Major Management Challenges and Program Risks
Department of Health and Human Services
Gao ID: GAO-03-101 January 1, 2003
In its 2001 performance and accountability report on the Department of Health and Human Services (HHS), GAO identified key management challenges faced by HHS and its constituent agencies associated with the Medicare program, oversight of nursing homes, medical product safety and efficacy, and ensuring the well-being of children and families. The information GAO presents in this report is intended to sustain congressional attention and a departmental focus on continuing to make progress in addressing these challenges' and others that have arisen since 2001. This report is part of a special series of reports on governmentwide and agency-specific issues.
Medicare program. Medicare remains on GAO's 2003 list of high-risk programs due to the program's size and complexity. The Centers for Medicare & Medicaid Services (CMS) continues to have difficulty refining Medicare's payment methods in ways that reward fiscal discipline while ensuring beneficiary access to care. Since 2001, the agency has made progress in estimating improper payments, collecting overpayments and conducting other financial activities, and identifying information system needs, but further improvements are needed in payment safeguard, financial, and information management activities. Medicaid program. GAO has added Medicaid to its 2003 list of high-risk programs, owing to the program's size, growth, diversity, and fiscal management weaknesses. Limited oversight has afforded states and health care providers the opportunity to increase federal funding inappropriately. Medicare and Medicaid care oversight. CMS has taken steps to improve nursing home oversight, but efforts to ensure quality care at nursing homes, home health agencies, kidney dialysis facilities, and other providers continue to be jeopardized by problems in the performance of state inspections, complaint investigations, and enforcement of federal standards. Public health emergency preparedness. Serious problems in coordination among federal, state, and local public health agencies and in hospital and laboratory capacity could limit emergency responses. HHS is also challenged to balance basic public health needs with critical homeland security priorities. Medical product safety and efficacy. While the Food and Drug Administration has stepped up the rigor of its biologics inspections, it faces several challenges in ensuring the availability, safety, and efficacy of marketed products, including vaccines, and struggles to retain its expert staff. Economic independence and well-being of children and families. Oversight by HHS of the states' implementation of social service program reforms has been encumbered by limitations in states' information systems, program effectiveness measurement, and efforts to foster and disseminate research findings. Financial management systems, processes, and controls. HHS has improved its financial management, but its systems and processes do not routinely generate financial information that is timely or reliable. Further, HHS cannot ensure that it can protect the confidentiality of sensitive information from unauthorized access or its systems from service disruption.
GAO-03-101, Major Management Challenges and Program Risks: Department of Health and Human Services
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Performance and Accountability Series:
January 2003:
Major Management Challenges and Program Risks:
Department of Health and Human Services:
GAO-03-101:
A Glance at the Agency Covered in This Report
The Department of Health and Human Services is responsible for
protecting
the health of all Americans and providing essential human services,
especially
for those who are least able to help themselves. The department
includes the
nation‘s two largest individual health insurers and is the largest
grant-making
agency in the federal government. Its multiple activities include
* Medicare (health insurance for elderly and some disabled Americans);
* Medicaid (health insurance for low-income people);
* infectious disease prevention, including immunization services;
* food and drug safety;
* financial assistance and services for low-income families, including
Head Start;
* comprehensive health services for Native Americans;
* substance abuse treatment and prevention; and
* medical and social science research.
The Department of Health and Human Service‘s Budgetary and Staff
Resources.
[See PDF for Image]
[A] Budgetary resources include new budget authority (BA) and
unobligated balances
of previous BA.
[B] Budget and staff resources are actuals for FY 1998-2001. FY 2002
are estimates
from the FY 2003 budget, which
are the latest publicly available figures on a consistent basis as of
January 2003.
Actuals for FY 2002 will be contained in the President‘s FY 2004
budget to be released
in February 2003.
[End of Figure]
This Series:
This report is part of a special GAO series, first issued in 1999
and updated in
2001, entitled the Performance and Accountability Series: Major
Management
Challenges and Program Risks. The 2003 Performance and
Accountability Series
contains separate reports covering each cabinet department, most
major
independent agencies, and the U.S. Postal Service. The series also
includes a
governmentwide perspective on transforming the way the government
does
business in order to meet 21st century challenges and address long-
term fiscal
needs. The companion 2003 High-Risk Series: An Update identifies
areas at high risk
due to either their greater vulnerabilities to waste, fraud, abuse,
and
mismanagement or major challenges associated with their economy,
efficiency, or
effectiveness. A list of all of the reports in this series is
included at the end of
this report.
GAO Highlights:
Highlights of GAO-03-101, a report to Congress included as part of
GAO‘s Performance and
Accountability Series.
PERFORMANCE AND ACCOUNTABILITY SERIES
Department of Health and Human Services
Why GAO Did This Report:
In its 2001 performance and accountability report on the Department
of Health and Human
Services (HHS), GAO identified key management challenges faced by
HHS and its constituent
agencies associated with the Medicare program, oversight of nursing
homes, medical product
safety and efficacy, and ensuring the well-being of children and
families. The information
GAO presents in this report is intended to sustain congressional
attention and a
departmental focus on continuing to make progress in addressing
these challenges”and others
that have arisen since 2001. This report is part of a special
series of reports on
governmentwide and agency-specific issues.
What GAO Found:
Medicare program. Medicare remains on GAO‘s 2003 list of high-
risk programs due to the
program‘s size and complexity. The Centers for Medicare &
Medicaid Services (CMS) continues
to have difficulty refining Medicare‘s payment methods in ways
that reward fiscal discipline
while ensuring beneficiary access to care. Since 2001, the agency
has made progress in
estimating improper payments, collecting overpayments and
conducting other financial
activities, and identifying information system needs, but further
improvements are needed
in payment safeguard, financial, and information management
activities.
Medicaid program. GAO has added Medicaid to its 2003 list of
high-risk programs, owing to the
program‘s size, growth, diversity, and fiscal management
weaknesses. Limited oversight has
afforded states and health care providers the opportunity to
increase federal funding
inappropriately.
Medicare and Medicaid care oversight. CMS has taken steps to
improve nursing home oversight,
but efforts to ensure quality care at nursing homes, home health
agencies, kidney dialysis
facilities, and other providers continue to be jeopardized by
problems in the performance of
state inspections, complaint investigations, and enforcement
of federal standards.
Public health emergency preparedness. Serious problems in
coordination among federal, state,
and local public health agencies and in hospital and laboratory
capacity could limit emergency
responses. HHS is also challenged to balance basic public
health needs with critical homeland
security priorities.
Medical product safety and efficacy. While the Food and Drug
Administration has stepped up
the rigor of its biologics inspections, it faces several challenges in
ensuring the availability,
safety, and efficacy of marketed products, including vaccines, and
struggles to retain its
expert staff.
Economic independence and well-being of children and families.
Oversight by HHS of the states‘
implementation of social service program reforms has been encumbered
by limitations in states‘
information systems, program effectiveness measurement, and efforts
to foster and disseminate
research findings.
Financial management systems, processes, and controls. HHS has
improved its financial management,
but its systems and processes do not routinely generate financial
information that is timely or
reliable. Further, HHS cannot ensure that it can protect the
confidentiality of sensitive information
from unauthorized access or its systems from service disruption.
What Remains to Be Done:
HHS‘s management challenges remain as profound as they are diverse:
the effective management of
the Medicare and Medicaid programs has significant fiscal implications
for the longer term, while
strengthening the nation‘s public health infrastructure is critically
important in the shorter
term. HHS must further strive to obtain current and reliable data for
effective program monitoring,
conduct well-targeted oversight activities to safeguard billions of
program dollars, and hire and
retain a sufficiently skilled workforce.
To view the full report, click on the link above.
For more information, contact Leslie G. Aronovitz at (312) 220-7600
or aronovitzl@gao.gov.
Contents:
Transmittal Letter:
Major Performance and Accountability Challenges:
GAO Contacts:
Related GAO Products:
Performance and Accountability and High-Risk Series:
This is a work of the U.S. Government and is not subject to copyright
protection in the
United States. It may be reproduced and distributed in its entirety
without further
permission from GAO. It may contain copyrighted graphics, images or
other materials.
Permission from the copyright holder may be necessary should you
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copyrighted materials separately from GAO‘s product.
Transmittal Letter January 2003:
The President of the Senate
The Speaker of the House of Representatives:
This report addresses the major management challenges and program risks
facing the U.S. Department of Health and Human Services (HHS) as it
works to carry out its multiple and highly diverse missions. The report
discusses the actions that HHS has taken and that are under way to
address the challenges GAO identified in its Performance and
Accountability Series 2 years ago, and major events that have occurred
that significantly influence the environment in which the department
carries out its mission. Also, GAO summarizes the challenges that
remain and further actions that GAO believes are needed.
This analysis should help the new Congress and the administration carry
out their responsibility and improve government for the benefit of the
American people. For additional information about this report, please
contact Leslie G. Aronovitz, Director, Health Care, at (312) 220-7600
or at aronovitzl@gao.gov.
David M. Walker
Comptroller General of the United States:
Signed by David M. Walker:
[End of section]
Major Performance and Accountability Challenges:
The Department of Health and Human Services (HHS), with a $460 billion
budget and a workforce of more than 65,000 people, presents one of the
more massive and complex management challenges in the federal
government. The more than 300 federal health and social programs it
oversees tangibly affect the lives and well-being of virtually all
Americans and encompass some of the most costly issues facing the
nation. Among its many tasks, HHS provides health insurance for
millions of individuals, is responsible for ensuring quality standards
are met across a number of health care settings, regulates drugs and
medical devices, and administers a multipronged effort to help low-
income children and families gain economic independence. HHS‘s fiscal
year 2003 budget presentation document is entitled ’Ensuring a Safe and
Healthy America,“ and its role in this regard has been particularly
significant in light of the events of September 11, 2001, and its
aftermath.
With such varied and significant missions, the performance of HHS and
its component agencies involves many dimensions. In our 2001 Series, we
reported on the following key missions: the administration of Medicare,
oversight of nursing homes, safety and efficacy of medical products,
and the economic independence and well-being of children and families.
These missions are principally addressed by HHS‘s Centers for Medicare
& Medicaid Services (CMS), the Food and Drug Administration (FDA), and
the Administration for Children and Families (ACF). These agencies
faced challenges in obtaining current and reliable data needed to
monitor programs effectively, conducting well-targeted oversight
activities needed to safeguard billions of program dollars, and hiring
or retaining a sufficiently skilled workforce. For Medicare, which
remained on our list of high-risk programs, CMS‘s leadership and
administrative capacity were stretched by its many responsibilities for
other programs--such as oversight of Medicaid, the State Children‘s
Health Insurance Program, and survey and certification activities for
nursing homes, home health agencies, and clinical laboratories. At the
same time, implementing several new Medicare payment methods introduced
additional challenges to safeguarding program payments. Our work on
nursing home quality found that state surveyors continued to miss or
understate the seriousness of care problems that harmed residents; this
occurred during a period of transition in which federal and state
initiatives for improving facility inspections were beginning to be
implemented. Our work on oversight of medical devices and products
found shortcomings in the FDA‘s resource targeting strategy for
inspecting device manufacturers and in monitoring adverse events that
may occur after products are marketed. Our work on oversight of social
service program reforms implemented by the states discussed the
substantial challenges ACF and CMS faced in getting the information
needed to hold multiple state and local government agencies accountable
for the use of federal funds to ensure the well-being of children and
families.
Our 2003 Series considers these same missions while highlighting
additional ones, as shown below.
[See PDF for image] - graphic text:
[End of figure] - graphic text:
Our discussions on the administration and safeguarding of Medicare, the
safety and efficacy of medical products, and the well-being of children
and families include issues of congressional interest in the past 2
years and abiding challenges involving information, financial, and
human capital management. New issues raised in this Series include
CMS‘s oversight of the Medicaid program, oversight of care delivered to
Medicare and Medicaid beneficiaries, the preparedness of HHS agencies
for public health emergencies, and needed improvements in HHS agencies‘
financial systems, processes, and controls. In brief, we make the
following observations:
* Design and administration of Medicare. In 2001, we reported that
major gaps in information about patients‘ health status and use of
services make it difficult to set prospective payment rates at the
appropriate level. CMS continues to lack adequate information to set
rates and refine payment methods in ways that reward fiscal discipline
while ensuring beneficiary access to care. The agency similarly lacks
the information and flexible approaches needed to price medical
services and products in line with market rates. We have made several
recommendations to improve payment methods that the agency has not
acted on.
* Medicare payment integrity safeguards. CMS has made improvements in
assessing the level of improper payments, collecting overpayments from
providers, and building the foundation for modernizing its information
technology. Nevertheless, much work remains to be done, given the
magnitude of its challenge to safeguard program payments. This includes
more effectively overseeing Medicare‘s claims administration
contractors, managing the agency‘s information technology initiatives,
and strengthening financial management processes across multiple
contractors and agency units. In light of these challenges and the
program‘s size and fiscal significance, Medicare remains on our list of
high-risk programs.
* Fiscal and management oversight of Medicaid. Our growing concern
about the difficulties CMS faces in managing a program of enormous
size, growth, and diversity has led us to add Medicaid to our 2003 list
of high-risk programs. Key problems we have identified in recent years
include schemes by some states to inappropriately leverage federal
funds, state waiver programs that inappropriately increase the federal
government‘s financial liability, and insufficient federal and state
oversight to ensure that payments to health care providers are accurate
and appropriate. Consistent with several of our recommendations, CMS
and the Congress have taken several significant actions to curb states‘
inappropriate leveraging of federal funds, but waiver program approvals
remain questionable and states‘ claims scrutiny activities are uneven.
* Oversight of care delivered to Medicare and Medicaid beneficiaries.
In our 2001 Series, we recapped the problems identified and
recommendations we made in earlier work on nursing home surveys and
other oversight activities by CMS and the states. CMS has increased its
attention to improving oversight of nursing homes, but it may have done
so at the expense of adequate monitoring of home health agencies,
kidney dialysis facilities, and other providers serving Medicare and
Medicaid beneficiaries. Vulnerable beneficiaries are not assured of
adequate protections, owing to problems with the conduct of state
surveys, the timeliness of complaint investigations, the strength and
use of federal sanctions for noncompliance with Medicare standards,
federal monitoring of state survey activities, and the adequacy of
numbers of skilled surveyors.
* Public health emergency preparedness. Following the events of
September 11, 2001, we have added public health emergency preparedness
to HHS‘s key challenges. The department must find ways to coordinate
programs that dually address critical homeland security priorities and
basic public health needs and ensure that the nation‘s fragile public
health infrastructure is strengthened at the federal, state, and local
levels.
* Oversight of medical product safety and efficacy. While FDA has
stepped up the speed of its drug approvals, its guidance to biologics
manufacturers on compliance with good practices has not been
sufficiently clear or made readily available. This problem has
significance for the manufacture of vaccines, which are currently in
short supply. We have recently made recommendations to FDA that aim at
producing safe vaccine products while mitigating the effects of supply
disruptions. With respect to new drugs, the speed of FDA‘s review and
approval has improved in recent years, largely because the agency has
hired more scientists to review applications, using fees collected from
the drugs‘ sponsors. However, FDA faces several challenges in its
effort to monitor the availability, safety, and efficacy of marketed
products, including the difficulty of retaining its expert staff.
* Economic independence and well-being of children and families. HHS
continues to face the challenges associated with oversight of the
states‘ implementation of social service program reforms. These include
facilitating states‘ efforts to implement information systems,
systematically measuring the extent to which programs are serving their
intended beneficiaries, and fostering efforts to conduct research and
disseminate findings on program effectiveness.
* Financial management systems, processes, and controls. While HHS‘s
financial statements are achieving unqualified, or ’clean opinions“--
indicating that the statements fairly present their information--its
financial systems and processes do not routinely generate information
that is timely or reliable and do not ensure that the confidentiality
of sensitive information is adequately protected from unauthorized
access or service disruption.
In all, HHS‘s management challenges are as profound as they are
diverse. The long-term significance of effectively managing the
Medicare and Medicaid programs cannot be overstated, as together they
consume an enormous and growing share of the federal budget. Similarly
compelling is the shorter-term importance of strengthening the nation‘s
public health infrastructure in light of recent historical events and
looming threats to the nation‘s domestic security.
Provide Current and Future Generations with a Well-designed and Well-
administered Medicare Program:
Medicare spending growth remains one of the most pressing and complex
issues facing the Congress and the nation. The program provides health
insurance for people aged 65 and older, some disabled people under age
65, and people with end-stage kidney disease. In fiscal year 2001,
Medicare program expenditures were about $241 billion, accounting for
about 1 of every 8 federal dollars spent that year. Based on the
Medicare Trustees‘ 2002 annual report, spending on Medicare is expected
to double as a share of the economy by 2035, which could crowd out
other spending and other valuable economic activity. The program‘s
projected growth has focused congressional attention on the need to
reform Medicare. At the same time, there is considerable public
pressure to expand program benefits. Although a broad consensus exists
to make program changes, there is much less agreement about what the
changes should be and whether they should be comprehensive or
incremental. Thus, until some agreement can be reached and reforms
implemented--which could take a number of years--it is imperative to
concentrate on making the existing program run as efficiently as
possible.
An abiding challenge for the HHS agency that administers Medicare--CMS-
-is to design payment methods that reward fiscal discipline while
maintaining access to quality care.[Footnote 1] CMS sets payment
amounts for thousands of services and items, but the agency‘s
responsibility to run the program in a fiscally prudent manner can
often leave an array of interested parties--hospitals, physicians, and
other providers of health care services--discontented with payment
policies. Payment rates that are too low can impair beneficiary access
to services and products, while rates that are too high add unnecessary
financial burdens to the program. Paying appropriately requires
accurate cost data and current information on access to needed
services.
Paying Appropriately for Medicare Services Requires Frequent and
Carefully Targeted Refinements:
Over the past two decades, at the Congress‘s direction, Medicare has
implemented a series of payment reforms designed to promote the
efficient delivery of services and control program spending. Some
reforms required establishing set fees for individual services; others
required paying a fixed amount for a bundle of services. The payment
methods introduced during this time were designed to include--in
addition to incentives for efficiencies--a means to calibrate payments
to ensure beneficiary access and fairness to providers.
A major challenge in administering payment methods--either through fee
schedules or bundled payments--involves adjusting the predetermined
amounts to better account for differences in patients‘ needs and
providers‘ local markets to ensure that the program is paying
appropriately and adequately. Providers adapting to Medicare‘s payment
methods have often raised concerns about payment adequacy. As Medicare
has sought to set more efficient prices, payment adjustments for cost
differences of providers and services become more important, and timely
and accurate information about beneficiaries‘ use of services becomes
paramount.
CMS has had mixed success in making refinements to payment methods. The
agency‘s difficulties stem, in part, from insufficient data on
providers‘ costs and beneficiaries‘ use of services. Such information
provides the systematic evidence needed to determine whether payments
are adequate and care is accessible. Medicare‘s experience with
payments for home health agencies, skilled nursing facilities, and
physicians‘ fees illustrate the importance of current, robust data on
which to base or support payment policies, as the following examples
illustrate.
* Payments for skilled nursing facility services. After the
implementation of the prospective payment system as required by the
Balanced Budget Act of 1997 (BBA), skilled nursing facilities contended
that Medicare‘s new payments were not adequate and brought intense
public pressure to undo BBA payment reforms. Our September 2000 study
found that, in the aggregate, payments to facilities were adequate but
that there was the potential for facilities serving a disproportionate
share of high-cost patients to be disadvantaged.[Footnote 2] The
payment methodology that CMS developed may not adequately target high-
cost patients and distribute payments accordingly. However, as CMS
lacked the data needed to calibrate payments sufficiently in line with
the expected needs of patients served, the Congress twice provided
several increases in payments, requiring that some of the increases be
temporary until CMS could make adequate refinements to the payment
methodology and others expired on October 1, 2002. CMS does not expect
to obtain the data needed to propose refinements before 2004.[Footnote
3]
* Payments for home health services. In previous work, we noted that
the design of the prospective payment method for home health services
contained flaws that would likely generate excessive payments for some
home health agencies. In addition, it lacked a means to provide
financial relief to other home health agencies that served a
disproportionate share of high-cost patients. CMS did not adopt our
2000 recommendation that would minimize excessive payments to some home
health agencies and extreme losses for others.[Footnote 4] In their
comments on our report, officials expressed concern that the industry
needed time to adapt to the new payment method without further
complications. We believe that adequate time has elapsed and that our
recommendation is warranted, given the number of home health agencies
and beneficiaries affected.
* Payments for physician services. Following a 5.4 percent reduction in
Medicare‘s payments to physicians in 2002--a reduction imposed by a
statutorily mandated formula--representatives of the physician
community voiced concerns about continued participation in the Medicare
program. An official of the American Medical Association testified that
the 2002 reduction could lead to serious beneficiary access problems,
citing examples of physicians and nurse practitioners in various states
who said they would no longer be able to accept Medicare patients. In
our view, however, whether beneficiaries are experiencing problems
getting access to physician care across localities cannot be determined
through anecdotes. Rather, CMS needs the capacity to generate adequate,
timely and relevant data regarding access to ensure that payment
policies that impose fiscal discipline are not compromising
access.[Footnote 5]
CMS Has Difficulty Calibrating Payments for Medical Products in Line
with Market Prices:
Setting payments appropriately for medical products has also been
challenging for CMS, because Medicare‘s payment approaches lack the
flexibility to keep pace with market changes.[Footnote 6] Medicare‘s
method of paying for medical equipment and supplies is through fee
schedules that remain tied to suppliers‘ historical charges to the
program rather than market prices. Similarly, Medicare‘s method of
determining outpatient drug payments is based on list prices, not
prices that purchasers actually pay for the drugs. Under these
approaches, Medicare often pays higher prices than other payers for
medical products.
Medicare Often Pays Higher Prices for Medical Products Than Other
Payers:
The Congress introduced fee schedules for medical equipment and
supplies in 1987. Statewide fees were determined on the basis of
average supplier charges from previous years and have been updated for
inflation in some years, but not in others. However, mechanisms to
adjust fees to reflect marketplace changes have been lacking, and
disparities between some fee schedule amounts and market prices have
developed over time. For example, until 1998, Medicare paid much more
for home oxygen equipment and supplies provided to patients with
pulmonary insufficiency than did the Department of Veterans Affairs
(VA), even after accounting for differences between Medicare and the VA
program. We estimated that Medicare could have saved over $500 million
in fiscal year 1996 if it had paid rates for home oxygen comparable to
those paid by VA.[Footnote 7] The BBA reduced Medicare‘s home oxygen
fees by 25 percent effective in 1998 and by an additional 5 percent in
1999.
Medicare‘s payments for the limited number of outpatient drugs that it
covers have been similarly excessive, although the methodology used to
determine payment amounts is somewhat different. Medicare‘s
supplementary medical insurance, called part B, covers roughly 450
outpatient drugs--generally those that cannot be self-administered and
are related to physicians‘ services, such as cancer chemotherapy, or
are provided in conjunction with covered durable medical equipment,
such as inhalation equipment. The rates paid for most covered
outpatient drugs are equal to 95 percent of the national average
wholesale price (AWP). However, the term AWP is not defined in law or
regulation. Essentially, drug manufacturers determine AWP, and there
are no requirements or conventions that AWP reflect the price of any
actual sale. Data have repeatedly demonstrated that the price
manufacturers give to physicians and suppliers may be significantly
lower than the AWP on the manufacturers list. As a result, Medicare‘s
payments often significantly exceed market prices--that is, the
transaction prices actually paid by other purchasers.
Our September 2001 report documented the excess that Medicare paid in
2001 for outpatient drugs compared to the prices widely available to
physicians and pharmacy suppliers.[Footnote 8] For example, the
physician-administered drugs we examined (which included drugs used in
chemotherapy) had widely available discounts ranging from
13 to 34 percent of AWP. Two physician-administered drugs had discounts
of 65 and 86 percent. Pharmacy suppliers also purchased drugs at prices
considerably lower than Medicare payments. For example, two inhalation
drugs accounting for most of Medicare payments to pharmacy suppliers
had widely available discounts averaging 78 percent and 85 percent of
AWP. In this report, we made several recommendations to improve drug
pricing that CMS has not acted upon.
Medicare‘s Ability to Adjust Payments for Medical Products Is Limited:
Despite instances of wide disparities between market prices and
Medicare‘s payment rates for equipment, supplies, and outpatient drugs,
CMS is not in a position to take prompt action. To lower unreasonably
high payment rates, the agency must follow a lengthy and complicated
regulatory process for making payment adjustments. The BBA gave the
agency authority to use a streamlined process to adjust payment rates
for most medical equipment items, supplies, and outpatient drugs.
However, the agency‘s attempt to use this authority drew intense
industry criticism, in part because the agency acted before it
responded to public comment on how it would implement the authority.
The Congress then prohibited use of either the original or streamlined
regulatory process until the agency addressed public comments and
issued a final rule. In our 2000 report on this subject, we made
several recommendations regarding improved data collection for rate-
setting purposes.[Footnote 9] On December 13, 2002, CMS issued an
interim final rule that included provisions related to our
recommendations. The rule will become effective on February 11, 2003.
To experiment with other ways of setting Medicare‘s payments for
medical equipment, supplies, and outpatient drugs, the BBA provided
authority for the agency to conduct demonstration projects using
competitive bidding. Evidence from two competitive bidding projects
suggests that, for most of the items selected, competition might
provide a tool that facilitates setting more appropriate payment rates
that result in program savings. By competing a small number of products
and limiting the geographic area of competition, CMS took steps to
manage the process, which included monitoring beneficiary access and
product quality. To use competitive bidding outside of a demonstration,
however, CMS would require not only new authority but substantial
administrative preparations, as competing a larger number of products
nationally would entail bidding in multiple markets and monitoring
access and quality once prices had been set.
CMS Efforts Limited in Obtaining Data-Driven Feedback to Assess Payment
Policies:
Analyses of data on providers‘ transaction costs and beneficiaries‘ use
of Medicare services can provide a window on the effectiveness or
shortcomings of a given payment policy. When such information is
lacking or when the data collected are not viewed as sufficiently
reliable and timely, CMS has a difficult time defending its position to
adjust payments downward. These adjustments can mean, in the aggregate,
tens of millions of dollars or more annually to affected parties, so
external pressures to maintain or raise payments are substantial.
Our work on payments for covered outpatient drugs illustrates the value
of accurate information for determining appropriate payments. For
example, the Congress has used the leverage of state Medicaid programs
and other public purchasers to allow VA to secure verifiable
information on actual market transactions by private purchasers--
specifically, the prices that drug manufacturers charge their ’most-
favored“ private customers. To enable VA to determine the most-favored
customer price, by statute, manufacturers that wish to sell their
products to the public agencies involved are required to provide
information on price discounts and rebates offered to domestic
customers and the terms and conditions involved, such as length of
contract periods and ordering and delivery practices. The manufacturers
provide this information and agree to offer VA and other government
purchasers drugs at these prices, subject to a VA audit of their
records[Footnote 10] in order to have state Medicaid programs--which,
jointly with the federal government, pay for health care for about 44
million low-income Americans each year--cover their drugs. The way
Medicare pays for drugs likely makes it inappropriate for the program
to seek the most-favored customer prices as VA does. However, detailed
information on market prices that is available to VA would assist
Medicare in setting appropriate, efficient payment amounts for covered
drugs.
No matter how payments are set, monitoring to ensure that beneficiaries
continue to have access to items and services is a critical management
activity. CMS‘s monitoring of access in its small competitive bidding
demonstration was required by statute and is not routinely done when
the agency makes fee schedule revisions. As with physician payments,
the importance of using current and reliable data to make payment
policy decisions cannot be overstated because of the impact such
decisions have on beneficiaries, providers, and taxpayers alike.
Safeguard the Integrity of the Medicare Program:
Medicare was among the first programs that we designated in 1990 to be
at high risk of considerable losses to waste, fraud, abuse, and
mismanagement because of the program‘s vast size and complex
administrative structure. It remains among the programs that we
consider high-risk. In fiscal year 2001, Medicare paid about $241
billion for a wide variety of inpatient and outpatient health care
services for 40 million elderly and disabled Americans. To help
administer claims for the traditional program, CMS--the agency within
HHS responsible for Medicare--contracts with about 38 health insurance
companies. These claims administration contractors process about 900
million claims submitted each year by nearly 1 million hospitals,
physicians, and other health care providers. For the 5 million
beneficiaries enrolled in Medicare‘s managed care option--
Medicare+Choice--CMS has 155 contracts with managed care plans, which
are paid a fixed monthly fee to provide needed Medicare services to
enrolled beneficiaries.
CMS has an important responsibility to safeguard fee-for-service and
Medicare+Choice payments and ensure that beneficiaries receive needed
program services. It must effectively oversee the claims administration
contractors that run the day-to-day operations of Medicare‘s
traditional program and the managed care plans that provide services to
beneficiaries enrolled in Medicare+Choice.
In recent years, our work has cited various weaknesses in CMS oversight
of contractors and managed care plans. The agency has addressed some of
them, but considerable oversight and other agency management challenges
remain. These include the need to reduce improper payments costing the
government billions of dollars annually; improve communication with
Medicare providers; monitor managed care plans to ensure that services
are provided as promised and payments made are appropriate; improve
financial management processes and controls; modernize the agency‘s
information technology to carry out basic management functions
effectively; and make adequate preparations in the event that the
Congress grants CMS new contracting authority.
Better Contractor Performance Information Could Help CMS Oversee
Efforts to Address Improper Claims Payments:
Since 1996, annual audits by HHS‘s Office of the Inspector General
(OIG) have found that Medicare contractors have improperly paid claims
worth billions of dollars. These claims successfully passed through
Medicare‘s highly automated claims processing systems because the
claims appeared valid on their face; the claims were disputed only
after pertinent patient medical records were reviewed or when requested
medical record documentation was not provided to the auditors. Such
improperly paid claims may not be spotted by contractors, because they
appear to be properly billed, and it is neither practical nor efficient
for a contractor to request and conduct detailed reviews of medical
records for more than a tiny fraction of claims, given the volume
Medicare processes.
The magnitude of estimated improper payments (over $12 billion in
fiscal year 2001), coupled with the difficulty in detecting them,
underscores the importance of having the agency and its contractors
implement effective strategies to address improper payments. The OIG
reports on Medicare‘s aggregate payment errors have spurred CMS to
improve its efforts to safeguard Medicare payments by developing more
targeted payment accuracy information. To do so, the agency instituted
the Comprehensive Error Rate Testing (CERT) program, which is designed
to measure the accuracy of payment decisions made by each contractor.
The CERT benchmark will allow CMS to hold the contractors accountable
for their claims payment performance and help them target remedial
actions to address certain problematic billing practices of the
providers in their jurisdictions. CMS currently has comparative
information on the payment accuracy of the four carriers that pay
claims for durable medical equipment. CERT information on all of the
claims processing contractors is expected to be available by June 2003.
CERT is expected to provide a much needed measure of contractor
performance. The agency‘s previous oversight of its contractors had
several failings, including reliance on unverified contractor-supplied
performance information, limited checking of contractors‘ internal
management controls, and oversight staff developing inconsistent
evaluation reviews and conducting uneven follow-up. In recent years,
the agency has responded to our work by improving contractor oversight
and adopting several of our recommendations. The agency has developed a
more consistent and strategic oversight approach that is directed by a
management board composed of senior executives. The agency has also
assigned additional staff to monitor the contractors. It has created
teams responsible for evaluating contractors, to ensure more
consistency, and has separated that function from day-to-day
responsibilities for managing contractors. In addition, CMS contracted
for a more intensive review of selected contractors‘ management
controls and has increased its oversight of financial management
activities.
Balance Needed to Reduce Provider Burden While Guarding Program
Payments:
While the agency has focused on specific contractor activities that it
believes need improvement, other activities, such as communication with
providers, may also need attention.[Footnote 11] Claims administration
contractors play a major role in communicating with physicians and
other providers who have raised concerns that Medicare‘s efforts to
provide information on billing rules fall short of their needs for
clear explanations. Our February 2002 report on Medicare‘s
communication with physicians found that physicians often do not
receive complete, accurate, clear, or timely guidance on Medicare
billing and payment policies.[Footnote 12] At the contractors we
studied, we found significant shortcomings in the printed materials,
Web sites, and telephone help lines that contractors use to provide
information and respond to physicians‘ questions. (See table 1.) CMS
agreed that it needed to improve communications with physicians. While
it elaborated on initiatives it currently has under way, it has not
taken action on our specific recommendations.
Table 1: Problems Identified in Medicare‘s Communications With
Physicians:
Contractor bulletins were unclear and difficult to use: [Empty].
Contractors‘ communications: Contractor bulletins were unclear and
difficult to use; CMS relies heavily on contractors‘ bulletins to
officially notify physicians of their responsibilities and requirements
under Medicare law, regulations, and guidelines. Our review of
bulletins issued in March through July 2001 by 10 randomly selected
contractors found many were unclear and poorly organized, requiring
physicians or their staff to scan each article to determine whether it
was relevant. Bulletins sometimes provided information too late for
physicians to comply with new rules in a timely manner--overall, 6 of
10 contractors did not communicate at least one billing change before
its scheduled implementation date..
Contractors‘ communications: Contractor call centers provided
incomplete or incorrect answers; We made 61 calls to provider inquiry
lines at 5 call centers and asked 3 questions from the ’frequently
asked questions“ on contractors‘ Web sites. We reported that only 15
percent of the call center answers were complete and accurate after
validating our findings with CMS. Lack of standardization of the
technological resources available at the call centers affected staff
ability to quickly retrieve appropriate information to help answer the
questions..
Contractors‘ communications: Contractor Web sites varied in usability
and content; Most of the Web sites we reviewed lacked features that
would allow physicians to quickly and directly obtain the information
they needed--such as search engines. Only 2 of the 10 Web sites that we
reviewed complied with all of CMS‘s content requirements..
Contractors‘ communications: CMS‘s management and oversight; [Empty].
Contractors‘ communications: CMS has set few standards for
communications with physicians; CMS has not established substantive
requirements regarding the content and readability of bulletins to
physicians, the completeness and accuracy of call center responses, or
the clarity and timeliness of Web-based communications..
Contractors‘ communications: CMS monitoring is not sufficient; The
agency has not undertaken comprehensive reviews of the quality and
usefulness of carriers‘ bulletins or Web sites. In 2001, it began to
evaluate provider call centers, but the team we observed focused on
performance standards that addressed procedures--such as how long the
physician was left on hold--rather than the quality of the answers
provided. CMS attributed some of its monitoring shortcomings to lack of
resources..
[End of table]
Source: GAO analysis.
Physicians have also raised questions about whether the program‘s
enforcement of payment rules has imposed too great an administrative
burden on those billing Medicare. Our May 2002 report on Medicare
claims scrutiny found that the vast majority of physician practices--at
least 90 percent in fiscal year 2001--had no claims selected for
medical review by their contractor.[Footnote 13] Medical reviews
involve a detailed examination of a sample of claims by clinically
trained staff and require that physicians submit medical records to
substantiate their claims. For the relatively few practices that had
any claims reviewed, the contractors typically requested patients‘
medical records for no more than two claims during the year. In an
independent assessment that we sponsored, carriers‘ reviews were found
to be highly accurate in their decisions to deny, reduce, or pay claims
in full. The overall level of accuracy was consistent across the three
carriers at about 96 percent.
Adequate Monitoring of Medicare+Choice Plans Needed to Ensure Adherence
to Program Rules:
Medicare+Choice, the program designed to allow beneficiaries to enroll
in different types of health plans, is subject to different program
integrity challenges from those of the traditional fee-for-service
program because the payment methods differ. Managed care organizations
(MCO) that offer Medicare+Choice health plans receive a fixed monthly
payment for each beneficiary enrolled rather than for each service
delivered. CMS must ensure that MCOs provide the services to enrollees
that are required by their Medicare contracts and are paid
appropriately for the beneficiaries enrolled.
If Medicare‘s payments are expected to exceed an MCO‘s costs of
providing Medicare-covered services combined with the amount of profit
or additional revenue that it would normally earn on non-Medicare
contracts, the MCO must use the difference either to provide additional
services, reduce beneficiary cost sharing, save in a noninterest-
bearing escrow account to maintain benefit or cost-sharing levels in
future years, or a combination of these. Beginning in 2003, an MCO may
pay all or part of a beneficiary‘s Medicare part B premium. For each
Medicare+Choice health plan that an MCO intends to offer, an MCO must
annually submit a benefit package proposal--called the adjusted
community rate proposalæ for CMS review and approval. The rate proposal
identifies the health services an MCO will provide to enrollees, the
estimated costs of providing these health services, and the estimated
payments the MCO will receive. This information is used to ensure that
Medicare-covered services will be provided and that excess payments
will be used as intended.
The Balanced Budget Act of 1997 required CMS to annually audit the
Medicare rate proposals and supporting financial records of at least
one-third of the participating MCOs and required that we monitor these
audit activities. In October 2001, we reported that, according to CMS,
the rate proposal audits showed that 59 of 80 health plans had
misreported key financial data or had accounting records too unreliable
to support their estimates, but that CMS did not have a follow-up
mechanism in place to resolve the issues identified in the
audits.[Footnote 14] Misreporting these data can affect the benefits
provided to enrollees, the amounts enrollees must pay in cost sharing,
or the amounts the MCO contributes to an escrow account used to
maintain benefit or cost-sharing levels in the future. Even small
dollar amounts can have a major impact at the MCO level. For example,
by underestimating its expected revenue by only $0.61 per member per
month, one MCO with three health plans failed to spend over $500,000
that could have been used to provide additional benefits, lower
enrollee cost sharing, or help maintain future benefit or cost-sharing
levels. We recommended that CMS (1) calculate the net effect of errors
identified by plans and the overall impact of rate proposal audit
findings and adjustments, (2) develop and implement a mechanism to
address audit findings in a timely manner, and (3) communicate to each
MCO the corrective actions needed for future rate proposal submissions.
CMS disagreed with our finding that the audit program lacked a formal
resolution process, stating that we had not given the agency sufficient
credit for efforts to develop an audit follow-up process. CMS also
stated, in response to our recommendation for better communication with
MCOs, that it had adequately communicated by providing MCOs copies of
the audit reports. Subsequently, CMS developed a draft action plan to
establish a follow-up mechanism for the rate proposal audits.
Informally, we provided the agency feedback on areas that we believed
would strengthen its draft plan. We will continue to monitor CMS
actions in this area.
Financial Management Has Improved, But Considerable Work Remains:
As we have reported previously, the agency‘s and its contractors‘
financial management procedures for payment of Medicare claims,
recovery of overpayments, and recording of financial transactions had
certain weaknesses,[Footnote 15] but the agency has made progress in
reducing them. Since the audit of its fiscal year 1999 financial
statements, CMS has received an unqualified or ’clean“ opinion from its
auditors each year and has taken significant steps to implement our
recommendations for financial management improvements. CMS has
developed a comprehensive financial management plan, improved its
reviews of contractors‘ financial management activities, made financial
management procedural guidance available to Medicare contractors
through an Internet-accessible database, and improved procedures for
handling audit findings. The agency is also assessing the skills and
competencies needed to manage Medicare‘s finances. Despite this
progress, CMS needs to take further steps to better analyze contractor
financial data to ensure it is accurately reported and to develop
financial systems, processes, and controls that routinely generate
reliable, useful, and timely information for agency decisionmakers.
CMS‘s efforts to collect Medicare overpayments illustrate both its
successes and its challenges. We reported previously that the agency
and its claims administration contractors had not been effective at
collecting some of the money owed to Medicare, which generally resulted
from overpayments made to providers. At the end of fiscal year 1999,
over $7 billion of debt had accumulated on contractors‘ books as
accounts
receivable that were neither collected nor written off. Responding to
our recommendation to comply with the terms of the Debt Collection
Improvement Act of 1996,[Footnote 16] Medicare contractors have
referred over two-thirds of the $6 billion in reported delinquent debts
eligible for referral to the Department of the Treasury or its designee
for collection by the third quarter of fiscal year 2002. Nevertheless,
as we reported in February 2002, CMS has difficulty ensuring that
contractors consistently make these referrals, as the agency lacks a
comprehensive database tracking all its debts, has inaccurate
information on the debts its limited database contains, and has not
developed a comprehensive debt referral plan.[Footnote 17] To help
ensure that CMS promptly refers all eligible delinquent Medicare debts
to Treasury or its designee for collection, we made a number of
additional recommendations to CMS. The agency is currently addressing
most of these recommendations.
At the heart of its financial management problems, CMS does not have a
single integrated financial accounting system that contains information
to track its financial activities. Lack of such integrated information
impedes efforts to monitor contractors‘ activities, safeguard payments,
and prepare yearly financial statements. CMS has begun to develop a
project to integrate its financial management systems, but the
complexity of this project has been challenging, involving information
from over a billion transactions a year and multiple claims contractor
systems and data centers. Recognizing the complexity of this project,
CMS has established a separate program management office and has hired
a systems integrator contractor with expertise to oversee software
development and system integration. A pilot test running the new
software parallel to the old is scheduled to begin at two claims
administration contractors in April 2004, with full implementation of
the integrated system scheduled for September 2007.
We have identified other financial management issues, which are
addressed in a separate HHS management challenge discussed in this
report--“Improve Financial Systems, Processes, and Controls.“:
Information Technology and Management Challenges Undermine Efforts to
Strengthen Program:
Financial management is not the only Medicare function hampered by
information technology (IT) shortcomings. CMS officials are in the
process of modernizing the technology that supports Medicare‘s core
missions of claims processing and payment, program oversight, and
administration of participating health plans. The agency‘s information
systems are of central importance in carrying out these missions, but
the major systems are aged and often incompatible with one another.
Because of their design, these systems do not assemble or maintain data
in a user-friendly format and are therefore difficult to query. Quick
answers are largely unavailable to such questions as the effects of
payment policies on beneficiaries‘ access to services, the adequacy of
payments to providers, or the status of debt owed the program because
of uncollected overpayments. Further, auditors of CMS‘s fiscal year
2001 financial statements noted numerous weaknesses in the security of
Medicare information systems that could result in unauthorized access
to sensitive Medicare data. These weaknesses are not only troublesome
from a data integrity standpoint but also because of the potential
financial loss that could occur through security breaches.
CMS‘s IT planning and management processes--intended to increase the
likelihood that systems development and implementation will be cost
effective and successful--have certain shortcomings that increase the
risk that some of its modernization efforts could fail to achieve
agency mission goals. In September 2001, we reported that CMS had
developed a blueprint documenting its existing and planned IT
environments--also known as its enterprise architecture--but this
blueprint was missing essential detail.[Footnote 18] We also found that
the agency‘s process for managing its IT investments was missing key
review, approval, and evaluation steps to ensure that CMS invests in
projects that succeed in supporting Medicare program management needs.
On the basis of these findings, we recommended that CMS fully develop
its architecture and strengthen its IT management process.
Agency officials reported that they have begun implementing guidance
for an improved IT management process. This process will require
additional review of the benefits, risks, and technical appropriateness
of all projects, except ongoing operations. Officials also reported
conducting additional IT development activities, making further
progress on detailing the agency‘s IT architecture, and assessing human
capital needs and skill gaps. To address weaknesses in the security
controls of the agency‘s and its contractors‘ ongoing system
operations, CMS has implemented additional requirements for contractors
to document compliance with security requirements, increased its
scrutiny of contractor internal management controls related to IT
systems security, and begun an agencywide mandatory training effort for
CMS staff on IT security procedures. Despite CMS‘s progress, strong and
continued management attention will be needed as the agency strives to
maintain current program services while working to build more effective
and secure information support.
Medicare Contracting Reform Looms as a Potentially Large Management
Challenge:
Managing Medicare effectively depends on finding a balance between
flexibility and accountability--that is, granting the agency adequate
flexibility to act prudently while ensuring that it can be held
accountable for its decisions. CMS has lacked some of the ability to
act prudently in managing claims administration because, under
Medicare‘s statute and regulations, its contracting authority and
practices differ from those embodied in standard federal contracting
regulations. There is generally no full and open competition for
entities to obtain contracts to process Medicare claims; CMS is limited
to choosing among health insurers to process Medicare claims; apart
from some recent exceptions, contractors must cover the full range of
claims processing and related activities; and the agency is limited in
its ability to terminate contracts.
Over the years, the agency repeatedly proposed legislation to obtain
new contracting authority and flexibility. In June 2001, we testified
that Medicare could benefit from Congress removing CMS‘s contracting
limitations and from use of full and open competition in the selection
of claims administration contractors.[Footnote 19] In June 2002, the
U.S. House of Representatives passed a bill that would amend the
Medicare statute to require competitive contracting and allow CMS
greater flexibility in its contracting arrangements.
Should CMS be granted more flexible contracting authority that relies
on competition, effectively managing the transition to a different
contracting environment will be a major new challenge for the agency in
the coming years. As we reported in our 2001 assessment of high-risk
federal programs, federal agencies that manage large procurements of
contracted services--such as the departments of Energy and Defense--
have had difficulties with contract acquisition and
management.[Footnote 20] These have included problems such as cost and
schedule overruns and failure to oversee contractors and hold them
accountable. CMS would need to carefully plan and manage its own
contracting efforts, while being attentive to best practices in the
field, to avoid some of the pitfalls experienced by other agencies.
Enhance the Fiscal and Management Oversight of the Medicaid Program:
Medicaid is a program jointly funded by the federal government and the
states that pays for both acute health care and long-term care services
for over 44 million low-income Americans, about half of whom are
children and over one-quarter of whom are aged, blind, or disabled. The
program‘s day-to-day administration is conducted by the states and is
overseen at the federal level by CMS in HHS. The challenges inherent in
overseeing a program of Medicaid‘s size, growth, and diversity,
combined with the open-ended nature of the program‘s federal funding,
puts the program at high risk for waste and exploitation and we have
added Medicaid to our 2003 list of high-risk programs. Consider the
following program characteristics:
* Size. In fiscal year 2001, federal and state Medicaid expenditures
totaled $228 billion. The federal share was about 57 percent,
representing
7 percent of all federal outlays. Medicaid is the third largest social
program in the federal budget (after Social Security and Medicare) and
the second largest budget item for most states (after education),
accounting for about 20 percent of states‘ total expenditures.
* Growth. The Congressional Budget Office projects that Medicaid
spending will grow each year on average by 8.8 percent, which would
more than double total Medicaid spending in 9 to 10 years. Recent
Medicaid expenditure growth has been fueled in part by escalating
prescription drug and hospital costs, as well as by ’creative“ state
financing schemes that inappropriately increase the federal share of
Medicaid expenditures without increasing the states‘ contribution.
Future program spending will also be significantly affected by the
growth of the population aged 65 and older, which is expected to more
than double by 2040. Individuals who are aged, blind, or disabled
already incur significantly higher Medicaid expenditures than those in
other eligibility categories. These individuals represent 27 percent of
all Medicaid beneficiaries, but they account for 66 percent of
expenditures, as shown in figure 1. As the share of the population that
is aged grows, so too will associated long-term care expenditures, thus
exerting additional financial pressures on future federal and state
budgets.
Figure 1: Medicaid Expenditures Are Disproportionately for Individuals
Who Are Aged, Blind, or Disabled:
[See PDF for image] - graphic text:
[A] Total Medicaid fiscal year 2000 expenditures were $209.6 billion;
expenditures in the figure do not include administrative expenses
($10.6 billion) and other expenses that could not be attributed to
particular beneficiary populations.
[End of figure] - graphic text:
* Diversity. Within broad federal guidelines, states have considerable
flexibility in how they administer their Medicaid programs. Each state
determines the amount, duration, and scope of covered services;
establishes eligibility guidelines; sets payment rates; and develops
its own administrative and delivery system structure. While federal
statute requires states to cover certain populations and services under
Medicaid, states may choose to expand eligibility or add benefits that
the statute defines as optional.[Footnote 21] About two-thirds of total
Medicaid expenditures are attributable to services for optional
populations and benefits. The resulting variation across states in
populations covered and benefits offered makes Medicaid less like a
single program than like 56 separate programs--the 50 states, the
District of Columbia, Puerto Rico, and U.S. territories--thus posing
significant complexities for federal oversight.
* Open-ended federal funding. Under Medicaid, the federal share of each
state‘s expenditures, also called the federal match, is based on a
formula that is linked to each state‘s per capita income and its total
program spending. The federal liability for program expenditures is
open-ended, as there is no limit on state spending for services that
are covered under a CMS-approved state Medicaid plan. In 2001, the
federal shares ranged from 50 to 77 percent of a state‘s total Medicaid
expenditures.
Our concerns about the program‘s risks have been heightened by our work
in recent years, which confirms the program‘s vulnerability to
exploitation and mismanagement. Through this work we have identified
key problems, including:
* schemes by some states to inappropriately leverage federal funds,
* state waiver programs that inappropriately increase the federal
government‘s financial liability, and:
* insufficient federal and state oversight to ensure that payments to
health care providers are accurate and appropriate.
We have also identified consistent weaknesses with federal oversight of
the quality of care in nursing homes, which receive billions of dollars
annually in Medicaid funds. These issues are addressed in a separate
section in this report entitled ’Improve Oversight of Care Delivered to
Medicare and Medicaid Beneficiaries.“:
State Financing Schemes Often Inappropriately Increase Federal Medicaid
Payments:
For more than a decade, states have used various financing schemes to
inappropriately generate excessive federal Medicaid matching funds
while their own share of expenditures has remained unchanged or
decreased. Using statutory and regulatory loopholes, some states have
created the illusion that they have made large Medicaid payments to
certain providers, such as county health facilities, in order to
generate federal matching payments. In reality, generally through
electronic funds transfers, the states have only momentarily made
payments to these providers, as states have required the payments to be
returned. In some cases, states have used these federal payments for
purposes other than Medicaid. Figure 2 illustrates a financing
arrangement under which a state can inappropriately increase federal
matching funds with no outlay of state funds.
Figure 2: One State‘s Arrangement to Increase Federal Medicaid Payments
Inappropriately:
[See PDF for image] - graphic text:
[End of figure] - graphic text:
In figure 2, a state makes Medicaid payments totaling $277 million to
certain county health facilities; the total includes $155 million in
federal funds at a matching rate of 56 percent (step 1). On the same
day that the county health facilities receive the funds, they transfer
all but $6 million of the payments back to the state, which retains
$271 million--a net gain of $149 million over the state‘s original
outlay of $122 million (steps 2 and 3).
Although the Congress and CMS have repeatedly acted to curtail abusive
financing schemes when they have come to light, states have
consistently developed new variations to this basic approach. Each
variant has the same result: the state‘s share of program expenditures
is shifted to the federal government, while federal Medicaid payments
escalate, with no assurances that the excessive federal payments are
used for valid Medicaid expenditures for covered beneficiaries. Table 2
describes various abusive Medicaid financing arrangements used by
states and the actions taken by the Congress and CMS to curtail them.
Table 2: Federal Actions to Address Inappropriate State Financing
Arrangements:
Financing arrangement: Payments to state health facilities;
Description: States made excessive Medicaid payments to state-owned
health facilities, which subsequently returned these funds to the state
treasury.; Action taken: In 1987, HCFA issued regulations that
established payment limits specifically for inpatient and institutional
facilities operated by states..
Financing arrangement: Provider taxes and donations; Description:
Revenues from special taxes on hospitals and other providers and from
provider ’donations“ were matched with federal funds and paid to the
providers, which returned most of the federal payment to the state.;
Action taken: The Medicaid Voluntary Contribution and Provider-Specific
Tax Amendments of 1991 essentially banned provider donations and placed
a series of restrictions on provider taxes..
Financing arrangement: Disproportionate share hospital (DSH) payments;
Description: DSH payments compensate hospitals that care for a
disproportionate number of low-income patients. Unusually large DSH
payments were made to certain hospitals, which returned the bulk of the
state and federal payments to the state.; Action taken: The Omnibus
Budget Reconciliation Act of 1993 placed limits on which hospitals
could receive DSH payments and capped both the amount of DSH payments
states could make and that individual hospitals could receive..
Financing arrangement: DSH payments to state mental hospitals;
Description: A large share of state DSH payments were paid to state-
operated psychiatric hospitals, where they were used to pay for
services not covered by Medicaid or were returned to the state
treasury.; Action taken: The Balanced Budget Act of 1997 limited the
proportion of a state‘s DSH payments that can be paid to state
psychiatric hospitals..
Financing arrangement: Payments to local government health facilities;
Description: In an effort to ensure that Medicaid payments are
reasonable, the federal statute and regulations prohibit Medicaid from
paying more than what Medicare would pay for comparable services. This
upper payment limit (UPL) applies to total payments and not individual
services. As a result of the aggregate upper limit, states were able to
make large supplemental payments to a few local public health
facilities, such as hospitals and nursing homes. The local government
health facilities then returned the bulk of the state and federal
payments to the state.; Action taken: The Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act of 2000 required HCFA to issue
a final regulation that established a separate payment limit for each
of several classes of local government health facilities. In 2002, CMS
issued a regulation that further lowered the payment limit for local
public hospitals..
[End of table]
Source: GAO analysis.
Financing schemes that some states use to inappropriately generate
federal payments can spread quickly to other states. For example, from
1990 to 1992, payments that compensate hospitals that care for a
disproportionate number of low-income patients--called DSH payments--
spiked from
$1 billion to over $17 billion. After limits were put on DSH payments,
states found that they could exploit the upper payment limit (UPL) on
Medicaid payments to conduct other financing schemes. From 1999 to
2000, the number of states using UPL-related schemes grew from 12 to
28, accounting for an estimated $5.8 billion in excessive federal
payments.
The savings estimated to result from curbing states‘ exploitative
practices demonstrate the enormous impact state financing schemes can
have on the federal budget. Prompted by our testimony,[Footnote 22]
CMS‘s 2001 regulation reducing the federal government‘s financial
liability under the UPL provision is estimated to save $55 billion over
10 years, and the related 2002 CMS regulation is estimated to yield an
additional $9 billion over 5 years.
While the Congress and CMS have often acted promptly to address
Medicaid financing schemes once they become apparent, new variations
continue to emerge and recommendations to reduce problems remain open.
Consequently, we recommended that the Congress consider legislation to
prohibit making Medicaid payments to a government-owned facility that
exceed the facility‘s costs. Additionally, CMS has responded, in part,
to recommendations made by OIG regarding UPL-related payments, but CMS
requirements do not provide for the capture of information to determine
whether local government health facilities transfer the federal funds
they receive back to the state.
States that have relied on abusive practices to maximize federal funds
as a staple for state financing are feeling the budgetary pressure from
the loss of these funds. Experience shows that some states are likely
to look for other creative means to supplant state financing, making a
compelling case for the Congress and CMS to sustain vigilance over
federal Medicaid payments.
Waiver Demonstration Programs May Increase Federal Liability for
Program Expenditures:
HHS oversight responsibilities include ensuring that states‘
demonstration programs do not put the federal government at risk for
spending more on Medicaid than it would without such programs. The
Secretary of HHS has broad authority under section 1115 of the Social
Security Act to waive certain statutory provisions and allow states to
conduct Medicaid research and demonstration projects that test new
ideas for delivering services and covering more people. Specifically,
HHS can grant section 1115 waivers to provide federal funds for
services and populations not otherwise eligible for federal matching
payments. States have commonly used section 1115 waivers to provide
health care coverage to Medicaid beneficiaries by enrolling them in
managed care plans. An estimated 20 percent of all Medicaid funds are
now spent under section 1115 waivers. Historically, HHS and the Office
of Management and Budget (OMB) have required that the demonstration
projects be budget neutral--that is, the demonstration‘s cost to the
federal government should be no more than it would have been without
the waiver.
Since the mid-1990s, however, adherence to budget neutrality
requirements has eroded, as HHS and OMB have permitted states to use
questionable methods that in our view do not demonstrate budget
neutrality. The section 1115 waivers of two states, approved in 2002,
are estimated to cost the federal government at least $330 million more
than if the waivers had not been approved. For one state‘s waiver, HHS
and OMB continued a practice that we first identified and objected to
in 1995, which allows states to disregard substantial new costs that
would be incurred under the waiver, thus making it easier to
demonstrate budget neutrality. For the other state‘s waiver, HHS and
OMB allowed the state to include impermissible costs to raise the level
of costs estimated without the waiver, thus making it easier to claim
that the demonstration was budget neutral and, in turn, inflating the
share for which the federal government would be liable. Our concern is
that additional states have requested similar waivers that are
currently under review. In 2002, we recommended that HHS ensure that
only valid methods are used to demonstrate budget neutrality,[Footnote
23] but the department and OMB continue to allow states to disregard
significant amounts of waiver costs when demonstrating budget
neutrality.
Shortcomings in Routine Oversight and Financial Management Practices
Leave Program Dollars Ill-Protected:
One of CMS‘s major challenges is to balance state flexibility with
accountability by providing adequate oversight of states‘ Medicaid
financial transactions. Our work shows that CMS falls short in
providing the level of oversight required to ensure accountability. In
particular, CMS lacks important policies and procedures to guide either
its own or states‘ financial oversight activities, and it has not
provided consistent guidance to the states on appropriate payment
practices.
Our studies of federal and state agencies‘ controls over payments have
identified systemic weaknesses in both federal and state oversight of
Medicaid expenditures.[Footnote 24] Our February 2002 report on federal
oversight of state claims for reimbursement found that CMS‘s general
policies and systems for financial oversight of state Medicaid programs
were limited. For example, CMS did not (1) have a sound method for
identifying areas at high risk for improper payments, (2) have
performance standards for review of state expenditures, or (3) conduct
analyses of trend information on the amount and type of Medicaid
expenditures deferred or disallowed to monitor performance of this
oversight activity. To address these weaknesses, we recommended a range
of approaches to strengthen internal controls and target limited
resources. In response, CMS has initiated steps to improve financial
reviews of Medicaid, which are in the planning and early implementation
stages.
In examining states‘ controls over improper payments to providers, we
found that states‘ efforts to identify billing errors and abusive
billing practices have been generally limited and only modestly funded.
In our June 2001 review, half the states reported spending no more than
one-tenth of 1 percent of program expenditures on activities to
safeguard program payments. No state had requested the full amount of
federal funds available for antifraud efforts because they would have
had to increase their own spending to receive the full federal match.
The potential benefit of improving oversight has been demonstrated by
individual state efforts. In our June 2001 study, we reported that,
since July 1999, California had identified $58 million in fraudulent
billings by 115 providers and pharmaceutical and durable medical
equipment wholesalers and suppliers; it was investigating an additional
300 entities for suspected fraud that could exceed $250 million.
Kentucky‘s analysis of claims payment data identified $137 million in
overpayments to providers between January 1995 and June 1998.
Our review of certain Medicaid services provided to children through
their schools also demonstrates the importance of heightened scrutiny
over Medicaid expenditures.[Footnote 25] In one state alone, there were
$324 million in disallowed claims involving school-based services for
three-and-a-half years ending in fiscal year 2001.[Footnote 26] Some
claims were for services not covered by Medicaid or for services
provided to non-Medicaid-eligible children. Our work also showed that,
in some states, very little of the federal reimbursement went directly
to schools where the services were provided. Some schools ended up with
as little as $7.50 for every $100 that the state claimed for
reimbursement, once states retained a portion of federal reimbursements
and private consulting firms were paid contingency fees.
Our review of Medicaid reimbursement in schools further illustrated
CMS‘s weaknesses in providing the states sufficient program guidance
and oversight. Schools in some states conduct outreach for the Medicaid
program and perform certain diagnostic, screening, and therapy
services. States that provide school-based Medicaid services must
establish procedures for determining Medicaid‘s payment rates within
broad federal guidelines.[Footnote 27] Under these procedures, the
costs identified for schools‘ administrative services claims must be
directly attributable to supporting the Medicaid program. Our analysis
found that some CMS regions failed to (1) provide clear and consistent
guidance to schools and state agencies or (2) exercise adequate
controls over the approval of claims for school-based services. Our
recommendations to CMS on school reimbursement were aimed at improving
the agency‘s oversight and establishing more consistent policies about
what constitutes appropriate payment. CMS has taken action to clarify
reimbursement policies addressing administrative activities performed
by certain medical personnel in schools. Additionally, CMS is
developing more consistent guidance for its regions, states, and
schools regarding what is allowable in submitting claims for
reimbursement for school-based administrative costs from Medicaid.
Improve Oversight of Care Delivered to Medicare and Medicaid
Beneficiaries:
CMS and the states share oversight responsibility for thousands of
health care providers that deliver care directly to Medicare and
Medicaid beneficiaries. (See table 3.) In response to congressional
requests, in recent years we have reviewed oversight efforts for three
of these types of providers--nursing homes, home health agencies, and
kidney dialysis facilities--that provide critical and often life-saving
care to nearly
4.5 million vulnerable individuals and that receive over $70 billion
annually in Medicare and Medicaid payments. Providers become eligible
for federal reimbursement for services provided by adhering to federal
quality standards, including statutory, regulatory, and other
requirements designed to help ensure that patients receive appropriate
care or treatment and are protected from harm. To ensure that providers
remain eligible for federal funding, CMS contracts with state agencies
to conduct periodic inspections, called surveys, of the providers‘
services. CMS, in turn, is charged with overseeing the adequacy of
states‘ activities in monitoring providers‘ performance.
Table 3: Providers Required to Meet Federal Quality Standards, Survey
Frequency, and Budgeted Federal Survey Expenditures:
Provider: Nursing homes; Number of
providers: 16,582; [Empty]; Survey frequency (as required by statute
or CMS): Every year (statute); Budgeted federal survey expenditures,
fiscal year 2003: $352,100,492.
Provider: Home health agencies; Number of
providers: 6,944; [Empty]; Survey frequency (as required by statute or
CMS): Every 3 years (statute); Budgeted federal survey expenditures,
fiscal year 2003: 25,469,304.
Provider: Intermediate care facilities for the mentally retarded;
Number of
providers: 6,693; [Empty]; Survey frequency (as required by statute or
CMS): Every year (CMS); Budgeted federal survey expenditures, fiscal
year 2003: 38,623,812.
Provider: Accredited hospitals; Number of
providers: 4,461; [Empty]; Survey frequency (as required by statute or
CMS): 1% per year (CMS); Budgeted federal survey expenditures, fiscal
year 2003: 5,528,523.
Provider: Kidney dialysis facilities; Number of
providers: 4,266; [Empty]; Survey frequency (as required by statute or
CMS): Every 3 years (CMS); Budgeted federal survey expenditures, fiscal
year 2003: 8,049,312.
Provider: Ambulatory surgical centers; Number of
providers: 3,532; [Empty]; Survey frequency (as required by statute or
CMS): Every 6 years (CMS); Budgeted federal survey expenditures, fiscal
year 2003: 2,482,379.
Provider: Rural health clinics; Number of
providers: 3,296; [Empty]; Survey frequency (as required by statute or
CMS): Every 6 years (CMS); Budgeted federal survey expenditures, fiscal
year 2003: 1,285,470.
Provider: Outpatient physical therapy; Number of
providers: 2,930; [Empty]; Survey frequency (as required by statute or
CMS): Every 6 years (CMS); Budgeted federal survey expenditures, fiscal
year 2003: 1,430,167.
Provider: Hospices; Number of
providers: 2,316; [Empty]; Survey frequency (as required by statute or
CMS): Every 6 years (CMS); Budgeted federal survey expenditures, fiscal
year 2003: 3,977,717.
Provider: Nonaccredited hospitals; Number of
providers: 1,551; [Empty]; Survey frequency (as required by statute or
CMS): Every 3 years (CMS); Budgeted federal survey expenditures, fiscal
year 2003: 7,615,329.
Provider: Portable X-ray suppliers; Number of
providers: 645; [Empty]; Survey frequency (as required by statute or
CMS): Every 6 years (CMS); Budgeted federal survey expenditures, fiscal
year 2003: 157,029.
Provider: Comprehensive outpatient rehabilitation facilities; Number
of
providers: 564; [Empty]; Survey frequency (as required by statute or
CMS): Every 6 years (CMS); Budgeted federal survey expenditures, fiscal
year 2003: 293,220.
Provider: Other direct survey costs[A]; Number of
providers: [Empty]; [Empty]; Survey frequency (as required by statute
or CMS): [Empty]; Budgeted federal survey expenditures, fiscal year
2003: 10,359,246.
Provider: Total; Number of
providers: [Empty]; [Empty]; Survey frequency (as required by statute
or CMS): [Empty]; Budgeted federal survey expenditures, fiscal year
2003: $457,400,000[B].
[End of table]
Source: CMS.
Note: Other providers, including organ procurement organizations,
community mental health care centers, and psychiatric residential
treatment facilities, require surveys by either CMS or state surveyors,
but funding for these surveys is not included in the survey budget. In
addition, a small proportion of the roughly 160,000 clinical
laboratories are required to be surveyed, but these laboratories pay
for the surveys themselves through fees instead of federal
appropriations and are therefore not included in budgeted federal
survey expenditures.
[A] Other direct survey costs are funds provided to state survey
agencies, but CMS is unable to allocate these costs among specific
provider types.
[B] Total does not reflect the sum of the provider amounts because of
rounding.
In response to our recent findings and recommendations on the need to
improve the quality of care provided by nursing homes, home health
agencies, and kidney dialysis facilities, CMS has increased its
attention to improving oversight of survey activities, especially for
nursing homes. While this additional attention to nursing home
oversight is warranted, CMS may have shifted its focus and resources to
nursing homes at the expense of adequate oversight of home health
agencies, kidney dialysis facilities, and other providers serving
Medicare and Medicaid beneficiaries. As such, CMS confronts significant
management challenges--first, ensuring that its monitoring of
compliance with federal quality standards by myriad providers is
effective and consistent across its 10 regional offices, and second,
ensuring that the 51 state survey agencies take appropriate actions to
enforce federal quality standards and protect beneficiaries.
Specifically, our work on federal and state oversight of survey
activities points to problems with the conduct of state surveys, the
timeliness of complaint investigations, the strength and use of federal
sanctions for providers‘ noncompliance with Medicare standards, federal
monitoring of state survey activities, and survey staffing.[Footnote
28]
Quality of Care Is Uncertain Because Some Providers Are Surveyed
Infrequently and Deficiencies Are Understated:
State survey problems we have noted frustrate efforts to determine
quality of care. Some providers are surveyed very infrequently and,
while state surveyors identified a disturbing prevalence of quality
problems in nursing homes, we have noted repeatedly that the
seriousness of deficiencies was understated. During our reviews of the
home health agency survey process, we reported similar problems with
understated deficiencies. We noted flaws in the following areas for the
three providers:
* Nursing homes. Because of weaknesses in the survey process, state
surveyors often missed or understated serious deficiencies, masking the
actual extent to which residents are harmed or placed in danger. The
1.6 million elderly and disabled nursing home residents, often very
dependent or incapacitated, may be totally reliant on nursing home
staff for medical care as well as assistance with basic activities of
daily living, such as dressing, grooming, and eating. Our work since
1998 has demonstrated that state surveyors failed to identify serious
nursing home care deficiencies or classified such deficiencies,
including weight loss, dehydration, pressure sores, and incontinence,
at an inappropriately low severity level. In independent reviews
conducted to evaluate the quality of state survey agencies‘
performance, CMS‘s surveyors often identified serious deficiencies
where state surveyors did not. Factors contributing to the
understatement of deficiencies included lack of sufficient rigor in the
survey process and nursing homes‘ ability to predict the timing of
their surveys so that, if a home chooses to do so, it may conceal
problems. In response to our recommendations, CMS has introduced
strengthened survey methods to spot serious deficiencies, but is still
developing important additional steps. To reduce survey predictability,
CMS has varied the starting times of surveys, but this change has had
limited effectiveness.
* Home health agencies. Patients receiving home health care are
homebound, may have little contact with anyone except home health
staff, and are therefore often isolated and vulnerable to poor care.
Surveys of home health agencies are required less frequently than those
of nursing homes--a minimum of once every 3 years as opposed to
annually--and branch offices, constituting about one-quarter of home
health locations, generally escape routine scrutiny. Some agencies must
be surveyed annually if, for example, they have had prior serious
deficiencies, but about half of these agencies did not receive required
annual surveys. A home health agency survey is less comprehensive than
a nursing home survey in that CMS does not require surveyors to review
about half of the conditions for participating in Medicare, including
assessing the quality of skilled nursing care. Although state surveyors
identified a small proportion of home health agencies with deficiencies
that either harmed or could harm patients, we found evidence that such
problems also were understated. Moreover, two states accounted for over
two-thirds of serious deficiencies reported nationwide, suggesting that
states have disparate survey practices that may not consistently
capture the actual status of quality. We found deficiencies in some
states documented at a lower level of seriousness than similar
deficiencies in other states that were documented as harming or
potentially harming patients. In July 2002, we recommended several
steps CMS could take to improve the home health agency survey process,
including strengthening reviews of branch offices. The following month
CMS began assigning these offices identification numbers to improve
oversight.
* Kidney dialysis facilities. Dialysis facilities treat more than
280,000 patients suffering from end-stage renal disease, an
irreversible state of kidney impairment that requires either a
transplant or regular dialysis. If performed improperly, dialysis can
cause serious complications or even death; many dialysis patients are
especially vulnerable because they are elderly and have other
conditions, such as diabetes. No statutory requirements exist for the
frequency of state surveys of dialysis facilities, and the number of
facilities surveyed each year declined steadily during the 1990s. For
instance, in 1999, only
11 percent of existing facilities received a recertification survey,
compared with 52 percent in 1993. The limited frequency of surveys made
it impossible for us to determine the exact extent to which dialysis
facilities were in compliance with federal quality requirements.
However, 15 percent of the most recent surveys conducted at the time of
our 2000 review identified deficiencies severe enough, if uncorrected,
to warrant terminating participation in Medicare. In fiscal year 2001,
CMS received additional funding that resulted in its increasing the
number of facilities surveyed annually to one-third and indicated that,
again,
15 percent of the facilities surveyed had at least one deficiency
severe enough to lead to termination, if uncorrected.
Many States‘ Complaint Intake and Investigation Processes Are
Ineffective:
Complaint investigations are an important opportunity for state survey
agencies to intervene promptly when care problems are reported. This is
especially true given the varying frequency with which surveys are
conducted for different types of providers. The ability to lodge
complaints against providers--whether by patients, family members, or
caregivers themselves--and to have them resolved promptly is an
essential aspect of protecting patient health and safety. Our reviews
of nursing home and home health agency oversight revealed continuing
weaknesses with complaint investigation practices in many states,
including problems with the filing of complaints and the timeliness of
state investigations.
In reviewing the nursing home and home health agency complaint
investigation processes for several states, we identified numerous
shortcomings, including complaint hotlines that were not easily
accessible, not publicized, limited to in-state callers, or that had no
voice mail capability; states that required or encouraged written
complaints over telephone calls; investigations of apparently serious
complaints that were delayed because they were assigned a low
investigation priority; and information systems that were inadequate
for properly monitoring the status of complaint investigations. CMS
currently has a complaint improvement project under way that is
designed to strengthen and improve the nursing home complaint process.
CMS expects to determine how the findings from this project can be
applied to other providers as well and to issue guidance for states‘
complaint investigation processes.
CMS‘s Use of Sanctions Does Not Ensure Provider Compliance:
Although sanctions can be an important enforcement tool, CMS does not
use the full array of sanctions available. CMS uses a broad array of
sanctions to penalize nursing homes that repeatedly harm residents or
fail to correct deficiencies within certain time frames. Sanction
options for nursing homes include, among others, assessing monetary
penalties and denying Medicare payments for new admissions, in addition
to termination from the program. In contrast, CMS limits its sanctions
for home health agencies and kidney dialysis facilities to termination
from the program, despite statutory authority and direction to do more.
Termination--or, in reality, the threat of termination--is an all-or-
nothing option that is limited in effectiveness. Under this sanction, a
provider can avoid termination by taking short-term corrective action
to show compliance when a surveyor revisits the facility, thus stopping
the termination process. Deficient facilities often temporarily return
to, but do not necessarily remain in, compliance.
We believe that using termination as the sole sanction option does not
prevent a cycle of recurring noncompliance. In many states, we found
home health agencies that had corrected their deficiencies, but were
found to have serious problems shortly afterward. Some of these home
health agencies had serious deficiencies cited in the same quality-of-
care category on three of four surveys, yet were still participating in
Medicare. Although the length of time between surveys of dialysis
facilities makes it difficult to determine how quickly and how often
they slip out of compliance, the results of our review suggested a
similar pattern. For instance, almost
40 percent of dialysis facilities with deficiencies on their most
recent survey also had a deficiency with at least one of the same
requirements on their last survey. More than half of them had two or
more such repeat deficiencies.
Since 1987, CMS has had statutory authority to use an array of
sanctions other than termination for home health agencies comparable to
those used for nursing homes. However, CMS has not implemented this
authority, as it was required to do by 1989, nor followed our 1997
recommendation to implement additional sanctions for home health
agencies that are repeatedly out of compliance with Medicare
participation requirements. Thus, we suggested in 2002 that the
Congress consider giving CMS a new deadline for implementing additional
sanctions for home health agencies. Although CMS also has broad
authority to implement most sanctions for dialysis facilities, it does
not have the authority to assess civil monetary penalties, except under
one specific condition. In 2000, we suggested that the Congress
consider authorizing CMS to assess similar monetary penalties on
dialysis facilities as are imposed on nursing homes that have severe or
repeated deficiencies. For its part, CMS is in the process of
developing a rule and procedures to strengthen sanction procedures for
one quality standard associated with dialysis care.
CMS Oversight of State Survey Agencies Is Inadequate to Identify
Systemic Problems:
CMS and its 10 regional offices are responsible for ensuring that state
survey agencies effectively identify and resolve problems with provider
quality of care. Our work has consistently identified weaknesses in
CMS‘s monitoring efforts. Although CMS had data available to assist in
monitoring state performance of nursing home surveys, it instead relied
heavily on states‘ self-evaluation--essentially allowing states to
write their own report cards on the adequacy of surveyors‘ inspections
or complaint investigations. CMS has responded to our recommendations
to strengthen its state nursing home oversight by initiating annual
assessments of each state‘s compliance with specific performance
requirements and by making greater use of survey data. Additional
management attention would further strengthen these efforts and ensure
greater consistency across CMS‘s regional offices. CMS‘s oversight of
home health agencies has been less stringent, with limited use of the
numerous tools it has available for monitoring states‘ nursing home
surveys.
To improve its monitoring of state nursing home survey activities, in
2001, CMS began producing and using reports from its numerous databases
and established an annual state performance review process. As part of
the annual performance review, it identified seven specific performance
standards that states are required to meet, for example, survey timing,
deficiency documentation, and complaint investigation criteria, and
assessed each state‘s compliance with each standard. Our ongoing work
is examining the results of this review, and we will comment on it in a
future report.
Another important component of CMS‘s oversight activities is monitoring
its new January 2000 requirement that states refer to CMS for immediate
sanction those nursing homes that were found on successive surveys to
have harmed one or more residents. This policy was implemented at our
recommendation to eliminate the practice of continually allowing such
homes a grace period to correct deficiencies and thus escape sanctions
indefinitely. Our ongoing work also will address the extent to which
CMS has monitored states‘ compliance with this new policy.
CMS‘s oversight of states‘ home health agency surveys is particularly
important because a new prospective payment system introduced in
October 2000 not only encouraged home health agencies to provide care
more efficiently but also created a situation in which reducing
services increases net revenues. Yet, CMS does not routinely review
whether states are complying with key statutory, regulatory, or other
requirements, such as annually surveying home health agencies with
serious deficiencies and ensuring that sample sizes of medical records
and patient visits meet minimum federal standards. Moreover, CMS does
not assess the adequacy of state agency surveys of home health agencies
by conducting its own on-site comparative survey at a sample of
agencies shortly after the state‘s survey. CMS is statutorily required
to perform such surveys for nursing homes and is currently planning to
more than double the number of these surveys. We recently suggested to
the Congress that it require CMS to perform similar surveys of home
health agencies. Although CMS is poised to conduct annual reviews of
state compliance with federal home health survey requirements, the
limited areas it selected for its first such review in 2002 did not
focus on critical issues requiring more immediate attention, such as
ensuring that home health agencies with serious deficiencies are
surveyed annually and that states assign complaints to appropriate
categories so that investigations are timely. In response to our
recommendations, CMS has proposed taking some limited steps to improve
oversight of home health agency surveys.
Staffing Issues Create Human Capital Challenges to Meeting Survey
Quality Requirements:
CMS and state survey agencies face an increasingly difficult challenge
to ensure that experienced survey staff--generally registered nurses--
are available to assess quality of care across the multitude of
providers serving Medicare and Medicaid beneficiaries. Some states
indicated that the numbers of their survey staff were inadequate to
meet expanding survey requirements, including complaint
investigations, and therefore planned to hire additional surveyors.
However, we were informed that it could take as long as 3 years for
newly hired surveyor staff to gain sufficient knowledge and experience
to perform their jobs well and independently. We found that, for home
health agencies, a substantial number of surveyors assigned during 2000
in some states we reviewed had neither taken the basic training course
that CMS offers nor acquired substantial on-the-job experience by
conducting home health agency surveys.
State officials cited surveyor turnover as a reason they must often
rely on relatively inexperienced surveyors to conduct surveys. In
addition, CMS has expressed concern that the economic downturn in the
past 2 years may have affected state budgets, to the extent that states
are unable to ensure that sufficient numbers of skilled staff are
available to survey providers as required. We have ongoing work that
addresses, among other things, states‘ ability to maintain a well-
trained and experienced surveyor workforce in order to meet their
obligations to the federal government to assess the quality of care
provided to public beneficiaries.
Strengthen Preparedness for Public Health Emergencies, Including
Bioterrorism:
Enhancing preparedness for public health emergencies has become an
important national and local priority since the attacks of September
11, 2001, and the subsequent anthrax incidents. Federal, state, and
local governments and the private sector share responsibility for
improving emergency preparedness. While responding to a public health
emergency, such as a natural disaster or a bioterrorist attack, is
initially a local responsibility, the federal government helps support
these efforts. The private sector also plays an important role in
preparedness because many clinical laboratories and hospitals are
privately owned and the blood industry is privately managed.
HHS, among other federal agencies, provides funding and assistance to
state and local jurisdictions to improve their emergency preparedness
and response capabilities. This includes funding and assistance to
conduct laboratory testing to identify biological agents and ensure
adequate treatment space in hospitals for a sudden increase in
patients. The department also supports research related to emergency
response and preparedness. These preparedness efforts are administered
through several different agencies within HHS--the Centers for Disease
Control and Prevention (CDC), which is responsible for health
surveillance and coordination of response to infectious diseases, the
Health Resources and Services Administration (HRSA), which provides
health resources to local areas, FDA, which is responsible for the
safety and efficacy of drugs and biologics such as blood, and the
National Institutes of Health (NIH), which supports medical research.
Ensuring that every community, and each of the approximately 2,850
local public health agencies across the nation, meets a basic standard
of preparedness is a significant challenge. It requires sustained
funding and attention, as well as substantial cooperation and
coordination among multiple federal, state, local, and private sector
agencies. Our reports have found significant weaknesses in key elements
of the public health infrastructure that are critical to emergency
response at the state and local levels. In addition, we have noted a
lack of coordination among programs with responsibility for public
health emergency preparedness at the local, state, and federal levels.
With the recent influx of additional federal funds, responsiveness at
the state and local level is changing. Although the creation of a
Department of Homeland Security has the potential to streamline overall
funding and oversight responsibilities for preparedness and response
for certain types of emergencies, some key preparedness functions that
are basic to HHS‘s public health and research mission remain with HHS.
Therefore, HHS continues to have coordination challenges.
Public Health Infrastructure Needs Strengthening:
The nation‘s public health infrastructure, as well as related aspects
of the private sector health care system, needs to be strengthened in
the following areas:
* Laboratory capacity. Many states‘ public health laboratory systems
were overwhelmed by the volume of testing during the initial outbreaks
of West Nile virus in the northeast in the fall of 1999 and during the
fall 2001 anthrax attacks.[Footnote 29] The 1999 West Nile virus
outbreak, which was relatively small, taxed the federal, state, and
local laboratory resources to the point that officials told us that CDC
would not have been able to respond to another outbreak had one
occurred at the same time. In the West Nile outbreak of 2002, many
laboratories ceased some testing because of the large volume. During
the anthrax attacks in 2001, over 70,000 samples were tested in
laboratories across the country. Even states in which no anthrax was
found conducted emergency testing; officials in these states told us
that their state laboratories were overwhelmed and that they could not
have sustained the testing effort for long without their other work
suffering. CDC was forced to keep its anthrax-testing laboratory
operating 24 hours a day, 7 days a week, and open another laboratory to
meet the demand for testing.
* Infectious disease surveillance. States collect data to monitor the
incidence of infectious diseases, which are then reported to CDC. Some
states still rely on traditional, paper-based surveillance systems that
suffer from underreporting and significant time delays between
diagnosis and reporting. Reliance on such outdated systems could cause
delays in the recognition of a public health emergency and adversely
affect its management.
* Hospital surge capacity. Federal, state, and local officials are
concerned that the nation‘s hospitals and associated treatment
facilities do not have enough capacity to treat a large, sudden influx
of patients as might be seen in an emergency. Capacity can be limited
by insufficient space in facilities such as emergency departments and
intensive care units, insufficient numbers of personnel, and a lack of
equipment such as ventilators. Some local officials report that they
often do not have enough capacity to treat patients on a typical Friday
night, much less in a large-scale emergency.
* Blood supply. The high volume of blood collected immediately after
the September 11, 2001, attacks put a strain on the collection system
and resulted in a surplus of blood.[Footnote 30] The survivors needed
little of the blood: an amount equal to one-third of the additional
units of blood expired and was discarded. Although the blood supply is
generally adequate, lessons learned from blood collection and usage
after the September 11 attacks have prompted HHS and the blood industry
to examine ways to improve how blood suppliers respond to public health
emergencies.[Footnote 31] Maintaining an adequate supply year-round is
key to preparing for emergencies where blood is needed immediately. The
demand for blood is increasing at the same time that new screening for
additional contaminants and donor eligibility policies in response to
emerging concerns about blood-borne disease transmission may reduce the
pool of potential donors. Therefore, more comprehensive, long-term
monitoring of the safety and adequacy of the blood supply by HHS may be
needed.
* Communications. Serious communication problems exist between and
among federal, state, and local government agencies. For example,
during the West Nile virus outbreak, the CDC and New York State
Department of Health databases were not linked to those in New York
City, requiring laboratory results to be manually entered. Physicians,
local health departments, and laboratory officials indicated that it
was sometimes difficult to determine the status of patients‘ samples
and laboratory results.
* Human capital. Increasing staffing of public health departments and
laboratories is a top priority for enhancing preparedness in many
areas. Officials told us that they did not have enough trained
epidemiologists, laboratory technicians, and other professionals to
respond to the anthrax incidents while meeting normal, day-to-day
responsibilities such as preventing the transmission of sexually
transmitted diseases.
* Research and development. The experiences with anthrax and the
possibility of future bioterrorist attacks drew attention to a number
of public health needs. These include new antibiotics and antivirals to
treat infectious diseases, a next generation of vaccines to prevent
infections, and tests to determine earlier in the infection cycle
whether individuals have been infected.[Footnote 32]
HHS has a number of programs designed to enhance these key elements of
the public health infrastructure and increase preparedness. At the
federal level, HHS has invested in expanding capacity at CDC, and NIH
has launched an expanded program to develop new ways to detect, treat,
and prevent diseases caused by biological agents likely to be used by
terrorists. HHS also manages three efforts to provide assistance to
state and local governments--CDC‘s Bioterrorism Preparedness and
Response Program, HRSA‘s Bioterrorism Hospital Preparedness Program,
and the Metropolitan Medical Response System in the Office of Emergency
Response. These programs provide funds to state health departments and
hospitals to improve the public health infrastructure at the state and
local level for activities such as making capital improvements and
purchasing equipment so hospitals can be better prepared for a public
health emergency. These three programs alone provided a total of $1.1
billion to state and local governments in fiscal year 2002. An
additional $1.2 billion has been requested for this purpose for fiscal
year 2003. State and local officials stressed that it is important that
funding for these efforts be sustained over the long term in order to
make meaningful improvements. The President‘s budget for fiscal year
2003 requests a total of $4.3 billion for HHS‘s efforts to address
bioterrorism.
Coordination of Public Health Emergency Preparedness Efforts Remains a
Significant Challenge:
Federal, state, and local government officials, as well as significant
partners in the private sector, must work together to ensure that
communities and the nation as a whole are prepared for a public health
emergency. Our reports over the last 2 years have repeatedly found that
coordination among the federal departments and agencies that have a
role in preparing for emergencies, including terrorist attacks, is
fragmented.[Footnote 33] In October 2001, the Office of the Assistant
Secretary for Public Health Emergency Preparedness (originally named
the Office of Public Health Preparedness) was created in HHS to serve
as the focal point within the department for activities relating to
public health emergencies. Specifically, its mission is to direct HHS‘s
efforts to prepare for, protect against, respond to, and recover from
all acts of bioterrorism and other public health emergencies that
affect the civilian population. However, coordination across
departments remains a challenge; for example, vaccine research and
development programs conducted by NIH require careful coordination with
efforts under way at the Department of Defense to avoid duplication of
the capabilities that currently exist in the federal
laboratories.[Footnote 34]
The new Department of Homeland Security has the potential to repair
this fragmentation in certain areas and to reduce some of the overlap
and duplication in federal programs.[Footnote 35] However, some
programs that have aspects that deal with preparedness will remain at
HHS and will need to be carefully coordinated with activities of the
new department. Just as with the West Nile virus outbreak in New York
City--which initially was feared to be the result of bioterrorism--when
an unusual case of disease occurs, public health officials must
investigate to determine whether it is naturally occurring or
intentionally caused. Although the origin of the disease may not be
clear at the outset, the same public health resources are needed to
investigate, regardless of the source.
Ensure the Safety and Efficacy of Medical Products:
FDA regulates medical products with annual sales of roughly $1 trillion
that touch the lives of virtually every American. One of the agency‘s
missions is to ensure that human and animal drugs, medical devices, and
vaccines, among other products, are safe and effective. In overseeing
the safety of these products, FDA requires manufacturers of drugs and
devices to obtain approval before marketing their products. Once
products are marketed, FDA continues to monitor product safety by
collecting and analyzing hundreds of thousands of reports of adverse
events related to medical product use each year. To carry out this
broad mandate, FDA has about 9,000 employees. These include
approximately 2,100 scientists who evaluate new product applications
and about 1,100 inspectors, who ensure that the country‘s almost 95,000
FDA-regulated businesses comply with minimum safety and quality
standards.
Over the past 2 years, our work has focused on drug review and approval
issues. The speed of FDA‘s review and approval of new drugs has
improved in recent years, largely because the Prescription Drug User
Fee Act of 1992 allowed FDA to collect fees from the sponsors of new
drug and biologic applications for the purpose of hiring more medical
officers and other scientists to review the applications. Further, FDA
has increased the rigor of its biologics industry inspections. However,
FDA faces several challenges in its effort to monitor the availability,
safety, and efficacy of marketed products. These include ensuring that
the supply of childhood vaccines is adequate, that new drugs are
adequately tested on the individuals who will use them, and that the
drug approval process works efficiently without jeopardizing safety.
FDA Faces Difficulties in Regulating Production of Childhood Vaccines:
Immunizations are widely considered one of the leading public health
achievements of the 20th century. Mandatory immunization programs have
eradicated polio and smallpox in the United States and have reduced the
number of deaths from several childhood diseases, such as measles, to
near zero. A consistent supply of many different vaccines is needed to
support this effort. However, recent childhood vaccine shortages have
prompted federal authorities to recommend deferring some immunizations
and have caused states to reduce immunization requirements.
FDA‘s role in licensing and regulating the manufacture of all vaccines
sold in the United States involves monitoring the clinical trials
conducted to demonstrate that a vaccine is safe and effective and
conducting periodic inspections of vaccine production facilities. FDA
recently announced that it is examining its regulatory standards
governing the manufacturing process to determine if reform is needed.
In considering such reforms, the agency seeks to balance the need for
requirements that will ensure product safety against the need to
prevent unnecessary disruptions of vaccine supply.
Part of the problem is that relatively few vaccine manufacturers
produce routine childhood vaccines.[Footnote 36] Five of the eight
recommended childhood vaccines have only one manufacturer each. Because
long lead times are needed to produce vaccines and alter production
volumes, even short-term disruptions in manufacturers‘ production have
created significant shortages of several childhood vaccines during the
last 2 years. In our recent report on vaccine shortages, we recommended
that FDA take the following measures to help mitigate the effects of
future disruptions on vaccine supply:
* Provide guidance on compliance with good manufacturing practices. In
1997, FDA began tightening its biologics industry inspections,
including those of vaccine manufacturers. In a phased approach, FDA
grew more rigorous in assessing manufacturers‘ compliance with
requirements, which included, among other things, quality assurance,
recordkeeping, personnel qualifications, equipment cleaning, and
laboratory controls. At the same time, manufacturers reported problems
with how well FDA communicated the changes in approach and expectations
for compliance. In October 1999, FDA issued a compliance program
guidance manual for its own staff, which could have provided
manufacturers a better understanding of the scope of the inspections.
However, the manual was available only on request; 3 years after its
issuance, it is still not available on line, nor is it included in
FDA‘s annual comprehensive list of guidance documents published in the
Federal Register.
* Reconsider including certain vaccines as eligible for expedited
review. A substantial number of vaccines are in the development
pipeline, but the clinical trials that need to be conducted prior to
obtaining a license to sell vaccine products in the United States can
take years, even when the products are licensed for use in other
countries. FDA‘s expedited review process cannot be used for most
vaccines under development because the agency‘s policy to use this
process generally applies only to the approval of new products that
address an unmet medical need or represent a significant improvement in
the safety and efficacy of treatment. Childhood vaccines under
development usually involve an existing vaccine or a combination of
existing vaccines. In our view, the recent shortages indicate a
substantial unmet medical need.
FDA Could Strengthen Its Drug Oversight For Specific Populations:
FDA approves drugs for sale in the United States based on its
determination that they are safe and their clinical benefits outweigh
potential health risks. To make this decision, FDA reviews supporting
data collected from several thousand patients during a drug‘s
development. Once a drug is approved for marketing and used by
potentially hundreds of thousands of patients, however, the type, rate,
and severity of adverse events caused by the drug can be much different
from those detected during the drug‘s development. In some cases, FDA
or drug manufacturers have acted to remove drugs from the market that
have been shown to have unacceptable health risks once they were in
widespread use. Because the reaction of children and women to drugs can
differ from the adult male population, it is critical that children and
women continue to be included in clinical drug trials and that FDA
monitor the trials for safety, efficacy, and compliance with
documentation requirements.
Labeling Drugs for Children:
As directed by the Federal Food, Drug, and Cosmetic Act, FDA gives
considerable attention to manufacturers‘ labeling of drugs, as label
approval is FDA‘s chief means for ensuring that a drug‘s risks and
benefits are adequately communicated to health care professionals and
the public. The role of labeling is particularly important in treating
children with drugs that have been approved for adults. Only about 25
percent of drugs in use today have been studied and labeled for
pediatric patients.
The Congress recognized the importance of learning more about how drugs
work in children by including in the FDA Modernization Act of 1997 a
financial incentive for pharmaceutical manufacturers and drug sponsors
to conduct pediatric studies and submit the results to FDA. The so-
called ’pediatric exclusivity provision“ offered manufacturers an
additional
6 months to be a drug‘s exclusive marketer in exchange for having the
drug tested for use in children. In May 2001, we reported that
pediatric drug studies had increased substantially since the 1997
legislation‘s enactment, but many manufacturers had not made the
labeling changes detailing the appropriate dosages, risks, and benefits
for children.[Footnote 37] Such label changes provide more specific
guidance regarding the effective dose for children, additional warnings
about adverse events in children, and information on related
medications. Of the 60 drugs that had been granted marketing
exclusivity extensions, as of August 2002, only 35 of these drugs had
their labels changed to incorporate findings from the research
conducted to obtain the extensions.
The Congress addressed this problem when it reauthorized the pediatric
exclusivity provision in the Best Pharmaceuticals for Children Act,
which was signed into law in January 2002. The act created a process
whereby FDA can determine that a drug is misbranded and essentially
remove it from the market, if the drug manufacturer fails to make the
agency‘s requested labeling changes. Under the act, FDA has the
authority to ensure that drug manufacturers relabel the 25 remaining
drugs that were granted marketing extensions and any such drugs in the
future. However, the agency is still trying to reach agreement with
drug manufacturers on label changes for several of the drugs granted
marketing extensions more than a year ago.
Monitoring the Inclusion of Women in Clinical Trials:
Potential sex differences in the safety and efficacy of new drugs
underscore the importance of including women and men in all stages of
drug development and analyzing the data for these differences. For
example, in January 2001, we reported that 3 of the 10 prescription
drugs withdrawn from the U.S. market in recent years induced
potentially fatal cardiac arrhythmias in women more often than in
men.[Footnote 38]
In a July 2001 report, we found that FDA did not know how many women
were included in clinical trials for new drugs, despite regulations in
1998 and 2000 requiring that safety and efficacy data be separately
presented for men and women in applications for approving new drugs. In
conducting our own analysis, we found that women were sufficiently
represented in new drug testing, but the agency itself lacks a
management system to record and track such information or monitor
compliance with regulations for conducting clinical drug
trials.[Footnote 39] Such monitoring is needed to ensure that drug
developers are in compliance with regulations for presenting outcome
data by sex and tabulating the number of women included in clinical
trials.
When clinical trials included women, neither drug developers nor FDA
took full advantage of the data available to learn more about the
tested drug‘s effects on women and to explore potential sex differences
in dosing. FDA internal documents compiled on each new drug application
are not required to include analyses of sex differences. Our study
noted that, although about one-third of new drug applications specified
that the concentrations of the drug in the bloodstream were greater in
people who weighed less, such as women, FDA reviewers did not comment
on the lack of dose adjustments based on sex. The potential for higher
drug concentration or exposure can lead to an increased risk of adverse
events for women. While FDA has taken some promising initial steps to
address these deficiencies, it is important that the agency finalizes
the pilot programs it has under way and give sustained attention to
these management issues.
FDA Efforts to Reduce Drug Approval Safety Risks and Retain Expert
Staff Pose New Challenges:
With added resources provided through the Prescription Drug User Fee
Act of 1992 and its extensions, the speed of FDA‘s review and approval
of new drugs and biologics has increased, but the rate at which drugs
have been withdrawn from the market for safety-related issues has
increased as well. Our September 2002 study found that the share of
drugs approved from 1997 to 2000 that have since been withdrawn has
risen to 5.34 percent, up from 1.56 percent of the drugs approved from
1993 to 1996.[Footnote 40] While differences in time periods may
account in part for this change, the rise in the number of newly
approved drugs entering the U.S. market increases the probability of
individuals experiencing adverse drug events and puts additional
pressure on FDA to ensure the safety of these products.
To address this issue, the agency plans to establish a more rigorous
safety monitoring system of newly approved drugs and increase the
resources devoted to tracking adverse effects from drugs already on the
market. It plans to use about $71 million over 5 years in funds
permitted by the User Fee Act reauthorization for this purpose. The
success of FDA‘s approach will likely depend on the establishment of
best practices or other guidance for pharmaceutical and biotechnology
industries to conduct risk assessment, risk management, and
surveillance activities and the agency‘s ability to react promptly to
the information companies are providing on risks and adverse effects.
FDA‘s success will also depend on how well it faces the challenge of
recruiting and retaining its expert workforce, who are key to ensuring
the timely review of drugs and biologics. Our September 2002 study
found that, in recent years, with the exception of chemists, FDA‘s
attrition rates for employees in its drug review process are higher
than the comparable attrition rates for the same disciplines at CDC,
NIH, and similar disciplines governmentwide. Specifically, FDA‘s
studies of staff turnover found that toxicologists, pharmacologists,
pharmacokinetists, and statisticians were leaving FDA to work in
private industry and academia for higher salaries. The loss of staff is
aggravated by the time the agency needs to hire and train replacement
reviewers. FDA maintains that hiring a replacement can take up to 6
months and training a reviewer to be fully functional, from
12 to 24 months. The agency‘s currently employed reviewers have been
forgoing training and professional development to meet statutory drug
review time frames. FDA has implemented a number of initiatives to
reduce reviewer attrition, including the payment of retention bonuses
to expert staff. Such initiatives are intended to help FDA maintain the
science base it needs to review increasingly complex applications for
new drugs.
Enhance the Programs That Target the Economic Independence and Well-
being of Children and Families:
The Personal Responsibility and Work Opportunity Reconciliation Act of
1996 significantly changed federal welfare policy by ending the federal
entitlement to cash assistance and creating a new program, designed to
serve as a transition to help welfare recipients enter and remain in
the workforce. Under the new federal welfare program, which provides
states with a block grant called Temporary Assistance for Needy
Families (TANF), states were afforded wide flexibility to design
programs to help needy families find, obtain, and retain jobs. In the
years following the enactment of welfare reform, welfare caseloads
declined dramatically and the proportion of single mothers in the
workforce greatly increased, helped in part by a period of strong
economic growth (see fig. 3).
Figure 3: Single Mothers‘ Work and Welfare Status, 1987-2000:
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The transformation of the federal welfare program affected more than
just welfare caseloads; it fundamentally altered the social safety net
by refocusing federal social service programs on their role as work
supports. The 1996 welfare legislation ended automatic eligibility
previously available for cash assistance recipients for Medicaid, a
jointly funded federal and state program that provides health insurance
for eligible low-income individuals. Instead, the legislation created a
separate Medicaid eligibility category not tied to recipients‘
eligibility for TANF. To ease their entrance into the workforce,
certain families losing Medicaid as a result of employment or increased
income may be eligible for up to 1 year of transitional Medicaid
assistance. In April 2002, we testified on the role this benefit can
play in supporting transitions from welfare to work.[Footnote 41] In
1997, a new health insurance program--the State Children‘s Health
Insurance Program (SCHIP)--was established to provide coverage to
children living in low-income families whose incomes exceed the
eligibility requirements for Medicaid.
Many other programs that HHS oversees have also undergone substantial
changes at the federal, state, and local levels in recent years to help
them better support working families. The 1996 law that created TANF
also provided authority and funding for the Child Care and Development
Fund, designed to promote maximum flexibility for states to subsidize
low-income working families. The law also mandated changes to child
support enforcement and child welfare. In addition to these programs
administered by HHS, other federal agencies oversee a variety of
programs that complement the new TANF focus on moving people into
employment and enhancing family independence and well-being, as shown
in figure 4.
Figure 4: Many Programs in Separate Departments Can Enhance Family
Independence and Well-Being:
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Although caseloads were declining during the early years of welfare
reform, more recently, as the economy has weakened and recent federal
and state budget constraints have increased, caseload declines have
slowed. Some states have seen increased demand for a range of social
service programs. These changes have renewed management challenges for
HHS and its agencies--principally the Administration for Children and
Families (ACF) and CMS--to develop information and information systems
to help states administer these programs and ensure program
accountability and effectiveness. HHS‘s role is complicated by the need
to balance accountability and effectiveness while allowing states the
flexibility to tailor these programs to their individual circumstances.
Improvements in Information Systems Needed to Strengthen Programs:
The major changes in the social safety net since 1996 have led to
demands for different types of information from state and local
agencies‘ information systems. Agencies‘ information systems are no
longer used simply to determine eligibility for aid, but are also
needed to facilitate and track aid recipients‘ progress toward
employment and to assess program performance. To this end, information
is needed on recipients‘ use of a wide array of safety net services,
including TANF, childcare, and other work supports.
Despite their importance, our work on states‘ information systems shows
that state and local systems typically do not meet the changing needs
of the new welfare environment. In addition, opportunities for more
effective use of state information systems to identify erroneous
payments to individuals and reduce program costs are not being fully
realized. HHS has a role to play in the following areas:
* Facilitating states‘ efforts to improve information systems. Because
of the importance of adequate automated systems to the success of
welfare reform and HHS‘ role as the key federal agency overseeing
reform, we recommended in April 2000 that HHS establish an interagency
group with other federal agencies, including the Department of
Agriculture, which oversees food stamps, to facilitate states‘ efforts
to improve their automated information systems.[Footnote 42] Officials
from ACF, CMS, and the Department of Agriculture have since met
regularly to improve the burdensome approval process for federal
funding of systems‘ development and operations, one area we identified
as hindering states‘ efforts. However, the group‘s progress over the
last 2 years has been stymied by a lack of agreement among the agencies
about what changes should be made to the approval process.
* Sharing information to reduce program costs. In 1997, staff at ACF
initiated the Public Assistance Reporting Information System (PARIS),
an information-sharing project that can help states reduce program
costs by identifying individuals who may be erroneously receiving
benefits from more than one state simultaneously. However, only a third
of the states participate in the project, and efforts by federal
agencies to increase participation in PARIS have been minimal. ACF
devotes very few resources to PARIS; and CMS, the federal agency that
stands to reap the greatest savings from the project by identifying
duplicate Medicaid payments made by states, has made no effort to
encourage state Medicaid agencies to participate. In our 2001 report,
we recommended that the Secretary of HHS direct the Administrators of
ACF and CMS to formally support PARIS and provide guidance to
participating states.[Footnote 43] Although HHS agreed with the
recommendation‘s intent, it has not taken any substantive action,
arguing that the states were better able to determine procedures for
engaging this system.
Efforts Needed to Ensure State Accountability:
Many of HHS‘ programs for low-income families and children are funded
through grants and administered by states, localities, and other
entities. This allows administrators the flexibility to tailor their
programs to meet state and local needs, but poses challenges to federal
efforts to maintain fiscal accountability and appropriate programmatic
performance.
HHS could do more to ensure fiscal accountability among the many
players involved in the new welfare environment. For example, while a
system to develop annual state audit reports--designed to meet federal
audit needs while minimizing the burden on states--is in place, we
found that HHS does not use the reports systematically to assess
accountability among the nongovernmental contractors that state and
local TANF offices use to provide TANF services. In our June 2002
report, we recommended that HHS make better use of these audit reports
to determine contractor problems and take actions that could help
prevent and correct such problems.[Footnote 44] Fiscal accountability
for states‘ TANF programs would also be increased if HHS worked with
the states to develop more informative and transparent reporting on
unspent TANF balances. Improved reporting on these balances could
enhance congressional oversight of how federal funds are being used to
meet the goals of the program. We also recommended in an earlier report
that HHS take steps to gather data that would allow it to monitor
changes in the federal-state fiscal balance, given the dramatic changes
from the welfare entitlement program to the TANF block grant and
states‘ increased flexibility in spending decisions.[Footnote 45] HHS
agreed that such data would be essential during TANF reauthorization
but expressed reservations about its ability to collect this
information and has not acted to implement this recommendation.
HHS could also improve accountability by having performance measures
and data in place to adequately assess its progress in meeting program
goals. For example, in our March 2002 review of Head Start and Even
Start programs, we found that one of these programs‘ goals is to
increase literacy in families of children enrolled, but the programs
did not measure their progress in this area. We recommended that HHS
coordinate with the Department of Education to develop performance
outcome measures for adult education and literacy programs similar to
those developed for children‘s programs.[Footnote 46] To date, no
action has been taken to coordinate the agencies‘ efforts. In other
work, we found that data integral to efforts to improve federal
programs are not always collected. Our June 2002 review of the Adoption
and Safe Families Act showed that important information to assess the
actís impact on children in foster care is still unavailable, despite
federal and state efforts to improve it[Footnote 47] As a result, we
recommended that HHS review the feasibility of collecting data on
statesí use of provisions that aim to place children in permanent
situations as quickly as possible. We noted that more information could
help HHS better target its limited resources to key areas where the
states may need assistance in achieving the act‘s goals. ACF concurred
and reported establishing a team to review data issues.
In some instances, HHS has used performance data to better inform
resource allocation decisions. In our 2002 review of how ACF used
performance information to guide resource allocation decisions, we
found several examples of ways in which the agency strengthened the
link between program performance and budgeting.[Footnote 48] For
example, regional staffs were able to allocate training and technical
assistance funds and organize staff resources based on program
performance and needs. To improve the link between performance and
budgeting, ACF told us that it collaborated with grantees to focus its
resources on areas where grantee and federal performance goals
coincided.
Efforts Needed to Ensure Program Effectiveness:
HHS faces considerable challenges ensuring that its programs reach
eligible children with services that improve their well being, in part
because responsibility for enrollment and service delivery policies and
practices largely reside at the state level. HHS must rely on states
and localities to develop effective outreach and enrollment methods, as
well as ensure that services are available for program participants.
However, HHS can work with states to better identify program
shortcomings and correct them.
One shortcoming of HHS‘s health insurance programs is that they do not
always reach individuals who may need them. Although Medicaid and SCHIP
provide insurance coverage to millions of low-income individuals, many
eligible children are not enrolled and remain uninsured. Our September
2001 review of state Medicaid and SCHIP enrollment policies showed that
differences in enrollment practices within states affect the ability of
children to obtain and keep health insurance coverage.[Footnote 49]
Differing application requirements and processing times can lead to
delayed coverage--and in some cases, to no coverage--if families do not
return to complete additional application requirements. Well-
coordinated programs, however, can minimize the effect of such
differences and facilitate enrollment and continuity of care for
children.
Once enrolled, beneficiaries in some states may face difficulty getting
health care because service availability is largely dependent on
providers‘ willingness to participate in the programs. Since physicians
decide whether to participate in Medicaid and SCHIP partly on the basis
of the payment rates, lower Medicaid payments relative to other payers
continue to be a source of concern. Additionally, the extent to which
states set specific requirements for--and routinely monitor--access to
care for Medicaid and SCHIP beneficiaries often differs according to
their service delivery approach, such as managed care or fee-for-
service.[Footnote 50] Moreover, federal and state governments often
have limited knowledge about the extent to which enrolled individuals
are getting care from Medicaid or SCHIP. For example, under Medicaid,
states must provide children and adolescents under age 21 with
comprehensive, periodic assessments of health, developmental and
nutritional status, as well as treatment for conditions identified--
called Early and Periodic Screening, Diagnostic, and Treatment (EPSDT)
services. Despite their importance, our July 2001 review of EPSDT found
that states had unreliable and incomplete data on the extent to which
children in Medicaid are receiving these services, particularly for
children enrolled in managed care.[Footnote 51]
Federal efforts to ensure that children are receiving EPSDT services
have focused largely on changing the format and specificity of state
reports so that states can collect more reliable data on the extent to
which children are screened. While a positive step, this did not
adequately address the difficulty states face in obtaining service
information. Therefore, we recommended that CMS work with states to
develop criteria and a timetable for assessing and improving the
reporting and provision of EPSDT services. Further, although some
states may have taken effective actions to improve the delivery of
EPSDT services, CMS has not taken steps to identify them. Therefore, we
also recommended that CMS develop mechanisms for identifying and
highlighting state EPSDT service delivery practices that could be used
as models for other states.
In addition to improving its health insurance programs, HHS could also
take steps to improve the effectiveness of the child support program,
which provides income for many children who do not live with both
parents. Although total collections from parents who owe support money
have increased in recent years, collections remain low relative to the
amount owed, as shown in figure 5. Our work shows that collecting
social security numbers from all drivers‘ license applicants, as
required under federal law, and providing the information to the
responsible child support agencies can result in increased collection
from parents who owe child support. This is especially true for some
particularly difficult-to-collect payments--those that are overdue and
that are from noncustodial parents who are self-employed or who work
informally for cash. Yet, at the time of our February 2002 review, six
states did not enforce this requirement.[Footnote 52] We recommended
that the Office of Child Support Enforcement in ACF more effectively
track, and take formal steps to bring about, compliance with this
requirement. In response, HHS has since begun a review of its processes
to track agency compliance and guidance on this issue. We also found
that, despite the demonstrated effectiveness of wage withholding as an
enforcement tool, the withholding form and related guidance developed
by the Office of Child Support Enforcement make it difficult for
employers to determine whether it is proper to begin withholding wages.
This can result in instances in which employees‘ wages are
inappropriately withheld. We recommended that the form and related
guidance be improved;[Footnote 53] since then, the office has begun
drafting revisions to the form and agency guidance.
Figure 5: Child Support Owed and Collected in Fiscal Years 1996 and
2000:
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In addition to other steps to improve effectiveness of programs, HHS
could also better identify where research on its programs‘ effects is
lacking, conduct or support the needed research, and coordinate and
disseminate its research findings. In some of our recent work we have
identified specific information gaps and recommended that HHS devote
resources to increasing the information available on the effects of the
following.
* State child care quality improvement initiatives on children‘s
development. Although little evidence exists on the effectiveness of
states‘ child care quality improvement initiatives, some literature
suggests that there is a link between child care quality attributes and
children‘s developmental progress. We recommended that HHS include this
analysis in its planned multiyear evaluation of the net impact and
benefits of state child care policies.[Footnote 54] In response, HHS
expressed optimism that this type of analysis would be included in the
multistate evaluation.
* Coordinated service delivery on outcomes of TANF clients. In looking
at coordination between Workforce Investment Act and TANF services, we
found that little is known about the effect of such coordination
efforts on recipient outcomes. We recommended that HHS, either alone or
jointly with the Department of Labor, promote research in this area,
while HHS contended that designing such research may not be
feasible.[Footnote 55]
* Federal programs that provide counseling and mental health services
for children who have experienced traumatic events. The effectiveness
of federal programs that could help children who have experienced
trauma remains largely unknown. For example, in examining the long-
standing federal Crisis Counseling Assistance and Training Program
administered by the Federal Emergency Management Agency (FEMA) in
collaboration with HHS‘s Substance Abuse and Mental Health Services
Administration (SAMHSA), we found that the agencies had not conducted
an evaluation of the program‘s effectiveness. Therefore, we recommended
that the Director of FEMA work with the Administrator of SAMHSA to
evaluate the effectiveness of the program, including its assistance to
children who need mental health services as the result of a disaster.
While both agencies agreed that program evaluation is important, FEMA
did not indicate whether it intends to coordinate with SAMHSA to
conduct such an evaluation.
Improve Financial Systems, Processes, and Controls:
HHS sustained the important achievement of an unqualified, or ’clean,“
opinion on its fiscal year 2001 financial statements, making this the
third consecutive year it received such an opinion. An unqualified, or
’clean,“ opinion indicates to financial statement users that the
information included in the statements is fairly presented as of the
date of the financial statements--the last day of the fiscal year.
While this is an important milestone, a clean audit opinion does not
provide assurances about the effectiveness and efficiency of financial
systems used to prepare the statements or the quality of internal
control. The ultimate goal for effective agency financial management is
achieving accountability, which is having major systems and controls in
place to provide accurate, timely, and useful financial information to
manage the department and its component agencies on a day-to-day basis.
HHS continues to have two weaknesses in its control over financial
management that auditors have identified as significant--deemed
material weaknesses--and that impair its ability to establish sound
financial accountability.[Footnote 56] First, the department and its
component agencies have ineffective financial systems and processes
that hamper preparation of timely and reliable financial statements.
Because HHS and its agencies lack integrated financial systems capable
of automating all internal and external financial reporting needs,
their current systems are not in compliance with requirements in the
Federal Financial Management Improvement Act of 1996 (FFMIA).[Footnote
57] In addition to these system issues, HHS and its agencies have
weaknesses in oversight and the conduct of key financial processes.
Auditors have identified problems with analysis and reporting of
Medicare financial data by HHS‘s contractors and of NIH‘s and ACF‘s
grant accounting.
HHS‘s second material weakness is having ineffective controls over
Medicare information systems, particularly relating to system security.
CMS relies on information systems operations at both its central office
and Medicare contractors to administer the Medicare program. Weaknesses
in security controls for these systems increase the risk that sensitive
program and financial data processed is not being adequately protected
from unauthorized access or service disruption. Controls over these
operations are essential to ensure the integrity, confidentiality, and
reliability of critical data while reducing the risk of errors, fraud,
or other illegal acts.
For more information on financial management in relation to Medicare,
see the section entitled ’ Safeguard the Integrity of the Medicare
Program.“:
Improvements in Financial Systems And Processes Are Needed to Help
Ensure Financial Accountability:
Preparing financial statements that provide accurate and timely
information is a key aspect of accountability. In preparing its
financial statements for fiscal year 2001, the lack of integrated
financial systems made it difficult for HHS and its agencies to prepare
reliable, timely financial statements. HHS had to rely on extensive,
time-consuming manual spreadsheets and adjustments at year-end in order
to report accurate financial information. These year-end efforts helped
HHS prepare statements that were materially and fairly presented.
Nevertheless, such efforts are expensive; prone to errors, mistakes,
and inaccuracies; and cannot be sustained.
Auditors reported problems in financial systems at some of the HHS
agencies that are responsible for their own financial management
systems and accounting functions--CMS, NIH, CDC, and FDA--as well as
some that are not, such as ACF. Agencies that are not responsible for
their own financial management systems rely on the Program Support
Center‘s Division of Financial Operations (DFO) for financial systems
and accounting.[Footnote 58]
Examples of systems weaknesses reported by auditors follow:
* CMS did not have an integrated accounting system to capture
expenditures at the Medicare contractor level and thus was not in
compliance with federal system requirements under FFMIA. CMS‘s systems
did not have capabilities necessary to properly process and record data
on accounts receivable activity. As a result, CMS paid for extensive
consultant time to establish reliable balances for its financial
statement.
* System inadequacies at NIH resulted in the agency developing
financial data necessary for the financial statements through a
substantial year-end process. This included creating and posting new
balances to the correct standard general ledger accounts. Through this
process, NIH generated about 19,000 nonstandard accounting entries with
an absolute value of about $348 billion. Posting nonstandard entries of
this size and magnitude is a concern because of the increased risk that
they could bypass normal accounting controls.
* ACF and CDC both used manually intensive processes and numerous
adjusted journal entries to prepare accurate financial statements. The
process used by these agencies often resulted in the untimely reporting
of financial information supporting management decision-making.
Auditors also reported that HHS‘s ability to ensure financial
accountability was hampered by weaknesses in key financial processes,
including financial analysis and reporting and grant accounting. At
present, HHS and some of its agencies do not routinely perform analysis
and reconciliation of financial data to ensure that program dollars are
properly accounted for. Financial analysis and reconciliation is key to
ensuring accurate, timely financial information because it helps to
detect unusual variances and fluctuations in data and pinpoint problems
and inconsistencies in reporting. Auditors reported the following
problems in financial analysis and reporting at HHS:
* CMS did not use adequate analysis procedures in overseeing Medicare
contractors and the financial data that they manage. Specifically, CMS
analysis did not detect errors in the amount of debt owed to the
Medicare program as reported by contractors. Also, while some analysis
procedures were implemented by CMS to help detect unusual variances and
fluctuations, the benefit of this analysis was lost because CMS did not
consistently follow up to determine the cause of inconsistencies in
financial data.
* At NIH and ACF, insufficient analysis was done to determine if
transactions were processed and recorded properly. Both agencies had to
make significant adjustments to accounts several months after their
financial statements were provided to auditors because they had not
analyzed account balances in time, including those for program
expenditures and accounts payable. NIH and ACF also failed to conduct
timely periodic reconciliations that would have detected errors in
amounts reported for accurate grant accounting. For example, auditors
reported that NIH‘s reconciliation process failed to detect and resolve
a $193 million difference between the amounts recorded in its
supporting accounting ledger and main accounting ledger for a liability
account.
* Auditors reported many differences between the grant data that NIH
and ACF records showed as reported to the HHS component responsible for
centralized grant accounting services--the Program Support Center
(PSC)--and the data in PSC‘s Payment Management System. In one case,
ACF failed to properly review expenditures reported in the Payment
Management System before they were released for other use. Once
reviewed, the agency decreased the amount that the grantee was
authorized to receive by $58 million, and as a result, by the time the
mistake had been rectified, the grantee exceeded its authorized
expenditures by $29 million.
It is especially important for HHS and its agencies to replace existing
financial systems and eliminate their manual efforts, given OMB‘s new
financial reporting requirements. OMB now requires agencies to prepare
interim financial statements and has accelerated their year-end
financial statement deadlines. For fiscal year 2002, the deadlines have
been accelerated by about 1 month--to February 1--and OMB plans to
significantly accelerate the deadlines for fiscal year 2004 when
financial statements will have to be submitted by November 15, 2004.
Failure to meet these deadlines could undermine HHS‘s financial
management achievements, including the clean audit opinion on its
financial statements. HHS will need to provide continued management
attention and funding to maintain current financial systems and
processes while working to develop major systems and controls that
provide accurate, timely, and useful information to manage the
department and its agencies on a day-to-day basis.
Improved Controls over Medicare Information Systems Needed To Protect
Data Security Integrity:
Controls over the information systems that process Medicare program and
financial data are essential to ensure data integrity and reduce the
risks of illegal access. Auditors noted weaknesses in almost every
aspect of the controls established for Medicare information systems.
Most of the problems cited related to controls that could allow
unauthorized system access, including the ability to make software
changes, but others could also prevent service continuity in case of
disaster. Poor control over system access compromises CMS‘s ability to
ensure security over sensitive programmatic and financial data.
Although most of the problems cited by auditors were at Medicare
contractors, some were also identified in the systems maintained by
CMS‘s central office, as the following examples illustrate.
* Access to sensitive data. Medicare contractors‘ staff had access to
sensitive data, including patient information, although it was not
required for their job duties. Their access could result in
unauthorized changes to Medicare information.
* Access to Medicare facilities. At several Medicare contractors and
CMS‘s central office, auditors noted that data centers did not have
sufficient procedures for continuously monitoring staff activities
within the centers. The data centers also lacked procedures to prevent
access to sensitive areas by staff whose job duties did not require
such access.
Auditors found no evidence of an actual compromise of security as a
result of the lax controls. Nevertheless, the integrity of Medicare
program and financial data remains at risk until CMS corrects these
control weaknesses.
HHS Efforts Under Way to Correct Weaknesses in Financial Systems,
Processes, and Controls:
HHS and its agencies have started to implement corrective actions to
address weaknesses in financial systems, processes, and controls. For
example, the department implemented an internet-based Automated
Financial System (AFS) to reduce the manually intensive spreadsheets
that had been used in the past to consolidate component financial
statements. Recognizing that AFS does not fully address the financial
system weaknesses that affect its ability to quickly generate accurate
and timely financial information, HHS has developed plans to replace
various existing and antiquated financial systems with a Unified
Financial Management System (UFMS). This unified system will consist of
two major subcomponents. One subcomponent--the Healthcare Integrated
General Ledger System (HIGLAS)--will be for CMS and the Medicare
contractors that CMS has begun developing and anticipates implementing
by 2007. The other subcomponent will be for all other HHS component
agencies.
HHS and its agencies are implementing other corrective actions to
address weaknesses in financial processes and Medicare information
systems controls, as the following examples illustrate.
* Financial processes. NIH developed plans to implement numerous
additional analyses and reconciliations to ensure that financial
statement balances are accurate. CMS made significant improvements in
its financial processes including (1) updating policies for contractors
on financial matters such as debt collection and cost reporting and
(2) publishing an accounting procedures manual to help ensure that its
staff process financial transactions properly.[Footnote 59]
* Medicare information systems controls. CMS has undertaken several
actions to improve security controls. CMS revised the information
security requirements for contractors based on a synthesis of
requirements as promulgated by several federal agencies including OMB
and GAO.[Footnote 60] CMS began requiring contractors to document their
compliance with the new security requirements and has also committed to
providing funding to establish controls where gaps are identified in
contractors‘ compliance with security requirements--to the extent that
funds are available.
These and other actions that HHS and its agencies have taken to improve
financial management are positive steps towards resolving their major
management challenges in this area. Sustaining financial management
achievements while implementing the major system enhancements needed to
improve financial accountability will require long-term management
commitment and follow-through.
[End of section]
GAO Contacts:
Subject(s) covered in this report: Medicare Program Design and
Administration; Contact Person: Laura A. Dummit, Director
Health Care--Medicare Payment Issues
(202) 512-7119
dummitl@gao.gov.
Subject(s) covered in this report: Medicare Program Integrity
Safeguards; Contact Person: Leslie G. Aronovitz, Director
Health Care--Program Administration and Integrity Issues
(312) 220-7600
aronovitzl@gao.gov.
Subject(s) covered in this report: Medicaid Fiscal and Management
Oversight/Medicare and Medicaid Care Oversight; Contact Person: Kathryn
G. Allen, Director
Health Care--Medicaid and Private Health Insurance Issues
(202) 512-7118
allenk@gao.gov.
Subject(s) covered in this report: Public Health Emergency
Preparedness/Medical Product Safety and Efficacy; Contact Person: Janet
Heinrich, Director
Health Care--Public Health Issues
(202) 512-7119
heinrichj@gao.gov.
Subject(s) covered in this report: Economic Independence and Well-Being
of Children and Families; Contact Person: Cynthia M. Fagnoni, Managing
Director
Education, Workforce, and Income Security Issues
(202) 512-7215
fagnonic@gao.gov.
Subject(s) covered in this report: Financial Management Systems,
Processes, and Controls; Contact Person: Linda M. Calbom, Director
Financial Management and Assurance
(202) 512-9508
calboml@gao.gov.
[End of table]
[End of section]
Related GAO Products:
[End of section]
Medicare Program Design and Administration:
Skilled Nursing Facilities: Providers Have Responded to Medicare
Payment System by Changing Practices. GAO-02-841. Washington, D.C.:
August 23, 2002.
Medicare: Challenges Remain in Setting Payments for Medical Equipment
and Supplies and Covered Drugs. GAO-02-833T. Washington, D.C.: June 12,
2002.
Medicare Physician Payments: Spending Targets Encourage Fiscal
Discipline, Modifications Could Stabilize Fees. GAO-02-441T.
Washington, D.C.: February 14, 2002.
Medicare: Payments for Covered Outpatient Drugs Exceed Providers‘ Cost.
GAO-01-1118. Washington, D.C.: September 21, 2001.
Medicare: Higher Expected Spending and Call for New Benefit Underscore
Need for Meaningful Reform. GAO-01-539T. Washington, D.C.: March 22,
2001.
Nursing Homes: Aggregate Medicare Payments Are Adequate Despite
Bankruptcies. GAO/T-HEHS-00-192. Washington, D.C.: September 5, 2000.
Medicare Program Integrity Safeguards:
Medicare Financial Management: Significant Progress Made to Enhance
Financial Accountability. GAO-03-151R. Washington, D.C.: October 31,
2002.
Medicare+Choice: Selected Program Requirements and Other Entities‘
Standards for HMOs. GAO-03-180. Washington, D.C.: October 31, 2002.
Medicare: Recent CMS Reforms Address Carrier Scrutiny of Physicians‘
Claims for Payment. GAO-02-693. Washington, D.C.: May 28, 2002.
Medicare: Using Education and Claims Scrutiny to Minimize Physician
Billing Errors. GAO-02-778T. Washington, D.C.: May 28, 2002.
Medicare: Communications With Physicians Can Be Improved.
GAO-02-249. Washington, D.C.: February 27, 2002.
Debt Collection Improvement Act of 1996: HHS‘s Centers for Medicare &
Medicaid Services Faces Challenges to Fully Implement Certain Key
Provisions. GAO-02-307. Washington, D.C.: February 22, 2002.
Medicare+Choice Audits: Lack of Audit Follow-up Limits Usefulness. GAO-
02-33. Washington, D.C.: October 9, 2001.
Medicare: Information Systems Modernization Needs Stronger Management
and Support. GAO-01-824. Washington, D.C.: September 20, 2001.
Medicare: Comments on HHS‘ Claims Administration Contracting Reform
Proposal. GAO-01-1046R. Washington, D.C.: August 17, 2001.
Medicare Management: CMS Faces Challenges to Sustain Progress and
Address Weaknesses. GAO-01-817. Washington, D.C.: July 31, 2001.
Medicare: Successful Reform Requires Meeting Key Management Challenges.
GAO-01-1006T. Washington, D.C.: July 25, 2001.
Medicare Contracting Reform: Opportunities and Challenges in
Contracting for Claims Administration Services. GAO-01-918T.
Washington, D.C.: June 28, 2001.
Medicare Management: Current and Future Challenges. GAO-01-878T.
Washington, D.C.: June 19, 2001.
Medicare Reform: Modernization Requires Comprehensive Program View.
GAO-01-862T. Washington, D.C.: June 14, 2001.
Regulatory Issues for Medicare Providers. GAO-01-802R. Washington,
D.C.: June 11, 2001.
Medicare: Opportunities and Challenges in Contracting for Program
Safeguards. GAO-01-616. Washington, D.C.: May 18, 2001.
Medicare Fraud and Abuse: DOJ Has Improved Oversight of False Claims
Act Guidance. GAO-01-506. Washington, D.C.: March 30, 2001.
Major Management Challenges and Program Risks: Department of Health and
Human Services. GAO-01-247. Washington, D.C.: January 2001.
High-Risk Series: An Update. GAO-01-263. Washington, D.C.: January
2001.
Medicare: HCFA Could Do More to Identify and Collect Overpayments.
HEHS/AIMD-00-304. Washington, D.C.: September 7, 2000.
Medicaid Fiscal and Management Oversight:
Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver
Projects Raise Concerns. GAO-02-817. Washington, D.C.: July 12, 2002.
Medicaid: HCFA Reversed Its Position and Approved Additional State
Financing Schemes. GAO-02-147. Washington, D.C.: October 30, 2001.
Medicaid: State Financing Schemes Again Drive Up Federal Payments. GAO/
T-HEHS-00-193. Washington, D.C.: September 6, 2000.
Medicare and Medicaid: Implementing State Demonstrations for Dual
Eligibles Has Proven Challenging. GAO/HEHS-00-94. Washington, D.C.:
August 18, 2000.
Medicaid in Schools: Poor Oversight and Improper Payments Compromise
Potential Benefit. GAO/T-HEHS/OSI-00-87. Washington, D.C.: April 5,
2000.
Medicaid in Schools: Improper Payments Demand Improvements in HCFA
Oversight. GAO/HEHS/OSI-00-69. Washington, D.C.: April 5, 2000.
Medicare and Medicaid Care Oversight:
Skilled Nursing Facilities: Providers Have Responded to Medicare
Payment System by Changing Practices. GAO-02-841. Washington, D.C.:
August 23, 2002.
Medicare Home Health Agencies: Weaknesses in Federal and State
Oversight Mask Potential Quality Issues. GAO-02-382. Washington, D.C.:
July 19, 2002.
Nursing Homes: Quality of Care More Related to Staffing than Spending.
GAO-02-431R. Washington, D.C.: June 13, 2002.
Nursing Homes: More Can Be Done to Protect Residents from Abuse. GAO-
02-312. Washington, D.C.: March 1, 2002.
Nursing Homes: Federal Efforts to Monitor Resident Assessment Data
Should Complement State Activities. GAO-02-279. Washington, D.C.:
February 15, 2002.
Nursing Homes: Sustained Efforts Are Essential to Realize Potential of
the Quality Initiatives. GAO-HEHS-00-197. Washington, D.C.: September
28, 2000.
Medicare Quality of Care: Oversight of Kidney Dialysis Facilities Needs
Improvement. GAO-HEHS-00-114. Washington, D.C.: June 23, 2000.
Public Health Emergency Preparedness:
Homeland Security: CDC‘s Oversight of the Select Agent Program. GAO-03-
315R. Washington, D.C.: November 22, 2002.
Public Health: Maintaining an Adequate Blood Supply Is Key to Emergency
Preparedness. GAO-02-1095T. Washington, D.C.: September 10, 2002.
Public Health: Blood Supply Generally Adequate Despite New Donor
Restrictions. GAO-02-754. Washington, D.C.: July 22, 2002.
Homeland Security: New Department Could Improve Coordination but
Transferring Control of Certain Public Health Programs Raises Concerns.
GAO-02-954T. Washington, D.C.: July 16, 2002.
Homeland Security: New Department Could Improve Biomedical R&D
Coordination but May Disrupt Dual-Purpose Efforts. GAO-02-924T.
Washington, D.C.: July 9, 2002.
Homeland Security: New Department Could Improve Coordination but May
Complicate Priority Setting. GAO-02-893T. Washington, D.C.: June 28,
2002.
Homeland Security: New Department Could Improve Coordination but May
Complicate Public Health Priority Setting. GAO-02-883T. Washington,
D.C.: June 25, 2002.
Bioterrorism: The Centers for Disease Control and Prevention‘s Role in
Public Health Protection. GAO-02-235T. Washington, D.C.: November 15,
2001.
Bioterrorism: Review of Public Health Preparedness Programs.
GAO-02-149T. Washington, D.C.: October 10, 2001.
Bioterrorism: Public Health and Medical Preparedness. GAO-02-141T.
Washington, D.C.: October 9, 2001.
Bioterrorism: Coordination and Preparedness. GAO-02-129T. Washington,
D.C.: October 5, 2001.
Bioterrorism: Federal Research and Preparedness Activities. GAO-01-
915. Washington, D.C.: September 28, 2001.
West Nile Virus Outbreak: Lessons for Public Health Preparedness. GAO/
HEHS-00-180. Washington, D.C.: September 11, 2000.
Medical Product Safety and Efficacy:
Food and Drug Administration: Effect of User Fees on Drug Approval
Times, Withdrawals, and Other Agency Activities. GAO-02-958.
Washington, D.C.: September 17, 2002.
Childhood Vaccines: Ensuring an Adequate Supply Poses Continuing
Challenges. GAO-02-987. Washington, D.C.: September 13, 2002.
Women‘s Health: Women Sufficiently Represented in New Drug Testing, but
FDA Oversight Needs Improvement. GAO-01-754. Washington, D.C.: July 6,
2001.
Pediatric Drug Research: Substantial Increase in Studies of Drugs for
Children, But Some Challenges Remain. GAO-01-705T. Washington, D.C.:
May 8, 2001.
Drug Safety: Most Drugs Withdrawn in Recent Years Had Greater Health
Risks for Women. GAO-01-286R. Washington, D.C.: January 19, 2001.
Economic Independence and Well-being of Children and Families:
Medicaid and SCHIP: States Use Varying Approaches to Monitor Children‘s
Access to Care. GAO-03-222. Washington, D.C.: January 14, 2003,
available February 2003.
Mental Health Services: Effectiveness of Insurance Coverage and Federal
Programs for Children Who Have Experienced Trauma Largely Unknown. GAO-
02-813. Washington, D.C.: August 22, 2002.
Human Services: Federal Approval and Funding Processes for States‘
Information Systems. GAO-02-347T. Washington, D.C.: July 9, 2002.
Welfare Reform: Federal Oversight of State and Local Contracting Can Be
Strengthened. GAO-02-661. Washington, D.C.: June 11, 2002.
Welfare Reform: Interim Report on Potential Ways to Strengthen Federal
Oversight of State and Local Contracting. GAO-02-245. Washington, D.C.:
April 23, 2002.
Medicaid: Transitional Coverage Can Help Families Move from Welfare to
Work. GAO-02-679T. Washington, D.C.: April 23, 2002.
Welfare Reform: States Provide TANF-Funded Services to Many Low-Income
Families Who Do Not Receive Cash Assistance. GAO-02-564. Washington,
D.C.: April 5, 2002.
Head Start and Even Start: Greater Collaboration Needed on Measures of
Adult Education and Literacy. GAO-02-348. Washington, D.C.: March 29,
2002.
Child Support Enforcement: Clear Guidance Would Help Ensure Proper
Access to Information and Use of Wage Withholding by Private Firms.
GAO-02-349. Washington, D.C.: March 26, 2002.
Welfare Reform: States Are Using TANF Flexibility to Adapt Work
Requirements and Time Limits to Meet State and Local Needs.
GAO-02-501T. Washington, D.C.: March 7, 2002.
Child Support Enforcement: Most States Collect Drivers‘ SSN and Use
Them to Enforce Child Support. GAO-02-239. Washington, D.C.: February
15, 2002.
Human Services Integration: Results of a GAO Cosponsored Conference on
Modernizing Information Systems. GAO-02-121. Washington, D.C.: January
31, 2002.
Welfare Reform: More Coordinated Federal Effort Could Help States and
Localities Move TANF Recipients with Impairments Toward Employment.
GAO-02-37. Washington, D.C.: October 31, 2001.
Medicaid and SCHIP: States‘ Enrollment and Payment Policies Can Affect
Children‘s Access to Care. GAO-01-883. Washington, D.C.: September 10,
2001.
Public Assistance: PARIS Project Can Help States Reduce Improper
Benefit Payments GAO-01-935. Washington, D.C.: September 6, 2001.
Welfare Reform: Challenges in Maintaining a Federal-State Fiscal
Partnership. GAO-01-828. Washington, D.C.: August 10, 2001.
Medicaid: Stronger Efforts Needed to Ensure Children‘s Access to Health
Screening Services. GAO-01-749. Washington, D.C.: July 13, 2001.
Health and Human Services: Status of Achieving Key Outcomes and
Addressing Major Management Challenges. GAO-01-748. Washington, D.C.:
June 15, 2001.
Welfare Reform: Moving Hard-to-Employ Recipients into the Workforce.
GAO-01-368. Washington, D.C.: March 15, 2001.
Welfare Reform: Progress in Meeting Work-Focused TANF Goals.
GAO-01-522T. Washington, D.C.: March 15, 2001.
Welfare Reform: Data Available to Assess TANF‘s Progress. GAO-01-298.
Washington, D.C.: February 28, 2001.
Financial Management Systems, Processes, and Controls:
Medicare Financial Management: Significant Progress Made to Enhance
Financial Accountability. GAO-03-151R. Washington, D.C.: October 31,
2002.
Medicaid Financial Management: Better Oversight of State Claims for
Federal Reimbursement Needed. GAO-02-300. Washington, D.C.:
February 28, 2002.
[End of section]
Performance and Accountability and High-Risk Series:
Major Management Challenges and Program Risks: A Governmentwide
Perspective. GAO-03-95.
Major Management Challenges and Program Risks: Department of
Agriculture. GAO-03-96.
Major Management Challenges and Program Risks: Department of Commerce.
GAO-03-97.
Major Management Challenges and Program Risks: Department of Defense.
GAO-03-98.
Major Management Challenges and Program Risks: Department of Education.
GAO-03-99.
Major Management Challenges and Program Risks: Department of Energy.
GAO-03-100.
Major Management Challenges and Program Risks: Department of Health and
Human Services. GAO-03-101.
Major Management Challenges and Program Risks: Department of Homeland
Security. GAO-03-102.
Major Management Challenges and Program Risks: Department of Housing
and Urban Development. GAO-03-103.
Major Management Challenges and Program Risks: Department of the
Interior. GAO-03-104.
Major Management Challenges and Program Risks: Department of Justice.
GAO-03-105.
Major Management Challenges and Program Risks: Department of Labor.
GAO-03-106.
Major Management Challenges and Program Risks: Department of State.
GAO-03-107.
Major Management Challenges and Program Risks: Department of
Transportation. GAO-03-108.
Major Management Challenges and Program Risks: Department of the
Treasury. GAO-03-109.
Major Management Challenges and Program Risks: Department of Veterans
Affairs. GAO-03-110.
Major Management Challenges and Program Risks: U.S. Agency for
International Development. GAO-03-111.
Major Management Challenges and Program Risks: Environmental Protection
Agency. GAO-03-112.
Major Management Challenges and Program Risks: Federal Emergency
Management Agency. GAO-03-113.
Major Management Challenges and Program Risks: National Aeronautics and
Space Administration. GAO-03-114.
Major Management Challenges and Program Risks: Office of Personnel
Management. GAO-03-115.
Major Management Challenges and Program Risks: Small Business
Administration. GAO-03-116.
Major Management Challenges and Program Risks: Social Security
Administration. GAO-03-117.
Major Management Challenges and Program Risks: U.S. Postal Service.
GAO-03-118.
High-Risk Series: An Update. GAO-03-119.
High-Risk Series: Strategic Human Capital Management. GAO-03-120.
High-Risk Series: Protecting Information Systems Supporting the Federal
Government and the Nation‘s Critical Infrastructures.
GAO-03-121.
High-Risk Series: Federal Real Property. GAO-03-122.
FOOTNOTES
[1] Until its name was officially changed July 1, 2001, CMS was called
the Health Care Financing Administration (HCFA).
[2] U.S. General Accounting Office, Nursing Homes: Aggregate Medicare
Payments Are Adequate Despite Bankruptcies, GAO/T-HEHS-00-192
(Washington, D.C.: Sept. 5, 2000).
[3] U.S. General Accounting Office, Skilled Nursing Facilities:
Providers Have Responded to Medicare Payment System by Changing
Practices, GAO-02-841 (Washington, D.C.: Aug. 23, 2002).
[4] U.S. General Accounting Office, Medicare Home Health: Prospective
Payment System Will Need Refinement as Data Become Available, GAO-HEHS-
00-9 (Washington, D.C.: Apr. 7, 2000) and U.S. General Accounting
Office, Medicare Home Health Care: Prospective Payment System Could
Reverse Recent Declines in Spending, GAO-HEHS-00-176 (Washington, D.C.:
Sept. 8, 2000).
[5] U.S. General Accounting Office, Medicare Physician Payments:
Spending Targets Encourage Fiscal Discipline, Modifications Could
Stabilize Fees, GAO-02-441T (Washington, D.C.: Feb. 14, 2002).
[6] U.S. General Accounting Office, Medicare: Challenges Remain in
Setting Payments for Medical Equipment and Supplies and Covered Drugs,
GAO-02-833T (Washington, D.C.: June 12, 2002).
[7] U.S. General Accounting Office, Medicare: Comparative Information
on Medicare and VA Patients, Services, and Payment Rates for Home
Oxygen, GAO/HEHS-97-151R (Washington, D.C.: June 6, 1997).
[8] U.S. General Accounting Office, Medicare: Payments for Covered
Outpatient Drugs Exceed Providers‘ Cost, GAO-01-1118 (Washington, D.C.:
Sept. 21, 2001).
[9] U.S. General Accounting Office, Medicare Payments: Use of Revised
’Inherent Reasonableness“ Process Generally Appropriate, GAO/HEHS-00-
79 (Washington, D.C.: July 5, 2000).
[10] VA negotiates prices for and purchases medical equipment,
supplies, and drugs through the Federal Supply Schedule. Federal Supply
Schedule prices are available to any federal agency that directly
procures pharmaceuticals or medical equipment and supplies.
[11] U.S. General Accounting Office, Medicare Management: CMS Faces
Challenges to Sustain Progress and Address Weaknesses, GAO-01-817
(Washington, D.C.: July 31, 2001).
[12] U.S. General Accounting Office, Medicare: Communications With
Physicians Can Be Improved, GAO-02-249 (Washington, D.C.: Feb. 27,
2002).
[13] U.S. General Accounting Office, Medicare: Recent CMS Reforms
Address Carrier Scrutiny of Physicians‘ Claims for Payment, GAO-02-693
(Washington, D.C.: May 28, 2002).
[14] U.S. General Accounting Office, Medicare+Choice Audits: Lack of
Audit Follow-up Limits Usefulness, GAO-02-33 (Washington, D.C.: Oct. 9,
2001).
[15] U.S. General Accounting Office, Major Management Challenges and
Program Risks, Department of Health and Human Services, GAO-01-247
(Washington, D.C.: January 2001).
[16] U.S. General Accounting Office, Medicare: HCFA Could Do More to
Identify and Collect Overpayments, HEHS/AIMD-00-304 (Washington, D.C.:
Sept. 7, 2000).
[17] U.S. General Accounting Office, Debt Collection Improvement Act of
1996: HHS‘s Centers for Medicare & Medicaid Services Faces Challenges
to Fully Implement Certain Key Provisions, GAO-02-307 (Washington,
D.C.: Feb. 22, 2002).
[18] U.S. General Accounting Office, Medicare: Information Systems
Modernization Needs Stronger Management and Support, GAO-01-824
(Washington, D.C.: Sept. 20, 2001).
[19] U.S. General Accounting Office, Medicare Contracting Reform:
Opportunities and Challenges in Contracting for Claims Administration
Services, GAO-01-918T (Washington, D.C.: June 28, 2001). Also see U.S.
General Accounting Office, Medicare: Comments on HHS‘ Claims
Administration Contracting Reform Proposal, GAO-01-1046R (Washington,
D.C.: Aug. 17, 2001) and U.S. General Accounting Office, Medicare
Contractors: Despite Its Efforts, HCFA Cannot Ensure Their
Effectiveness or Integrity, GAO/HEHS-99-115 (Washington, D.C.: July 14,
1999).
[20] U.S. General Accounting Office, High-Risk Series: An Update, GAO-
01-263 (Washington, D.C.: January 2001).
[21] Mandatory services include inpatient and outpatient hospital care;
physician services; nursing home care; lab and x-ray services;
immunizations, and other early and periodic screening, diagnostic, and
treatment services for children; family planning services; health
center and rural health clinic services; and nurse midwife and nurse
practitioner services. Services that are optional include outpatient
prescription drugs, institutional care for persons with mental
retardation, personal care, and dental and vision care for adults.
[22] U.S. General Accounting Office, Medicaid: State Financing Schemes
Again Drive Up Federal Payments, GAO/T-HEHS-00-193 (Washington, D.C.:
Sept. 6, 2000).
[23] U.S. General Accounting Office, Medicaid and SCHIP: Recent HHS
Approvals of Demonstration Waiver Projects Raise Concerns, GAO-02-817
(Washington, D.C.: July 12, 2002).
[24] U.S. General Accounting Office, Medicaid Financial Management:
Better Oversight of State Claims for Federal Reimbursement Needed, GAO-
02-300 (Washington, D.C.: Feb. 28, 2002), and U.S. General Accounting
Office, Medicaid: State Efforts to Control Improper Payments Vary, GAO-
01-662 (Washington, D.C.: June 7, 2001).
[25] U.S. General Accounting Office, Medicaid in Schools: Improper
Payments Demand Improvement in HCFA Oversight, GAO/HEHS/OSI-00-69
(Washington, D.C.: Apr. 5, 2000).
[26] This fiscal year 2001 figure updates the findings in our April
2000 report.
[27] States must abide by the cost allocation principles described in
OMB Circular A-87, which requires, among other things, that costs be
’necessary and reasonable“ and ’allocable“ to the Medicaid program.
[28] U.S. General Accounting Office, Nursing Homes: Sustained Efforts
Are Essential to Realize Potential of the Quality Initiatives, GAO/
HEHS-00-197 (Washington, D.C.: Sept. 28, 2000); U.S. General Accounting
Office, Medicare Home Health Agencies: Weaknesses in Federal and State
Oversight Mask Potential Quality Issues, GAO-02-382 (Washington, D.C.:
July 19, 2002); and U.S. General Accounting Office, Medicare Quality of
Care: Oversight of Kidney Dialysis Facilities Needs Improvement, GAO/
HEHS-00-114 (Washington, D.C.: June 23, 2000).
[29] U.S. General Accounting Office, West Nile Virus Outbreak: Lessons
for Public Health Preparedness, GAO/HEHS-00-180 (Washington, D.C.:
Sept. 11, 2000).
[30] U.S. General Accounting Office, Public Health: Maintaining an
Adequate Blood Supply Is Key to Emergency Preparedness, GAO-02-1095T
(Washington, D.C.: Sept. 10, 2002).
[31] U.S. General Accounting Office, Public Health: Blood Supply
Generally Adequate Despite New Donor Restrictions, GAO-02-754
(Washington, D.C.: July 22, 2002).
[32] U.S. General Accounting Office, Homeland Security: New Department
Could Improve Coordination but May Complicate Priority Setting, GAO-02-
893T (Washington, D.C.: June 28, 2002).
[33] U.S. General Accounting Office, Bioterrorism: Federal Research and
Preparedness Activities, GAO-01-915 (Washington, D.C.: Sept. 28, 2001).
[34] U.S. General Accounting Office, Homeland Security: New Department
Could Improve Biomedical R&D Coordination but May Disrupt Dual-Purpose
Efforts, GAO-02-924T (Washington, D.C.: July 9, 2002).
[35] U.S. General Accounting Office, Homeland Security: New Department
Could Improve Coordination but May Complicate Priority Setting, GAO-02-
893T (Washington, D.C.: June 28, 2002).
[36] U.S. General Accounting Office, Childhood Vaccines: Ensuring an
Adequate Supply Poses Continuing Challenges, GAO-02-987 (Washington,
D.C.: Sept. 13, 2002).
[37] U.S. General Accounting Office, Pediatric Drug Research:
Substantial Increase in Studies of Drugs for Children, But Some
Challenges Remain, GAO-01-705T (Washington, D.C.: May 8, 2001).
[38] U.S. General Accounting Office, Drug Safety: Most Drugs Withdrawn
in Recent Years Had Greater Health Risks for Women, GAO-01-286R
(Washington, D.C.: Jan. 19, 2001).
[39] U.S. General Accounting Office, Women‘s Health: Women Sufficiently
Represented in New Drug Testing, but FDA Oversight Needs Improvement,
GAO-01-754 (Washington, D.C.: July 6, 2001).
[40] U.S. General Accounting Office, Food and Drug Administration:
Effect of User Fees on Drug Approval Times, Withdrawals, and Other
Agency Activities, GAO-02-958 (Washington, D.C.: Sept. 17, 2002).
[41] See U.S. General Accounting Office, Medicaid: Transitional
Coverage Can Help Families Move from Welfare to Work, GAO-02-679T
(Washington, D.C.: Apr. 23, 2002). The transitional Medicaid provision,
which was due to expire in September 2002, has been temporarily
extended to allow eligible individuals to receive this benefit through
March 31, 2003.
[42] U.S. General Accounting Office, Welfare Reform: Improving State
Automated Systems Requires Coordinated Federal Effort, GAO/HEHS-00-48
(Washington, D.C.: Apr. 27, 2000).
[43] See U.S. General Accounting Office, Public Assistance: PARIS
Project Can Help States Reduce Improper Benefit Payments, GAO-01-935
(Washington, D.C.: Sept. 6, 2001).
[44] U.S. General Accounting Office, Welfare Reform: Federal Oversight
of State and Local Contracting Can Be Strengthened, GAO-02-661
(Washington, D.C.: June 11, 2002).
[45] U.S. General Accounting Office, Welfare Reform: Challenges
Maintaining a Federal-State Fiscal Partnership, GAO-01-828
(Washington, D.C.: Aug. 10, 2001).
[46] U.S. General Accounting Office, Head Start and Even Start: Greater
Collaboration Needed on Measures of Adult Education and Literacy, GAO-
02-348, (Washington, D.C.:
Mar. 29, 2002).
[47] U.S. General Accounting Office, Foster Care: Recent Legislation
Helps States Focus on Finding Permanent Homes for Children, but Long-
Standing Barriers Remain, GAO-02-585 (Washington, D.C.: June 28, 2002).
[48] U.S. General Accounting Office, Managing for Results: ACF‘s Effort
to Strengthen the Link Between Resources and Results, GAO-03-09
(Washington, D.C.: December 2002).
[49] U.S. General Accounting Office, Medicaid and SCHIP: States‘
Enrollment and Payment Policies Can Affect Children‘s Access to Care,
GAO-01-883 (Washington, D.C.: Sept. 10, 2001).
[50] See U.S. General Accounting Office, Medicaid and SCHIP: States Use
Varying Approaches to Monitor Children‘s Access to Care, GAO-03-222
(Washington, D.C.:
Jan. 14, 2003), available February 2003.
[51] U.S. General Accounting Office, Medicaid: Stronger Efforts Needed
to Ensure Children‘s Access to Health Screening Services, GAO-01-749
(Washington, D.C.: July 13, 2001).
[52] U.S. General Accounting Office, Child Support Enforcement: Most
States Collect Drivers‘ SSNs and Use Them to Enforce Child Support,
GAO-02-239 (Washington, D.C.: Feb. 15, 2002).
[53] U.S. General Accounting Office, Child Support Enforcement: Clear
Guidance Would Help Ensure Proper Access to Information and Use of Wage
Withholding by Private Firms, GAO-02-349 (Washington, D.C.: Mar. 26,
2002).
[54] U.S. General Accounting Office, Child Care: States Have Undertaken
a Variety of Quality Improvement Initiatives, but More Evaluations of
Effectiveness Are Needed, GAO-02-897 (Washington, D.C.: Sept. 6, 2002).
[55] U.S. General Accounting Office, Workforce Investment Act: States
and Localities Increasingly Coordinate Services for TANF Clients, but
Better Information Needed on Effective Approaches , GAO-02-696
(Washington, D.C.: July 3, 2002).
[56] A material weakness is a condition in which the design or
operation of one or more of the internal control components does not
reduce, to a relatively low level, the risk that errors or
irregularities in amounts that would be material to the financial
statements may occur and not be detected promptly by employees in the
normal course of performing their duties.
[57] FFMIA of 1996, Public Law 104-208, requires that the 24 major
departments and agencies named in the Chief Financial Officers Act
implement and maintain financial management systems that substantially
comply with (1) federal financial management systems requirements, (2)
applicable federal accounting standards, and (3) the United States
Government Standard General Ledger at the transaction level. Except for
the federal financial management systems requirements, HHS is in
compliance with the act‘s provisions.
[58] DFO provides financial management services for ACF, HRSA, SAMSHA,
the Indian Health Service and the Administration on Aging.
[59] U.S. General Accounting Office, Medicare Financial Management:
Significant Progress Made to Enhance Financial Accountability, GAO-03-
151R (Washington, D.C.: Oct. 31, 2002).
[60] The core requirements are based on a syntheses of controls as
included in OMB Circular A-130, PDD 63, General Accounting Office
Federal Information System Controls Audit Manual, Internal Revenue
Service Publication 1075, the Health Insurance Portability and
Accountability Act of 1996, and new CMS requirements for systems
architecture and security handbook.
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