Kids who have been taught whole language methods often read quite well when given high-frequency words, yet struggle with words that have the exact same patterns but are not on the Dolch or Fry lists. Why? Because they have been taught to memorize, not generalize.
Here is a quick, simple test to see if your student is reading based on memorization, or is actually decoding the words:
Have them read both the first and 2nd sentence. The first sentence has only Primer sight words (ie, high frequency words). The 2nd has words that have similar phonics patterns but are not sight words. If they read the first sentence quickly but the 2nd slowly and make errors then they are using their memory, not phonics knowledge, to read. If they read both sentences equally well, they are doing well with sounding out the words and using their phonics patterns.
E. G. Johnson’s 2-Sentence Reading Test (thanks to Don Potter for sharing this on the SpellTalk listserv)
1. Mother will not like me to play games in my big red hat.
2. Mike fed some nuts and figs to his tame rat.