Hurricane Katrina: Allocation and Use of $2 Billion for Medicaid 
and Other Health Care Needs (28-FEB-07, GAO-07-67).		 
                                                                 
In February 2006, the Deficit Reduction Act of 2005 (DRA)	 
appropriated $2 billion for certain health care costs related to 
Hurricane Katrina through Medicaid and the State Children's	 
Health Insurance Program (SCHIP). The Centers for Medicare &	 
Medicaid Services (CMS) was charged with allocating the $2	 
billion in funding to states directly affected by the hurricane  
or that hosted evacuees. GAO performed this work under the	 
Comptroller General's statutory authority to conduct evaluations 
on his own initiative. In this report, GAO examined: (1) how CMS 
allocated the DRA funds to states, (2) the extent to which states
have used DRA funds, and (3) whether selected states--Alabama,	 
Louisiana, Mississippi, and Texas--anticipate the need for	 
additional funds after DRA funds are expended. To conduct this	 
review, GAO reviewed CMS's allocations of DRA funds to all	 
eligible states, focusing in particular on the four selected	 
states that had the highest initial allocation (released by CMS  
on March 29, 2006). GAO obtained data from Medicaid offices in	 
the four selected states regarding their experiences enrolling	 
individuals, providing services, and submitting claims; collected
state Medicaid enrollment data; and analyzed DRA expenditure data
that states submitted to CMS.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-67						        
    ACCNO:   A66344						        
  TITLE:     Hurricane Katrina: Allocation and Use of $2 Billion for  
Medicaid and Other Health Care Needs				 
     DATE:   02/28/2007 
  SUBJECT:   Allocation (Government accounting) 		 
	     Claims processing					 
	     Disaster recovery					 
	     Disaster relief aid				 
	     Expense allowances 				 
	     Federal aid to states				 
	     Federal/state relations				 
	     Financial management				 
	     Health care programs				 
	     Hurricane Katrina					 
	     Medicaid						 
	     Medical expense claims				 
	     Medicaid Program					 
	     State Children's Health Insurance			 
	     Program						 
                                                                 
	     Alabama						 
	     Louisiana						 
	     Mississippi					 
	     Texas						 

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GAO-07-67

   

     * [1]Results in Brief
     * [2]Background
     * [3]CMS Allocated DRA Funds to Three Funding Categories

          * [4]CMS Allocated $1.9 Billion of DRA Funds to Three DRA Categor
          * [5]CMS Provided Allocations to States on Two Occasions

     * [6]States Have Submitted Claims for About Half of Total DRA All

          * [7]About Two-Thirds of Eligible States Have Submitted Claims fo
          * [8]States' Claims Were Concentrated in Three Service Areas

     * [9]Louisiana and Texas Raised Concerns Regarding Future Funding

          * [10]Louisiana's Concerns Centered on Its Ability to Administer a
          * [11]Texas Is Hosting Large Number of Evacuees Whose Future Plans

     * [12]Agency and State Comments and Our Evaluation
     * [13]Appendix I: Deficit Reduction Act of 2005 Allocations to 32
     * [14]Appendix II: Comments from the Centers for Medicare & Medica
     * [15]Appendix III: Comments from the State of Louisiana Departmen
     * [16]Appendix IV: Comments from the State of Texas Health and Hum
     * [17]Appendix V: GAO Contact and Staff Acknowledgments

          * [18]GAO Contact
          * [19]Acknowledgments

     * [20]Related GAO Products

          * [21]Order by Mail or Phone

Report to Congressional Committees

United States Government Accountability Office

GAO

February 2007

HURRICANE KATRINA

Allocation and Use of $2 Billion for Medicaid and Other Health Care Needs

GAO-07-67

Contents

Letter 1

Results in Brief 5
Background 7
CMS Allocated DRA Funds to Three Funding Categories 12
States Have Submitted Claims for About Half of Total DRA Allocations 17
Louisiana and Texas Raised Concerns Regarding Future Funding Needs 23
Agency and State Comments and Our Evaluation 30
Appendix I Deficit Reduction Act of 2005 Allocations to 32 States 35
Appendix II Comments from the Centers for Medicare & Medicaid Services 38
Appendix III Comments from the State of Louisiana Department of Health and
Hospitals 43
Appendix IV Comments from the State of Texas Health and Human Services
Commission 48
Appendix V GAO Contact and Staff Acknowledgments 50
Related GAO Products 51

Tables

Table 1: CMS's Simplified Eligibility Groups for Demonstration Projects
for Time-Limited Medicaid and SCHIP Services 9
Table 2: DRA Funding Characteristics and Categories 10
Table 3: CMS's Allocation of DRA Funds to States Based on States'
Estimated Expenditures, as of September 30, 2006 15
Table 4: Selected States' Initial and Updated Estimated Expenditures and
CMS's Initial and Updated Allocations, as of September 30, 2006 17
Table 5: CMS Allocation of DRA funds and States' Claims Submitted for
Reimbursement, by State, as of October 2, 2006 18
Table 6: CMS Allocation of DRA Funds and States' Claims Submitted, by
Time-limited Funding Categories, as of October 2, 2006 20
Table 7: Claims Submitted for the Nonfederal Share of Expenditures for
Existing Medicaid and SCHIP Beneficiaries (Category III), as of October 2,
2006 21
Table 8: Percentages of Submitted Claims for Top Four Medicaid Services in
Each Selected State, as of October 2, 2006 23
Table 9: Selected States' Monthly Enrollment in Category I, Time-limited
Medicaid Services 28
Table 10: CMS's Allocation of DRA Funds to States, Based on States'
Estimated Expenditures, as of September 30, 2006 36

Figures

Figure 1: Affected Counties or Parishes in Louisiana, Mississippi, and
Alabama 12
Figure 2: Percentage of $1.9 Billion DRA Allocation by Funding Category,
as of September 30, 2006 14
Figure 3: Texas Monthly Enrollment for Its Traditional Medicaid Program
and DRA Categories I and II, July 2005-June 2006 29

Abbreviations

CMS Centers for Medicare & Medicaid Services
DRA Deficit Reduction Act of 2005
FPL Federal Poverty Level
HHS Health and Human Services
MBES Medicaid Budget and Expenditure System
SCHIP State Children's Health Insurance Program
SSA Social Security Act
SSI Supplemental Security Income

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United States Government Accountability Office

Washington, DC 20548

February 28, 2007

Congressional Committees

Hurricane Katrina, which made landfall along the Gulf coast of Louisiana
and Mississippi on August 29, 2005, was one of the largest natural
disasters in our nation's history, disrupting the lives of hundreds of
thousands of individuals who suddenly lacked housing and access to basic
health care services. The states most directly affected by the
hurricane--Alabama, Louisiana, and Mississippi1--were among the poorest
areas in the United States, even before Hurricane Katrina hit. Compared to
the rest of the United States, higher proportions of the nonelderly
populations in these directly affected states were enrolled in Medicaid, a
program jointly financed by the federal government and states to provide
health care coverage to certain categories of low-income individuals. The
devastation caused by Hurricane Katrina compounded the health care needs
of these communities, increasing the numbers of eligible beneficiaries for
Medicaid and adding large numbers of uninsured individuals. Additionally,
individuals displaced from their homes and jobs evacuated their home
states and moved to other states, such as Texas, which strained these
states' health care resources.

During the first 3 weeks after the hurricane, the Centers for Medicare &
Medicaid Services (CMS), which oversees the Medicaid program, announced
that states could apply for demonstration projects--to be approved by
CMS--through which the federal government would fund its share of
expenditures for health care services for certain individuals affected by
the hurricane.2 CMS identified two categories of services covered under
these demonstration projects, both of which were subject to time
limitations. The first category allowed individuals affected by the
hurricane and eligible under an approved demonstration project to receive
benefits under Medicaid or the State Children's Health Insurance Program
(SCHIP) for up to 5 months.3 The second category, known as uncompensated
care, allowed states to reimburse providers rendering services from August
24, 2005, through January 31, 2006, to individuals affected by the
hurricane who had no other method of payment or insurance.4 In February
2006, the Deficit Reduction Act of 2005 (DRA) appropriated $2 billion to
fund, among other purposes, these two categories of services under
approved demonstration projects.5 DRA further specified that the $2
billion could be used for two additional categories of expenditures that
were not time-limited. With respect to the third category, funds were
available for the nonfederal (state) share of expenditures for services
provided to existing Medicaid and SCHIP beneficiaries from certain areas
of the directly affected states.6 Funds were also available for the fourth
category of restoring access to health care in impacted communities.7 DRA
did not specify how the $2 billion in Hurricane Katrina relief funding
would be allocated among the states; rather, CMS was responsible for
determining these allocations.8

1Throughout this report, we refer to these three states--Alabama,
Louisiana, and Mississippi--as the "directly affected" states.

2Under section 1115 of the Social Security Act (SSA), the Secretary of
Health and Human Services (HHS) may waive certain Medicaid requirements
and authorize certain Medicaid expenditures in order to demonstrate
approaches that are likely to promote Medicaid program objectives. See SSA
S 1115 (codified at 42 U.S.C. S 1315). HHS has delegated the
administration of these demonstration projects to CMS.

Because of broad congressional interest, we performed this work under the
Comptroller General's statutory authority to conduct evaluations on his
own initiative. This report presents results of our work examining: (1)
how CMS allocated the DRA funds to states, (2) the extent to which states
have used DRA funds, and (3) whether Alabama, Louisiana, Mississippi, and
Texas anticipate the need for additional funds after DRA funds are
expended.

3SCHIP is a federal-state program that provides health coverage,
generally, for children living in families whose incomes exceed the
eligibility limits for Medicaid. See SSA S 2107(e) (codified at 42 U.S.C.
S 1397gg(e)) regarding the applicability of section 1115 of the SSA to the
SCHIP program.

4For purposes of this report, the District of Columbia and insular areas
(such as Puerto Rico) that were allocated or expended DRA funds will be
included in our discussion of states.

5The Deficit Reduction Act of 2005, Pub. L. No. 109-171, S 6201, 120 Stat.
132-134 (Feb. 8, 2006). For purposes of this report, we refer to DRA funds
available for the nonfederal share of expenditures associated with
individuals affected by the hurricane receiving Medicaid or SCHIP benefits
under an approved demonstration project as "Category I" and DRA funds
available for the total expenditures associated with uncompensated care
services provided to individuals affected by the hurricane who had no
other method of payment or insurance as "Category II."

6For purposes of this report, we refer to DRA funds available for the
nonfederal share of expenditures associated with services provided to
existing Medicaid and SCHIP beneficiaries from certain areas of directly
affected states as "Category III."

7For purposes of this report, we refer to DRA funds available for
expenditures associated with restoring access to health care in impacted
communities as "Category IV."

8Throughout this report, we refer to Hurricane Katrina relief funding
provided through the DRA as DRA funding or DRA funds.

To conduct this work, we obtained documentation from CMS on its allocation
of DRA funds to states. We reviewed allocations for four categories, as
outlined below.

           o Category I--time-limited Medicaid and SCHIP services:9 This
           category was for the nonfederal (state) share of expenditures
           associated with Medicaid and SCHIP services (including
           administrative costs) provided to individuals affected by
           Hurricane Katrina and eligible under an approved demonstration
           project.10 Each state defined the populations eligible for its
           demonstration project for individuals affected by the hurricane.
           Funding is available through this category for services delivered
           through June 30, 2006.

           o Category II--time-limited uncompensated care services:11 This
           category contained funding for the total expenditures associated
           with services (including administrative costs) provided to
           individuals affected by Hurricane Katrina who did not have a
           method of payment or insurance.12 Funding is available through
           this category for services delivered through January 31, 2006.

           o Category III--existing Medicaid and SCHIP beneficiaries:13 This
           category was designated to compensate states for the nonfederal
           (state) share of expenditures associated with services provided to
           existing Medicaid and SCHIP beneficiaries from certain areas of
           directly affected states. The DRA did not specify any time limits
           on funding for services delivered under this category. Funding is
           limited to the three directly affected states--Alabama, Louisiana,
           and Mississippi.

           o Category IV--restore access to health care in impacted
           communities:14 This category allowed for coverage of expenditures
           provided for other purposes, if approved by the Secretary of HHS,
           to restore access to health care in impacted communities. The DRA
           did not specify any time limits on funding under this category.

           We focused our review on four selected states that, as of March
           29, 2006, had received the highest allocations of DRA funding from
           CMS--Alabama, Louisiana, Mississippi, and Texas.15 We selected
           March 29, 2006, because this was the date on which CMS made its
           initial allocation of DRA funds to states. We obtained data and
           information from Medicaid offices in these states regarding their
           experiences enrolling individuals, providing services, and
           submitting claims for services and administrative costs. We also
           collected Medicaid enrollment data from the four selected states
           through June 2006. In addition, we analyzed CMS data included in
           the Medicaid Budget and Expenditure System (MBES) on DRA funding
           for the states that received initial allocations as of March 29,
           2006. Within the MBES, we examined data that states submitted for
           expenditures that qualified for DRA funding as of October 2, 2006.
           States submit all Medicaid data to MBES electronically and must
           attest to its completeness and accuracy. These data are
           preliminary in nature, in that they are subject to further review
           and are likely to be updated as states continue to submit claims
           for DRA funding. Nevertheless, we considered MBES data
           sufficiently reliable for purposes of conducting a preliminary
           assessment of claims submitted to date. We also contacted Medicaid
           officials in Arizona and Georgia to ascertain why they had not
           submitted claims for DRA funding. We chose Arizona and Georgia
           because they had not submitted claims data as of June 2006, but
           were the only two states that had logged into MBES and inserted
           placeholders for their claims data. We conducted our work from
           April 2006 to October 2006 in accordance with generally accepted
           government auditing standards.
			  
			  Results in Brief

           As of September 30, 2006, CMS had allocated $1.9 billion of the $2
           billion made available by DRA to states that were directly
           affected by Hurricane Katrina or that hosted evacuees in the
           aftermath of the storm. Based on states' estimates of their DRA
           expenditures, CMS allocated funds as follows:

           o Category I--CMS allocated about $102 million to 32 states for
           the nonfederal share of expenditures for time-limited Medicaid and
           SCHIP services for individuals affected by the hurricane and
           eligible under an approved demonstration project.

           o Category II--CMS allocated about $302 million to 8 states for
           expenditures for time-limited uncompensated care services provided
           to individuals affected by the hurricane who did not have a method
           of payment or insurance.

           o Category III--CMS allocated approximately $1.5 billion to the 3
           directly affected states (Alabama, Louisiana, and Mississippi) for
           the nonfederal share of expenditures for existing Medicaid and
           SCHIP beneficiaries.

           o Category IV--CMS chose not to allocate any DRA funding to this
           category--restoring access to health care in impacted
           communities--because, according to CMS, the agency viewed this
           category as discretionary in nature and not associated with direct
           services expenditures.

           In allocating the $1.9 billion, CMS met 100 percent of the states'
           estimated expenditures in categories I, II, and III. After CMS
           reconciles states' expenditures with their allocations, CMS will
           determine how to allocate the remaining $136 million of available
           DRA funds and any unexpended funds from the approximately $1.9
           billion in DRA funds previously allocated to states.

           Of the $1.9 billion in DRA funding that CMS allocated, states had
           submitted claims for approximately $1 billion (54 percent) as of
           October 2, 2006. Approximately two-thirds of the 32 states that
           received DRA funding (including the 4 selected states--Alabama,
           Louisiana, Mississippi, and Texas), submitted claims. The amount
           of claims submitted for Category I, the nonfederal share of
           expenditures for time-limited Medicaid and SCHIP services,
           accounted for 20 percent of allocations; for Category II,
           expenditures for time-limited uncompensated care services, 42
           percent; and for Category III, the nonfederal share of
           expenditures for existing Medicaid and SCHIP beneficiaries, 58
           percent. Claims from Alabama, Louisiana, and Mississippi for the
           nonfederal share of expenditures for existing Medicaid and SCHIP
           beneficiaries (Category III) accounted for about 85 percent of
           claims filed for all categories of funding. States are permitted
           up to 2 years after paying claims to seek reimbursement from CMS.
           According to state officials, they have not submitted claims to
           CMS in some instances because of problems processing providers'
           claims. For example, in Mississippi, uncompensated care claims had
           to be processed manually because the state did not have a
           computerized system to accommodate such claims. Although
           expenditures varied by state, typically claims were concentrated
           in nursing facility services, inpatient hospital care, and
           prescription drugs.

           Of the four selected states, two states--Louisiana and
           Texas--raised concerns about their ability to meet future health
           care needs of those affected by the hurricane once the DRA funds
           are expended.

           o Louisiana, a directly affected state that is therefore eligible
           for DRA funding for services provided beyond June 30, 2006, raised
           concerns that it would need additional funds to provide coverage
           for individuals affected by the hurricane who evacuated the state
           but intend to return. State officials noted that Louisiana is
           currently managing what they characterized as a national Medicaid
           program, given that many individuals enrolled in Louisiana
           Medicaid are temporarily residing in other states. Additionally,
           the state has asked CMS for direction on issues such as managing
           out-of-state providers, redetermining eligibility, and ensuring
           program integrity given the state's concern that some providers
           may be receiving payment from more than one state for the same
           service.

           o Texas, which is eligible only for the time-limited DRA funds
           from Categories I and II, expressed concern about its future
           funding needs in light of the many evacuees remaining in the
           state. To learn more about this population, the state commissioned
           a survey that indicated that evacuees responding to the survey
           continue to have a high need for services, including health care
           coverage under Medicaid and SCHIP. Because the state is not
           eligible for DRA funding for Medicaid services provided beyond
           June 30, 2006, officials expressed concern that these services are
           being provided through evacuees' use of emergency rooms in the
           state or through local county facilities, thus straining resources
           that provide care for all Texas residents.

           The remaining two selected states--Alabama and Mississippi--while
           also eligible for ongoing DRA funding, stated that they did not
           anticipate a need for funding beyond that allocated by CMS.

           We received comments on a draft of this report from CMS and state
           officials from Alabama, Louisiana, and Texas. In commenting, CMS
           provided additional information on an initiative aimed at
           assisting Louisiana to rebuild its health care system in the
           aftermath of Hurricane Katrina. In response to CMS's comment that
           we mischaracterized the categories of DRA funding, we provided
           additional legal citations to better link the statutory language
           of DRA with the categories of funding presented in the report.
           Additionally, CMS noted that our description of its process for
           allocating unexpended funds was misleading. While the draft report
           did include a thorough description of this process, we clarified
           this process in the Highlights and Results in Brief. CMS also
           discussed criticism it faced in communicating with the states,
           particularly Louisiana, regarding program implementation, coverage
           for out-of-state evacuees, and other issues. In its comments, CMS
           identified the steps it took to work with states with approved
           demonstration projects. While CMS may have provided such
           assistance, from Louisiana's perspective, it was not sufficient to
           address the many issues the state is facing. Louisiana and Texas
           primarily provided comments about their efforts to assist those
           affected by the hurricane and ongoing challenges as a result of
           Hurricane Katrina. Alabama provided technical comments which we
           incorporated as appropriate, while Mississippi did not provide
           comments.
			  
			  Background

           Medicaid and SCHIP are joint federal-state programs that finance
           health care coverage for certain categories of low-income
           individuals. To qualify for Medicaid or SCHIP, individuals must
           meet specific eligibility requirements related to their income,
           assets, and other personal characteristics such as age. Each state
           operates its program under a CMS-approved state plan.

           Almost immediately after Hurricane Katrina, CMS announced in a
           State Medicaid Director's letter on September 16, 2005, that
           states could apply for Medicaid demonstration projects authorized
           under section 1115 of the SSA, through which the federal
           government would fund its share of expenditures for health care
           services for certain individuals affected by the hurricane.16
           These demonstration projects provided for (1) time-limited
           Medicaid and SCHIP services to allow states to quickly enroll
           eligible individuals who were affected by the hurricane, and (2)
           time-limited uncompensated care services--allowing states to pay
           providers rendering services for individuals affected by the
           hurricane who do not have an alternative method of payment or
           insurance. Interested states could apply to CMS to offer
           demonstration projects for either or both categories, and those
           receiving CMS approval were permitted to seek reimbursement for
           the federal share of allowable expenditures for covered
           beneficiaries under the demonstrations. To assist states in
           applying for these demonstration projects, CMS convened a
           conference call with all state Medicaid agencies to brief them on
           the agency's September 16, 2005, letter, discuss the application
           process, and provide information on other implementation issues,
           such as benefits for evacuees and relevant federal regulations
           regarding Medicaid eligibility.

           For time-limited Medicaid and SCHIP services under the
           demonstrations, states received approval to provide Medicaid and
           SCHIP coverage to certain evacuees and affected individuals.17 In
           establishing eligibility for this type of demonstration, states
           primarily used simplified eligibility criteria that CMS developed
           to determine if affected individuals and evacuees could enroll to
           receive time-limited Medicaid and SCHIP services (see table 1).

9DRA, Pub. L. No. 109-171, S 6201(a)(1)(A),(C), (a)(2), 120 Stat. 132-133.

10This category of DRA funding required CMS approval of a section 1115
demonstration project for Katrina-affected individuals.

11DRA, Pub. L. No. 109-171, S 6201(a)(1)(B),(D), (a)(2), 120 Stat.
132-133.

12This category of DRA funding required CMS approval of a section 1115
demonstration project for Katrina-affected individuals. In addition to
individuals without a method of payment or insurance, it also included
Medicaid and SCHIP-eligible individuals who did not have any coverage for
certain services.

13DRA, Pub. L. No. 109-171, S 6201(a)(3), 120 Stat. 132-133.

14DRA, Pub. L. No. 109-171, S 6201(a)(4), 120 Stat. 132-133.

15Throughout this report, we refer to Alabama, Louisiana, Mississippi, and
Texas as "selected states."

16See SSA S 1115 (codified at 42 U.S.C. S 1315). Throughout this report,
we refer to the section 1115 demonstrations that were approved after
Hurricane Katrina with the intent of providing services to individuals
affected by the hurricane as "demonstration projects," or
"demonstrations."

17Affected individuals and evacuees were individuals from certain counties
or parishes of directly affected states that were declared disaster areas
eligible for individual assistance under section 408 of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act (codified at 42
U.S.C. S 5174). Affected individuals continued to reside in the same
state, while evacuees relocated to another state after the hurricane.

Table 1: CMS's Simplified Eligibility Groups for Demonstration Projects
for Time-Limited Medicaid and SCHIP Services

Source: CMS.

Note: CMS approved these demonstration projects under section 1115 of the
SSA.

aIn fiscal year 2005, the Federal Poverty Level for a family of four was
$19,350 in the 48 contiguous United States and the District of Columbia.
Federal poverty levels are not defined for Puerto Rico and other insular
areas.

bSSI is a means-tested income assistance program for disabled, blind, or
aged individuals.

States with approved demonstrations for time-limited uncompensated care
services could pay providers who delivered services to affected
individuals and evacuees who either did not have any other coverage for
health care services (such as private or public health insurance), or who
had Medicaid or SCHIP coverage but required services beyond those covered
under either program.

On February 8, 2006, the DRA appropriated $2 billion to be available until
expended for four funding categories--two categories associated with the
demonstration projects, and two additional categories of funding.18 DRA
applied time limits on the first two categories that were linked to the
demonstration projects--that is, services must have been provided by
certain dates. The DRA did not specify time limits for the two remaining
funding categories. (See table 2.)

18DRA, Pub. L. No. 109-171, S 6201, 120 Stat. 132-134.

Table 2: DRA Funding Characteristics and Categories

Source: GAO analysis of DRA and CMS demonstration project provisions.

aCategory I and Category II required CMS approval of a demonstration
project under section 1115 of the SSA. In addition to service
expenditures, associated administrative costs are also covered under these
categories.

bDRA, Pub. L. No. 109-171, S 6201(a)(1)(A),(C), (a)(2), 120 Stat. 132-133.

cDRA, Pub. L. No. 109-171, S 6201(a)(1)(B),(D), (a)(2), 120 Stat. 132-133.

dDRA, Pub. L. No. 109-171, S 6201(a)(3), 120 Stat. 132-133.

eDRA, Pub. L. No. 109-171, S 6201(a)(4), 120 Stat. 132-133.

fDRA funding is available for the states' share of expenditures incurred
under this category. The remaining share of funding would be obtained from
the federal Medicaid program; thus, the states' expenditures in these
categories would be $0 until DRA funds have been expended.

gAlthough the DRA was not enacted until February 8, 2006, CMS allowed
funding to be retroactive to August 24, 2005.

hCMS required states to limit Medicaid and SCHIP eligibility to 5 months
under their demonstration projects.

iThe three directly affected states are Alabama, Louisiana, and
Mississippi.

States could receive allocations from CMS based on certain criteria
identified in the DRA, including whether they were directly affected by
the hurricane or hosted evacuees. States directly affected by the
hurricane--Alabama, Louisiana, and Mississippi--and states that hosted
evacuees could receive DRA funding through Categories I and II, the
nonfederal share of expenditures for time-limited Medicaid and SCHIP
services and expenditures for time-limited uncompensated care services. In
contrast, as specified by DRA, funds for Category III, the nonfederal
share of expenditures for existing Medicaid and SCHIP beneficiaries, were
available only to certain areas in the directly affected states. These
areas were counties or parishes designated under the Robert T. Stafford
Disaster Relief and Emergency Assistance Act as areas eligible to receive
federal disaster assistance.19 According to a CMS official, shortly after
Hurricane Katrina, 10 counties in Alabama, 31 parishes in Louisiana, and
47 counties in Mississippi were identified as eligible to receive such
assistance and were declared individual assistance areas.20 (See fig. 1.)

19Certain counties and parishes were declared disaster areas that are
eligible for individual assistance under section 408 of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act (codified at 42
U.S.C. S 5174). The declaration allows for a variety of federal programs
to assist in the disaster recovery effort, including housing for
individuals and families. We refer to these areas as "designated areas of
the directly affected states."

20In the aftermath of Hurricane Katrina, individuals were evacuated from
individual assistance areas to other locations. Areas absorbing evacuees
were within states directly affected by the hurricane or in other states
entirely.

Figure 1: Affected Counties or Parishes in Louisiana, Mississippi, and
Alabama

Note: These three states were all considered directly affected by
Hurricane Katrina.

States receive reimbursement for their expenditures in each of the funding
categories through the submission of claims to CMS. To obtain
reimbursement of claims for services, providers first submit claims to
states for health care services provided to affected individuals and
evacuees. States then submit claims to CMS for DRA-covered expenditures
made for health care services provided to affected individuals and
evacuees under each of the DRA funding categories. In addition, although
the DRA was not enacted until February 8, 2006, CMS allowed funding to be
retroactive to August 24, 2005.

CMS Allocated DRA Funds to Three Funding Categories

As of September 30, 2006, CMS had allocated approximately $1.9 billion of
the total $2 billion in DRA funds to states that were directly affected by
Hurricane Katrina or that hosted evacuees in the aftermath of the storm.
CMS allocated funds to the first three categories: Category I--the
nonfederal share of expenditures for time-limited Medicaid and SCHIP
services; Category II--expenditures for time-limited uncompensated care
services; and Category III--the nonfederal share of expenditures for
existing Medicaid and SCHIP beneficiaries from designated areas of the
directly affected states. CMS chose not to allocate any DRA funding to
Category IV, for restoring access to health care in impacted communities.
CMS allocated the majority of DRA funding (78.3 percent of the $1.9
billion allocated) to Category III, the nonfederal share of expenditures
for existing Medicaid and SCHIP beneficiaries, which, by law, was limited
to the three directly affected states (Alabama, Louisiana, and
Mississippi).21 CMS allocated funds to states on two occasions--an initial
allocation of $1.5 billion on March 29, 2006, and a subsequent allocation
on September 30, 2006. Both of these allocations were based on states'
estimates of their DRA expenditures. In the second allocation on September
30, 2006, no state received less funding than it received in the March 29,
2006, allocation, but allocations shifted among the DRA categories.

CMS Allocated $1.9 Billion of DRA Funds to Three DRA Categories

As of September 30, 2006, CMS had allocated approximately $1.9 billion of
DRA funds to three DRA funding categories to 32 states. The majority of
the $1.9 billion allocation--about $1.5 billion (78.3 percent)--is for
Category III, existing Medicaid and SCHIP beneficiaries, which is limited
to the three directly affected states (Alabama, Louisiana, and
Mississippi). For Category I, time-limited Medicaid and SCHIP services,
and Category II, time-limited uncompensated care services, states received
about $102 million (5.5 percent of the total allocation) and about $302
million (16.2 percent of the total allocation), respectively. (See fig.
2.) With regard to Category I, 32 states received approval to extend
time-limited Medicaid and SCHIP coverage to individuals affected by
Hurricane Katrina; however, no states actually enrolled individuals in
SCHIP. Therefore, only Medicaid services were covered through this DRA
funding category.22 Of these 32 states, 8 states also received approval
for Category II to pay providers for rendering extend time-limited
uncompensated care services to individuals affected by the hurricane. CMS
officials stated that the agency approved the majority of states'
applications for demonstration projects within 45 days of the hurricane.23

21DRA, Pub. L. No. 109-171, S 6201(a)(3), 120 Stat. 132-133.

22Because no states enrolled individuals into SCHIP, we refer to Category
I as "time-limited Medicaid services" for the remainder of this report.

Figure 2: Percentage of $1.9 Billion DRA Allocation by Funding Category,
as of September 30, 2006

aCategory I and Category II required CMS approval of a demonstration
project under section 1115 of the SSA.

Of the 32 states that received allocations totaling $1.9 billion,
Louisiana received the largest amount--44.6 percent (about $832 million)
of the total allocation. Combined, the 3 directly affected
states--Louisiana, Alabama, and Mississippi--received approximately 90
percent ($1.7 billion) of the $1.9 billion allocated to states. While not
a directly affected state, Texas hosted a large number of evacuees and
received about 7.6 percent ($142 million) of the allocation. These 4
selected states together received approximately 97.5 percent ($1.8
billion) of the $1.9 billion allocation. (See table 3.)

23Thirty-five states applied for the time-limited Medicaid and SCHIP
category of the demonstrations, but 3 states were denied because they
applied after the January 31, 2006, deadline. Although 17 states applied
for the time-limited uncompensated care services category of the
demonstration, 9 states were denied because of their low number of
evacuees and because of their lack of proximity to the directly affected
states.

Table 3: CMS's Allocation of DRA Funds to States Based on States'
Estimated Expenditures, as of September 30, 2006

Source: GAO analysis of CMS data.

Note: This table accounts for the approximately $1.9 billion of DRA funds
allocated to states as of September 30, 2006.

aWhile states applied for and received approval to extend time-limited
SCHIP coverage to individuals affected by Hurricane Katrina, no states
actually enrolled individuals in SCHIP.

bCategory I and Category II required CMS approval of a demonstration
project under section 1115 of the SSA. In addition to service
expenditures, associated administrative costs are also included.

cCMS did not allocate funds to this category.

dState was not eligible for funding to this category.

CMS Provided Allocations to States on Two Occasions

CMS provided DRA allocations on two occasions, and both allocations were
based on states' estimated DRA expenditures.24 CMS first allocated $1.5
billion to 32 states on March 29, 2006. After the DRA was enacted in
February 2006, CMS requested states' estimated fiscal year 2006
expenditures for three of the four DRA funding categories: Category I--the
nonfederal share of expenditures for time-limited Medicaid services;
Category II--expenditures for time-limited uncompensated care services;
and Category III--for directly affected states, the nonfederal share of
expenditures for existing Medicaid and SCHIP beneficiaries. CMS did not
request that the three directly affected states estimate expenditures for
Category IV--restoring access to health care in impacted communities. CMS
officials told us that they viewed restoring access to care as
discretionary in nature and not associated with direct service
expenditures. In the March 29, 2006, allocation, CMS fully funded 32
states' estimated expenditures for DRA funding for Categories I and II,
and also provided the three directly affected states with allocations to
approximately half of their estimated expenditures for Category III.
Because allocations were based on states' estimates, CMS withheld $500
million of the $2 billion available for the initial allocation,
anticipating that allocations would need to be realigned.

24When submitting estimates to CMS, states provided estimated expenditures
by service, as well as any associated administrative costs for Categories
I and II, time-limited Medicaid and uncompensated care services. For
Category III, existing Medicaid and SCHIP beneficiaries, CMS did not ask
states to provide a breakdown of service and administrative costs, but did
request separate estimates for Medicaid and SCHIP.

In July 2006, CMS requested updated estimates of DRA expenditures for
fiscal year 2006 for the same three categories: the two time-limited
categories for Medicaid and uncompensated care services (Categories I and
II) and the existing Medicaid and SCHIP beneficiaries (Category III). On
September 30, 2006, CMS allocated an additional amount of about $364
million to states, which, combined with the initial March 29, 2006,
allocation of $1.5 billion, provided a total allocation of approximately
$1.9 billion. This allocation was based on states' updated estimated
expenditures for each of the three DRA categories for which CMS provided
funding. For the second allocation, each of the three directly affected
states received allocations of 100 percent of their updated estimated
expenditures for all three funding categories.

While CMS did not decrease any state's allocation as a result of the July
2006 request for updated estimates, it did shift allocation amounts among
DRA funding categories when necessary for the September 30, 2006,
allocation. Therefore, each state received its allocation amount from
March 29, 2006, plus any additional funding included in the updated
estimated expenditures. As a result, some states that lowered their
subsequent estimates received more than they requested. For example, Texas
lowered its initial estimated expenditures from $142 million (its March
29, 2006, estimate) to approximately $36 million. CMS did not change
Texas' allocation from the amount the state received on March 29, 2006;
thus, Texas retained an allocation of $142 million.25 Other states
received more than they were initially allocated. For example, Alabama
requested about $181 million initially, but gave CMS an updated estimate
of $248 million. CMS initially allocated Alabama approximately $97
million, but increased its allocation to $248 million on September 30,
2006. (See table 4.)

25CMS did not decrease the amounts states received in the March 29, 2006,
allocation (even if their updated estimated expenditures were less than
the March 29, 2006, allocation), because when CMS fully funded states'
increased estimated expenditures, the total allocation of $1.9 billion was
still less than the $2 billion in DRA funds available.

Table 4: Selected States' Initial and Updated Estimated Expenditures and
CMS's Initial and Updated Allocations, as of September 30, 2006

Source: GAO analysis of CMS data.

aCMS's initial allocation on March 29, 2006, provided states with
allocations of 100 percent of their estimated expenditures for Categories
I and II. For Category III, which was available only to the directly
affected states, Alabama, Louisiana, and Mississippi each received
allocations of approximately half of their estimated expenditures. CMS did
not allocate any funds to Category IV.

bRepresents states' updated estimated DRA expenditures for fiscal year
2006 requested by CMS in July 2006.

As of September 30, 2006, $136 million in DRA funding remained available
for allocation. CMS officials stated that, during the first quarter of
fiscal year 2007, they plan to reconcile states' expenditures submitted to
CMS with the allocation amounts provided to states on September 30, 2006.
After this reconciliation is completed, CMS will determine how to allocate
the remaining $136 million of available DRA funds and any unexpended funds
of the approximately $1.9 billion previously allocated to states.

States Have Submitted Claims for About Half of Total DRA Allocations

As of October 2, 2006, states had submitted to CMS claims for
services--including associated administrative costs--totaling about $1
billion (or 54 percent) of the $1.9 billion in DRA funds allocated to
them. The amount of claims submitted and the number of states that
submitted claims varied by DRA category. Of the 32 states that received
allocations from CMS, 22 states have submitted claims, including the 3
directly affected states. Some state officials said they faced obstacles
processing DRA-related claims. While DRA-related expenditures varied by
state, claims were concentrated in nursing facilities, inpatient hospital
care, and prescription drugs.

About Two-Thirds of Eligible States Have Submitted Claims for Reimbursement,
Accounting for 54 Percent of Total Allocations

Of the 32 states that received DRA allocations, about two-thirds (22) had
submitted claims for expenditures to CMS as of October 2, 2006. The
submitted claims accounted for about 54 percent of CMS's $1.9 billion
allocated to states. States that submitted claims for reimbursement did so
for amounts that ranged from about 7 percent to approximately 96 percent
of their allocations. (See table 5.) Each of the 4 selected states we
reviewed--Alabama, Louisiana, Mississippi, and Texas--had submitted claims
by this time.

Table 5: CMS Allocation of DRA funds and States' Claims Submitted for
Reimbursement, by State, as of October 2, 2006

Source: GAO analysis of CMS and MBES data.

Note: This table includes the three DRA funding categories for which
states received allocations: (I) time-limited Medicaid and SCHIP services,
(II) time-limited uncompensated care services, and (III) existing Medicaid
and SCHIP beneficiaries. The selected states--Alabama, Louisiana,
Mississippi, and Texas--which received the highest allocations of DRA
funding are presented in bold type.

aThe remaining 10 states received allocations but had not submitted claims
as of October 2, 2006. The remaining states are: California, Georgia,
Massachusetts, North Carolina, North Dakota, Oregon, Pennsylvania, Puerto
Rico, Rhode Island, and Virginia.

Of the claims submitted for the two time-limited funding categories, 22 of
32 states submitted claims for Medicaid services (Category I) and 6 of 8
states submitted claims for uncompensated care services (Category II). The
claims submitted constituted approximately 20 percent of total allocations
to Medicaid and about 42 percent of total allocations to uncompensated
care services. Of the 4 selected states, 3 states--Alabama, Mississippi,
and Texas--submitted claims for Medicaid services, while all 4 selected
states submitted claims for uncompensated care services. (See table 6.)

Table 6: CMS Allocation of DRA Funds and States' Claims Submitted, by
Time-limited Funding Categories, as of October 2, 2006

Source: GAO analysis of CMS and MBES data.

Note: The four selected states--Alabama, Louisiana, Mississippi, and
Texas--which received the highest allocations of DRA funding are presented
in bold type.

aCategory I and Category II required CMS approval of a demonstration
project under section 1115 of the SSA. In addition to service
expenditures, associated administrative costs are also included.

bWhile states applied for and received approval to extend time-limited
SCHIP coverage to individuals affected by Hurricane Katrina, no states
actually enrolled individuals in SCHIP.

cState did not receive an allocation to Category II--time-limited
uncompensated care funding.

dAs of October 2, 2006, state(s) had not submitted claims.

eThe remaining states that received allocations but had not submitted
claims as of October 2, 2006, are: California, Georgia, Massachusetts,
North Carolina, North Dakota, Oregon, Pennsylvania, Puerto Rico, Rhode
Island, and Virginia.

Only the three directly affected states--Alabama, Louisiana, and
Mississippi--were eligible to receive DRA funding for existing Medicaid
and SCHIP beneficiaries (Category III). The claims submitted by the
directly affected states constituted approximately 58 percent of total
allocations to Category III. (See table 7.) In addition, claims from the
three directly affected states for existing Medicaid and SCHIP
beneficiaries accounted for about 85 percent of all DRA claims filed.
While funds for existing Medicaid and SCHIP beneficiaries were available
for both programs, about 98 percent of claims submitted were for Medicaid
expenditures.

Table 7: Claims Submitted for the Nonfederal Share of Expenditures for
Existing Medicaid and SCHIP Beneficiaries (Category III), as of October 2,
2006

Source: GAO analysis of CMS and MBES data.

It has taken longer than usual for states--both those directly affected by
the hurricane as well as states that hosted evacuees--to submit claims.
Typically, Medicaid expenditure reports are due the month after the
quarter ends. CMS officials estimated that about 75 percent of states
submit their Medicaid expenditures within 1 to 2 months after the close of
a quarter. However, data are not finalized until CMS and states ensure the
accuracy of claims. The process of states submitting claims for
DRA-related expenditures has been more prolonged. As with other Medicaid
claims, states are permitted up to 2 years after paying claims to seek
reimbursement from CMS. Therefore, these initial results are likely to
change as states continue to file claims for services. As of October 2,
2006, 10 of 32 states that received allocations of DRA funding had not
submitted any claims even though fiscal year 2006 ended on September 30,
2006.

Some state officials told us that they were having difficulties submitting
claims because of various obstacles related to processing claims or
receiving claims from providers, including needing to manually process
claims or adapt computer systems to accommodate the new types of claims
being submitted. For example, Mississippi officials explained that they
were manually processing claims for time-limited uncompensated care
services because they did not have an electronic system for processing
such claims. Georgia officials reported that the state's claims processing
system had to be adjusted in order to properly accept claims for
time-limited uncompensated care services. After such adjustments were
made, Georgia officials anticipated accepting these claims from mid-July
through the end of August 2006. Alabama officials noted that they had to
specifically request that providers submit claims for the costs of
providing uncompensated care services they may have assumed would not be
reimbursable.

States' Claims Were Concentrated in Three Service Areas

Claims that the four selected states submitted for Medicaid expenditures
in the three categories of DRA funding we reviewed varied, but were
typically concentrated in three service areas: nursing facilities,
inpatient hospital care, and prescription drugs. For example, all four
selected states had nursing facility services as one of their top four
services for which they submitted claims, while only Alabama had home and
community-based services as one of its services with the highest
expenditures. Of the claims submitted by states, the proportions
attributed to specific services varied across the states. (See table 8.)

Table 8: Percentages of Submitted Claims for Top Four Medicaid Services in
Each Selected State, as of October 2, 2006

Source: GAO analysis of MBES data.

aClaims submitted for this service were not among the top four services of
this state.

Alabama, Louisiana, and Mississippi submitted claims for the nonfederal
share of expenditures for SCHIP services to existing SCHIP beneficiaries.
Overall, the dollar amount of claims for SCHIP represented approximately 2
percent of the total value of claims submitted. As of October 2, 2006, the
top four SCHIP expenditures in Alabama were for physician services (22.8
percent), prescription drugs (20.7 percent), inpatient hospital services
(13.4 percent), and dental services (12.1 percent). The top four SCHIP
expenditures in Louisiana were for prescription drugs (45.4 percent),
physician services (22.4 percent), outpatient hospital services (12.5
percent), and inpatient hospital services (9.8 percent). For Mississippi,
all of the claims for DRA funds were for expenditures associated with
paying SCHIP premiums for certain enrollees.

Louisiana and Texas Raised Concerns Regarding Future Funding Needs

Two of our four selected states raised concerns about their ability to
meet the future health care needs of those affected by the hurricane once
DRA funds have been expended: Louisiana, which is eligible for DRA funding
for Category III services that may be provided beyond June 30, 2006; and
Texas, which is not eligible for such ongoing assistance. Of the three
directly affected states--Alabama, Louisiana, and Mississippi--only
Louisiana raised concerns that it would need additional funds to provide
coverage for individuals affected by the hurricane who evacuated the state
yet remain enrolled in Louisiana Medicaid. Alabama and Mississippi
officials did not anticipate the need for additional funding beyond what
was already allocated by CMS. In contrast, because Texas is eligible only
for the time-limited DRA funds from Category I and Category II, state
officials expressed concern about future funding needs in light of the
many evacuees remaining in the state. To learn more about this population,
the state commissioned a survey that indicated that evacuees responding to
the survey continue to have a high need for services, including health
care coverage under Medicaid and SCHIP.

Louisiana's Concerns Centered on Its Ability to Administer and Fund Medicaid
Coverage for Out-of-State Evacuees

Only the three directly affected states--Alabama, Louisiana, and
Mississippi--are eligible for DRA funds for Category III services, which
were designated to compensate states for the state share of expenditures
associated with services provided to existing Medicaid and SCHIP
beneficiaries from certain areas of directly affected states beyond June
30, 2006. This additional DRA funding could potentially be available from
any unused funds of the $1.9 billion allocated on September 30, 2006, and
the $136 million remaining from the $2 billion appropriated. It is unclear
how much of the $1.9 billion allocation will be unused and thus available
for redistribution. Additionally, it is not yet known how the remaining
$136 million will be distributed, but CMS will make that determination
after reconciling states' claims submitted during the first quarter of
fiscal year 2007 with the allocations. Of the three states eligible for
ongoing DRA funding, only Louisiana raised concerns that additional funds
will be necessary; Alabama and Mississippi did not anticipate additional
funding needs beyond those CMS already allocated.

Louisiana's funding concerns were associated with managing its program
across state borders as evacuees who left the state continue to remain
eligible for Louisiana Medicaid. State officials acknowledged that their
immediate funding needs have been addressed by the September 30, 2006,
allocation; however, they remain concerned that they do not have the
financial or administrative capacity to serve their Medicaid beneficiaries
across multiple states.26 Louisiana officials also cited the difficulty of
maintaining what they characterized as a national Medicaid program for
enrolled individuals and providers living in many different states.

Louisiana has submitted claims for DRA funding for Category III for
existing Medicaid and SCHIP beneficiaries (individuals enrolled in
Louisiana Medicaid) who resided in 1 of the 31 affected parishes in
Louisiana prior to Hurricane Katrina, but evacuated to another state after
the hurricane, and who continue to reside in that state.27 Because many of
these evacuated individuals have expressed intent to return to Louisiana,
they have not declared residency in the state where they have been living
since Hurricane Katrina. Under these circumstances, these individuals have
continued to remain eligible for Louisiana Medicaid. However, Louisiana
officials were uncertain how long the state would be expected to continue
this coverage on a long-distance basis. While DRA funds cover the
nonfederal (Louisiana state) share of service expenditures for these
Medicaid and SCHIP beneficiaries (Category III), they are not designated
to include reimbursement for the administrative costs associated with
serving Louisiana Medicaid beneficiaries living in other states.28

26While administrative costs associated with providing services for
Louisiana's existing Medicaid beneficiaries would qualify for federal
matching funds under Medicaid, Louisiana officials cited the added
complexity and cost of ensuring that such beneficiaries were originally
from 1 of the 31 affected parishes in order to qualify for funding under
Category III. This would increase the state's share of administrative
costs, which would not be covered under the DRA.

In particular, Louisiana officials noted the following difficulties, which
were also outlined in a May 15, 2006, letter to HHS and a May 26, 2006,
letter to CMS. These letters requested specific direction from CMS on the
issues presented as well as permission to waive certain federal Medicaid
requirements that Louisiana believes it has been unable to comply with. In
commenting on a draft of our report, Louisiana officials stated that as of
November 30, 2006, they had not received the written guidance that they
requested from CMS on the following issues:

           o Managing and monitoring a nationwide network of providers.
           Covering individuals who have evacuated from the state but remain
           eligible for Louisiana Medicaid requires the state to identify,
           enroll, and reimburse providers from other states.29 According to
           Louisiana officials, the state has enrolled more than 16,000
           out-of-state providers in Louisiana Medicaid since August 28,
           2005. The state does not believe that it can manage and monitor a
           nationwide network of providers indefinitely. Therefore, Louisiana
           is seeking guidance from CMS to ensure that the state is
           continuing to comply with federal Medicaid requirements for
           payments for services furnished to out-of-state Medicaid
           beneficiaries.30

           o Redetermining eligibility. Federal Medicaid regulations require
           that states redetermine eligibility at least annually as well as
           when they receive information about changes in individuals'
           circumstances.31 Louisiana officials indicated that they had
           received approval through its demonstration project to defer
           redetermination processes through January 31, 2006. Officials
           noted that they have more than 100,000 individuals from affected
           areas whose eligibility had not yet been redetermined as of May
           26, 2006. Officials say they do not want to take beneficiaries who
           need coverage off the state's Medicaid rolls for procedural
           reasons, and thus would prefer to conduct mail-in renewals and
           have a process for expedited reenrollment upon return to the
           state. According to Louisiana officials, the state's
           redetermination processes are currently on hold while CMS examines
           the possibility of granting a waiver for redetermining eligibility
           for individuals from the most severely affected parishes around
           New Orleans.

           o Maintaining program integrity. Louisiana officials explained
           that running a Medicaid program in multiple states raises issues
           of program integrity. While some providers have contacted
           Louisiana Medicaid to report that they have received payment from
           more than one state, Louisiana officials believe that other
           providers are not reporting overpayments. State officials
           indicated that they will conduct postpayment claims reviews to
           ensure that double billing and other fraudulent activities have
           not occurred. These officials estimated that this effort to review
           claims could be time consuming, taking approximately 3 to 8 years
           to complete. Because Louisiana believes that it is unable to
           ensure the integrity of the program as long as it continues
           enrolling out-of-state providers, the state requested specific
           direction from CMS on whether to continue such enrollment efforts.

           o Ensuring access to services. Louisiana officials expressed a
           concern about the state's ability to ensure access to home and
           community-based services in other states. Officials noted that
           some states have long waiting lists for this type of long-term
           care, making it difficult for them to provide services that assist
           in keeping individuals in the community rather than in an
           institution. Additionally, as a requirement of providing home and
           community-based services, measures are needed to protect the
           health and welfare of beneficiaries. However, officials stated
           that Louisiana is not in the position to assure the health and
           safety of individuals requiring these services out of the state.
           Thus, the state asked CMS for direction on how to continue
           operating its Medicaid program without violating the federal
           requirement to assure the health and welfare of beneficiaries
           receiving home and community-based services.
			  
			  Texas Is Hosting Large Number of Evacuees Whose Future Plans Are
			  Uncertain

           While Texas is not a directly affected state and therefore not
           eligible for DRA funding for any Medicaid or SCHIP services
           provided beyond June 30, 2006, it has been significantly affected
           by the number of evacuees seeking services, thus prompting concern
           among state officials regarding the state's future funding needs.
           To address the health needs of evacuees entering the state, Texas
           enrolled these individuals into Medicaid under Category
           I--providing time-limited Medicaid services for evacuees who were
           eligible under an approved demonstration project.32 In comparison
           to Alabama and Mississippi, which also enrolled evacuees into
           time-limited Medicaid services, Texas enrolled the largest number
           of evacuees--peaking at nearly 39,000 individuals in January 2006.
           (See table 9).

           Table 9: Selected States' Monthly Enrollment in Category I,
           Time-limited Medicaid Services

           Source: States' Medicaid enrollment data.

           Note: Louisiana was excluded from this table because it did not
           enroll any evacuees in the time-limited Medicaid category of its
           demonstration. Louisiana officials informed us that 52 evacuees
           who relocated to Louisiana met the state's criteria for its
           traditional Medicaid program and were enrolled in that program.

           aCategory I and Category II required CMS approval of a
           demonstration project under section 1115 of the SSA. While states
           applied for and received approval to extend time-limited SCHIP
           coverage to individuals affected by Hurricane Katrina, no states
           actually enrolled individuals in SCHIP.

           bData were not available.

           Texas also submitted claims for Category II DRA funds for
           time-limited uncompensated care services to evacuees, shortly
           after the hurricane. Enrollment into this category grew steadily
           from 2,224 individuals in October 2005 to 9,080 individuals in
           January 2006. Figure 3 shows the enrollment patterns for the Texas
           Medicaid program, as well as Category I and Category II services
           provided for the period following Hurricane Katrina.

           Figure 3: Texas Monthly Enrollment for Its Traditional Medicaid
           Program and DRA Categories I and II, July 2005-June 2006

           To better understand the characteristics, needs, and future plans
           of the evacuee population, the Texas Health and Human Services
           Commission contracted with the Gallup Organization to survey
           Hurricane Katrina evacuees in Texas.33 Data from survey
           respondents indicated that, as of June 2006, evacuees remaining in
           the state were predominantly adult women who lived in low-income
           households with children and had increasing rates of uninsurance
           since the hurricane.34 Despite the loss of insurance coverage, the
           survey indicated that fewer evacuees received Medicaid than
           previously expected and the loss of insurance primarily affected
           children's health coverage. Evacuees appear to be turning to
           hospital emergency departments to meet their health care needs, as
           survey respondents reported an increase in emergency room visits
           in the past 6 months. Texas officials confirmed that evacuees who
           were previously eligible for the two DRA categories for
           time-limited coverage (Medicaid and uncompensated care services)
           are beginning to present themselves to local county facilities for
           their health care needs, thus straining local resources to provide
           care for all Texas residents. Based on this survey, Texas
           officials said they are concerned that they will continue to host
           an evacuee population with high needs who do not have immediate
           plans to leave the state. In particular, over half of the survey
           respondents believe they will continue to reside in Texas in the
           next 6 months and half believe they will still be there in 1 year.
           Texas was not a directly affected state and is therefore not
           eligible for ongoing assistance through the DRA; funding for
           Category I only covers services provided as of June 30, 2006, and
           funding for Category II only covers services provided as of
           January 31, 2006.
			  
			  Agency and State Comments and Our Evaluation

           We provided copies of a draft of this report to CMS and the four
           states we reviewed: Alabama, Louisiana, Mississippi, and Texas. We
           received written general and additional comments from CMS (see
           app. II) and from Louisiana and Texas (see apps. III and IV,
           respectively). Alabama provided technical comments, while
           Mississippi did not comment on the draft report.

           In commenting on the draft report, CMS provided information on an
           initiative it took to respond to Hurricane Katrina. The agency
           indicated that HHS, which oversees CMS, worked closely with
           Louisiana's Department of Health and Hospitals to assist the state
           in convening the Louisiana Health Care Redesign Collaborative,
           which will work to rebuild Louisiana's health care system. We did
           not revise the text of the report to include information on this
           effort because it was beyond the scope of this report. However, we
           have earlier reported on HHS efforts to help rebuild Louisiana's
           health care system.35

           CMS also commented on three issues: our characterization of the
           categories of funding provided through DRA, our description of
           CMS's reconciliation process, and criticism it faced in
           communicating with the states, particularly Louisiana and Texas,
           regarding program implementation, coverage for out-of-state
           evacuees, and other issues. These comments are addressed below.

           CMS commented that we mischaracterized the categories of DRA
           funding by specifying them in the report as Categories I, II, III,
           and IV. We developed these four descriptive categories, which were
           derived from provisions of the DRA, in order to simplify report
           presentation. However, to respond to CMS's comment, we included
           additional legal citations in the report to better link the
           statutory language of the DRA with the categories of funding
           presented in this report. We did not, however, adopt all of CMS's
           descriptions of DRA provisions as CMS presented some of the
           descriptions inaccurately. In particular, CMS presented DRA
           sections 6201(a)(3) and 6201(a)(4) as providing federal funding
           under an approved section 1115 demonstration project, but as
           stated in the report, such approval is irrelevant to this funding.

           CMS also commented that the report was misleading because it did
           not fully describe the reconciliation process that will be used to
           allocate remaining and unused DRA funds. Specifically, the agency
           indicated that we did not explain that additional DRA allocations
           would be made to states not only from the remaining $136 million
           in unallocated funds but also from any unspent funds already
           allocated to states. The draft report did contain a full
           explanation of the reconciliation process. However, to address
           CMS's comment, we clarified this process in the report's
           Highlights and Results in Brief.

27Louisiana did not enroll any evacuees entering the state into its
time-limited Medicaid demonstration. Because the state did not expand
eligibility as permitted under its approved demonstration project,
Louisiana enrolled all evacuees who relocated in the state and who were
eligible into its traditional Medicaid program. There were 52 individuals
who met these criteria and were enrolled in Louisiana Medicaid.

28Funds for the nonfederal share of administrative costs are included in
Categories I and II, time-limited Medicaid and SCHIP services and
time-limited uncompensated care services, but not for Category III,
existing Medicaid and SCHIP beneficiaries. Coverage in Category I was
limited to services provided from August 24, 2005, through June 30, 2006,
for the time-limited Medicaid and SCHIP beneficiaries eligible under a
demonstration. Coverage in Category II was limited to services provided
from August 24, 2005, through January 31, 2006, for uncompensated  care
provided to individuals without a method of payment or insurance.

29To ensure that evacuees from Louisiana had access to care while
temporarily residing in other states, Louisiana Medicaid stated that it
had enrolled out-of-state providers by using emergency procedures and
waiving some provider enrollment requirements.

30See SSA S 1902(a)(16); 42 C.F.R. S431.52 for requirements governing
Medicaid payments for services furnished out of state.

31See 42 C.F.R S435.916 for regulations governing periodic Medicaid
eligibility redeterminations.

32Under demonstration projects, states were permitted to provide coverage
to evacuees for up to 5 months beginning when the individual became
eligible but not running beyond June 30, 2006. For example, if a person
became eligible for Medicaid coverage under the demonstration on October
1, 2005, his or her eligibility would continue for 5 months, ending on
February 28, 2006.

33See Hurricane Katrina Evacuees in Texas, Texas Health and Human Services
Commission, Epidemiology Team, Strategic Decision Support, Financial
Services Division, August 2006. The target population for the survey
included all Hurricane Katrina evacuees from other states who resided in
Texas at the time of the survey, which was administered in May and June
2006. The statewide survey response rate was 38 percent.

34Survey respondents largely reported earning less than $1,000 per month
before the hurricane.

35See GAO, Hurricane Katrina: Status of Hospital Inpatient and Emergency
Departments in the Greater New Orleans Area, [24]GAO-06-1003 (Washington,
D.C.: Sept. 29, 2006); and Hurricane Katrina: Status of the Health Care
System in New Orleans and Difficult Decisions Related to Efforts to
Rebuild It Approximately 6 Months After Hurricane Katrina, 

[25]GAO-06-576R (Washington, D.C.: Mar. 28, 2006).

           Finally, CMS disagreed with statements in the draft report that
           Louisiana had not received the requested direction detailed in
           letters written to HHS on May 15, 2006, and CMS on May 26, 2006.
           Louisiana's letters included concerns and questions that arose
           after the state implemented its section 1115 demonstration
           project. CMS indicated that it provided and continues to provide
           technical assistance to all states with section 1115 demonstration
           projects for Hurricane Katrina assistance beyond the states
           reviewed in this report. In particular, immediately following the
           hurricane CMS provided guidance to states through a conference
           call and a September 16, 2005, letter sent to all state Medicaid
           directors that explained the process of applying for the section
           1115 demonstration project, the benefits and eligibility criteria
           for evacuees, the uncompensated care pool, and other pertinent
           information. We revised the report to reflect the guidance that
           CMS provided to the states immediately following the hurricane.
           CMS also commented that it worked with Louisiana and the other
           hurricane-affected states on redetermining eligibility through a
           conference call, and provided information to Louisiana several
           times regarding regulations that the state should follow for
           redetermining eligibility on an annual basis. Further, CMS
           indicated that it provided technical assistance to Louisiana in
           its efforts to ensure program integrity and access to health care
           services. While CMS may have provided such assistance, from
           Louisiana's perspective, it was not sufficient to address the many
           issues the state is facing. In Louisiana's written comments, state
           officials maintained that as of November 30, 2006, they had not
           received written guidance from CMS regarding the issues outlined
           in their May 15, 2006, letter.

           Comments from Louisiana and Texas centered on each state's efforts
           to assist those affected by the hurricane and the ongoing
           challenges that exist as a result of Hurricane Katrina. In
           particular, Louisiana emphasized the lack of response from HHS
           regarding its concerns about running its Medicaid program in many
           states and related difficulties to ensuring the program's
           integrity. Texas commented on its continued need to provide health
           care services to Hurricane Katrina evacuees given the results of a
           survey conducted by the Gallup Organization, which indicated that
           most of the evacuees still residing in Texas were uninsured as of
           June 2006.

           Additional technical and editorial comments from CMS and the
           states were incorporated into the report as appropriate.

           We are sending a copy of this report to the Secretary of Health
           and Human Services and the Administrator of CMS. We will make
           copies available to others upon request. In addition, the report
           will be available at no charge on the GAO Web site at
           http://www.gao.gov .

           If you or your staff have any questions about this report, please
           contact me at (202) 512-7118 or [email protected] . Contact
           points for our Offices of Congressional Relations and Public
           Affairs may be found on the last page of this report. GAO staff
           who made major contributions to this report are listed in appendix
           V.

           Kathryn G. Allen
			  Director, Health Care

           List of Congressional Committees

           The Honorable Max Baucus
			  Chairman
			  The Honorable Charles E. Grassley
			  Ranking Member
			  Committee on Finance
			  United States Senate

           The Honorable John D. Dingell
			  Chairman
			  The Honorable Joe Barton
           Ranking Member
			  Committee on Energy and Commerce
			  House of Representatives

           The Honorable Henry A. Waxman
			  Chairman
			  The Honorable Tom Davis
           Ranking Member
			  Committee on Oversight and Government Reform
			  House of Representatives
			  
			  Appendix I: Deficit Reduction Act of 2005 Allocations to 32
			  States

           Under the authority of the Deficit Reduction Act of 2005, the
           Centers for Medicare & Medicaid Services (CMS) allocated funding
           totaling approximately $1.9 billion to 32 states, as of September
           30, 2006. The agency allocated funds to all 32 states for the
           time-limited Medicaid category of demonstration projects, to 8 of
           those 32 states for the time-limited uncompensated care category
           of demonstration projects, and to the 3 directly affected
           states--Alabama, Louisiana, and Mississippi--for the nonfederal
           share of expenditures for existing Medicaid and SCHIP
           beneficiaries. The 4 states selected for this study--Alabama,
           Louisiana, Mississippi, and Texas--received approximately 97.5
           percent of the $1.9 billion allocation. All allocations were based
           on estimates states submitted for each of the funding categories
           in response to CMS's July 2006 request for updated estimates. (See
           table 10.)

Table 10: CMS's Allocation of DRA Funds to States, Based on States'
Estimated Expenditures, as of September 30, 2006

Source: GAO analysis of CMS data.

Note: This table accounts for the approximately $1.9 billion of DRA funds
allocated to states.

aWhile states applied for and received approval to extend time-limited
SCHIP coverage to individuals affected by Hurricane Katrina, no states
actually enrolled individuals in SCHIP.

bCategory I and Category II required CMS approval of a demonstration
project under section 1115 of the SSA. In addition to service
expenditures, associated administrative costs are also included.

cDRA, Pub. L. No. 109-171, S 6201(a)(1)(A),(C), (a)(2), 120 Stat. 132-133.

dDRA, Pub. L. No. 109-171, S 6201(a)(1)(B),(D), (a)(2), 120 Stat. 132-133.

eDRA, Pub. L. No. 109-171, S 6201(a)(3), 120 Stat. 132-133.

fDRA, Pub. L. No. 109-171, S 6201(a)(4), 120 Stat. 132-133.

gCMS did not allocate funds to this category.

hState was not eligible for funding from this category.

iState's percentage of DRA allocation is less than 0.10 percent.

jNumbers may not add to 100 percent due to rounding.

Appendix II: Comments from the Centers for Medicare & Medicaid Services			  

Now page 25

Now page 9

Now page 9

Now pages 1 and 2

Now page 26

Now page 21

Now page 6

Appendix III: Comments from the State of Louisiana Department of
Health and Hospitals

Appendix IV: Comments from the State of Texas Health and Human 
Services Commission 

Appendix V: GAO Contact and Staff Acknowledgments

GAO Contact

Kathryn G. Allen (202) 512-7118 or [email protected]

Acknowledgments

In addition to the contact named above, Carolyn Yocom, Assistant Director;
Jennie Apter; Laura M. Mervilde; JoAnn Martinez-Shriver; Sari B. Shuman;
and Hemi Tewarson made key contributions to this report.

Related GAO Products

Hurricane Katrina: Status of Hospital Inpatient and Emergency Departments
in the Greater New Orleans Area. [27]GAO-06-1003 . Washington, D.C.:
September 29, 2006.

Catastrophic Disasters: Enhanced Leadership, Capabilities, and
Accountability Controls Will Improve the Effectiveness of the Nation's
Preparedness, Response, and Recovery System. [28]GAO-06-618 . Washington,
D.C.: September 6, 2006.

Hurricane Katrina: Status of the Health Care System in New Orleans and
Difficult Decisions Related to Efforts to Rebuild It Approximately 6
Months After Hurricane Katrina. [29]GAO-06-576R . Washington, D.C.: March
28, 2006.

Hurricane Katrina: GAO's Preliminary Observations Regarding Preparedness,
Response, and Recovery. [30]GAO-06-442T . Washington, D.C.: March 8, 2006.

Statement by Comptroller General David M. Walker on GAO's Preliminary
Observations Regarding Preparedness and Response to Hurricanes Katrina and
Rita. [31]GAO-06-365R . Washington, D.C.: February 1, 2006.

(290539)

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www.gao.gov/cgi-bin/getrpt?GAO-07-67 .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact Kathryn G. Allen (202) 512-7118 or
[email protected].

Highlights of [39]GAO-07-67 , a report to congressional committees

February 2007

HURRICANE KATRINA

Allocation and Use of $2 Billion for Medicaid and Other Health Care Needs

In February 2006, the Deficit Reduction Act of 2005 (DRA) appropriated $2
billion for certain health care costs related to Hurricane Katrina through
Medicaid and the State Children's Health Insurance Program (SCHIP). The
Centers for Medicare & Medicaid Services (CMS) was charged with allocating
the $2 billion in funding to states directly affected by the hurricane or
that hosted evacuees.

GAO performed this work under the Comptroller General's statutory
authority to conduct evaluations on his own initiative. In this report,
GAO examined: (1) how CMS allocated the DRA funds to states, (2) the
extent to which states have used DRA funds, and (3) whether selected
states--Alabama, Louisiana, Mississippi, and Texas--anticipate the need
for additional funds after DRA funds are expended. To conduct this review,
GAO reviewed CMS's allocations of DRA funds to all eligible states,
focusing in particular on the four selected states that had the highest
initial allocation (released by CMS on March 29, 2006). GAO obtained data
from Medicaid offices in the four selected states regarding their
experiences enrolling individuals, providing services, and submitting
claims; collected state Medicaid enrollment data; and analyzed DRA
expenditure data that states submitted to CMS.

As of September 30, 2006, CMS allocated $1.9 billion of the $2 billion in
DRA funding to states. CMS allocated funds to: Category I--the nonfederal
share of expenditures for time-limited Medicaid and SCHIP services for
eligible individuals affected by the hurricane (32 states); Category
II--expenditures for time-limited uncompensated care services for
individuals without a method of payment or insurance (8 of the 32 states);
and Category III--the nonfederal share of expenditures for existing
Medicaid and SCHIP beneficiaries (Alabama, Louisiana, and Mississippi).
CMS did not allocate funds to Category IV--for restoration of access to
health care. After CMS reconciles states' expenditures with allocations,
it will determine how to allocate the unallocated $136 million and
unexpended funds from the $1.9 billion allocated to states.

Allocation of DRA Funds to States, as of September 30, 2006

Source: GAO analysis of CMS data.

Note: This table accounts for the DRA funds allocated to states as of
September 30, 2006.

^aCMS did not allocate funds to Category IV, restoring access to health
care.

bTexas and the remaining states were not eligible for funding from this
category.

Of the $1.9 billion in allocated DRA funds, almost two-thirds of the 32
states that received these funds submitted claims totaling about $1
billion as of October 2, 2006. Claims from Alabama, Louisiana, and
Mississippi for Category III accounted for about 85 percent of all claims
filed. These initial results are likely to change as states continue to
file claims for services.

Of the four selected states, Louisiana and Texas raised concerns about
their ability to meet future health care needs once the DRA funds are
expended. Louisiana's concerns involved managing its Medicaid program
across state borders as those who left the state remain eligible for the
program. Texas was significantly affected by the number of evacuees
seeking services, thus raising concerns among state officials about the
state's future funding needs.

CMS, Alabama, Louisiana, and Texas commented on a draft of this report.
CMS suggested the report clarify the DRA funding categories, reallocation
process, and communication strategy with states, especially Louisiana.
Louisiana and Texas commented on their ongoing challenges, and Alabama
provided technical comments. The report was revised as appropriate.

References

Visible links
  24. http://www.gao.gov/cgi-bin/getrpt?GAO-06-1003
  25. http://www.gao.gov/cgi-bin/getrpt?GAO-06-576R
  27. http://www.gao.gov/cgi-bin/getrpt?GAO-06-1003
  28. http://www.gao.gov/cgi-bin/getrpt?GAO-06-618
  29. http://www.gao.gov/cgi-bin/getrpt?GAO-06-576R
  30. http://www.gao.gov/cgi-bin/getrpt?GAO-06-442T
  31. http://www.gao.gov/cgi-bin/getrpt?GAO-06-365R
  39. http://www.gao.gov/cgi-bin/getrpt?GAO-07-67
*** End of document. ***