibility, 13.3 percent overpaid cases, 5.5 percent underpaid cases); this amounts to close to a 40 percent reduction since 1973. The levels to which we are driving to reduce error rates are 3 percent ineligibility, 5 percent overpayments, and 5 percent underpayments.

CHILD SUPPORT EFFORTS

Mr. ROYBAL. The child support enforcement is a new program. Has a study been done to indicate how the program is working? What were the results?

Mr. WORTMAN. No study has yet been performed to evaluate the new child support enforcement program. We have a survey currently underway, with the questionnaire at OMB, to determine the level of State and local activity in child support enforcement prior to enactment of title IV-D. We also have at OMB a form on which the States will be required to report quarterly on their staff levels and case activities. These two instruments were designed to elicit comparable results. Comparison of the results of the baseline survey with the new reports of State activities should indicate how the program is working. Evaluation of State progress may be premature at this time because the States have been somewhat hampered in their efforts because of Federal inability to operate the Parent Locator Service prior to March 15, 1976. The beginning of PLS development was delayed pending the enactment of the Department's appropriation. However, we have noted a marked increase in State and local child support activity since the enactment of the title IV-D child support program.

MEDICAID

Mr. ROYBAL. You indicated that SRS has oversight responsibility for about 53 different versions of the medicaid program. Wouldn't it be more efficient and less costly if there were only one program?

Dr. WEIKEL. The question of efficiency and cost relates to the number of levels of government involved in administration of the program and the issue of the amount of flexibility allowed in structuring the program by the various levels of government. For example, the law currently allows States a great number of options for setting eligibility for medicaid. This leads to higher costs in the Federal administration of the program since we must use manpower to be assured that the different means used for determining eligibility by States are in conformance with Federal requirements.

Mr. ROYBAL. There are still a huge number of errors in medicaid reimbursement. What have you done to cut these down?

Dr. WEIKEL. You are probably correct in stating that significant errors exist in the area of medicaid reimbursement. The 108 positions just allowed in the fiscal year 1976 appropriation will be used to detect and prosecute fraudulent reimbursements. We are also reviewing our regulations in the area of reimbursement to make sure that providers cannot take advantage of the ways in which reimbursement must be determined by States. For example some clinical labs have continued to charge the prevailing rates for some tests that, because of the introduction of automated equipment, do not cost as much to do. In this instance, regulations using the prevailing rate method are not able to account for the fact that some costs may actually be decreasing. As a result, substantial profits are being made which have led to veiled methods of kicking back some of these profits to physicians. Mr. FLOOD. Mr. Conte.

QUALITY CONTROL DATA

Mr. CONTE. How long does it take to get error data ready to apply and adjustments to State grants? I noticed that July 1 to December 31, 1975, data will not be available for fourth quarter fiscal year 1976.

Mr. WORTMAN. The final error data for the period July to December 1975 will be available around the first of April 1976. However, due to the present process for making grant awards, the actual adjustments for these errors will not be made until October 1, 1976, or the fifth quarter.

Mr. CONTE. Would you outline some of the facets of the AFDC quality control program?

Mr. WORTMAN. The quality control system used in the AFDC program is an adoption of a technique used extensively in industry for maintaining control over the quality of production services. With large numbers of units it is more economical, and equally valid, to inspect a statistical sample of units rather than every individual unit. The units in AFDC quality control are cases, and the inspection focuses on the correctness of eligibility status and amount of payment. The system is used by States and the Federal Government and is accomplished by (1) continuous review of statistically reliable statewide samples of cases; (2) periodic assembly and analysis of case findings to determine incidence amount and causes of errors; and (3) application of these findings to develop corrective action to reduce error rates. Approximately 1,200 State and 200 Federal personnel are involved in the operation of the AFDC quality control program.

Mr. CONTE. How much would you estimate has been saved by the AFDC QC program?

Mr. WORTMAN. We estimate that there has been a direct saving since 1973 of close to $936 million as a result of the quality control program. This amount is calculated by taking the error rate that existed at the inception of the program in 1973 and comparing it to the present lower error rate; the difference is then applied to the level of expenditures to arrive at a cost avoidance saving of $936 million.

Mr. CONTE. The preliminary July to December error rates seem to be decreasing as hoped. Will this trend continue at the same pace?

Mr. WORTMAN. We have had a dramatic reduction in error rates since the inception of the quality control program in 1973. From that time to the present error rates have dropped from 41 percent to 25 percent, which is close to a 40 percent decrease. We expect that this trend will continue until the States reach the permissible error tolerances of 3 percent ineligibility, 5 percent overpayment, 5 percent underpayment.

ABSENT PARENT PROGRAM

Mr. CONTE. Why is there such a large increase in the Federal share of collections from absent parents for fiscal year 1977 as shown on page 15 of the justifications?

Mr. WORTMAN. The projected increase in the Federal share of collections results from two changes. First, the States project an 18-percent increase in total collections between fiscal year 1976 and fiscal year 1977. Second, the incentive payment to recipients, projected to be $83 million (or about 26 percent of total collections) in fiscal year 1976, decreases to zero in fiscal year 1977 in accordance with the legislative requirement that such payments end September 30, 1976. Thus, the Federal share of collections, estimated at 30 percent of total for fiscal year 1976 would increase to about 40 percent in fiscal year 1977. It should be noted that the net State share of collections is projected to in

crease by 57 percent, from about $113 million to $178 million. I would like to insert for the record a table to clarify our estimates for you. [The information follows:]

Mr. CONTE. Are the new child support enforcement provisions fully operational?

Mr. WORTMAN. All 54 States and jurisdictions have submitted plans for the child support enforcement program. All but three plans have been approved, and grant awards in excess of $47 million have been made for costs of State and local administration. The Office of Child Support Enforcement in HEW, including the parent locator service, is operational and moving rapidly to fill the positions provided for in the fiscal year 1976 budget.

There was a delay in implementing the Federal aspects of the child support enforcement program due to the lack of appropriation until January 28, 1976. There has also been some delay in implementation in the States, which is to be expected in a new program of considerable complexity. In recognition of this fact, title IV-D provides that the States may not be penalized prior to January 1, 1977, if they are making a good faith effort to implement the program.

CASELOAD ESTIMATES

Mr. CONTE. On what do you base the assumption that AFDC caseload will decline by 200.000 monthly recipients in fiscal year 1977? Mr. WORTMAN. Our assumptions are for a continually improving economy and we expect the recipient level to decrease accordingly.

LEGISLATIVE PROPOSAL

Mr. CONTE. You mention three legislative proposals which if enacted would reduce Federal costs and afford a more just application of law. Could you discuss these three proposals?

Mr. WORTMAN. Well, they are income disregard, changed matching formula, and stepparent support.

First, the current income disregard provisions require that the first $30 plus one-third of the remaining gross family earnings for the month be disregarded. After that, reasonable expenses attributable to earning the income are also deducted. We are proposing to disregard the first $60 of monthly earnings plus expenses for day care of children when required for employment plus one-third of the balance.

With respect to the matching formula, we are simply proposing to eliminate the old basic formula and require all the States to use the socalled alternate medical percentage formula. Seven States still use the basic formula.

Concerning stepparent support, our proposal is that stepparent income be considered when determining eligibility for AFDC.

Mr. CONTE. How would the estimated $256 million be distributed among the three proposals?

Mr. WORTMAN. We have estimated that the new disregards would save $149 million, the revised matching formula $70 million, and stepparent support $37 million.

MEDICAID

Mr. CONTE. Of the $1,030 million increase in medical assistance in 1977 how much is attributable to increasing medical costs and how much to more recipients?

Dr. WEIKEL. $994 million is attributable to increased prices while only $139 million is related to increased recipients.

Mr. CONTE. If States are beginning to submit plan revisions reducing services how much of a reduction in utilization of services may be seen in 1977?

Dr. WEIKEL. We estimate that about a third of a percent reduction, net, in utilization will occur. That is a decrease of about $25 million. Mr. CONTE. How much effort will be expended on improved monitoring of State operations?

Dr. WEIKEL. The responsibility for State program monitoring has been decentralized to the regional offices. This provides closer access to State operations and allows for quicker responses to problems raised by the States.

To assist in improving the monitoring of State program operations and to assure regional offices are performing the required functions, the central office will function in the following ways: (1) Using the regional work plan procedure, key essential operational data and information will be gathered to provide the base for analyses and evaluation of the State operations. The State data book will be the primary means by which data will be drawn from many sources and housed for references and analyses. (2) We will computerize program and financial data to facilitate rapid availability of information and comparative analyses. (3) We will intensify our efforts in the area of follow-up monitoring of audit findings. This will involve assuring proper regional action to obtain complete resolution of problems. (4) A revised compliance strategy is under consideration that will entail joint central office/regional office staff involvement. Specific targeted items will be reviewed each year. (5) There is an intensified effort to strengthen Federal and State actions to better identify fraud and abuse as well as to be more effective in prosecution. Additional staff have been au