Extensive research on simulating eligibility for food stamps and AFDC has identified a perplexing and thus far inescapable problem: nontrivial numbers of those who report participation are simulated to be ineligible.(28) The existence of such people may reflect the incompleteness or inaccuracy of the simulation model. This is particularly true of Medicaid, with its complex eligibility determination and the difficulties analysts face in documenting current state policies. Adding to the complexity are provisions that allow certain classes of participants to maintain their eligibility, once established, despite changes in income that would render other participants ineligible. Such provisions apply to pregnant women and infants and to families receiving transitional coverage after losing AFDC benefits because of increased earnings. The fraction of participants who experience extended eligibility is likely to increase as the Balanced Budget Act of 1997 gives states the option to guarantee coverage to children for up to 12 months after enrollment, regardless of changes in family income (Lewis and Ellwood 1998).
The appearance of simulated ineligible participants may also be due to misreported participation, incorrect edits or imputations, errors in the actual eligibility determination, or the failure of participants to report changes in their circumstances. These different explanations for the phenomenon of seemingly ineligible participants carry different implications for how such cases should be handled in calculating participation rates (Vaughan 1992). When the errors are due to the simulation, there is little question that such participants should be included in participation rates providing that the total number of simulated eligibles can be corrected to offset any bias.(29) At the same time, however, people who participate when in fact ineligible or who are incorrectly identified as participants should be excluded from participation rates. Simply adding them to the denominator to offset their inclusion in the numerator gives them an implied participation rate of 100 percent, which is difficult to interpret. Clearly, it would be desirable to know more about the seemingly ineligible participants, but “they” have proven difficult to understand. Limiting participation rates to simulated eligibles (which would also imply removing ineligible participants from administrative statistics if the latter are used to form the numerator) makes it unnecessary to address what may be unresolvable issues in the definition of the denominator, and it maintains the concept of a participation rate as the number of eligible participants divided by the total number of eligibles.