prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: Medicare is a federal program that pays for covered health care services of qualified beneficiaries  It was established in 1965 under Title XVIII of the Social Security Act to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under 65  The program is administered by the Centers for Medicare & Medicaid Services (CMS), within the U S  Department of Health and Human Services (HHS)  Medicare consists of four distinct parts: Part A (Hospital Insurance, or HI) covers inpatient hospital services, skilled nursing care, hospice care, and some home health services  The HI trust fund is mainly funded by a dedicated payroll tax of 2 9% of earnings, shared equally between employers and workers  Since 2013, workers with income of more than $200,000 per year for single tax filers (or more than $250,000 for joint tax filers) pay an additional 0 9% on income over those amounts  Part B (Supplementary Medical Insurance, or SMI) covers physician services, outpatient services, and some home health and preventive services  The SMI trust fund is funded through beneficiary premiums (set at 25% of estimated program costs for the aged) and general revenues (the remaining amount, approximately 75%)  Part C (Medicare Advantage, or MA) is a private plan option for beneficiaries that covers all Parts A and B services, except hospice  Individuals choosing to enroll in Part C must also enroll in Part B  Part C is funded through the HI and SMI trust funds  Part D covers outpatient prescription drug benefits  Funding is included in the SMI trust fund and is financed through beneficiary premiums, general revenues, and state transfer payments  Medicare serves approximately one in six Americans and virtually all of the population aged 65 and older  In 2019, the program will cover an estimated 61 million persons (52 million aged and 9 million disabled)  The Congressional Budget Office (CBO) estimates that total Medicare spending in 2019 will be about $772 billion; of this amount, approximately $749 billion will be spent on benefits  About 28% of Medicare benefit spending is for hospital inpatient and hospital outpatient services (see Figure 1 )  CBO also estimates that federal Medicare spending (after deduction of beneficiary premiums and other offsetting receipts) will be about $637 billion in 2019, accounting for about 14% of total federal spending and 3% of GDP  Medicare is required to pay for all covered services provided to eligible persons, so long as specific criteria are met  Spending under the program (except for a portion of administrative costs) is considered mandatory spending and is not subject to the appropriations process  Medicare is expected to be a high-priority issue in the current Congress  The program has a significant impact on beneficiaries and other stakeholders as well as on the economy in general through its coverage of important health care benefits for the aged and disabled, the payment of premiums and other cost sharing by those beneficiaries, its payments to providers who supply those health care services, and its interaction with other insurance coverage  Projections of future Medicare expenditures and funding indicate that the program will place increasing financial demands on the federal budget and on beneficiaries  In response to these concerns, Congress may consider a range of Medicare reform options, from making changes within the current structure, including modifying provider payments and revising existing oversight and regulatory mechanisms, to restructuring the entire program  The committees of jurisdiction for the mandatory spending (benefits) portion of Medicare are the Senate Committee on Finance, the House Committee on Ways and Means, and the House Committee on Energy and Commerce  The House and Senate Committees on Appropriations have jurisdiction over the discretionary spending used to administer and oversee the program  Medicare was enacted in 1965 (P L  89-97) in response to the concern that only about half of the nation's seniors had health insurance, and most of those had coverage only for inpatient hospital costs  The new program, which became effective July 1, 1966, included Part A coverage for hospital and posthospital services and Part B coverage for doctors and other medical services  As is the case for the Social Security program, Part A is financed by payroll taxes levied on current workers and their employers; persons must pay into the system for 40 quarters to become entitled to premium-free benefits  Medicare Part B is voluntary, with a monthly premium required of beneficiaries who choose to enroll  Payments to health care providers under both Part A and Part B were originally based on the most common form of payment at the time, namely "reasonable costs" for hospital and other institutional services or "usual, customary and reasonable charges" for physicians and other medical services  Medicare is considered a social insurance program and is the second-largest such federal program, after Social Security  The 1965 law also established Medicaid, the federal/state health insurance program for the poor; this was an expansion of previous welfare-based assistance programs  Some low-income individuals qualify for both Medicare and Medicaid  In the ensuing years, Medicare has undergone considerable change  P L  92-603, enacted in 1972, expanded program coverage to certain individuals under 65 (the disabled and persons with end-stage renal disease (ESRD)), and introduced managed care into Medicare by allowing private insurance entities to provide Medicare benefits in exchange for a monthly capitated payment  This law also began to place limitations on the definitions of reasonable costs and charges in order to gain some control over program spending which, even initially, exceeded original projections  During the 1980s and 1990s, a number of laws were enacted that included provisions designed to further stem the rapid increase in program spending through modifications to the way payments to providers were determined, and to postpone the insolvency of the Medicare Part A trust fund  This was typically achieved through tightening rules governing payments to providers of services and limiting the annual updates in such payments  The program moved from payments based on reasonable costs and reasonable charges to payment systems under which a predetermined payment amount was established for a specified unit of service  At the same time, beneficiaries were given expanded options to obtain covered services through private managed care arrangements, typically health maintenance organizations (HMOs)  Most Medicare payment provisions were incorporated into larger budget reconciliation bills designed to control overall federal spending  This effort culminated in the enactment of the Balanced Budget Act of 1997 (BBA 97; P L  105-33 )  This law slowed the rate of growth in payments to providers and established new payment systems for certain categories of providers, including establishing the sustainable growth rate (SGR) methodology for determining the annual update to Medicare physician payments  It also established the Medicare+Choice program, which expanded private plan options for beneficiaries and changed the way most of these plans were paid  BBA 97 further expanded preventive services covered by the program  Subsequently, Congress became concerned that the BBA 97 cuts in payments to providers were somewhat larger than originally anticipated  Therefore, legislation was enacted in both 1999 (Balanced Budget Refinement Act of 1999, or BBRA; P L  106-113 ) and 2000 (Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, or BIPA; P L  106-554 ) to mitigate the impact of BBA 97 on providers  In 2003, Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P L  108-173 ), which included a major benefit expansion and placed increasing emphasis on the private sector to deliver and manage benefits  The MMA included provisions that (1) created a new voluntary outpatient prescription drug benefit to be administered by private entities; (2) replaced the Medicare+Choice program with the Medicare Advantage (MA) program and raised payments to plans in order to increase their availability for beneficiaries; (3) introduced the concept of income testing into Medicare, with higher-income persons paying larger Part B premiums beginning in 2007; (4) modified some provider payment rules; (5) expanded covered preventive services; and (6) created a specific process for overall program review if general revenue spending exceeded a specified threshold  During the 109 th Congress, two laws were enacted that incorporated minor modifications to Medicare's payment rules  These were the Deficit Reduction Act of 2005 (DRA; P L  109-171 ) and the Tax Relief and Health Care Act of 2006 (TRHCA; P L  109-432 )  In the 110 th Congress, additional changes were incorporated in the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA; P L  110-173 ) and the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA; P L  110-275 )  In the 111 th Congress, comprehensive health reform legislation was enacted that, among other things, made statutory changes to the Medicare program  The Patient Protection and Affordable Care Act (ACA; P L  111-148 ), enacted on March 23, 2010, included numerous provisions affecting Medicare payments, payment rules, covered benefits, and the delivery of care  The Health Care and Education Affordability Reconciliation Act of 2010 (the Reconciliation Act, or HCERA; P L  111-152 ), enacted on March 30, 2010, made changes to a number of Medicare-related provisions in the ACA and added several new provisions  Included in the ACA, as amended, are provisions that (1) constrain Medicare's annual payment increases for certain providers; (2) change payment rates in the MA program so that they more closely resemble those in fee-for-service; (3) reduce payments to hospitals that serve a large number of low-income patients; (4) create an Independent Payment Advisory Board (IPAB) to make recommendations to adjust Medicare payment rates; (5) phase out the Part D prescription drug benefit "doughnut hole"; (6) increase resources and enhance activities to prevent fraud and abuse; and (7) provide incentives to increase the quality and efficiency of care, such as creating value-based purchasing programs for certain types of providers, allowing accountable care organizations (ACOs) that meet certain quality and efficiency standards to share in the savings, creating a voluntary pilot program that bundles payments for physician, hospital, and post-acute care services, and adjusting payments to hospitals for readmissions related to certain potentially preventable conditions  In the 112 th and 113 th Congresses, the American Taxpayer Relief Act of 2012 (ATRA; P L  112-240 ), the Continuing Appropriations Resolution of 2014 ( P L  113-67 ), and the Protecting Access to Medicare Act of 2014 (PAMA; P L  113-93 ) primarily made short-term modifications to physician payment updates and payment adjustments for certain types of providers  PAMA also established a new skilled nursing facility (SNF) value-based purchasing program and a new system for determining payments for clinical diagnostic laboratory tests  The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT; P L  113-185 ) required that post-acute care providers—defined in the law as long-term care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), SNFs, and home health agencies (HHAs)—report standardized patient assessment data and data on quality measures and resource use  IMPACT also modified the annual update to the hospice aggregate payment cap and required that hospices be reviewed every three years to ensure that they are compliant with existing regulations related to patient health and safety and quality of care  In the 114 th Congress, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P L  114-10 ) repealed the SGR formula for calculating updates to Medicare payment rates to physicians and other practitioners and established an alternative set of methods for determining the annual updates   MACRA also introduced alternatives to the current fee-for-service (FFS) based physician payments by creating a new merit-based incentive payment system (MIPS) and put in place processes for developing, evaluating, and adopting alternative payment models (APMs)  Additionally, MACRA reduced updates to hospital and post-acute care provider payments, extended several expiring provider payment adjustments, made adjustments to income-related premiums in Parts B and D, and prohibited using Social Security numbers on beneficiaries' Medicare cards  Among other changes, the Increasing Choice, Access, and Quality in Health Care for Americans Act (Division C of the 21 st Century Cures Act; P L  114-255 ) made adjustments to LTCH reimbursement and modified the average length of stay criteria, which determines whether a hospital qualifies as an LTCH  It also delayed payment reductions and required the Secretary of Health and Human Services (the Secretary) to make changes to how payments are determined for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS)  Lastly, it allowed beneficiaries with ESRD to enroll in MA beginning January 1, 2021  In the 115 th Congress, the Bipartisan Budget Act of 2018 (BBA 18; P L  115-123 ) made a number of changes to federal health care programs, including Medicare  For example, BBA 18 included provisions designed to expand care for beneficiaries with chronic health conditions, such as promoting team-based care by providers, increasing the use of telehealth services, and expanding certain MA supplemental benefits  In addition, BBA 18 extended for five years a number of existing Medicare provisions that were set to expire (or that had temporarily expired), including the Medicare dependent hospital program and add-on payments for low-volume hospitals, rural home health services, and certain ambulance services  BBA 18 also specified payment updates for the Medicare physician fee schedule, SNFs, and home health services; reduced payments for non-emergency ambulance transports; and required modification of the home health prospective payment system starting in 2020  In addition, the act provided for indefinite authority for MA special needs plans, repealed limits on outpatient therapy services, and eliminated the IPAB  Starting in 2019, the act will require that pharmaceutical manufacturers participating in Medicare Part D provide a larger discount on brand-name drugs purchased by enrollees in the coverage gap and will create a new high-income premium category under Parts B and D  Most persons aged 65 or older are automatically entitled to premium-free Part A because they or their spouse paid Medicare payroll taxes for at least 40 quarters (about 10 years) on earnings covered by either the Social Security or the Railroad Retirement systems  Persons under the age of 65 who receive cash disability benefits from Social Security or the Railroad Retirement systems for at least 24 months are also entitled to Part A  (Since there is a five-month waiting period for cash payments, the Medicare waiting period is effectively 29 months ) The 24-month waiting period is waived for persons with amyotrophic lateral sclerosis (ALS, "Lou Gehrig's disease")  Individuals of any age with ESRD who receive dialysis on a regular basis or a kidney transplant are generally eligible for Medicare  Medicare coverage for individuals with ESRD usually starts the first day of the fourth month of dialysis treatments  In addition, individuals with one or more specified lung diseases or types of cancer who lived for six months during a certain period prior to diagnosis in an area subject to a public health emergency declaration by the Environmental Protection Agency (EPA) as of June 17, 2009, are also deemed entitled to benefits under Part A and eligible to enroll in Part B  Persons over the age of 65 who are not entitled to premium-free Part A may obtain coverage by paying a monthly premium ($437 in 2019) or, for persons with at least 30 quarters of covered employment, a reduced monthly premium ($240 in 2019)  In addition, disabled persons who lose their cash benefits solely because of higher earnings, and subsequently lose their extended Medicare coverage, may continue their Medicare enrollment by paying a premium, subject to limitations  Generally, enrollment in Medicare Part B is voluntary  All persons entitled to Part A (and persons over the age of 65 who are not entitled to premium-free Part A) may enroll in Part B by paying a monthly premium  In 2019, the monthly premium is $135 50; however, about 3 5% of Part B enrollees pay less, due to a "hold-harmless" provision in the Social Security Act  Since 2007, higher-income Part B enrollees pay higher premiums  (See " Part B Financing  ") Although enrollment in Part B is voluntary for most individuals, in most cases, those who enroll in Part A by paying a premium also must enroll in Part B  Additionally, ESRD beneficiaries and Medicare Advantage enrollees (discussed below) also must enroll in Part B  Together, Parts A and B of Medicare comprise "original Medicare," which covers benefits on a fee-for-service basis  Beneficiaries have another option for coverage through private plans, called the Medicare Advantage (MA or Part C) program  When beneficiaries first become eligible for Medicare, they may choose either original Medicare or they may enroll in a private MA plan  Each fall, there is an annual open enrollment period during which time Medicare beneficiaries may choose a different MA plan, or leave or join the MA program  Beneficiaries are to receive information about their options to help them make informed decisions  In 2019, the annual open enrollment period runs from October 15 to December 7 for plan choices starting the following January  Since 2012, MA plans with a 5-star quality rating have been allowed to enroll Medicare beneficiaries who are either in traditional Medicare or in an MA plan with a lower quality rating at any time  Finally, each individual enrolled in either Part A or Part B is also entitled to obtain qualified prescription drug coverage through enrollment in a Part D prescription drug plan  Similar to Part B, enrollment in Part D is voluntary and the beneficiary pays a monthly premium  Since 2011, some higher-income enrollees pay higher premiums, similar to enrollees in Part B  Generally, beneficiaries enrolled in an MA plan providing qualified prescription drug coverage (MA-PD plan) must obtain their prescription drug coverage through that plan  In general, individuals who do not enroll in Part B or Part D during an initial enrollment period (when they first become eligible for Medicare) must pay a permanent penalty of increased monthly premiums if they choose to enroll at a later date  Individuals who do not enroll in Part B during their initial enrollment period may enroll only during the annual general enrollment period, which occurs from January 1 to March 31 each year  Coverage begins the following July 1  However, the law waives the Part B late enrollment penalty for current workers who have primary coverage through their own or a spouse's employer-sponsored plan  These individuals have a special enrollment period once their employment ends; as long as they enroll in Part B during this time, they will not be subject to penalty  Individuals who do not enroll in Part D during their initial enrollment period may enroll during the annual open enrollment period, which corresponds with the Part C annual enrollment period—from October 15 to December 7, with coverage effective the following January  Individuals are not subject to the Part D penalty if they have maintained "creditable" drug coverage through another source, such as retiree health coverage offered by a former employer or union  However, once employees retire or have no access to "creditable" Part D coverage, a penalty will apply unless they sign up for coverage during a special enrollment period  Finally, for persons who qualify for the low-income subsidy for Part D, the delayed-enrollment penalty does not apply  Medicare Parts A, B, and D each cover different services, with Part C providing a private plan alternative for all Medicare services covered under Parts A and B, except hospice  The Parts A-D covered services are described below, along with a description of Medicare's payments  Part A provides coverage for inpatient hospital services, posthospital skilled nursing facility (SNF) services, hospice care, and some home health services, subject to certain conditions and limitations  Approximately 20% of fee-for-service enrollees use Part A services during a year  Medicare inpatient hospital services include (1) bed and board; (2) nursing services; (3) use of hospital facilities; (4) drugs, biologics, supplies, appliances, and equipment; and (5) diagnostic and therapeutic items and services  (Physicians' services provided during an inpatient stay are paid under the physician fee schedule and discussed below in the " Physicians and Nonphysician Practitioner Services " section ) Coverage for inpatient services is linked to an individual's benefit period or "spell of illness" (defined as beginning on the day a patient enters a hospital and ending when he or she has not been in a hospital or skilled nursing facility for 60 days)  An individual admitted to a hospital more than 60 days after the last discharge from a hospital or SNF begins a new benefit period  Coverage in each benefit period is subject to the following conditions: Days 1-60  Beneficiary pays a deductible ($1,364 in 2019)  Days 61-90  Beneficiary pays a daily co-payment charge ($341 in 2019)  Days 91-150  After 90 days, the beneficiary may draw on one or more of 60 lifetime reserve days, provided they have not been previously used  (Each of the 60 lifetime reserve days can be used only once during an individual's lifetime ) For lifetime reserve days, the beneficiary pays a daily co-payment charge ($682 in 2019); otherwise the beneficiary pays all costs  Days 151 and over  Beneficiary pays for all costs for these days  Inpatient mental health care in a psychiatric facility is limited to 190 days during a patient's lifetime  Cost sharing is structured similarly to that for stays in a general hospital (above)  Medicare makes payments to most acute care hospitals under the inpatient prospective payment system (IPPS), using a prospectively determined amount for each discharge  Medicare's payments to hospitals is the product of two components: (1) a discharge payment amount adjusted by a wage index for the area where the hospital is located or where it has been reclassified, and (2) the weight associated with the Medicare severity-diagnosis related group (MS-DRG) to which the patient is assigned  This weight reflects the relative costliness of the average patient in that MS-DRG, which is revised annually, generally effective October 1 st of each year  Additional payments are made to hospitals for cases with extraordinary costs (outliers), for indirect costs incurred by teaching hospitals for graduate medical education, and to disproportionate share hospitals (DSH) which provide a certain volume of care to low-income patients  Additional payments may also be made for qualified new technologies that have been approved for special add-on payments  Medicare also makes payments outside the IPPS system for direct costs associated with graduate medical education (GME) for hospital residents, subject to certain limits  In addition, Medicare pays hospitals for 65% of the allowable costs associated with beneficiaries' unpaid deductible and co-payment amounts as well as for the costs for certain other services  IPPS payments may be reduced by certain quality-related programs based on a hospital's quality performance  These quality-related programs include the Hospital Readmissions Reduction Program, the Hospital-Acquired Condition Reduction Program, and the Hospital Value-Based Purchasing Program  Further, hospitals may receive Medicare payment reductions for failing to demonstrate meaningful use of certified electronic health record (EHR) technology  Additional payment adjustments or special treatment under the IPPS may apply for hospitals meeting one of the following designations: (1) sole community hospitals (SCHs), (2) Medicare dependent hospitals, (3) rural referral centers, and (4) low-volume hospitals  Certain hospitals or distinct hospital units are exempt from IPPS and paid on an alternative basis, including (1) inpatient rehabilitation facilities, (2) long-term care hospitals, (3) psychiatric facilities including hospitals and distinct part units, (4) children's hospitals, (5) cancer hospitals, and (6) critical access hospitals  Medicare covers up to 100 days of posthospital care for persons needing skilled nursing or rehabilitation services on a daily basis  The SNF stay must be preceded by an inpatient hospital stay of at least 3 consecutive calendar days, and the transfer to the SNF typically must occur within 30 days of the hospital discharge  Medicare requires SNFs to provide services for a condition the beneficiary was receiving treatment for during his or her qualifying hospital stay (or for an additional condition that arose while in the SNF)  There is no beneficiary cost sharing for the first 20 days of a Medicare-covered SNF stay  For days 21 to 100, beneficiaries are subject to daily co-payment charges ($170 50 in 2019)  The 100-day limit begins again with a new spell of illness  SNF services are paid under a prospective payment system (PPS), which is based on a per diem urban or rural base payment rate, adjusted for case mix (average severity of illness) and area wages  The per diem rate generally covers all services, including room and board, provided to the patient that day  The case-mix adjustment is made using the resource utilization groups (RUGs) classification system, which uses patient assessments to assign a beneficiary to one of 66 groups that reflect the beneficiary's expected use of services  Patient assessments are done at various times during a patient's stay and a beneficiary's designated RUG category can change with changes in the beneficiary's condition  Extra payments are not made for extraordinarily costly cases ("outliers")  The Medicare hospice benefit covers services designed to provide palliative care and management of a terminal illness; the benefit includes drugs and medical and support services  These services are provided to Medicare beneficiaries with a life expectancy of six months or less for two 90-day periods, followed by an unlimited number of 60-day periods  The individual's attending physician and the hospice physician must certify the need for the first benefit period, but only the hospice physician needs to recertify for subsequent periods  Since January 1, 2011, a hospice physician or nurse practitioner must have a face-to-face encounter with the individual to determine continued eligibility prior to the 180 th day recertification, and for each subsequent recertification  Hospice care is provided in lieu of most other Medicare services related to the curative treatment of the terminal illness  Beneficiaries electing hospice care from a hospice program may receive curative services for illnesses or injuries unrelated to their terminal illness, and they may disenroll from the hospice at any time  Nominal cost sharing is required for drugs and respite care  Payment for hospice care is based on one of four prospectively determined rates (which correspond to four different levels of care) for each day a beneficiary is under the care of the hospice  The four rate categories are routine home care, continuous home care, inpatient respite care, and general inpatient care  Payment rates are adjusted to reflect differences in area wage levels, using the hospital wage index  Payments to a hospice are limited by two caps; the first limits the number of days of inpatient care to 20% or less of total patient care days, and the second limits the average annual payment per beneficiary  Home health services and services for individuals with end-stage renal disease are covered under both Parts A and B of Medicare  Medicare covers visits by participating home health agencies for beneficiaries who (1) are confined to home and (2) need either skilled nursing care on an intermittent basis or physical or speech language therapy  After establishing such eligibility, the continuing need for occupational therapy services may extend the eligibility period  Covered services include part-time or intermittent nursing care, physical or occupational therapy or speech language pathology services, medical social services, home health aide services, and medical supplies and durable medical equipment  The services must be provided under a plan of care established by a physician, and the plan must be reviewed by the physician at least every 60 days  There is no beneficiary cost sharing for home health services (though some other Part B services provided in connection with the visit, such as durable medical equipment, may be subject to cost-sharing charges)  Home health services are covered under both Medicare Parts A and B  There are special eligibility requirements and benefit limits for home health services furnished under Part A to beneficiaries who are enrolled in both Parts A and B  For such a beneficiary, Part A pays for only postinstitutional home health services furnished for up to 100 visits during a spell of illness, while Part B covers any medically necessary home health services that exceed the 100-visit limit, as well as medically necessary home health services that do not qualify as "postinstitutional " For beneficiaries enrolled in only Part A or only Part B, the requirements described above do not apply  Part A or Part B, as applicable, covers all medically necessary episodes of home health care, without a visit limit, regardless of whether the episode follows a hospitalization  Regardless of whether the beneficiary is enrolled in Part A only, in Part B only, or in both parts, the scope of the Medicare home health benefit is the same, Medicare's payments to HHAs are calculated using the same methods, and beneficiaries have no cost-sharing  Home health services are paid under a home health PPS, based on 60-day episodes of care; a patient may have an unlimited number of episodes  The physician's certification of an initial 60-day episode of home health must be supported by a face-to-face encounter with the patient related to the primary reason that the patient needs home health services  Under the PPS, for episodes with five or greater visits, a nationwide base payment amount is adjusted by differences in wages (using the hospital wage index)  This amount is then adjusted for case mix using the applicable Home Health Resource Group (HHRG) to which the beneficiary has been assigned  The HHRG applicable to a beneficiary is determined following an assessment of the patient's condition and care needs using the Outcome and Assessment Information Set (OASIS); there are 153 HHRGs  For episodes with four or fewer visits, the PPS reimburses the provider for each visit performed  Further payment adjustments may be made for services provided in rural areas, outlier visits (for extremely costly patients), a partial episode for beneficiaries that have an intervening event during their episode, or an agency's failure to submit quality data to CMS  Since January 1, 2016, home health agencies in nine states are being reimbursed under a home health value-based purchasing (HHVBP) model  These home health agencies can receive increased or decreased home health reimbursements depending on their performance across certain quality measures  Individuals with end-stage renal disease (ESRD) are eligible for all services covered under Parts A and B  Kidney transplantation services, to the extent they are inpatient hospital services, are subject to the inpatient hospital PPS and are reimbursed by both Parts A and B  However, kidney acquisition costs are paid on a reasonable cost basis under Part A  Dialysis treatments, when an individual is admitted to a hospital, are covered under Part A  Part B covers their dialysis services, drugs, biologicals (including erythropoiesis stimulating agents used in treating anemia as a result of ESRD), diagnostic laboratory tests, and other items and services furnished to individuals for the treatment of ESRD  In effect since January 1, 2011, the ESRD prospective payment system (PPS) makes no payment distinction as to the site where renal dialysis services are provided  With the implementation of the ESRD PPS, Medicare dialysis payments provide a single "bundled" payment for Medicare renal dialysis services that includes (1) items and services included in the former payment system's base rate as of December 31, 2010; (2) erythropoiesis stimulating agents (ESAs) for the treatment of ESRD; (3) other drugs and biologicals for which payment was made separately (before bundling); and (4) diagnostic laboratory tests and other items and services furnished to individuals for the treatment of ESRD  The system is case-mix adjusted based on factors such as patient weight, body mass index, comorbidities, length of time on dialysis, age, race, ethnicity, and other appropriate factors as determined by the Secretary  Under the ESRD Quality Incentive Program, dialysis facilities that fail to meet certain performance standards receive reduced payments  Medicare Part B covers physicians' services, outpatient hospital services, durable medical equipment, and other medical services  Initially, over 98% of the eligible population voluntarily enrolled in Part B, but in recent years the percentage has fallen to about 91%  About 89% of enrollees in original (FFS) Medicare use Part B services during a year  The program generally pays 80% of the approved amount (most commonly, a fee schedule or other predetermined amount) for covered services in excess of the annual deductible ($185 in 2019)  The beneficiary is liable for the remaining 20%  Most providers and practitioners are subject to limits on amounts they can bill beneficiaries for covered services  For example, physicians and some other practitioners may choose whether or not to accept "assignment" on a claim  When a physician signs a binding agreement to accept assignment for all Medicare patients, the physician accepts the Medicare payment amount as payment in full and can bill the beneficiary only the 20% coinsurance plus any unmet deductible  The physician agrees to accept assignment on all Medicare claims in a given year and is referred to as a "participating physician " There are several advantages to being a participating provider, including higher payment under the Medicare fee schedule, a lower beneficiary co-payment, and automatic forwarding of Medigap claims  Physicians who do not agree to accept assignment on all Medicare claims in a given year are referred to as nonparticipating physicians  Nonparticipating physicians may or may not accept assignment for a given service  If they do not, they may charge beneficiaries more than the fee schedule amount on nonassigned claims; however, these "balance billing" charges are subject to certain limits  Alternatively, physicians may choose not to accept any Medicare payment and enter into private contracts with their patients where no Medicare restrictions on payment or balance billing apply; however, this requires that physicians "opt out" of Medicare for two years  For some providers, such as nurse practitioners and physician assistants, assignment is mandatory; these providers can only bill the beneficiary the 20% coinsurance and any unmet deductible  For other Part B services, such as durable medical equipment, assignment is optional; for these services, applicable providers may bill beneficiaries for amounts above Medicare's recognized payment level and may do so without limit  Medicare Part B covers medically necessary physician services and medical services provided by some nonphysician practitioners  Covered nonphysician practitioner services include, but are not limited to, those provided by physician assistants, nurse practitioners, certified registered nurse anesthetists, and clinical social workers  Certain limitations apply for services provided by chiropractors and podiatrists  Beneficiary cost sharing is typically 20% of the approved amount, although most preventive services require no coinsurance from the beneficiary  A number of Part B services are paid under the Medicare physician fee schedule (MPFS), including services of physicians, nonphysician practitioners, and therapists  There are over 7,000 service codes under the MPFS  The fee schedule assigns relative values to each service code  These relative values reflect physician work (based on time, skill, and intensity involved), practice expenses (e g , overhead and nonphysician labor), and malpractice expenses  The relative values are adjusted for geographic variations in the costs of practicing medicine  These geographically adjusted relative values are converted into a dollar payment amount by a national conversion factor  Annual updates to payments are determined through changes in the conversion factor  MACRA made several fundamental changes to how Medicare pays for physician and practitioner services by (1) changing the methodology for determining the annual updates to the conversion factor, (2) establishing a merit-based incentive payment system (MIPS) to consolidate and replace several existing incentive programs and to apply value and quality adjustments to the MPFS, and (3) establishing the development of, and participation in, alternative payment models (APMs)  Prior to MACRA, the SGR system, which had been in place since BBA 97, tied annual updates to the Medicare fee schedule to cumulative Part B expenditure targets  MACRA repealed the SGR methodology, established annual fee schedule updates in the short term, and put in place a new method for determining updates thereafter  As a result of the MACRA changes, the update to physician payments under the MPFS was 0% from January 2015 through June 2015; for the remainder of that year—July 2015 through December 2015—the payments were increased by 0 5%  In each of the next four years, 2016 through 2019, the payments were to increase by 0 5% each year; however, the BBA 18 reduced the 2019 update to 0 25%  For the next six years, from 2020 through 2025, the payment update will be 0%  In addition to changes to the annual update, MACRA established two pathways for payment reform, collectively referred to as the Quality Payment Program (QPP)  Medicare payment to all physicians and other practitioners will be determined by which conditions of the QPP, either MIPS or APM, the participant satisfies  The MIPS is a new program that remains based on FFS rates but combines four categories of performance measures (quality of care, cost/resource use, clinical practice improvement activities, and promoting interoperability) into a single adjustment to the base MPFS payment  Following several years of data collection and feedback on measures, the MIPS adjustments will affect actual payments for the first time in 2019  In contrast, qualified advanced APMs are intended to be alternatives to FFS, incorporating new approaches to paying for medical care that reward quality and efficiency while de-emphasizing the number of services billed (volume of care)  Proposed advanced APMs are evaluated by an ad hoc committee (the Physician-Focused Payment Models Technical Advisory Committee), which provides comments and recommendations to the Secretary as to whether new payment models meet the criteria of APMs  For 2019, there are 13 advanced APMs under the QPP, though not all are available to all physicians and practitioners, as some are restricted to certain special services (e g , oncology care, joint replacement) or geographic locations (e g , Vermont's Medicare ACO Initiative, Maryland's Total Cost of Care Model)  MACRA established incentives to make APMs more attractive than MIPS  First, qualifying participants in advanced APMs are eligible for an annual prepaid bonus (paid 2019-2024)  Second, beginning in 2026, there will be two update factors, one for items and services furnished by a participant in an advanced APM and another for those electing to remain in the modified FFS payment system (MIPS) that do not participate in an advanced APM  The update factor for the advanced APM participants will be 0 75%, and the update factor for MIPS will be 0 25%, causing a difference between the payment levels that will grow over time  Medicare covers medically necessary outpatient physical and occupational therapy and speech-language pathology services  Beginning in 1997 and for many years subsequently but intermittently, beneficiaries faced limits ( therapy caps ) on how much Medicare would pay for outpatient therapy services in a calendar year  BBA 18 permanently repealed the outpatient therapy caps beginning January 1, 2018, and established a requirement that therapy services exceeding $3,000 would trigger a manual medical review (MMR) of the medical necessity of these services, in years 2018-2028  Beginning with 2029, the annual MMR threshold limit is to be increased by the percentage increase in the MEI, and it is to be applied separately for (1) physical therapy services and speech-language pathology services combined and (2) occupational therapy services  Medicare statute prohibits payments for covered items and services that are "not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member," which would effectively exclude the coverage of preventive and screening services  However, Congress has explicitly added and expanded Medicare coverage for a number of such services through legislation, including through MMA, MIPPA, and ACA  Under current law, if a preventive service is recommended for use by the U S  Preventive Services Task Force (USPSTF, an independent evidence-review panel) and Medicare covers the service, all cost sharing must be waived  Also, the Secretary may add coverage of a USPSTF-recommended service that is not already covered  Coverage for preventive and screening services currently includes, among other services, (1) a "welcome to Medicare" physical exam during the first year of enrollment in Part B and an annual visit and prevention plan thereafter; (2) flu vaccine (annual), pneumococcal vaccine, and hepatitis B vaccine (for persons at high risk); (3) screening tests for breast, cervical, prostate, and colorectal cancers; (4) screening for other conditions such as depression, alcohol misuse, heart disease, glaucoma, and osteoporosis; and (5) intensive behavioral therapy for heart disease and for obesity  Payments for these services are provided under the physician fee schedule and/or the clinical laboratory fee schedule  Part B covers outpatient clinical laboratory tests, such as certain blood tests, urinalysis, and some screening tests, provided by Medicare-participating laboratories  These services may be furnished by labs located in hospitals and physician offices, as well as by independent labs  Beneficiaries have no co-payments or deductibles for covered clinical lab services  From 1984 until recently, payments for outpatient clinical laboratory services were made on the basis of the Medicare clinical laboratory fee schedule (CLFS), which set payment amounts as the lesser of the amount billed, the local fee for a geographic area, or a national limit amount  Most clinical lab services were paid at the national limit amount  The national limits were set at a percentage (74%) of the median of all local fee schedule amounts for each laboratory test code; therefore, fee schedule amounts may differ by region  In general, annual increases in clinical lab fees have been based on the percentage change in the CPI-U  However, since 1987, Congress has specified lower updates  Beginning in 2014, with certain exceptions, laboratory tests provided in hospital outpatient departments are no longer paid separately under the CLFS and are instead included in the OPPS payments  PAMA introduced a new method for determining clinical laboratory payments and required CMS to base Medicare CLFS reimbursement on reported private insurance payment amounts  Medicare has been using weighted median private insurer rates to calculate Medicare payment rates for laboratory tests paid under the CLFS since January 1, 2018  These payment rates are national and do not vary by geographic area  Part B also covers diagnostic nonlaboratory x-ray tests and other diagnostic tests, as well as x-ray, radium, and radioisotope therapy  Generally, these services are paid for under the physician fee schedule, with beneficiaries responsible for a 20% coinsurance payment  Medicare covers a wide variety of equipment and devices under the heading of durable medical equipment (DME), prosthetics, and orthotics (PO) if they are medically necessary and are prescribed by a physician  DME is defined as equipment that (1) can withstand repeated use, (2) has an expected life of at least three years (effective for items classified as DME after January 1, 2012), (3) is used primarily to serve a medical purpose, (4) is not generally useful in the absence of an illness or injury, and (5) is appropriate for use in the home  DME includes such items as hospital beds, wheelchairs, blood glucose monitors, and oxygen and oxygen equipment  It also includes related supplies (S), such as drugs and biologics that are necessary for the effective use of the product  Prosthetics (P) are items that replace all or part of a body organ or its function, such as colostomy bags, pacemakers, and artificial eyes, arms, or legs  Orthotics (O) are braces that support a weak or deformed body member, such as leg or back braces  Except in competitive bidding areas (CBAs, described below), Medicare pays for most durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) based on fee schedules  Medicare pays 80% of the lower of the supplier's charge for the item or the fee schedule amount  The beneficiary is responsible for the remaining 20%  In general, fee schedule amounts are updated each year by a (1) measure of price inflation, and (2) a measure of economy-wide productivity, which may result in lower fee schedule amounts from one year to the next  Since 2016, the fee schedule rates that applied outside of competitive bidding areas for certain DMEPOS have been reduced based on price information from the competitive bidding program  The reductions were phased in during 2016, and fully phased in starting in January 2017  In response to concerns that the adjusted rates were too low, the Secretary again applied the phase-in rate for rural and noncontiguous areas not subject to competitive bidding starting in June 2018  Currently, two different fee schedules apply outside of CBAs  First, in rural or noncontiguous areas, the fee schedule is a 50/50 blend of the fee schedule with and without the reductions based on information from competitive bidding (i e , the phase-in methodology)  Second, in nonrural and contiguous areas, the fee schedule amounts are fully adjusted by information from the competitive bidding program  Numerous studies and investigations indicated that Medicare paid more for certain items of DME and PO than some other health insurers and some retail outlets  Such overpayments were attributed, in part, to the fee schedule mechanism of payment  MMA required the Secretary to establish a Competitive Acquisition Program for certain DMEPOS in specified areas  Instead of paying for medical equipment based on a fee schedule established by law, payment for items in competitive bidding areas was based on the supplier bids  The program started in 9 metropolitan areas in January 2011 and had expanded to 130 competitive bidding areas in 2018  However, the program has been suspended while a new bidding methodology is established  During the gap, the payments for previously competitively bid items in competitive bidding areas will be the amounts that applied on December 31, 2018, increased, yearly, by a measure of inflation  Certain specified outpatient prescription drugs and biologics are covered under Medicare Part B  (However, most outpatient prescription drugs are covered under Part D, discussed below ) Covered Part B drugs and biologics include drugs furnished incident to physician services, immunosuppressive drugs following a Medicare-covered organ transplant, erythropoietin for treatment of anemia for individuals with ESRD when not part of the ESRD composite rate, oral anticancer drugs (provided they have the same active ingredients and are used for the same indications as chemotherapy drugs that would be covered if furnished incident to physician services), certain vaccines under selected conditions, and drugs administered through DME  Generally, Medicare reimburses physicians and other providers, such as hospital outpatient clinics, for covered Part B drugs and biologics at 106% of the volume weighted average sales price of all drugs billed under the same billing code, although some Part B drugs, such as those administered through DME, are reimbursed at 95% of the drug's average wholesale price  Health care providers also are paid separately for administering Medicare Part B drugs  Medicare pays 80% of the amount paid to providers, and beneficiaries are responsible for the remaining 20%  A hospital outpatient is a person who has not been admitted by the hospital as an inpatient but is registered on the hospital records as an outpatient  Generally, payments under the hospital outpatient prospective payment system (OPPS) cover the operating and capital-related costs that are directly related and integral to performing a procedure or furnishing a service on an outpatient basis  These payments cover services such as the use of an operating suite, treatment, procedure, or recovery room; use of an observation bed as well as anesthesia; certain drugs or pharmaceuticals; incidental services; and other necessary or implantable supplies or services  Payments for services such as those provided by physicians and other professionals as well as therapy and clinical diagnostic laboratory services, among others, are separate  Under the OPPS, the unit of payment for acute care hospitals is the individual service or procedure as assigned to an ambulatory payment classification (APC)  To the extent possible, integral services and items (excluding physician services paid under the physician fee schedule) are bundled within each APC  Specified new technologies are assigned to "new technology APCs" until clinical and cost data are available to permit assignment into a "clinical APC " Medicare's hospital outpatient payment is calculated by multiplying the relative weight associated with an APC by a conversion factor  For most APCs, 60% of the conversion factor is geographically adjusted by the wage index used for the inpatient prospective payment system  Except for new technology APCs, each APC has a relative weight that is based on the median cost of services in that APC  The OPPS also includes pass-through payments for new technologies (specific drugs, biologicals, and devices) and payments for outliers  The Medicare Payment Advisory Commission (MedPAC) has recommended site-neutral payment policies that base payments on the resources needed to provide high-quality care in the most efficient setting  The Bipartisan Budget Act of 2015 (BBA 15; P L  114-74 ) gave CMS the authority to add new restrictions on Medicare payments for services furnished in provider-based off-campus hospital outpatient departments (HOPDs) to address discrepancies between payments under the MPFS and the OPPS for similar services  In its 2019 OPPS Final Rule, CMS explicitly applies the site-neutral policy to clinic visits, the most commonly billed service in hospital outpatient departments  An ambulatory surgical center (ASC) is a distinct entity that furnishes outpatient surgical procedures to patients who do not require an overnight stay after the procedure  According to MedPAC, most ASCs are freestanding facilities rather than part of a larger facility, such as a hospital  Medicare covers surgical and medical services performed in an ambulatory surgical center that are (1) commonly performed on an inpatient basis but may be safely performed in an ASC; (2) not of a type that are commonly performed or that may be safely performed in physicians' offices; (3) limited to procedures requiring a dedicated operating room or suite and generally requiring a postoperative recovery room or short-term (not overnight) convalescent room; and (4) not otherwise excluded from Medicare coverage  Medicare pays for surgery-related facility services provided in ASCs using a prospective payment system based on the OPPS  (Associated physician fees are paid for separately under the physician fee schedule ) Each of the approximately 3,500 procedures approved for payment in an ASC is classified into an APC group on the basis of clinical and cost similarity  The ASC system primarily uses the same payment groups as the OPPS; however, ASC payment rates are generally lower  The ASC weights are scaled (reduced) to account for the different mix of services in an ASC, and the ASC conversion factor (the base payment amount) is lower  A different payment method is used to set ASC payment for office-based procedures, separately payable radiology services, separately payable drugs, and device-intensive procedures  In addition, separate payments are made for certain ancillary items and services when they are integral to surgical procedures, including corneal tissue acquisition, brachytherapy sources, certain radiology services, many drugs, and certain implantable devices  The application of the site-neutral payment policy to clinic visits also affects such payments to ASCs (see discussion above)  Medicare Part B covers emergency and nonemergency ambulance services to or from a hospital, a critical access hospital, a skilled nursing facility, or a dialysis facility for End-Stage Renal Disease (ESRD) beneficiaries who require dialysis when other modes of transportation could endanger the Medicare beneficiary's health  In most cases, the program covers 80% of the allowed amount for the service, and the beneficiary is responsible for the remaining 20%  Generally, ambulance services are covered if (1) transportation of the beneficiary occurs; (2) the beneficiary is taken to an appropriate location (generally, the closest appropriate facility); (3) the ambulance service is medically necessary (other forms of transportation are contraindicated); (4) the ambulance provider or supplier meets state licensing requirements; and (5) the transportation is not part of a Medicare Part A covered stay  Medicare covers both scheduled and nonscheduled nonemergency transports if the beneficiary is bed-confined or meets other medical necessity criteria  Medicare may also cover emergency ambulance transportation by airplane or helicopter if the beneficiary's location is not easily reached by ground transportation or if long distance or obstacles, such as heavy traffic, would prevent the individual from obtaining needed care  Medicare pays for ambulance services according to a national fee schedule  The fee schedule establishes seven categories of ground ambulance services and two categories of air ambulance services  Medicare pays for different levels of ambulance services, which reflect the staff training and equipment required to meet the patient's medical condition or health needs  Generally, basic life support is provided by emergency medical technicians (EMTs)  Advanced life support is provided by EMTs with advanced training or by paramedics  Some rural ground and air ambulance services may qualify for increased payments  Also, ambulance providers that are CAHs, or that are entities that are owned and operated by a CAH, are paid on a reasonable-cost basis rather than the fee schedule if they are the only ambulance provider within a 35-mile radius  Medicare covers Part B services in rural health clinics (RHCs) and federally qualified health centers (FQHCs) provided by (1) physicians and specified nonphysician practitioners; (2) visiting nurses for homebound patients in home health shortage areas; (3) registered dieticians or nutritional professionals for diabetes training and medical nutrition therapy; and (4) others, as well as certain drugs administered by a physician or nonphysician practitioner  RHCs are paid based on an "all-inclusive" cost-based rate per beneficiary visit subject to a per visit upper limit, adjusted annually for inflation  For cost-reporting periods that began on or after October 1, 2014, FQHCs are paid a base payment rate per visit (with a limit, in most cases, of one billable visit per day) under a PPS methodology  Each FQHC's PPS rate is adjusted based on the location where the service is furnished using geographic adjustment factors, which are the geographic practice cost indices (GPCI) used in Medicare's physician fee schedule (MPFS)  This rate is increased by 34% for new patients (those not seen in the FQHC organization within the past three years)  The 34% increase also applies when a beneficiary receives a comprehensive initial Medicare visit (an initial preventive physician examination or an initial annual wellness visit) or a subsequent annual wellness visit  Effective January 1, 2017, the FQHC PPS base rate is updated annually using an FQHC-specific market basket  Medicare's payment to the FQHC is equal to 80% of the lesser of the adjusted PPS rate or the FQHC's actual charges associated with the visit, and the beneficiary is responsible for a 20% coinsurance  Medicare Advantage (MA) is an alternative way for Medicare beneficiaries to receive covered benefits  Under MA, private health plans are paid a per-person amount to provide all Medicare covered benefits (except hospice) to beneficiaries who enroll in their plan  Medicare beneficiaries who are eligible for Part A, enrolled in Part B, and do not have ESRD are eligible to enroll in an MA plan if one is available in their area  Some MA plans may choose their service area (local MA plans), while others agree to serve one or more regions defined by the Secretary (regional MA plans)  In 2019, nearly all Medicare beneficiaries have access to an MA plan and approximately a third of beneficiaries are enrolled in one  Private plans may use different techniques to influence the medical care used by enrollees  Some plans, such as health maintenance organizations (HMOs), may require enrollees to receive care from a restricted network of medical providers; enrollees may be required to see a primary care physician who will coordinate their care and refer them to specialists as necessary  Other types of private plans, such as private fee-for-service (PFFS) plans, may look more like original Medicare, with fewer restrictions on the providers an enrollee can see and minimal coordination of care  In general, MA plans offer additional benefits or require smaller co-payments or deductibles than original Medicare  Sometimes beneficiaries pay for these additional benefits through a higher monthly premium, but sometimes they are financed through plan savings  The extent of extra benefits and reduced cost sharing varies by plan type and geography  However, MA plans are seen by some beneficiaries as an attractive alternative to more expensive supplemental insurance policies found in the private market  By contract with CMS, a plan agrees to provide all required services covered in return for a capitated monthly payment adjusted for the demographics and health history of their enrollees  The same monthly payment is made regardless of how many or few services a beneficiary actually uses  In general, the plan is at-risk if costs, in the aggregate, exceed program payments; conversely, the plan can retain savings if aggregate costs are less than payments  Payments to MA plans are based on a comparison of each plan's estimated cost of providing Medicare covered services (a bid) relative to the maximum amount the federal government will pay for providing those services in the plan's service area (a benchmark)  If a plan's bid is less than the benchmark, its payment equals its bid plus a rebate  The size of the rebate is dependent on plan quality and ranges from 50% to 70% of the difference between the bid and the benchmark  The rebate must be returned to enrollees in the form of additional benefits, reduced cost sharing, reduced Part B or Part D premiums, or some combination of these options  If a plan's bid is equal to or above the benchmark, its payment will be the benchmark amount and each enrollee in that plan will pay an additional premium, equal to the amount by which the bid exceeds the benchmark  The MA benchmarks are determined through statutorily specified formulas that have changed over time  Since BBA 97, formulas have increased the benchmark amounts, in part, to encourage plan participation in all areas of the country  As a result, however, the benchmark amounts (and plan payments) in some areas have been higher than the average cost of original FFS Medicare  The ACA changed the way benchmarks are calculated by tying them closer to (or below) spending in FFS Medicare, and adjusting them based on plan quality  In a recent analysis, MedPAC found that "over the past few years, plan bids and payments have come down in relation to FFS spending while MA enrollment continues to grow  The pressure of lower benchmarks has led to improved efficiencies and more competitive bids that enable MA plans to continue to increase enrollment by offering benefits that beneficiaries find attractive " In 2006, the MA program began to offer MA regional plans  Regional MA plans must agree to serve one or more regions designated by the Secretary  There are 26 MA regions consisting of states or groups of states  Regional plan benchmarks include two components: (1) a statutorily determined amount (comparable to benchmarks described above) and (2) a weighted average of plan bids  Thus, a portion of the benchmark is competitively determined  Similar to local plans, plans with bids below the benchmark are given a rebate, while plans with bids above the benchmark require an additional enrollee premium  In general, MA eligible individuals may enroll in any MA plan that serves their area  However, some MA plans may restrict their enrollment to beneficiaries who meet additional criteria  For example, employer-sponsored MA plans are generally only available to the retirees of the company sponsoring the plan  In addition, Medicare Special Needs Plans (SNPs) are a type of coordinated care MA plan that exclusively enrolls, or enrolls a disproportionate percentage of, special needs individuals  Special needs individuals are any MA eligible individuals who are either institutionalized as defined by the Secretary, eligible for both Medicare and Medicaid, or have a severe or disabling chronic condition and would benefit from enrollment in a specialized MA plan  Medicare Part D provides coverage of outpatient prescription drugs to Medicare beneficiaries who choose to enroll in this optional benefit  (As previously discussed, Part B provides limited coverage of some outpatient prescription drugs ) In 2019, about 47 million (about 77%) of eligible Medicare beneficiaries are estimated to be enrolled in a Part D plan  Prescription drug coverage is provided through private prescription drug plans (PDPs), which offer only prescription drug coverage, or through Medicare Advantage prescription drug plans (MA-PDs), which offer prescription drug coverage that is integrated with the health care coverage they provide to Medicare beneficiaries under Part C  Plans must meet certain minimum requirements; however, there are significant variations among them in benefit design, including differences in premiums, drugs included on plan formularies, and cost sharing for particular drugs  Part D prescription drug plans are required to offer either "standard coverage" or alternative coverage that has actuarially equivalent benefits  In 2019, "standard coverage" has a $415 deductible and a 25% coinsurance for costs between $415 and $3,820  From this point, there is reduced coverage until the beneficiary has out-of-pocket costs of $5,100 (an estimated $8,139 54 in total spending); this coverage gap has been labeled the "doughnut hole " Once the beneficiary reaches the catastrophic limit, the program pays all costs except for the greater of 5% coinsurance or $3 40 for a generic drug and $8 50 for a brand-name drug  As required by the ACA, in 2010, Medicare sent a tax-free, one-time $250 rebate check to each Part D enrollee who reached the doughnut hole  Additionally, starting in 2011, the coverage gap is being gradually reduced each year  Under the ACA, the coverage gap for both brand-name and generic drugs was to be eliminated in 2020, but Congress moved up the date to 2019 for brand-name drugs as part of BBA 18  In 2019, a 70% discount is provided by drug manufacturers and Medicare pays an additional 5% of the cost of brand-name drugs dispensed during the coverage gap  In 2019, Medicare also pays 63% of the cost of generic drugs dispensed during the coverage gap and enrollees pay 37%  (See Figure 2  ) By 2020, through a combination of manufacturer discounts and increased Medicare coverage, Part D enrollees will be responsible for 25% of the costs for brand-name and generic drugs in the coverage gap (the same as during the initial coverage period)  Most plans offer actuarially equivalent benefits rather than the standard package, including alternatives such as reducing or eliminating the deductible, or using tiered cost sharing with lower cost sharing for generic drugs  Medicare's payments to plans are determined through a competitive bidding process, and enrollee premiums are tied to plan bids  Plans are paid a risk-adjusted monthly per capita amount based on their bids during a given plan year  Part D plan sponsors determine payments for drugs and are expected to negotiate prices  The federal government is prohibited from interfering in the price negotiations between drug manufacturers, pharmacies, and plans (the so-called "non-interference clause")  Part D also provides enhanced coverage for low-income enrolled individuals, such as persons who previously received drug benefits under Medicaid (known as "dual eligibles"—enrollees in both Medicare and Medicaid)  Additionally, certain persons who do not qualify for Medicaid, but whose incomes are below 150% of poverty, may also receive assistance for some portion of their premium and cost-sharing charges  The MMA included significant incentives for employers to continue to offer coverage to their retirees by providing a 28% federal subsidy  In 2019, the maximum potential subsidy per covered retiree is $2,264 for employers or unions offering drug coverage that is at least actuarially equivalent (called "creditable" coverage) to standard coverage  Employers or unions may select an alternative option (instead of taking the subsidy) with respect to Part D, such as electing to pay a portion of the Part D premiums  They may also elect to provide enhanced coverage, though this has some financial consequences for the employer or union  Alternatively, employers or unions may contract with a PDP or MA-PD to offer the coverage or become a Part D plan sponsor themselves for their retirees  A variety of public and private entities are involved in carrying out Medicare administrative and oversight functions  CMS, an agency within HHS, has primary operational responsibilities  Such responsibilities include managing program finances, developing policies and regulations, setting payment rates, and developing the program's information-technology infrastructure  CMS conducts its activities through its headquarters and 10 regional offices  The Social Security Administration, however, enrolls beneficiaries into the program and issues Medicare beneficiary cards  CMS also contracts with various private entities, including private health insurance companies, to help administer the program  For example, Medicare Administrative Contractors (MACs) process and pay Parts A and B reimbursement claims, enroll providers and suppliers, educate providers and suppliers on billing requirements, support appeal processes, and answer provider and supplier inquiries through call centers, as well as other activities  Qualified Independent Contractors (QICs) perform second-level reviews on appeals initially reviewed by MACs  Medicare's quality assurance activities are primarily handled by State Survey Agencies and Quality Improvement Organizations (QIOs), which operate in all states and the District of Columbia, Puerto Rico, and the U S  Virgin Islands  The State Survey Agencies are responsible for inspecting Medicare provider facilities (e g , nursing homes, home health agencies, and hospitals) to ensure that they are in compliance with federal safety and quality standards referred to as Conditions (or Requirements) of Participation  Alternatively, some types of providers, including hospitals, may receive certification through private accrediting agencies, such as the Joint Commission  QIOs are mostly private, not-for-profit organizations that monitor the quality of care delivered to Medicare beneficiaries and educate providers on the latest quality-improvement techniques  Medicare program integrity activities, such as audits, provider education, medical review, and predictive data analysis, also are carried out by a variety of government and private entities  For example, the Center for Program Integrity within CMS works together with the U S  Department of Justice (DOJ) and the HHS Office of Inspector General (OIG) to identify and prevent fraud, waste, and abuse in Medicare  CMS also works with private contractors to carry out certain program-integrity functions  Unified Program Integrity Contractors (UPICs) perform integrity-related activities including data analysis to identify potentially fraudulent claims (bills) for Medicare Parts A and B, home health and hospice services, and DME  Similarly, the National Benefit Integrity Medicare Drug Integrity Contractor (MEDIC) is responsible for identifying and investigating fraud, waste, and abuse in Medicare Advantage and Part D  When appropriate, the UPICs and MEDIC work with and refer cases to law enforcement, including OIG and DOJ  In addition, Recovery Audit Contractors (RACs) are responsible for identifying improper Medicare payments, including both underpayments and overpayments, and for recouping any overpayments made to providers  Each year, the Comprehensive Error Rate Testing (CERT) program quantifies a national improper Medicare payment rate by examining a random sample of claims  In turn, the Supplemental Medical Review Contractor targets medical reviews in areas where OIG, RACs, and CERT have identified vulnerabilities and/or questionable billing patterns to identify ways to lower improper payment rates  As required by the ACA, the Center for Medicare and Medicaid Innovation (CMMI) was established in January 2011 to test and evaluate innovative payment and service delivery models to reduce program expenditures under Medicare  Examples of these models include providing payment incentives for groups of doctors, hospitals, and other health care providers (Accountable Care Organizations, or ACOs) to coordinate the services they provide to Medicare beneficiaries; bundling payments for services provided in different settings during a beneficiary's episode of care; and reimbursing health providers based on the quality of care rather than on the volume of services  CMMI also plays an important role in developing and implementing the new physician payment models required by MACRA  Medicare beneficiary education and outreach duties are shared between CMS and the Social Security Administration  Each year, CMS mails out a "Medicare and You" handbook to beneficiaries, which provides information on their benefits for the upcoming year  Additional educational materials and responses to frequently asked questions may be found on the CMS-maintained "Medicare gov" website, and beneficiaries may call a CMS-operated 1-800 number for assistance with specific questions and help with selecting and enrolling in a Medicare Advantage and/or Part D plan  A Medicare beneficiary ombudsman is also available to provide assistance to Medicare consumers with their complaints, grievances, and requests  The Social Security Administration is responsible for notifying low-income Medicare beneficiaries about programs that may be able to assist them with their medical and prescription drug expenses  The Social Security Administration also provides general Medicare eligibility and enrollment information on its webpage and on Social Security benefit statements  Finally, CMS partners with community-based organizations, such as State Health Insurance Assistance Programs, in every state to provide educational resources and personalized assistance to Medicare beneficiaries  Medicare's financial operations are accounted for through two trust funds maintained by the Department of the Treasury—the Hospital Insurance (HI) trust fund for Part A and the Supplementary Medical Insurance (SMI) trust fund for Parts B and D  For beneficiaries enrolled in Medicare Advantage (Part C), payments are made on their behalf in appropriate portions from the HI and SMI trust funds  HI is primarily funded by payroll taxes, while SMI is primarily funded through general revenue transfers and premiums  (See Figure 3  ) The HI and SMI trust funds are overseen by a Board of Trustees that provides annual reports to Congress  The trust funds are accounting mechanisms  Income to the trust funds is credited to the fund in the form of interest-bearing government securities  Expenditures for services and administrative costs are recorded against the fund  These securities represent obligations that the government has issued to itself  As long as a trust fund has a balance, the Department of the Treasury is authorized to make payments for it from the U S  Treasury  Medicare expenditures are primarily paid for through mandatory spending—generally Medicare pays for all covered health care services provided to beneficiaries  Aside from certain constraints in HI described below, the program is not subject to spending limits  Additionally, most Medicare expenditures (aside from premiums paid by beneficiaries) are paid for by current workers through income taxes and dedicated Medicare payroll taxes, that is, current income is used to pay current expenditures  Medicare taxes paid by current workers are not set aside to cover their future Medicare expenses  The primary source of funding for Part A is payroll taxes paid by employees and employers  Each pays a tax of 1 45% on the employee's earnings; the self-employed pay 2 9%  Beginning in 2013, some higher-income employees pay higher payroll taxes  Unlike Social Security, there is no upper limit on earnings subject to the tax  Other sources of income include (1) interest on federal securities held by the trust fund, (2) a portion of federal income taxes that individuals pay on their Social Security benefits, and (3) premiums paid by voluntary enrollees who are not automatically entitled to Medicare Part A  Income for Part A is credited to the HI trust fund  Part A expenditures for CY2019 are estimated to reach approximately $330 billion  Revenue to the trust fund is expected to consist of about $285 billion in payroll tax income and another $38 billion in interest and other income  The Medicare Trustees project that in CY2019, the HI trust fund will incur a deficit of approximately $7 billion  As long as the HI trust fund has a balance, the Treasury Department is authorized to make payments for Medicare Part A services  To date, the HI trust fund has never run out of money (i e , become insolvent), and there are no provisions in the Social Security Act that govern what would happen if that were to occur  Part A expenditures exceeded HI income each year from 2008 through 2015, and the assets credited to the trust fund were drawn down to make up the deficit in those years  Although the HI trust fund accumulated small surpluses in 2016 and 2017, the Medicare Trustees estimate that, beginning in 2018, expenditures will outpace income in all future years, and project that the HI trust fund will become insolvent in 2026 (i e , the balance of the trust fund will reach $0)  At that time there would no longer be sufficient funds to fully cover Part A expenditures  Medicare Part B is financed primarily from federal general revenues and from beneficiary premiums, which are set at 25% of estimated per capita program costs for the aged  (The disabled pay the same premium as the aged ) Income for Part B is credited to the SMI trust fund  Total spending for Part B is estimated to reach about $368 billion in CY2019, with premiums financing about $98 billion of that amount and general revenues financing most of the rest  Most beneficiaries who enroll in Medicare Part B pay a monthly premium  Individuals receiving Social Security benefits have their Part B premium payments automatically deducted from their Social Security benefit checks  Due to a "hold-harmless" provision in the Social Security Act, an individual's Social Security check cannot decrease from one year to the next as a result of the annual Part B premium increase (except in the case of higher-income individuals subject to income-related premiums)  The 2019 monthly Part B premium is $135 50  However, about 3 5% of Medicare enrollees are protected by the hold-harmless provision and pay lower premium amounts because the dollar amount of the 2019 cost-of-living increase in their Social Security benefits was not sufficient to cover the full premium increase  Since 2007, higher-income Part B enrollees have paid higher premiums  In 2019, individuals whose modified adjusted gross income (AGI) exceeds $85,000 and each member of a couple filing jointly whose modified AGI exceeds $170,000 are subject to higher premium amounts  These higher-income premiums range from 35% to 85% of the value of Part B and affect about 5% of Medicare enrollees  (See Appendix B for 2019 Part B premiums and high-income thresholds ) Payments for spending under the Medicare Advantage program are made in appropriate portions from the HI and SMI trust funds  There is no separate trust fund for Part C  Medicare Part D is financed through a combination of beneficiary premiums and federal general revenues  In addition, certain transfers are made from the states  These transfers, referred to as "clawback payments," represent a portion of the amounts states could otherwise have been expected to pay for drugs under Medicaid if drug coverage for the dual eligible population had not been transferred to Part D  Part D revenues are credited to a separate Part D account within the SMI trust fund  In CY2019, total spending for Part D is estimated to reach approximately $98 billion, with about $71 billion of that amount paid for by general revenues, $16 billion from beneficiary premiums, and $12 billion from state transfers  In 2019, the base beneficiary premium is $33 19; however, beneficiaries pay different premiums depending on the plan they have selected and whether they are entitled to low-income premium subsidies  Additionally, beginning in 2011, higher income Part D enrollees pay higher premiums  (The income thresholds are the same as for Part B, as described above ) On average, beneficiary premiums are set at 25 5% of expected total Part D costs for basic coverage  The Budget Control Act of 2011 (BCA; P L  112-25 ) provided for increases in the debt limit and established procedures designed to reduce the federal budget deficit, including the creation of a Joint Select Committee on Deficit Reduction  The failure of the Joint Committee to propose deficit reduction legislation by its mandated deadline triggered automatic spending reductions ("sequestration" of mandatory spending and reductions in discretionary spending) in fiscal years 2013 through 2021  The American Taxpayer Relief Act of 2012 (ATRA; P L  112-240 ) delayed the automatic reductions by two months, while the Bipartisan Budget Act of 2013 (BBA; P L  113-67 ) extended sequestration for mandatory spending for an additional two years—through FY2023  In 2014, the President signed into law an amended version of S  25 ( P L  113-82 ), which included a provision to extend BCA's sequester of mandatory spending through FY2024  BBA 15 extended the sequestration of mandatory spending another year, through FY2025  Most recently, BBA 18 extended the BCA mandatory spending sequester through FY2027  Section 256(d) of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P L  99-177 ) contains special rules for the Medicare program in the event of a sequestration  Among other things, it specifies that for Medicare, sequestration is to begin the month after the sequestration order has been issued  Therefore, as the sequestration order was issued March 2013, Medicare sequestration began April 1, 2013, and will continue through March 31, 2028  Under sequestration, Medicare's benefit structure generally remains unchanged; however, benefit related payments are subject to 2% reductions  In other words, most Medicare payments to health care providers, as well as to MA and Part D plans, are being reduced by 2%  Certain Medicare payments are exempt from sequestration and therefore not reduced  These exemptions include (1) Part D low-income subsidies, (2) the Part D catastrophic subsidy, and (3) Qualified Individual (QI) premiums  Some non-benefit related Medicare expenses, such as administrative and operational spending, are subject to higher reductions, 6 2% in 2019  While Medicare provides broad protection against the costs of many, primarily acute care, services, the program does not cover all services that may be used by its aged and disabled beneficiaries  In general, Medicare does not cover eyeglasses, hearing aids, dentures, or most long-term care services  Further, unlike most private insurance policies, it does not include an annual "catastrophic" cap on out-of-pocket spending on cost-sharing charges for services covered under Parts A and B (except for persons enrolled in Medicare Advantage plans)  Most Medicare beneficiaries have some coverage in addition to Medicare  The following are the main sources of additional coverage for Medicare enrollees: Medicare Advantage  Many MA plans offer services in addition to those covered under original Medicare, reduced cost sharing, or reduced Part B or D premiums  All MA plans have a catastrophic cap  Employer Coverage  Coverage may be provided through a current or former employer  In recent years, a number of employers have cut back on the scope of retiree coverage  Some have dropped such coverage entirely, particularly for future retirees  As noted earlier, the MMA attempted to stem this trend, at least for prescription drug coverage, by offering subsidies to employers who offer drug coverage, at least as good as that available under Part D  Medigap  Individual insurance policies that supplement fee-for-service Medicare are referred to as Medigap policies  Beneficiaries with Medigap insurance typically have coverage for a portion of Medicare's deductibles and coinsurance; they may also have coverage for some items and services not covered by Medicare  Individuals select from a set of standardized plans, though not all plans are offered in all states  Medicaid  Certain low-income Medicare beneficiaries also may be eligible for full or partial benefits under their state's Medicaid program  Individuals eligible for both Medicare and Medicaid are referred to as dual eligibles  The lowest-income dual eligibles qualify for full Medicaid benefits, so that the majority of their health care expenses are paid by either Medicare or Medicaid; Medicare pays first, with Medicaid picking up most of the remaining costs  In addition to full-benefit dual eligibles, state Medicaid programs pay Medicare premiums and some cost sharing for other partial dual eligibles, who have higher income than full-benefit dual eligibles but are still considered to have low income  Other Public Sources  Individuals may have additional coverage through the Department of Veterans Affairs, or TRICARE for military retirees eligible for Medicare (and enrolled in Part B)  In 2015, about 87% of Medicare beneficiaries had some form of additional coverage  Some persons may have had more than one type of additional coverage  Appendix A  Abbreviations Appendix B  2019 Medicare Beneficiary Costs


Report 2: The DEA, within the Department of Justice, is responsible for ensuring the availability of controlled substances for legitimate uses while preventing their diversion through its administration and enforcement of the Controlled Substances Act and its implementing regulations  Under the Controlled Substances Act, all persons or entities that manufacture, distribute, or dispense controlled substances are required to register with DEA, unless specifically exempted  DEA regulates these entities to limit diversion and prevent abuse  For example, DEA regulates pharmaceutical companies that manufacture controlled substances, health care providers who prescribe them to patients, and pharmacies that dispense them  In October 2010, the Disposal Act amended the Controlled Substances Act to allow the public to deliver unused controlled substances to an entity authorized by DEA to dispose of the substances  DEA was given responsibility for promulgating the implementing regulations, and the Disposal Act stipulated that the regulations should prevent diversion of controlled substances while also taking into consideration public health and safety, ease and cost of implementation, and participation by various communities  In addition to disposal bins, DEA’s regulations describe two other options for the public to transfer controlled substances for the purpose of disposal: mail-back programs and take-back events  Law enforcement agencies may use all three methods of drug disposal without the need for authorization by DEA  The Disposal Act stipulates that the regulations cannot require an entity to participate in or establish any of the disposal options  To participate as authorized collectors of unused prescription drugs, eligible entities—retail pharmacies, hospitals/clinics with an on-site pharmacy, narcotic treatment programs, reverse distributors, distributors, and drug manufacturers that are already authorized by DEA to handle controlled substances—must modify their DEA registration  According to DEA officials, such modification is free and simple to do  Eligible retail pharmacies or hospitals/clinics that become authorized collectors are able to install and maintain disposal bins in long-term care facilities in addition to their own location  DEA’s website contains a public search feature to identify authorized collectors located near a specific zip code or address  Authorized collectors must install, manage, and maintain the disposal bins following DEA regulations  For example, under DEA’s regulations for maintaining the disposal bins, the disposal bin must be securely fastened to a permanent structure, securely locked, substantially constructed with a permanent outer container and removable inner liner, and have a small opening that allows contents to be added but not removed; the bin must also prominently display a sign indicating which types of substances are acceptable; users must dispose the unused prescriptions into the collection receptacle themselves without handing them to staff at the pharmacy; the disposal bin must typically be located in an area where an employee is present and near where controlled substances are stored, and the bin must be made inaccessible to the public when an employee is not present; the inner liner of the disposal bin must meet certain requirements, including being waterproof, tamper-evident, tear-resistant, opaque, and having the size and identification number clearly labeled; and the installation and removal of inner liners must be performed under the supervision of at least two employees of the authorized collector  DEA regulations also require that all controlled substances collected in the disposal bin’s inner liners must be destroyed in compliance with applicable federal, state, and local laws and rendered non-retrievable  According to DEA regulations, non-retrievable means that the physical and chemical conditions of the controlled substance must be permanently altered, thereby rendering the controlled substance unavailable and unusable for all practical purposes  Authorized collectors are permitted to destroy the inner liner on their premises if they have the capacity to do so  If not, the inner liners can be transported to a separate location to be destroyed  Typically, in this case, an authorized collector contracts with a reverse distributor to periodically remove, transport, and destroy the inner liners  DEA regulations require that two reverse distributor employees transport the inner liners directly to the disposal location without any unnecessary stops or stops of an extended duration  Authorized collectors must document certain information, including inner liner identification numbers and the dates that each liner is installed, removed, and transferred for destruction  The authorized collectors must maintain these records for 2 years  Figure 1 summarizes the steps involved in the collection of unused prescription drugs  About 3 percent of pharmacies and other eligible entities have voluntarily chosen to become DEA-authorized collectors of unused prescription drugs, according to DEA data  As of April 2017, 2,233 of the 89,550 (2 49 percent) of eligible entities—which are already authorized by DEA to handle controlled substances—had registered to use disposal bins to collect unused prescription drugs  Most of the authorized collectors— about 81 percent—were pharmacies, followed by hospitals or clinics  (See table 1)  Narcotic treatment programs, reverse distributors, and distributors made up approximately 1 percent of the authorized collectors  We also found that participation rates varied by state, though in most states relatively few of the eligible entities had registered with DEA to become authorized collectors of unused prescription drugs  In 44 states, less than 5 percent of the eligible entities had registered  (See figure 2 and appendix I for more information on the participation rates of authorized collectors in each state)  As of April 2017, Connecticut, Missouri, and Maine had the lowest participation rates, with 0 11, 0 22, and 0 70 percent, respectively  In contrast, North Dakota had the highest participation rate, with 32 0 percent of its pharmacies and other eligible entities registered to be authorized collectors  The state with next highest participation rate was Alaska, with 8 96 percent  In North Dakota, the state’s Board of Pharmacy provides funding for authorized collectors to purchase and maintain the disposal bins  According to a board official, the board decided to fund these activities to increase participation rates and plans to continue its funding indefinitely using revenue generated from prescription drug licensing fees it collects  In addition, our analysis shows that about 82 percent of all authorized collectors were located in urban areas as of April 2017  However, when comparing the entities registered to be authorized collectors with the total number of eligible entities, we found that a larger percentage of the eligible entities in rural areas became authorized collectors compared with those in urban areas (see table 2)  The data we obtained on the number of eligible and participating authorized collectors and their locations are the only available DEA data on the use of disposal bins to collect unused prescription drugs  According to DEA officials, the agency does not collect any other information on the use of disposal bins, such as the extent to which the bins are used, or the amount and types of prescription drugs deposited into the bins  For example, to minimize the risk of diversion, DEA regulations do not allow authorized collectors to open and inspect the inner liners of the disposal bins, so information on their contents cannot be collected  According to DEA officials, the agency is not responsible for collecting information on the amount and types of prescription drugs destroyed through the disposal bins  DEA officials told us that the agency views its responsibility solely as giving pharmacies and other eligible entities the opportunity to become authorized collectors  Though we do not have information on the extent to which individuals use DEA’s prescription drug disposal bins, we were able to estimate that as of April 2017, about half of the country’s population lived less than 5 miles away from a pharmacy or other DEA-authorized entity offering a prescription disposal bin  In 21 states, at least 50 percent of the state’s population lived within 5 miles of a prescription disposal bin  (See figure 3)  While close to half of the nation’s population lived less than 5 miles from a disposal bin as of April 2017, the availability of nearby disposal bins varied significantly for people depending on whether they lived in an urban or a rural area  Specifically, about 52 percent of the population in urban areas lived less than 5 miles away from a disposal bin, compared to about 13 percent of the population in rural areas  Furthermore, about 44 percent of the population in rural areas lived even further away—more than 30 miles away from a disposal bin  An exception to this is North Dakota, where about 86 percent of its urban population and about 64 percent of its rural population lived within 5 miles of a disposal bin  According to officials from the 11 stakeholder organizations we interviewed—which represent authorized collectors and long-term care facilities—several factors may explain why relatively few pharmacies and other eligible entities have chosen to become authorized collectors of unused prescription drugs  These factors include the associated costs of participating, uncertainty over proper implementation, and participation in other, similar efforts for disposing of unused prescription drugs  Costs: Stakeholders said that the costs associated with purchasing, installing, and managing the disposal bins is a factor that explains the relatively low rate of participation  One stakeholder told us that many eligible entities may decide that the benefit of participating does not outweigh the costs associated with doing so  Specifically, stakeholders told us that the major costs associated with participating include the one-time cost of purchasing and installing a disposal bin; the ongoing costs to train personnel to manage the bins; and the cost of contracting with a reverse distributor to periodically dispose of the bin’s inner liner and contents  Stakeholders gave varying examples of the specific costs associated with these investments  For example, one stakeholder estimated the yearly costs of maintaining a disposal bin ranged from $500 to $600 per location; another stakeholder said that the cost is thousands of dollars per location per year, but did not provide a specific estimate  These stakeholders added that costs can increase if the disposal bins fill more quickly and need to be emptied more often than expected  For their part, officials from the reverse distributor stakeholders we interviewed cited incinerating hazardous waste, the availability of incinerators, and the cost of personnel as factors that increase the cost of their services for authorized collectors  One reverse distributor stakeholder told us that there are not many incinerators available, requiring them to travel long distances to incinerate collected waste  The other reverse distributor stakeholder added that DEA’s requirement that a second employee be present during the transportation and disposal increases the cost of their services  While some stakeholders speculated that costs are a reason for low participation, a few stakeholders told us that the benefits are worth the costs  In fact, two stakeholders we spoke with told us that the benefit to the communities was so important that they decided to provide funding to retail pharmacies, alleviating an individual pharmacy’s concern about the cost of installing and maintaining the disposal bins  We found that as of April 2017, over a quarter of the 2,233 authorized collectors using disposal bins received external funding to pay for the costs associated with installing and maintaining the disposal bins  In addition, stakeholders told us that some localities have enacted laws known as extended producer responsibility ordinances, which require that pharmaceutical manufacturers pay for certain costs associated with drug disposal  When asked about the costs associated with operating disposal bins, DEA officials told us that addressing cost issues with eligible participants falls outside of their responsibilities  Uncertainty: Stakeholders also told us that uncertainty regarding how to comply with aspects of DEA’s regulations for prescription drug disposal bins affected their decisions to participate  One stakeholder added that many eligible entities decide not to participate because uncertainties over participation requirements could result in inadvertent non-compliance with DEA’s regulations  As an example of their uncertainty over some of the requirements governing the disposal bins, officials from both of the reverse distributor stakeholders we interviewed cited DEA’s non-retrievable standard for destruction of the inner liners of the bins  DEA requires that the method of destruction be sufficient to render all controlled substances non- retrievable, meaning that the physical and chemical conditions of the controlled substances must be permanently altered and unusable in order to prevent diversion for illicit purposes  Both reverse distributor stakeholders told us that they are uncertain about whether certain disposal methods meet this standard, and they said that the agency has not provided further guidance on how reverse distributors can meet this requirement  DEA officials told us that the agency responds to questions about whether a specific method of destruction meets the non-retrievable standard by telling the registrant to test the remnants after destruction, to see if any components of the controlled substance are still present  In its summary of the regulations implementing the Disposal Act, DEA stated that in order to allow for the development of various methods of destruction, the agency did not require a specific method of destruction as long as the desired result is achieved  However, DEA officials stated that to their knowledge, incineration is the only method known to meet the non-retrievable standard to date, but the officials hoped other methods will be developed in the future  When asked about the guidance they provide to authorized collectors of unused prescription drugs or those eligible to become authorized collectors, DEA officials told us that they post frequently-asked questions on their website, routinely answer questions from participants and others, and give training presentations at conferences that include information on the disposal bins  In our prior work, we found problems with DEA’s communication and guidance to stakeholders  In 2015, we recommended that DEA identify and implement cost-effective means for communicating regularly with pharmacies and other entities authorized to handle controlled substances  DEA agreed with the recommendation, and officials told us that, starting in August 2017, these entities can subscribe to DEA’s website to receive notifications when it is updated with new guidance  Stakeholders also noted that some DEA requirements related to disposal bins may conflict with other state and federal requirements governing the transportation and disposal of hazardous waste, which includes some controlled substances  For example, the two reverse distributor stakeholders told us that some incinerator permits issued by states require that hazardous waste be examined before incineration; however, DEA requirements do not allow the contents of the liners to be examined, even at the time of incineration  To address the incinerator permit requirements, one reverse distributor told us that they use the Environmental Protection Agency’s hazardous waste household exemption, which treats the liners as household waste and thereby allows incinerator facilities to destroy the liners without examining the contents or violating their state permit  In addition, some stakeholders raised concerns that DEA’s regulations may conflict with other federal regulations  For instance, one stakeholder noted that they recently learned that transporting the disposal bin’s inner liners could violate Department of Transportation regulations  DEA officials told us that they were aware of this, explaining that the conflict was between DEA’s requirement that controlled substances be transported in liners and the Department of Transportation’s requirement that this type of waste be transported in sturdy containers  According to DEA officials, this conflict has been resolved by the Department of Transportation allowing reverse distributors to place the liners inside sturdy containers kept on trucks  Participation in or Availability of Similar Efforts: Stakeholders said that some pharmacies and other eligible entities were already participating in other, similar efforts that allow for the safe disposal of controlled substances, and therefore they did not want to invest additional resources into participating as authorized collectors using disposal bins  For example, the Centers for Medicare & Medicaid Services has an established process that long-term care facilities use to dispose of their unused controlled substances  As a result, all of the long-term care stakeholders told us that long-term care facilities may choose not to partner with pharmacies interested in placing disposal bins within their facilities because it adds significant cost and effort without any additional benefit  Furthermore, pharmacy stakeholders noted that because of the availability of other prescription drug collection efforts in their communities, they did not think that maintaining a disposal bin at their locations was needed  For example, two of the stakeholders explained that local law enforcement precincts already had a similar type of disposal bin in place to collect unused prescription drugs  DEA officials told us that they were aware of other options for the public and entities such as long-term care facilities that are not registered as authorized collectors to dispose of controlled substances  The officials also indicated that the availability of disposal options at law enforcement agencies contributes to the low participation rates among pharmacies as authorized collectors of unused prescription drugs  We provided a draft of this report to the Department of Justice for comment  DEA, part of the Department of Justice, provided technical comments, which we incorporated as appropriate  As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date  At that time, we will send copies to the Attorney General of the United States and the Administrator of DEA  In addition, the report will be available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-7114 or draperd@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix II  In addition to the contact name above, Elizabeth H  Curda (Director), Will Simerl (Assistant Director), Kathryn Richter (Analyst-In-Charge), Nick Bartine, Giselle Hicks, Jessica Lin, and Emily Wilson made key contributions to this report  Also contributing were Muriel Brown and Krister Friday 

ground_truth: Medicare is a federal program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under the age of 65. Medicare, which consists of four parts (A-D), covers hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, and hospice care, among other services. Generally, individuals are eligible for Medicare if they or their spouse worked for at least 40 quarters in Medicare-covered employment, are 65 years old, and are a citizen or permanent resident of the United States. Individuals may also qualify for coverage if they are a younger person who cannot work because they have a medical condition that is expected to last at least one year or result in death, or have end-stage renal disease (permanent kidney failure requiring dialysis or transplant). The program is administered by the Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS) and by private entities that contract with CMS to provide claims processing, auditing, and quality oversight services. In FY2019, the program is expected to cover approximately 61 million persons (52 million aged and 9 million disabled) at a total cost of about $772 billion. Spending under the program (except for a portion of administrative costs) is considered mandatory spending and is not subject to the annual appropriations process. Services provided under Parts A and B (also referred to as "original" or "traditional" Medicare) are generally paid directly by the government on a "fee-for-service" basis, using different prospective payment systems or fee schedules. Under Parts C and D, private insurers are paid a monthly "capitated" amount to provide enrollees with required benefits. Medicare is required to pay for all covered services provided to eligible persons, so long as specific criteria are met. Since 1965, the Medicare program has undergone considerable change. For example, during the 111th Congress, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 and P.L. 111-152) made numerous changes to the Medicare program that modified provider reimbursements, provided incentives to increase the quality and efficiency of care, and enhanced certain Medicare benefits. In the 114th Congress, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10) changed the method for calculating updates to Medicare payment rates to physicians and altered how physicians and other practitioners will be paid in the future. Projections of future Medicare expenditures and funding indicate that the program will place increasing financial demands on the federal budget and on beneficiaries. For example, the Hospital Insurance (Part A) trust fund is projected to become insolvent in 2026. Additionally, although the Supplementary Medical Insurance (Parts B and D) trust fund is financed in large part through federal general revenues and cannot become insolvent, associated spending growth is expected to put increasing strains on the country's competing spending priorities. As such, Medicare is expected to be a high-priority issue in the current Congress, and Congress may consider a variety of Medicare reform options ranging from further modifications of provider payment mechanisms to redesigning the entire program. This report provides a general overview of the Medicare program including descriptions of the program's history, eligibility criteria, covered services, provider payment systems, and program administration and financing. A list of commonly used acronyms, as well as information on beneficiary cost sharing, may be found in the appendixes.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: Coal accounted for 17 percent of energy production (30 percent of electricity production) in the United States in 2016  To generate this energy, approximately 730 million tons of coal were mined domestically in 2016, according to the U S  Energy Information Administration, approximately 40 percent of which was produced on federal lands  As of 2016, state regulatory authorities and OSMRE had received financial assurances associated with coal mines that had been permitted to disturb approximately 2 3 million acres, according to OSMRE data  Coal is mined in two different ways: surface mining and underground mining  In surface coal mining, before the underlying coal can be extracted, the land is cleared of forests and other vegetation and topsoil is removed and stored for later use  Explosives or other techniques are then used to break up the overlying solid rock, creating dislodged earth, rock, and other materials known as spoil  Surface coal mines can cover an area of many square miles  In underground coal mining, tunnels are dug to access coal that is too deep for surface mining methods  In some cases, underground coal mines are designed to leave sufficient coal in the mine to support the overlying surface, and in other cases, they are designed to extract higher quantities of coal that results in subsidence of the overlying surface as mining progresses  In addition to disturbing the land surface, coal mining can affect water quality, according to the Environmental Protection Agency, the National Academies, and others  For example, mining can increase sediments in rivers or streams, which may negatively affect aquatic species  Moreover, mining can expose minerals and heavy metals to air and water, leading to a condition known as acid mine drainage, which can lead to long-term water pollution and harm some fish and wildlife species  Mining can also lower the water table or change surface drainage patterns  The surface effects of coal mining in the United States are regulated under SMCRA, which also created OSMRE to administer the act  SMCRA allows an individual state or Indian tribe to develop its own program to implement the act if the Secretary of the Interior finds that the program is in accordance with federal law  A state with an approved program is said to have “primacy” for that program  To obtain primacy, a state or Indian tribe submits to the Secretary of the Interior for approval a program that demonstrates that the state or tribe has the capability of carrying out the requirements of SMCRA  The program must demonstrate that the state or Indian tribe has, among other things, a law that provides for the regulation of the surface effects of coal mining and reclamation in accordance with the requirements of SMCRA, and a regulatory authority with sufficient personnel and funding to do so  Of the 25 states and four Indian tribes that OSMRE identified as having active coal mining in 2017, 23 states had primacy, and OSMRE manages the coal program in 2 states and for the four Indian tribes  SMCRA requires a mine operator to obtain a permit before starting to mine  The permit process requires operators to submit plans describing the extent of proposed mining operations and how and on what timeline the mine sites will be reclaimed  In general, an operator must reclaim the land to a use it was capable of supporting before mining or to an alternative postmining land use that OSMRE or the state regulatory authority deems higher or better than the premining land use  In reclaiming the mine site, operators must comply with regulatory standards that govern, among other things, how the reclaimed area is regraded, replanting of the site, and the quality of water flowing from the site  Specifically: Operators are generally required to return mine sites to their approximate original contour unless the operator receives a variance from the regulatory authority  To return to this contour, the surface configuration achieved by backfilling and grading of the mined area must closely resemble the general surface configuration of the land before mining and blend into and complement the drainage pattern of the surrounding terrain, with all highwalls and spoil piles eliminated  Operators are required to demonstrate successful revegetation of the mine site for 5 years (in locations that receive more than 26 inches of rain annually) or 10 years (in drier areas)  States have requirements for what vegetation may be planted depending on the approved postmining land use  For example, West Virginia’s regulations call for sites with a postmining land use of forest land to be planted with at least 500 woody plants per acre  The state specifies that at least five species of trees be used, including at least three of the species being higher value hardwoods, such as oak, ash, or maple  SMCRA requires that financial assurances be sufficient to ensure reclamation compliant with water quality standards, including those established by the Environmental Protection Agency or the states under the Clean Water Act  SMCRA’s implementing regulations also contain additional water protection requirements  For example, the regulations require that all surface mining and reclamation activities be conducted to minimize disturbance of the hydrologic balance within the permit and adjacent areas and to prevent material damage to the hydrologic balance outside the permit area  The federal government also enacted SMCRA, in part, to implement an abandoned mine land program to promote the reclamation of mined areas left without adequate reclamation prior to 1977, when SMCRA was enacted, and that continue to substantially degrade the quality of the environment, prevent or damage the beneficial use of land or water resources, or endanger the health or safety of the public  Specifically, Congress found that a substantial number of acres of land throughout the United States had been disturbed by surface and underground coal mining on which little or no reclamation was conducted  Further, it found that the impacts from these unreclaimed lands imposed social and economic costs on residents in nearby areas as well as impaired environmental quality  Since the abandoned mine land program was created, approximately $3 9 billion has been spent to reclaim abandoned mine lands, and there is at least $10 2 billion in remaining reclamation costs for coal mines abandoned prior to 1977, as of September 30, 2017, according to OSMRE  SMCRA generally requires operators to submit a financial assurance in an amount sufficient to ensure that adequate funds will be available for OSMRE or the state regulatory authority to complete the reclamation if the operator does not do so  The amount of financial assurance required is determined by the regulatory authority—OSMRE or the state—and is based on its calculation of the estimated cost to complete the reclamation plan it approved as part of the mining permit  Financial assurance amounts can be adjusted as the size of the permit area or the projected cost of reclamation changes  SMCRA also authorizes states to enact an OSMRE-approved alternative bonding system as long as the alternative achieves the same objectives  One kind of alternative bonding system is known as a bond pool  Under this type of system, the operator may post a financial assurance for an amount determined by multiplying the number of acres in the permit area by a per-acre assessment  The per-acre assessment may vary depending on the site-specific characteristics of the planned mining operation and the operator’s history of compliance with state regulations  However, the per-acre bond amount may be less than the estimated cost of reclamation  To supplement the per-acre bond, the operator generally must pay a fee for each ton of mined coal and may also be required to pay other types of fees  These funds are pooled and can be used to reclaim sites that participants in the alternative bonding system do not reclaim  Under OSMRE regulations, all alternative bonding systems must provide a substantial economic incentive for the operator to comply with reclamation requirements and must ensure that the regulatory authority has adequate resources to complete the reclamation plan for any sites that may be in default at any time  OSMRE regulations implementing SMCRA recognize three major types of financial assurances: surety bonds, collateral bonds, and self-bonds  A surety bond is a bond in which the operator pays a surety company to guarantee the operator’s obligation to reclaim the mine site  If the operator does not reclaim the site, the surety company must pay the bond amount to the regulatory authority, or the regulatory authority may allow the surety company to perform the reclamation instead of paying the bond amount  Collateral bonds include cash; certificates of deposit; liens on real estate; letters of credit; federal, state, or municipal bonds; and investment-grade rated securities deposited directly with the regulatory authority  A self-bond is a bond in which the operator promises to pay reclamation costs itself  Self-bonds are available only to operators with a history of financial solvency and continuous operation  To remain qualified for self-bonding, operators must, among other requirements, do one of the following: have an “A” or higher bond rating, maintain a net worth of at least $10 million, or possess fixed assets in the United States of at least $20 million  In addition, the total amount of self-bonds any single operator can provide shall not exceed 25 percent of its tangible net worth in the United States  Primacy states have the discretion on whether to accept self-bonds  State regulatory authorities and OSMRE reported holding a total of approximately $10 2 billion in surety bonds, collateral bonds, and self- bonds as financial assurances for coal mine reclamation in 2017  Of the total amount of financial assurances, approximately 76 percent ($7 8 billion) were in the form of surety bonds, 12 percent ($1 2 billion) in collateral bonds, and 12 percent ($1 2 billion) in self-bonds (see fig  1)  Twenty-four states reported holding surety bonds, 20 states reported holding collateral bonds, and 8 states reported holding self-bonds (see table 1)  In addition, OSMRE officials identified 6 states—Indiana, Kentucky, Maryland, Ohio, Virginia, and West Virginia—that have also established alternative bonding systems, such as bond pools  In a state with a bond pool, the operator may generally post a financial assurance for less than the full estimated cost of reclamation; in addition, the operator must pay into a bond pool  The pooled funds can be used to supplement forfeited financial assurances to reclaim sites that operators participating in the bond pool do not reclaim  States and OSMRE reported that operators forfeited more than 450 financial assurances for reclaiming coal mines between July 2007 and June 2016, with 13 of the 25 states reporting at least one forfeiture  States and OSMRE reported that the amount of financial assurance forfeited was sufficient to cover the cost of required reclamation in about 52 percent of the cases and did not cover the cost of required reclamation in about 22 percent of the cases  In the remainder of the cases (26 percent), the state or OSMRE reported that it had not yet determined if the financial assurance amount covered the reclamation costs that it was intended to cover  State and OSMRE officials said that it can take many years to fully reclaim a site and that it may take time for them to identify the extent of reclamation needed and to determine if the amount of financial assurance forfeited was sufficient to cover reclamation costs  State and OSMRE officials said there were several reasons why the amount of financial assurance obtained might not be sufficient to cover reclamation costs  For example, officials said the amount of financial assurance might not be sufficient if an operator mined in a manner inconsistent with the approved mining plan upon which the amount of financial assurance was calculated or if mining activity resulted in water pollution that was not considered when the amount of financial assurance was calculated  In cases where the amount of financial assurance does not cover the cost of reclamation, the operator remains responsible for reclaiming the mine site  However, OSMRE officials said that in those cases where the operator may be experiencing financial difficulties, it might be difficult for the states or OSMRE to compel the operator to complete the reclamation or provide additional funds to do so without having the operator go out of business or into bankruptcy  If the operator does not reclaim the site, the regulatory authority must use the forfeited financial assurance to do so  If the forfeited funds are not adequate, the site may not be fully reclaimed unless the regulatory authority either successfully sues the operator for more funds or provides any additional funds needed for reclamation  One other source of funds states can use to reclaim forfeited mines is civil penalties that the United States government collects from operators that violate conditions of their mining permits  OSMRE obligated approximately $2 8 million in civil penalties from fiscal years 2012 through 2017 for states to use to perform reclamation in cases where the financial assurance was not sufficient, according to agency officials  OSMRE has taken steps—including periodically reviewing financial assurance amounts, inspecting mine sites, and reviewing state programs that implement SMCRA—to oversee financial assurances and aspects of the mining and reclamation process that can affect whether the amount of financial assurances obtained will cover the cost of required reclamation  SMCRA requires OSMRE or the primacy state regulatory authority to calculate the amount of financial assurance required for each mine and to adjust the amount when the area requiring bond coverage increases or decreases or when the cost of future reclamation changes  OSMRE officials and state regulatory authority officials from four of the six states we interviewed said they generally review the amount of financial assurance at least every 2 1/2 years or when the mining plan has been modified in a way that may affect the amount of financial assurance required  Such periodic reviews are in part to help ensure that OSMRE and state regulatory authorities continue to hold an amount sufficient to complete required reclamation as conditions change  These reviews can lead to OSMRE or the state regulatory authority changing the amount of financial assurance required for a mine  For example: A state regulatory authority official in Utah said that the regulatory authority reviewed an existing mine permit in 2014, which led to it recalculating the estimated cost of reclamation on the basis of current costs  The state regulatory authority requested that the operator provide a financial assurance to cover the difference (approximately $195,000), in addition to the $445,000 financial assurance already in place  However, the official said that the operator—which had stopped mining the site in 2012 and filed for bankruptcy in 2013—did not provide the additional financial assurance amount  As a result, in 2017 the state regulatory authority collected the financial assurance that was in place (i e , the operator forfeited its assurance)  The official said in December 2017 that the state regulatory authority is determining the steps it will take to reclaim the site and expects that the forfeited amount will be sufficient to cover reclamation costs  OSMRE officials said that the agency reviewed a permit for a mine on Navajo tribal lands and determined that it needed to ask the operator to provide an additional financial assurance in the amount of $5 7 million  The increase was due to inflation and to include certain costs, such as the cost of mobilizing equipment needed for reclamation, that had inadvertently been excluded from the earlier calculation of the financial assurance required  The officials said that the operator provided the additional financial assurance amount  State regulatory authority officials in Wyoming said they review financial assurance amounts annually, and in 2017 they reduced the financial assurance for one mine by almost $35 million because of a substantial decline in fuel costs and the mine’s ability to share the cost of needed reclamation equipment with a neighboring mine  SMCRA requires OSMRE to make an average of at least one complete inspection per calendar quarter and one partial inspection per month for each active permit for which it is the regulatory authority to ensure that mines are in compliance with SMCRA and federal regulations  Complete inspections cover all inspection elements in OSMRE’s directive, while partial inspections may instead focus on issues that most frequently result in violations or a specific topic identified for oversight, according to OSMRE officials  In addition, OSMRE’s directive instructs the agency to inspect a sample of mines annually in states that have primacy to monitor and evaluate approved state programs’ compliance with SMCRA  The total number of inspections OSMRE is directed to conduct in primacy states is based on the number of inspectable units in each state  Complete inspections are to be done on 33 percent of those sites selected for inspection  Overall, OSMRE completed more inspections in primacy states than directed each year for evaluation years 2013 through 2016, according to agency data  For example, in evaluation year 2016, OSMRE’s directive called for it to conduct 1,225 inspections and OSMRE completed 1,388  As part of a complete inspection, OSMRE confirms that the operator is following the mining and reclamation plans to assure that the amount of financial assurance in place is adequate, according to OSMRE officials  If a violation is identified during an inspection, SMCRA requires OSMRE to issue a ten-day notice to the state regulatory authority or an immediate cessation order to the operator  If the violation increases the estimated cost of reclamation (e g , if the operator disturbed more land than it was approved for) or an adequate financial assurance had not been collected, OSMRE or the state regulatory authority can request that the operator provide an additional financial assurance  For example: OSMRE issued a ten-day notice to the Pennsylvania regulatory authority in 2015 because a water treatment system for a mine in that state did not have a financial assurance  According to OSMRE officials, the state regulatory authority took appropriate action to resolve the situation by issuing an order for the operator to post a financial assurance within 7 days


Report 2:  During an inspection of a mine in Tennessee, a nonprimacy state, OSMRE determined that the operator had not correctly reclaimed a portion of the mine because the slope of the regraded area was too steep, according to an OSMRE official  For the reclamation work that would be needed to regrade that area, OSMRE determined that the operator needed to provide an additional financial assurance of $272,000  Under SMCRA, OSMRE is required to evaluate each primacy state’s coal program annually to ensure that it complies with SMCRA  SMCRA includes a requirement that the regulatory authority secure necessary financial assurances to assure the reclamation of each permitted mine site  While OSMRE’s directive on oversight of state and tribal regulatory programs does not instruct the agency to review state regulatory authority calculations of financial assurance amounts, it instructs OSMRE to focus on the state programs’ success in achieving the overall purposes of SMCRA  For example, OSMRE, in conducting its oversight, is to evaluate the states’ effectiveness in successfully reclaiming lands affected by mining and in avoiding negative effects outside of areas authorized for mining activities  If OSMRE’s review of a state program identifies an issue that could result in the state not effectively implementing, administering, enforcing, or maintaining all or any portion of its approved coal program, OSMRE can work with the state regulatory authority to develop an action plan to correct the issue  If a state regulatory authority does not take the necessary corrective action, OSMRE may begin the process of withdrawing approval for a part or all of the state’s primacy  In addition to annually evaluating state programs, OSMRE can conduct national or regional reviews on specific topics  For example, OSMRE conducted a national review in 2010 that examined how state regulatory authorities calculated the required amount of financial assurances for coal mine reclamation  The review examined financial assurance practices in 23 states and reported that on the basis of the sample of mining permits reviewed, OSMRE was unable to determine if the amount of financial assurances was adequate for at least one of the permits it reviewed in 10 of the 23 states  Among the potential issues OSMRE identified were errors in the methods state regulatory authorities used to calculate financial assurance amounts and insufficient information in the reclamation plan upon which to calculate reclamation costs  OSMRE has worked with the 10 state regulatory authorities to address the financial assurance issues identified in the 2010 review  For example, OSMRE’s review found that the regulatory authority in Pennsylvania did not secure sufficient financial assurances to complete reclamation plans, in part because amounts were not calculated based on the actual sizes of the areas excavated for mining  In August 2014, OSMRE and Pennsylvania’s regulatory authority agreed to an action plan to ensure that the financial assurances for all active and new permits would be calculated using the actual sizes of the excavated areas  According to an OSMRE official, as of February 2017, the state regulatory authority had recalculated the financial assurance amount for all mines and had secured the additional financial assurances needed from operators of all but two of the mines  State officials said in October 2017 that they were continuing to work to obtain the assurances required for the two mines  OSMRE’s 2010 review also found that financial assurances in Kentucky were not always sufficient to cover required reclamation costs, in part because the method Kentucky’s regulatory authority used to calculate financial assurance amounts did not factor in all costs, such as the cost of moving equipment to and from the reclamation site  In February 2011, OSMRE and Kentucky’s regulatory authority signed an action plan identifying steps needed to address the issues OSMRE had identified  However, in May 2012, OSMRE determined that the state regulatory authority’s proposed changes to its method for calculating financial assurance amounts was an improvement but would not result in the authority obtaining sufficient funds to cover required reclamation  As a result, OSMRE initiated the process of revoking Kentucky’s primacy for this aspect of its program  In response, Kentucky implemented regulations to increase the minimum financial assurance required  The regulations also required the state regulatory authority to evaluate financial assurance amounts every 2 years to determine whether they need to be increased, among other things  The state regulatory authority sent a set of program amendments to OSMRE designed to address the identified deficiencies, some of which OSMRE is currently reviewing  OSMRE and state regulatory authorities face a number of challenges in managing financial assurances for coal mine reclamation—including those related to self-bonding, unanticipated reclamation costs, and the financial stability of surety companies—according to federal and selected state regulatory authority officials, representatives from organizations associated with the mining and financial assurance industries, and representatives from environmental nongovernmental organizations whom we interviewed  Challenges facing OSMRE and state regulatory authorities related to self- bonding include the following: Not knowing the complete financial health of an operator  The information federal regulations require operators to provide to regulatory authorities may provide an incomplete picture of the financial health of an operator, according to some parties we interviewed  For example, the financial information that operators provide reflects their past financial health, which may not reflect the operators’ current financial position, according to OSMRE’s response to the 2016 petition seeking revisions to its self-bonding regulations  In addition, if an operator applying for a self-bond is a subsidiary of another company, the operator is not required by regulation to submit information on the financial health of its parent company  While the operator applying may have sufficient financial assets to qualify for self-bonding, if its parent company experiences financial difficulties, the operator’s assets may be drawn on to meet the parent’s obligations, which could worsen the financial health of the self-bonded operator  In addition, according to OSMRE officials, even if OSMRE or a state regulatory authority were to become aware that an operator’s parent company was at financial risk, it would be difficult for the agency to deny the operator’s request for a self-bond because eligibility is specific to the entity applying for the self-bond, according to regulations  OSMRE could change its self-bonding regulations to require more information, according to OSMRE officials  However, the financial relationships between parent and subsidiary companies have become increasingly complex, making it difficult to ascertain an operator’s financial health on the basis of information reported in company financial and accounting documents, according to officials  When OSMRE first approved its self-bonding regulations in 1983, it noted that it was attempting to provide rules that would allow self-bonding without necessitating regulatory authorities to employ financial experts to determine which companies should be allowed to self-bond  However, according to OSMRE officials, financial expertise is now often needed to evaluate the current complex financial structures of large coal companies, which was not envisioned when the regulations were developed  Difficulty in determining whether an operator qualifies for self- bonding  The regulatory authority in a given state may not be aware that an operator had self-bonded in other states, making it difficult for the agency to determine whether the operator qualifies for self- bonding, according to some parties we interviewed  Operators are only allowed to self-bond for up to 25 percent of their net worth in the United States, according to regulations  Regulatory authority decisions on accepting self-bonds generally focus on assessing activities occurring in a specific state, not nationwide, according to the Interstate Mining Compact Commission  As a result, the state regulatory authority or OSMRE may know whether an operator has applied for self-bonds in other states that if approved would exceed 25 percent of its net worth in total  Difficulty in replacing existing self-bonds with other assurances if needed  OSMRE and state regulatory authorities may find it difficult to get operators to replace existing self-bonds with another type of financial assurance when needed, according to some parties we interviewed  If an operator no longer qualifies for self-bonding (e g , if it has declared bankruptcy), federal regulations require it to either replace self-bonds with other types of financial assurances or stop mining and reclaim the site  In either case, however, some parties noted that such actions could lead to a worsening of the operator’s financial condition, which could make it less likely that the operator will successfully reclaim the site  Some parties we interviewed have noted that regulatory authorities may be reluctant to direct the operator to replace a self-bond with another type of financial assurance and may instead allow the operator to keep mining so that any generated revenue could help the operator reclaim the site  For example, in 2015 the Wyoming regulatory authority determined that an operator no longer qualified for self-bonding and ordered it to replace a $411 million self-bond  However, the operator entered into bankruptcy without having replaced the self-bond  In this case, the state regulatory authority determined that reclamation was more likely to occur if the operator continued mining and allowed the operator to do so without a valid financial assurance  The operator replaced its self-bond as a part of its bankruptcy settlement approximately 17 months after the state regulatory authority’s order to replace the self-bond, according to OSMRE officials  However, if a self-bonded operator were to enter bankruptcy and did not secure a financial assurance to replace the self-bond or complete the required reclamation, the state regulatory authority would have to work through the bankruptcy proceedings to obtain funds for reclamation, according to OSMRE’s preamble to its 1983 self-bonding regulations  As a result, the state may recover only some, or possibly none, of the funds promised through the self- bond, and the cost of reclamation could fall on taxpayers  Difficulty in managing the risk associated with self-bonding  The risk associated with self-bonding is greater now than when the practice was first authorized under SMCRA, according to some parties we interviewed  According to SMCRA, the purpose of financial assurances is to ensure that regulatory authorities have sufficient funds to complete required reclamation if the operator does not do so  While SMCRA allows self-bonding in certain circumstances, when OSMRE first approved its self-bonding regulations, the agency did so noting that at the time there were companies financially sound enough that the probability of bankruptcy was small  Furthermore, the regulations stated that the intent was to avoid, to the extent reasonably possible, the acceptance of a self-bond from a company that would enter bankruptcy  However, as previously mentioned, three of the largest coal companies in the United States declared bankruptcy in 2015 and 2016, and these companies held approximately $2 billion in self-bonds at the time, according to an OSMRE August 2016 policy advisory, making it a very different risk landscape than originally envisioned  Following these bankruptcies—and recognizing that the coal industry was likely to continue to face economic challenges for several more years— OSMRE initiated steps in 2016 to reexamine the role of self-bonding for coal mine reclamation  Specifically, as previously mentioned, OSMRE issued a policy advisory in August 2016 noting that given these circumstances, state regulatory authorities should exercise their discretion under SMCRA and not accept new or additional self-bonds for any permit until coal production and consumption market conditions reach equilibrium  OSMRE has reported that it is not likely for that to occur until at least 2021  OSMRE also announced in September 2016 that the agency planned to examine changes to its bonding regulations that would, among other things, help ensure that reclamation is completed if a self-bonded operator does not do so  However, following a review of department actions that could affect domestic energy production, Interior announced in October 2017 that it was reconsidering the need for and scope of potential changes to its bonding regulations  OSMRE officials said that they did not have a timeline for finalizing a decision on potential changes in its bonding regulations  In addition, OSMRE rescinded its August 2016 policy advisory that states take steps to assess whether operators currently using self-bonds can still quality to do so and that states not accept any new self-bonds  Similar issues involving bankruptcies of hardrock mining operators led the Bureau of Land Management to implement regulations in 2001 eliminating the use of self-bonding for hardrock mining  In doing so, the Bureau of Land Management determined that a self-bond is less secure than other types of financial assurances, especially in cases where commodity prices fluctuate  The agency also noted that operators that would otherwise be eligible to self-bond should not have a significant problem obtaining another type of financial assurance  In our previous work examining other types of environmental cleanup, we found that the financial risk to the government and the amount of oversight needed for self-bonds are relatively high compared to other forms of financial assurances  Furthermore, we also previously reviewed federal financial assurance requirements for coal mining, hardrock mining, onshore oil and gas extraction, and wind and solar energy production and found that of these activities coal mining is the only one where self-bonding was allowed  Because SMCRA explicitly allows states to decide whether to accept self-bonds, eliminating the risk that self-bonding poses to the federal government and states would require that SMCRA be amended  Unanticipated reclamation costs, such as those related to long-term treatment for water pollution, may arise late in a mine’s projected lifespan, and the operator may not have the financial means to cover the additional costs, according to OSMRE officials  Under SMCRA, OSMRE and state regulatory authorities are not to approve a permit for a coal mine if the regulatory authority expects the mine to result in long-term water pollution  As a result, since long-term water pollution is not anticipated to occur, the cost of addressing it would not be included in the initial financial assurance that the operator provides  If the regulatory authority later determines that long-term water treatment is needed, the regulatory authority must adjust the amount of financial assurance that the operator is required to provide  Some parties we interviewed have also noted that the costs and duration of long-term water treatment are not well defined and that surety bonds are not well-suited to provide assurance for such indefinite long-term costs  For example, according to the Interstate Mining Compact Commission, surety bonds are designed for shorter-term, defined obligations that have a high certainty for bond release following the completion of reclamation  To help address this challenge, some states have established, or allowed operators to establish, trust funds to help cover such unanticipated reclamation costs  For example, West Virginia established a fund, primarily supported through a tax on the amount of coal mined, to operate water treatment systems on forfeited sites  West Virginia’s regulatory authority is also working to evaluate permits for sites with water pollution to estimate water treatment costs within the state more precisely  Similarly, Pennsylvania allows operators to establish trust funds that are maintained by foundations and monitored by the state regulatory authority and are intended to ensure that there are sufficient funds to cover the costs of long-term water treatment, according to state regulatory authority officials  In addition, the OSMRE-run coal program in Tennessee allows trust funds for water treatment, in part because an assurance system that provides an income stream may be better suited to ensuring the treatment of long-term water pollution than conventional financial assurances, according to an OSMRE notice in the Federal Register  The utility of surety bonds in providing a financial assurance depends on the surety company’s ability to pay the amount pledged if the operator forfeits  OSMRE regulations require that a surety company be licensed to do business in the state where a mine is located  Some parties we interviewed noted that surety companies have declared bankruptcy or experienced financial difficulties in the past and could experience similar difficulties in the future  In addition, two states reported recent issues related to surety companies  For example, state regulatory authority officials in Alabama said that a surety company that had provided surety bonds totaling $760,000 for four mines in that state had gone bankrupt or was insolvent  As of May 2017, the state had collected only $127,000  Similarly, state regulatory authority officials in Alaska said that as of August 2017, the state had not collected any part of a forfeited $150,000 surety bond because the surety company had gone bankrupt  In our previous work examining other types of environmental cleanup, we have found that the financial risk to the government and the amount of oversight needed for surety bonds are relatively low to moderate compared to other forms of financial assurances  Billions have been spent to reclaim mines abandoned prior to the financial assurance requirements SMCRA put in place, and billions more remain  Under SMCRA, self-bonding is allowed for coal mine operators with a history of financial solvency and continuous operation—the only type of energy production or mineral extraction activity we have reviewed for which this is allowed  Bankruptcies of coal mine operators in 2015 and 2016 have highlighted risks that OSMRE and state regulatory authorities face in managing self-bonding—a risk that may be greater today than when self-bonding was first authorized under SMCRA  If a self-bonded operator were to enter bankruptcy and does not provide a different type of financial assurance or complete the required reclamation, the regulatory authority and the taxpayer potentially assume the risk of paying for the reclamation  Although OSMRE said it would examine changes to its self- bonding regulations following recent bankruptcies, Interior recently said that it is reconsidering the need to do so  Because SMCRA explicitly allows states to decide whether to accept self-bonds, eliminating the risk that self-bonding poses would require amending SMCRA  Until such a change is made, the government will remain potentially at financial risk for future reclamation costs resulting from coal mines with unsecured financial assurances  Congress should consider amending SMCRA to eliminate the use of self- bonding as a type of financial assurance for coal mine reclamation  (Matter for Consideration 1) We provided a draft of this report to the Department of the Interior for review and comment  Interior did not provide written comments on our findings and matter for congressional consideration  OSMRE provided technical comments in an e-mail, which we incorporated as appropriate  As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date  At that time, we will send copies to the appropriate congressional committees, the Secretary of the Interior, the Acting Director of OSMRE, and other interested parties  In addition, the report will be available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions, please contact Anne-Marie Fennell at (202) 512-3841 or fennella@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  Major contributors to this report are listed in appendix II  We selected a nonprobability sample of states to examine the Office of Surface Mining Reclamation and Enforcement’s (OSMRE) oversight activities in more detail  We generally selected states that produced the most coal in 2015 but also selected states in order to achieve some variation in factors such as geographic location, the dominant type of coal mining conducted (e g , surface or underground mining), whether the state had primacy, and whether the state allowed self-bonding (see table 2)  In addition to the contact named above, Elizabeth Erdmann (Assistant Director), Antoinette Capaccio, Jonathan Dent, Cynthia Grant, Marya Link, Anne Rhodes-Kline, Sheryl Stein, Guiovany Venegas, and Jack Wang made key contributions to this report 

ground_truth: In 2015, 3.8 million Americans reported misusing prescription drugs within the last month, and deaths from prescription opioids have more than quadrupled since 1999. About half of the people who reported misusing prescription drugs in 2015 received them from a friend or relative. One way to help prevent this kind of diversion and potential misuse is by providing secure and convenient ways to dispose of unused, unneeded, or expired prescription medications. The Secure and Responsible Drug Disposal Act of 2010 authorizes pharmacies and other entities already authorized by DEA to handle controlled substances to also collect unused prescription drugs for disposal. In 2014, DEA finalized regulations for the implementation of the Act, establishing a voluntary process for eligible entities to become authorized collectors of unused prescription drugs using disposal bins. GAO was asked to review participation among authorized collectors that maintain disposal bins. In this report GAO describes (1) participation rates among entities eligible to collect unused prescription drugs and (2) factors that affect participation. GAO analyzed the most currently available DEA data from April 2017 on entities eligible to participate and those participating as authorized collectors. GAO also conducted interviews with DEA officials and a nongeneralizable sample of 11 stakeholder organizations selected to illustrate different types of authorized collectors and long-term care facilities. GAO is not making any recommendations. DEA provided technical comments, which GAO incorporated as appropriate. GAO found that about 3 percent of pharmacies and other entities eligible to collect unused prescription drugs for disposal have volunteered to do so. The Drug Enforcement Administration (DEA) authorizes these entities to dispose of unused drugs to help reduce their potential misuse. Analysis of DEA data shows that as of April 2017, 2,233 of the 89,550 (2.49 percent) eligible entities—that is, certain entities already authorized by DEA to handle controlled substances—had registered with DEA to use disposal bins to collect unused prescription drugs. Most—about 81 percent—of the authorized collectors were pharmacies, followed by hospitals or clinics. GAO also found that participation rates varied by state, though in 44 states less than 5 percent of the state's pharmacies and other eligible entities had registered to become authorized collectors. Stakeholders cited several factors that may explain why relatively few pharmacies and other eligible entities have registered with DEA as authorized collectors of unused drugs. Most notably, stakeholders representing authorized collectors told GAO that because participation is voluntary, the cost associated with maintaining a disposal bin—which includes purchasing and installing the bin according to DEA requirements and paying for the destruction of its contents—is an important factor to weigh against potential benefits. DEA noted that availability of disposal by law enforcement agencies also contributes to low participation.