COLUMBIA, S.C. - The state agency responsible for administering the federal health care program for the poor residents could save more money if it implemented the recommendations of a two-year-old audit, a follow-up report says.

The report issued Thursday by the Legislative Audit Council said the state Health and Human Services Department implemented many, but not all of the recommendations from its 2003 audit.

According to the report, the agency still needs to:

_ Eliminate a second year of transitional Medicaid for some welfare recipients, which could have saved as much as $7 million in the current fiscal year.

_ Add some child support payments to income before determining eligibility. If the number of adult recipients in the low-income tax bracket was reduced by 10 percent through this step, the agency could save $3.4 million.

_ Charge an enrollment fee for its Partners for Healthy Children program.

The agency decided not to eliminate the second year of Medicaid for needy families because they found that the program had value and would yield little savings, agency spokesman Bryan Kost said Thursday.

He said, however, the agency was looking at some tweaks to the program that could save some money.

Kost said the agency was still considering whether to include all child support payments in an applicant's income before determining eligibility. "We're still looking at it," he said.

But, he said, letting applicants exempt some of the money from income consideration encourages them to seek child-support payments.

The follow-up report also shows that the agency has implemented some recommendations from the audit, including more frequent reviews of eligibility, better determination of whether recipients have private health insurance and implementation of a preferred drug list.

The report estimated that the preferred drug list could yield savings of $12.8 million once it is fully implemented.

The follow-up also said the agency started requiring a co-payment for recipients in March of last year, but has not calculated any cost savings related to that.

"We did take a lot of big steps" in reducing expenses, Kost said. "Overall growth in the Medicaid program was less than 6 percent" in the last fiscal year. "We hope to stay near that this year."