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entitled 'Aging Issues: Related GAO Products in Calendar Years 2001 and 
2002' which was released on November 21, 2003.

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November 21, 2003:

The Honorable Larry E. Craig:


Special Committee on Aging:

United States Senate:

Subject: Aging Issues: Related GAO Products in Calendar Years 2001 and 

Dear Mr. Chairman:

This report responds to the Committee's request for a compilation of 
our calendar years 2001 and 2002 products pertaining to older Americans 
and their families.

We are in the midst of one of the most profound changes in American 
history--America's population, estimated at over 288 million in 
2002,[Footnote 1] is growing older at a rapid pace. The number of 
Americans age 65 and older, estimated at 35 million in 2000, is 
expected to grow to 70 million by 2030 and to about 82 million in 2050, 
according to Bureau of the Census projections (fig. 1). Census 
projections also indicate that the fastest growing segment within the 
older population is individuals age 85 and older. This group, estimated 
at about 4 million in 2000, is expected to grow to 19 million by 2050.

The nation's aging population promises to have major policy and 
budgetary implications for the federal government. While there will be 
large increases in the number of older people who will be active and in 
very good health, there will also be growing numbers of older Americans 
requiring increased medical and long-term care. Health care has been 
one of the most rapidly rising elements of federal spending, growing at 
an average annual rate twice that of the rest of the federal budget 
over the last 10 years. Of particular concern is the growth in Medicare 
expenditures, estimated to total about $264 billion in 2002. Without 
changes, Medicare is expected to nearly double its share of the economy 
by 2030, crowding out other spending and economic activity of value.

Figure 1: Total Number of Persons Age 65 or Older, by Age Group, 1900 
to 2050 (in millions):

[See PDF for image]

[End of figure]

In addition, Social Security has long served as the foundation of the 
nation's retirement income system. About 39 million people receive 
Social Security retirement and survivor benefits. For one-fifth of the 
elderly, Social Security is the sole source of income. The declining 
ratio of workers to retirees will have fundamental implications for 
Social Security and the economy. Although Social Security payroll tax 
revenues currently exceed expenditures, projections suggest that 
beginning in 2017, spending will exceed revenues by growing proportions 
and that in 2041, the Social Security Trust Fund will be depleted. 
Addressing the needs of the elderly will likely become increasingly 
challenging and require sufficient knowledge about the issues facing 
this population.

One of our goals is to provide continued support of congressional and 
federal efforts relating to the health needs of an aging and diverse 
population and a secure retirement for older Americans. In striving to 
meet this goal, our work on aging-related programs and issues continues 
to reflect the broad range and importance of federal programs for older 
Americans. Our work during calendar years 2001 and 2002 primarily 
covered issues concerning health, income security, and veterans. In the 
compilation of work you requested, we describe two types of products 
that relate to older Americans:

* reports and correspondences (66 in total), and:

* congressional testimonies (36 in total).

The product summaries included were prepared shortly after the products 
were issued and, therefore, reflect the results of our work at that 
time. The issues addressed by these products are presented in table 1 
and the summaries themselves are in enclosure I.

Table 1: GAO Products Relating to the Elderly in Calendar Years 2001 
and 2002:

Elderly issues: 

Elderly issues: Health issues; Reports and correspondence: 35; 
Testimonies: 21.

Elderly issues: Income security issues; Reports and correspondence: 
15; Testimonies: 4.

Elderly issues: Veterans/DOD issues; Reports and correspondence: 13; 
Testimonies: 9.

Elderly issues: Other issues; Reports and correspondence: 3; 
Testimonies: 2.

Elderly issues: Total; Reports and correspondence: 66; Testimonies: 36.

Source: GAO.

[End of table]

If you or your staff have any questions about the information in this 
report, please contact me at (202) 512-7215 or Other 
key contributors to this report were Shelia D. Drake and Gwendolyn M. 

Sincerely yours,

Signed by: 

Barbara D. Bovbjerg:

Director, Education, Workforce, and Income Security Issues:


Reports and Correspondence: Calendar Years 2001 and 2002, Issues 
Affecting Older Americans:

Health Issues:

Income Security Issues:

Veterans/DOD Issues:

Other Issues:

Testimonies: Calendar Years 2001 and 2002, Issues Affecting Older 

Health Issues:

Income Security Issues:

Veterans/DOD Issues:

Other Issues:

Figure 1: Total Number of Persons Age 65 or Older,

by Age Group, 1900 to 2050, in Millions:

Table 1: GAO Products Relating to the Elderly in Calendar Years 2001 
and 2002:


During calendar years 2001 and 2002, GAO issued 102 reports on issues 
affecting older Americans. Of these, 56 were on health issues, 19 were 
on income security issues, 22 were on veterans' issues, and 5 were 
other issues related to older Americans.

Reports and Correspondence: Calendar Years 2001 and 2002, Issues 
Affecting Older Americans.


Federal Employees' Health Plans: Premium Growth and OPM's Role in 
Negotiating Benefits (GAO-03-236, 31-DEC-02):

Federal employees' health insurance premiums have increased at double-
digit rates for 3 consecutive years. GAO was asked to examine how the 
Federal Employees Health Benefits Program's (FEHBP) premium trends 
compared to those of other large purchasers of employer-sponsored 
health insurance, factors contributing to FEHBP's premium growth, and 
steps the Office of Personnel Management (OPM) takes to help contain 
premium increases compared to those of other large purchasers. GAO 
compared FEHBP to the California Public Employees' Retirement System 
(CalPERS), General Motors, and a large private employer purchasing 
coalition in California as well as data from employee benefit surveys.

FEHBP's premium trends from 1991 to 2002 were generally in line with 
other large purchasers--increasing on average about 6 percent annually. 
OPM announced that average FEHBP premiums would increase about 11 
percent in 2003, 2 percentage points less than in 2002 and less than 
some other large purchasers are expecting. FEHBP enrollees would likely 
have paid even higher premiums in recent years if not for modest 
benefit reductions and enrollees who shifted to less expensive plans. 
Increasing premiums are related to the plans' higher claims 
expenditures. For FEHBP's three largest plans, about 70 percent of 
increased claims expenditures from 1998 to 2000 was due to prescription 
drugs and hospital outpatient care. Most of the increase in drug 
expenditures was due to higher plan payments per drug, while the 
increase in hospital outpatient care expenditures was due to higher 
utilization. OPM relies on enrollee choice, competition among plans, 
and annual negotiations with participating plans to moderate premium 
increases. Whereas some large purchasers require plans to offer 
standardized benefit packages and reject bids from plans not offering 
satisfactory premiums, OPM contracts with all plans willing to meet 
minimum standards and allows plans to vary benefits, maximizing 
enrollees' choices. Each year, OPM suggests cost containment strategies 
for plans to consider and relies on participating plans to propose 
benefits and premiums that will be competitive with other participating 
plans. OPM generally concurred with our findings.

Fruits and Vegetables: Enhanced Federal Efforts to Increase Consumption 
Could Yield Health Benefits for Americans (GAO-02-657, 25-JUL-02):

Fruits and vegetables are a critical source of nutrients and other 
substances that help protect against chronic diseases. Yet fewer than 
one in four Americans consumes the 5 to 9 daily servings of fruits and 
vegetables recommended by the federal Dietary Guidelines for Americans. 
Fruit and vegetable consumption by the general public as a whole has 
increased by about half a serving under key federal nutritional policy, 
guidance, and educational programs, as shown by the national 
consumption data compiled by federal agencies. But key federal food 
assistance programs have had mixed effects on fruit and vegetables 
consumption, as shown by national consumption data. However, increasing 
fruit and vegetable consumption is not a primary focus of these 
programs, which are intended to reduce hunger and support agriculture. 
A number of actions the federal government could take to encourage more 
Americans to consume the recommended daily servings have been 
identified. These include expanding nutrition education efforts, such 
as the 5 A Day Program; modifying the special supplemental Nutrition 
Program for Women, Infants, and Children to allow participants to 
choose from more of those fruits and vegetables; expanding the use of 
the Department of Defense Fresh Fruit and Vegetable Project in schools; 
and expanding farmers' market programs for food assistance participants 
and the elderly. These options could require additional resources or 
redirecting resources from other programs.

Health Care: Adequacy of Pharmacy, Laboratory, and Radiology Workforce 
Supply Difficult to Determine (GAO-02-137R, 10-OCT-01):

Concerns have been growing about the supply of health care workers and 
the future needs of an aging population. Shortages of nurses and nurse 
aides, the two largest categories of health care workers, are of 
particular concern. Although the number of pharmacists has grown during 
the past decade, the increasing demand for pharmacy services is 
outpacing the growth in supply, according to the Department of Health 
and Human Services. Provider and professional associations have 
reported high vacancy rates and a decline in new entrants to the 
laboratory and radiologic fields. However, employment and earnings data 
for laboratory and radiologic technologists and technicians do not 
indicate a clear picture about the current balance of supply and demand 
for these workers. Demographic changes, technological advances, and 
management decisions on how staff and technology are used will affect 
the future demand for health care workers.

Health Products for Seniors: 'Anti-Aging' Products Pose Potential for 
Physical and Economic Harm (GAO-01-1129, 07-SEP-01):

Evidence from the medical literature shows that a variety of frequently 
used dietary supplements marketed as anti-aging therapies can have 
serious health consequences for senior citizens. Some seniors have 
underlying diseases or health conditions that make the use of the 
product medically inadvisable, and some supplements can interact with 
medications that are being taken concurrently. Furthermore, studies 
have found that products sometimes contain harmful contaminants or much 
more of an active ingredient than is indicated on the label. Unproven 
anti-aging and alternative medicine products also pose an economic risk 
to seniors. The Food and Drug Administration (FDA) and the Federal 
Trade Commission (FTC) have identified several products that make 
advertising or labeling claims with insufficient substantiation, some 
costing consumers hundreds or thousands of dollars apiece. Federal and 
state agencies have efforts under way to protect consumers of these 
products. FDA and FTC sponsor programs and provide educational 
materials for senior citizens to help them avoid health fraud. At the 
state level, agencies are working to protect consumers of health 
products by enforcing state consumer protection and public health laws, 
although anti-aging and alternative products are receiving limited 
attention. GAO summarized this report in testimony before Congress 

Long-Term Care: Availability of Medicaid Home and Community Services 
for Elderly Individuals Varies Considerably (GAO-02-1121, 26-SEP-02):

As the baby boomers age, spending on long-term care for the elderly 
could nearly quadruple by 2050. Medicaid, the joint federal state 
health financing program for low income individuals is currently the 
largest payer for long-term care services and is anticipated to face 
substantial increases in spending as demand for long-term care 
increases. Nursing home care traditionally has accounted for most 
Medicaid long-term care expenditures, but the high costs of such care 
and the preference of many individuals to stay in their own homes has 
led states to expand their Medicaid programs to provide coverage for 
home-and community-based long-term care. The case managers GAO 
contacted in four states for two hypothetical elderly individuals 
generally offered care plans that relied on in-home services rather 
than other residential care settings. However, the in-home services 
offered varied considerably. The care that case managers offered the 
two hypothetical individuals sometimes differed due to state policies 
or practices that shaped the availability of their Medicaid covered 
services. In two of the four states there was a waiting list for home 
and community based services and some states had caps or other 
practices that limited the amount of Medicaid in-home care that could 
be offered.

Mammography: Capacity Generally Exists to Deliver Services (GAO-02-532, 

Breast cancer is the second leading cause of cancer deaths among 
American women. In 2001, 192,200 new cases of breast cancer were 
diagnosed and 40,200 women died from the disease. The probability of 
survival increases significantly, however, when breast cancer is 
discovered in its early stages. Currently, the most effective technique 
for early detection of breast cancer is screening mammography, an X-ray 
procedure that can detect small tumors and breast abnormalities up to 
two years before they can be detected by touch. Nationwide data 
indicate that mammography services are generally adequate to meet the 
growing demand. Between 1998 and 2000, both the population of women 40 
and older and the extent to which they were screened increased by 15 
percent. Although mammography services are generally available, women 
in some locations have problems obtaining timely mammography services 
in some metropolitan areas. However, the greatest losses in capacity 
have come in rural counties. In all, 121 counties, most of them rural, 
have experienced a drop of more than 25 percent in the number of 
mammography machines in the last three years. Officials from 37 of 
these counties reported that the decrease had not had a measurable 
adverse effect on the availability of mammography services. By 
contrast, in 18 metropolitan counties that lost a smaller percentage of 
their total capacity, officials in half of the counties reported 
service disruptions. Officials from six other urban areas, including 
Houston and Los Angeles, reported that public health facilities serving 
low-income women had long waiting times. However, most women whose 
clinical exam or initial mammogram indicated a need for a follow-up 
mammogram were able to get appointments within one to three weeks.

Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver 
Projects Raise Concerns (GAO-02-817, 12-JUL-02):

States provide health care coverage to about 40 million uninsured, low-
income adults and children under two federal-state programs--Medicaid 
and the State Children's Health Insurance Program (SCHIP). To receive 
federal funding, states must meet statutory requirements, including 
providing certain levels of benefits to specified populations. Under 
section 1115 of the Social Security Act, the Secretary of Health and 
Human Services (HHS) can waive many of the statutory requirements in 
the case of experimental, pilot, or demonstration projects likely to 
promote program objectives. From August 2001 through May 2002, HHS 
approved four waiver proposals from states to either expand health 
insurance to uninsured populations or extend pharmacy coverage to low-
income seniors, consistent with the new goals. Of the nine proposals 
that were under review as of June 2002, five sought to expand coverage 
to uninsured populations, while four sought to provide pharmacy 
benefits for low-income seniors. GAO has both legal and policy concerns 
about the extent to which the approved waivers are consistent with the 
goals and fiscal integrity of Medicaid and SCHIP. The legal concern is 
that HHS has allowed Arizona to use unspent SCHIP funding to cover 
adults without children, despite SCHIP's objective of expanding health 
coverage to low-income children. GAO found that HHS' approval of the 
waiver to cover childless adults is not consistent with this objective, 
and it is not authorized. A related policy concern is that HHS used its 
waiver authority to allow Arizona and California to use SCHIP funds to 
cover parents of SCHIP and Medicare-eligible children with no regard to 
cost effectiveness when the statute provides that family coverage may 
be provided only if it is cost-effective to do so--that is, with no 
additional costs beyond covering the child. An opportunity for the 
public to learn about and comment on pending waivers has not been 
consistently provided in accordance with policy adopted by HHS in 1994. 
At the federal level, since 1998 HHS has not followed established 
procedures to publish notification of new and pending section 1115 
waiver applications in the Federal Register with a 30-day comment 

Medicare: Beneficiary Use of Clinical Preventive Services (GAO-02-422, 

Preventive medicine, including immunizations for many diseases and 
screening for some types of cancer, holds the promise to extend and 
improve the quality of life for millions of Americans. Medicare now 
covers three preventive services for immunizations and seven for 
screenings, and the Centers for Medicare and Medicaid Services (CMS) 
sponsors "interventions" to increase the use of preventive services. 
GAO found that the use of preventive services varies widely by service, 
state, ethnic group, income, and education. The greatest differences 
among ethnic groups were for immunization rates. Cancer screening rates 
tended to differ according to income and education level. CMS pays for 
interventions that promote breast cancer screenings and pneumonia and 
flu shots. Most of the techniques being used, such as reminder systems 
that medical offices can use to alert doctors and patients to needed 
cancer screenings, have been effective. CMS is evaluating what its 
current efforts have accomplished and expects the results later in the 

Medicare: Communications with Physicians Can Be Improved (GAO-02-249, 

Unlike other federal programs that make expenditures under the direct 
control of the government, Medicare constitutes a promise to pay for 
covered medical services provided to its beneficiaries by about one 
million providers. Given this open-ended entitlement, it is essential 
that appropriate and effective rules and policies be specified so that 
only necessary services are provided and reimbursed. Congress and the 
Centers for Medicare and Medicaid Services (CMS) have promulgated an 
extensive body of statutes, regulations, policies, and procedures on 
what shall be paid for and under what circumstances. Information that 
carriers give to physicians is often difficult to use, out of date, 
inaccurate, and incomplete. Medicare bulletins that carriers use to 
communicate with physicians are often poorly organized and contain 
dense legal language. Similarly, other means of communicating with 
physicians, such as toll-free provider assistance lines and websites, 
have problems with accuracy and completeness. Although all carriers 
issue bulletins, operate call centers, and maintain websites, each 
carrier develops its own communications policies and strategies. This 
approach results in a duplication of effort as well as variations in 
the quality of carrier communications. CMS provides little technical 
assistance to help carriers develop effective communication strategies. 
Neither CMS carrier oversight nor self-monitoring by the carriers is 
comprehensive enough to provide sufficiently detailed information that 
could either pinpoint specific communication problems or identify 
poorly performing carriers. CMS is working to improve its physician 
communications by consolidating new instructions and regulations and 
issuing them on a more predictable schedule to lessen the burden of 
frequent policy changes that physicians cannot anticipate. CMS is also 
enhancing its education programs for both physicians and carrier staffs 
and expanding its efforts to obtain physician feedback. Finally, CMS is 
improving its national website and intends to develop a single web-
based source of information for physicians.

Medicare: Orthotics Ruling Has Implications for Beneficiary Access and 
Federal and State Costs (GAO-02-330, 22-MAY-02):

In the late 1980s and early 1990s, the Health Care Financing 
Administration (HCFA), now called the Centers for Medicare and Medicaid 
Services (CMS), became concerned that some suppliers were improperly 
billing Medicare for items that attach to wheelchairs and other 
equipment. Some suppliers were billing for such items using codes for 
orthodic devices, including arm, back, and neck braces that provide 
support for or immobilize weak or injured limbs, while others were 
billing using codes for durable medical equipment, which includes 
equipment such as wheelchairs and crutches that can withstand repeated 
use and is appropriate for home use. Whether an item is billed as an 
orthotic or DME device can affect whether such claims are paid. HCFA 
issued Ruling 96-1 to clarify the circumstances under which certain 
items would be classified as orthotics or as DME for Medicare part B 
payment purposes. A federal appellate court found that HFCA had 
followed appropriate procedures to issue the rule as an interpretation 
of Medicare policy, the interpretation in the ruling was wholly 
supportable, and the treating of seating systems as DME was consistent 
with congressional intent. HCFA's ruling that attached bracing devices 
were in the DME benefits category and could no longer be billed as 
orthotics affects beneficiaries residing in Medicare-certified skilled 
nursing facilities and other institutions primarily engaged in 
providing skilled nursing care (SNF). Because Medicare part B does not 
cover DME in SNFs and other institutions primarily engaged in providing 
skilled nursing care, claims for such items are no longer paid for 
residents in nursing homes. If HCFA's ruling were rescinded and 
Medicare's policy changed so that attached bracing devices were 
classified as orthotics, how much Medicare and Medicaid would spend for 
orthotics is uncertain. The distinction between DME and orthotics would 
become less clear, which could lead to inappropriate billing. 
Therefore, if the ruling were rescinded, additional controls, such as 
closely monitoring billing and reviewing medical justification for 
customized items prior to payment, would be vital to help curb 
potentially inappropriate billing.

Medicare: Payments for Covered Outpatient Drugs Exceed Providers' Costs 
(GAO-01-1118, 21-SEP-01):

Physicians are able to obtain Medicare-covered drugs at prices 
significantly below current Medicare payments, which are set at 95 
percent of average wholesale prices (AWP). The difference between these 
prices and AWP for physician-administered drugs in GAO's sample varied 
by drug. For most physician-administered drugs, the average discount 
from AWP ranged from 13 percent to 34 percent; two physician-
administered drugs had discounts of 65 percent and 86 percent. Other 
suppliers are also able to buy drugs at prices that are considerably 
less than the AWP used to establish the applicable Medicare payment 
with discounts ranging from 78 percent to 85 percent below AWP for two 
drugs in the sample. Also, suppliers generally receive a payment from 
Medicare for the durable medical equipment needed to administer the 
drug and supplies. Private and other public payers use different 
payment methods for drugs and their administration. Private health 
plans use their drug-purchase and patient volume to negotiate favorable 
prices for drugs and physician and supplier services related to 
supplying or delivering the drugs. Other public payers also use their 
purchasing volume along with information about actual transaction 
prices from private payers to lower their drug payments.

Medicare: Program Designed to Inform Beneficiaries and Promote Choice 
Faces Challenges (GAO-01-1071, 28-SEP-01):

The Balanced Budget Act of 1997 (BBA) established the Medicare+Choice 
(M+C) program to expand health plan choices. BBA permitted Medicare 
participation by preferred provider organizations, provider-sponsored 
organizations, and insurers offering private fee-for-service plans or 
medical savings accounts. It also encouraged the wider availability of 
health maintenance organizations, which have long been an option for 
many beneficiaries. To help beneficiaries understand and consider all 
of their Medicare options, the National Medicare Education Program 
offers a toll-free help line, informational mailings to beneficiaries, 
an Internet site, and educational and publicity campaigns. During 
fiscal years 1998 through 2000, the Health Care Financing 
Administration (HCFA) spent an average of $107.8 million on the program 
annually. Most of the money came from user fees collected from M+C 
plans. Reaction to the program has generally been positive among 
beneficiaries and beneficiary advocacy groups, but representatives of 
M+C plans offered a mixed assessment. Program activities have increased 
the information available to beneficiaries on Medicare, the M+C 
program, and specific health plans. However, the extent to which the 
program has motivated beneficiaries to actively weigh their health plan 
options is unknown.

Medicare: Utilization of Home Health Care by State (GAO-02-782R, 23-

This report discusses the variation in Medicare home health use across 
states. Using home health claims for the first 6 months of 2001 from 
the Centers for Medicare and Medicaid, GAO compiled statistics on home 
health users, home health visits, home health episodes, and the 
percentage of home health users with multiple episodes for each state. 
A home health episode, the basis for Medicare payment under the 
prospective payment system, is up to a 60-day period of care during 
which any number of visits may be provided.

Medicare + Choice: Recent Payment Increases Had Little Effect on 
Benefits or Plan Availability in 2001 (GAO-02-202, 21-NOV-01):

The number of contracts under Medicare's managed care program--
Medicare+Choice (M+C)--fell from 340 to 180 between 1998 and 2001. The 
reduction reflected decisions by some managed care organizations (MCOs) 
to terminate selected contracts or to discontinue service in some 
covered areas. Although nearly all MCOs renewed at least some of their 
Medicare contracts over this period, many reduced the geographic areas 
served. As a result, 1.6 million beneficiaries had to switch MCOs or 
return to Medicare's traditional fee-for-service program. Other MCOs 
plan either to terminate or reduce their participation in M+C at the 
end of 2001. Concerned about MCO withdrawals, Congress sought to make 
participation in the program more attractive. As a result of the 
Benefits Improvement and Protection Act of 2000, aggregate 
Medicare+Choice payments in 2001 are estimated to have increased by $1 
billion. The act permitted three basic uses for the higher payment. 
MCOs could (1) improve their health plans' benefit packages, (2) set 
aside money for future years in a benefit stabilization fund, or (3) 
stabilize or enhance beneficiary access to providers. Most MCOs 
reported that additional money would be used to stabilize or enhance 
beneficiary access to providers. A minority of MCOs reported that the 
money would go toward benefit improvements or be placed in a benefit 
stabilization fund. In 83 percent of M+C plans, MCOs stated that some 
or all of the additional money would be used to stabilize or enhance 
beneficiary access. The payment increases had little effect on the 
availability of M+C plans during 2001. Following passage of the act, 
three MCOs reentered counties they had dropped from their service 
areas, three MCOs expanded into counties that they previously had not 
served, and one MCO both reentered previously served counties and 
expanded into new ones.

Medicare+Choice: Selected Program Requirements and Other Entities' 
Standards for HMOs (GAO-03-180, 31-OCT-02):

Since the early 1980s, health maintenance organizations (HMO) have 
entered into risk-based contracts with Medicare and offered 
beneficiaries an alternative to the traditional fee-for-service (FFS) 
program. By 1997, 5.2 million Medicare beneficiaries were enrolled in 
an HMO. Although Medicare HMOs were available in most urban areas, they 
were often unavailable in rural areas. Medicare+Choice (M+C) has HMO 
requirements pertaining to benefit package proposals, the beneficiary 
enrollment process, marketing and enrollee communication materials, and 
quality improvement, among other areas. An HMO must annually submit a 
benefit package proposal to the Centers for Medicare and Medicaid 
Services (CMS) for each M+C health plan that the HMO intends to offer. 
M+C requirements for the beneficiary enrollment process specify the 
information that an HMO must include in its enrollment application and 
the checks that it must perform to ensure that beneficiaries who submit 
applications are eligible to enroll in the HMO's health plan. M+C 
marketing requirements prohibit HMOs from using inaccurate or 
misleading language in advertisements or materials distributed to 
enrollees. M+C requirements for quality improvements specify that HMOs 
must undertake multiyear projects intended to improve the quality of 
health care and must routinely gather and report performance data to 

Medicare Home Health: Clarifying the Homebound Definition Is Likely to 
Have Little Effect on Costs and Access (GAO-02-555R, 26-APR-02):

Medicare's home health benefit provides skilled nursing and other 
services to eligible beneficiaries who are homebound. The Department of 
Health and Human Services (HHS) had a long-standing policy that 
beneficiaries who regularly attend adult day care were not considered 
homebound, particularly if the purpose of attending was to receive 
nonmedical or custodial care. In 2000, Congress specified that Medicare 
beneficiaries who attended adult day care could be considered homebound 
if they still met the other homebound requirements. GAO found that this 
clarification will likely have little effect on program costs or access 
to services because the number of affected individuals is probably 
small. On the basis of National Long Term Care Survey data, GAO 
estimated that, as of 1999, 0.2 percent of elderly Medicare 
beneficiaries attended adult day care and had mobility or cognitive 
impairments that might make some eligible for Medicare home health 

Medicare Home Health Agencies: Weaknesses in Federal and State 
Oversight Mask Potential Quality Issues (GAO-02-382, 19-JUL-02):

The 6,900 Home Health Agencies (HHAs) that serve Medicare beneficiaries 
must meet federal requirements, known as conditions of participation 
(COP), to ensure that they have the appropriate staff, are following 
the plan of care specified by a physician, maintain medical records to 
document the care provided, and periodically reassess each patient's 
condition. Although nationwide surveys done at HHAs since 1998 have 
identified a small proportion of agencies with serious deficiencies, 
the extent of the problem may be understated, and situations 
endangering the health and well being of home health patients may occur 
more often than documented. Shortcomings in the survey process and 
inconsistencies in state surveys make it difficult to assess the 
quality of care delivered and may mask potential problems. The ability 
to lodge complaints about an HHA and have them resolved promptly is 
important to protecting patient health and safety. HHA oversight by the 
Centers for Medicare and Medicaid Services (CMS) has been too limited 
to identify the problems GAO found in the survey process. CMS does not 
review state compliance with requirements for conducting HHA surveys, 
such as whether HHAs with COP-level deficiencies are surveyed annually 
rather than every 3 years or whether minimum patient visit and medical 
record review samples are adhered to.

Medicare Home Health Care: OASIS Data Use, Cost, and Privacy 
Implications (GAO-01-205, 30-JAN-0):

With the Health Care Financing Administration's (HCFA) implementation 
of a prospective payment system, efforts to protect patients from 
potential underprovision of care and to hold home health agencies (HHA) 
accountable are essential. Instituting the collection and reporting of 
Outcome and Assessment Information Set (OASIS) data is an important 
step in that direction. The use of OASIS data enhances consistency in 
the performance and documentation of patient assessments for home 
health services. As a result, information on patient outcomes will 
become available for the first time. Collecting such data is not 
without its costs. To varying degrees, the requirement to collect OASIS 
data on all home health patients increases the amount of staff time 
devoted to collecting and reporting patient assessment information. 
HHAs have been compensated for some of these costs through adjustments 
made to their payment rates. Moreover, because prospective payment 
system episode payment rates are based on historically high utilization 
levels, which have since declined, these rates should allow the 
completion of OASIS assessments. Protecting the privacy of home health 
care patients is also important. HCFA has made progress in this area by 
enhancing protections in the collection and transmission of the OASIS 
data. The effectiveness of these policies and procedures will depend on 
how well they are implemented.

Medicare Home Health Care: Payments to Home Health Agencies Are 
Considerably Higher than Costs (GAO-02-663, 06-MAY-02):

The Balanced Budget Act of 1997 significantly changed Medicare's home 
health care payments to home health agencies (HHAs). Under a 
prospective payment system (PPS), HHAs are paid a fixed amount, 
adjusted for beneficiary care needs, for providing up to 60 days of 
care--termed a "home health episode." The act also imposed new interim 
payment limits to moderate spending until the PPS could be implemented. 
Although PPS was designed to lower Medicare spending below what it was 
under the interim system, GAO found that Medicare's payments for full 
home health care episodes were 35 percent higher than estimated costs 
in the first six months of 2001. These disparities indicate that 
Medicare's PPS overpays for services actually provided, although some 
HHAs facing extraordinary costs not accounted for by the payment system 
may be financially disadvantaged.

Medicare Physician Fee Schedule: Practice Expense Payments to 
Oncologists Indicate Need For Overall Refinements (GAO-02-53, 31-OCT-

Medicare's physician fee schedule establishes payments for more than 
7,000 different services, such as office visits, surgical procedures, 
and treatments. Before 1992, fees were based on charges physicians 
billed for these services. Since then, the Health Care Financing 
Administration (HCFA), which administers Medicare, has been phasing in 
a new fee schedule on the basis of the amount of resources used to 
provide that service relative to other services. The development of the 
resource-based practice expense component of the fee, which is intended 
to pay for the costs of running a physician's practice, has been 
particularly controversial. HCFA adjusted the underlying data and basic 
method for calculating resource-based practice expense payments and 
payment changes were required to be budget-neutral--which means that 
total Medicare spending for physician services was to be the same under 
the new payment method as it was under the old one. As a result, 
Medicare payments to some specialties have increased while payments to 
other specialties have decreased. Oncologists claim that their practice 
expense payments are particularly inadequate for some office-based 
services, such as chemotherapy. Oncology practice expense payments in 
2001 are eight percent higher than they would have been had charged-
based payments continued. Oncology practice expense payments compared 
to their estimated practice expenses are about the same as the average 
for all physicians. HCFA's adjustments to the data and basic method 
reduced payments to oncologists.

Medicare Physician Payments: Medical Settings and Safety of Endoscopic 
Procedures (GAO-03-179, 18-OCT-02):

Every year millions of Americans covered by Medicare undergo endoscopic 
medical procedures in a variety of health care settings ranging from 
physicians' offices to hospitals. These invasive procedures call for 
the use of a lighted, flexible instrument and are used for screening 
and treating disease. Although some of these procedures can be 
performed while the patient is fully awake, most require some form of 
sedation and are usually provided in health care facilities such as 
hospitals or ambulatory surgical centers. Some physician specialty 
societies have expressed concern that Medicare's reimbursement policies 
may offer a financial incentive to physicians to perform endoscopic 
procedures in their offices and that these procedures may be less safe 
because physicians' offices are less closely regulated and therefore 
there is less oversight of the quality of care. For the 20 procedures 
reviewed, there was no evidence to suggest that there was any 
difference in the level of safety of gastroenterological and urological 
endoscopic procedures performed on Medicare beneficiaries in either 
physicians' offices or health care facilities, such as hospitals and 
ASC's. There was also no evidence found to suggest that the resource-
based site-of-service payment differential has caused physicians to 
conduct a greater proportion of gastroenterological or urological 
endoscopic procedures in their offices for Medicare beneficiaries. If 
Medicare coverage for the office procedures in the study were 
terminated, few access problems would occur in most of the country 
because physicians perform the vast majority of the procedures that 
were studied in health care facilities.

Medigap Insurance: Plans Are Widely Available but Have Limited Benefits 
and May Have High Costs (GAO-01-941, 31-JUL-01):

To protect themselves against large out-of-pocket expenses and help 
fill gaps in Medicare coverage, most beneficiaries buy supplemental 
insurance, known as Medigap; contribute to employer-sponsored health 
benefits to supplement Medicare coverage; or enroll in private 
Medicare+Choice plans rather than traditional fee-for-service 
Medicare. Because Medicare+Choice plans are not available everywhere 
and many employers do not offer retiree health benefits, Medigap is 
sometimes the only supplemental insurance option available to seniors. 
Medicare beneficiaries who buy Medigap plans have coverage for 
essentially all major Medicare cost-sharing requirements, including 
coinsurance and deductibles. Although various proposals have been made 
to add a prescription drug benefit to Medicare, relatively few 
beneficiaries buy standardized Medigap plans with this benefit. Low 
enrollment in these plans may be due to the fact that fewer plans are 
being marketed with these benefits; their relatively high cost; and the 
limited nature of their prescription drug benefit, which still requires 
beneficiaries to pay more than half of their prescription drug costs. 
Most plans offering this coverage have a $3,000 cap on prescription 
drug benefits. As a result, Medigap beneficiaries with prescription 
drug coverage continue to incur substantial out-of-pocket expenses for 
prescription drugs and other health care services.

Nursing Homes: Federal Efforts to Monitor Resident Assessment Data 
Should Complement State Activities (GAO-02-279, 15-FEB-02):

Nursing homes that participate in Medicare and Medicaid must 
periodically assess the needs of residents in order to develop an 
appropriate plan of care. Such resident assessments are known as the 
minimum data set (MDS). According to officials in the 10 states with 
MDS accuracy review programs in operation as of January 2001, these 
programs were established because of the important role played by MDS 
data in setting Medicaid payments and identifying quality of care 
problems. Nine of the 10 states conduct periodic on-site reviews in all 
or a significant portion of their nursing homes to assess the accuracy 
of the MDS data. These reviews sample a home's MDS assessments to 
determine whether the basis for the assessments is adequately 
documented in residents' medical records. These reviews often include 
interviews of nursing home personnel familiar with residents and 
observations of the residents themselves. States with separate MDS 
review programs identified various approaches to improve MDS accuracy. 
State officials highlighted the on-site review process itself and 
provider education activities as their primary approaches. State 
officials also reported such remedies as requiring nursing homes to 
prepare a corrective action plan or imposing financial penalties on 
nursing homes when serious or extensive errors in MDS data are found.

Following the 1998 implementation of Medicare's MDS-based payment 
system the Federal government began building the foundation for its own 
separate review program to ensure the accuracy of MDS data. In the 
course of developing and testing various accuracy review approaches, 
widespread MDS errors were found that resulted in a change in the 
Medicare payment level for two-thirds of the resident assessments 
sampled. On site visits proved to be a very effective method of 
assessing accuracy. However as currently planned, federal MDS review 
activities are projected to involve roughly 1 percent of the estimated 
14.7 million MDS assessments expected to be completed with on site 
reviews in fewer than 200 of the nations 17,000 nursing homes each 
year. While the federal approach may yield some broad sense of the 
accuracy of MDS assessments on an aggregate level, it appears to be 
insufficient to provide confidence about the accuracy of MDS 
assessments in the vast bulk of nursing homes nationwide. Given the 
substantial level of effort and resources already invested at the state 
and federal levels to oversee nursing home quality of care, including 
periodic inspections at each home nationwide, we recommend that CMS 
reorient its MDS accuracy program so that it complements and leverages 
existing state review activities and its own established nursing home 
oversight efforts.

Nursing Homes: More Can Be Done to Protect Residents from Abuse (GAO-
02-312, 01-MAR-02):

Often suffering from multiple physical and mental impairments, the 1.5 
million elderly and disabled Americans living in nursing homes are a 
highly vulnerable population. These individuals typically require 
extensive help with daily living, such as such as dressing, feeding, 
and bathing. Many require skilled nursing or rehabilitative care. In 
recent years, reports of inadequate care, including malnutrition, 
dehydration, and other forms of neglect, have led to mounting scrutiny 
from state and federal authorities, which share responsibility for 
overseeing the nation's 17,000 nursing homes. Concerns have also been 
growing that some residents are abused--pushed, slapped, or beaten--by 
the very individuals to whom their care has been entrusted. GAO found 
that allegations of physical and sexual abuse of nursing home residents 
are not reported promptly. Local law enforcement officials said that 
they are seldom summoned to nursing homes to immediately investigate 
allegations of abuse and that few allegations are ever prosecuted. Some 
agencies use different policies when deciding whether to refer 
allegations of abuse to law enforcement. As a result, law enforcement 
agencies were never told of some incidents or were notified only after 
lengthy delays. GAO found that federal and state safeguards intended to 
protect nursing home residents from abuse are inadequate. No federal 
statute requires criminal background checks for nursing home employees. 
Background checks are also not required by the Centers for Medicare and 
Medicaid Services, which sets the standards that nursing homes must 
meet to participate in the Medicare and Medicaid programs. State 
agencies rarely recommend that sanctions be imposed on nursing homes. 
Although state agencies compile lists of aides who have previously 
abused residents, which can prevent an aide from being hired at another 
nursing home, GAO found that delays in making these identifications can 
limit the usefulness of these registries. GAO summarized this report in 
testimony before Congress; see GAO-02-448T.

Nursing Homes: Public Reporting of Quality Indicators Has Merit, but 
National Implementation Is Premature (GAO-03-187, 31-OCT-02):

GAO was asked to review the Centers for Medicare & Medicaid Services 
(CMS) initiative to publicly report additional information on its 
"Nursing Home Compare" Web site intended to help consumers choose a 
nursing home. GAO examined CMS's development of the new nursing home 
quality indicators and efforts to verify the underlying data used to 
calculate them. GAO also reviewed the assistance CMS offered the public 
in interpreting and comparing indicators available in its six-state 
pilot program, launched in April 2002, and its own evaluation of the 
pilot. The new indicators are scheduled to be used nationally beginning 
in November 2002.

CMS's initiative to augment existing public data on nursing home 
quality has considerable merit, but its planned November 2002 
implementation does not allow sufficient time to ensure the indicators 
are appropriate and useful to consumers. CMS's plan urges consumers to 
consider nursing homes with positive quality indicator scores, in 
effect, attempting to use market forces to encourage nursing homes to 
improve the quality of care. However, CMS is moving forward without 
adequately resolving important open issues on the appropriateness of 
the indicators chosen for national reporting or the accuracy of the 
underlying data. To develop and help select the quality indicators, CMS 
hired two organizations with expertise in health care data--Abt 
Associates, Inc. and the National Quality Forum (NQF). Abt identified a 
list of potential quality indicators and tested them to verify that 
they represented the actual quality of care individual nursing homes 
provide. GAO's review of the available portions of the report raised 
serious questions about the basis for moving forward with national 
reporting at this time. NQF, which was created to develop and implement 
a national strategy for measuring health care quality, was hired to 
review Abt's work and identify core indicators for national reporting. 
To allow sufficient time to review Abt's validation report, NQF agreed 
to delay its recommendations for national reporting until 2003. CMS 
limited its own evaluation of its six-state pilot program for the 
initiative so that the November 2002 implementation date could be met. 
Early results were expected in October 2002, leaving little time to 
incorporate them into the national rollout. Despite the lack of a final 
report from NQF and an incomplete pilot evaluation, CMS has announced a 
set of indicators it will begin reporting nationally in November 2002. 
GAO has serious concerns about the potential for public confusion by 
the quality information published, especially if there are significant 
changes to the quality indicators due to the NQF's review. CMS's 
proposed reporting format implies a precision in the data that is 
lacking at this time. While acknowledging this problem, CMS said it 
prefers to wait until after the national rollout to modify the 
presentation of the data. GAO's analysis of data currently available 
from the pilot states demonstrated there was ample opportunity for the 
public to be confused, highlighting the need for clear descriptions of 
the data's limitations and easy access to impartial experts hired by 
CMS to operate consumer hotlines. CMS has not yet demonstrated its 
readiness to meet these consumer needs either directly or through the 
hotlines fielding public questions about confusing or conflicting 
quality data. CMS acknowledged that further work is needed to refine 
its initiative, but believes that its indicators are sufficiently 
valid, reliable, and accurate to move forward with national 
implementation in November 2002 as planned.

Nursing Homes: Quality of Care More Related to Staffing than Spending 
(GAO-02-431R, 13-JUN-02):

Costs for nursing home care have almost doubled since 1990, from $53 
billion to $92 billion in 2000. Much of that spending has been financed 
with public monies. Under the Medicare and Medicaid programs, the 
federal government financed 39 percent of the nation's nursing home 
spending in 2000, up from 28 percent in 1990. As federal outlays have 
grown, Congress has focused attention on the quality of care delivered 
and the level of staffing in nursing homes. GAO surveyed three states 
and found that nursing home expenditures per resident day varied 
considerably across Ohio, Mississippi, and Washington. Although the 
total level of spending varied, the average share devoted to resident-
care activities, such as nursing care and medical supplies, was 
relatively stable. The share of spending devoted to buildings and 
equipment, by comparison, was more variable. Homes in Ohio and 
Washington that provided more nursing hours per resident day, 
especially nurses' aide hours, were less likely than homes providing 
fewer nursing hours to have repeated serious or potentially life-
threatening quality problems. However, GAO found no clear relationship 
between a nursing home's spending per resident day and the number of 
serious quality problems.

Nursing Workforce: Emerging Nurse Shortages Due to Multiple Factors 
(GAO-01-944, 10-JUL-01):

The nation's hospitals and nursing homes rely heavily on the services 
of nurses. Concerns have been raised about whether the current and 
projected supply of nurses will meet the nation's needs. This report 
reviews (1) whether evidence of a nursing shortage exists, (2) the 
reasons for current nurse recruitment and retention problems, and (3) 
what is known about the projected future supply of and demand for 
nurses. GAO found that national data are not adequate to describe the 
nature and extent of nurse workforce shortages, nor are data 
sufficiently sensitive or current to compare nurse workforce 
availability across states, specialties, or provider types. Multiple 
factors affect recruitment and retention problems, including the aging 
of the nurse workforce, resulting from reduced entry of younger people 
into the profession and nurses' job dissatisfaction. A serious shortage 
of nurses is expected in the future as demographic pressures influence 
both demand and supply.

Private Health Insurance: Access to Individual Market Coverage May Be 
Restricted for Applicants with Mental Disorders (GAO-02-339, 28-FEB-

About five percent of adults suffer from serious mental disorders. 
Although health insurance carriers in 11 states guarantee coverage for 
mental health treatment, in most states individuals with mental 
disorders face restrictions in purchasing private health insurance for 
themselves and their families. Eleven states require carriers to accept 
all applicants regardless of health status, but coverage options vary. 
Eight of these 11 states require all carriers to guarantee access to 
coverage sold in this market. In three states, laws apply only to some 
carriers, such as Blue Cross and Blue Shield, or certain periods of the 
year. Carriers in nine of the 11 states are also required to limit the 
extent to which premium rates vary between healthy and unhealthy 
individuals. In states without guaranteed coverage in the individual 
market, the seven carriers GAO reviewed would likely deny coverage more 
frequently for applicants with mental disorders than for applicants 
with other chronic health conditions. Specifically, for six mental 
disorders of generally moderate severity, carriers said that they would 
likely decline applicants 52 percent of the time. State-sponsored high-
risk pools are the primary coverage option available to rejected 
applicants in most states. In 27 of the 34 states where carriers may 
deny coverage to applicants with mental disorders or other health 
conditions, high-risk pools offer coverage to applicants denied 
individual market coverage. The pools are subsidized--generally through 
assessments on carriers or state tax revenues--and premium rates are 
generally capped at 125 to 200 percent of standard rates for healthy 
individuals. Health benefits available under the pools are generally 
comparable to those available in the individual market, including 
similar restrictions on mental health benefits; however, benefits for 
mental disorders or other health conditions are not permanently 
excluded as they may be in the individual insurance market.

Retiree Health Benefits: Employer-Sponsored Benefits May Be Vulnerable 
to Further Erosion (GAO-01-374, 01-MAY-01):

In 1999, about 10 million retired people aged 55 or older relied on 
employer-sponsored health insurance as either their primary source of 
coverage or as a supplement to their Medicare coverage. Some of these 
persons are concerned about the continued availability of employer-
sponsored coverage. Premium increases and forecasts for a potential 
economic slowdown could further erode employer-sponsored retired health 
benefits. In the long term, these factors, coupled with the potential 
for Medicare reforms and the rising number of aging baby boomers, may 
produce even more uncertainty and cost pressures for employers. 
Consequently, as an increasing number of retirees lack employer-based 
coverage, those in poorer health may have difficulty finding affordable 
alternative health coverage.

Retiree Health Benefits: Examples of Employer-Reported Obligations in 
Selected Industries (GAO-02-639R, 29-APR-02):

In addition to providing an overview of a company's business 
operations, the annual reports submitted to the Securities and Exchange 
Commission present important information on an employer's estimated 
obligations for postemployment benefits, including retiree health 
benefits. However, the assumption used to estimate obligations for 
postemployment benefits vary across companies and are not comparable. 
Financial Accounting Standards Board guidelines give employers latitude 
in calculating these obligations. Moreover, changes in companies' 
benefit offerings or financial stability would likely alter companies' 
obligations for retiree health benefits. Most employers also reserve 
the right to change or terminate retiree health benefits.

Skilled Nursing Facilities: Available Data Show Average Nursing Staff 
Time Changed Little after Medicare Payment Increase (GAO-03-176, 13-

The nation's 15,000 skilled nursing facilities (SNF) play an essential 
role in our health care system, providing Medicare-covered skilled 
nursing and rehabilitative care each year for 1.4 million Medicare 
patients who have recently been discharged from acute care hospitals. 
In recent years, many analysts and other observers, including members 
of Congress, have expressed concern about the level of nursing staff in 
SNFs and the impact of inadequate staffing on the quality of care. The 
Congress temporarily increased the nursing component of the SNF 
Medicare payment rate by 16.6 percent. GAO's analysis of available data 
shows that, in the aggregate, SNFs' nurse staffing ratios changed 
little after the increase took effect. Overall, SNFs' average nursing 
time increased by 1.9 minutes per patient day, relative to their 
average in 2000 of about 3 and one-half hours of nursing time per 
patient day. For most SNFs, increases in staffing ratios were small. 
Further, GAO found that the share of SNF patients covered by Medicare 
was not a factor in whether facilities increased their nursing time. 
Similarly, SNFs that had total revenues considerably in excess of costs 
before the added payments took effect did not increase their staffing 
substantially more than others.

Skilled Nursing Facilities: Medicare Payments Exceed Costs for Most but 
Not All Facilities (GAO-03-183, 31-DEC-02):

This report addresses (1) the relationship between Medicare skilled 
nursing facility (SNF) payments and the costs of treating Medicare 
patients in freestanding SNFs, as well as the effect of Medicare SNF 
payments on the financial condition of these facilities, and (2) the 
relationship between Medicare SNF payments and the costs of treating 
patients in hospital-based SNFs, as well as the factors that may 
account for cost differences between hospital-based and freestanding 

Under the prospective payment system (PPS), most freestanding SNFs' 
Medicare payments substantially exceeded the costs of caring for 
Medicare patients, contributing to facilities' overall positive 
financial condition. In 1999, the first full year under the PPS, the 
median freestanding SNF Medicare margin--a measure that compares 
Medicare payments with Medicare costs--was slightly over 8 percent. By 
2000, when the temporary payment increases authorized by the Congress 
started to take effect, the median Medicare margin had risen to almost 
19 percent. However, nearly one-quarter of SNFs in 2000 had Medicare 
margins exceeding 30 percent, while about one-fifth had negative 
Medicare margins; that is, the payments they received from Medicare did 
not cover their costs of providing care. Medicare margins were higher 
for freestanding SNFs affiliated with large, for-profit nursing home 
chains and for those with high occupancy. The median SNF total margin-
-which reflects total revenues and costs across all patients--was 1.3 
percent in 1999 and 1.8 percent in 2000. A SNF's total margin tended to 
be higher when its Medicare margin was higher despite the fact that, in 
most SNFs, Medicare's share of patient days was small. The total 
margins for freestanding SNFs tended to be lower when a higher 
proportion of a SNF's patients had their care paid for by Medicaid. 
Unlike freestanding SNFs, about 90 percent of hospital-based SNFs 
reported significantly negative Medicare margins after Medicare's new 
SNF payment system was launched. The median hospital-based SNF Medicare 
margin was -53 percent in 1999. Under the PPS, per diem payments to 
hospital-based SNFs dropped considerably, reflecting the change from 
payments based on a facility's own costs to fixed payments based on 
average costs for all facilities. At the same time, hospital-based SNFs 
reported per diem costs rose from 1997 through 1999. This is in 
contrast to the experience of freestanding SNFs, which had lower per 
diem Medicare costs than hospital-based SNFs prior to the PPS and 
reduced their costs further after the shift to the PPS. The higher 
Medicare costs reported by hospital-based SNFs may stem in part from 
differences in services provided to patients. The higher costs may also 
reflect the historical allocation of overhead costs to the SNF from the 
hospital, an accounting practice that, while consistent with the 
payment incentives under the prior cost-based reimbursement system, 
means that hospital-based SNFs reported costs should be treated 

Skilled Nursing Facilities: Providers Have Responded to Medicare 
Payment System By Changing Practices (GAO-02-841, 23-AUG-02):

In 1998, the Health Care Financing Administration implemented a 
prospective payment system (PPS) for skilled nursing facility (SNF) 
services provided to Medicare beneficiaries. The PPS is intended to 
control the growth in Medicare spending for skilled nursing and 
rehabilitative services that SNFs provide by providing a predetermined 
payment for each day of care. The payment varies depending on the 
patient's payment group classification, which reflects expected 
resource use, but not the actual resource use. Two years after the 
implementation of the PPS, the mix of patients across the payment 
groups has shifted, as determined by the patients' initial assessments. 
More patients were classified into the high and medium rehabilitation 
payment group categories, which were believed to be the most 
profitable, and fewer were initially classified into the most intensive 
(highest paying) and least intensive (lowest paying) rehabilitation 
payment group categories. The majority of patients in rehabilitation 
payment groups received less therapy than was provided in 1999. This 
was true even for patients within the same rehabilitation payment group 
categories. Across all rehabilitation payment group categories, fewer 
patients received the highest amounts of therapy associated with each 
payment group.

Skilled Nursing Facilities: Services Excluded From Medicare's Daily 
Rate Need to be Reevaluated (GAO-01-816, 22-AUG-01):

Congress and the Health Care Financing Administration recognized that 
certain services needed to be excluded from the skilled nursing 
facility (SNF) prospective payment system (PPS) rate to help ensure 
beneficiary access to appropriate care and to financially protect the 
SNFs that take care of high-cost patients. The criteria used to 
identify services--high cost, infrequently provided during a SNF stay 
and likely to be overprovided--and the services currently excluded 
appear reasonable. Even so, questions remain about whether certain 
other services should be excluded and how to modify the exclusions over 
time. Current exclusion policies raise three unintended consequences--
beneficiary liability is higher for excluded services; beneficiaries 
may be required to receive excluded services in only certain 
facilities, which may be higher cost; and the broad definition of 
excluded emergency services may result in more care being classified as 
emergency. The Centers for Medicare & Medicaid Services (CMS) does not 
plan to collect data on all services provided to beneficiaries during 
their SNF stays. Without these data, CMS will have difficulty updating 
the exclusions over time and limit efforts to refine the payment 

Title III, Older Americans Act: Carryover Funds Are Not Creating a 
Serious Meal Service Problem Nationwide (GAO-01-211, 09-JAN-01):

Under Title III of the Older Americans Act, the Administration on Aging 
(AoA) distributes grants to states on the basis of their proportional 
share of the total elderly population in the United States. Most states 
then disburse these grants to more than 600 area agencies nationwide. 
The grants are further subdivided by these agencies to more than 4,000 
local service providers and are used to fund group and in-home meals, 
as well as support services, including transportation and housekeeping. 
AoA requires that states obligate these funds by September 30 of the 
fiscal year in which they are awarded. Also, states must spend this 
money within two years after the fiscal year in which it is awarded. 
During this time AoA does not limit or monitor the amount of unspent 
funds that states may carry over to the succeeding fiscal year. GAO 
examined whether states were using Title III carryover funds to expand 
their meal service programs for the elderly beyond a level sustainable 
by their annual allotments alone. GAO found that the buildup and use of 
Title III carryover funds to support elderly nutrition services does 
not appear to be a widespread problem. However, AoA does not monitor 
the states' buildup of carryover funds. As a result, the agency has 
little assurance that it could identify meal service problems that 
could emerge in the future.


Answers to Key Questions about Private Pension Plans (GAO-02-745SP, 18-

This primer on private pensions provides information on the basic 
features of the private pension plan system and the federal framework 
that governs how private plans must operate. GAO answers questions 
about the types of plans that private employers may sponsor, the 
benefits these plans provide, and the basic requirements that govern 
how these plans are administered.

Older Workers: Demographic Trends Pose Challenges for Employers and 
Workers (GAO-02-85, 16-NOV-01):

The impending retirement of the "baby boom" generation is receiving 
considerable attention. The number of older workers will grow 
substantially during the next two decades, and they will become an 
increasingly significant share of the U.S. workforce. For example, 
according to the 2001 Current Population Survey, there were 17.3 
million workers over age 55 in the laborforce, and this number is 
expected to increase to 25.3 million or over 20 percent of the 
laborforce in 2015. Although older workers are less likely than younger 
workers to lose a job, when they do lose a job, they are less likely 
than younger workers to find other employment. To retain older workers 
and extend their careers, some public and a few private employers are 
providing options, including flexible hours and financial benefits, 
reduced workloads through the use of part-time or part-year schedules, 
and job-sharing. Most employers are not yet facing labor shortages or 
other economic pressures that would require them to consider flexible 
employment arrangements because the retirement of the baby boom 
generation will occur gradually during the next several decades.

Private Pensions: Improving Worker Coverage and Benefits (GAO-02-225, 

Although pensions are an important source of income for many retirees, 
millions of workers lack individual pension coverage. Only half of the 
nation's workers have been covered by private employer-sponsored 
pensions since the 1970s. Traditional reforms to the voluntary, single-
employer-based pension system have limited potential to expand pension 
coverage and improve worker benefits. These pension reforms have 
concentrated mainly on improving tax incentives and reducing the 
regulatory burden on small employers. Furthermore, efforts to increase 
retirement savings by restricting the use of lump-sum distributions 
could limit worker participation in and contributions to pension plans. 
Three categories of reform--pooled employer reforms, universal access 
reforms, and universal participation reforms--go beyond the voluntary, 
single-employer private pension system. Pooled employer reforms seek to 
increase the number of firms offering pension coverage by creating 
centralized third-party administration and increasing pension plan 
portability. Universal access reforms seek to boost savings by offering 
payroll-based accounts, albeit without mandating employer 
contributions. Universal participation reforms would mandate pension 
availability and participation for all workers, similar to the existing 
Social Security system.

Private Pensions: IRS Can Improve the Quality and Usefulness of 
Compliance Studies (GAO-02-353, 12-APR-02):

The Internal Revenue Service (IRS) studied 401(k) plan compliance with 
Internal Revenue Code requirements for tax-qualified plans. GAO found 
that IRS's estimates of noncompliance were inaccurate. The study, which 
audited a sample of 401(k) plans, did not provide information on the 
severity of the compliance violations identified and did not determine 
the number of plan participants or the amount of assets associated with 
noncompliance errors. Only 27 of the 73 study questions identified as 
compliance indicators conclusively demonstrated whether a plan was 
compliant or not. Consequently, the 44 percent reported to have one or 
more instances of noncompliance is at best an upper limit on the extent 
of noncompliance found. IRS has chosen specific types of private 
pension plans to study in a manner similar to the one conducted on 
401(k) pension plans. The data that IRS collects will be analyzed to 
determine the prevalence and types of noncompliance among the plans 

Private Pensions: Issues of Coverage and Increasing Contribution Limits 
for Defined Contribution Plans (GAO-01-846, 17-SEP-01):

Proposals to expand pension coverage and promote pension savings have 
recently received much attention. In the Economic Growth and Tax Relief 
Reconciliation Act of 2001, for example, Congress raised statutory 
limits on tax-deferred pension contributions and benefits and made 
other changes to the law governing qualified pension plans. Some 
believe that increasing these limits will encourage employers to start 
new plans and improve existing plan coverage, especially for employees 
of small businesses. Others contend that these measures will primarily 
benefit higher-paid individuals and may not improve pension coverage 
for low-or moderate-income workers. Forty-seven percent of all workers 
participated in a pension plan, and 36 percent of all workers 
participated in a defined contribution (DC) plan. Most pension plan 
participants had low or moderate earnings (less than $40,000 per year) 
and were men. About eight percent of all DC participants, or 3.1 
million people, were likely direct beneficiaries of a simultaneous 
increase in all the statutory contribution limits GAO analyzed. Higher 
earners were more likely than low and moderate earners, and men were 
more likely than women, to benefit directly from such an increase; this 
was also true of increases in each of the separate dollar limits on 
contributions. About 721,000 DC participants, or 11 percent of eligible 
DC participants, were likely to benefit from a so-called "catch-up" 
provision allowing persons aged 50 or older to make additional 
contributions to DC plans. Higher earners were more likely to benefit 
directly from this option than were low and moderate earners. However, 
neither male more female DC participants were significantly more likely 
to benefit directly from this option.

Private Pensions: Participants Need Information on the Risks of 
Investing in Employer Securities and the Benefits of Diversification 
(GAO-02-943, 06-SEP-02):

The financial collapse of large firms and the effects on workers and 
retirees has raised questions about retirement funds being invested in 
employer securities and the laws governing such investments. Pensions 
are important source of income of many retirees, and the federal 
government has encouraged employers to sponsor and maintain pension and 
savings plans for their employees. The continued growth in these plans 
and their vulnerabilities has caused Congress to focus on issues 
related to participants investing in employer securities through 
employer-sponsored retirement plans. GAO's analysis of the 1998 plan 
data for the Fortune 1,000 firms showed that 550 of those companies 
held employer securities in their defined benefit plans or defined 
contribution plans, covering 13 million participants. Investment in 
employer securities through employer-sponsored retirement plans can 
present significant risks for employees. If the employees' retirement 
savings is largely in employer securities in these plans, employees 
risk losing not only their jobs should the company go out of business, 
but also a significant portion of their savings. Even if employers do 
not declare bankruptcy, employees are still subject to the dual risk of 
loss of job and loss of retirement savings because corporate losses and 
stock price declines can result in companies significantly reducing 
their operations. Under the Employee Retirement Income Security Act and 
the Securities Acts, the Department of Labor and Securities and 
Exchange Commission (SEC) are responsible for ensuring that certain 
disclosures are made to plan participants regarding their investments. 
Although employees in plans where they control their investments 
receive disclosures under the act regarding their investments, such 
regulations do not require companies to disclose the importance of 
diversification or warn employees about the potential risks of owning 
employer securities. SEC requires companies with defined contribution 
plans that offer employees an opportunity to invest in employer stock 
to register and disclose to SEC specific information about those plans. 
In addition, in most cases the underlying securities of those plans 
must be registered with SEC. However, SEC does not routinely review 
these company plan filings because pension plans generally fall under 
other federal regulation.

Retirement Savings: Opportunities to Improve DOL's SAVER Act Campaign 
(GAO-01-634, 26-JUN-01):

Many of today's workers may not be financially prepared for retirement 
when they stop working. Many people are counting on Social Security 
alone, without an additional retirement plan. The Savings Are Vital to 
Everyone's Retirement (SAVER) Act of 1997 requires the Department of 
Labor (DOL) to hold periodic national summits and run an outreach 
program to promote retirement saving. This report (1) identifies major 
accomplishments of the 1998 summit and issues that might affect future 
summits, (2) describes DOL's outreach program, and (3) determines what 
DOL knows about the effectiveness of the summit and outreach program. 
GAO found that the 1998 National Summit made progress in identifying 
problems that workers face in saving for retirement. DOL's Outreach 
Program--the Retirement Savings Education Campaign--targets of small 
business owners, women, minorities, and youth to change the way they 
think about, and act on, their retirement saving needs. DOL has not 
tried to assess the extent to which outreach efforts from the 1998 
National Summit and Pension and Welfare Benefits Administration have 
increased the public's knowledge and understanding of retirement 

Social Security: Program's Role in Helping Ensure Income Adequacy (GAO-
02-62, 30-NOV-01):

Before Social Security, being old often meant being poor. Today, 
dependency on public assistance has dropped to a fraction of its 
Depression-era levels, and poverty rates among the elderly are now 
lower than for the population as a whole. At the same time, Social 
Security has become the single largest source of retirement income for 
more than 90 percent of persons aged 65 and older. Automatic 
adjustments were introduced in 1972 to reflect increases in the cost of 
living. Other program changes gradually increased social security 
coverage to larger portions of the workforce and extended eligibility 
to family members and disabled workers. Other benefit programs, such as 
Supplemental Security Income (SSI), Medicare, and Medicaid, have also 
been added over the years. With regard to measuring income adequacy, 
various measures help examine different aspects of this concept, but no 
single measure can provide a complete picture. For various subgroups of 
beneficiaries that have lower lifetime earnings, poverty rates have 
also declined. Although the Social Security benefit formula favors 
lower lifetime earners, their lower earnings and work histories can 
leave them with incomes below the poverty level when they retire or 
become disabled. The outlook for future Social Security benefit levels 
and income adequacy depend on how the program's long-term financing 
imbalance is addressed, as well as on the measures used. GAO concludes 
that reductions in promised benefits and increases in program revenues 
will be needed to restore the program's long-term solvency and 
sustainability. Possible benefit changes might include adjustments to 
the benefit formula or reductions in cost-of-living increases. Possible 
revenue sources might include higher payroll taxes or transfers from 
the Treasury's general fund.

Social Security Administration: Information Systems Could Improve 
Processing Attorney Fee Payments in Disability (GAO-01-796, 29-JUN-01):

To ensure that people claiming disability insurance benefits can obtain 
legal representation at a fair price, the Social Security Act requires 
that the Social Security Administration (SSA) regulate the fees that 
attorneys charge people to represent their disability claims before the 
agency. Inefficiencies in the current process increase both the time it 
takes to pay the attorney fees and the costs of administration. One 
segment of attorney fee processing--the fee approval process--was 
substantially simplified in 1991. Systems support could streamline the 
second segment of the processing--the fee payment--thus lowering the 
annual administrative costs and cutting processing time. By automating 
this final segment of the fee processing, SSA could help improve 
customer service for both claimants and their attorneys. GAO found that 
despite internal recommendations for a new system, SSA has repeatedly 
postponed its plans to improve the attorney fee payment process. 
Indeed, even though these improvements have been part of SSA's system's 
plans since 1998, SSA has yet to establish a firm schedule for carrying 
out its plans. Additionally, although SSA has a draft plan for 
improving the process, agency officials told GAO that the details of 
the plan have not been completed and SSA has yet to complete a cost 
estimate for the project. There are also other gaps in the plan--such 
as not creating an attorney master file or establishing an electronic 
connection between the payment processing staff and the Office of 
Hearings and Appeals fee approval staff--where taking additional 
actions could improve the process. Furthermore, SSA's performance plan 
did not have goals related to attorney fees--neither for cost reduction 
of the program nor payment timeliness. SSA would need such goals as 
part of its current planning effort for improving the attorney fee 
payment process as well as for its future operations. Without such 
quantifiable goals, future efforts to track and oversee SSA's progress 
in these areas will be difficult.

Social Security Administration: Revision to the Government Pension 
Offset Exemption Should Be Reconsidered (GAO-02-950, 15-AUG-02):

Social Security benefits are payable to the spouses of retired, 
disabled, or deceased workers. The benefits often provide income to 
wives and husbands who have little or no Social Security benefits of 
their own. Until 1977, workers receiving pensions from government 
positions not covered by Social Security could receive their full 
pension benefit and their full spousal benefits as if they were 
nonworking spouses. Since then, a government pension offset has been in 
effect to equalize the treatment of workers covered by Social Security 
and those with noncovered government benefits. This report was prompted 
by a referral to GAO's Fraudnet that questioned a practice in which 
individuals in Texas were transferring to Social Security-covered 
positions for one day to avoid the offset. GAO found no central data on 
the use of the offset exemption by individuals, and time constraints 
did not permit in-depth audit work on the 2,300 state and local 
government retirement plans. However, GAO did establish that, as of 
June 2002, more than 4,800 persons in Texas and Georgia worked for 
brief periods in jobs covered by Social Security to qualify for the 
"last-day exemption." GAO estimates that the long-term Social Security 
payments to these individuals could be as high as $450 million. Such 
abuses of the offset exemption could be prevented by (1) changing the 
last-day provision to a longer minimum time period or (2) using a 
proportional approach based on the number of working years as a 
government employee spent in covered and noncovered employment to 
determine the extent to which the government pension offset applies.

SSA Disability: SGA Levels Appear to Affect the Work Behavior of 
Relatively Few Beneficiaries, but More Data Needed (GAO-02-224, 16-JAN-

The Social Security Administration's (SSA) Disability Insurance (DI) 
program paid $50 billion in cash benefits to more than five million 
disabled workers in 2000. Eligibility for DI benefits is based on 
whether a person with a severe physical or mental impairment has 
earnings that exceed the Substantial Gainful Activity (SGA) level. SSA 
terminates monthly cash benefit payments for beneficiaries who return 
to work and have earnings that exceed the SGA level--$1,300 per month 
for blind beneficiaries and $780 per month for all other beneficiaries. 
GAO found that the SGA level affects the work patterns of only a small 
proportion of DI beneficiaries. However, GAO also found that the SGA 
may affect the earnings of some beneficiaries. About 13 percent of 
those beneficiaries with earnings near the SGA level in 1985 still had 
earnings near the SGA level in 1995, even though the level was 
increased during that period. The absence of key information 
identifying the monthly earnings of beneficiaries, their trial work 
period status, and whether they are blind limited GAO's ability to 
definitively identify a relationship between SGA levels and 
beneficiaries' work patterns. Data limitations also make the effect of 
the SGA on DI program entry and exit rates difficult to isolate. 
Although the rate of program entry increased in the years immediately 
following a 1990 increase in the SGA level, it then gradually declined 
to a level below the pre-1990 entry rates. Since 1990, DI exit rates 
continue to be driven largely by beneficiary death and conversion to 
retirement benefits. However, the percentage of all exits caused by 
improvements in medical conditions or a return to work increased 
slowly, from 1.9 percent in 1985 to 9.2 percent in 1996, and then rose 
dramatically to 19.9 percent in 1997. A substantial increase in the 
number of continuing disability reviews done by SSA may account, in 
part, for this 1997 upturn, but data limitations preclude GAO from 
obtaining a full understanding of the link between the SGA and exit 

Social Security Programs: Scope of SSA's Authority to Deny Benefits to 
Fugitive Felons and to Release Information About OASI and DI 
Beneficiaries Who Are Fugitive Felons (GAO-02-459R, 27-FEB-02):

In response to concerns that individuals wanted in connection with a 
felony or violating terms of their parole or probation could receive 
benefits from programs for the needy, the Congress added provisions to 
the Personal Responsibility and Work Opportunity Reconciliation Act 
(PRWORA) of 1996 that prohibit these individuals from receiving 
Supplemental Security Income (SSI), Food Stamps benefits, Temporary 
Assistance for Needy Families (TANF), and federal housing assistance. 
To assist in the apprehension of fugitive felons, PRWORA also directs 
these programs to provide law enforcement agencies with information 
about program recipients for whom there are outstanding warrants. GAO 
was asked to determine if SSA has the authority under these provisions 
(1) to deny Old Age and Survivors Insurance (OASI) and Disability 
Insurance (DI) to fugitive felons, and (2) to give law enforcements 
agencies the current addresses and Social Security numbers of OASI or 
DI recipients who are fugitive felons. GAO found that SSA currently 
lacks the authority to deny OASI and DI benefits to fugitive felons who 
otherwise are eligible to receive them, and the Privacy Act authorizes 
but does not require SSA to provide information it collects about 
individuals, including OASI and DI recipients who are fugitive felons, 
to law enforcement agencies.

Social Security Reform: Potential Effects on SSA's Disability Programs 
and Beneficiaries (GAO-01-35, 24-JAN-01):

There has been little analysis of how the various Social Security 
reform proposals might affect the Social Security Disability Insurance 
(DI) program. This report assesses the potential impact of these 
proposals on the solvency of the DI trust fund and on the benefits 
disabled beneficiaries receive. GAO found that most disabled 
beneficiaries would receive higher benefits under the various Social 
Security reform proposals it reviewed than under a solvency scenario 
that maintained payroll tax rates while reducing benefits. However, 
most of the disabled beneficiaries GAO studied would receive lower 
benefits under three of the reform proposals reviewed than under a 
solvency scenario that maintained current-law benefits while raising 
payroll taxes. The proposals GAO studied treat DI beneficiaries similar 
to Old-Age and Survivor Insurance beneficiaries. However, the 
circumstances facing disabled workers differ from those facing retired 
workers. The differences between disabled workers and retired workers 
suggest that Social Security reform proposals should be viewed not only 
in light of their effects on retired workers but also explicitly for 
their effect on disabled beneficiaries and their families.

Supplemental Security Income: Progress Made in Detecting and Recovering 
Overpayments, but Management Attention Should Continue (GAO-02-849, 16-

The Supplemental Security Income (SSI) program is the nation's largest 
cash assistance program for the poor. The program paid $33 billion in 
benefits to 6.8 million aged, blind, and disabled persons in fiscal 
year 2001. Benefit eligibility and payment amounts for the SSI 
population are determined by complex and often difficult to verify 
financial factors such as an individual's income, resource levels, and 
living arrangements. Thus, the SSI program tends to be difficult, labor 
intensive, and time consuming to administer. These factors make the SSI 
program vulnerable to overpayments. The Social Security Administration 
(SSA) has demonstrated a stronger commitment to SSI program integrity 
and taken many actions to better deter and detect overpayments. 
Specifically, SSA has (1) obtained legislative authority in 1999 to use 
additional tools to verify recipients' financial eligibility for 
benefits, including strengthening its ability to access individuals' 
bank account information; (2) developed additional measures to hold 
staff accountable for completing assigned SSI workloads and resolving 
overpayment issues; (3) provided field staff with direct access to 
state databases to facilitate more timely verification of recipient's 
wages and unemployment information; and (4) significantly increased, 
since 1998, the number of eligibility reviews conducted each year to 
verify recipient's income, resources, and continuing eligibility for 
benefits. In addition to better detection and deterrence of SSI 
overpayments, SSA has made recovery of overpaid benefits a high 

Sustained management attention should continue to ensure progress 
towards fully implementing crucial overpayment deterrence, detection, 
and recovery tools. Despite these efforts, further improvements in 
overpayment recovery are possible. The report includes recommendations 
that SSA address complex SSI program rules to better prevent payment 
errors, reassess its policies and procedures for imposing 
administrative penalties and sanctions, and ensure that overpayment 
waiver policies are designed and implemented in a way that maintains 
program integrity.

Welfare Reform: Implementation of Fugitive Felon Provisions Should Be 
Strengthened (GAO-02-716, 25-SEP-02):

In response to concerns that individuals wanted in connection with a 
felony or violating terms of their parole or probation could receive 
benefits from programs for the needy, Congress added provisions to the 
Personal Responsibility and Work Opportunity Reconciliation Act of 1996 
that prohibit these individuals from receiving Supplemental Security 
Income (SSI), Food Stamp benefits, and Temporary Assistance to Needy 
Families (TANF) and make fugitive felon status grounds for the 
termination of tenancy in federal housing assistance programs. In 
addition, the Act directs these programs to provide law enforcement 
officers with information about program recipients for whom there are 
outstanding warrants to assist in their apprehension. Actions taken to 
implement the Act's fugitive felon provisions have varied substantially 
by program. In implementing provisions to prohibit benefits to fugitive 
felons, all but housing assistance programs include, at a minimum, a 
question about fugitive felon status in their applications. SSI and 
some state Food Stamp and TANF programs also seek independent 
verification of fugitive felon status by using computer matching to 
compare arrest warrant and program recipient files. To date, 110,000 
beneficiaries have been identified as fugitive felons and dropped from 
the SSI, Food Stamp, and TANF rolls, and many have been apprehended. 
Computerized file matching has been responsible for the identification 
of most of these fugitive felons. Aggressive implementation of the 
Act's fugitive felon provisions poses a number of challenges for 
programs. First, centralized and complete national and statewide arrest 
warrant data for computer matching are not readily available. Second, 
because direct access to arrest warrants and criminal records is 
limited to law enforcement personnel, computer matching requires what 
many state TANF and Food Stamp officials view as a burdensome and 
complex negotiation process to obtain these records. Third, the absence 
of information and guidance about how to conduct file matching and 
overcome its logistical challenges has also hindered aggressive 
implementation of the law. Finally, there is evidence that individuals 
with outstanding warrants for felonies, or probation or parole 
violations, may continue to collect benefits because there may be 
differences in the interpretation of what constitutes a fugitive felon 
within the Food Stamp and TANF programs.


DOD and VA Pharmacy: Progress and Remaining Challenges in Jointly 
Buying and Mailing Out Drugs (GAO-01-588, 25-MAY-01):

The Department of Veterans Affairs (VA) and the Department of Defense 
(DOD) have made important progress, particularly during the past year, 
in their efforts to jointly procure drugs to help control spiraling 
prescription drug costs. Although their collaborative efforts have been 
impressive, the two agencies have largely targeted generic drugs, which 
comprise less than 10 percent of their combined expenditures. More 
dramatic cost reductions could be achieved through procurements of 
high-cost brand-name drugs, although doing so can be more complex and 
time consuming to garner the necessary clinical support and provider 
acceptance on therapeutic interchangeability. Nonetheless, DOD's 
greatly expanded retiree drug benefit and the formularies being 
developed by both agencies should provide added joint procurement 
opportunities for such drugs. Also, VA and DOD have shown that flexible 
approaches to developing joint solicitations can take into account 
differences in their health systems while still maximizing drug 
discounts. In GAO's view, their joint activities could be further 
enhanced by periodically conferring with private managed care pharmacy 
experts and reporting to Congress on their joint procurement 
activities. Top management at DOD and VA need to stay focused on their 
joint procurement and distribution activities as leadership changes 
continue at the two agencies. VA and DOD have also made progress in 
their efforts to conduct a consolidated mail outpatient pharmacy pilot. 
The sooner the pilot proves feasible, the sooner DOD can begin to 
realize the financial and quality of care benefits associated with the 
transfer of its refill workload.

Financial Management: Department of Defense Regulations Establishing 
Methods to Calculate Amounts To Be Transferred from Department of 
Defense Medicare Eligible Retiree Health Care Fund (GAO-02-1061R, 30-

GAO reviewed regulations issued by the Department of Defense (DOD) to 
cover transfers from a new fund created by Congress to finance the cost 
of expanded health care programs' benefits for Medicare-eligible 
uniformed services retirees and their eligible dependents. These health 
care programs include pharmacy benefits and coverage of the deductible 
portion of Medicare benefits. The Floyd D. Spence National Defense 
Authorization Act for Fiscal Year 2001 established the Department of 
Defense Medicare Eligible Retiree Health Care Fund in the U.S. 
Treasury. Beginning on October 1, 2002, the fund will finance DOD's 
liabilities under the uniformed services retiree health programs for 
Medicare-eligible beneficiaries. The legislation requires that (1) the 
Secretary of Defense establish by regulation the methods for 
calculating amounts to be transferred periodically from the fund to 
applicable appropriations that incur the programs' cost and (2) the 
Comptroller General report to the Secretary of Defense and to Congress 
on the adequacy and appropriateness of these regulations within 30 days 
of receiving them from the Secretary. GAO found that regulations 
establishing the methods for calculating transfers from the fund to 
finance eligible health care costs were issued in July 2002, in 
sufficient time to begin making transfers upon activation of the fund 
on October 1, 2002. DOD regulations for establishing the methods for 
calculating transfers from the fund are adequate and appropriate, and 
they provide a framework for the transfers to be implemented upon 
activation of the fund. Under these regulations, there are to be daily 
transfers from the fund to cover amounts disbursed to non-DOD 
providers, such as civilian health care providers and retail 
pharmacies, based on claims transactions. The regulations also provide 
the methodology for calculating transfers to cover the cost of military 
treatment facilities care to the intended beneficiaries. However, the 
reliability of the underlying cost and patient clinical data could 
limit DOD's ability to reliably assign costs and bill DOD for services 
to DOD Medicare-eligible retirees and their eligible dependents.

VA Drug Formulary: Better Oversight Is Required, but Veterans Are 
Getting Needed Drugs (GAO-01-183, 29-JAN-01):

During the last three years, the Department of Veterans Affairs (VA) 
has made significant progress in establishing its national drug 
formulary, which has generally met with prescriber acceptance. Most 
veterans are receiving the drugs they need. However, VA oversight has 
not been sufficient to ensure that the Veterans Integrated Service 
Networks (VISN) and medical centers comply with formulary policies and 
that the flexibility given to them does not compromise VA's goal of 
formulary standardization. Contrary to VA formulary policy, some 
facilities omitted national formulary drugs or modified the closed drug 
classes. Although a limited number of drugs to supplement the national 
formulary is permitted, formulary differences among facilities are 
likely to become more pronounced, as more drugs are added by VISNs, 
decreasing formulary standardization. VA recognizes the trade-off 
between local flexibility and standardization, but it lacks criteria 
for determining the appropriateness of adding drugs to supplement the 
national formulary and therefore may not be able to determine whether 
the decrease in standardization is acceptable.

VA Health Care: Allocation Changes Would Better Align Resources with 
Workload (GAO-02-338, 28-FEB-02):

The Department of Veterans Affairs (VA) spent $21 billion in fiscal 
year 2001 to treat 3.8 million veterans--most of whom had service-
connected disabilities or low incomes. Since 1997, VA has used the 
Veterans Equitable Resource Allocation (VERA) system to allocate most 
of its medical care appropriation. GAO found that VERA has had a 
substantial impact on network resource allocations and workloads. 
First, VERA shifted $921 million from networks located primarily in the 
northeast and midwest to networks located in the south and west in 
fiscal year 2001. In addition, VERA, along with other VA initiatives, 
has provided an incentive for networks to serve more veterans. VERA's 
overall design is a reasonable approach to allocate resources 
commensurate with workloads. It provides a predetermined dollar amount 
per veteran served to each of VA's 22 health care networks. This amount 
varies depending upon the health care needs of the veteran served and 
local cost differences. This approach is designed to allocate resources 
commensurate with each network's workload in terms of veterans served 
and their health care needs. GAO identified weaknesses in VERA's 
implementation. First, VERA excludes about one fifth of VA's workload 
in determining each network's allocation. Second, VERA does not account 
well for cost differences among networks resulting from variation in 
their patients' health care needs. Third, the process for providing 
supplemental resources to networks through VA's National Reserve Fund 
has not been used to analyze how the need for such resources is caused 
by potential problems in VERA's allocation, network inefficiency, or 
other factors.

VA Health Care: Expanded Eligibility Has Increased Outpatient Pharmacy 
Use and Expenditures (GAO-03-161, 08-NOV-02):

The Department of Veterans Affairs (VA) spent about $3.0 billion on its 
outpatient pharmacy benefit in fiscal year 2001. After VA implemented 
the Veterans' Health Care Eligibility Reform Act in 1999, more veterans 
could use VA outpatient care, including the pharmacy benefit, than 
before. Increased eligibility contributed to a doubling of the number 
of Priority 7 veterans using VA health care. Priority 7 veterans are 
primarily veterans with higher incomes and no service-connected 
disability. GAO was asked to report on Priority 7 veterans' use of the 
outpatient pharmacy benefit and VA's expenditures to provide this 
benefit. To do this, GAO reviewed VA pharmacy data on use and costs 
from fiscal years 1999 through 2001.

VA spent $418 million on the outpatient pharmacy benefit for Priority 7 
veterans in fiscal year 2001. VA pharmacy expenditures for Priority 7 
veterans in this year were offset by copayments for drugs. In fiscal 
year 2001, VA collected approximately $41 million in drug copayments 
from Priority 7 veterans by charging $2 for a 30-day or less supply. 
This reduced VA's net expenditures to $377 million. After VA 
implemented eligibility reform in 1999, Priority 7 veterans' use of the 
pharmacy benefit increased rapidly from about 11 million 30-day 
equivalents of drugs or supplies in fiscal year 1999 to about 26 
million 30-day equivalents in fiscal year 2001. This resulted in more 
than a doubling of VA's net pharmacy expenditures for these veterans. 
Yet, net pharmacy expenditures for Priority 7 veterans remain a 
relatively small share of VA's total net spending for outpatient drugs 
and supplies. Most of VA's increased pharmacy spending during this 
period was for all other veterans--those with service-connected 
disabilities, low incomes, or certain other recognized statuses such as 
former prisoners of war. In fiscal year 2001, 87 percent of VA's net 
pharmacy expenditures were for these veterans.

VA Health Care: Implementation of Prescribing Guideline for Atypical 
Antipsychotic Drugs Generally Sound (GAO-02-579, 29-APR-02):

The Department of Veterans Affairs (VA) provides health care services 
to veterans who have been diagnosed with psychosis--primarily 
schizophrenia, a disorder that can substantially limit their ability to 
care for themselves, secure employment, and maintain relationships. 
These veterans also have a high risk of premature death, including 
suicide. Effective treatment, especially antipsychotic drug therapy, 
has reduced the severity of their illnesses and increased their ability 
to function in society. VA's guideline for prescribing atypical 
antipsychotic drugs is sound and consistent with published clinical 
practice guidelines used by public and private health care systems. 
VA's prescribing guideline recommends that physicians use their best 
clinical judgment, based on clinical circumstances and patients' needs, 
when choosing among the atypical drugs. Most Veterans Integrated 
Service Networks (VISN) and facilities use VA's prescribing guideline; 
however, five VISNs have additional policies and procedures for 
prescribing atypical antipsychotic drugs. Although these procedures 
help manage pharmaceutical cost, they also have the potential to result 
in more weight given to cost than clinical judgment, which is 
inconsistent with the prescribing guideline.

VA Health Care: More National Action Needed to Reduce Waiting Times, 
but Some Clinics Have Made Progress (GAO-01-953, 31-AUG-01):

In fiscal year 2000, roughly four million patients made 39 million 
outpatient visits to more than 700 health care facilities nationwide, 
run by the Department of Veterans Affairs (VA). However, excessive 
waiting times for outpatient care have been a long-standing problem. To 
ensure timely access to care, VA established a goal that all nonurgent 
primary and specialty care appointments be scheduled within 30 days; 
clinics were to meet this goal by 1998. Yet, three years later, reports 
of long waiting times persist. Waiting times at the clinics in the 10 
medical centers GAO visited indicate that meeting VA's 30-day standard 
is a continuing challenge for many clinics. Although most of the 
primary care clinics GAO visited (15 of 17) reported meeting VA's 
standard for nonurgent, outpatient appointments, only one-third of the 
specialty care clinics visited (18 of 54) met VA's 30-day standard. For 
the remaining two-thirds, waiting times ranged from 33 days at one 
urology clinic to 282 days at an optometry clinic. Although two-thirds 
of the specialty clinics GAO visited continued to have long waiting 
times, some were making progress in reducing waiting times, primarily 
by improving their scheduling processes and making better use of their 
staff. These successes were often the result of collaborative efforts 
with the Institute for Healthcare Improvement (IHI) a private 
contractor VA retained in July 1999--to develop strategies to reduce 
patient waiting times. Medical centers and clinics participating in 
VA's IHI project have received valuable information and strategies for 
successfully reducing waiting times. However, VA has only recently 
contracted with IHI to disseminate best practices agency-wide and VA 
has not established a national set of referral guidelines that could 
alleviate waiting times for specialty care.

VA Long-Term Care: Implementation of Certain Millennium Act Provisions 
Is Incomplete, and Availability of Noninstitutional Services Is Uneven 
(GAO-02-510R, 29-MAR-02):

The Department of Veterans Affairs (VA) spent about $3.1 billion on 
long-term care in fiscal year 2001. This amount is likely to increase 
as the veteran population ages. VA provides or pays for long-term care 
in institutional settings, such as nursing homes, or in veteran's own 
homes and other community locations. The Veterans Millennium Health 
Care and Benefits Act of 1999 required VA to offer long-term care 
services to eligible veterans, including in noninstitutional settings. 
More than two years after the act's passage, VA has not completely met 
the act's requirement that all eligible veterans be offered adult day 
health care, respite care, and geriatric evaluation. Although VA 
published draft regulations that would make these three services 
available, the regulations were not finalized as of March 2002. To 
respond to the act's requirements before its draft regulations were 
finalized, VA issued a policy directive making these three services 
available in noninstitutional settings. At the time of GAO's review, 
however, access to these services was far from universal. Moreover, the 
availability of all VA noninstitutional long-term care services, 
including the newly required services, is uneven across the VA system.

VA Long-Term Care: Oversight of Community Nursing Homes Needs 
Strengthening (GAO-01-768, 27-JUL-01):

The Department of Veterans Affairs (VA) spent about $1.9 billion--or 
about 10 percent of its health care budget--to provide nursing home 
care to veterans in fiscal year 2000. VA will likely see increasing 
demand for nursing home care during the next decade. The number of 
veterans age 85 and older is expected to triple--from 422,000 veterans 
in 2000 to nearly 1.3 million in 2010. Among the very old, the 
prevalence of chronic health conditions and disabilities increases 
markedly. In addition, VA is required to provide long-term care to some 
veterans, which may further increase veterans' demand for nursing home 
care. Almost 73 percent of VA's nursing home care in fiscal year 2000 
went to VA's 134 nursing homes; the rest went to state-owned and 
operated veterans' nursing homes (15 percent) or to community nursing 
homes under local or national contract to VA (12 percent). VA generally 
requires its medical center staff to conduct annual inspections of 
state veterans' homes and community nursing homes; it also requires 
monthly staff visits to veterans in community nursing homes. GAO found 
that VA's adherence to its oversight policies for state veterans' homes 
and community nursing homes has been mixed because of a lack of VA 
monitoring and oversight. VA medical staff are required to inspect each 
state veterans' home annually, and of the 86 inspections reviewed by 
GAO, about 85 percent were done within the time frame or shortly 
thereafter. VA lacks a departmentwide approach to monitoring medical 
centers' community nursing home oversight activities and enforcing VA's 
oversight policies--particularly regarding locally contracted homes, 
which make up about 75 percent of the community nursing homes under 
contract to VA--and individual medical centers vary in how well they 
have overseen community nursing homes. Under its planned policy change, 
VA would eliminate the requirement for annual inspections of community 
nursing homes and instead would rely on Medicare and Medicaid 
certification inspections. Local VA medical centers' staff will review 
state inspection reports and CMS data to evaluate community nursing 
homes. However, the quality of state inspections of nursing homes 
varies, and CMS is unable to accurately assess state inspection results 
in all cases.

Medicare Subvention Demonstration: DOD Costs and Medicare Spending 
(GAO-02-67, 31-OCT-01):

The Balanced Budget Act of 1997 authorized the Department of Defense 
(DOD) to conduct the Medicare subvention demonstration for a three-year 
period. Under this demonstration, DOD formed Medicare managed care 
organizations--collectively called TRICARE Senior Prime--at six sites 
that provided the full range of Medicare-covered services as well as 
additional DOD-covered services, notably prescription drugs. The 
Medicare program was to pay DOD for Medicare-covered care of the 
enrolled military retirees if DOD continued to spend on all aged 
military retirees at least as much as it had historically. Under the 
subvention demonstration, Senior Prime enrollees' care in 1999 cost DOD 
far more than the Medicare capitation rate that was established for the 
demonstration. This mainly resulted from enrollees' heavy use of 
medical services, but DOD coverage of prescription drugs--not included 
in the Medicare benefit package--also contributed to its high costs. 
Without the demonstration, Medicare spending in 1999 for retirees who 
enrolled in Senior Prime would have been, on average, about 55 percent 
of the Senior Prime capitation rate. This was partly because Senior 
Prime enrollees were somewhat healthier than comparable Medicare 
beneficiaries, but mainly because Medicare would have paid for only 
part of the enrollees' care. DOD would have provided much of their 
care, which would not have been reflected in Medicare's spending on 
their behalf. The Balanced Budget Act's payment rules resulted in no 
Medicare payment to DOD in 1999. This was because they were designed to 
prevent the government from paying twice for the same care--once 
through DOD appropriations and again through Medicare. The rules also 
required that the payment be adjusted to account for Senior Prime 
enrollees' health status. Together, these two requirements resulted in 
Medicare paying nothing for care provided in 1999. Even without these 
two requirements, Medicare would have paid DOD less than the monthly 
capitation rate of $320 per person, because Congress had capped the 
Medicare payment for all enrollees at $60 million for 1999.

Medicare Subvention Demonstration: DOD's Pilot HMO Appealed to Seniors, 
Underscored Management Complexities (GAO-01-671, 14-JUN-01):

This interim report reviews the implementation of the Department of 
Defense (DOD) Medicare Subvention Demonstration. GAO found that the 
demonstration sites were successful in operating Medicare managed care 
plans. Officials put substantial effort into meeting Medicare managed 
care requirements and, according to Health Care Financing 
Administration reviewers, were generally as successful as other new 
Medicare managed care plans in this regard. Most sites reached the 
enrollment limits they had established for retirees already covered by 
Medicare. DOD officials indicated that the demonstration's effect was 
positive. Enrollees received a broader range of services from DOD than 
in the past, when they got care only when space was available in DOD 
facilities. Officials also noted that providing more comprehensive care 
to seniors helped sharpen the skills of military clinical staff, which 
contributed to their readiness for supporting combat or other military 
missions. Some challenges encountered in the demonstration reflect 
larger DOD managed care issues and may have implications for DOD 
managed care generally. Although access to care was generally good, the 
demonstration experienced some problems in maintaining adequate 
clinical staff.

Medicare Subvention Demonstration: Greater Access Improved Enrollee 
Satisfaction but Raised DOD Costs (GAO-02-68, 31-OCT-01):

In the Balanced Budget Act of 1997, Congress established a three-year 
demonstration, called Medicare subvention, to improve the access of 
Medicare-eligible military retirees to care at military treatment 
facilities (MTF). The demonstration allowed Medicare-eligible retirees 
to get their health care largely at MTFs by enrolling in a Department 
of Defense (DOD) Medicare managed care organization known as TRICARE 
Senior Prime. During the subvention demonstration, access to health 
care for many retirees who enrolled in Senior Prime improved, while 
access to MTF care for some of those who did not enroll declined. Many 
enrollees in Senior Prime said they were better able to get care when 
they needed it. They also reported better access to doctors in general 
as well as to care at MTFs. Enrollees generally were more satisfied 
with their care than before the demonstration. However, the 
demonstration did not improve enrollees' self-reported health status. 
In addition, compared to nonenrollees, enrollees did not have better 
health outcomes, as measured by their mortality rates and rates of 
"preventable" hospitalizations. Moreover, DOD's costs were high, 
reflecting enrollees' heavy use of hospitals and doctors.

Medicare Subvention Demonstration: Pilot Satisfies Enrollees, Raises 
Cost and Management Issues for DOD Health Care (GAO-02-284, 11-FEB-02):

The Department of Defense's (DOD) Medicare subvention demonstration 
tested alternate approaches to health care coverage for military 
retirees. Retirees could enroll in new DOD-run Medicare managed care 
plans, known as TRICARE Senior Prime, at six sites. The demonstration 
plan offered enrollees the full range of Medicare-covered services as 
well as additional TRICARE services, with minimal copayments. During 
the demonstration period, the program parameters were changed, allowing 
military retirees age 65 and older to become eligible for TRICARE 
coverage as of October 1, 2001, and Senior Prime was extended for one 
year. The demonstration showed that retirees were interested in 
enrolling in low-cost military health plans and that DOD was able to 
satisfy its Senior Prime enrollees. By the close of the initial 
demonstration period, about 33,000 retirees were enrolled in Senior 
Prime, and more were on waiting lists. When nonenrollees were asked why 
they did not join Senior Prime, more than 60 percent said that they 
were satisfied with their existing health coverage; few said that they 
disliked military care. Although the demonstration had positive results 
for enrollees, it also highlighted three challenges confronting the 
military health system in managing patient care and costs. First, care 
needs to be managed more efficiently. Although DOD satisfied enrollees 
and gave them good access to care, it incurred high costs. Second, 
DOD's efforts were hindered by limitations in its data and data 
systems. Finally, the demonstration illustrated the tension between the 
military health system's commitment to support military operations and 
promote the health of active-duty personnel and its commitment to 
provide care to dependents of active-duty personnel, retirees and their 
families, and survivors.


Electronic Transfers: Use by Federal Payment Recipients Has Increased 
but Obstacles to Greater Participation Remain (GAO-02-913, 12-SEP-02):

In 2001, the Department of the Treasury made 764 million payments 
valued at $549 billion to beneficiaries of federal programs, primarily 
programs administered by the Social Security Administration. Of these 
payments, 76 percent were made using electronic funds transfers (EFTs), 
potentially saving the government millions of dollars in costs 
associated with disbursing paper checks. In 1996, Congress passed 
legislation, which required that federal payments except tax refunds be 
made electronically as of January 1999. The act also required that each 
person affected by this mandate have access to an account at a 
financial institution at a reasonable cost and with certain consumer 
protections. To meet this requirement, Treasury developed the 
Electronic Transfer Account (ETA). Most recipients of federal benefits 
have their payments deposited electronically. The number of recipients 
using EFT climbed steadily throughout the 1990s, rising from around 
half to more than three-quarters of all beneficiaries. Treasury and the 
Social Security Administration (SSA) have undertaken activities to 
increase the use of direct deposit, including developing marketing 
material and directly notifying check recipients of the advantages of 
using EFT, particularly safety and convenience. Although information 
describing the characteristics of these EFT users is limited, GAO 
determined that participation rates are highest for those 65 and older. 
The primary obstacle to using EFT was that many federal check 
recipients did not have a bank account. GAO's analysis of the Survey of 
Income and Program Participation's 1998 data indicated that 11 million 
benefit recipients, over half of all federal benefit check recipients 
in 1998, were unbanked. The ETA has not been widely accepted by banks 
or unbanked beneficiaries despite Treasury's efforts to promote it. 
Since initiation of the program in 1999, 36,000 ETAs have been opened, 
representing fewer than 1 percent of unbanked beneficiaries. Based on 
discussions with representatives from Treasury, SSA, financial 
institutions, and consumer groups, GAO identified several approaches 
that Treasury could consider to increase the use of electronic 
transfers. These approaches include increasing cooperation between 
banks and local SSA offices to more effectively enroll beneficiaries 
for ETAs; exploring other electronic payment options besides the ETA to 
deliver benefits; partnering with banks to provide information on the 
general availability of low cost banking products, especially in areas 
with low ETA coverage; and conducting further research to determine why 
certain states have low direct deposit participation rates.

Information Technology Management: Social Security Administration 
Practices Can Be Improved (GAO-01-961, 21-AUG-02):

The Social Security Administration (SSA) needs to identify strengths 
and weaknesses within its agency-wide operational and managerial 
capabilities to enable the delivery of high-quality customer service in 
the face of increases in both workloads and in the number of 
retirements from its experienced workforce. Evaluating SSA's management 
of information technology (IT) is critical to assess whether the agency 
is adequately addressing these capabilities. This report reviews SSA's 
IT policies, procedures, and practices in the following five areas: 
investment management, enterprise architecture, software acquisition 
and development, information security, and human capital. GAO found 
that SSA had many important IT management policies and procedures in 
place in each of these five key areas but did not always implement them 
consistently. In some areas, SSA had not established key policies, 
procedures, or practices essential to ensure that its IT was 
effectively managed. GAO found weaknesses in all of the five key areas 
of IT management--particularly in investment management and human 
capital management.

Record Linkage and Privacy: Issues in Creating New Federal Research and 
Statistical Information (GAO-01-126SP, 01-APR-01):

This study focuses on privacy issues related to record-linkage--a 
computer-based process that combines multiple of existing data on 
individual persons. Federally sponsored linkage projects conducted for 
research and statistical purposes have many potential benefits, such as 
informing policy debates; tracking program outcomes; or contributing 
knowledge that, in some cases, might benefit millions of people. 
Examples of record linkage in GAO's study include the use of 
administrative and survey data on the aging to provide a better 
understanding of health care and income security issues relevant to 
this population. Despite these benefits, concerns about personal 
privacy are relevant because linkages often involve data on 
identifiable persons. GAO describes (1) how record linkage can create 
new research and statistical information related to the aging and other 
populations, (2) why linkage heightens certain privacy issues, and (3) 
how data stewardship might be enhanced.

Testimonies: Calendar Years 2001 and 2002, Issues Affecting Older 


Flu Vaccine: Steps Are Needed to Better Prepare for Possible Future 
Shortages (GAO-01-786T, 30-MAY-01):

Until the 2001 flu season, the production and distribution of influenza 
vaccine generally went smoothly. Last year, however, several people 
reported that they wanted but could not get flu shots. In addition, 
physicians and public health departments could not provide shots to 
high-risk patients in their medical offices and clinics because they 
had not received vaccine they ordered many months in advance, or 
because they were being asked to pay much higher prices for vaccine in 
order to get it right away. At the same time, there were reports that 
providers in other locations, even grocery stores and restaurants, were 
offering flu shots to everyone--including younger, healthier people who 
were not at high risk. This testimony discusses the delays in 
production, distribution, and pricing of the 2000-2001 flu vaccine. GAO 
found that manufacturing difficulties during the 2000-2001 flu season 
resulted in an overall delay of about six to eight weeks in shipping 
vaccine to most customers. This delay created an initial shortage and 
temporary price spikes. There is no system in place to ensure that 
high-risk people have priority for receiving flu shots when supply is 
short. Because vaccine purchases are mainly done in the private sector, 
federal actions to help mitigate any adverse effects of vaccine delays 
or shortages need to rely to a great extent on collaboration between 
the public and private sectors.

Health Insurance: Proposals for Expanding Private and Public Coverage 
(GAO-01-481T, 15-MAR-01):

Various approaches have been proposed to increase private and public 
health care coverage of uninsured persons. The success of these 
proposals will depend on several key factors. The impact of tax 
subsidies on promoting private health insurance will depend on whether 
the subsidies reduce premiums enough to induce uninsured low-income 
individuals to buy health insurance and on whether these subsidies can 
be made available at the time the person needs to pay premiums. The 
effectiveness of public program expansions will depend on states' 
ability and willingness to use any new flexibility to cover uninsured 
residents as well as develop effective outreach to enroll the targeted 
populations. Although crowd-out is a concern with any of the 
approaches, some degree of public funds going to those currently with 
private health insurance may be inevitable to provide stable health 
coverage for some of the 42 million uninsured Americans.

Health Products for Seniors: Potential Harm From 'Anti-Aging' Products 
(GAO-01-1139T, 10-SEP-01):

Dietary supplements marketed as anti-aging therapies may pose a 
potential for physical harm to senior citizens. Evidence from the 
medical literature shows that a variety of frequently used dietary 
supplements can have serious health consequences for seniors. 
Particularly risky are products that may be used by seniors who have 
underlying diseases or health conditions that make the use of the 
product medically inadvisable or supplements that interact with 
medications that are being taken concurrently. Studies have also found 
that these products sometimes contain harmful contaminants or much more 
of an active ingredient than is indicated on the label. Although GAO 
was unable to find any recent, reliable estimates of the overall 
economic harm to seniors from these products, it did uncover several 
examples that illustrate the risk of economic harm. The Food and Drug 
Administration (FDA) and the Federal Trade Commission (FTC) have 
identified several products that make advertising or labeling claims 
with insufficient substantiation, some costing consumers hundreds or 
thousands of dollars apiece. The potential for harm to senior citizens 
from health products making questionable claims has been a concern for 
public health and law enforcement officials. FDA and FTC sponsor 
programs and provide educational materials for senior citizens to help 
them avoid health fraud. At the state level, agencies are working to 
protect consumers of health products by enforcing state consumer 
protection and public health laws, although anti-aging and alternative 
products are receiving limited attention. This testimony summarized a 
September report (GAO-01-1129).

Health Workforce: Ensuring Adequate Supply and Distribution Remains 
Challenging (GAO-01-1042T, 01-AUG-01):

This testimony discusses (1) the shortage of healthcare workers and (2) 
the lessons learned by the National Health Service Corps (NHSC) in 
addressing these shortages. GAO found that problems in recruiting and 
retaining health care professionals could worsen as demand for these 
workers increases. High levels of job dissatisfaction among nurses and 
nurses aides may also play a crucial role in current and future nursing 
shortages. Efforts to improve the workplace environment may both reduce 
the likelihood of nurses and nurse aides leaving the field and 
encourage more young people to enter the nursing profession. 
Nonetheless, demographic forces will continue to widen the gap between 
the number of people needing care and the nursing staff available. As a 
result, the nation will face a caregiver shortage very different from 
shortages of the past. More detailed data are needed, however, to 
delineate the extent and nature of nurse and nurse aide shortages to 
assist in planning and targeting corrective efforts. Better 
coordination of NHSC placements, with waivers for foreign U.S.-educated 
physicians, could help more needy areas. In addition, addressing 
shortfalls in the Department of Health and Human Services (HHS) systems 
for identifying underservice is long overdue. HHS needs to gather more 
consistent and reliable information on the changing needs for services 
in underserved communities. Until then, it will remain difficult to 
determine whether federal resources are appropriately targeted to 
communities of greatest need and to measure their impact.

Long-Term Care: Aging Baby Boom Generation Will Increase Demand and 
Burden on Federal and State Budgets (GAO-02-544T, 21-MAR-02):

As more and more of the baby boomers enter retirement age, spending for 
Medicare, Medicaid, and Social Security is expected to absorb 
correspondingly larger shares of federal revenue and threatens to crowd 
out other spending. The aging of the baby boomers will also increase 
the demand for long-term care and contribute to federal and state 
budget burdens. The number of disabled elderly who cannot perform daily 
living activities without assistance may double in the future. Long-
term care spending from public and private sources--about $137 billion 
for persons of all ages in 2000--will rise dramatically as the baby 
boomers age. Without fundamental financing changes, Medicaid--which 
pays more than one-third of long-term care expenditures for the 
elderly--can be expected to remain one of the largest funding sources, 
straining both federal and state governments.

Long-Term Care: Baby Boom Generation Increases Challenge of Financing 
Needed Services (GAO-01-563T, 27-MAR-01):

The confluence of the aging baby boom generation, longer life 
expectancies, and evolving options for providing and financing long-
term care services will require substantial public and private 
investment in long-term care and the development of sufficient capacity 
to serve this growing population. Spending for long-term care was about 
$134 billion in 1999. Medicaid and Medicare paid for nearly 58 percent 
of these services, contributing about $59 billion and $18 billion, 
respectively. Private long-term care insurance is viewed as a possible 
way to reduce catastrophic financial risk for the elderly needing long-
term care and to relieve some of the financing burden now shouldered by 
public long-term care programs. Yet private insurance represents only 
about 10 percent of long-term care spending. Questions remain about the 
affordability of policies and the value of the coverage relative to the 
premiums charged. Although many states have adopted standards for long-
term care policies, it is uncertain whether these standards have 
bolstered consumer confidence in the reliability of long-term care 
insurance. If long-term care insurance is to have a more significant 
role in addressing the baby boom generation's upcoming chronic health 
care needs, consumers must view the policies being offered as reliable, 
affordable products with benefits and limitations that are easy to 

Long-Term Care: Elderly Individuals Could Find Significant Variation in 
the Availability of Medicaid Home and Community Services (GAO-02-1131T, 

As the baby boomers age, spending on long-term care for the elderly 
could nearly quadruple by 2050. The growing demand for long-term care 
will put pressure on federal and state budgets because long-term care 
relies heavily on public financing, particularly Medicaid. Nursing home 
care traditionally has accounted for most Medicaid long-term care 
expenditures, but the high costs of such care and the preference of 
many individuals to stay in their own homes has led states to expand 
their Medicaid programs to provide coverage for home-and community-
based long-term care. GAO found that a Medicaid-eligible elderly 
individual with the same disabling conditions, care needs, and 
availability of informal family support could find significant 
differences in the type and intensity of home and community-based 
services that would be offered for his or her care. These differences 
were due in part to the very nature of long-term care needs--which can 
involve physical or cognitive disabling conditions--and the lack of a 
consensus as to what services are needed to compensate for these 
disabilities and what balance should exist between publicly available 
and family-provided services. The differences in care plans were also 
due to decisions that states have made in designing their Medicaid 
long-term care programs and the resources devoted to them. The case 
managers GAO contacted generally offered care plans that relied on in-
home services rather than other residential care settings. However, the 
extent of in-home services offered varied considerably.

Long-Term Care: Implications of Supreme Court's Olmstead Decision Are 
Still Unfolding (GAO-01-1167T, 24-SEP-01):

In the Olmstead case, the Supreme Court decided that states were 
violating title II of the Americans with Disabilities Act of 1990 (ADA) 
if they provided care to disabled people in institutional settings when 
they could be appropriately served in a home or community-based 
setting. Considerable attention has focused on the decision's 
implications for Medicaid, the dominant public program supporting long-
term care institutional, home, and community-based services. Although 
Medicaid spending for home and community-based service is growing, 
these are largely optional benefits that states may or may not choose 
to offer, and states vary widely in the degree to which they cover 
them. The implications of the Olmstead decision--in terms of the scope 
and the nature of states' obligation to provide home and community-
based long-term care services--are still unfolding. Although the 
Supreme Court ruled that providing care in institutional settings may 
violate the ADA, it also recognized that there are limits to what 
states can do, given the available resources and the obligation to 
provide a range of services for disabled people. The decision left many 
open questions for states and lower courts to resolve. State programs 
also may be influenced over time as dozens of lawsuits and hundreds of 
formal complaints seeking access to appropriate services are resolved.

Medicare: Cost Sharing Policies Problematic for Beneficiaries and 
Program (GAO-01-713T, 09-MAY-01):

Medicare provides valuable and extensive health care coverage for 
beneficiaries. Nevertheless, significant gaps leave some beneficiaries 
vulnerable to sizeable financial burdens from out-of-pocket expenses. 
Medigap is a widely available source of supplemental coverage. This 
testimony discusses (1) beneficiaries' potential financial liability 
under Medicare's current benefit structure and cost-sharing 
requirements, (2) the cost of Medigap policies and the extent to which 
they provide additional coverage, and (3) concerns that Medigap's so-
called "first dollar" coverage undermines the cost control incentives 
of Medicare's cost-sharing requirements. GAO found that Medicare's 
benefits package and cost-sharing requirements leave beneficiaries 
liable for high out-of-pocket costs. Medigap policies pay for some or 
all Medicare cost-sharing requirements but do not fully protect 
beneficiaries from potentially significant out-of-pocket costs such as 
prescription drug coverage. Medigap first-dollar coverage eliminates 
the ability of Medicare's cost-sharing requirements to promote prudent 
use of services.

Medicare: Financial Outlook Poses Challenges for Sustaining Program and 
Adding Drug Coverage (GAO-02-643T, 17-APR-02):

The lack of outpatient prescription drug coverage may leave Medicare's 
most vulnerable beneficiaries with high out-of-pocket costs. Recent 
estimates suggest that, at any given time, more than a third of 
Medicare beneficiaries lack prescription drug coverage. The rest have 
some coverage through various sources--most commonly employer-
sponsored health plans. Recent evidence indicates that this coverage is 
beginning to erode. The short-and long-term cost pressures facing 
Medicare will require substantial financing and programmatic reforms to 
put future Medicare on a sustainable footing. In the absence of a drug 
benefit, many Medicare beneficiaries obtain coverage through health 
plans, public programs, and the Medigap insurance market. The price, 
availability, and level of such coverage varies widely, leaving 
substantial gaps and exposure to high out-of-pocket costs for 
thousands. Despite pressures to adopt a prescription drug benefit, the 
rapidly rising cost of current obligations argues for careful 
deliberation and extreme caution in expanding benefits. GAO's long-term 
simulations show that the aging of the baby boomers and rising per 
capita health care spending will, absent meaningful reform, lead to 
massive fiscal challenges in future years.

Medicare: New Spending Estimates Underscore Need for Reform (GAO-01-
1010T, 25-JUL-01):

Although the short-term outlook of Medicare's hospital insurance trust 
fund improved in the last year, Medicare's long-term prospects have 
worsened. The Medicare Trustee's latest projections, released in March, 
use more realistic assumptions about health care spending in the years 
ahead. These latest projections call into question the program's long-
term financial health. The Congressional Budget Office also increased 
its long-term estimates of Medicare spending. The slowdown in Medicare 
spending growth in recent years appears to have ended. In the first 
eight months of fiscal year 2001, Medicare spending was 7.5 percent 
higher than a year earlier. This testimony discusses several 
fundamental challenges to Medicare reform. Without meaningful 
entitlement reform, GAO's long-term budget simulations show that an 
aging population and rising health care spending will eventually drive 
the country back into deficit and debt. The addition of a prescription 
drug benefits would boost spending projections even further. Properly 
structured reform to promote competition among health plans could make 
Medicare beneficiaries more cost conscious. The continued importance of 
traditional Medicare underscores the need to base adjustments to 
provider payments on hard evidence rather than on anecdotal 
information. Similarly, reforms in the management of the Medicare 
program should ensure that adequate resources accompany increased 
expectations about performance and accountability. Ultimately, broader 
health care reforms will be needed to balance health care spending with 
other societal priorities.

Medicare: Use of Preventive Services is Growing but Varies Widely (GAO-
02-777T, 23 -MAY-02):

Preventive health care services can extend lives and promote the well 
being of the nation's seniors. Medicare now covers 10 preventive 
services--three types of immunizations and seven types of screenings--
and legislation has been introduced to cover additional services. 
However, not all beneficiaries avail themselves of Medicare's 
preventive services. Some may simply choose not to use them, but others 
may be unaware that these services are covered by Medicare. Although 
the use of Medicare preventive service is growing, it varies from 
service to service and by state, ethnic group, income, and level of 
education. To ensure that preventive services are delivered to those 
who need them, the Centers for Medicare and Medicaid Services (CMS) 
sponsors activities to increase their use. CMS now funds interventions 
to increase the use of three services--breast cancer screening and 
immunizations against the flu and pneumonia--in each state. CMS also 
pays for interventions to increase use of services by minorities and 
low-income beneficiaries with low usage rates. CMS is evaluating the 
effectiveness of current efforts and expects to have the evaluation 
results later in 2002.

Medicare Hospital and Physician Payments: Geographic Cost Adjustments 
Important to Preserve Beneficiary Access to Services (GAO-02-968T, 23-

This testimony discusses Medicare program payment adjustments to 
hospitals and physicians that account for geographic differences in 
costs. Because Medicare's hospital and physician payment systems are 
based on national rates, these geographic cost adjustments are 
essential to account for costs beyond providers' control and to ensure 
that beneficiaries have adequate access to services. If these 
adjustments are not adequate, this could affect providers' financial 
stability and their ability or willingness to continue serving Medicare 
patients. Medicare's payments to hospitals vary with the average wages 
paid in a hospital's labor market. Yet, some hospitals believe that the 
labor cost adjustment applied does not reflect the average wage in 
their labor market area. Medicare's labor cost adjustment does not 
adequately account for geographic differences in hospital wages in some 
areas because a single adjustment is applied to all hospitals in an 
area, even though it may encompass multiple labor markets or different 
types of communities within which hospitals pay significantly different 
average wages. Geographic reclassification addresses some inequities in 
Medicare's labor cost adjustments by allowing some hospitals that pay 
wages enough above the average in their area to receive higher labor 
cost adjustments. However, some hospitals can reclassify even though 
they pay wages that are comparable to the average in their area. To 
help ensure that beneficiaries in all parts of the country have access 
to services, Medicare adjusts its physician fee schedule on the basis 
of indexes designed to reflect cost differences among 92 geographic 
areas. The adjustment is designed to help ensure that the fees paid 
appropriately reflect the cost of living and operating a practice in 
that area.

Medicare Management: Current and Future Challenges (GAO-01-878T, 19-

Medicare is a popular program that millions of Americans depend on for 
covering their essential health needs. However, the management of the 
program has fallen short of expectations because it has not always 
appropriately balanced or satisfied the needs of beneficiaries, 
providers, and taxpayers. For example, stakeholders expect that 
Medicare will price services prudently; that providers will be treated 
fairly and paid accurately; and that beneficiaries will clearly 
understand their program options and will receive services that meet 
quality standards. In addition, there are expectations that the agency 
will be prepared to implement restructuring or added benefits in the 
context of Medicare reform. Today's Medicare, although successful in 
some areas, may not be able to meet these expectations effectively 
without further congressional attention to its multiple missions, 
capacity, and flexibility. The program will also need to do its part by 
implementing a performance-based approach that articulates priorities, 
documents resource needs, and holds managers accountable for 
accomplishing program goals.

Medicare Outpatient Drugs: Program Payments Should Better Reflect 
Market Prices (GAO-02-531T, 14-MAR-02):

In some cases, Medicare pays significantly more for covered outpatient 
drugs than the actual costs to the physicians and pharmacy suppliers. 
Attempts to reduce these payments have been met with provider claims 
that overpayments for the drugs are needed to cover underpayments for 
administering or delivering them. Medicare's method for establishing 
drug payments is flawed. Medicare pays 95 percent of the average 
wholesale price (AWP), which, despite its name, is neither an average 
nor a price that wholesalers charge. Instead, it is a number that 
manufacturers derive using their own criteria. There are no 
requirements or conventions that AWP reflect the price of actual drug 
sales. Widely available prices for drugs in 2001 were substantially 
below AWP. For both physician-billed drugs and pharmacy supplier-billed 
drugs, Medicare payments often far exceeded widely available prices. 
Physicians and pharmacy suppliers contend that the excess payments for 
covered drugs are necessary to offset what they claim are 
inappropriately low Medicare payments or no such payments for services 
related to the administration or delivery of these drugs. Although 
physicians receive an explicit payment for administering drugs, 
Medicare's payment policies for delivering pharmacy supplier-billed 
drugs and related equipment are uneven. Pharmacy suppliers billing 
Medicare receive a dispensing fee for one drug type--inhalation therapy 
drugs--but not for other covered drugs, such as infusion therapy or 
covered oral drugs. Other payers and purchasers, such as private health 
plans and the Department of Veterans Affairs (VA), use different 
approaches to pay for or buy drugs that may be instructive for 
Medicare. In particular, VA uses the leverage from the volume of 
federal drug purchases to secure verifiable data on actual market 
transactions, and it uses the prices paid by manufacturers' best 
customers to set Federal Supply Schedule prices.

Medicare Physician Payments: Spending Targets Encourage Fiscal 
Discipline, Modifications Could Stabilize Fees (GAO-02-441T, 14-FEB-

Congress implemented a physician fee schedule and a fee update formula 
to moderate spending growth relative to specified Medicare spending 
targets. These spending targets increase annually to reflect higher 
costs for physician services, the growth in the overall economy, and 
changes in the number of Medicare beneficiaries. Physician fees are 
adjusted for changes in the costs of providing services and on actual 
cumulative spending compared to the cumulative targets. The annual 
update may increase or decrease fees depending on whether actual 
spending fell below or exceeded the targets. In November 2001, the 
Centers for Medicare and Medicaid announced that Medicare's fees would 
decline 5.4 percent from what was paid in 2001, despite an estimated 
2.6 percent increase in the cost of physician inputs. This reduction 
occurred because historical cumulative spending exceeded the target by 
$8.9 billion, or 13 percent of estimated 2002 spending. Several factors 
contributed to the disparity between actual and targeted spending, 
including the correction of substantial errors in past spending 
estimates and the revision of targets for prior years. The current 
update mechanism could be modified to moderate fluctuations in 
physician fees and to ensure adequate payments, while retaining the 
fiscal discipline created by a spending target. Such modifications 
would need to balance concerns about preserving fiscal discipline on 
physician spending with the need to maintain adequate payment rates to 
ensure that beneficiaries have access to physician services. Because 
the paramount consideration in setting payment rates is ensuring 
appropriate beneficiary access to services, timely and detailed data on 
Medicare beneficiary service use are essential to achieving this 

Medicare Reform: Modernization Requires Comprehensive Program View 
(GAO-01-862T, 14-JUN-01):

Medicare faces many challenges. The overarching issue is how to sustain 
the program for future generations. Meeting that challenge will require 
difficult decisions that will affect beneficiaries, providers, and 
taxpayers. However, the financing issue should not obscure other 
important challenges. Medicare's current cost-sharing arrangements do 
not encourage the efficient use of services without discouraging 
necessary care. Moreover, the lack of catastrophic coverage can leave 
some beneficiaries liable for substantial Medicare expenses. Finally, 
some aspects of Medicare's program management are inefficient and lag 
behind modern private sector practices. Changes in Medicare's program 
management could improve both the delivery of health care to 
beneficiaries and the program's ability to pay providers appropriately. 
Some view restructuring of the relationship between parts A and B as an 
important element of overall Medicare reform. Fundamentally, assessing 
the program as a whole is an important first step in addressing 
Medicare's challenges. Solutions to many of these challenges could be 
crafted without restructuring. However, restructuring may provide 
opportunities to implement desired reforms--with or without unifying 
the Hospital Insurance and Supplemental Medical Insurance trust funds-
-while undoubtedly raising issues that will have to be considered.

Medigap: Current Polices Contain Coverage Gaps, Undermine Cost Control 
Incentives (GAO-02-533T, 14-MAR-02):

Medicare provides valuable and extensive health care coverage for 40 
million elderly and disabled beneficiaries. Nevertheless, significant 
gaps leave some beneficiaries vulnerable to sizeable out-of-pocket 
expenses. Medicare provides no limit on out-of-pocket spending and no 
coverage for most outpatient prescription drugs. Most beneficiaries 
have supplemental coverage that helps to fill Medicare coverage gaps 
and pay some out-of-pocket expenses. Privately purchased Medigap 
policies are a widely available source of supplemental coverage. The 
other sources--employer-sponsored policies, Medicare + Choice plans, 
and Medicaid--are not available to all beneficiaries. Medigap policies 
help to fill in some of Medicare's gaps but also have shortcomings. In 
1999, premiums paid for Medigap policies averaged $1,300, with more 
than 20 percent going to administrative costs. Medigap plans typically 
cover Medicare's required deductibles, coinsurance, and copayments but 
do not fully protect beneficiaries from potentially significant out-of-
pocket costs. Medigap policies offering prescription drug coverage can 
be inadequate because beneficiaries still pay most of the cost and the 
Medigap benefit is capped.

Nursing Homes: Many Shortcomings Exist in Efforts to Protect Residents 
from Abuse (GAO-02-448T, 04-MAR-02):

Often suffering from multiple physical and mental impairments, the 1.5 
million elderly and disabled Americans living in nursing homes are a 
highly vulnerable population. These individuals typically require 
extensive help with daily living, such as such as dressing, feeding, 
and bathing. Many require skilled nursing or rehabilitative care. In 
recent years, reports of inadequate care, including malnutrition, 
dehydration, and other forms of neglect, have led to mounting scrutiny 
from state and federal authorities. Concerns have also been growing 
that some residents are abused--pushed, slapped, or beaten--by the very 
individuals to whom their care has been entrusted. GAO found that 
allegations of physical and sexual abuse of nursing home residents are 
not reported promptly. Local law enforcement officials said that they 
are seldom summoned to nursing homes to immediately investigate 
allegations of abuse and that few allegations are ever prosecuted. Some 
agencies use different policies when deciding whether to refer 
allegations of abuse to law enforcement. As a result, law enforcement 
agencies were never told of some incidents or were notified only after 
lengthy delays. GAO found that federal and state safeguards intended to 
protect nursing home residents from abuse are inadequate. No federal 
statute requires criminal background checks for nursing home employees. 
Background checks are also not required by the Centers for Medicare and 
Medicaid Services, which sets the standards that nursing homes must 
meet to participate in the Medicare and Medicaid programs. State 
agencies rarely recommend that sanctions be imposed on nursing homes. 
Although state agencies compile lists of aids who have previously 
abused residents, which can prevent an aide from being hired at another 
nursing home, GAO found that delays in making these identifications can 
limit the usefulness of these registries. This testimony summarizes a 
March report (GAO-02-312).

Nursing Workforce: Multiple Factors Create Nurse Recruitment and 
Retention Problems (GAO-01-912T, 27-JUN-01):

While comprehensive data are lacking on the nature and extent of 
current difficulties recruiting and retaining nurses, current evidence 
suggests an emerging shortage. Several factors, including nurses' 
decreased levels of job satisfaction, are combining to constrain the 
current supply of nurses. Furthermore, like the general population, the 
nurse workforce is aging, and the average age of a registered nurse 
(RN) increased from 37 years in 1983 to 42 in 1998. Additionally, 
enrollments in registered nursing programs have declined over the past 
5 years, shrinking the pool of new workers to replace those who are 
leaving or retiring. The problem is expected to become more serious in 
the future as the aging of the population substantially increases the 
demand for nurses.

Retiree Health Insurance: Gaps in Coverage and Availability (GAO-02-
178T, 01-NOV-01):

In 1999, about 10 million Americans aged 55 and older relied on 
employer-sponsored health benefits until they became eligible for 
Medicare or to pay for out-of-pocket expenses not covered by Medicare. 
However, the number of employers offering these benefits has declined 
considerably during the past decade. Despite the recent strong economy 
and the relatively low increases in health insurance premiums during 
the late 1990's, the availability of employer-sponsored health benefits 
for retirees has declined. Two widely cited surveys found that only 
about one-third of large employers and less than 10 percent of small 
employers offer such benefits. Alternative sources of health care 
coverage for retirees may be costly, limited, or unavailable. Retirees 
not yet 65 may be eligible for coverage from a spouse's employer or 
continuation coverage, known as "COBRA," from their former employer. 
Other retirees not yet 65 may seek coverage in the individual insurance 
market, but these policies can be expensive or may offer more limited 
coverage, especially for those with existing health problems. Nearly 
one-third of retirees eligible for Medicare have employer-sponsored 
supplemental coverage, but many others buy private supplemental 
coverage known as "Medigap." It costs an average of $1,300 per year and 
more for Medigap policies that include prescription drug coverage. 
Neither Medicare nor private insurance covers a significant share of 
long-term care expenses.


Private Pensions: Key Issues to Consider Following the Enron Collapse 
(GAO-02-480T, 27-FEB-02):

The collapse of the Enron Corporation and the resulting loss of 
employee retirement savings highlighted several key vulnerabilities in 
the nation's private pension system. Asset diversification was a 
crucial lesson, especially for defined contribution plans, in which 
employees bear the investment risk. The Enron case underscores the 
importance of encouraging employees to diversify. Workers need clear 
and understandable information about their pension plans to make sound 
decisions on retirement savings. Although disclosure rules require plan 
sponsors to provide participants with a summary of their plan benefits 
and rights and to notify them when benefits are changed, this 
information is not always clear, particularly in the case of complex 
plans like floor-offset arrangements. Employees, like other investors, 
also need reliable and understandable information on a company's 
financial condition and prospects. Fiduciary standards form the 
cornerstone of private pension protections. These standards require 
plan sponsors to act solely in the interest of plan participants and 
beneficiaries. The Enron investigations should determine whether plan 
fiduciaries acted in accordance with their responsibilities.

Social Security: Issues in Evaluating Reform Proposals (GAO-02-288T, 

This testimony discusses the long-term viability of the Social Security 
program. Social Security's Trust Funds will not be exhausted until 
2038, but the trustees now project that the program's cash demands on 
the rest of the federal government will begin much sooner. Aiming for 
sustainable solvency would increase the chance that future policymakers 
would not have to face these difficult questions on a recurring basis. 
GAO has developed the following criteria for evaluating Social Security 
reform proposals: financing sustainable solvency, balancing adequacy 
and equity, and implementing and administering reforms. These criteria 
seek to balance financial and economic considerations with benefit 
adequacy and equity issues and the administrative challenges associated 
with various proposals. GAO's recent report on Social Security and 
income adequacy (GAO-02-62) makes three key points. First, no single 
measure of adequacy provides a complete picture; each measure reflects 
a different outlook on what adequacy means. Second, given the projected 
long-term financial shortfall of the program, it is important to 
compare proposals to both benefits at currently promised levels and 
benefits funded at current tax levels. Third, various approaches to 
benefit reductions would have differing effects on adequacy.

Social Security: Long-Term Financing Shortfall Drives Need for Reform 
(GAO-02-845T, 19-JUN-02):

Social Security not only represents the foundation of our retirement 
income system; it also provides millions of Americans with disability 
insurance and survivor's benefits. Although the Social Security 
Trustees now project that under the intermediate or "best estimate" 
assumptions the combined Social Security Trust Funds will be exhausted 
3 years later than in last year's estimates, the magnitude of the long-
term funding shortfall is virtually unchanged. Without reform, Social 
Security, Medicare, and Medicaid are unsustainable, and the long-term 
impact of these entitlement programs on the federal budget and the 
economy will be dramatic. Social Security reform is part of a larger 
and significant fiscal and economic challenge. Absent reform, the 
nation will ultimately have to choose between persistent, escalating 
federal deficits, significant tax increases, or dramatic budget cuts. 
Focusing on trust fund solvency alone is not sufficient. Aiming for 
sustainable solvency would increase the chance that future policymakers 
would not have to face, on a recurring basis, the difficult questions 
of whether the government will have the capacity to pay future claims 
or what else will have to be squeezed to pay those claims. Comparing 
the beneficiary impact of reform proposals solely to current Social 
Security promised benefits is inappropriate since all current promised 
benefits are not funded over the longer term. Reform proposals should 
be evaluated as packages. If the focus is on the pros and cons of each 
element of reform, it may prove impossible to build the bridges 
necessary to achieve consensus. Acting sooner rather than later helps 
to ease the difficulty of change. Waiting until Social Security faces 
an immediate solvency crisis will limit the scope of feasible solutions 
and could reduce the options field to only those choices that are the 
most difficult and could also delay the really tough decisions on 
Medicare and Medicaid.

Social Security Administration: Systems Support Could Improve 
Processing Attorney Fee Payments in the Disability Program (GAO-01-
710T, 17-MAY-01):

To ensure that people claiming disability insurance program benefits 
can obtain legal representation at a fair price, the Social Security 
Administration (SSA) is required to regulate the fees that attorneys 
charge people to represent their disability claims before the agency. 
Balancing the needs of the claimants with those of their attorneys, the 
law limits the amount of fees that attorneys can charge claimants, but 
also guarantees that those fees will be paid from the claimants' past-
due benefits. Inefficiencies in the current process increase both the 
time it takes to pay the attorney fees and the cost of administration. 
One segment of attorney fee processing--the fee approval process--was 
substantially simplified in 1991. Systems support could streamline the 
second segment of the processing--the fee payment--thus lowering the 
annual administrative costs and cutting processing time. Automation of 
this final segment of the fee process could help improve customer 
service for both claimants and their attorneys.


VA and Defense Health Care: Potential Exists for Savings through Joint 
Purchasing of Medical and Surgical Supplies (GAO-02-872T, 26-JUN-02):

The Department of Veterans Affairs (VA) spent $500 million and the 
Department of Defense (DOD) spent $240 million for medical and surgical 
supplies in fiscal year 2001. To achieve greater efficiencies through 
improved acquisition processes and increased sharing of medical 
resources, VA and DOD signed a memorandum of agreement in 1999 to 
combine their buying power. VA and DOD saved $170 in 2001 by jointly 
procuring pharmaceuticals, agreeing on particular drugs to be 
purchased, and contracting with the manufacturers for discounts based 
on their combined larger volume. However, VA and DOD have not awarded 
joint national contracts for medical and surgical supplies as 
envisioned by their memorandum of agreement, and it is unlikely that 
the two departments will have joint national contracts for supplies 
anytime soon. The lack of progress in jointly contracting for medical 
and surgical supplies has, in part, been the result of different 
approaches VA and DOD have taken to standardizing medical and surgical 
supplies. Other impediments to joint purchasing have been incomplete 
procurement data and the inability to identify similar high-volume, 
high-dollar purchases. Nevertheless, a few VA and DOD facilities have 
yielded modest savings through local joint contracting agreements.

VA and DOD Health Care: Factors Contributing to Reduced Pharmacy Costs 
and Continuing Challenges (GAO-02-969T, 22-JUL-02):

The Department of Veterans Affairs (VA) and the Department of Defense 
(DOD) pharmacy expenditures have risen significantly, reflecting 
national trends. The increase in pharmacy costs would have been even 
greater if not for the efforts taken by VA and DOD. GAO identified four 
important factors that have contributed to reduced pharmacy spending by 
VA and DOD. First, the two departments have used formularies to 
encourage the substitution of lower-cost drugs that are determined to 
be just as effective as higher-cost drugs. Second, VA and DOD have been 
able to effectively employ different arrangements to pay for or 
purchase prescription drugs at substantial discounts. Third, VA has 
significantly reduced the cost of dispensing prescription refills by 
using highly automated and less expensive consolidated mail outpatient 
pharmacy (CMOP) centers to handle a majority of the pharmacy workload. 
Fourth, VA and DOD have reduced costs by leveraging their combined 
purchasing power through joint procurement of generic prescription 
drugs. Nevertheless, one of the most important challenges is the joint 
procurement of brand name drugs. Although brand name drugs account for 
the bulk of prescription drug expenditures, most of VA/DOD joint 
contracts have been for generic drugs. Generic drugs are easier to 
contract for because these products are already known to be chemically 
and therapeutically alike. Contracting for brand name drugs is more 
difficult because of the scientific reviews needed to gain clinical 
agreement on therapeutic equivalence of competing drugs. Joint 
purchasing of brand name drugs is also more difficult due to the 
significant differences between the VA and DOD health care systems in 
patient populations, national formularies, and prescribing patterns of 
providers, some of whom are private physicians.

VA Health Care: Changes Needed to Improve Resource Allocation (GAO-02-
685T, 30-APR-02):

The Veterans Equitable Resource Allocation (VERA) system allocated 
$17.8 billion of its $20.3 billion health care budget to 22 regional 
health care networks in fiscal year 2001. Before VERA resources were 
allocated to facilities on the basis of their historical expenditures. 
By aligning resources with workloads VERA shifted about$921 million 
among VA's networks in fiscal year 2001. VERA's design is reasonable 
for equitably allocating resources, but improvements could better 
allocate comparable resources for comparable workloads. VERA's 
allocations are based primarily on network workload, with adjustments 
made for factors beyond the control of network management. These 
include the health care needs of veterans and some local cost 
differences. VERA's design also protects patients from the effects of 
network budget shortfalls. However, GAO found that $200 million 
annually that could be reallocated to better align network resources 
with workloads. First, VERA's measurement of network workload is not 
accurate enough to determine each network's allocation because VERA 
excludes most veterans with higher incomes who do not have service-
connected disabilities--about one-fifth of VA's workload. Second, VERA 
does not accurately adjust for cost differences among networks for 
differences in patients' health care needs or case mix across networks. 
GAO also found that the Veterans Administration has not analyzed 
whether the networks' need for supplemental resources--provided through 
the National Reserve Fund--is the result of potential problems in VERA, 
network inefficiency, or other factors. Without such information, VA 
can neither ensure the appropriateness of supplemental funding nor take 
corrective action.

VA Health Care: Changes Needed to Improve Resource Allocation to Health 
Care Networks (GAO-02-744T, 14-MAY-02):

The Department of Veterans Affairs (VA) spent $21 billion in fiscal 
year 2001 to treat 3.8 million veterans--most of whom had service-
connected disabilities or low incomes. Since 1997, VA has used the 
Veterans Equitable Resource Allocation (VERA) system to allocate most 
of its medical care appropriation. GAO found that VERA has had a 
substantial impact on network resource allocations and workloads. VERA 
shifted $921 million from networks primarily in the northeast and 
midwest to networks in the south and west in fiscal year 2001. VERA, 
along with other VA initiatives, has provided an incentive for networks 
to serve more veterans. In GAO's view, VERA's overall design is a 
reasonable approach to allocating resources according to workloads. It 
provides a predetermined dollar amount per veteran served to each of 
VA's 22 health care networks. This amount varies depending upon the 
health care needs of the veteran served and local cost differences. 
However, GAO identified weaknesses in VERA's implementation. First, 
VERA excludes about one fifth of VA's workload in determining each 
network's allocation. Second, VERA does not account well for cost 
differences among networks resulting from variation in their patients' 
health care needs. Third, the process for providing supplemental 
resources to networks through VA's National Reserve Fund has not been 
used to analyze how the need for such resources is caused by potential 
problems in VERA's allocation, network inefficiency, or other factors. 
This testimony is based on an April report (GAO-02-338).

VA Health Care: Community-Based Clinics Improve Primary Care Access 
(GAO-01-678T, 02-MAY-01):

This testimony discusses the Veterans Health Administration's (VHA) 
efforts to improve veterans' access to health care through its 
Community-Based Outpatient Clinics Initiative. Overall, through its 
clinics, VHA is steadily making primary care more available within 
reasonable proximity of patients who have used VHA's system in the 
past. However, the uneven distribution of patients living more than 30 
miles from a VHA primary care facility suggests that access inequities 
across networks may exist. Also, the improvements likely to result from 
VHA's planned clinics indicate that achieving equity of access may be 
difficult. In addition, GAO's assessment suggests that new clinics may 
have contributed to, but are not primarily responsible for, the marked 
rise in the number of higher-income patients who have sought health 
care through VHA in recent years. Although the clinics have undoubtedly 
attracted some new patients to VHA, GAO's analysis suggests that new 
patients would have sought care at other VHA facilities in the absence 
of the new clinics. Enhanced benefits and access improvements afforded 
by eligibility reform may have attracted more new patients, including 
those with higher incomes.

VA Health Care: Continuing Oversight Needed to Achieve Formulary Goals 
(GAO-01-998T, 24-JUL-01):

Although the Department of Veterans Affairs (VA) has made significant 
progress establishing a national formulary that has generally met with 
acceptance by prescribers and patients, VA oversight has not fully 
ensured standardization of its drug benefit nationwide. The three 
medical centers GAO visited did not comply with the national formulary. 
Specifically, two of the three medical centers omitted more than 140 
required national formulary drugs, and all three facilities 
inappropriately modified the national formulary list of required drugs 
for certain drug classes by adding or omitting some drugs. In addition, 
as VA policy allows, Veterans Integrated Service Networks (VISN) added 
drugs to supplement the national formulary ranging from five drugs at 
one VISN to 63 drugs at another. However, VA lacked criteria for 
determining the appropriateness of the actions networks took to add 
these drugs. In addition to problems standardizing the national 
formulary, GAO identified weaknesses in the nonformulary approval 
process. Although the national formulary directive requires certain 
criteria for approving nonformulary drugs, it does not prescribe a 
specific nonformulary approval process. As a result, the processes 
health care providers must follow to obtain nonformulary drugs differ 
among VA facilities on how requests are made, who receives them, who 
approves them, and how long it takes to obtain approval. GAO found that 
the length of time to approve nonformulary drugs averages nine days, 
but it can be as short as a few minutes in some medical centers. Some 
VISNs have not established processes to collect and analyze data on 
nonformulary requests. As a result, VA does not know if approved 
requests meet its established criteria or if denied requests are 
appropriate. This testimony summarizes the December 1999 report, HEHS-
00-34 and the January 2001 report, GAO-01-183.

VA Long-Term Care: The Availability of Noninstitutional Services Is 
Uneven (GAO-02-652T, 25-APR-02):

Noninstitutional long-term care services are delivered by the 
Department of Veterans Affairs (VA) to veterans in their own homes and 
other community locations. The Veterans Millennium Health Care and 
Benefits Act requires VA to offer long-term care services to eligible 
veterans, including services provided in noninstitutional settings. 
More than two years after the act's passage, VA has yet to offer 
eligible veterans adult day health care, geriatric evaluation, or 
respite care. Although VA published proposed regulations that would 
make these services available in noninstitutional settings to eligible 
veterans, the regulations had not been finalized as of April 17, 2002. 
To be responsive before its draft regulations were made final, VA 
issued a policy directive requiring that these three services be 
available in noninstitutional settings. GAO found, however, that both 
the services required by the act and VA's other noninstitutional 
services were unevenly available across the VA system.

Veterans' Health Care: Observations on VA's Assessment of Hepatitis C 
Budgeting and Funding (GAO-01-661T, 25-APR-01):

The Department of Veterans Affairs (VA) requested and received $195 
million for Hepatitis C screening and treatment in fiscal year 2000. 
VA's budget documentation showed that it had spent $100 million on 
Hepatitis C screening and treatment, leaving a difference of $95 
million between its estimated and actual expenditures. However, GAO's 
review revealed that the difference was actually much larger--$145 
million. VA's documentation showed that only $50 million was used for 
budgeted activities and $50 million was used for an activity not 
included in its original budget--treatment of conditions related to 
Hepatitis C. It appears that VA is unable to develop a budget estimate 
that can reliably forecast its Hepatitis C funding needs at this time. 
However, VA's Veterans Health Administration (VHA) appears to be taking 
reasonable steps to improve future budget estimates and thereby 
minimize the potential for large differences. Such steps include 
developing a Hepatitis C patient registry that could provide the 
critical data needed to improve budgetary estimates. However, this 
registry could take as long as 15 months to become operational, which 
suggests that it may not provide budgetary data in time to formulate 
the 2004 budget. In the meantime, VHA's ongoing efforts to upgrade its 
data collection systems should help improve budget estimates for fiscal 
year 2002. These efforts, however, have provided only minimal help in 
the development of VA's 2002 budget for Hepatitis C spending. As a 
result, it is not possible to conclude with certainty whether VA's 
fiscal year 2002 spending estimate of $171 million is appropriate.

Veterans' Health Care: Standards and Accountability Could Improve 
Hepatitis C Screening and Testing Performance (GAO-01-807T, 14-JUN-01):

Three years ago, the Department of Veterans Affairs (VA) characterized 
hepatitis C as a serious national health problem that needs early 
detection to reduce transmission risks, ensure timely treatment, and 
prevent progression of liver disease. In a 1988 letter, VA outlined the 
process clinicians should use when (1) screening veterans for known 
risk factors for exposure to hepatitis C and (2) ordering tests to 
detect antibodies and diagnose hepatitis C infection as part of a plan 
to evaluate and assess risk factors for VA patients. This testimony 
discusses VA's progress in screening and testing veterans for hepatitis 
C during fiscal years 1999 and 2000. GAO found that VA missed 
opportunities to screen as many as three million veterans when they 
visited medical facilities during fiscal years 1999 and 2000, 
potentially leaving as many as 200,000 veterans unaware that they have 
hepatitis C infections. Of those screened, an unknown number likely 
remain undiagnosed because of flawed procedures. Although the pace of 
screening and testing appears to be improving, many currently 
undiagnosed veterans may not be identified expeditiously unless VA (1) 
establishes early detection of hepatitis C as a standard for care and 
(2) holds facility managers accountable for timely screening and 
testing of veterans who visit VA medical facilities.


Budget Issues: Long-Term Fiscal Challenges. (GAO-02-467T, 27-FEB-02):

Combating terrorism and ensuring homeland security have created urgent 
claims on the nation's attention and on the federal budget. At the same 
time, the fiscal pressures created by the retirement of the baby 
boomers and rising health care costs continue unchanged. Because the 
longer-term outlook is driven in large part by known demographic 
trends, the outlook 20 years from now is surer than the forecast for 
the next few years. The message of GAO's updated simulations remains 
the same: absent structural changes in entitlement programs for the 
elderly, persistent deficits and escalating debt will overwhelm the 
budget in the long term. Both longer-term and new commitments 
undertaken after September 11 sharpen the need for careful scrutiny of 
competing claims and new priorities. A fundamental review of existing 
programs and activities is necessary both to increase fiscal 
flexibility and to make government fit the modern world. Stated 
differently, there is a need to consider the proper role of the federal 
government in the 21st century and how government should do business. 
The fiscal benchmarks and rules that moved the country from deficit to 
surplus expire this fiscal year. Any successor system should include a 
debate about reprioritization today and a better understanding of the 
long-term implications of different policy choices. Many things that 
the nation may be able to afford today may not be sustainable in the 

Homelessness: Improving Program Coordination and Client Access to 
Programs. (GAO-02-485T, 06-MAR-02):

Many people are homeless for only a short time and get back on their 
feet with minimal assistance, but others are chronically homeless and 
need intensive and ongoing assistance. Fifty federal programs exist to 
help the homeless with housing. Sixteen of these are targeted 
exclusively to the homeless, and the others are mainstream programs. 
Targeted programs were funded at $1.7 billion in fiscal year 2001. GAO 
found that the Department of Housing and Urban Development (HUD) has 
been unable to ensure that adequate coordination occurs among the 
programs without creating undue administrative burdens for the states 
and communities. Steps have been taken to improve the coordination of 
homeless assistance programs within communities and to reduce some of 
the administrative burdens caused by separate programs. Although low-
income populations face barriers to obtaining services provided by 
mainstream programs, these barriers are compounded by homelessness. In 
addition, the underlying structure and operations of federal mainstream 
programs do not ensure that the special needs of homeless people are 
met. Consolidating HUD's McKinney-Vento programs could help reduce the 
administrative burden. However, to end chronic homelessness in 10 
years, federal agencies must strive to eliminate the barriers that 
homeless people encounter as they seek services from mainstream 



[1] Population Division, U.S. Census Bureau, Table NA-EST2002-01-
National Population Estimates: April 1, 2000 to July 1, 2002 (Release 
Date: December 31, 2002).