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



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



Report 2: Medicare pays for laboratory tests that are performed individually or in a group  For individual tests, laboratories submit claims to Medicare for each test they perform that is on the CLFS; tests are identified using a billing code  Prior to the implementation of PAMA in 2018, the payment rates on the CLFS were based on rates charged for laboratory tests in 1984 through 1985 adjusted for inflation  Additionally, 57 geographic jurisdictions had their own fee schedules for laboratory tests  CMS used the 57 separate fee schedules to calculate a national limitation amount, which served as the maximum payment for individual laboratory tests  Thus, the payment rate for an individual test was the lesser of the amount claimed by the laboratory, the local fee for a geographic area, or the national limitation amount for a particular test  Medicare pays bundled payment rates for certain laboratory tests that are performed as a group, called panel tests  Panel tests can be divided into two categories—those without billing codes and those with billing codes  Panel tests without billing codes are composed of at least 2 of 23 distinct component tests  Additionally, there are 7 specific combinations of these 23 component tests that are commonly used and have their own billing code  Prior to 2018, Medicare paid for both types of panel tests (those without or with a billing code) using a bundled rate based on the number of tests performed, with modest payment increases for each additional test conducted  For example, in 2017, Medicare paid $7 15 for panel tests with two component tests and $9 12 for panel tests with 3 component tests, with a maximum bundled payment rate of $16 64 for all 23 component tests  Prior to 2018, the Medicare Administrative Contractors would count the number of tests performed before determining the appropriate bundled payment rate  For those panel tests with a billing code, the payment rate was the same if laboratories used the associated billing code for the panel test or listed each of the component tests separately  After PAMA’s implementation in 2018, the 57 separate fee schedules for individual laboratory tests were replaced with a single national fee schedule  The payment rates for this single national fee schedule were based on private-payer rates for laboratory tests paid from January 1, 2016 through June 30, 2016  Specifically, the payment rate for an individual test was generally based on the median private-payer rates for a given test, weighted by test volume  Payment for panel tests also changed in 2018  For panel tests without billing codes, Medicare Administrative Contractors no longer counted the number of component tests performed to determine the bundled payment rate; instead, Medicare paid the separate rate for each component test in the panel  For panel tests with a billing code, the payment rate depended on how the laboratory submitted the claim  If a laboratory used the billing code associated with the panel test, Medicare paid the bundled payment rate for that billing code  If a laboratory submitted a claim for the panel test, but listed each of the component tests separately instead of using the panel test’s billing code, Medicare paid the individual payment rate for each component test  Table 1 below summarizes the changes to payment rates before and after 2018  Multiple types of laboratories receive payment under Medicare  The three laboratory types that received the most revenue from the CLFS in 2016 were independent laboratories, hospital-outreach laboratories, and physician-office laboratories  (See table 2 ) Estimates of the size of the total U S  laboratory market vary  For example, the Healthcare Fraud Prevention Partnership estimated that the laboratory industry received $87 billion in revenue in 2017, while another market report estimated the laboratory industry received $75 billion in revenue in 2016  Similar to Medicare, the three laboratory types that generally receive the most revenue overall are independent laboratories, hospital-outreach laboratories, and physician-office laboratories, when laboratory tests performed in hospital inpatient and outpatient settings were excluded  Estimates of revenue received by these laboratories also vary  For example, in recent years, estimates of the share of laboratory industry revenue generated by independent laboratories ranged from 37 percent to 54 percent  Additionally, estimates of revenue generated by hospital- outreach laboratories recently ranged from 21 to 35 percent, and physician-office laboratories ranged from 4 to 11 percent of total laboratory industry revenue  Private-payer rates for laboratory tests conducted by the three largest laboratory types generally vary by type and other characteristics, according to market reports and the laboratory industry officials we interviewed  Independent laboratories  These laboratories generally receive lower private-payer rates than other types of laboratories, according to industry officials we interviewed  Market reports we reviewed noted that about half of the independent laboratory market is dominated by two national laboratories and that these national laboratories provide more competitive pricing by performing a large volume of tests at one time  Medicare accounted for a smaller proportion of the revenue earned by these two national laboratories (12 percent), compared to other laboratories, according to another market report we reviewed  In contrast, a different market report noted that smaller, independent laboratories tend to earn more of their revenue from Medicare (34 percent)  Hospital-outreach laboratories  These hospital-affiliated laboratories typically receive relatively higher private-payer rates, according to industry officials we interviewed  Although hospital- outreach laboratories perform tests similar to other laboratories, they can obtain above-average payment rates by leveraging the market power of their affiliated hospital when negotiating rates with private payers, according to industry officials and market reports  Hospital-outreach laboratories generally receive about 25 to 30 percent of their revenue from the Medicare CLFS  Physician-office laboratories  Physician-office laboratories typically receive higher private-payer rates than independent laboratories, according to a recent analysis by a laboratory industry association  This industry association also noted that the cost structure to operate in a setting such as a physician-office laboratory is different than in large independent laboratories, as the physician-office laboratory is unable to conduct a large number of tests at one time  Officials from another industry association we interviewed said that payment rates for these laboratories are generally dependent on the size of the physician practice group  These same officials told us that larger physician groups (e g , 10 or more physicians) typically negotiate higher rates from private payers than smaller physician groups  Most physician-office laboratories received less than $25,000 in revenue per year from Medicare, according to CMS  Additionally, in 2013, the Department of Health and Human Services Office of Inspector General found that Medicare’s payment rates on the CLFS were higher than rates paid by some private health insurance plans  Specifically, it found that Medicare rates for laboratory tests were 18 percent to 30 percent higher than rates paid by certain insurers under health benefits plans for federal employees  Definition of Applicable Laboratories Required to Report Private-Payer Data to CMS CMS defined applicable laboratories as those meeting four criteria: (1) they met the definition of laboratory under regulations implementing the Clinical Laboratory Improvement Amendments of 1988; (2) they billed Medicare Part B under their own Medicare billing number, also called the national provider identifier; (3) more than 50 percent of their total Medicare revenues came from the Clinical Laboratory Fee Schedule (CLFS) and/or the Physician Fee Schedule; and (4) they received at least $12,500 in Medicare revenue from the CLFS from January 1, 2016, through June 30, 2016  CMS analyzed private-payer data it collected from about 2,000 laboratories to develop new payment rates for individual laboratory tests on the CLFS  PAMA defined laboratories required to report private-payer data, called applicable laboratories, as laboratories that meet certain criteria  (See sidebar ) Applicable laboratories with their own specific billing number, the NPI, submitted these data to CMS  If one organization operated multiple applicable laboratories, each with its own NPI, then the organization could report data to CMS for multiple applicable laboratories  CMS collected data from applicable laboratories on payments they received from private payers during the first half of 2016  Specifically, CMS collected data on (1) the unique billing code associated with a laboratory test; (2) the private-payer rate for each laboratory test for which final payment was made during the data collection period (January 1, 2016, through June 30, 2016); and (3) the volume of tests performed for each unique billing code at that private- payer rate  For the data CMS collected between January 1, 2017, and May 30, 2017, CMS relied on the entities reporting to CMS to attest to the completeness and accuracy of the data they submitted  CMS relied on each laboratory to identify whether or not it was an applicable laboratory and took steps to assist laboratories in meeting reporting requirements  According to CMS officials, they relied on laboratories to self-identify as applicable laboratories because they were unable to accurately identify the number of laboratories required to report  To assist laboratories, CMS issued multiple guidance documents to the industry outlining the criteria for being an applicable laboratory and describing the type of data CMS intended to collect  CMS also conducted educational calls when the proposed and final rules were issued and prior to the data collection period  CMS officials told us they conducted additional outreach activities, including holding conference calls with national laboratory associations and attending professional conferences  Officials said they used these outreach activities in addition to the guidance issued to inform laboratories of the reporting requirements for applicable laboratories, for example  In addition, CMS established a revenue threshold of $12,500 in an effort to reduce the reporting burden for entities that receive a relatively small amount of revenues under the CLFS  In its final rule, CMS noted that it expected that many of the laboratories that would be below this revenue threshold and, thus exempt from reporting data to CMS, would be physician-office laboratories  CMS also chose to use the NPI in its definition of applicable laboratory in the final rule to allow hospital- outreach laboratories that use their own NPI to submit data to the agency  In its proposed rule, CMS suggested using an alternative identification number to the NPI  However, according to the final rule, CMS chose to use the NPI in its definition of applicable laboratory to allow those hospital-outreach laboratories billing using their own NPI to submit private-payer data to the agency  According to CMS, at the end of the 5-month submission period, the agency had received data from approximately 2,000 applicable laboratories, representing a volume of almost 248 million laboratory tests; these data accounted for about $31 billion in revenue from private payers  CMS reported that the data it collected included private-payer rates for 96 percent of the 1,347 eligible billing codes on the CLFS  CMS used these data to calculate a median, private-payer rate, weighted by volume and phased in this change by limiting payment-rate reductions to 10 percent per year  Beginning in 2018, these new payment rates served as the single, national payment rate for individual laboratory tests  These payment rates were also used for the individual, component tests that make up panel tests and were used when laboratories billed Medicare for panel tests by listing the component tests separately  In general, the median payments rates, weighted for volume, that CMS calculated were lower than Medicare’s previous payment rates for most laboratory tests  According to our analysis, these median payment rates were lower than the corresponding 2017 CLFS national limitation amounts (the maximum that CMS would pay for laboratory tests) for approximately 88 percent of tests  Figure 1 below describes the percentage difference between these median payment rates and Medicare’s 2017 national limitation amounts for laboratory tests  The final payment rates that CMS calculated, which included the 10- percent, phased in, payment-rate reductions, will remain in effect until December 31, 2020; PAMA requires CMS to calculate new payment rates for the CLFS every 3 years  Reporting entities will next be required to submit data on private-payer rates to CMS in early 2020, for final payments made from January 1, 2019 through June 30, 2019  PAMA capped any reductions for the second 3-year cycle after implementation to a maximum of 15 percent per year  CMS did not collect private-payer data from all laboratories required to report this information and did not estimate how much data was not reported by these laboratories, according to agency officials  CMS relied on laboratories to determine whether they met data reporting requirements and submit data accordingly  CMS emphasized the importance of receiving data from all laboratories required to report by stating that it is critical that CMS collect complete data on private-payer rates in order to set accurate Medicare rates  However, agency officials told us that CMS did not receive data from all laboratories required to report  They also told us that CMS did not have the information available to estimate how much data was missing because not all laboratories reported or the extent to which the data collected were representative of all of the data that laboratories were required to report  Prior to collecting private-payer data, CMS estimated that laboratories subject to reporting requirements would receive more than 90 percent of CLFS expenditures to physician-office laboratories and independent laboratories  Specifically, based on its analysis of 2013 Medicare expenditures, CMS estimated that reporting requirements would apply to the laboratories that received 92 percent of CLFS payments to physician- office laboratories and 99 percent of CLFS payments to independent laboratories  After laboratories reported private-payer data, we analyzed the share of CLFS expenditures received by the laboratories that reported  Our analysis found that CMS collected data from laboratories that received the majority of CLFS payments to physician-office, independent, and other non-hospital laboratories in 2016  However, the laboratories that reported private-payer data received less than 70 percent of CLFS expenditures to physician-office, independent, and other non-hospital laboratories  Specifically, using Medicare claims data, we calculated that CMS collected data from laboratories that received 68 percent of 2016 CLFS payments to physician-office, independent, and other non-hospital laboratories  Although it did not collect complete data, CMS concluded that it collected sufficient private-payer data to set Medicare payment rates and that collecting more data from additional laboratories that were required to report would not significantly affect Medicare expenditures  This conclusion was based, in part, on a sensitivity analyses that CMS conducted of the effects that collecting certain types and amounts of additional data would have on weighted median private-payer rates and the effects those rates could have on Medicare payment rates and, thus, expenditures  Results from these analyses showed that Medicare expenditures based on the CLFS would have changed by 2 percent or less after collecting more data from the various types of laboratories  For example, CMS estimated that doubling the amount of private-payer data from physician-office laboratories would increase expenditures by 2 percent and collecting ten times as much data from hospital outreach laboratories would increase expenditures by 1 percent  (See fig  2 ) PAMA’s 10-percent limit on annual payment-rate reductions likely reduced the effect that incomplete private-payer data could have on the CLFS because this limit applied to most Medicare payment rates for laboratory tests  As demonstrated in figure 1, while 59 percent of tests had median private-payer rates that were at least 30 percent less than their respective 2017 national limitation amounts, CMS published Medicare rates for these tests for 2018 through 2020 that were reduced by only 10 percent per year as a result of this limit  For example, a hypothetical laboratory test with a 2017 CLFS national limitation amount of $10 00 and a median private-payer rate of $7 00 would result in CLFS rates of $9 00 in 2018, $8 10 in 2019, and $7 29 in 2020  Changes to median private-payer rates due to collecting more complete data or eliminating inaccurate data would have no effect on Medicare payment rates from 2018 through 2020 for this hypothetical test if they resulted in new median rates of $7 29 or less  Our analysis of the potential effects that collecting data from additional laboratories could have had on Medicare payment rates and expenditures found that the effect of CMS not collecting complete data would likely have been greater absent PAMA’s limits on annual reductions to Medicare payment rates  As a result, CMS may face challenges setting accurate Medicare rates if it does not collect complete data from all laboratories required to report in the future when PAMA allows for greater annual payment-rate reductions  To conduct this analysis, we used the private-payer data CMS collected to analyze the range of effects that collecting additional data could have on Medicare expenditures, assuming 2016 utilization rates remain constant  The extent of these effects depends on the amount of additional data CMS would need to collect to obtain complete data and whether the payment rates in these additional data would have been greater or less than the medians of the rates reported  For example, we estimated that if CMS needed to collect 20 percent more data for its collection to be complete, doing so could increase Medicare CLFS expenditures from 2018 through 2020 by as much as 3 percent or reduce them by as much as 3 percent depending on the payment rates in these additional data  However, if annual limits to Medicare payment-rate reductions were not applied, collecting these additional data could increase CLFS expenditures by as much as 9 percent or reduce them by as much as 9 percent  (See fig  3 and app  II for additional information about these estimates ) As demonstrated in figure 2, CMS did analyze how collecting certain types and amounts of data from additional laboratories would affect Medicare expenditures  However, without valid estimates of how much more data these additional laboratories were required to report and how much these data would change median payment rates, it remains unknown whether CMS’s analyses estimate the actual risk of setting Medicare payment rates that do not reflect private-payer rates from all applicable laboratories, as mandated by PAMA  CMS could have compared the data it collected with independent information on the payment rates laboratories were required to report, for example  The independent information could be estimated by auditing a random sample of laboratories or could be estimated using data from third-party vendors, if these vendors could supply relevant and reliable information  We found that CMS mitigated challenges to setting accurate Medicare payment rates by identifying, analyzing, and responding to potentially inaccurate private-payer data  CMS addressed potentially inaccurate private-payer data and other data that CMS determined did not meet reporting requirements  CMS removed or replaced data from four reporting entities that appeared to have or confirmed having reported revenue—which is the payment rate multiplied by the volume of tests paid at that rate—instead of payment rates  We estimated that if CMS had included these data that CLFS expenditures from 2018 through 2020 would have increased by 7 percent  CMS removed data it determined were reported in error including duplicate submissions and submissions with payment rates of $0 00  We estimated that removing these data will change CLFS expenditures from 2018 through 2020 by less than one percent  CMS identified four other types of potentially inaccurate data that it determined would not significantly impact Medicare payment rates or expenditures and did not exclude them from calculations of median private-payer rates  CMS considered the following potentially inaccurate data to have met its reporting requirements: 1  data from 57 entities that reported particularly high rates in at least 60 percent of their data, 2  data from 12 entities that reported particularly low rates in at least 50 percent of their data, 3  data with payment rates that were 10 times greater than the 2017 national limitation amounts or 10 times less than these amounts, and 4  data from laboratories that may not have met the $12,500 low- expenditure threshold or that reported data from a hospital NPI instead of a laboratory NPI
Report 2:  We found that the Coast Guard did not report the possible extent of these limitations with this performance goal in its fiscal year 2016 APR  For the other performance goal, the Coast Guard and DHS identified limitations with the number of detected incursions of foreign fishing vessels violating U S  waters, which is publicly reported in DHS’s APR  DHS’s review of this performance goal, reported in August 2015, raised questions about the validity of this goal—that is, whether it provides a useful measure of the Coast Guard’s performance  Specifically, the review noted that this performance goal is intended to measure a deterrence effect, but doing so is inherently difficult and may lead to contradictory interpretations of performance  In October 2017, we found that the data for this performance goal was sufficiently reliable for our reporting objective purposes, but questions remain about its validity  Reliable data is not a useful indication of performance unless it is also a valid representation of the goal being addressed  DHS officials reported that they did not include a discussion of the limitations for this performance goal in DHS’s fiscal year 2015 APR because the performance goal met the minimum threshold for data reliability despite the goal’s limitations  Coast Guard officials reported they were aware of these limitations and were working with DHS and OMB to improve the performance goal and implement corrective actions within 1 to 2 years  We recommended that the Coast Guard assess the extent to which documentation on performance data reliability contains appropriate information on known data reliability limitations and update these documents, as needed, based on the results of the assessment  The Coast Guard concurred and in February 2018, informed us that it had taken initial actions to address our recommendation  However, our preliminary review of these actions indicates that further action will be needed to fully address our recommendation, such as documenting and reporting the limitations of performance data  Our previous reports have identified areas in which the Coast Guard could improve the transparency of its data used for reporting on its mission performance and planning  Improve transparency of data on mission performance  In our October 2017 report on performance goals, we found that the Coast Guard’s APR has not been released publicly since 2011 due to a previous DHS leadership decision  Consequently, there has not been full visibility over performance across all of the Coast Guard’s missions  For example, one of the Coast Guard’s missions—defense readiness—has no goals that are publicly reported or shared with Congress, even though measures related to defense readiness are included in the Coast Guard’s APR  Coast Guard officials stated that they could see the benefit of publicly releasing their APR; however, DHS’s decision to limit the number of performance goals shared publicly has so far deterred the Coast Guard from pursuing the public release of its APR  DHS officials told us that the department is concerned about conflicting information that a component’s APR might present because it is vetted and produced separately from the DHS APR  However, the lack of transparency regarding performance data shared publicly and with Congress can result in an incomplete picture of mission performance and can limit effective oversight of Coast Guard operations  As a result, the public and Congress may be unable to determine the extent to which the Coast Guard is meeting its missions  We recommended that future Coast Guard APRs be available on the Coast Guard’s public website  The Coast Guard concurred with this recommendation and in February 2018, the Coast Guard informed us that it had completed its 2017 APR and are determining an appropriate approach for making it publicly available  Improve capital planning transparency  In our previously issued work on the Coast Guard’s annual 5-year capital investment plan (CIP), we found that the CIP does not consistently reflect current total cost estimates or the effects of tradeoffs that are made as part of the annual budget cycle  We made several recommendations in recent years intended to help the Coast Guard plan for future acquisitions and the difficult tradeoff decisions it will likely face  The Coast Guard generally concurred with these recommendations and is in various stages of implementation  For example, in 2017 we reported that we have made recommendations that DHS and the Coast Guard take several actions to gain an understanding of what the Coast Guard needs to meet its mission within its likely acquisition funding levels  These recommended actions included the Coast Guard: (1) conducting a comprehensive portfolio review across all its acquisitions to develop revised baselines that meet mission needs and reflect realistic funding scenarios and (2) developing a 20-year plan that identifies all necessary recapitalization efforts and any fiscal resources likely necessary to complete these efforts  For example, in 2014 we recommended the Coast Guard develop a 20-year fleet modernization plan that identifies all acquisitions needed to maintain the current level of service and the fiscal resources needed to acquire them  Without these efforts, the Coast Guard will continue, as it has in recent years, to plan its future acquisitions through the annual budgeting process, an approach that has led to delayed and reduced capabilities  In 2016, the Coast Guard revised its 2005 Mission Needs Statement, which provides a basic foundation for long-term investment planning that is to serve as the basis for evaluating the effectiveness of various fleet mixes, and inform the Coast Guard’s CIP  However, the 2016 Mission Needs Statement did not identify specific assets the Coast Guard needs to achieve its missions, nor did it update the annual hours it needs from each asset class to satisfactorily complete its missions  The Coast Guard has stated it is developing a 20-year Long-term Major Acquisition Plan, but it has not stated when the plan will be completed or what will be included in this plan, such as potential trade-offs that could be made across the Coast Guard’s portfolio of acquisitions to better meet mission needs within realistic funding levels  A long-term plan with a tradeoff analysis would facilitate a full understanding of the affordability challenges facing the Coast Guard while it builds the Offshore Patrol Cutter  DHS concurred with our 2014 recommendation, but it is unclear when the Coast Guard plans to complete the 20-year plan  Chairman Hunter, Ranking Member Garamendi, and members of the sub- committee, this completes my prepared statement  I would be happy to respond to any questions you may have at this time  If you or your staff members have any questions about this testimony, please contact Nathan Anderson at (202) 512-3841 or andersonn@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement  Other individuals making key contributions to this work, and the underlying reports on which it is based, include Dawn Hoff (Assistant Director); Andrew Curry (Analyst-in-Charge); Chuck Bausell; David Bieler; Richard Cederholm; John Crawford; Timothy J  DiNapoli; Michele Fejfar; Laurier R  Fish; Peter Haderlein; Eric Hauswirth; Laura Jezewski; Tracey King; Benjamin Licht; Marie A  Mak; Gary Malavenda; Diana Moldafsky; Heidi Nielson; Meg Ullengren; and Kayli Westling  This is a work of the U S  government and is not subject to copyright protection in the United States  The published product may be reproduced and distributed in its entirety without further permission from GAO  However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately 

ground_truth: The Trump Administration submitted to Congress its FY2019 budget request on February 12, 2018. The proposal included $41.86 billion for the Department of State, Foreign Operations, and Related Programs (SFOPS). Of that amount, $13.26 billion was for State Department operations, international broadcasting, and related agencies, and $28.60 billion for foreign operations. With the enactment of the Bipartisan Budget Act of 2018 (BBA; P.L. 115-123, February 9, 2018), which raised discretionary spending limits set by the Budget Control Act of 2011 (BCA; P.L. 112-25), the Administration's FY2019 foreign affairs funding request was entirely within enduring (base) funds; no Overseas Contingency Operations (OCO) funding was included the SFOPS request for the first time since FY2012. The FY2019 request would have represented a 23.3% decrease in SFOPS funding compared with FY2018 actual funding levels. The proposed State and related agency funding would have been 18.7% below FY2018 funding and the foreign operations funding would have been reduced by 25.2%. In the State and related programs budget, cuts were proposed for several accounts, including the diplomatic security accounts, contributions to international organizations, and contributions for international peacekeeping activities. In the foreign operations budget, cuts would have been applied across all accounts, with disproportionately large cuts proposed for humanitarian assistance, multilateral assistance, and funding for bilateral development programs focused on agriculture, education, and democracy promotion. Both the House and Senate appropriations committees approved FY2019 SFOPS bills that included funding at higher levels than the Administration requested and closer to FY2018 funding. H.R. 6385, approved by the House appropriations committee on June 20, 2018, would have funded SFOPS accounts at $54.177 billion. S. 3108, approved by the Senate appropriations committee on June 21, 2018, would have provided $54.602 billion for SFOPS accounts. FY2019 began with seven appropriations bills, including SFOPS, unfinished. Congress and the President approved continuing resolutions to fund the affected federal agencies through December 21, 2018 at the FY2018 level (P.L. 115-245, Division C and P.L. 115-298). After December 21, a partial shutdown of the government, including SFOPS funded agencies, occurred. On January 25, 2019, an agreement was reached to continue funding for SFOPS and other appropriations that had lapsed through February 15, at the FY2018 level (P.L. 116-5). On February 14, Congress passed, and the President later signed into law, a full year omnibus appropriation that included SFOPS funding (P.L. 116-6, Division F). P.L. 116-6 included a total of $54.377 billion for SFOPS accounts in FY2019, a 0.3% decrease from the FY2018 funding level and about 30% more than the Administration's request. Of that enacted total, $8.0 billion, or 14.7%, was designated as OCO. This report provides an account-by-account comparison of the FY2019 SFOPS request, House and Senate SFOPS legislation and the final FY2019 SFOPS appropriation to FY2018 funding in Appendix A. The International Affairs (function 150) budget in Appendix B provides a similar comparison. This report will not be further updated unless there is further congressional activity on FY2019 appropriations.

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



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

Report 1: On February 12, 2018, the Trump Administration submitted to Congress its FY2019 budget request, which included $41 86 billion of base (or enduring) funds for the Department of State, Foreign Operations, and Related Programs (SFOPS)  Of that amount, $13 26 billion would have been for State operations, international broadcasting, and related agencies and $28 60 billion for foreign operations  Comparing the request with the FY2018 actual SFOPS funding levels, the FY2019 request represented a 23 3% decrease in SFOPS funding  The proposed State and related agency funding would have been 18 7% below FY2018 funding levels, and the foreign operations funding would have been reduced by 25 2%  The Consolidated Appropriations Act, 2019 ( P L  116-6 ), signed into law on February 15, included a total of $54 377 billion for SFOPS accounts, a 0 3% decrease over the FY2018 funding level and about 30% more than the Administration's request  An account-by-account comparison of the SFOPS request with the FY2018 actual funding and FY2019 enacted appropriation is provided in Appendix A   International Affairs 150 function funding levels are detailed in Appendix B   A chart depicting the components of the SFOPS appropriations bill is in Appendix C   A glossary is provided in Appendix D   The appropriations process for FY2019 was shaped by the Bipartisan Budget Act of 2018 (BBA, H R  1892 , P L  115-123 ), which Congress passed on February 9, 2018  The act raised the overall revised discretionary spending limits set by the Budget Control Act of 2011 (BCA, P L  112-25 ) from $1 069 trillion for FY2017 to $1 208 trillion for FY2018 and to $1 244 trillion for FY2019  The BBA increased FY2019 defense funding levels by $85 billion, from $562 billion to $647 billion, and nondefense funding (including SFOPS) by $68 billion, from $529 billion to $597 billion  It also extended direct spending reductions from FY2021 in the original BCA through FY2027, as amended  Every year since FY2012, the Administration has distinguished SFOPS spending as either enduring (base) funds or those to support overseas contingency operations (OCO)  The OCO designation gained increased significance with enactment of the BCA, which specified that emergency or OCO funds do not count toward the spending limits established by the act  In early years of requesting OCO funds, the Obama Administration described OCO requests for "extraordinary, but temporary, costs of the Department of State and USAID in Iraq, Afghanistan, and Pakistan " Syria and other countries were added in later years, and the Trump Administration expanded OCO use in its first budget request in FY2018 to be available for longer-term, core activities and more countries  For FY2019, because the BBA raised spending limits, the Administration did not seek foreign affairs OCO funds, but requested the entire SFOPS budget within base funds  The final legislation, P L  116-6 , included $8 0 billion designated as OCO, or about 15% of enacted SFOPS funding  For funding trends, see Table 1   House and Senate SFOPS Legislation   FY2019 SFOPS legislation was introduced and approved by the full appropriations committee in each chamber  The House legislation, H R  6385 , included total SFOPS funding of $54 18 billion, 0 6% lower than FY2018 funding and 29% more than requested  The Senate proposal, S  3108 , would have provided $54 602 billion for SFOPS accounts, which is about 0 1% more than FY2018 funding and 30% more than requested  Neither bill received floor consideration in its respective chamber  Continuing Resolutions   On September 28, 2018, the President signed into law P L  115-245 , legislation which included the Continuing Appropriations Act, 2019 (CR) to continue funding for SFOPS accounts (among seven other appropriations that were not completed by the start of FY2019) at a prorated 2018 funding level through December 7, 2018  Funds designated as OCO in 2018 appropriations continued to be so designated for SFOPS in the CR  On December 3, 2018, Congress and the Administration extended funding through December 21, 2018 by enacting P L  115-298   After December 21, funding lapsed and a partial shutdown of the government occurred  On January 25, an agreement was reached to continue funding for SFOPS and other appropriations that had lapsed through February 15, at the FY2018 level ( P L  116-5 )  Enacted Legislation   On February 14 Congress passed, and the President later signed into law, a full year appropriation ( P L  116-6 , Division F) that included $54 38 billion in total SFOPS funding, a 0 3% decrease from the FY2018 funding level and about 30% more than the Administration's request  Of that total, $16 46 billion was for State Department operations and related agencies; $37 92 billion for foreign operations accounts  About 14 7%, or $8 0 billion, was designated as OCO  The State Department sought to cut funding for the Department of State and Related Agency category by 19% in FY2019 from FY2018 funding levels, to $13 26 billion  Conversely, both the House and Senate committee bills sought to maintain funding near previous fiscal year levels  The House committee bill would have increased funding in this category to $16 38 billion, or 0 4% above the FY2018 funding level  The Senate committee bill would have raised funding to $16 34 billion, around $40 million less than the House committee bill and approximately 0 1% more than the FY2018 funding level  Similar to the House and Senate committee bills, the FY2019 enacted appropriation ( P L  116-6 ) maintained funding for the State Department and Related Agency category slightly above FY2018 funding level  It provided $16 46 billion for this category, or 0 9% more than the F2018 level  The State Department's request sought to fund the entirety of this category through base (or enduring) funding  Following passage of the BBA and the resulting increase in discretionary spending cap levels for FY2018 and FY2019, the State Department moved the $3 69 billion request for Overseas Contingency Operations (OCO) in this category into the base budget request  Both the House and Senate committee bills sought to retain OCO funding within the Department of State and Related Agency category  The House committee bill would have provided $3 03 billion for OCO, or around 28% less than the FY2018 figure of $4 18 billion  The Senate committee bill would have provided $4 11 billion, which constituted about 2% less than FY2018 level  While the House committee bill would have afforded approximately $1 08 billion less for OCO than the Senate committee bill, the House committee bill provided around $1 12 billion more in enduring funding ($13 35 billion) than the Senate committee bill ($12 23 billion)  As with the House and Senate committee bills, P L  116-6 retained OCO funding for the Department of State and Related Agency category  The law provided a total of $4 37 billion for OCO, or 4 5% more than the FY2018 funding level  While the law provided more for OCO than either the Senate or House committee bills, it provided less in enduring funding ($12 09 billion)  Areas where the State Department's proposed cuts were focused included the diplomatic security accounts (the Worldwide Security Protection programmatic allocation within the Diplomatic Programs account and, separately, the Embassy Security, Construction, and Maintenance account), Contributions to International Organizations, and Contributions for International Peacekeeping Activities  In most cases, P L  116-6 , in a manner similar to the House and Senate committee bills, maintained annual budget authority for these accounts closer to the FY2018 funding levels than the Administration requested (see following sections for more detailed analysis)  The State Department also requested $246 2 million to implement the Leadership and Modernization Impact Initiative, which serves as the implementation phase of the department's "Redesign" efforts  While neither the House nor the Senate committee bill directly addressed the Impact Initiative, both included provisions enabling Congress to conduct oversight of any broader reorganization efforts at the department  The enacted legislation, P L  116-6 , took the same approach  Table 3 provides an overview of proposed changes to selected accounts within the State Department and Related Agency category  Under the State Department's budget request, the Diplomatic Programs account, which is the State Department's principal operating appropriation, would have declined by 11% from the FY2018 funding level of $8 82 billion, to $7 81 billion  According to the State Department, this account provides funding for "core people, infrastructure, security, and programs that facilitate productive and peaceful U S  relations" with foreign governments and international organizations  The House and Senate committee bills would have provided $8 80 billion and $8 92 billion, respectively, for Diplomatic Programs  For FY2019 enacted, P L  116-6 provided $9 17 billion, or 4% more than the FY2018 funding level and 17% more than the State Department's request  In Section 7081 of the Consolidated Appropriations Act, 2017 ( P L  115-31 ), Congress authorized the establishment of a new "Consular and Border Security Programs" (CBSP) account into which consular fees shall be deposited for the purposes of administering consular and border security programs  As a result, consular fees retained by the State Department to fund consular services will be credited to this new account  The State Department thus requested that Congress rename the former Diplomatic and Consular Programs account "Diplomatic Programs " However, because many consular fees are generated and retained by the State Department to administer consular programs, they do not comprise part of the department's annual appropriations and therefore do not count against overall funds appropriated annually for this account  The FY2019 enacted legislation, P L  116-6 , authorized the renaming of Diplomatic and Consular Programs to Diplomatic Programs, as did the House and Senate committee bills  The Diplomatic Programs account provides funds for a large share of U S  direct hire positions, including but not limited to State Department Foreign Service and Civil Service officers  Although the Trump Administration lifted the federal hiring freeze upon issuance of OMB M-17-22 on April 12, 2017, the State Department elected to keep its own hiring freeze in place  The Department of State released guidance in May 2018 lifting the hiring freeze and allowing the department to increase staffing to December 31, 2017 levels  Some Members of Congress expressed concern with the hiring freeze and the continued impacts of perceived personnel shortages at the Department of State  Both the House and Senate committee bills, and the committee reports accompanying those bills, included oversight provisions pertaining to State Department personnel levels  In this vein, Section 7073 of P L  116-6 required that no appropriated funds may be used to expand or reduce the size of the State Department and USAID's Civil Service, Foreign Service, eligible family member, and locally employed staff workforce from the on-board levels as of December 31, 2017 without consultation with the Committees on Appropriations and Foreign Relations of the Senate and the Committees on Appropriations and Foreign Affairs of the House of Representatives  Section 7073 also required the Secretary of State to submit reports to Congress, beginning 60 days after enactment of the law, and every 60 days thereafter until September 30, 2020, regarding the State Department's on-board personnel levels, hiring, and attrition of the Civil Service, Foreign Service, eligible family member, and locally employed staff workforce  These reports were also required to include a hiring plan for maintaining Foreign Service and Civil Service personnel numbers at not less than December 31, 2017, levels through FY2019  Among other personnel-related provisions, the joint explanatory statement accompanying this law noted that keeping personnel at these levels reflected "minimum necessary hiring" and encouraged the Secretary of State to work with Congress to increase hiring above such levels as appropriate  The Human Resources funding category within Diplomatic Programs provides funding for the Charles B  Rangel International Affairs and Thomas R  Pickering Foreign Affairs fellowship programs to promote greater diversity in the Foreign Service, as authorized by Section 47 of the State Department Basic Authorities Act (P L  84-885)  While Congress required the State Department to expand the number of fellows participating in the Rangel and Pickering programs by 10 apiece pursuant to Section 706 of the Department of State Authorities Act, 2017 ( P L  114-323 ), it has provided the department the discretion to fund these programs at levels it deems appropriate from monies appropriated for Human Resources  P L  116-6 , like the House and Senate committee bills, continued to provide such discretion to the State Department  In addition, the House committee report indicated support for department efforts to increase diversity in hiring, including through the Rangel and Pickering programs  It also encouraged the Secretary of State to explore more opportunities to further the goal of increasing workforce diversity  The Senate committee report recommended the continued expansion of the department's workforce diversity programs and directed that qualified graduates of the Rangel and Pickering programs shall be inducted into the Foreign Service  While neither P L  116-6 nor the accompanying joint explanatory statement addressed the Rangel and Pickering programs specifically or Foreign Service diversity more generally, the joint explanatory statement did not negate any of the language in the House and Senate committee reports  The Diplomatic Programs account also provides funding for a number of overseas programs  These include programs carried out by the Bureau of Conflict and Stabilization Operations and the department's regional bureaus  Activities of the department's Bureau of Medical Services, which is responsible for providing health care services to U S  government employees and their families assigned to overseas posts, are also funded through this account  Public diplomacy programs are among the overseas programs funded through Diplomatic Programs, which include the Global Engagement Center's (GEC's) countering state disinformation (CSD) program  According to the State Department, planned CSD activities, for which $20 million was requested, included "coordinating U S  government efforts in specific sub-regions; enhancing the capacity of local actors to build resilience against disinformation, including thwarting attacks on their IT systems; providing attribution of adversarial disinformation; and convening anti-disinformation practitioners, journalists, and other influencers to exchange best practices, build networks, and generate support for U S  efforts against disinformation " The House committee report registered concern regarding "foreign propaganda and disinformation that threatens United States national security, especially as carried out by China, Russia, and extremists groups" and asserted that the GEC "is expected to use a wide range of technologies and techniques to counter these campaigns," consistent with its statutory mandate  The Senate committee report recommended up to $75 4 million for the GEC, including up to $40 million for countering foreign state propaganda and disinformation  The joint explanatory statement accompanying for the FY2019-enacted legislation ( P L  116-6 ) included up to $55 4 million for the GEC and up to $20 million for CSD, a funding level for CSD identical to the department's request  Section 1284 of the National Defense Authorization Act for Fiscal Year 2019 ( P L  115-232 ) authorized the Department of Defense (DOD) to transfer not more than $60 million to the GEC for each of FY2019 and FY2020; DOD has previously transferred funds to the GEC under similar authorities  The State Department's FY2019 budget request sought to provide approximately $5 36 billion for the department's key embassy security accounts: $3 70 billion for the Worldwide Security Protection (WSP) programmatic allocation within the Diplomatic Programs account and $1 66 billion for the Embassy Security, Construction, and Maintenance (ESCM) account  The House committee bill would have provided $3 76 billion for WSP and $2 31 billion for ESCM, for a total funding level of $6 07 billion for these accounts  While the House bill would have funded the ESCM account exclusively through the base budget, it would have provided approximately $2 38 billion of overall funding for WSP through OCO  The Senate committee bill would have provided $3 82 billion for WSP and $1 92 billion for ESCM, for a total funding level of $5 74 billion  As with the House committee measure, the Senate committee bill would have funded the ESCM account with base budget funds only  For WSP, the Senate committee measure, like the House committee bill, would provide $2 38 billion of total account funds through OCO  The FY2019 enacted appropriations provided a total of $4 10 billion for WSP and $1 98 billion for ESCM, for a total funding level of $6 08 billion in budget authority for these accounts  Like the House and Senate committee bills, P L  116-6 funded ESCM exclusively through the base budget  Of the $4 10 billion provided for WSP in the law, $2 63 billion was done so through OCO  Had the Administration's request been enacted, it would have marked a decline of 2% for WSP and 28% for ESCM relative to the FY2018 figures of approximately $3 76 billion and $2 31 billion, respectively  The enacted legislation provided 9% more funding for WSP and 15% less for ESCM relative to FY2018 levels  Over the past several years, Congress has provided no-year appropriations for both WSP and ESCM, thereby authorizing the State Department to indefinitely retain appropriated funds beyond the fiscal year for which they were appropriated  As a result, the department has carried over large balances of unexpired, unobligated funds each year that it is authorized to obligate for programs within both accounts when it deems appropriate to do so  For example, for FY2018, the State Department carried over more than $7 6 billion in previously appropriated funds for ESCM  Both the House and Senate committee bills would have continued this practice with respect to WSP, and the Senate committee bill would have continued with respect to ESCM, as well  The House committee bill, if enacted, would have provided that all funds appropriated for ESCM remained available until September 30, 2023, rather than indefinitely  P L  116-6 provided no-year appropriations for WSP  For ESCM, the law stipulated that while funds for worldwide security upgrades and for purposes of acquisition and construction would remain available until expended, all other monies within this account (such as funds for preserving, maintaining, repairing, and planning for real property that State Department owns) would remain available only until September 30, 2023  The Worldwide Security Protection (WSP) allocation within the Diplomatic Programs account supports the Bureau of Diplomatic Security's (DS's) implementation of security programs located at over 275 overseas posts and 125 domestic offices of the State Department, including a worldwide guard force protecting overseas diplomatic posts, residences, and domestic offices  The State Department revisited previous assumptions for funding for the U S  security presence, which prompted it to ask for a rescission of $301 20 million for WSP OCO funds provided through the Further Continuing and Security Assistance Appropriations Act, 2017 (SAAA) ( P L  114-254 )  State Department officials noted that this funding was "intended to support diplomatic reengagements in Syria, Libya, and Yemen that were predicated on different security and political conditions " The department maintained that this proposed cancellation was based on evolving security and political conditions, and would not affect DS operations  While neither the House nor the Senate committee bill included a rescission, P L  116-6 provided for a rescission of $301 2 million of SAAA funds appropriated for Diplomatic Programs and designated them more generally for OCO  The Embassy Security, Construction, and Maintenance (ESCM) account funds the Bureau of Overseas Building Operations (OBO), which is responsible for providing U S  diplomatic and consular missions overseas with secure, safe, and functional facilities  The State Department's request included $869 54 million to provide its share of what it maintains is the $2 20 billion in annual funding that the Benghazi Accountability Review Board (ARB) recommended for the Capital Security Cost Sharing (CSCS) and Maintenance Cost Sharing (MCS) programs (the remainder of the funding is provided through consular fee revenues and contributions from other agencies)  These programs are used to fund the planning, design, and construction of new overseas posts and the maintenance of existing diplomatic facilities  The House committee report maintained that funds the House bill made available for ESCM would allow for the State Department's CSCS and MCS contributions, when combined with those from other agencies and consular fees, to exceed the ARB's annual recommended funding and support " the accelerated multi-year program to construct new secure replacement facilities for the most vulnerable embassies and consulates " The Senate committee bill stipulated that of funds made available for ESCM by it and prior acts making appropriations for SFOPS, not less than $1 02 billion shall be made available for the department's FY2019 CSCS and MCS contributions; the joint explanatory statement accompanying P L  116-6 indicated that Congress provided the same amount for this purpose for FY2019  In FY2019, OBO intended to fund four CSCS projects and one MCS project (see Table 4 )  The House committee report noted concern with the cost of new embassy and consulate compound projects, including ongoing projects in Beirut, Lebanon; Mexico City, Mexico; New Delhi, India; Erbil, Iraq; and Jakarta, Indonesia  Like Section 7004(h) of the House bill, as noted in the joint explanatory statement accompanying P L  116-6 , Congress mandated that the State Department provide more detailed reports regarding the costs of these projects than previously required  The State Department maintained that the "construction of a new U S  Embassy facility in Jerusalem is a high priority for the Administration     planning and interagency coordination for the Jerusalem Embassy move is ongoing and the department intends to realign CSCS project funding, as necessary, to execute this project " It later attached a timeframe to its intent, and the United States opened a new U S  embassy in Jerusalem in May 2018  This new embassy is located in a building that housed consular operations of the former U S  Consulate General in Jerusalem  The State Department has said that one of its next steps would be to construct an embassy annex to the current building, while also considering options for a permanent embassy over the long term  The department could choose to draw upon the unexpired, unobligated funds previously appropriated by Congress to the ESCM account for any construction expenses related to interim and permanent embassy facilities in Jerusalem  The Senate committee report requires the Secretary of State to "regularly inform the Committee" on the status of plans for a permanent New Embassy Compound in Jerusalem  Neither P L  116-6 nor its joint explanatory statement addresses this issue or negates the Senate committee report language  The State Department's FY2019 budget request included a combined request of $2 29 billion for the Contributions to International Organizations (CIO) and Contributions for International Peacekeeping Activities (CIPA) accounts, a 20% reduction from the FY2018 funding levels for these accounts  The CIO account is the source for funding for annual U S  assessed contributions to 45 international organizations, including the United Nations and its affiliated organizations and other international organizations, including the North Atlantic Treaty Organization (NATO)  The State Department's FY2019 request for CIO totaled approximately $1 10 billion  Following passage of the BBA, the department increased its request for CIO by approximately $100 million to fund a higher U S  contribution to the U N  regular budget at a rate of 20% of the overall U N  budget (the U S  assessment is 22%)  According to the department, U N  assessments of U S  contributions to the United Nations and its affiliated agencies exceeded the request for funds to pay these contributions  Therefore, if the department's request was enacted, the United States may have accumulated arrears to some organizations  The Contributions for International Peacekeeping Activities (CIPA) account provides U S  funding for U N  peacekeeping missions around the world that the State Department says "seek to maintain or restore international peace and security " The State Department's FY2019 request for CIPA totaled $1 20 billion  According to the department, this request "reflects the Administration's commitment to seek reduced costs by reevaluating the mandates, design, and implementation of peacekeeping missions and sharing the funding burden more fairly among U N  members " Under this request, no U S  contribution would have exceeded 25% of all assessed contributions for a single operation, which is the cap established in Section 404(b) of the Foreign Relations Authorization Act, Fiscal Years 1994 and 1995 ( P L  103-236 )  The State Department maintained that it expected that the "unfunded portion of U S  assessed expenses will be met through a combination of a reduction in the U S  assessed rate of contributions, reductions in the number of U N  peacekeeping missions, and significant reductions in the budgets of peacekeeping missions across the board " The department also requested that Congress provide two-year funds for CIPA (in other words, that Congress make funds available for both the fiscal year for which the funds were appropriated and the subsequent fiscal year) "due to the demonstrated unpredictability of the requirements in this account from year to year and the nature of multi-year operations that have mandates overlapping U S  fiscal years " The House committee bill would have provided $1 36 billion for CIO and $1 59 billion for CIPA, for a combined total of $2 95 billion for these accounts, which was 29% higher than the department's request and 4% higher than the FY2018 funding levels  The Senate committee bill would have provided $1 44 billion for CIO and $1 68 billion for CIPA, for a combined total of $3 12 billion  This figure was 36% higher than the department's request and 9% higher than the FY2018 level  The Senate committee bill included a provision not present in recent appropriations laws mandating that funds appropriated for CIO "are made available to pay not less than the full fiscal year 2019 United States assessment for each respective international organization " With regard to CIPA, both the House and Senate committee reports noted that appropriated monies were intended to support an assessed peacekeeping cost at the statutory level of 25% rather than the U N  assessed rate for the United States of 28 4%  Both committee reports called on the department to review peacekeeping missions for cost savings and work to renegotiate rates of assessment  For FY2019, P L  116-6 provided $1 36 billion for CIO and $1 55 billion for CIPA, for a total of $2 91 billion—slightly less than both the House and Senate committee bills  This figure was still 2% higher than the FY2018 figure and 27% higher than the department's request  While the law did not include the aforementioned Senate committee bill provision regarding payment of full U S  assessments for organizations funded through the CIO account, the law's joint explanatory statement noted that it assumed the payment of the full United States assessment for each relevant organization (with some exceptions, including organizations from which the United States has withdrawn) and required the Secretary of State to consult with the Committees on Appropriations with respect to any decision not to provide the full assessment for any such organization  With respect to CIPA, the joint explanatory statement noted that sufficient funds are provided for contributions to peacekeeping missions at the statutory level of 25%  The enacted legislation, like the House and Senate committee bills, provided a share of CIPA funds as two-year funds, as requested by the department  The State Department requested $246 2 million for FY2019 to implement the Leadership and Modernization Impact Initiative (hereinafter, the Impact Initiative)  The Impact Initiative constitutes the implementation phase of the State Department's "Redesign" project  Former Secretary Tillerson initiated the redesign in 2017 to implement Executive Order 13781 and Office of Management and Budget (OMB) Memorandum M-17-22, which aim to "improve the efficiency, effectiveness, and accountability of the executive branch " The Impact Initiative constitutes 16 keystone modernization projects in three focus areas: Modernizing Information Technology and Human Resources Operations; Modernizing Global Presence, and Creating and Implementing Policy; and Improving Operational Efficiencies (see Table 5 )  According to the State Department, these focus areas and modernization projects are derived from the results of the listening tour that former Secretary Tillerson launched in May 2017, which included interviews conducted with approximately 300 individuals that the department said comprised a representative cross-section of its broader workforce, and a survey completed by 35,000 department personnel that asked them to discuss the means they use to help complete the department's mission and obstacles they encounter in the process  Of the $246 2 million requested, $150 0 million was requested from the IT Central Fund (which is funded through funds appropriated by Congress to the Capital Investment Fund account and, separately, expedited passport fees) and $96 2 million from the D&CP account to implement modernization projects  Proceeds from the IT Central Fund were intended to implement projects focused on IT, including modernizing existing IT infrastructure, systems, and applications based on a roadmap to be created in FY2018 and centralizing management of all WiFi networks  Funds from the D&CP account were intended to implement modernization projects focusing on Human Resources issues, including leadership development, management services consolidation, data analytics, and workforce readiness initiatives  Like the House and the Senate committee bills and reports, neither P L  116-6 nor the joint explanatory statement accompanying the law specifically mentioned the Impact Initiative by name  However, both the law and the joint explanatory statement included provisions explicitly prohibiting the Department of State from using appropriated funds to implement a reorganization without prior consultation, notification, and reporting to Congress (for example, see Section 7073 of P L  116-6 )  Like the Senate committee bill, P L  116-6 stated that no funds appropriated for SFOPs may be used to "downsize, downgrade, consolidate, close, move, or relocate" the State Department's Bureau of Population, Refugees, and Migration  Foreign operations accounts, together with food aid appropriated through the Agriculture appropriations bill, constitute the foreign aid component of the international affairs budget  These accounts fund bilateral economic aid, humanitarian assistance, security assistance, multilateral aid, and export promotion programs  For FY2019, the Administration requested $28 60 billion for foreign aid programs within the international affairs (function 150) budget, about 28% less than the FY2018 actual funding level  None of the requested funds were designated as OCO  The FY2019 enacted appropriation provided $37 92 billion for foreign operations account, including $3 63 billion designated as OCO  Together with food aid accounts in the Agriculture appropriation, total enacted foreign aid within the international affairs budget was $39 85 billion, or 0 7% below the FY2018 actual funding level and 39% above the FY2019 request  Table 6 shows foreign aid funding by type for FY2017 and FY2018 actual, and the FY2019 request, committee-approved legislation, and enacted legislation  Account Mergers and Eliminations   The Administration aimed to simplify the foreign operations budget in part by channeling funds through fewer accounts and eliminating certain programs  These account mergers and eliminations were also proposed in the FY2018 budget request Under bilateral economic assistance, the Development Assistance (DA), Economic Support Fund (ESF), Assistance to Europe, Eurasia and Central Asia (AEECA) and Democracy Fund (DF) accounts were zero funded in the FY2019 request  Programs currently funded through these accounts would have been funded through a new Economic Support and Development Fund (ESDF) account  The proposed funding level for ESDF, $5 063 billion, was more than 36% below the FY2018 funding for the accounts it would have replaced  Fifteen countries that received DA, ESF, or AEECA in FY2017 would no longer have received funding from these accounts or from ESDF under the FY2019 request  Within multilateral assistance, the International Organizations & Programs (IO&P) account, which funds U S  voluntary contributions to many U N  entities, including UNICEF, U N  Development Program, and UN Women, would also have been zeroed out  Budget documents suggested that some unspecified activities currently funded through IO&P could have received funding through the ESDF or other accounts  Related to humanitarian assistance, the P L  480 Title II food aid account in the Agriculture appropriation would have been zero-funded and all food assistance would have been funded through the International Disaster Assistance (IDA) account, which would have nevertheless declined by about 17% from FY2018 actual funding (see " Humanitarian Assistance " section below)  The Emergency Refugee and Migration Assistance (ERMA) account would have been subsumed into the Migration and Refugee Assistance (MRA) account  Closeout of Inter-American Foundation and U S -Africa Development Foundation   The FY2019 request proposed to terminate the Inter-American Foundation (IAF) and the U S -Africa Development Foundation (ADF), independent entities that implement small U S  assistance grants, often in remote communities  The Administration proposed to consolidate all small grant programs aimed at reaching the poor under USAID, as a means of improving their integration with larger development programs and U S  foreign policy objectives, as well as improving efficiency  Funds were requested for IAF and ADF only for the purposes of an orderly closeout  Development Finance Institution   The Administration requested, for the first time in FY2019, the consolidation of the Overseas Private Investment Corporation (OPIC) and USAID's Development Credit Authority (DCA) into a new standalone Development Finance Institution (DFI)  The request called for $96 million for administrative expenses and $38 million for credit subsidies for DFI, but assumed that these expenses would be more than offset by collections, resulting in a net income of $460 million (based on OPIC's projected offsetting collections)  In addition, $56 million in ESDF funds would have been used to support DFI activities  The Administration sought congressional authority for the new standalone entity, which it described as a means of incentivizing private sector investment in development and improving the efficiency of U S  development finance programs  Both the House and Senate committee bills, as well as the enacted FY2019 appropriation, rejected these account changes, with the exception of the elimination of the ERMA account, which the House bill eliminated and the Senate and final bill funded with $1 million  All the FY2019 SFOPS legislation, including P L  116-6 , used the same bilateral account structure used for FY2018, not a new ESDF, and funded IAF and ADF at the FY2018 levels  Prior to enactment of the final FY2019 SFOPS appropriation, Congress passed the BUILD Act ( P L  115-254 ), which authorized the establishment of a new International Development Finance Corporation (IDFC), consistent with the Administration's DFI proposal  The IDFC is expected to become operational near the end of FY2019, and P L  116-6 made FY2019 appropriations for OPIC and DCA using the same account structure as in prior years, but authorized $5 million in the OPIC noncredit account to be used for transition costs  Top Country Recipients   Under the FY2019 request, top foreign assistance recipients would not have changed significantly, continuing to include strategic allies in the Middle East (Israel, Egypt, Jordan) and major global health and development partners in Africa (see Table 7 )  Israel would have seen an increase of $200 million from FY2017, reflecting a new 10-year security assistance Memorandum of Understanding  Zambia and Uganda would both have seen an 11% increase  All other top recipients would have seen reduced aid in FY2019 compared with FY2017 (comprehensive FY2018 country allocations were not yet available), though unallocated global health and humanitarian funds (added to the request after passage of the Bipartisan Budget Act of 2018) may have changed these totals  Figure 1 and Table 7 show the requested FY2019 foreign operations budget allocations by region and country  Under the FY2019 request, foreign assistance for every region would have been reduced compared to FY2018 funding  The Middle East and North Africa (MENA) region and Sub-Saharan Africa would continue to be the top regional recipients, together comprising nearly 80% of aid allocated by region ( Figure 2 )  Proposed cuts ranged from 61% in Europe and Eurasia to 2% in the MENA  Aid to Sub-Saharan Africa would have declined by 31%, aid to East Asia and Pacific by approximately half (51%), aid to South and Central Asia by about 4%, and aid to Western Hemisphere by 35%  The House bill ( H R  6385 ) and accompanying report did not provide comprehensive country and regional allocations, but did specify aid levels for some countries and regional programs, including Israel ($3 300 billion), Egypt ($1 457 billion), Jordan ($1 525 billion), Ukraine ($441 million), the U S  Strategy for Engagement in Central America ($595 million), and the Countering Russian Influence Funds ($250 million)  The Senate bill ( S  3108 ) and report specified aid allocations for several countries and regional programs, including Israel ($3 300 billion), Egypt ($1 082 billion), Jordan ($1 525 billion), Iraq ($429 million), West Bank & Gaza ($286 million), Afghanistan ($698 million), Pakistan ($271 million), Colombia ($391 million), Ukraine $426 million), U S  Strategy for Engagement in Central America ($515 million) and the Countering Russian Influence Fund ($300 million)  The enacted legislation, P L  116-6 , and the accompanying explanatory statement, specified FY2019 aid levels for several countries, including Israel ($3 300 billion), Egypt ($1 419 billion), Jordan ($1 525 billion), Iraq ($407 million), Colombia ($418 million), Mexico ($163 million), and Ukraine ($446 million), as well as for the U S  Strategy for engagement in Central America ($528 million) and the Countering Russian Influence Fund ($275 million)  The budget submission did not identify any new foreign assistance initiatives  The FY2019 request called for decreases in foreign aid funding generally while continuing to prioritize the aid sectors that have long made up the bulk of U S  foreign assistance: global health, humanitarian, and security assistance  The Administration requested $6 70 billion for global health programs in FY2019  This was a 23% reduction from the FY2018 funding level, yet global health programs would have increased slightly as a proportion of the foreign aid budget, from 22% of total aid in FY2018 to 23% in the FY2019 request, due to deeper proposed cuts elsewhere  HIV/AIDS programs, for which funding would have been cut about 27% from FY2018 actual levels, would have continued to make up the bulk (69%) of global health funding, as they have since the creation of the President's Emergency Plan for AIDS Relief (PEPFAR) in 2004  Family planning and reproductive health services (for which the Administration proposed no funding for FY2018) would have received $302 million, a 42% reduction from FY2018 funding  Assistance levels would have been reduced for every health sector compared to FY2018, including maternal and child health (-25%), tuberculosis (-31%), malaria (-11%), neglected tropical diseases (-25%), global health security (-0 1%, funded through a proposed repurposing of FY2015 Ebola emergency funds), and nutrition (-37%)  The House committee bill included $8 69 billion for global health programs, the same as FY2018 funding  While total funding would remain the same, the House proposal would have reduced funding for family planning and reproductive health by about 12% compared to FY2018, while slightly increasing funding for polio, nutrition, and maternal and child health, and more than doubling funding for global health security and emerging threats  The Senate committee bill would have funded global health programs $8 792 billion, 1 2% above the FY2018 level  No subsectors would have received reduced funding and allocations for tuberculosis, HIV/AIDS, family planning, nutrition, neglected tropical diseases and vulnerable children would all have increased slightly  While both bills included long-standing language preventing the use of appropriated funds to pay for abortions, the House bill, but not the Senate bill, also included a provision prohibiting aid to any foreign nongovernmental organizations that "promotes or performs" voluntary abortion, with some exceptions, regardless of the source of funding for such activities  P L  116-6 provides $8 84 billion for global health programs for FY2019, a 1 7% increase over FY2018 funding  Every health subsector was funded at the same or slightly higher level than in FY2018  The Trump Administration's FY2019 budget request for humanitarian assistance totaled $6 358 billion, which was roughly 32% less than FY2018 actual funding ($9 37 billion) and about 22% of the total FY2019 foreign aid request  The request included $2,800 4 million for the Migration and Refugee Assistance (MRA) account (-17% from FY2018) and $3,557 4 million for the International Disaster Assistance (IDA) account (-17%) ( Figure 2 )  As in its FY2018 request, the Administration proposed to eliminate the Food for Peace (P L  480, Title II) and Emergency Refugee and Migration Assistance (ERMA) accounts, asserting that the activities supported through these accounts can be more efficiently and effectively funded through the IDA and MRA accounts, respectively  (Congress did not adopt the proposed changes to Food for Peace for FY2018, appropriating $1 716 billion for the account through the Agriculture appropriation, but did appropriate only $1 million for ERMA, a 98% reduction from FY2017 funding ) The Administration also sought authority to transfer and merge IDA and MRA base funds (current authority only applies to OCO-designated funds)  The Administration described its IDA request as focused "on crises at the forefront of U S  security interests, such as Syria, Iraq, Yemen, Nigeria, Somalia, and South Sudan " The MRA request focused on "conflict displacement in Afghanistan, Burma, Iraq, Somalia, South Sudan, Syria and Yemen," as well as strengthening bilateral relationships with "key refugee hosting countries such as Kenya, Turkey, Jordan, Ethiopia and Bangladesh " Consistent with last year, the request suggested that the proposed funding reduction assumes that other donors will shoulder an increased share of the overall humanitarian assistance burden worldwide  The House committee bills proposed $9 145 billion for humanitarian assistance accounts, about 2% less than FY2018 funding  The total included $1 5 billion for Food for Peace from the Agriculture appropriation but would not have funded the ERMA account  The Senate committee bills proposed $9 534 billion for humanitarian assistance, about 2% more than FY2018 funding  The total included $1 716 billion for Food for Peace and $1 million for the ERMA account  Neither bill included language authorizing broad transfers and mergers between the IDA and MRA base funding account, though both bills include provisions allowing for the transfer and merger of funds from several accounts, including IDA and MRA, as an extraordinary measure in response to a severe international infectious disease outbreak  As in FY2018, Congress did not adopt the significant humanitarian aid changes proposed by the Administration  P L  116-6 provided a total of $9 534 billion for humanitarian assistance in FY2019, almost level with FY2018 funding (-0 5%), of which about 21% was designated as OCO  This total included $3 434 billion in MRA funds, $1 million for ERMA, and $4 385 billion for IDA in the SFOPS division of the bill, as well as $1 716 billion for Food for Peace in the Agriculture division  The FY2019 security assistance request within foreign operations accounts totaled $7 304 billion, a 19% reduction from the FY2018 actual funding level and about 26% of the total foreign aid request  Consistent with recent years, 63% of the entire security assistance request was for FMF aid to Israel and Egypt  However, six countries were identified in the request as joint Department of Defense (DOD) and State Department security sector assistance priorities: Philippines, Vietnam, Ukraine, Lebanon, Tunisia, and Colombia  The International Narcotics Control and Law Enforcement (INCLE) account would have been reduced by about 36% from FY2018 actual levels, Nonproliferation, Antiterrorism, Demining and Related (NADR) by 21%, and International Military Education and Training (IMET) by about 14%  In each of these cases, the Administration described the proposed reductions as concentrating resources where they offer the most value and U S  national security impact  As in the FY2018 request, the Peacekeeping Operations (PKO) account, which supports most non-U N  multilateral peacekeeping and regional stability operations, including U S  training and equipment for African militaries and funding for the U N  Support Office in Somalia (UNSOS), would have seen the biggest reduction (-46%) under the FY2019 request  This is because Administrations generally request UNSOS funds through the CIPA account, while Congress usually funds the office through the PKO account  The Foreign Military Financing (FMF) account would have been reduced by 13% compared to FY2018, with specific allocations for 11 countries and a proposed $75 million Global Fund to be allocated flexibly  This was a notable change from the FY2018 FMF request, in which funds were allocated to four countries and a larger global fund, and from FY2018-enacted funding, for which allocations were specified for more than 20 countries  The House committee bill would have provided $9 274 billion for security assistance, a 3% increase over FY2018 funding, with funding increases proposed for the INCLE (+7%) and FMF (+4%) accounts and a reduction proposed for the PKO account (-9%)  Consistent with the request, and in contrast to recent year appropriations, no security assistance funding in the House committee bill was designated as OCO  The Senate committee bill included $8 789 billion for security assistance programs, a 2 6% total decrease from FY2018 funding  The INCLE account would have increased by 2 6% while the FMF and PKO accounts would be reduced by 3% and 11%, respectively  About 16% of the security assistance funding in the Senate bill was designated as OCO  In the final FY2019 appropriation, P L  116-6 , security assistance funding totaled $9 153 billion, a 1 4% increase from FY2018  Of the total, $555 million within the PKO and FMF accounts (6% of total security funding) was designated as OCO  Funding provided for most accounts was similar to FY2018 levels, with the exception of INCLE, which increased by 9 4% in part to support increased efforts to address the flow of illegal opioids, and PKO, for which funding decreased by about 9 2%  Bilateral economic development assistance is the broad category that includes programs focused on education, agricultural development and food security, good governance and democracy promotion, microfinance, environmental management, and other sectors  While the majority of this aid is implemented by USAID, it also includes the programs carried out by the independent Millennium Challenge Corporation (MCC), Peace Corps, Inter-American Foundation and the U S -Africa Development Foundation  Excluding global health assistance, bilateral economic development assistance in the Administration's FY2019 request totaled $6 354 billion, a 33% reduction from FY2018 funding levels  Proposed FY2019 allocations for key sectors, compared with FY2018 levels prescribed in legislation, included the following: food security, $518 million (-48% from FY2018); democracy promotion programs, $1,235 million (-47% from FY2018); and education, $512 million (-51% from FY2018)  The Administration requested $800 million for MCC and $396 million for Peace Corps, representing cuts of 12% and 3%, respectively  As discussed above, the budget request also proposed to merge I-AF and USADF into USAID, and requested only small amounts of funding to close out their independent activities  The House committee bill would have provided $9 383 billion for economic development assistance and specified allocations for several development sectors, including education ($1 035 billion), conservation programs ($360 million), food security and agricultural development ($1 001 million), microenterprise and microfinance ($265 million), water and sanitation ($400 million) and democracy programs ($2 4 billion)  The Senate committee bill would have provided $9 764 billion for economic development activities and specifies allocations for education ($750 million), environment and renewable energy ($943 million), food security and agricultural development ($1 001 billion), small and micro credit ($265 million), water and sanitation ($435 million), and democracy programs ($2 4 billion), among others  Both the House and Senate bills would have funded the I-AF, USADF, Peace Corp, and MCC at the FY2018 funding level, and both bills explicitly rejected the Administration's proposal to merge I-AF and USADF into USAID  The enacted appropriation for FY2019, P L  116-6 , provided about $9 239 billion for nonhealth economic development aid  Minimum allocations specified for key sectors included $1 035 billion for education (basic and higher), $285 million for biodiversity conservation, $125 million for sustainable landscapes, $1 001 billion for food security and agricultural development, $265 million to support micro and small enterprises, $67 million to combat trafficking in persons, and $435 million for water and sanitation programs  The independent agencies were all funded at the same level as in FY2018  Appendix A  State Department, Foreign Operations, and Related Agencies Appropriations, by Account Appendix B  International Affairs Budget The International Affairs budget, or Function 150, includes funding that is not in the Department of State, Foreign Operations, and Related Programs appropriation: foreign food aid programs (P L  480 Title II Food for Peace and McGovern-Dole International Food for Education and Child Nutrition programs) are in the Agriculture Appropriations, and the Foreign Claim Settlement Commission and the International Trade Commission are in the Commerce, Justice, Science appropriations  In addition, the Department of State, Foreign Operations, and Related Programs appropriation measure includes funding for certain international commissions that are not part of the International Affairs Function 150 account  Appendix C  SFOPS Organizational Chart Appendix D  Glossary


Report 2:  We found that each of these four types of potentially inaccurate data would have changed estimated Medicare CLFS expenditures from 2018 through 2020 by 1 percent or less if CMS had instead excluded the data  To conduct this analysis, we recalculated Medicare rates after excluding each type of data and estimated Medicare expenditures assuming 2016 rates of utilization  Although weighted median private-payer rates were lower than Medicare’s 2017 national limitation amounts for 88 percent of tests, we estimated the total Medicare expenditures based on the 2018 CLFS would likely increase by 3 percent ($225 million overall) compared to 2016 expenditures, assuming test utilization remained at 2016 levels  This increase in estimated expenditures is due, in part, to CMS’s use of above-average payment rates as a baseline to calculate payment rates for those laboratory tests affected by PAMA’s annual payment-rate reduction limit of 10 percent  (See fig  4 ) When applying the 10-percent payment-rate reduction limit, CMS used as its starting point the 2017 national limitation amounts in order to set a single, national payment rate for each laboratory test  Thus, the Medicare payment rate for a test in 2018 could not be less than 90 percent of the test’s 2017 national limitation amount  However, prior to 2018, some payment rates were commonly lower than the national limitation amounts because they were based on the lesser of (1) the amount billed on claims, (2) the local fee for a geographic area, or (3) a national limitation amount, and because panel tests had different bundled payment rates  As a result, by reducing payment rates from national limitation amounts, CMS did not always reduce rates from what Medicare actually paid  Panel tests, in particular, frequently received bundled payment rates that differed substantially from national limitation amounts associated with their billing codes prior to 2018  We compared national limitation amounts, which represent maximum Medicare payment rates for tests, with the average amounts Medicare allowed for payment in 2016, which reflect actual Medicare payment rates  For example, figure 5 below shows that the 2017 national limitation amount for comprehensive metabolic panel tests ($14 49) was substantially higher than both the average amount Medicare allowed for payment in 2016 ($11 45) and the median payment rate laboratories reported receiving from private payers ($9 08)  As a result, using the 2017 national limitation amount as a basis for payment reductions caused Medicare’s payment rate to increase from an average allowed amount of $11 45 in 2016, to a payment rate of $13 04 in 2018, instead of decreasing towards a lower median private- payer rate of $9 08  By increasing average payment rates rather than phasing in reductions to rates, CMS’s implementation may lead to paying more than necessary for some tests  Federal standards for internal control for information and communications require agency management to use quality information to achieve its objectives  Basing reductions on national limitation amounts rather than more relevant information on how much Medicare actually paid—such as the average allowable amounts in 2016, for example—could result in Medicare paying more than necessary by $733 million from 2018 through 2020, according to our estimates  In implementing PAMA, CMS eliminated bundled rates for panel tests that lack billing codes and started paying separately for each component test instead  CMS also implemented the 2018 CLFS in a manner that could lead to unbundling payment rates for panel tests with billing codes  If payment rates for all panel tests were unbundled, we estimated that Medicare expenditures could increase by $218 million for panel tests that lack billing codes and by as much as $10 1 billion for panel tests with billing codes from 2018 through 2020  CMS also estimated that there could be significant risks of paying more than necessary associated with unbundling and has taken initial steps to monitor these risks and explore possible responses, but had not yet responded to these risks as of July 2018  CMS Unbundled Payment Rates for Panel Tests without Billing Codes Beginning in 2018, CMS no longer uses bundled payment rates for panel tests without billing codes and instead pays laboratories individual payments for each component test that comprises these panel tests  However, CMS staff and members of its advisory panel discussed concerns with this approach  At an advisory panel meeting in 2016, CMS staff relayed concerns from stakeholders that CMS would not be able to collect valid data on private-payer rates for these panel tests  According to agency staff, stakeholders had informed CMS that private payers commonly use bundled payment rates for these panel tests, but laboratories would only be able to report unbundled payment rates for individual component tests  We estimated that unbundling these payment rates would increase Medicare expenditures from 2018 through 2020 by $218 million in comparison to the estimated Medicare expenditures over the same time period based on Medicare’s 2016 utilization and allowable amounts  For example, under the 2016 CLFS, Medicare paid approximately 435,000 claims for panel tests that included the laboratory tests assay of creatinine (HCPCS code 82565) and assay of urea nitrogen (HCPCS code 84520) at an average bundled payment rate of $6 82  In contrast, under the 2018 CLFS, these two component tests are reimbursed individually at $6 33 and $4 88, respectively, or $11 21 combined—a 63 percent increase  Despite concerns about the validity of available private-payer data on component tests for panel tests without billing codes, CMS used these data to set payment rates for component tests  CMS officials told us that they stopped using bundled payment rates for these panel tests because it is not clear that CMS has the authority to combine the individual component tests into groups for bundled payment as it did before 2018 due to PAMA’s reference to payments for each test  However, in July 2018, CMS officials told us the agency was reviewing its authority regarding this issue  CMS officials told us they are exploring alternative approaches that could limit increases to Medicare expenditures but had not yet determined what additional legal authority would be needed, if any, and did not know when CMS would make this determination  Agency officials told us that CMS has taken initial steps to monitor unbundling and explore possible responses, including the following: Monitoring unbundling: CMS has begun monitoring changes in panel test utilization, payment rates, and expenditures associated with its implementation of PAMA, according to officials  For example, CMS officials told us that preliminary data indicated that Medicare payments for individual component tests of panel tests has increased substantially in 2018, but, as of July 2018, it was too early to draw conclusions from these data because laboratories have up to one year to submit claims for tests  Collecting input on alternatives: In 2016, a subcommittee of an advisory panel that CMS established reviewed Medicare’s use of bundled payment rates for panel tests and published different approaches for CMS to consider implementing in combination with other changes to implement PAMA  CMS’s Implementation of PAMA May Have Allowed Unbundling of Payment Rates for Panel Tests with Billing Codes Beginning in 2018, laboratories that submit claims for any of the seven panel tests with billing codes by using the billing codes for the individual component tests now receive the payment rate for each component test, rather than the bundled rate  Prior to 2018, laboratories could submit claims for these panel tests either by using the specific codes for panel tests or by billing separately for each of the component tests, and, regardless of how laboratories submitted claims, Medicare Administrative Contractors would pay bundled payment rates based on how many of the 23 component tests were conducted  However, CMS instructed Medicare Administrative Contractors to stop bundling payment rates for tests that are billed individually on claims rather than billed on claims using codes for panel tests, beginning in 2018  CMS did so because it was not clear that CMS had the authority to combine the individual component tests into groups for bundled payment as it did before 2018 due to PAMA’s reference to payments for individual tests, according to agency officials  This change could potentially have a large effect on Medicare spending  For example, if a laboratory submitted a claim individually for the 14 component tests that comprise a comprehensive metabolic panel it would receive a payment of $81 91, a 528 percent increase from the 2018 Medicare bundled payment rate of $13 04 for this panel test  (See fig  6 ) Improving how reductions to payment rates for panel tests are phased in could mitigate, but not completely counteract, the effect of unbundling these payment rates  For example, for the comprehensive metabolic panel test described in figure 6, basing maximum reductions on 2016 average allowable amounts would result in a 2018 Medicare bundled payment rate of $10 31 instead of $13 04 and individual payment rates for the 14 component tests that total $56 06—a 32 percent decrease from $81 91 that Medicare would otherwise pay  If the payment rate for each panel test with a billing code were unbundled, we estimated that Medicare expenditures for these tests from 2018 through 2020 could reach $13 5 billion, a $10 1 billion increase from the $3 3 billion we estimated Medicare would spend using the bundled payment rates in the CLFS  Similarly, prior to implementing PAMA, CMS estimated that Medicare expenditures to physician-office, independent, and other non-hospital laboratories could potentially increase as much as $2 5 billion in 2018, alone if it paid for the same number of panel tests with billing codes as it did in 2016 but paid for each component test individually  These estimates represent an upper limit on the increased expenditures that could occur if every laboratory stopped using panel test billing codes and instead used the billing codes for individual component tests  We do not know the extent to which laboratories will stop filing claims using panel test billing codes  CMS officials also told us that they were aware of the risks associated with paying for the individual component tests instead of the bundled payment rate for a panel test with a billing code  However, CMS guidance, which was effective in 2018, continued to allow laboratories to use the billing codes for individual component tests rather than the billing code for the panel  CMS officials explained that this was due to PAMA’s reference to payments for individual tests, similar to CMS’s decision to stop paying bundled rates for panel tests without billing codes  At the time we did our work, CMS had not implemented a response to these risks but had taken some initial steps to monitor unbundling and consider alternative approaches to Medicare payment rates for these tests  HHS provided additional information on planned activities to address these risks in its written comments on a draft of this report  (See app  III ) CMS collected data on private-payer rates from laboratories that were required to report these data, but not all laboratories complied with the reporting requirement, and the extent of noncompliance remains unclear  PAMA’s provision directing CMS to phase in payment-rate reductions to Medicare payment rates likely moderates the potential adverse effects of incomplete private-payer data  However, in the future, failing to collect complete data could substantially affect Medicare payment rates because private-payer rates alone will determine Medicare payment rates  In addition, we estimated that Medicare expenditures on laboratory tests will be $733 million higher from 2018 through 2020, because CMS started phasing in payment-rate reductions from national limitation amounts instead of more relevant data on actual payment rates, such as average allowable amounts  Finally, changes to payment rates, billing practices, and testing practices could increase Medicare expenditures by as much as $10 3 billion from 2018 through 2020, if CMS does not address the risks associated with unbundling payment rates for panel tests  Agency officials indicated that it was unclear if PAMA limited CMS’s ability to combine individual component tests into groups for bundled payment, and, as of July 2018, CMS was reviewing this matter but did not know when it would make a determination  We are making the following three recommendations to CMS: The Administrator of CMS should take steps to collect all of the data from all laboratories that are required to report  If only partial data can be collected, CMS should estimate how incomplete data would affect Medicare payment rates and address any significant challenges to setting accurate Medicare rates  (Recommendation 1) The Administrator of CMS should phase in payment-rate reductions that start from the actual payment rates Medicare paid prior to 2018 rather than the national limitation amounts  CMS should revise these rates as soon as practicable to prevent paying more than necessary  (Recommendation 2) The Administrator of CMS should use bundled rates for panel tests, consistent with its practice prior to 2018, rather than paying for them individually; if necessary, the Administrator of CMS should seek legislative authority to do so  (Recommendation 3) We provided a draft of this report to HHS for review and comment  HHs provided written comments, which are reproduced in appendix III  HHS also provided technical comments, which we incorporated as appropriate  HHS concurred with our first recommendation to take steps to collect all data from laboratories required to report and commented that it is evaluating ways to increase reporting  In particular, in a November 2018 final rule, HHS changed the definition of an applicable laboratory, which it expects will increase the number of laboratories required to report data on private-payer rates to the agency  HHS neither agreed nor disagreed with our second recommendation to phase in payment-rate reductions that start from the actual payment rates Medicare paid prior to 2018  HHS noted that any changes to the phasing in of payment-rate reductions would need to be implemented through rulemaking  We estimated that by using the national limitation amounts as a starting point for these reductions, Medicare expenditures would increase by $733 million from 2018 through 2020  For this reason, we continue to believe CMS should revise these rates as soon as practicable and through whatever mechanism CMS determines appropriate  HHS neither agreed nor disagreed with our third recommendation to use bundled rates for panel tests  However, HHS commented that it is taking steps to address this issue  More specifically, for panel tests with billing codes, HHS is working to implement an automated process to identify claims for panel tests that should receive bundled payments, similar to the process used to bundle payment rates for these panel tests prior to PAMA’s implementation and anticipates implementing this change by the summer of 2019  In addition, HHS posted guidance on November 14, 2018, stating that the panel tests with billing codes, laboratories should submit claims using the corresponding code rather than the codes for the separate component tests beginning in 2019  To reduce the potential of paying more than necessary, we believe it is important that CMS implement its proposed automated process to allow for these payments as soon as possible  In contrast, for panel tests without billing codes, HHS commented that it is continuing to review its authority and considering other approaches to payment for these panel tests, such as adding codes to the CLFS  We estimate that unbundling the payment for these panel tests could increase Medicare expenditures by $218 million from 2018 through 2020 compared to expenditures based on Medicare’s 2016 utilization, and the actual amount could be higher if utilization increases  For this reason, we believe CMS should implement bundled payment rates for these panel tests to avoid excess payments  We are sending copies of this report to the appropriate congressional committees and the Administrator of CMS  In addition, the report is 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 cosgrovej@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 IV  Appendix I: Table of Key Dates Related to Developing the New Payment Rates for the 2018 Clinical Laboratory Fee Schedule Event Centers for Medicare and Medicaid Services (CMS) issued the CLFS proposed rule  CMS issued responses to frequently asked questions regarding the CLFS proposed rule  CMS issued the CLFS final rule  CMS issued responses to frequently asked questions regarding the CLFS final rule  CMS held the joint Annual Laboratory Public Meeting and Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting  CMS issued laboratory billing codes subject to data collection and reporting  CMS issued guidance to laboratories for collecting and reporting data  CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting  CMS issued the CLFS data reporting template  CMS collected data on (1) the billing code associated with a laboratory test; (2) the private-payer rate for each laboratory test for which final payment was made during the data collection period (i e , January 1, 2016, through June 30, 2016); and (3) the volume of tests performed for each billing code at that private-payer rate  CMS issued additional guidance for laboratories as the data collection period began  CMS issued the CLFS fee-for-service data collection user’s manual  CMS issued revised guidance to laboratories for collecting and reporting data  CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting  CMS released the proposed CLFS rates  CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting  Deadline for stakeholders to submit comments on the proposed CLFS rates to CMS  CMS issued the final CLFS rates  New CLFS rates became effective  Table 4 below demonstrates the challenges the Centers for Medicare & Medicaid Services (CMS) faces in setting accurate Medicare payment rates to the extent it does not collect complete data from laboratories on private-payer rates  Specifically, the table shows the potential effect that collecting additional data for each laboratory test could have on Medicare expenditures and how this effect could vary depending on (1) the amount of additional data collected, (2) payment rates in the additional data, and (3) limits to annual reductions in Medicare payment rates  These limits are in place from 2018 through 2023 to phase in changes to payment rates  In addition to the contact named above, Martin T  Gahart, Assistant Director; Gay Hee Lee, Analyst-in-Charge; Kaitlin Farquharson, Sandra George, Dan Lee, Elizabeth T  Morrison, Laurie Pachter, Vikki Porter, and Russell Voth made key contributions to this report 

ground_truth: Medicare paid $7.1 billion for 433 million laboratory tests in 2017. These tests help health care providers prevent, diagnose, and treat diseases. PAMA included a provision for GAO to review CMS's implementation of new payment rates for these tests. This report addresses, among other objectives, (1) how CMS developed the new payment rates; (2) challenges CMS faced in setting accurate payment rates and what factors may have mitigated these challenges; and (3) the potential effect of the new payment rates on Medicare expenditures. GAO analyzed 2016 Medicare claims data (the most recent data available when GAO started its work and the year on which new payment rates were based) and private-payer data CMS collected. GAO also interviewed CMS and industry officials. The Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS) revised the Clinical Laboratory Fee Schedule (CLFS) for 2018, establishing new Medicare payment rates for laboratory services. Prior to 2018, these rates were based on historical laboratory fees and were typically higher than the rates paid by private payers. The Protecting Access to Medicare Act of 2014 (PAMA) required CMS to develop a national fee schedule for laboratory tests based on private-payer data. To revise the rates, CMS collected data on private-payer rates from approximately 2,000 laboratories and calculated median payment rates, weighted by volume. GAO found that the median private-payer rates were lower than Medicare's maximum payment rates in 2017 for 88 percent of tests. CMS is gradually phasing in reductions to Medicare payment rates, limited annually at 10 percent over a 3-year period (2018 through 2020), as outlined in PAMA. CMS relied on laboratories to determine whether they met data reporting requirements, but agency officials told GAO that CMS did not receive data from all laboratories required to report. CMS did not estimate the amount of data it should have received from laboratories that were required to report but did not. CMS took steps to exclude inaccurate private-payer data and estimated how collecting certain types and amounts of additional private-payer data could affect Medicare expenditures. However, it is not known whether CMS's estimates reflect the actual risk of incomplete data resulting in inaccurate Medicare payment rates. GAO found that PAMA's phased in reductions to new Medicare payment rates likely mitigated this risk of inaccurate Medicare payment rates from 2018 through 2020. However, GAO found that collecting incomplete data could have a larger effect on the accuracy of Medicare payment rates in future years when PAMA allows for greater payment-rate reductions. CMS's implementation of the new payment rates could lead Medicare to pay billions of dollars more than is necessary and result in CLFS expenditures increasing from what Medicare paid prior to 2018 for two reasons. First, CMS used the maximum Medicare payment rates in 2017 as a baseline to start the phase in of payment-rate reductions instead of using actual Medicare payment rates. This resulted in excess payments for some laboratory tests and, in some cases, higher payment rates than those Medicare previously paid, on average. GAO estimated that Medicare expenditures from 2018 through 2020 may be $733 million more than if CMS had phased in payment-rate reductions based on the average payment rates in 2016. Second, CMS stopped paying a bundled payment rate for certain panel tests (groups of laboratory tests generally performed together), as was its practice prior to 2018, because CMS had not yet clarified its authority to do so under PAMA, according to officials. CMS is currently reviewing whether it has the authority to bundle payment rates for panel tests to reflect the efficiency of conducting a group of tests. GAO estimated that if the payment rate for each panel test were unbundled, Medicare expenditures could increase by as much as $10.3 billion from 2018 through 2020 compared to estimated Medicare expenditures using lower bundled payment rates for panel tests. GAO recommends that the Administrator of CMS (1) collect complete private-payer data from all laboratories required to report or address the estimated effects of incomplete data, (2) phase in payment-rate reductions that start from the actual payment rates rather than the maximum payment rates Medicare paid prior to 2018, and (3) use bundled rates for panel tests. HHS concurred with GAO's first recommendation, neither agreed nor disagreed with the other two, and has since issued guidance to help address the third. GAO believes CMS should fully address these recommendations to prevent Medicare from paying more than is necessary.