    Medicaid Demonstration Waivers: Lack of Opportunity for Public
    Input during Federal Approval Process Still a Concern (24-JUL-07,
    GAO-07-694R).

    States provide health care coverage to about 60 million
    low-income individuals through Medicaid, a joint federal and
    state program established under title XIX of the Social Security
    Act (the Act). Title XIX of the Act established parameters under
    which states operate their Medicaid programs, such as requiring
    states to cover certain services for certain mandatory groups of
    individuals such as low-income children; pregnant women; and
    aged, blind, or disabled adults. The Secretary of Health and
    Human Services (HHS), however, possesses authority to allow
    states to depart from these requirements under certain
    conditions. Under section 1115 of the Act, the Secretary may
    waive certain Medicaid requirements and authorize Medicaid
    expenditures for experimental, pilot, or demonstration projects
    that are likely to assist in promoting Medicaid objectives.
    Medicaid section 1115 demonstration projects vary in scope, from
    targeted demonstrations, which are limited to specific services
    and populations, to comprehensive demonstrations, which affect
    Medicaid populations statewide, cover a broad range of services,
    and account for the majority of a state's Medicaid expenditures.
    Since 1982, the Secretary has approved comprehensive
    demonstration projects in a number of states, including Arizona,
    Florida, Hawaii, Oregon, Tennessee, and Vermont. Since our 2002
    report, and our subsequent 2004 report on 1115 demonstration
    approvals, HHS has continued to review and approve waivers of
    federal requirements for new comprehensive demonstration
    proposals. At Congress's request, we reviewed recently approved
    comprehensive demonstrations, including the process HHS used to
    obtain public input on these proposals. This correspondence
    addresses (1) implications for beneficiaries of recently approved
    comprehensive Medicaid demonstrations and (2) the extent to which
    the Secretary ensured opportunities for public input during the
    approval process. Our review encompassed recently approved
    comprehensive demonstration programs in two states, Florida and
    Vermont. These were the two demonstration programs meeting our
    criteria of (1) being approved by HHS from July 2004 (when we
    last reviewed HHS-approved section 1115 demonstrations) through
    December 2006 and (2) being comprehensive, including accounting
    for greater than 50 percent of the state's Medicaid expenditures.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-694R
        ACCNO:   A73208
      TITLE:     Medicaid Demonstration Waivers: Lack of Opportunity for
    Public Input during Federal Approval Process Still a Concern
         DATE:   07/24/2007
      SUBJECT:   Beneficiaries
    	     Federal law
    	     Federal/state relations
    	     Health care programs
    	     Medicaid
    	     Program evaluation
    	     State-administered programs
    	     Policy evaluation
    	     Health care reform
    	     Florida
    	     Vermont

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    GAO-07-694R

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    July 24, 2007

    The Honorable Henry A. Waxman
    Chairman
    Committee on Oversight and Government Reform
    House of Representatives

    The Honorable John D. Dingell
    Chairman
    Committee on Energy and Commerce
    House of Representatives

    The Honorable Frank J. Pallone, Jr.
    Chairman
    Subcommittee on Health
    Committee on Energy and Commerce
    House of Representatives

    The Honorable Sherrod Brown
    United States Senate

    Subject: Medicaid Demonstration Waivers: Lack of Opportunity for Public
    Input during Federal Approval Process Still a Concern

    States provide health care coverage to about 60 million low-income
    individuals through Medicaid, a joint federal and state program
    established under title XIX of the Social Security Act (the Act). Title
    XIX of the Act established parameters under which states operate their
    Medicaid programs, such as requiring states to cover certain services for
    certain mandatory groups of individuals such as low-income children;
    pregnant women; and aged, blind, or disabled adults.^1 The Secretary of
    Health and Human Services, however, possesses authority to allow states to
    depart from these requirements under certain conditions. Under section
    1115 of the Act, the Secretary may waive certain Medicaid requirements and
    authorize Medicaid expenditures for experimental, pilot, or demonstration
    projects that are likely to assist in promoting Medicaid objectives.
    Medicaid section 1115 demonstration projects vary in scope, from targeted
    demonstrations, which are limited to specific services and populations, to
    comprehensive demonstrations, which affect Medicaid populations statewide,
    cover a broad range of services, and account for the majority of a state's
    Medicaid expenditures.^2 Since 1982, the Secretary has approved
    comprehensive demonstration projects in a number of states, including
    Arizona, Florida, Hawaii, Oregon, Tennessee, and Vermont.

    ^1See Social Security Amendments of 1965, Pub. L. No. 89-97, S 121, 79
    Stat. 286, 343-352 (1965) (adding new sections 1901-1905 and amending
    sections 1109, 1115 of the Social Security Act, codified, as amended, at
    42 U.S.C. SS 1309, 1315, 1396-1396d).

    In 1994, the Department of Health and Human Services (HHS) established in
    the Federal Register the department's policies and procedures for
    evaluating Medicaid section 1115 demonstration^3 proposals, including
    processes for soliciting public input at both the state and federal
    levels.^4 At the state level, for example, states were expected to post
    notice of proposals in major newspapers, hold public hearings about the
    proposal, or take certain other steps to solicit public input. At the
    federal level, HHS indicated that it would notify interested organizations
    when it received a demonstration proposal; publish monthly notices of all
    new and pending demonstration proposals in the Federal Register; allow for
    a 30-day comment period after new proposals were received; acknowledge, if
    feasible, receipt of comments; and refrain from approving or disapproving
    proposals until at least 30 days after proposals were received.

    In July 2002, we reported that HHS had not consistently provided an
    opportunity at the federal level for the public to learn about and comment
    on pending demonstrations in accordance with its 1994 policy.^5 We
    concluded that public input was important at the federal level in part
    because approved demonstrations represent federal policy that may have
    influence beyond a single state. A federal-level process also provides
    more visibility and transparency for all affected and interested parties,
    including Congress. Because HHS disagreed with our recommendation that the
    agency provide for a federal public input process--indicating instead that
    it planned to post notice of proposed (pending) and approved
    demonstrations to its Web site--we suggested that Congress consider
    requiring the Secretary to improve the public notification and input
    processes at the federal level to ensure that individuals affected by
    section 1115 demonstrations have an opportunity to review and comment on
    proposals before they are approved. Congress has not yet enacted
    legislation that responds to this recommendation.

    ^2For the purposes of this report, we use the Department of Health and
    Human Services' (HHS) Center for Medicare & Medicaid Services (CMS)
    definition that "comprehensive Medicaid section 1115 demonstrations"
    include those that affect a broad range of services for Medicaid
    populations statewide; in addition, we add the criterion that the
    comprehensive demonstrations we reviewed account for greater than 50
    percent of a state's Medicaid expenditures.

    ^3For purposes of this report, we refer to "Medicaid section 1115
    demonstrations," "section 1115 demonstrations," "demonstration projects,"
    and "demonstrations" interchangeably.

    ^4In September 1994, HHS published in the Federal Register its policy on
    public participation during the demonstration approval process. At the
    federal level, HHS's policy stated that the department would post notice
    of pending demonstrations in the Federal Register; notify organizations
    that request information; and acknowledge, if feasible, comments received.
    At the state level, HHS's policy expected states to facilitate public
    involvement in developing demonstration proposals, such as by holding
    public hearings, convening commissions with open public meetings, enacting
    state legislation regarding the demonstrations, or posting information in
    newspapers. See Medicaid Program; Demonstration Proposals Pursuant to
    Section 1115(a) of the Social Security Act; Policies and Procedures, 59
    Fed. Reg. 49,249 (Sept. 27, 1994).

    ^5GAO, Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver
    Projects Raise Concerns, GAO-02-817 (Washington, D.C.: July 12, 2002).

    Since our 2002 report, and our subsequent 2004 report on 1115
    demonstration approvals,^6 HHS has continued to review and approve waivers
    of federal requirements for new comprehensive demonstration proposals. At
    your request, we reviewed recently approved comprehensive demonstrations,
    including the process HHS used to obtain public input on these proposals.
    This correspondence addresses

               o implications for beneficiaries of recently approved
               comprehensive Medicaid demonstrations and

               o the extent to which the Secretary ensured opportunities for
               public input during the approval process.

    Our review encompassed recently approved comprehensive demonstration
    programs in two states, Florida and Vermont. These were the two
    demonstration programs meeting our criteria of (1) being approved by HHS
    from July 2004 (when we last reviewed HHS-approved section 1115
    demonstrations) through December 2006 and (2) being comprehensive,
    including accounting for greater than 50 percent of the state's Medicaid
    expenditures.^7 To assess the reliability of HHS information on states'
    Medicaid expenditures, we reviewed HHS documentation on the collection of
    and quality assurance activities related to the data and interviewed
    knowledgeable HHS officials, and determined the data to be reliable for
    our purposes. To assess implications for beneficiaries of the Florida and
    Vermont demonstrations, we reviewed HHS's and states' documents, including
    proposals for these demonstrations and approved demonstrations' terms and
    conditions,^8 and federal and state laws; we also interviewed state and
    HHS officials, including officials from CMS.^9 To examine public input
    processes, we reviewed certain federal and state laws and guidance;
    interviewed HHS and state officials; interviewed representatives from
    national, state, and local stakeholder groups; reviewed information posted
    by HHS on its Web site; and reviewed documentation of public meetings and
    written responses to public comments. (See enc. I for a list of
    stakeholder groups interviewed for this correspondence.) Because the
    Florida and Vermont demonstrations were in their early implementation
    phase during our review, we focused our assessment largely on determining
    implications for Medicaid beneficiaries under the terms of the states'
    demonstrations as approved by HHS. We did not, however, consider
    implications of these demonstrations with respect to other aspects of
    federal oversight of the Medicaid program.^10 We conducted our review from
    June 2006 through June 2007 in accordance with generally accepted
    government auditing standards.

    ^6GAO, Medicaid Waivers: Recent HHS Approvals of Pharmacy Plus
    Demonstrations Continue to Raise Cost and Oversight Concerns, GAO-04-480
    (Washington, D.C.: June 30, 2004).

    ^7Our findings from HHS's approval of these two states' demonstrations
    cannot be generalized to HHS's approval of other states' demonstrations.
    We used this criterion for purposes of our assessing HHS's process as it
    was applied in these particular cases of importance. These cases we
    considered important because the majority of the state's Medicaid spending
    was governed by the terms of the demonstration.

    ^8For each demonstration it approves, HHS approval documents may include a
    demonstration approval letter, a demonstration fact sheet, the terms and
    conditions of the demonstration, and a description of waiver and
    expenditure authorities granted by the Secretary for the demonstration.
    The state documents its acceptance of HHS's approval with an approval
    acceptance letter. A demonstration's terms and conditions describe general
    requirements of the demonstration program, such as benefits, eligibility,
    populations covered, cost-sharing requirements, enrollment, evaluation,
    and allocated budget.

    ^9Although HHS has delegated the administration of the Medicaid program,
    including the approval of section 1115 demonstrations, to CMS, we refer to
    HHS throughout this report because section 1115 demonstration authority
    ultimately resides with the Secretary, and, accordingly, other HHS
    components are involved in the review and approval of these
    demonstrations.

    Results in Brief

    Recently approved Medicaid section 1115 demonstrations in Florida and
    Vermont have mixed implications for beneficiaries in terms of coverage and
    eligibility. The demonstrations are implementing different methods for
    administering each state's Medicaid program and, as of March 2007, had
    been under way less than 8 months in Florida and less than 18 months in
    Vermont. Consequently, the actual effect of the demonstrations on
    beneficiaries was not yet known.

               o Florida's demonstration program. Approved by HHS in October 2005
               and launched in July 2006, Florida's demonstration program is
               designed to give Medicaid beneficiaries more options in selecting
               health care plans and benefits. In the initial phase of the
               demonstration, certain Medicaid beneficiaries in two counties are
               required to enroll in managed care benefit plans. Managed care
               plans compete for Medicaid beneficiaries by offering different
               coverage options, including customized benefits, subject to
               certain limitations. For example, some plans could offer
               supplemental coverage for nonemergency dental benefits or
               over-the-counter pharmaceuticals not offered by other health
               plans. If beneficiaries do not choose a plan, they are
               automatically enrolled into a plan by the state, and coverage can
               be limited to emergency medical services and nursing home level
               care for beneficiaries for up to 30 days pending beneficiaries'
               enrollment in a managed care plan. Unlike many other previous
               Medicaid managed care systems, managed care plans in Florida have
               the authority to design benefit packages subject to approval by
               the state. Medicaid beneficiaries are notified about changes in
               their benefits from year to year and are responsible for
               determining whether plans continue to meet their health care
               needs. Medicaid beneficiaries may also voluntarily "opt out" of
               Medicaid coverage altogether and use a state-paid Medicaid premium
               toward their costs to enroll in an employer-sponsored insurance
               plan or--if they are self-employed--in a commercial benefit plan.
               In making this choice, however, these individuals, including
               mandatory Medicaid beneficiaries,^11 would no longer be entitled
               to mandatory Medicaid benefits; for example, children would no
               longer be entitled to mandatory comprehensive screening and
               treatment benefits if their parents enrolled in an
               employer-sponsored or commercial benefit plan that did not provide
               these benefits. Medicaid beneficiaries can choose a new benefit
               plan each year. If they opt out of Medicaid but later desire to
               enroll in one of Florida's Medicaid demonstration managed care
               plans, they need to wait for a qualifying event or open enrollment
               period before reenrolling. Initially implemented in a two-county
               area, the components of the demonstration are planned for
               statewide implementation by June 2010.^12

               o Vermont's demonstration program. Approved by HHS in September
               2005 and launched the following month, Vermont's demonstration
               created a single, state-operated managed care organization to
               cover virtually all of the state's Medicaid population.^13 The
               demonstration is designed to contain costs; to improve system
               accountability and quality of care; and, by potentially delivering
               services to Medicaid beneficiaries for less and reinvesting
               savings, to allow the state to serve more of its uninsured
               population. As a condition of approval, HHS required that the
               state be at risk for paying any costs for the demonstration beyond
               an established spending limit; however, the state has additional
               flexibility beyond traditional Medicaid requirements to change
               benefits, increase cost-sharing requirements, and alter
               eligibility for nonmandatory Medicaid beneficiaries. For example,
               the state is authorized to change the covered benefit package
               offered to certain groups of beneficiaries, such as nonmandatory
               groups that previously received Medicaid coverage at the state's
               option, without additional HHS approval as long as the changes
               result in no more than a 5 percent increase or decrease each year
               from the prior year's total Medicaid expenditures.

    ^10In a separate letter to the Secretary of Health and Human Services, we
    discuss concerns about the consistency of the Florida and Vermont
    demonstrations with federal law. See B-309734, July 24, 2007.

    ^11Mandatory Medicaid beneficiaries are those individuals who must be
    covered under a Medicaid program, such as children under age 6 in families
    with incomes at or below 133 percent of the federal poverty level and
    pregnant women whose family income is below 133 percent of the federal
    poverty level. (See enc. II for a summary of mandatory Medicaid benefits,
    eligibility requirements, and cost-sharing limits.)

    Officials in both states took steps to obtain public input in line with
    HHS's 1994 policy, but HHS did not provide opportunity for public input at
    the federal level once the proposals were received or post the states'
    proposals on its Web site before approving them. Instead, HHS relied on
    Florida and Vermont officials to obtain and respond to public comments.
    Both states provided opportunities for public input--for example, by
    holding public hearings and posting drafts of the demonstration proposal
    on the states' Web sites. Even so, stakeholders in each state and at the
    national level said they lacked access to specific information about
    aspects of the proposals that directly affected beneficiaries or lacked
    sufficient time to review and comment on the proposals. In Vermont, for
    example, the state's Medical Care Advisory Committee, established by the
    state to facilitate consumer input in state Medicaid policy, voted against
    approval of the demonstration proposal because members said they lacked
    sufficient time and information to understand the proposal. In Florida,
    stakeholders said that information about the demonstration proposal
    provided during public meetings was insufficient for adequately
    understanding implications and that, upon request, state officials did not
    provide key documents related to the demonstration, such as budget and
    demographic information related to the proposal. At the federal level,
    organizations representing individuals aged 50 and above, children and
    families, and other Medicaid beneficiaries affected by the Florida and
    Vermont demonstrations said that HHS did not post the proposals to its Web
    site or provide them with timely information about the demonstrations upon
    request. Unless Congress and HHS take actions in response to the matters
    for congressional consideration and recommendations to HHS presented in
    our July 2002 report, it appears likely that HHS will continue to approve
    waivers for comprehensive demonstration proposals--with potentially
    significant implications for program beneficiaries--without adequate
    opportunity for public input.

    In commenting on a draft of this report, HHS said the department continues
    to disagree with our recommendation that the Secretary provide for an
    improved public input process at the federal level. HHS said that
    sufficient opportunities are available at the state level and that a new
    federal-level requirement could create legal challenges that would delay
    HHS's and states' implementation of innovative demonstrations. We disagree
    with HHS's contention that its current policies and practices allow for
    sufficient public input. For example, stakeholders reported they lacked
    access to specific information about the proposals during the public input
    process. Also, HHS told us in 2002 that it planned to post proposed
    demonstrations on its Web site, but has not since established this policy
    in a written form in HHS guidance,^14 and has not followed this practice
    in the case of recently approved demonstrations in Florida and Vermont.
    Furthermore, HHS did not explain or provide a basis for its contention
    that allowing for federal input could create legal challenges. Therefore,
    we disagree with HHS's suggestion that a public process should be limited
    in order to avoid legal challenges. Because of long-standing concerns with
    inadequate opportunities for public input in the process and because a
    notice-and-comment period at the federal level would provide for a more
    open and transparent process for all parties, we maintain our earlier
    recommendation that Congress consider requiring the Secretary to institute
    such a process.

    ^12Florida's demonstration is expected to expand to five counties in 2007
    and to expand statewide by 2010.

    ^13Populations not covered by the state managed-care organization include
    individuals enrolled in the state's long-term care demonstration and the
    State Children's Health Insurance Program (SCHIP).

    We also provided a copy of a draft of this report to Florida and Vermont.
    Florida stated that our draft report did not provide an accurate
    representation of the demonstration structure as it selectively
    represented certain aspects of Florida's demonstration and omitted or
    underemphasized other innovative and integral aspects of the program. We
    maintain that our report accurately describes the major components of
    Florida's demonstration. We did, however, update the report to discuss a
    component of the demonstration that Florida said was important,
    specifically, information on a financial benefit to encourage healthy
    behaviors; about $34,000 had been used by beneficiaries as of March 2007.
    Vermont, while disheartened that some stakeholders noted that the state's
    public input process was somehow weak or not well rounded, stated that our
    draft report was thorough, thoughtful, balanced, and complete.

    Background

    Medicaid is one of the largest programs in federal and state budgets. In
    fiscal year 2005, the most recent year for which complete information is
    available, total Medicaid expenditures were an estimated $317 billion.
    States pay qualified health providers for a broad range of covered
    services provided to eligible beneficiaries. The federal government
    reimburses states for its share of these expenditures. The federal
    matching share of each state's Medicaid expenditures for services is
    determined under a formula defined under federal law and can range from 50
    to 83 percent.^15 Each state administers its Medicaid program in
    accordance with a state Medicaid plan, which must be approved by HHS.^16
    Traditional Medicaid programs represent an open-ended entitlement, meaning
    the state will enroll all individuals who are eligible for Medicaid, and
    both the state and the federal government will pay, without limitation,
    their share of state expenditures for people covered under a state's
    approved Medicaid plan.

    ^14When asked for a copy of its policy, HHS officials clarified that the
    expectation that waiver applications be posted on the Web site is not
    contained in formal HHS policy guidance, but in performance plans for
    certain CMS division managers.

    ^15See Social Security Act SS 1903(a)(1), 1905(b) (codified, as amended,
    at 42 U.S.C. SS 1396b(a)(1), 1396d(b)). States with lower per capita
    income typically receive higher federal matching shares.

    ^16A state Medicaid plan details the fundamental characteristics of a
    state's program such as the mandatory and optional populations a state's
    program serves; the amount, scope, and duration of mandatory and optional
    services the program covers; and the rates of and methods for calculating
    payments to providers.

    States have considerable flexibility in designing their Medicaid programs,
    but under federal Medicaid law, states generally must meet certain
    requirements for which benefits are to be provided and who is eligible for
    the program, and states may impose only nominal deductibles, coinsurance,
    or co-payments on some Medicaid beneficiaries for certain services.^17 For
    example, states are required to cover certain services, such as physician,
    hospital, and nursing facility services, as well as early and periodic
    screening, diagnostic, and treatment (EPSDT) services for children (under
    the age of 21). States can receive federal matching payments to cover
    certain optional services, such as prescription drugs, vision, and dental
    services, but if they do so, they must generally provide the same benefits
    to all covered beneficiaries. Groups of individuals that states are
    required to cover under the state plan are known as "mandatory"
    populations, and states may choose to provide Medicaid coverage to
    additional optional groups of individuals.^18 Generally, optional Medicaid
    beneficiary groups share characteristics similar to the mandatory groups,
    but have higher incomes and states may cover these individuals under a
    state plan. Expansion eligibility groups are those individuals who do not
    fall under statutorily defined Medicaid eligibility categories but whom
    states are able to cover under a section 1115 demonstration.

    Under section 1115 of the Social Security Act, the Secretary has authority
    to waive certain federal Medicaid requirements and authorize Medicaid
    expenditures for experimental, pilot, or demonstration projects that are
    likely to assist in promoting Medicaid objectives.^19 States have used the
    flexibility granted through section 1115 to implement major changes to
    existing state Medicaid programs. For example, some states have used
    Medicaid section 1115 demonstrations to introduce mandatory managed care
    for their Medicaid beneficiaries; other states have expanded Medicaid
    coverage to additional populations or services.

    Recognizing that people who may be affected by a demonstration project
    "have a legitimate interest in learning about proposed projects and having
    input into the decision-making process," HHS established procedures in a
    1994 Federal Register notice for both a federal- and a state-level public
    notice-and-comment process.^20 At the state level, the requirements of
    this policy have remained essentially unchanged since the notice was
    issued on September 27, 1994. In directing states to facilitate public
    involvement and input during the development of proposed demonstrations,
    the notice describes a variety of ways that states may create
    opportunities for public input, such as holding public hearings, convening
    commissions with open public meetings, enacting state legislation
    regarding the demonstrations, or posting information about demonstration
    proposals in newspapers. HHS's policy also instructs states to include in
    their formal 1115 demonstration proposals a brief narrative describing the
    process used to obtain public input.^21 In the 1994 notice, HHS indicated
    that it would post notice of new and pending demonstrations in the Federal
    Register; allow for a 30-day comment period; notify certain organizations
    of the receipt of demonstration proposals; acknowledge, if feasible,
    comments made; and refrain from approving or disapproving proposals until
    at least 30 days after proposals were received.

    ^17See Social Security Act SS 1902(a)(10)(A), 1905(a), 1916, 1916A
    (codified, as amended, at 42 U.S.C. SS 1396a(a)(10)(A), 1396d(a), 1396o,
    1396o-1).

    ^18Social Security Act S 1902(a) (10)(A)(i), (ii) (codified, as amended,
    at 42 U.S.C. 1396a(a)(10)(A)(i), (ii)). In 2006, income thresholds for
    Medicaid eligibility as a percent of the federal poverty level in Florida
    were 200 percent for infants, 133 percent for children age 1-5, 100
    percent for children age 6-19, 185 percent for pregnant women, 22 percent
    for nonworking parents, and 58 percent for working parents. In Vermont,
    income thresholds in 2006 were 300 percent for infants and children up to
    age 19, 200 percent for pregnant women, 185 percent for nonworking
    parents, and 192 percent for working parents. The federal poverty level
    for a family of four in 2006 was $20,000.

    ^19Social Security Act S 1115 (codified, as amended, at 42 U.S.C. S 1315).

    ^2059 Fed. Reg. at 49,250-251.

    Demonstrations in Florida and Vermont Have Mixed Implications for
    Beneficiaries, but Actual Effects Are Unknown

    Recently approved demonstrations in Florida and Vermont implement
    different methods for administering each state's Medicaid program and have
    potentially wide-ranging implications for beneficiaries. In Florida, for
    example, beneficiaries have greater flexibility to choose among different
    benefit plans, but could face the loss of some benefits, limits on covered
    services, or additional cost-sharing requirements, and beneficiaries could
    face up to 30 days with limited coverage before being enrolled in a
    managed care benefit plan. Vermont may use savings from managed care
    operations to fund additional health care initiatives, but the state is at
    financial risk should demonstration costs exceed the approved spending
    limit, with uncertain implications for beneficiaries should that happen.
    Because the demonstrations were in early stages of implementation at the
    time of our review, the actual effect on beneficiaries of their various
    components was not yet known.

    Florida's Demonstration Provides Beneficiaries More Choice, but
    Beneficiaries Assume Risk for Their Choice of Plans, under Which Benefits
    Could Be Limited

    Florida's demonstration proposal, which Florida submitted and HHS approved
    in October 2005, gives beneficiaries a more active role in determining
    their health care by requiring them to choose from a number of managed
    care plans in their area. Under the demonstration, HHS gave authority to
    the state to develop and pay risk-adjusted premiums^22 to managed care
    plans that cover beneficiaries, and to establish an annual maximum benefit
    limit for adults.^23 The state in turn is requiring most beneficiaries,
    including aged and disabled persons and certain families and children,^24
    to choose from a number of managed care plans offering a variety of
    benefit packages (beneficiaries are automatically enrolled in a plan if
    they do not make a choice), or they can opt out of Medicaid and enroll in
    employer-sponsored benefit plans or, in the case of those who are
    self-employed, in commercial benefit plans. By choosing a benefit plan or
    opting out of Medicaid to purchase employer-based or commercial insurance,
    however, beneficiaries may also experience reduced benefits or increased
    cost sharing such as co-payments or deductibles. Florida's demonstration
    program began in July 2006 in two counties, Broward and Duval, and is
    scheduled to expand statewide by 2010.

    ^21In addition to HHS's 1994 policy, a May 3, 2002, letter issued by HHS
    to state Medicaid directors reiterated that the public should continue to
    be involved in the development of demonstrations and that HHS will
    continue to review demonstrations to ensure that states are following
    public-notice procedures. The letter stated that the states have
    responsibility for providing opportunity for public input, for example,
    through public forums, legislative hearings, placement of information on
    the state's Web site with a link for public comments, or distribution of
    draft proposals for comment. Letter to state Medicaid directors 02-007
    (May 3, 2002), available at
    http://www.cms.hhs.gov/SMDL/SMD/list.asp#TopOfPage (downloaded Feb. 15,
    2007).

    ^22Florida calculates risk-adjusted premiums for Medicaid beneficiaries
    based on eligibility groups, age, and gender for a specific geographic
    area and then adjusts for risks associated with health status.

    ^23For plans accepting risk for comprehensive coverage only, the plan
    would be responsible for care up to a $50,000 limit per beneficiary. Once
    the plan reaches $50,000, the state reimburses the plan at 95 percent of
    the state's current Medicaid fee-for-service rate for costs accrued up to
    the $550,000 annual maximum benefit limit for nonpregnant adults. For
    plans accepting risk for both comprehensive and catastrophic care, the
    plan is responsible for care of nonpregnant adults up to the $550,000
    annual maximum benefit limit.

    Selected features of the Florida demonstration and implications for
    beneficiaries include the following:

               o Managed care plans have flexibility to offer state-approved
               benefit plans tailored to specific groups of beneficiaries:
               Participating managed care plans can vary the amount, duration,
               and scope of benefits offered to individual beneficiaries who
               share demographic characteristics or who have varying levels of
               medical need, and they can drop or impose cost sharing on certain
               services as long as the required cost sharing is within those
               limits approved for services under the state Medicaid plan.
               According to state officials, managed care plans must provide the
               same level of coverage available under the state plan with respect
               to children under age 21 and pregnant women.^25 Managed care plans
               are encouraged to compete for enrollees by offering customized
               benefit packages--for example, by including additional services or
               lower cost sharing--targeted to specific populations. To ensure
               that all benefit plans offer sufficient coverage, the state must
               approve all benefit packages offered to Medicaid beneficiaries.^26
               Managed care plans participating in the demonstration as of March
               2007^27 offered similar plans, in that they each covered certain
               basic Medicaid benefits, such as hospital inpatient and outpatient
               services, ambulance services, and maternity services. However,
               some participating plans offered beneficiaries additional
               services, such as adult dental benefits, over-the-counter pharmacy
               benefits, and frail- or elder-care services that were not offered
               by other plans. Some plans limited beneficiaries to 60 lifetime
               visits for home health services--consistent with Florida's
               state-plan-required coverage--while others expanded this service
               to 210 visits annually per beneficiary. Several plans had no
               limits on the amount or cost of prescription drugs a beneficiary
               may use, while others limited the number of monthly prescriptions
               that beneficiaries were allowed or the annual covered cost for
               prescription drugs. Nearly half of the plans required
               beneficiaries to pay some form of co-payments, while the remaining
               plans did not have co-payment requirements. Whereas before the
               demonstration all beneficiaries meeting the same eligibility
               requirements received the same benefits as covered under the state
               Medicaid plan, under the demonstration, Medicaid beneficiaries
               could enroll in a participating plan based on the particular
               benefit package offered by managed care plans, much as they would
               in the commercial insurance market. In addition, unlike many other
               previous Medicaid managed care systems, managed care plans may
               change benefit packages annually with state approval. After
               beneficiaries are notified each year about changes in their
               benefits, they are responsible for determining whether their plans
               continue to meet their health care needs. Under the demonstration,
               beneficiaries can remain with the same plan or can choose a new
               plan each year during a designated open enrollment period.
               Beneficiaries need to review their plans each year to ensure that
               they understand how benefits may be changing.

               o Beneficiaries can have the state contribute towards the purchase
               of available employer-sponsored insurance or commercial health
               insurance and voluntarily opt out of Medicaid: Under Florida's
               demonstration, beneficiaries can choose to "opt out" of Medicaid
               and have the state use their Medicaid premium toward paying the
               costs of employer-sponsored health insurance or, if they are
               self-employed, towards individually purchased commercial health
               insurance. HHS has authorized the state to pay for such costs up
               to the state-established Medicaid premium and receive federal
               matching payments for these expenditures. Although
               employer-sponsored or commercial benefit plans must meet minimum
               state licensing standards, these plans are not subject to benefit
               package requirements applicable to plans participating in the
               demonstration and, therefore, may offer fewer benefits than plans
               participating in the demonstration. Also, these plans may have
               greater cost-sharing requirements, such as deductibles,
               co-payments, and higher monthly premiums than those the state
               would allow for plans participating in the demonstration.^28 By
               choosing to opt out of Medicaid, beneficiaries from mandatory
               populations could receive fewer benefits through
               employer-sponsored health plans. For example, children of parents
               who opt out and who previously had comprehensive Medicaid coverage
               for a broad range of EPSDT services could potentially have their
               benefits reduced. Medicaid beneficiaries who opt out of Medicaid
               have 90 days to choose to enroll instead in a Medicaid managed
               care plan. After 90 days, the beneficiary must remain with the
               employer-sponsored insurance and can make no further changes,
               including enrolling in a Florida Medicaid managed care plan, until
               the next employer-sponsored open enrollment period, unless the
               enrollee no longer has access to employer-sponsored coverage. If a
               beneficiary loses eligibility for participation in the
               employer-sponsored plan, the state has a process for "opting back
               in" to a Medicaid managed care plan.

               o Choice counselors will assist beneficiaries with choosing
               benefit plans or with opting out of Medicaid, but beneficiaries
               must assume risk for their choices: Through the mandatory
               enrollment of beneficiaries into managed care plans that they
               choose, Florida's demonstration emphasizes individual involvement
               in selecting from benefit plan options, and the state expects to
               gain valuable information about the effects of infusing
               market-based approaches into a public entitlement program. To
               assist beneficiaries with their choices, Florida is providing
               counselors--called "choice counselors"--to provide information
               about choosing a benefit plan and about opting out of Medicaid.
               According to the demonstration's terms and conditions, independent
               choice counselors will provide beneficiaries with information
               about each plan's coverage, benefits and benefit limitations,
               cost-sharing requirements, network and contacts, performance
               measures, results of consumer satisfaction reviews, and access to
               preventive services. Because the choice of benefit plans could
               have significant implications for beneficiaries, how well Florida
               implements choice counseling is critical to beneficiaries'
               understanding their options and making sound choices regarding
               which benefit plan best meets their needs. As of March 2007, it
               was too early to evaluate the effectiveness of choice counselors
               in helping beneficiaries choose benefits plans.

               o Florida may limit retroactive eligibility and benefits for new
               beneficiaries: Under the demonstration, Florida may limit
               eligibility to the date of an individual's Medicaid application
               and need not provide Medicaid coverage for new beneficiaries
               retroactively, that is, for up to 3 months before the date the
               individual applied for assistance. Under the statutory
               requirements for Medicaid, if an applicant is found eligible for
               Medicaid, a state plan must make medical assistance retroactive
               for up to 3 months. HHS approved a waiver of this statutory
               requirement for the demonstration. In addition, Florida could, if
               it chooses, restrict newly eligible beneficiaries' coverage for
               Medicaid services for up to 30 days after a beneficiary is
               determined to be eligible, but before a benefit plan is selected
               or before the state assigns a beneficiary to a benefit plan.
               During this 30-day period, or until a beneficiary selects a
               benefit plan or is assigned to one, Florida can restrict his or
               her care to only emergency medical services and nursing home level
               of care.^29 Florida Medicaid officials, however, informed us that
               pregnant women and children under 21 years of age will continue to
               have retroactive eligibility for up to 3 months prior to the date
               of application,^30 will receive full state plan benefits, and are
               also exempt from receiving limited benefits for up to 30 days
               before they are enrolled in a managed care plan.

    ^24Specifically, the state is requiring aged and disabled persons
    receiving cash assistance under the Supplemental Security Income program
    and children and families receiving cash assistance under the Temporary
    Assistance to Needy Families program to participate in the demonstration.
    The demonstration will initially exclude several special-needs groups
    currently receiving Medicaid services, such as foster-care children,
    individuals with developmental disabilities, and individuals residing in
    nursing homes or psychiatric facilities.

    ^25In commenting on a draft of this report, Florida indicated that managed
    care plans must also provide the same level of coverage available under
    the state plan to Supplemental Security Income (SSI) beneficiaries, and
    must provide emergency services to all enrollees in the demonstration.

    ^26To meet requirements of the demonstration, a managed care plan must
    cover all the categories of mandatory services, as well as optional
    services covered under Florida's state plan when indicated by historical
    data. The plan, however, may cover services in differing amount, duration,
    and scope as long as the plan can demonstrate that its proposed benefits
    are actuarially equivalent to historical utilization levels and are
    sufficient to cover the needs of the vast majority of enrollees.

    ^27As of March 2007, 16 plans were under contract to provide services for
    the Florida demonstration.

    ^28Under the demonstration, HHS approved a waiver of a statutory
    requirement that establishes limits on the imposition of cost-sharing on
    Medicaid populations and services, thereby allowing the state to authorize
    participation by beneficiaries in employer-sponsored or commercial health
    plans that may impose cost sharing amounts that exceed such limits.

    According to Florida officials, another key component of the demonstration
    is the enhanced benefit program to promote healthy behaviors. Under the
    program, accounts are established to provide incentives to enrollees for
    participating in state-defined activities that promote healthy behaviors.
    An individual who participates in certain state-defined activities that
    promote healthy behavior is given up to $125 per state fiscal year in
    "credits" in an individual enhanced benefit account to use for certain
    health-care-related expenditures. As of March 2007, beneficiaries had used
    about $34,000 of $1.7 million credited to their accounts under the
    program.^31

    ^29Under the demonstration, HHS approved a waiver of a statutory
    requirement that would otherwise have required the state to provide
    mandatory benefits to all mandatory and optional Medicaid beneficiaries,
    thereby allowing the state to limit coverage, for up to 30 days, pending
    enrollment in a managed care organization, to emergency services and
    nursing home level of care.

    ^30In commenting on a draft of this report, Florida said that although HHS
    granted a waiver so that the state was not required to provide retroactive
    eligibility for up to 90 days prior to the application, the state had not
    as of June 2007 implemented this component of the program.

    ^31In March 2007--the latest month for which data were available--about
    $15,000 of $524,000 credited by the state under the program had been used
    by Medicaid beneficiaries. About 1,000 of 19,000 enrollees receiving
    credits had used them.

    Florida began implementation of this demonstration program in July 2006;
    however, beneficiaries were not enrolled in benefit plans until September
    2006. As of March 2007, more than 165,000 beneficiaries were enrolled in
    benefit plans. At the time of our review, the demonstration program was
    not yet far enough along to determine the effect on beneficiaries and the
    extent to which providing beneficiaries with increased choices, along with
    the increased risk associated with those choices, was improving care.

    Vermont's Demonstration Grants the State New Flexibility, but Some
    Beneficiaries May Have Benefits Reduced and Eligibility Delayed or Denied

    Vermont's demonstration, submitted in April 2005 and approved by HHS in
    September 2005, provides the state with the flexibility necessary to
    administer most of the state's Medicaid program in a more centralized
    manner. The demonstration, which began in October 2005, allows the state
    to operate its own managed care organization. Under the demonstration, an
    office within the state's Medicaid agency was converted to a publicly
    operated managed care organization responsible for providing services and
    managing costs for most of the state's Medicaid program.^32 The
    demonstration proposal indicated that changes to the state's Medicaid
    program under the demonstration would be transparent to most Medicaid
    enrollees in the short term: the demonstration would not change delivery
    or coverage of services to beneficiaries.

    Selected features of the Vermont demonstration and implications for
    beneficiaries and providers include the following:

               o Expected cost savings could enable Vermont to serve more of the
               state's uninsured population: HHS permitted the state to convert
               its Office of Vermont Health Access, which is within the state's
               Medicaid organization, into a single, state-run managed care
               organization. As described in the demonstration proposal, the
               demonstration is designed to put in place a series of health care
               options responsive to priorities supported by the governor and
               state legislature, including improved access to health care for
               Vermont's uninsured, cost containment within Medicaid, and
               improved system accountability and quality of care. Under the
               demonstration, the state is provided flexibility, including the
               ability to use creative payment mechanisms, rather than
               fee-for-service, to pay for services not traditionally
               reimbursable through Medicaid. The state expects the new state-run
               managed care organization to be more efficient. By employing a
               cost-containment strategy, which includes standardizing provider
               reimbursement systems and managing chronic care, the new state
               Medicaid structure and finance arrangement could help state
               officials address Medicaid deficits that had been projected to
               occur in Vermont. Under the demonstration, the state automatically
               enrolled nearly all Medicaid beneficiaries in the new state-run
               managed care organization. In doing so, according to the state's
               Medicaid director, it hoped to introduce chronic-care management
               and disease prevention services for enrollees, such as
               smoking-cessation programs. State officials indicated that savings
               generated by the demonstration could be applied to previously
               state-funded programs, such as those for the state's uninsured.

               o Expenditures for Medicaid services are allowed to increase or
               decrease up to 5 percent annually for nonmandatory beneficiaries:
               Under Vermont's demonstration, HHS provided the state the
               authority to change the benefit package for the nonmandatory
               eligible population as long as the changes result in no more than
               a 5 percent cumulative increase, or decrease, each year in total
               Medicaid expenditures.^33 The state is required to notify HHS of
               any such change in the benefit package but is not required to
               receive HHS approval for the changes. If Vermont's Medicaid
               program incurs financial setbacks or continues to run deficits,
               these beneficiaries could potentially experience a reduction in
               benefits offered by the state, such as the number of prescriptions
               allowed or number of doctor visits permitted each month, as long
               as these reductions do not decrease state expenditures for
               Medicaid by more than 5 percent annually.

               o Optional and expansion Medicaid populations may see an increase
               in their share of costs: Under the demonstration's terms and
               conditions, HHS permitted Vermont to maintain or increase premiums
               and co-payments for services for optional and expansion Medicaid
               populations--as long as such cost sharing for children in optional
               and expansion populations does not exceed 5 percent of a family's
               income. The state is not required to obtain HHS approval for
               changes to premiums and co-payments within the range specified in
               the demonstration's terms and conditions if they do not exceed 5
               percent of a family's gross income for eligible children. The
               state agreed to maintain the state plan co-payments and premium
               provisions for the mandatory population.

               o Optional and expansion Medicaid populations may experience a
               change or delay in eligibility: Under the demonstration's terms
               and conditions, Vermont agreed to maintain eligibility established
               in the demonstration's base year for mandatory beneficiaries but
               was authorized, for optional and expansion populations, to impose
               enrollment caps or eliminate eligibility during the 5-year
               demonstration. The state can limit enrollment and impose waiting
               lists for these groups; however, such changes must be approved by
               HHS.

               o Financing approach limits federal risk but shifts risk to state
               and potentially to all beneficiaries and providers: Another
               component of Vermont's demonstration is a spending limit, which,
               if exceeded, would end federal matching payments for Medicaid
               services paid under the demonstration. By establishing a spending
               limit on federal matching funds, HHS transfers financial risk from
               the federal government to the state, with implications for all
               beneficiaries and providers. If the state experiences an
               unexpected increase in Medicaid beneficiaries or expenditures
               during the demonstration period, it could reach or exceed the
               demonstration's spending limit. The state would then have to
               finance the demonstration using only state funds. Without
               available federal matching funds to continue to cover the
               demonstration's required costs to provide services, options
               available to the state to reduce expenditures could include
               reducing benefits and increasing cost sharing requirements,
               cutting back on populations served, or decreasing provider payment
               rates.

    ^32In addition to the recently approved comprehensive 1115 demonstration
    in Vermont (known as Global Commitment to Health), the Secretary approved
    Vermont's Long Term Care demonstration in June 2005. The Long Term Care
    demonstration enables the state to provide long-term care beneficiaries
    home-and community-based alternatives to institutional or nursing home
    care. The Global Commitment to Health and Long Term Care demonstrations
    encompass Vermont's entire state Medicaid program, with the exception of
    Medicaid Management Information System (MMIS) costs, State Children's
    Health Insurance Program (SCHIP) payments, and disproportionate share
    hospital (DSH) payments. DSH payments are a form of Medicaid financing
    that allows states and HHS to compensate those hospitals that care for a
    disproportionate number of low-income Medicaid and uninsured patients in a
    state. Unlike other federal Medicaid matching payments, federal Medicaid
    DSH payments do not flow to states on an open-ended basis. Instead, these
    payments are allocated among states as defined under federal law. States
    may claim federal matching funds for DSH payments made to qualifying
    hospitals up to these ceilings.

    ^33Vermont is not obligated to provide state plan services to optional or
    expansion beneficiaries but can instead provide coverage as approved by
    HHS, which includes inpatient and outpatient hospital services,
    physicians' surgical and medical services, laboratory and x-ray services,
    and well-baby and well-child care.

    Vermont began implementation of this demonstration program in October
    2005, and the demonstration proposal indicated that, initially, delivery
    of services to beneficiaries would not change. Nearly all Medicaid
    beneficiaries were enrolled in the demonstration at the time it was
    initiated, and as of December 2006, the latest month in which information
    was available, more than 141,000 beneficiaries in Vermont were enrolled.
    At the time of our review, the demonstration program was not yet far
    enough along to assess the financial effects of the demonstration on
    beneficiaries' benefits, coverage, or eligibility, including the accuracy
    of the spending projections approved for the demonstration.

    States Provided Opportunities for Public Input on Proposals but Details
    Were Lacking, and HHS Did Not Provide for Input at the Federal Level

    In Florida and Vermont, beneficiaries and other stakeholders had a number
    of opportunities at the state level to provide public input and comment
    during the development of demonstration proposals. Despite these
    opportunities, local stakeholders in each state we spoke to told us that
    state officials did not provide sufficient information or time to review
    the proposals prior to their submission for federal review and approval.
    At the federal level, HHS did not provide formal public notice or the
    opportunity to comment. Also, contrary to its stated policy of posting
    demonstration proposals on its Web site prior to approval, HHS did not do
    so in the case of Florida or Vermont.

    Florida and Vermont Provided Opportunities for Public Notice and Comment,
    but Stakeholders Reported That Only Limited Information Was Available

    Florida and Vermont followed HHS's guidance regarding public notice and
    comment, each holding multiple public forums and posting information on
    state Web sites and in newspapers. Stakeholders in each state, however,
    reported that the information provided was primarily broad concepts,
    lacking the specificity they needed to offer constructive comments or ask
    meaningful questions. For example, stakeholders said that public documents
    did not adequately describe growth trends used to develop the
    demonstrations' budgets. In both Florida and Vermont, the state
    legislatures were active in soliciting public input and reviewing versions
    of the demonstration proposals as they were developed. Stakeholders in
    each state, however, reported that they were not given sufficient time to
    review the proposals once they were made public and prior to the state
    submitting the formal proposal to HHS for review and approval.

    Florida's Public Notice-and-Comment Process

    Florida Medicaid officials followed HHS's policy for public process at the
    state level by conducting stakeholder presentations and posting a draft of
    the proposed demonstration on the state's Web site for 30 days during
    September 2005. Before submitting a proposal to HHS on October 3, 2005,
    the Florida State Medicaid Director and state officials from the Agency
    for Health Care Administration (AHCA), the agency responsible for the
    state's Medicaid program, made presentations to the public about general
    concepts of the demonstration, during which the public could comment as
    well as learn about the demonstration. Concerned about the proposal and
    the speed at which it was progressing, Florida's legislature had earlier
    enacted legislation that authorized AHCA to implement the demonstration,
    subject to parameters defined under state law and as approved by HHS. The
    state law also required AHCA to post drafts of the section 1115
    demonstration proposals on the state's Web site for 30 days for public
    comment before submitting it to HHS and to obtain approval from the state
    legislature before submitting and implementing the demonstration
    proposals.^34 The state legislature also sponsored several public forums
    to solicit public input on the proposal.

    Some stakeholders we spoke to, including those representing beneficiaries,
    reported that information about the proposal was not available, for
    example, budget and demographic information and nursing home and
    pharmaceutical costs. Two stakeholders representing hospitals and a large
    managed care organization in Florida made positive comments about the way
    the state created opportunities for public input during the development of
    the proposal. However, two state-level organizations--one representing
    individuals aged 50 and older and one that provides legal services to
    low-income individuals--filed formal public information requests for
    material not made available to stakeholders during the development of the
    demonstration proposal after these organizations were unable to acquire
    documents through other means. In October 2005, soon after the state
    submitted its proposal to HHS, the organization that represents
    individuals aged 50 and older filed a public-records request to obtain a
    copy of a state-sponsored analysis of Medicaid expenditure trends.
    Organization officials told us they received the requested analysis, but
    only after repeated requests. Another organization--a state-level group
    providing legal services to low-income people--after experiencing
    difficulty obtaining sufficient information on the proposal from state
    Medicaid officials during public meetings, in December 2004 filed a
    Freedom of Information Act request with HHS for copies of draft proposals,
    state plan amendments related to the demonstration, budget and demographic
    information, and correspondence between HHS and state officials. As of
    June 2007, 20 months after HHS approved the demonstration proposal in
    Florida, the organization had not received the requested documents from
    HHS.^35 In addition, stakeholders in Florida expressed concern that the
    state's Medical Care Advisory Committee^36 did not participate in the
    development of the demonstration proposal because it had not convened
    while the demonstration proposal was under development and review.

    Vermont's Public Notice-and-Comment Process

    Vermont Medicaid officials followed HHS's requirements for public process
    at the state level, and the final demonstration proposal submitted to HHS
    included a record of public comments and the responses offered by the
    state Medicaid officials. Officials from the Vermont Agency of Human
    Services and Office of Vermont Health Access, both responsible for
    administering the state's Medicaid program, held three public hearings
    during which they received public questions and comments. Additionally,
    the Vermont legislature made several changes to the proposal before voting
    to approve the demonstration. For example, counsel to the legislature
    advised the state legislature that HHS would not have authority to approve
    a Medicaid demonstration as a block grant, as the governor and state
    Medicaid officials had initially proposed. As required under state law,
    the Vermont legislature oversees the demonstration by approving any
    changes made to demonstration components or financing.^37

    ^34Fla. Stat. ch. 409.91211 (2006).

    ^35In commenting on a draft of this report, HHS acknowledged that its
    response to this request was pending.

    ^36Under federal regulations, states are required to establish a Medical
    Care Advisory Committee to advise the Medicaid agency about health and
    medical care services. This committee must include members of consumer
    groups who, along with other members, must have the opportunity to
    participate in the development of Medicaid policies and administration,
    including furthering the participation of recipient members in the agency
    program. In Vermont, the committee is known as the Medicaid Advisory
    Board. See 42 C.F.R. S 431.12.

    Stakeholders in Vermont also reported difficulties in obtaining sufficient
    information on the demonstration proposal, such as the effect of the
    demonstration on benefits for beneficiaries and methods the state used to
    formulate the demonstration's projected savings. Local stakeholders we
    interviewed told us that the level of detail provided by Vermont Medicaid
    officials in presentations was limited to broad examples used to
    illustrate how the demonstration would operate and that state officials
    could not offer a comprehensive explanation of the demonstration's
    implementation. These stakeholders told us they were unclear about many of
    the implications for beneficiaries. Members of the state's Medical Care
    Advisory Board, established by the state to facilitate consumer input to
    its Medicaid policies, told us that they had lacked time and information
    to review the demonstration proposal prior to its formal submission to HHS
    for review and approval and had voted in April 2005--just before the
    proposal was submitted to HHS--not to approve its going forward. The board
    did not receive information it had requested from the state on federal
    matching formulas, disenrollment rates, historical cost and caseload
    trends, programs included in the budget projection, or how the
    demonstration interacts with the state budget. Because the board's role
    was advisory, however, the state submitted the demonstration proposal
    despite the board's lack of support.

    At the Federal Level, HHS Did Not Provide Notice and Opportunity for
    Public Comment by Stakeholders

    At the federal level, HHS did not provide a process for public notice and
    comment on either Florida's or Vermont's proposed demonstrations. In
    January 2007, HHS officials reiterated statements made to us by HHS
    officials in 2002 that the agency no longer followed the federal public
    notice-and-comment process in its 1994 policy published in the Federal
    Register and instead was posting pending and approved demonstration
    proposals to its Web site. (Table 1 shows the differences between the 1994
    and 2007 federal-level policies.) However, some national stakeholders
    reported that HHS did not post the proposals to its Web site before
    approving the Florida and Vermont demonstrations. Further, HHS had not
    posted to its Web site a demonstration amendment proposal submitted by
    Vermont Medicaid officials to HHS in September 2006 until mid-April
    2007.^38 All of the national stakeholders we queried about the
    demonstration amendment told us that they were unaware of the proposed
    amendment and that neither HHS nor state Medicaid officials had provided
    them a copy.

    ^37Vt. Stat. Ann. tit. 33 SS 1901, 1901a, 1901e (2006).

    ^38In commenting on a draft of this report, HHS indicated that it
    considered the September 2006 submission a concept paper and did not
    consider the amendment as a formal application until December 2006.

    Table 1: Comparison of HHS's 1994 and 2007 Policies on Public Notice and
    Comment at the Federal Level

    Federal action                                                   1994 2007
    State notified as to adequacy of intended public process
    Monthly notice of all new and pending proposals published in
    Federal Register
    Federal Register notice published indicating that HHS is
    accepting written comments on proposals
    List maintained of organizations requesting notice of receipt of
    demonstration proposal
    Organizations notified when proposal received
    Thirty-day comment period provided before decision on proposal
    Acknowledgment issued for receipt of all comments

    Source: 59 Fed. Reg. at 49,249 (Sept. 27, 1994) and HHS officials.

    In January 2007, HHS officials told us--as they had told us in 2002--that
    the department no longer adhered to the 30-day waiting period to accept
    and consider comments before rendering a decision on a demonstration
    proposal as described in the agency's 1994 policy. For example, in
    Florida, HHS approved the state's demonstration proposal 16 days after the
    state submitted the formal proposal to HHS.^39 Nearly all of the national
    stakeholders we interviewed told us that this window was not enough time
    to allow them to review and comment on Florida's final proposal. Further,
    stakeholders said that HHS does not notify interested groups or the public
    when HHS receives a demonstration proposal for review. As a result, in
    contrast to the department's 1994 policy, beneficiaries and other
    interested parties may be unaware that HHS has received a proposal until
    after the proposal has been approved, as some reported was the case for
    Florida.

    Several national stakeholders reported that requests they made to HHS for
    information about both demonstrations went unanswered. These stakeholders
    told us that such information helps their organizations to evaluate
    proposed demonstrations before providing comments and to assist local
    stakeholders in understanding the implications of proposed demonstrations.

    The Medicaid Commission recently endorsed compliance with policies
    requiring a public input process at the federal level for achieving
    Medicaid reform.^40 In December 2006, the commission issued a report to
    the Secretary of Health and Human Services, which recommended, among other
    things, that compliance with existing policies regarding public notice of
    section 1115 demonstration proposals, such as HHS's 1994 public
    notice-and-comment policy, be monitored and enforced. The report
    recommended that HHS and states enforce existing federal and state laws
    and regulations so that stakeholders such as beneficiaries, providers, and
    family members may provide input while new programs and delivery models
    affecting them are developed and implemented. The Medicaid Commission
    found that information and perspectives offered during public comment
    periods constituted important feedback and recommended that HHS and state
    officials elicit public feedback when state Medicaid agencies pursue
    policies that would restructure state Medicaid programs.

    ^39For Vermont's demonstration, the HHS approval process took more than 5
    months; state Medicaid officials submitted the proposal to HHS on April
    15, 2005, and received HHS approval on September 27, 2005.

    ^40The Medicaid Commission, appointed in July 2005 by the Secretary, was
    charged by the Secretary with identifying reforms necessary to stabilize
    and strengthen Medicaid. The commission issued its report and
    recommendations in December 2006.

    A broad range of national stakeholder organizations have also raised
    concerns to Congress about the need for an improved federal-level process
    for public input during HHS review of demonstration proposals. A group of
    nearly 60 national stakeholder organizations sent a letter in February
    2006 to the Chairman and Ranking Member of the Senate Committee on
    Finance, expressing concern that significant and complex policy changes
    are made to the Medicaid program through section 1115 demonstrations,
    often with little opportunity for public input. This group of national
    stakeholders further stated that it wanted to ensure that major changes
    made to Medicaid were subject to appropriate public input and
    congressional oversight and that the ramifications of these changes for
    beneficiaries were well understood.

    Views varied among the national stakeholder groups we interviewed
    concerning the need for a public input-and-comment process at the federal
    level. National stakeholder organizations representing state governors and
    legislatures did not believe that additional measures were required at the
    federal level to provide for public input. These groups--the National
    Governors Association, National Conference of State Legislatures, and the
    Center for Health Transformation--told us that state-level public input
    processes were sufficient for providing information and opportunities for
    comment and that additional action at the federal level would not add to
    stakeholders' understanding of demonstration proposals. In contrast,
    national stakeholder groups we interviewed that represent beneficiaries
    generally told us that a process for public comment at the federal level
    was important to their organizations. In November 2006, a panel of 16
    representatives from a broad range of national stakeholder organizations
    described the relationship between HHS's current actions and their
    organizations' activities:

               o Providing public input during the federal approval process.
               Representatives said that providing public input on topics that
               affect their constituents is a significant responsibility for
               their organizations during the federal approval process. HHS did
               not, however, provide an opportunity for national groups to offer
               public input during the approval process for the Florida and
               Vermont demonstrations. An official from a national group
               representing community health centers said, for example, that HHS
               had not provided the organization an opportunity to offer input to
               the pending demonstration proposals, both of which affect health
               centers in those states. Officials from other national groups
               confirmed that HHS directs their organizations to offer input to
               states rather than to HHS, even after HHS has received a formal
               demonstration proposal from a state. In addition, an official from
               a national organization providing legal services to low-income
               individuals, including Medicaid beneficiaries, said that HHS has
               no formal process to notify national stakeholders of pending
               proposals received for HHS review and that if advocates and
               organizations did not actively seek out information through other
               channels, they would not be aware of pending demonstration
               proposals.

               o Providing technical assistance to local affiliates and
               beneficiaries. Representatives told us that information from HHS
               on proposed demonstrations during the approval process is critical
               for their organizations to provide technical assistance to
               beneficiaries and local affiliates, particularly if the
               state-level public input process was insufficient. For example, an
               official from a national organization representing children with
               behavioral health issues (many of whom are Medicaid beneficiaries)
               commented that local members often call the national organization
               to ask for information about demonstration proposals pending in
               their own state. Likewise, an official from an organization
               representing individuals with Alzheimer's disease said that state
               and local chapters rely on the national organization for expertise
               and information on public policy issues, including proposed
               Medicaid demonstrations. An official from a national group
               providing social services to low-income seniors told us that the
               group uses information provided by HHS to inform its constituency
               of implications of new or untested Medicaid policies on long-term
               care services. Officials from other national groups we contacted
               also told us that HHS did not provide requested information
               related to pending demonstrations in Florida and Vermont,
               including copies of the proposals.

               o Informing HHS about lessons learned from past demonstrations.
               Representatives said that HHS itself cannot necessarily track
               every implication for beneficiaries that could occur over a
               demonstration's 5-year period for all the demonstrations it
               approves for different states. As a result, national stakeholders
               try to inform HHS on which provisions and procedures from former
               demonstrations have and have not worked and on what implications
               may have developed for beneficiaries. National groups told us they
               have an "experiential base" of knowledge about the past
               performance of demonstrations, which, through an open exchange of
               information with stakeholders, can benefit HHS officials in
               deciding whether to approve a demonstration proposal.

               o Monitoring changes to federal Medicaid policy. Representatives
               also expressed concern that HHS has introduced major changes to
               federal Medicaid policy through approvals of state demonstrations
               and that public input at the federal level is an important
               requirement for monitoring and anticipating these changes. An
               official from a national organization representing providers of
               mental health services told us that the federal approval process
               for demonstration proposals has become so complex that changes in
               federal Medicaid policy have occurred without a complete paper
               trail available to the public showing how demonstration proposals
               were developed, which limits accountability and transparency for
               HHS.

    Concluding Observations

    Both the Florida and Vermont demonstrations embody significant changes in
    how these states operate their Medicaid programs. In approving these
    demonstrations, HHS has approved state Medicaid reforms that depart from
    previously approved demonstrations. These reforms have potentially mixed
    implications for beneficiaries covered under the demonstrations in terms
    of how the demonstrations may affect their access to health care services.
    In Florida, which will test the effects of combining market-based
    commercial approaches with the delivery of services to the low-income
    Medicaid population, it is important that beneficiaries are fully informed
    and understand the trade-offs involved with their health care choices,
    especially if they are relinquishing certain Medicaid benefits, such as
    EPSDT. In Vermont, the federal financial risk is limited to a specified
    level, but the risk of increased costs due to unforeseen circumstances is
    assumed by the state--and could potentially result in program changes for
    beneficiaries and providers should the spending limit be exceeded. As HHS
    noted in issuing its 1994 policy, people who may be affected by a
    demonstration have a legitimate interest in learning about proposed
    demonstrations and should have an opportunity to provide input to the
    decision-making process. Although Florida and Vermont officials provided
    for public input and comment during the development of their proposals,
    many stakeholders reported seeking, but not obtaining, more time and
    information to understand and provide informed input on the proposed
    changes. A federal-level process does not exist that would allow
    stakeholders and beneficiaries to learn of, review, and provide input on
    the submitted proposals.

    HHS's objective of expediting the waiver review and approval process is
    reasonable. But, as we stated in our 2002 report, public input into new
    demonstration proposals is important not only because such input helps
    ensure that demonstrations are consistent with overall Medicaid goals and
    that the waiver of certain statutory provisions is justified by the
    benefits obtained, but also because approved demonstrations represent
    federal policy whose influence may reach beyond a single state. A
    notice-and-comment opportunity at the federal level would provide for a
    more open and transparent process for all affected and interested parties,
    including Congress--something that, as shown by our earlier work and more
    recently in Florida and Vermont, may be better accomplished at the federal
    rather than state level. Unless Congress and HHS take action in response
    to the matters for congressional consideration and recommendations to the
    Secretary that we presented in our July 2002 report--namely that Congress
    consider requiring the Secretary to improve public notification and input
    at the federal level and that the Secretary provide for an improved
    process--it appears likely that HHS will continue to approve waivers for
    comprehensive Medicaid demonstrations without adequate opportunity for
    public input. Improvements should include, at minimum, posting pending
    demonstration proposals to the HHS Web site, implementing a 30-day comment
    period after receipt of a demonstration proposal before issuing a
    decision, and notifying interested parties of the receipt of proposals.

    Agency and State Comments and Our Evaluation

    We provided a draft of this report for comment to HHS, Florida, and
    Vermont. Each provided written comments, which we summarize and evaluate
    below.

    HHS's Comments and Our Evaluation

    As in 2002, when we reported concerns with the lack of opportunity for
    public input to the section 1115 demonstration approvals, HHS disagreed
    with our recommendation that called for the Secretary to improve the
    opportunities for public input at the federal level. HHS expressed a view
    that opportunities for public input are more than adequate because states
    have a broad array of options for soliciting public input, and because HHS
    holds states accountable for complying with its 1994 policy and subsequent
    guidance regarding public input. HHS expressed concern that requirements
    that the department build a new process would create redundancy and slow
    the approval process, delaying states' creative approaches under the
    demonstrations. Of greatest concern to HHS was that federal legislation
    could create a pathway to court that would allow a single individual to
    delay implementation of a Medicaid demonstration and in so doing, disrupt
    a state's budget.

    Our report points out that Florida and Vermont offered opportunities for
    public notice and comment consistent with HHS's policy for input at the
    state level; however, we do not agree that such a process at the state
    level precludes the need for input to HHS once a proposal is made final
    and submitted to HHS for approval. It is only at this point in the process
    that a state's final plans may be made clear. As discussed extensively by
    HHS in its comments, states may make significant changes to plans for the
    demonstration before submitting a proposal to HHS; stakeholders may not be
    aware of these changes or the plans as laid out in the final proposal.^41
    Further, demonstrations have potentially far-reaching implications for
    beneficiaries beyond a state's borders, as approval of an innovative
    approach in one state paves the way for other states to follow suit
    through similar demonstrations. Finally, HHS did not explain or provide a
    basis for its contention that allowing for input at the federal level
    would create legal challenges. Therefore, we disagree with HHS's
    suggestion that a public process should be limited in order to avoid legal
    challenges. Although ensuring that opportunities for comment are available
    for 30 days or longer after a proposal is received could slow the current
    process--since HHS is approving some proposals more quickly, as in
    Florida--we believe this added time is a cost that is outweighed by the
    potential benefits in improved transparency and the potential for
    meaningful federal consideration of input from beneficiaries and others.
    We maintain that such a process is important for ensuring that
    precedent-setting decisions to waive Medicaid requirements are made after
    the consideration of concerns of stakeholder organizations and those
    affected by the decisions. Furthermore, because not all information key to
    stakeholders may be available to them during the state process and because
    the proposal might be changing significantly during the state's process, a
    notice-and-comment process that provides openness and transparency for all
    affected and interested parties at the federal level remains important for
    ensuring adequate public input to the final proposal as submitted to HHS.
    Consequently, we continue to believe our recommendation is valid.

    ^41In its comments, HHS acknowledged that demonstration proposals often
    evolve rapidly--alterations, additions, and deletions are made along the
    way, often on a more-than-daily basis. Further, states may not have
    labeled a particular document the "official or final submission."

    HHS committed to several actions to ensure a transparent approval process
    which we summarize and respond to below.

               o HHS noted that its 1994 policy predates widespread access to,
               and use of, the Internet. HHS said that it has a policy to post
               applications on its Web site within 10 days after the application,
               renewal, or amendment request is received.^42 HHS also stated its
               intention to add to the CMS Web site within the next several
               months a summary page of pending actions including state and
               federal contact information. We note that HHS did not have a
               10-day-to-Web site policy during the course of our review and that
               HHS told us in 2002 that it planned to post waiver applications to
               its Web site but did not do so in the case of Florida and Vermont.
               When asked for a copy of its new 10-day policy, HHS officials told
               us that the policy was contained in division manager performance
               expectations and was communicated to staff who work with 1115
               demonstrations.

               o HHS also noted that CMS accepts and responds to written comments
               on demonstration proposals at any time. Officials had made this
               observation during our review, but also provided documentation
               indicating that they had received only one comment on the Florida
               demonstration and none on the Vermont demonstration during the
               process.

    Finally, HHS offered several additional comments of a technical nature,
    including questioning our selection of Florida and Vermont as the focus of
    our review. HHS indicated that other state demonstrations have higher
    matching rates and high federal financial exposure; in particular, family
    planning demonstrations, for which states receive a 90 percent matching
    rate. We recognize HHS has approved many section 1115 demonstrations, some
    of which carry higher matching rates than the Florida and Vermont
    demonstrations. Yet we focused our work on recently approved comprehensive
    demonstrations, for which the majority of the state's Medicaid spending
    was directed by the demonstration's terms, precisely for the reason
    indicated by HHS--that these "two projects are significant demonstrations
    with far-reaching financial and programmatic implications." Other recently
    approved section 1115 demonstrations identified by HHS either were not
    comprehensive, or did not affect more than 50 percent of the state's
    Medicaid spending.^43 The family planning demonstrations that HHS
    highlighted as at high risk of federal financial exposure because of their
    high matching rates cover a small portion of many Medicaid services that
    states provide, and these demonstrations are not consistent with HHS's
    definition of "comprehensive." We incorporated other of HHS's technical
    comments where appropriate. HHS's comments are reproduced in enclosure
    III.

    ^42Because of the widespread availability of the Internet, we are not
    reiterating the specific portion of our previous recommendation that HHS
    post proposals in the Federal Register.

    State Comments and Our Evaluation

    In commenting on a draft of this report, Florida stated that our draft
    report did not provide an accurate and unbiased representation of its
    demonstration. In particular, Florida said the report did not acknowledge
    key aspects of the state's demonstration, such as the use of choice
    counselors to provide information to beneficiaries and the implementation
    of an enhanced benefit program. Florida said such omissions and
    underemphasized facts could lead to inaccurate conclusions about the
    nature of the demonstration and its implications for beneficiaries.
    Florida also said the report overemphasized the customized benefit
    packages and opt-out program components of its demonstration and did not
    adequately describe other important components. From our analysis of the
    demonstration's terms and conditions, we believe the draft report
    accurately reflects the major potential implications for beneficiaries
    over the 5-year demonstration period; we have nonetheless added
    information to our report on the enhanced benefit program which had not
    previously been described. Florida also took issue with the use of the
    phrase "commercial managed care plans," saying that the state is not
    solely contracting with commercial plans. Because the state did not
    consider all contracted plans as "commercial," we removed this word when
    describing the plans with which Florida contracts. We note that Florida
    acknowledges that its demonstration seeks to build upon the "commercial"
    market structure.

    Florida also reiterated its extensive efforts to provide opportunities for
    public comment during development of the demonstration proposal and stated
    that it would not be prudent to duplicate the state's process at the
    federal level. Florida offered opportunities for public comment;
    nevertheless, stakeholders reported that information about the proposal
    was not available and two state-level groups filed public information
    requests to obtain this information. Stakeholders also expressed concern
    that Florida's Medical Care Advisory Committee--required by federal
    regulation to provide consumer input to the state on Medicaid policy
    development and program administration--did not participate in the
    development of the demonstration proposal. Finally, Florida provided
    several technical comments, which we incorporated as appropriate.
    Florida's comments are reproduced in enclosure IV.

    Vermont stated that our draft report was thorough, thoughtful, balanced,
    and complete; nonetheless, state officials were disheartened that some
    stakeholders reported that the state's public input process was somehow
    weak or not well rounded. Vermont also noted that there is no more
    uncertainty regarding future benefit levels under the Vermont
    demonstration than there is without any demonstration at all, as optional
    Medicaid populations have always been subject to inclusion at states'
    discretion. Vermont's comments are reproduced in enclosure V.

    ^43In addition to Florida and Vermont, we identified California and Iowa
    as states with recently approved comprehensive demonstrations. We
    estimated the portion of total state Medicaid expenditures covered in
    demonstration year one to be 4.6 percent and 4.4 percent, respectively.

                                       - - - - -

    As arranged with your office, unless you publicly announce the contents of
    this report earlier, we plan no further distribution until 30 days after
    its issue date. At that time, we will send copies of this report to the
    Secretary of Health and Human Services, the Administrator of the Centers
    for Medicare & Medicaid Services, and other interested parties. We will
    also make copies available to others upon request. In addition, the report
    will be available at no charge on the GAO Web site at
    [3]http://www.gao.gov .

    If you or your staff members have any questions, please contact me at
    (202) 512-7114 or allenk@gao.gov. Contact points for our Office of
    Congressional Relations and Public Affairs may be found on the last page
    of this report. Major contributors to this report are acknowledged in
    enclosure VI.

    Kathryn G. Allen
    Director, Health Care Issues

    Enclosures - 6

    Enclosure I
                National, State, and Local Stakeholder Groups Contacted

    National stakeholder groups that GAO contacted:

               o Alzheimer's Association
               o American Association of Homes and Services for the Aging
               o AARP (formerly the American Association of Retired Persons)
               o American Network of Community Options & Resources
               o Center for Health Transformation
               o Center on Budget and Policy Priorities
               o Families USA
               o Georgetown Health Policy Institute
               o The Heritage Foundation
               o March of Dimes
               o National Association for Children's Behavioral Health
               o National Association of Community Health Centers
               o National Conference of State Legislatures
               o National Governors Association
               o National Health Law Program
               o National Health Policy Forum
               o National Mental Health Association
               o National Senior Citizens Law Center
               o National Women's Law Center
               o Service Employees International Union

    State-level and local stakeholder groups in Florida and Vermont that GAO
    contacted:

               o Florida AARP
               o Florida Association of Health Plans
               o Florida Hospital Association
               o Florida Legal Services
               o Low Income Pool Council (in Florida)
               o Florida Pediatric Society
               o WellCare (in Florida)
               o Vermont Association of Hospitals and Health Systems
               o Bi-State Primary Care Association (in Vermont)
               o Vermont Legal Aid
               o Vermont Medical Care Advisory Committee (known as the Medicaid
               Advisory Board)

    Enclosure II

        Summary of Mandatory Federal Requirements for Traditional State Medicaid
                                        Programs

    Summary of Mandatory Federal Requirements for Traditional State Medicaid
    Programs

    Mandatory health benefits States must cover, at a minimum, the following
                                 services under their state plans:

                                    o Inpatient hospital services
                                    o Outpatient hospital services
                                    o Prenatal care
                                    o Vaccines for children
                                    o Physician services
                                    o Nursing facility services for persons aged
                                    21 or older
                                    o Family planning services and supplies
                                    o Rural health clinic services
                                    o Home health care for persons eligible for
                                    skilled-nursing services
                                    o Laboratory and x-ray services
                                    o Pediatric and family nurse practitioner
                                    services
                                    o Nurse-midwife services
                                    o Federally qualified health-center services
                                    o Early and periodic screening, diagnostic,
                                    and treatment services for children under age
                                    21^a
    Mandatory eligibility     States must cover, at a minimum, the following
    groups                    individuals under their state plans:

                                    o Individuals eligible for Aid to Families
                                    with Dependent Children program (now known as
                                    Temporary Assistance for Needy Families, or
                                    TANF) if they meet requirements that were in
                                    effect in their state on July 16,1996
                                    o Children under age 6 whose family income is
                                    at or below 133 percent of the federal
                                    poverty level (FPL)
                                    o Pregnant women whose family income is below
                                    133 percent of FPL
                                    o Supplemental Security Income recipients in
                                    most states
                                    o Recipients of adoption or foster care
                                    assistance under Title IV of the Social
                                    Security Act
                                    o Special protected groups
                                    o All children born after September 30, 1983,
                                    who are under age 19 and in families with
                                    incomes at or below FPL
                                    o Certain Medicare beneficiaries^b
    Cost-sharing limits       States are limited to the following cost-sharing
                                 requirements under their state plans:

                                    o States may not impose enrollment fees or
                                    premiums on mandatory eligibility groups
                                    o States may impose nominal deductibles,
                                    coinsurance, or co-payments on some Medicaid
                                    beneficiaries for certain services
                                    o Certain Medicaid beneficiaries must be
                                    exempt from this cost sharing, including
                                    pregnant women, children under age 18, and
                                    hospital and nursing home patients expected
                                    to contribute most of their income to
                                    institutional care
                                    o All Medicaid beneficiaries must be exempt
                                    from co-payments for emergency services,
                                    hospice services,and family-planning
                                    services^c

    Source: GAO analysis of federal laws and Department of Health and Human
    Services regulations and guidance.

    aSocial Security Act SS 1902(a)(10)(A), 1905(a) (codified, as amended, at
    42 U.S.C. SS 1396a(a)(10)(A), 1396d). Effective March 31, 2006, states
    also have the option of limiting coverage of services for certain Medicaid
    recipients to either benchmark coverage or coverage that provides a
    benefit package equal in value to benchmark coverage. Benchmark coverage
    is defined as (1) the Federal Employee Health Benefits Program (Blue
    Cross/Blue Shield) benefit plan, (2) the health benefits plan offered to
    state employees, (3) coverage offered by a health maintenance organization
    with the largest enrollment in the state, or (4) a package of benefits
    approved by the Secretary of Health and Human Services. SSA S 1937 (to be
    codified at 42 U.S.C. S 1396u-7).

    bSSA S 1902(a)(10)(A)(i)) (codified, as amended, at 42 U.S.C. S
    1396a(a)(10)(A)(i)).

    cSSA S 1916 (codified, as amended, at 42 U.S.C. S 1396o). Effective March
    31, 2006, states may impose premiums on certain previously exempt Medicaid
    recipients with family incomes above 150 percent of the FPL. States may
    also impose more than nominal cost sharing on certain services such as
    nonpreferred drugs and nonemergency services provided in an emergency
    room. States also have the option of imposing co-payments on certain
    individuals in previously exempt populations. SSA S 1916A (to be codified
    at 42 U.S.C. S 1396o-1).

    Enclosure iII

            Comments from the Department of Health and Human Services (HHS)

    Enclosure IV

                           Comments from the State of Florida

    Enclosure V

                           Comments from the State of Vermont

    Enclosure VI
                           Contact and Staff Acknowledgments

    GAO Contact

    Kathryn G. Allen, (202) 512-7114 or allenk@gao.gov

    Acknowledgments

    In addition to the contact mentioned above, Katherine M. Iritani,
    Assistant Director; Ted Burik; Ellen W. Chu; Tom Moscovitch; Terry Saiki;
    Stan Stenersen; Hemi Tewarson; and Jennifer Whitworth made key
    contributions to this report.

    (290553)

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