Federal Prisons:

Containing Health Care Costs for an Increasing Inmate Population

T-GGD-00-112: Published: Apr 6, 2000. Publicly Released: Apr 6, 2000.

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Pursuant to a congressional request, GAO discussed health care costs at the federal Bureau of Prisons (BOP), focusing on: (1) trends in BOP health care costs from fiscal year (FY) 1990 through FY 1999; (2) BOP initiatives to contain rising medical costs; and (3) legislative and administrative options for helping to contain health care costs.

GAO noted that: (1) in conjunction with a rising federal inmate population, BOP's health care costs (not adjusted for inflation) increased from $137.6 million in FY 1990 to $372.1 million in FY 1999, an average annual increase of about 8.6 percent; (2) adjusted for inflation, BOP's per capita inmate health care costs increased from $3,001 in FY 1990 to a high of $3,703 in FY 1996; (3) the per capita costs steadily decreased in subsequent fiscal years, declining to $3,242 in FY 1999; (4) in contrast, the nation's per capita health care costs (adjusted for inflation) rose continuously during FY 1990 through FY 1999; (5) since the early 1990s, BOP has attempted to increase the efficiency and economy of health care delivery to prisoners through various cost-containment initiatives, such as restructuring medical staffing, obtaining discounts through quantity or bulk purchases, leveraging resources through cooperative efforts with other governmental entities, and even privatizing medical services at selected facilities; (6) BOP reports that some of these efforts are starting to produce savings; (7) to further control medical costs, BOP has proposed two legislative provisions; (8) one--a prisoner copayment provision--would authorize the Director of BOP to assess and collect a fee of not less than $2 for each health care visit requested by a prisoner; (9) BOP officials expect that a copayment provision would serve primarily to reduce the number of unnecessary medical visits; (10) the Congressional Budget Office's (CBO) analysis also concluded that a copayment provision would reduce the number of unnecessary medical visits and would generate annual revenues of about $1 million; (11) the second legislative provision would establish a Medicare-based cap on payments to community hospitals that treat inmates; (12) CBO has estimated that this legislative provision would save BOP about $6 million annually; (13) GAO identified an administrative option whereby BOP might achieve further savings by negotiating more cost-effective contracts with community hospitals that provide medical care for inmates; (14) in late 1999, to provide a basis for identifying best value among competing proposed contracts, one of BOP's six regions--the South Central Region--began using an innovative "benchmarking" approach; and (15) according to regional office contracting officials, if the benchmarking approach were applied to all contracts in the South Central Region, the estimated savings would be about $5.6 million annually in this one region alone.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: In April 2000, BOP agreed to pilot test the benchmarking approach to medical contracting. In November 2003, BOP responded that it had awarded 36 medical contracts using the benchmark approach, and was conducting a comprehensive analysis to determine savings. In February 2004, BOP reported that its analysis showed an estimated annual savings of about $14 million, which equated to an average savings of 22 percent for the 36 institutions. Furthermore, BOP stated that it plans to continue to solicit medical contracts using the benchmarking approach and that there were another 30 medical contracts in various stages of the pre-award phase.

    Recommendation: The Attorney General should require Director, BOP, to test the benchmark contracting approach currently being used in BOP's South Central Region. If test results validate the cost effectiveness of the benchmark contracting approach, the BOP Director should require its implementation for health care contracts throughout BOP.

    Agency Affected: Department of Justice


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