HARRISBURG -- The state Department of Public Welfare needs to tighten up its oversight of Medicaid payments for thousands of low-income, elderly and disabled people because as much as $3.3 million may have been improperly spent over the past three years, Auditor General Jack Wagner said yesterday.

From January 2005 to March 2008, his auditors looked at nearly 11,700 randomly selected medical assistance cases from 79 county assistance offices in 53 counties. It found errors in 1,648, or 14 percent of them, such as failure to verify a person's age, income level, family relationship or other eligibility criteria.

That information could have made some of those people ineligible for benefits.

"That error rate is unacceptable," said Mr. Wagner. If that percentage of mistakes applies to all of the 513,000 Medicaid cases in those counties, "it could translate into tens of millions of dollars" being misspent, he said.

Four of the seven welfare offices in Allegheny County were among those with the highest error rates -- one with a 47 percent error rate and others at 44 percent, 41.9 percent and 34.7 percent. The highest error rate was in Lehigh County, at 53 percent.

Mr. Wagner said the department's county assistance offices should check the eligibility of Medicaid recipients more often than annually.

But department spokeswoman Stacey Witalec said the data is reviewed every three months and the department believes it is accurate.

Medicaid, also called medical assistance, makes up 19 percent of the state's $28 billion budget. The federal government also pays a significant amount for Medicaid, which covers medical costs for low-income children and families, disabled people, the elderly and chronically ill adults.

With the state's growing budget deficit, Mr. Wagner said the state can't afford to waste millions of dollars on a poorly administered program.

But Ms. Witalec defended the way the program is handled, saying Mr. Wagner isn't considering all the eligibility factors that the department does.

"While we understand his concern about the issue, we think he is, unfortunately, significantly overestimating the potential size of the problem," she said.

"He isn't looking at a recipient's whole picture" in regard to income or disability or having children at home, she said. "He hasn't shown us his full methodology, but there are a large number of families he considers ineligible that we consider eligible. And medical assistance can be a lifesaver for many families.''