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



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

Report 1: Because of technological advances in digitization and data processing, electronic forms of payment have become increasingly available, convenient, and cost efficient  Established technologies, such as credit and debit cards, have long been a popular payment option  In addition, new payment methods (e g , PayPal's Venmo app and Square's point-of-sale hardware, among others) use underlying traditional banking and payments systems to make electronic payments less expensive and more available to individuals and small businesses  Newer digital currencies, such as cryptocurrencies, offer alternative (though not yet widely adopted) options that have a high degree of independence from traditional systems  Although cash remains an important method of payment in the United States (see Figure 1 ), anecdotal reporting suggests that various electronic payment systems have become so effective and inexpensive relative to cash payments that some U S  businesses—even those at which sales generally have a low dollar value—are increasingly choosing not to accept cash  In some developed countries, such as Sweden, cash payments are becoming relatively scarce  In addition, a number of central banks worldwide are examining the possibility of issuing government-backed digital currencies that exist only electronically  These trends suggest that due to buyer or seller preference or government policy, the role of cash in the payment system may continue to decline, perhaps significantly, in coming years  Some observers have examined the consequences of an evolution away from cash  Proponents of reducing the use of physical currency (or even eliminating it all together and becoming a cashless society ) argue that it will generate important benefits, including potentially improved efficiency of the payment system, a reduction of crime, and less constrained monetary policy  Proponents of maintaining cash as a payment option argue that significant reductions in cash usage and acceptance would further marginalize people with limited access to the financial system, increase the financial system's vulnerability to cyberattack, and reduce personal privacy  Given developments and debate in this area, Congress may consider policy issues related to the declining use of cash relative to electronic forms of payment  This report is divided into two parts  The first part analyzes cash and noncash payment systems, and the second analyzes potential outcomes if cash were to be significantly displaced as a commonly accepted form of payment  Part I describes the characteristics of cash and the various electronic payment systems that could potentially supplant cash  The noncash payment systems include traditional electronic payment systems (such as credit cards or payment apps) and alternative electronic payment systems, focusing on private systems using distributed ledger technology (such as cryptocurrencies) and central bank digital currencies (which are only under consideration by central banks at this time)  Part I also examines the advantages and costs specific to each payment system and the potential obstacles to the adoption of alternative electronic payment systems  Part II of this report analyzes the potential implications of a reduced role of cash payments in the economy, including potential benefits, costs, and risks  The report also includes an Appendix that presents two international case studies of economies in which noncash payment systems rapidly expanded  This section provides analysis of cash, traditional noncash payment systems, and potential alternative payment systems  It describes the characteristics, presents usage data, and analyzes the advantages and costs of each system  It also includes a discussion on the potential decline in cash usage and a short inset on the legality of businesses' refusing to accept cash  How well something serves as money in a payment system depends on how well it serves as (1) a medium of exchange, (2) a unit of account, and (3) a store of value  To function as a medium of exchange , the thing must be tradable and agreed to have value  To function as a unit of account , the thing must act as a good measurement system  To function as a store of value , the thing must be able to purchase approximately the same value of goods and services at some future date as it can purchase now  Currently, cash continues to serve the three functions of money well as part of a robust, physical payment system  Physical currency can be carried easily in a pocket and thus is tradeable  Each unit of currency (e g , a dollar) is identical and can be divided into fractions (e g , cents) of the whole, making dollars effective units of account  A bill or coin, when well cared for, will not degrade substantively for years, meaning it can function as a store of value  In the United States, paper currency and coins are produced by the Bureau of Engraving and Printing (BEP) and the United States Mint, respectively, both of which are units within the Department of the Treasury (Treasury)  The Federal Reserve (the Fed) distributes the currency and coin to banks, savings associations, and credit unions upon request, and the banks in turn make the cash available to their customers  When a bank orders cash, the Fed deducts the amount from the bank's Fed account  The revenues and costs to the government from this system are examined in the " Cash Effects on Government " section below  Data suggests that the demand for cash in the United States has continued to grow despite the introduction of new payment services and systems  Fed data indicates that the amount of currency in circulation has increased steadily over at least the past 20 years (see Figure 2 )  As of December 31, 2018, there were more than 43 billion notes (more commonly called bills ) worth over $1 67 trillion in circulation  The Fed determines how many new notes "are needed to meet the public's demand [, which]…reflects the Board's assessment of the expected growth rates for payments of currency to and receipts of currency from circulation " This growth in demand is not wholly surprising, because demand for cash would be expected to grow as does the economy, the population, and price levels  In addition, the demand for cash is growing because certain people may be increasingly using it solely as a store of value or safe investment (imagine the proverbial risk-averse saver keeping money under the mattress), rather than to make purchases  In addition, there remains a high demand for U S  currency abroad, both as a store of value and medium of exchange  Some evidence suggests people are using cash for payments less often  For example, according to preliminary findings of a Fed survey, cash transactions in the United States fell from 40 7% of all transactions in 2012 to 32 5% in 2015  Taken together with data from the triennial Federal Reserve Payment S tudy , these survey results suggest the number of cash transactions during that time fell from roughly 84 8 billion per year to 69 4 billion  However, Fed economists have subsequently noted that significant changes in the survey methodology and unaccounted for effects from economic conditions means the eight-point decline in the share of transactions "almost surely does not accurately reflect actual changes in consumer preferences for cash " After making adjustments to account for these factors, those economists estimated the decline in the percentage of transactions that were in cash was roughly half of the initially estimated decline in the share of cash transactions  The most recent data indicates that Americans used cash for 31% of their transactions in 2016, with stronger cash preference for small, in-person transactions (60% of in-person transactions under $10)  One of the main benefits of cash is that it is a simple, easy, robust payment mechanism that requires no ancillary technologies  Payers and payees validate and settle transactions simply by physically exchanging the currency; the consumer needs no magnetic-stripe card or mobile device, and the seller does not need a card-reading machine or other payment-receiving device  Relatedly, some observers assert cash provides a security against potential disruptions to electronic payment systems  For example, in the event of a significant cyberattack or extended power outage, cash could continue to serve the functions of money while electronic payment systems could not  Cash also acts as a safe asset in which to invest savings and its usage can involve a high degree of privacy, features that will be examined in more detail in the " Potential Costs and Risks of a Reduced Role for Cash " section below  In addition, holding cash might impart other psychological benefits to a consumer, such as feelings of greater control over budgeting and associations with wealth  Using and accepting cash involves certain costs to consumers and businesses  For example, consumers may have to pay fees to withdraw cash from automatic teller machines (ATMs)  Banks with more than $1 billion in assets are required to report their revenue from ATM fees, and a Congressional Research Service (CRS) analysis indicates those banks collected at least $1 9 billion in ATM fees in 2018  Other costs—including consumer losses through theft, misplacement, or accidental destruction of cash—are more difficult to estimate  Businesses must pay for cash management services, such as cash delivery with armored trucks (an industry with estimated annual U S  revenues of $2 8 billion) and security systems to dissuade thieves or robbers from attempting to steal cash kept on the retailer's premises  Despite these efforts, U S  businesses lose about $40 billion in employee cash thefts per year  Similar to consumer's costs, quantifying all the costs of cash to businesses presents challenges, as certain costs are not straightforward and easily measurable  For example, some portion of retail staff and managers' paid time is spent counting cash and reconciling tills  In addition to its impacts on consumers and businesses, cash directly affects government revenues through three main mechanisms: (1) seigniorage (i e , the "profit" the government makes by producing cash), (2) Federal Reserve remittances to the Treasury, and (3) tax evasion  Two of these mechanisms—seigniorage and remittances—increase government revenues  The third mechanism—tax evasion, facilitated by the anonymous and difficult-to-trace nature of cash transactions—decreases government revenue  Revenue Generating: Seignoriage   In general, the value of the physical currency produced by the government exceeds the cost incurred to produce it  For example, a $100 bill costs about 14 cents to print, generating revenues $99 86 greater than cost  The profit generated by this difference is called seigniorage, and this income would decrease if demand for cash were to fall  In FY2017, the U S  Mint generated $391 5 million in net income from circulating coins and the U S  Bureau of Engraving and Printing generated revenues $693 million greater than expenses  Revenue Generating: Fed Remittances   The second source of cash-generating revenue is remittances, which are transferred from the Fed to the U S  Treasury  Any income the Fed earns after expenses and dividends paid to member banks, it remits to the Treasury (in 2017, the amount was $80 6 billion), and hence becomes a source of revenue for the federal government  A significant expense for the Fed is the interest it pays on depository institutions' deposits held in their Fed accounts  Such payments accounted for $28 9 billion of the Fed's $35 4 billion total expenses in 2017  However, currency is a Fed liability on which it pays no interest  Recall that when a bank orders cash from the Fed, the Fed deducts the amount from the bank's account  Thus, the more cash that is in circulation, the less interest the Fed must pay, and the greater its remittances to Treasury  In January 2019, there was approximately $1 7 trillion of currency in circulation, and the Fed (as of this publication) paid an annual interest rate of 2 4% on reserve balances  By these measures, if all currency were instead bank reserve balances held at the Fed, it could increase Fed expenses (and thus reduce government revenues) by more than $40 billion a year  If interest rates on reserves (which change when the Fed alters monetary policy) rose or fell, then expenses would increase or decrease, respectively, in this scenario  Revenue Reducing: Tax Evasion   Because cash leaves no electronic record, wage earners and businesses are able to underreport (in general, illegally) how much cash they receive in order to reduce their tax payments  Thus, cash contributes to the tax gap —the difference between what the government is owed and what is actually paid  The most recent Internal Revenue Service estimate released in 2016 examined the tax gap for the years 2008-2010, and found that the gap due to underreporting averaged $387 billion a year  This estimate does not directly measure how much underreporting is facilitated by cash payments, and the figure for recent years is likely to be different  However, it provides a general context for how much tax revenue the government does not collect due to underreporting that is at least in part made possible by cash transactions  Businesses have long set conditions under which they would not accept cash  For example, certain businesses refuse to accept high-denomination bills  However, according to anecdotal reporting, retail businesses are increasingly deciding that the costs of transacting in cash are high enough that they would rather not accept it at all  Notably, this is occurring at businesses at which transactions are typically in-person for small dollar amounts—traditionally viewed as the type of transactions for which cash is the least costly option  If these stories are in fact indicative of a sustained trend, widespread non-acceptance of cash could have a variety of effects on consumers, businesses, as well as society and the economy at large  One particular effect that has drawn significant attention, as well as litigation, is that non-acceptance of cash could potentially marginalize those that have limited access to the financial system or mobile technological devices  This issue is examined in the " Lack of Financial Access for Certain Groups " section later in the report  Were cash to decline as a payment system, the most likely replacement—at least at the current time—would appear to be traditional noncash, electronic payment systems, such as debit cards, credit cards, or payment mobile apps  In traditional noncash payment systems like those that are prevalent today, participants hold their money in an account at a bank or other financial intermediary that maintains accurate ledgers of how much money each customer has available  To make a payment, the payer instructs (using a physical check or an electronic message) the intermediary to transfer money to the recipient's account  If the recipient holds an account at a different intermediary, those intermediaries will send messages to each other via messaging networks connecting them, instructing each to make the necessary changes to their ledgers  The intermediaries validate the transaction, ensure the payer has sufficient funds for the payment, deduct the appropriate amount from the payer's account, and add that amount to the payee's account  For example, in the United States, a retail consumer may initiate an electronic payment by swiping a debit card, at which time an electronic message is sent over a network instructing the purchaser's bank to send payment to the seller's bank  Those banks then make the appropriate changes to their account ledgers (possibly using the Fed's payment system) reflecting that value has been transferred from the purchaser's account to the seller's account  As with physical currency, digital entries in account ledgers can serve the three functions of money well for use in payments  Instructions to change entries in a ledger can easily be sent, making the values in the ledger easily tradable  Numerical entries can be denominated in identical and divisible units, making them good units of account  Because numbers in a ledger can remain unchanged during periods when no transactions are made, they can serve as a store of value  According to the most recent complete Federal Reserve Payment S tudy on noncash payments, the number of traditional noncash payments made in the U S  totaled more than 144 billion transactions with a value of almost $178 trillion in 2015  These included payments via debit cards (69 5 billion transactions worth $2 56 trillion), credit cards (33 8 billion transactions worth $3 16 trillion), automated clearing house payments (ACH; 23 5 billion transactions worth $26 83 trillion), and check payments (17 3 billion payments worth $26 83 trillion)  Between 2012 and 2015, the number of transactions of the three electronic systems, debit, credit, and ACH, grew at annual rates of 7 1%, 8 0%, and 4 9%, respectively  Their values grew by 6 8%, 7 4%, and 4 0%, respectively  Check payments declined by an annual rate of 4 4% by number and 0 5% by value  According to a recent supplement to that study, both the growth of electronic payments and the decline of check payments accelerated in 2017  Payment based on physically exchanging currency has some notable shortcomings that can be addressed by a payment system based on maintaining account ledgers  One is that physical currency requires both the payer and the payee to either (1) be physically near each other, allowing the physical currency to pass from the possession of the former into the possession of the latter; or (2) have a sufficient trust in each other that the payee believes an assurance that he or she will receive the currency later  Another shortcoming is that holders of physical currency may have little recourse if it is lost, stolen, or accidentally destroyed  If, instead, money is exchanged by making valid changes in ledgers maintained by trusted intermediaries, the exchange can be accomplished without the risk of lost, stolen, or damaged currency  In addition, noncash systems can make payments fast, easy, and convenient  Using them decreases the need for people to make regular estimations of how much cash they need to have on a particular day, the frequency of trips to the bank or ATM to get cash, and the amount of time waiting for cashiers to make change  Instead, a plastic card or an app on a mobile device can replace those activities with a card swipe or button push  As information technology has progressed, the convenience has increased and the option to use electronic payments has become nearly ubiquitous  Until fairly recently, it was not uncommon for a retail establishment to reject card payments  Now, services such as Venmo, Apple Pay, and Google Pay, and card-reading devices, such as those made by Square, have made electronic payment options increasingly available, even for individuals to accept electronic payments from other individuals  The previously mentioned anecdotal reporting suggests there is a growing number of establishments that only accept electronic payments  For these systems to work well, participants must trust that banks and other intermediaries are keeping accurate ledgers that are changed only for valid transfers  Otherwise, an individual's money could be lost or stolen if a bank records the account as having an inaccurately low amount or transfers value without his or her permission  Another advantage of systems using traditional intermediaries is that they have a number of features that generate a high degree of trust and accuracy  Banks and other intermediaries have both a market and governmental incentive to be accurate  A bank or financial intermediary that does not have a good reputation for protecting a customer's money and processing transactions accurately would likely lose customers  In addition, governments typically subject banks to laws and regulations designed in part to ensure that banks are well run and that the money they hold is safe  As such, banks take substantial measures to ensure security and accuracy  In addition, intermediaries generally are required to provide certain protections to consumers involved in electronic transactions, in part to protect them from losses resulting from unauthorized transfers  For example, the Electronic Fund Transfer Act ( P L  95-630 ) limits consumers' liability for unauthorized transfers made using their accounts  Similarly, the Fair Credit Billing Act ( P L  93-495 ) requires credit card companies to take certain steps to correct billing errors, including when the goods or services a consumer purchased are not delivered as agreed  Both laws also require financial institutions to make certain disclosures to consumers related to the costs and terms of using an institution's services  Significant costs and physical infrastructure underlie systems for electronic money transfers to ensure the systems' integrity, performance, and availability  For example, payment system providers operate and maintain robust digital networks to connect retail locations with banks  The Fed operates and maintains electronics networks to connect banks to itself and each other  These intermediaries store and protect huge amounts of data  Because these intermediaries are generally highly regulated, they incur regulatory compliance costs  Intermediaries recoup the costs associated with these systems and regulations and earn profits by charging fees directly when the system is used (such as the fees a merchant pays to have a card reading machine and "swipe fees" on each card transaction) or by charging fees for related services (such as checking account fees)  It is difficult to quantify how much traditional noncash payment systems cost and what portion of those costs is passed on to consumers and businesses  Performing a quantitative analysis is beyond the scope of this report  What bears mentioning here is that certain costs of traditional payment systems—and, in particular, the fees intermediaries in those systems charge—have at times been high enough to raise policymakers' concern and elicit policy responses  For example, in response to businesses' assertions that Visa and MasterCard had exercised market power in setting debit card swipe fees at unfairly high levels, Congress included Section 1075 in the Dodd-Frank Consumer Protection and Wall Street Reform Act (Dodd-Frank Act; P L  111-203 )—sometimes called the Durbin Amendment  Section 1075 directs the Fed to limit debit card swipe fees charged by banks with assets of more than $10 billion  In addition, studies on unbanked and underbanked populations cite the fees associated with traditional bank accounts, a portion of which may be the result of providing payment services, as a possible cause for those populations' limited interaction with the traditional banking system  Although electronic payment systems protect customers from physical theft and are subject to a complex and sometimes overlapping array of state and federal laws, regulators, and regulations related to cybersecurity, they could nevertheless expose individuals to cyber-theft and identity theft  In addition, the systems themselves could be susceptible to disruption from cyberattacks  The occurrence of successful hacks of banks and other financial institutions, wherein huge amounts of individuals' personal information are stolen or compromised, illustrates cyber-related risks  For example, in 2014, JPMorgan Chase, the largest U S  bank, experienced a data breach that exposed financial records of 76 million households  However, no consensus exists on how best to reduce the occurrence of such incidents, and whether current cybersecurity measures and regulatory frameworks are effective and efficient in mitigating cybersecurity risk is an open question  For a more detailed examination of cybersecurity at financial institutions, see CRS Report R44429, Financial Services and Cybersecurity: The Federal Role , by N  Eric Weiss and M  Maureen Murphy  In addition, although the traditional electronic payment system is sufficiently fast and convenient to complete many transactions, other transactions can involve problematic delays  One such delay that can be particularly costly for consumers is the lag between when a payment (such as a paycheck) is deposited and when the full amount of the funds are available to the individual  Depending on factors related to which networks the payer's and payee's bank uses to process payments, it can take up to two business days (or more under certain circumstances) after a deposit is made for banks to fully validate, process, and settle the deposit  Settlement delays can create a situation in which an individual has made a deposit that would give sufficient funds to pay a bill that is due, but nevertheless may overdraw the account because the deposit is awaiting processing  In such a situation, the individual faces a choice between costly outcomes—a late payment penalty on the bill, an overdraft fee on the bank account, or a fee from a check cashing or payday lending service  These costs are likely disproportionately borne by low- or moderate-income individuals who typically have low balances in their bank accounts  Faster or immediate payment processing could potentially reduce or eliminate costs incurred by individuals facing this situation  While delays in the payment system may seem anachronistic at a time when digital messages can be sent and data processed nearly instantaneously, the fact remains that aspects of the systems, networks, and infrastructures used today (including those operated by the Fed) were developed and deployed decades ago  Both the Fed and private institutions are working to increase system speed and efforts are underway to make real-time payments in the United States the norm  However, payment system operators arguably have little incentive to achieve faster or real-time payments because (1) they are in compliance with the current requirement facing banks pursuant to the Expedited Funds Availability Act of 1987 ( P L  108-100 ) to generally make most types of deposits available by the second business day, (2) updating legacy systems is costly for the institutions that operate them, and (3) banks are generating revenue through overdraft fees  Currently, it appears that the traditional noncash payment systems described above likely would replace cash payments should cash usage significantly decline  However some observers, citing the various costs and disadvantages associated with those systems—including delays in processing as well as reliance on traditional financial intermediaries—point to alternative electronic payment systems as potential dominant payment systems of the future  Cryptocurrenc y , such as Bitcoin , is the most well-known of these alternatives  Described in more detail below, cryptocurrencies use blockchain technology and public or "distributed" ledgers to achieve validated transfers of digital representations of value  The use of these systems to make payments is quite rare relative to cash and traditional systems, and the role they will play in the future is speculative  Nevertheless, their potential to significantly affect the usage of cash and traditional systems for payments has drawn the attention of central banks  Some central banks are examining whether they should create a comparable payment system of digital currencies to offer the advantages of those systems themselves and to avoid being bypassed in the future  This section briefly describes (1) existing private alternative electronic payment systems and (2) possible future central bank-run systems  With respect to alternative electronic payment systems, the section examines their potential advantages, costs, and obstacles to their widespread adoption  With respect to a potential central bank-run system, which is more speculative at this time, the section examines potential advantages and obstacles to their widespread adoption and uncertainties they present  In general, private electronic payment systems using distributed ledgers allow individuals to establish an account identified by a string of numbers and characters (often called an address or public key ) that is paired with a password or private key known only to the account holder  A transaction occurs when two parties agree to transfer digital currency (perhaps in payment for a good or service) from one account to another  The buying party will "unlock" the currency used as payment with her private key, allowing some amount to be transferred from her account to the seller's  The seller then "locks" the currency in her account using her own private key  From the perspective of the individuals using the system, the mechanics are similar to authorizing payment on any website that requires an individual to enter a username and password  In addition, companies offer applications or interfaces that users can download onto a device to make transacting in cryptocurrencies more user-friendly  Many digital currency platforms use blockchain technology to validate changes to the ledgers  In a blockchain-enabled system, payments are validated on a public or "distributed" ledger by a decentralized network of system users and cryptographic protocols  In these systems, parties that otherwise do not know each other can exchange something of value (i e , a digital currency) not because they trust each other but because they trust the platform and its protocols to prevent invalid changes to the ledger  A notable feature of transfers using blockchain is that they require no centralized, trusted intermediary such as a bank, government central bank, or other financial or government institution  Proponents envision these systems could achieve instantaneous transfers, although they currently require minutes or hours to finalize transfers  The decentralized nature of digital currencies and their recent proliferation poses challenges to performing industry-wide analysis of their use in payments  For example, as of August 27, 2018, one industry group purported to track trading prices of 1,890 cryptocurrencies alone  For brevity and clarity, this report uses statistics on Bitcoin—the first and most well-known cryptocurrency, the total value of which accounts for more than half of the industry as a whole —as an illustrative example of a digital currency's use in payments  In January 2017, the price of a Bitcoin on an exchange was about $993  The price surged during the year, peaking at about $19,650 in December 2017, an almost 1,880% increase  However, the price then dramatically declined  Overall, the price of Bitcoin has experienced a high degree of volatility  On March 12, 2018, the price of Bitcoin was $3,860, down 80% from its peak  More recently, the price rebounded and was $5,948 on May 8, 2019  Although price data on Bitcoin illustrates the public interest in and overall demand for this cryptocurrency, it is a poor indicator of how often it is being exchanged for goods and services (i e , how often it is being used as money)  Certain analyses appear to show that digital currencies are not being widely used and accepted as payment for goods and services, but rather as investment vehicles  The number of Bitcoin transactions may serve as a better indicator—though a flawed one—of the use of Bitcoin as a payment system  This number reveals how many times Bitcoins are transferred between accounts each day, and data indicates the number of transactions is miniscule compared with those of traditional systems  For example, in 2019 through March 12, the Bitcoin system averaged about 310,000 transactions per day globally, a pace that would result in about 113 million transactions per year  Recall that in the United States alone, more than 144 billion traditional (nearly 1,275 times as many) noncash payments were made in 2015  Moreover, one problem with this measure it that it is a count of how many times two parties have exchanged Bitcoin, not a count of how many times Bitcoin has been used to buy something  Some portion of those exchanges, possibly a significantly large portion, is driven by investors giving fiat currency to an exchange to buy and hold the Bitcoin as an investment  In those transfers, Bitcoin is not acting as money (i e , not being exchanged for a good or service)  Advantages of Private Payment Systems Using Distributed Ledgers   As discussed in an earlier section, traditional electronic payment systems involve a number of intermediaries, such as government central banks and private financial institutions  To carry out transactions, these institutions operate and maintain extensive electronic networks and other infrastructure, employ workers, and require time to finalize transactions  To meet costs and earn profits, these institutions charge various user fees  Cryptocurrency advocates anticipate that a decentralized payment system operated through the internet could be less costly than traditional payment systems and existing infrastructures  However, whether such efficiencies can or will be achieved remains an open question  In addition, opening a bank account or otherwise using traditional electronic payment systems generally requires an individual to divulge to a financial institution certain basic personal information, such as name, Social Security number, and birthdate  Financial institutions store and may analyze or share this information  In some instances hackers have stolen personal information from financial institutions, causing concerns over how well these institutions can protect sensitive data  Individuals seeking a higher degree of privacy or control over their personal data than that afforded by traditional systems may choose to use an alternative digital currency system that provides a degree of pseudonymity or anonymity  Although inflation in the United States and other developed economies has been low in recent decades, some individuals may nevertheless believe that nontraditional digital money may maintain its value better than government-backed money in traditional systems  The dollar and most modern currencies are fiat money—that is, money that derives value based solely on government decree  Historically, incidents of hyperinflation in certain countries have seen government-backed currencies lose most or nearly all of their value  Thus, some individuals may judge the probability of their fiat money losing a significant portion of its value to be undesirably high  These individuals may place greater trust in the ability of a decentralized network using cryptographic protocols that limit the creation of new money to maintain stable value of money than in the ability of government institutions to do so  Obstacles to Widespread Adoption of Private Payment Systems Using Distributed Ledgers   Several characteristics of cryptocurrency undermine its ability to serve the functions of money in a payment system  Currently, a relatively small number of businesses and individuals use or accept cryptocurrency for payment  As discussed above, Bitcoin transactions have averaged about 310,000 per day globally  Cryptocurrency may be used as a medium of exchange less frequently than traditional money for several reasons  Unlike the dollar and most other government-backed currencies, cryptocurrencies are not legal tender, meaning creditors are not legally required to accept them to settle debts  Consumers and businesses also may be hesitant to place their trust in these systems because they have limited understanding of them  Relatedly, consumers and businesses may have sufficient trust in and be generally satisfied with traditional payment systems  The recent high volatility in the price of many cryptocurrencies undermines their ability to serve as a unit of account and a store of value  Cryptocurrencies can have significant value fluctuations within short periods of time; as a result, pricing goods and services in units of cryptocurrency would require frequent repricing and likely would cause confusion among buyers and sellers  Whether cryptocurrency systems are scalable —meaning their capacity can be increased in a cost-effective way without loss of functionality—is uncertain  At present, the systems underlying cryptocurrencies do not appear capable of processing the number of transactions that would be required of a widely adopted, global payment system  One concern involves the significant energy consumption required to run and cool the computers that validate the transactions on these platforms  Costs of Private Payment Systems Using Distributed Ledgers   As the energy consumption of a digital currency system demonstrates, these systems are not costless  In addition to energy, they require computer hardware and facilities  Often making payments on these platforms involves paying fees  Whether these direct economic costs of using the system are fixed or—as they develop and mature—become less than existing systems is an open question  Digital currency systems, at least as currently designed and regulated, also might impose other costs on society  Some critics of these systems fear their pseudonymous, decentralized nature may provide a new avenue for criminals to launder money, evade taxes, or sidestep financial sanctions  For example, Bitcoin was the currency used on the internet-based, illegal drug marketplace and Bitcoin escrow service called Silk Road  This marketplace facilitated more than 100,000 illegal drug sales from approximately January 2011 to October 2013, at which time the government shut down the website and arrested the individuals running the site  Consumer groups and other observers are also concerned that digital currency users are inadequately protected against unfair, deceptive, and abusive acts and practices  The way cryptocurrencies are sold, exchanged, or marketed can subject cryptocurrency exchanges or other cryptocurrency-related businesses to generally applicable consumer protection laws, and certain state laws and regulations are being applied to cryptocurrency-related businesses  However, other laws and regulations aimed at protecting consumers engaged in electronic financial transactions may not apply  For example, the Electronic Fund Transfer Act of 1978 (EFTA; P L  95-630 ) requires traditional financial institutions engaging in electronic fund transfers to make certain disclosures about fees, correct errors when identified by the consumer, and limit consumer liability in the event of unauthorized transfers  Because no bank or other centralized financial institution is involved in digital currency transactions, EFTA generally has not been applied to these transactions  In addition, the laws and regulations that do apply generally have not been implemented specifically to address digital currencies or related businesses  Whether the current regulatory regime applied to digital currency transactions, but originally implemented for different financial activities (e g , traditional money transmission), is effective and efficient is a debated issue  Finally, some central bankers and other experts and observers have speculated that the widespread adoption of cryptocurrencies could affect the ability of the Fed and other central banks to implement and transmit monetary policy  The Fed conducts monetary policy with the goals of achieving price stability and low unemployment  Like other central banks it achieves its goals by, putting it simply, controlling the amount of money in circulation in the economy  If one or more additional currencies that the government did not control the supply of were also prevalent and viable payment options, it could limit central banks' ability to transmit monetary policy to financial markets and the real economy  In this scenario, central banks likely would have to make larger adjustments to the fiat currency they do control to have the same effect as previous adjustments  Another possibility is that they would have to start buying and selling the digital currencies themselves in an effort to affect the availability of these currencies  These risks have led some central banks and other observers to suggest that perhaps central banks could issue their own digital currencies  The risks and challenges posed by private digital currencies have led some observers to suggest that perhaps central banks should offer their own central bank digital currencies (CBDCs) to realize certain hoped-for efficiencies in the payment system in a way that would be "safe, robust, and convenient " To date, no country has successfully created a CBDC for payment use by the general public  The extent to which a central bank could or would want to create a new, digital-only payment system likely would be weighed against the consideration that these government institutions already have trusted digital payment systems in place  Because of such considerations, the exact form that CBDCs would take could vary across a number of features and characteristics  Nevertheless, some central banks are examining the idea of CBDCs and the possible benefits and issues they may present  For the purposes of this discussion, this report examines a CBDC that would be available to consumers for retail payments  Some proposals would limit CBDCs to wholesale payments between banks and other financial institutions  Potential Advantages of CBDCs   Proponents of CBDCs generally argue they could provide efficiency gains over traditional legacy systems and contend that central banks could use the technologies underlying digital currencies to deploy a faster, less costly government-supported payment system  Observers have speculated that a CBDC could take the form of a central bank allowing individuals to hold accounts directly at the central bank  Advocates argue that a CBDC created in this way could increase systemic stability by imposing additional discipline on commercial banks  Because consumers would have the alternative of safe deposits made directly with the central bank, commercial banks likely would have to offer interest rates and limit risks at levels necessary to attract deposits above any deposit insurance limit  In addition, CBDCs could increase government revenue through a seignoriage-like mechanism  A more expansive definition of seignoriage is the income government obtains from having government liabilities act as money  Physical money—because it is liquid and low-risk—earns no interest rate and carries a cost to produce  Money—both physical and electronic in the traditional system—is also a balance sheet liability to the issuing authority, such as the Fed or other central banks  If the Fed allowed individuals to hold accounts directly with the Fed, the Fed would issue low- or no-interest liabilities to individuals (as electronic entries in a ledger produced at less cost than physical currency)  Then, as happens now, the Fed would use those liabilities to fund purchases of assets that earn a higher interest rate than what the Fed pays on liabilities  This would produce income, perhaps greater income than is earned through traditional seignoriage  Potential Obstacles to Creation of CBDCs   One of the main arguments critics—including various central bank officials—make against CBDCs is that there is no "compelling demonstrated need" for such a currency, because central banks and private banks already operate trusted electronic payment systems that generally offer fast, easy, and inexpensive transfers of value  Opponents also argue that a CBDC in the form of individual direct accounts at the central bank would reduce the role of private banks in financial intermediation and potentially expand the role of government central banks inappropriately  A portion of consumers likely would shift their deposits away from private banks toward central bank digital money, which would be a safe, government-backed liquid asset  Deprived of this funding, private banks likely would have to reduce their lending, leaving central banks to decide whether or how they should support lending markets to avoid a reduction in credit availability  In addition, skeptics of CBDCs object to the assertion that these currencies would increase systemic stability, arguing that CBDCs would create a less-stable system because they would facilitate runs on private banks  These critics argue that at the first signs of distress at an individual institution or the bank industry, depositors would transfer their funds to this alternative liquid, government-backed asset  Uncertaint y : CBDCs' Potential Effects on Monetary Policy   Observers also disagree over whether CBDCs would have a desirable effect on central banks' role and abilities in carrying out monetary policy  Proponents argue that, if individuals held a CBDC on which the central bank set interest rates, the central bank could directly transmit a policy rate to the macroeconomy, rather than achieving transmission through the rates the central bank charges banks and the indirect influence of rates in particular markets  In addition, if holding cash (which in effect has a 0% interest rate) were not an option for consumers, central banks potentially would be less constrained by the zero lower bound   The zero lower bound is the idea that the ability of individuals and businesses to hold cash and thus avoid negative interest rates limits central banks' ability to transmit negative interest rates to the economy  Critics argue that taking on such a direct and influential role in private financial markets is an inappropriately expansive role for a central bank  They assert that if CBDCs were to displace cash and private bank deposits, central banks would have to increase asset holdings, support lending markets, and otherwise provide a number of credit intermediation activities that private institutions currently perform in response to market conditions  As discussed above, although cash remains a frequently used payment system, other payment systems continue to develop that offer their own advantages and costs  Various trends suggest that due to market preference or government policy, the role of cash in the payment system has begun to decline and may continue to decline, perhaps significantly, in coming years  If the relative benefits and costs of cash and the various other payment methods evolve in such a way that cash is significantly displaced as a commonly accepted form of payment, that evolution could have a number of effects, both positive and negative, on the economy and society  This section of the report describes a number of potential benefits of a reduced role for cash in the U S  economy and the various risks and costs that may occur  Many of the factors discussed below may not occur wholly as a benefit, risk, or cost; rather, a potential benefit may bring with it a risk, and vice versa  Some observers argue that reducing or eliminating cash payments in the U S  economy will produce certain beneficial outcomes, including improved efficiency in payments, reduced criminality, and improved ability for the Fed to implement certain monetary policy  As discussed below, although these outcomes generally may be beneficial, that does not mean that there are not certain costs, or drawbacks, that may counterbalance these positive effects  Proponents of noncash payment systems assert that net economic benefits from the use and maintenance of a cash payment system are (or will become as technology advances) less than the net benefits of using and maintaining noncash systems  Put another way, they argue that the resources, labor, and capital that go into the cash system—for example, producing currency; stocking and maintaining ATMs; safely transporting cash; protecting businesses from theft and robbery—make it less efficient than noncash systems  If true—and absent policy interventions—market forces likely will result in the displacement of cash by other payment methods as businesses increasingly choose not to accept cash and consumers increasingly prefer not to use it  Under this scenario, although the payment system on net may be more efficient, it would not necessarily be true that all people would benefit, as is discussed in the " Potential Costs and Risks of a Reduced Role for Cash " section  Proponents of cashless societies assert that the elimination of cash would reduce crime by making operating an illegal enterprise more difficult and certain crimes, such as robbery and burglary, less remunerative  These proponents argue that criminals are more likely to conduct business in cash and to hold cash as an asset, in large part because cash is anonymous and allows them to avoid establishing relationships with and generating records at financial institutions that may be subject to anti-money laundering reporting and compliance requirements  Accordingly, they assert that the elimination of cash would be beneficial on net, because operating a criminal enterprise would become more difficult  Certain studies have shown that the prevalence of cash is correlated with the incidence of crime  In addition, the amount of "strong" currencies (i e , highly valuable and highly stable currencies) in circulation exceeds what many people would consider a reasonable amount needed for typical consumer transactions  For example, with the U S  population at approximately 329 million, the $1 6 trillion of currency in circulation equates to about $4,900 per person  Proponents of a cashless society assert that this number is inflated due in part to the cash demand of criminals (although part is also due to demand for the U S  dollar from abroad)  Although a robust analysis of this question is beyond the scope of this report, arguments that cash facilitates crime and even that reducing cash may reduce crime appear in certain cases to be well founded  However, when analyzing the net benefit to society of going cashless, reduced crime should be weighed against any cost that a reduction in cash would impose on legitimate cash users  One such legitimate group is examined in more detail in the " Lack of Financial Access for Certain Groups " section below  The effect a reduction in cash payments would have on crime should not be overstated, as criminals likely would seek other ways to commit and hide their crimes  For example, the prevalence of cybercrime may increase  Another benefit (from a macroeconomic perspective) of a cashless society cited by economists would be the potential elimination of the practical inability of central banks, such as the Fed, to implement negative interest rates  When an economy is in recession or otherwise performing poorly, one monetary policy response is to lower interest rates  Lower interest rates can spur companies to borrow in order to invest and spur consumers to borrow in order to make additional purchases, thus boosting economic activity and mitigating the impact of recessions  However, many economists believe that policymakers are constrained by a zero lower bound—that whatever policy rate they may set, interest rates in many markets will not fall below zero  The reason is that holding cash offers a zero interest rate  Thus, if the Fed attempted to implement negative interest rates, individuals could avoid those rates by transferring their funds into cash  If holding cash was not an available option, it would be easier for negative interest rates to be transmitted to more financial markets  However, any benefit provided by increasing policymakers' ability to affect the macroeconomy with negative interest rates should be weighed against the cost it would impose on the individual savers whose account balances would decrease in value during a period of negative interest rates  Skeptics of reducing or eliminating the role of cash in the economy assert that cash serves a number of beneficial purposes, and argue that eliminating it would have adverse effects on certain financially vulnerable groups, eliminate an asset that provides safety against cyber vulnerabilities and financial crises, and reduce individuals' privacy  As with potential benefits to a reduction in cash, many of the factors discussed below may not occur wholly as a risk or cost, and they must be weighed against potential benefits when considering their overall impact  If the United States were to move toward becoming a cashless society that required consumers to use noncash, electronic payment services, it could present difficulties for those segments of the population who lack access to the financial system or to an electronic network  Access to electronic payments typically requires an account with some financial institution, usually a bank  Often—and increasingly—it also involves using or accessing a device connected to the internet  However, these factors can present hardships and obstacles for certain vulnerable groups  The Federal Deposit Insurance Corporation reported that in the United States in 2015, 9 million households were unbanked, meaning that no member had a bank account  Of these, 37 8% reported that the main reason was that they do not have enough money to keep in an account, 9 4% reported that fees were too high, and 1 9% reported fees were unpredictable  In total, this indicates almost half of the total unbanked, or roughly 4 5 million households, do not access banking services due to economic obstacles  Sweden has been at the forefront of the move away from cash (see Appendix ), and observers there, including Stefan Ingves, governor of Sweden's central bank, have voiced some of these concerns about going cashless  In addition, anecdotal reporting indicates that retirees in Sweden are finding the change difficult and costly  In the United States, many assert that it would be beneficial to bring the unbanked into the banking system  Nevertheless, if the unbanked engaged with the banking system at a relatively high cost only because cash (which was a less expensive option for them) was no longer available, it would likely be a detrimental outcome for this group  Conversely, if the move to a cashless system led to less costly financial access for this group, they may stand to benefit  Proponents of cash often cite the robustness of physical currency as a payment system  Once in an individual's possession, cash does not rely on financial institutions or information technology (IT) based payment networks  These proponents argue that if payments became entirely electronic, events such as power outages, hacker attacks, or (in the event of future cyber war) a state-sponsored attack would be capable of shutting down the most simple financial transaction—the exchange of money for goods and services  The financial system is already exposed to these threats to varying degrees, but the argument is that the elimination of cash amplifies those risks  Because it functions well as a store of value, cash is a relatively safe asset in which to invest savings with no risk of losses resulting from a decline in a securities value or the failure of financial institutions or other entities  The perceived safety of cash and its non-reliance on financial institutions also makes it desirable in times of financial turmoil or distress, when confidence in such institutions decreases  During these periods, many people prefer assets that are free from credit risk  For some of these individuals, deposit insurance guarantees may not wholly eliminate their fear of losses, whereas the safety of physical currency would  Holding cash, then, could also provide a sense of security to risk-adverse people that may mistrust the financial system  Opening a bank account or otherwise using traditional noncash payment systems generally requires an individual to divulge certain basic personal information, such as name, Social Security number, and birthdate, to a financial institution  Financial institutions store this information and information about the transactions linked to this identity  Under certain circumstances, they may analyze or share this information, such as with a credit-reporting agency  In some instances hackers have stolen personal information from financial institutions, causing concerns over how well these institutions can protect sensitive data  Finally, provided it follows proper legal procedures, the government also can access this information under certain circumstances  Similarly, although new alternative payment systems may offer a degree of anonymity or pseudonymity, these systems still generate an unalterable record of transactions between parties  Cash, by contrast, can be used anonymously, and people may wish to use cash for legitimate purposes to ensure their privacy  Certain consumers who are uncomfortable divulging and generating private information—even basic information that a transaction occurred—may prefer cash to any electronic payment methods  Cash has a number of advantageous features that has made it a simple and robust payment system throughout most of human history  It is difficult to imagine conditions under which cash would be replaced entirely, and disappear from the economy, at least in the near future  Nevertheless, its hegemony as a payment system appears to have come to an end, as electronic payment systems have gained popularity, and the ubiquity of cash acceptance for in-person purchases also seems precarious  If noncash payment systems significantly displace cash and cash usage and acceptance significantly declines, there would be a number of effects (both positive and negative) on the economy and society  Now or in the near future, policymakers may face decisions about whether to impede or hasten the decline of cash and consider the implications of doing so  Two countries provide interesting case studies of market forces drastically changing the way a society makes payments  Sweden In recent years, the use of cash in Sweden has quickly and substantially declined, dropping from 40% to 13% of transactions between 2010 and 2018  In many cases, businesses no longer accept cash, and one survey indicated that two-thirds of small businesses planned to stop accepting cash  Anecdotal reporting indicates that about 5% of bank branches accept cash deposits or offer cash withdrawals  Furthermore, Sweden's central bank is examining the possibility of creating registered accounts for the purpose of issuing currency electronically  Reportedly, many Swedes are generally in favor of the trend (the displacement of cash is due largely to consumer preference), though some have voiced concerns about financial access issues that the change causes for certain groups, such as the elderly  Observers have put forward a number of explanations for the Sweden's growing preference for electronic payment methods such as cards and mobile app enabled payments  One argument asserts that Sweden is an especially technology savvy country  As such, Swedes are comfortable using electronic payment systems, and Swedish companies have developed fast and easy payment technologies, such as iZettle and Swish  Some observers also have suggested that Swedes are especially trusting of institutions and thus have fewer privacy concerns  Some have noted that the timing of the start of the decline in cash use among Swedes coincided with the start of a transition to new Swedish banknotes and coins  They suggest that this spurred people and businesses to make a switch not to the new bills and coins but instead to electronic payment methods  Kenya In 2007, a company named Safaricom—Kenya's largest mobile phone network operator—introduced a "mobile money" service called M-Pesa ("M" stands for "mobile" and "pesa" is the Swahili word for money)  Users of the service download a phone application and deposit cash with M-Pesa employees called "agents " They can then transfer money into any other M-Pesa account using their phone  Originally intended as a service for Kenyans who had moved to a city to earn money to send back home to rural areas, the service became tremendously popular as a general use payment system  By 2016, there were approximately 31 6 million mobile money accounts in Kenya, which had a total population of 47 6 million in 2017  Many observers identify the combination of lack of access to traditional banking services and the proliferation of mobile phones in Kenya as a driving factor for the expansion of M-Pesa and subsequent mobile money services  These observers argue that in Kenya, as with many developing and largely rural nations, both consumers and banks view financial and bank services as a business need of the rich  In 2006, before the introduction of M-Pesa, just 19% of Kenyans had bank accounts and there was 1 5 bank branches for every 100,000 people  However, 54% of Kenyans had their own mobile phone or access to one  Another explanation for the rise of mobile money is that Safaricom successfully identified a large, profitable, and previously untapped market in Kenya  Available mobile technology and its proliferation among the population meant low-cost money transfers could be profitably offered to lower-income consumers  Certain observers assert that the success of M-Pesa has caused Kenyan financial institutions to reevaluate their business models, shifting their focus to offering services to lower-income groups than they previously targeted, and cite the increase in bank accounts and the decline of the average account balances as evidence of this change  As a result, the portion of the Kenyan population with access to some type of formal financial services has grown from 27% in 2006 to 75% in 2017  Although mobile money appears to have filled a market need, the degree to which it has displaced cash should not be overstated  An official at Safaricom estimated in February 2018 that as many as 8 out of 10 transactions are still cash transactions, as Kenyans still reportedly prefer cash for small, in-person purchases because of convenience and using M-Pesa generally involves fees  In addition, workers are still generally paid in cash 


Report 2: NAS is a withdrawal condition within infants that can result from the prenatal use of opioids by pregnant women  Prenatal opioid use occurs when a woman, during the course of her pregnancy, uses an opioid- based medication or substance  Prenatal opioid use can take various forms, including (1) the use of prescriptions for pain management, such as fentanyl and oxycodone; (2) medication-assisted treatment for opioid addiction, such as methadone and buprenorphine; (3) prescription drug misuse or use disorder (such as using an opioid without a prescription, using a different dosage than prescribed, or continuing to use an opioid when it is no longer needed for pain); and (4) illicit opioid use, such as heroin use  These types of prenatal opioid use are not mutually exclusive  A 2014 study found that almost 22 percent of pregnant Medicaid beneficiaries filled a prescription for an opioid during their pregnancy  Medication-assisted treatment—an approach that combines the use of certain medications and behavioral therapy—is generally considered by HHS and medical specialty societies to be the standard of care for treating pregnant women with opioid use disorders, depending on the individual and her circumstances  SAMHSA and several medical specialty societies, including the American College of Obstetricians and Gynecologists and the American Society of Addiction Medicine, have noted that providing medication-assisted treatment during pregnancy prevents complications associated with illicit opioid use, encourages prenatal care, and reduces the risk of obstetric complications  Further, women may use multiple substances in addition to opioids during pregnancy—known as maternal polysubstance use—such as tobacco, alcohol, or anti-depressants, among others  GAO reported in 2015 that the gaps in efforts to address prenatal opioid use and NAS most commonly cited by federal agency officials and experts were related to the treatment of prenatal opioid use and NAS  Agency officials and experts said that there has not been adequate research comparing different types of treatment approaches and that research is needed on how best to treat a pregnant woman with an opioid use disorder so that the treatment is most effective for the woman while offering minimal risk to the fetus  See GAO-15-203  For more information on factors that can affect access to medication- assisted treatment, see GAO, Opioid Addiction: Laws, Regulations, and Other Factors Can Affect Medication-Assisted Treatment Access, GAO-16-833 (Washington, D C : Sept  2016)  respiratory distress  There is currently no national standard of care for screening or treating NAS  There have been a few scoring tools developed to screen the infant to determine the appropriate course of treatment  Health care providers predominantly diagnose NAS using the Finnegan Neonatal Abstinence Scoring Tool, which calculates a score based on a variety of central nervous, metabolic, respiratory, and gastro-intestinal symptoms that might be observed  The American Academy of Pediatrics and the American College of Obstetricians and Gynecologists recommend that infants with NAS should not be initially treated with medication, known as pharmacologic treatment  Instead, these organizations recommend starting with non-pharmacologic treatment, which includes placing the infant in a dark and quiet environment, swaddling, breastfeeding, rooming-in with the mother, and providing high-calorie nutrition, among other things  For example, rooming-in—allowing the mother to reside with the infant during the infant’s treatment—may have benefits, such as helping to develop a bond between the mother and infant and to reduce the severity of the infant’s NAS symptoms  Pharmacologic treatment, such as using methadone or morphine, may be necessary only for the relief of moderate to severe signs of NAS  See figure 1 for more information on non-pharmacologic and pharmacologic treatment  HHS has published several guidance and educational resources related to NAS and prenatal opioid use  These documents serve as tools to help stakeholders, including state entities and health care providers, who work with this population  For example, SAMHSA published a clinical report for health care providers in 2016 that provides recommendations to help them when making decisions regarding the evaluation, care, and treatment of women with opioid use disorders and infants with NAS  As of July 2017, SAMHSA is in the process of producing a clinical guide based on this report and expects to publish an updated report later this year  In another example, SAMHSA published a guidance document in 2016 that aims to support the efforts of states, tribes, and local communities in addressing the needs of pregnant women with opioid use disorders and their infants  Among other things, the document includes strategies and guidance to promote care coordination among stakeholders, including child welfare agencies and medical professionals, when treating infants with NAS  (See app  II for a list of federal educational resources related to NAS and prenatal opioid use published by HHS ) As we previously noted, more than 80 percent of NAS cases are paid for by Medicaid, which is a federal-state health care program that finances health care coverage for low-income and medically needy populations, including children and aged or disabled adults  States administer their Medicaid programs within broad federal requirements and according to a state plan approved by CMS, the federal agency within HHS that oversees Medicaid  The Medicaid program allows states to design and implement their programs within certain federal parameters, resulting in more than 50 distinct state-based programs  For example, states generally determine the type and scope of services to cover, set payment rates that different health care providers will receive for various covered services, and pay these providers for claims submitted for services rendered  In addition, states vary in the extent to which they enroll beneficiaries in managed care versus delivering care through the more traditional fee-for-service model  Under a managed care delivery model, states typically contract with managed care plans to provide a specific set of Medicaid-covered services to beneficiaries and pay them a set amount per beneficiary—referred to as capitation payments—to provide those services  Under fee-for-service, Medicaid pays health care providers a fee for each service provided to a Medicaid beneficiary  Medicaid’s Early and Periodic Screening, Diagnostic, and Treatment benefit, which states are required to provide, covers comprehensive health screenings, preventive health services, and all medically necessary treatment and services—for Medicaid eligible-children under the age of 21—to correct or ameliorate health conditions discovered through screenings  According to the literature we reviewed, most infants with NAS in the United States are treated in a hospital setting, often in the neonatal intensive care unit (NICU), which has a relatively high daily cost of care  Stakeholders we interviewed told us that these infants may also be treated in other hospital settings  According to state and perinatal collaborative officials in the four selected states we reviewed, infants diagnosed with NAS begin—and most complete—treatment for the condition in various hospital settings which provide different levels of care: a well newborn nursery (level I), special care nursery (level II), or NICU (level III or IV)  For example, according to these officials, most infants with NAS in Vermont are treated in well newborn nurseries, while most infants with NAS in Kentucky and Wisconsin are treated in NICUs  West Virginia perinatal collaborative officials told us that about a third of infants with NAS are treated in well newborn nurseries, while two-thirds receive treatment in either a special care nursery or NICU  According to perinatal collaborative officials and hospital providers in the four selected states, the severity of the infant’s NAS symptoms or the hospital’s capability to treat NAS can determine whether the infant receives care in a nursery or NICU  Health care providers in the four selected states described the general clinical approach for treating infants with NAS  According to these providers, they generally start with non-pharmacologic treatment—for example, swaddling or placing the infant in a quiet, dark room  Health care providers may continue to monitor and assess the severity of the infant’s NAS symptoms using one of the available scoring tools for NAS  If the infant’s symptoms meet or exceed a certain threshold, these providers may initiate pharmacologic treatment by administering morphine or methadone, for example  Some perinatal collaborative officials that we interviewed in the four selected states told us that not all hospitals may have the capability to provide pharmacologic treatment  For example, these officials told us that level I hospitals—hospitals with only well newborn nurseries—in Kentucky and Wisconsin may not provide pharmacologic treatment to infants with NAS because these hospitals may not have the staff expertise to administer the needed medication and monitor the infants who receive it  Instead, these hospitals may transfer infants with NAS who require pharmacologic treatment to hospitals with higher levels of care, such as those with a NICU  Table 1 provides information on the eight selected hospitals in our review that provide NAS services  According to a 2015 study we reviewed, nationwide, infants with NAS who require pharmacologic treatment generally have longer average hospital stays (23 days) compared with infants with NAS who do not require such medication (17 days)  Health care providers from our selected hospitals also indicated a similar trend—the average length of hospital stay in calendar year 2016 for infants with NAS who received pharmacologic treatment ranged from 7 to 30 days, while the stays for infants who did not require such medication ranged from 3 to 7 days  Medicaid generally pays for NAS treatment services in our four selected states using a diagnosis-related group (DRG) based payment system, in which hospitals receive a fixed amount for a bundle of services  In general, the DRG-based system used in Medicaid pays for the medical services necessary for treating infants with NAS, such as medication, bed space, and nursing staff, according to CMS officials  CMS officials said that the DRG-based system generally does not pay for professional services, such as physician visits; instead, these services are typically paid under a fee-for-service payment schedule, in which states or contracted managed care plans pay health care providers directly for their services  Officials in our selected states said information on total Medicaid payments for hospital-based NAS services was not readily available  Several DRGs are typically used to bill Medicaid for services provided to infants  However, these codes alone cannot provide an accurate estimate of Medicaid payments for NAS treatment services because the codes are not used exclusively for NAS  For example, according to some health care providers we interviewed, two DRG codes that may be used to bill Medicaid and other payers for NAS treatment services are 791 (prematurity with major problems) and 793 (full term neonate with major problems)  However, these codes could be used to bill for over 2,000 diagnoses—for example, pneumonia or measles  One state official said that while they could provide us with information on Medicaid payments for these infants, they could not parse out the costs by diagnosis codes, such as those related to NAS  Thus, estimates of total Medicaid payments based only on DRG codes likely overstate the amount paid for NAS hospital-based services  Officials from two of the four selected states told us that their state has a public health surveillance system that tracks the incidence of infants diagnosed with NAS; however, the surveillance systems do not capture financial information, including Medicaid payments for NAS  At our request, one of the states cross-referenced their surveillance and Medicaid data and estimated that in 2016, their state Medicaid program spent over $22 million to treat 1,565 infants with NAS  While selected states generally could not provide information on total Medicaid payments for infants with NAS, some hospitals in our selected states were able to generate this information at our request using diagnosis codes that they identified as related to NAS from hospital claims data  Six of our selected eight hospitals reported that in calendar year 2016, the average Medicaid payment for treating infants with NAS ranged from about $1,500 to about $20,200 per infant per stay  The wide range in Medicaid payment averages may be because the averages included both infants who did and did not require pharmacologic treatment and because these hospitals treated infants in various settings, such as a nursery or a NICU  The literature we reviewed also had limited information on Medicaid payments for NAS treatment services provided in hospitals  A recent study reported that from 2009 through 2012—the most recent data available at the time of the study—Medicaid payments to hospitals for NAS treatment services increased from about $564 million to $1 2 billion nationwide  While most infants with NAS typically complete treatment in a hospital setting, stakeholders told us that some of these infants may be transferred to a non-hospital setting to complete pharmacologic treatment and continue non-pharmacologic treatment  HHS officials told us that there is not a comprehensive list of facilities that may treat infants with NAS outside of the hospital  Based on information from the stakeholders we interviewed and the literature we reviewed, we identified two types of non-hospital settings available in certain states that treat infants with NAS: (1) outpatient clinics and programs and (2) neonatal withdrawal centers  For the purposes of this report, we defined neonatal withdrawal centers as facilities that can treat infants who are prenatally exposed to drugs, including infants with NAS, within the facility  Outpatient clinics and programs to treat NAS Through stakeholder interviews and the literature we reviewed, we identified examples of outpatient clinics and programs in certain states where infants with NAS can continue pharmacologic treatment after their discharge from the hospital  For example, some stakeholders we interviewed told us about a Neonatal Medical Follow-Up Clinic in Vermont used to follow-up with infants with NAS who have been discharged from the hospital and are being weaned off methadone on an outpatient basis  Hospital providers train the infant’s family on how to administer the infant’s medication at home and provide a referral to the clinic  After hospital discharge, the infant and family have follow-up visits in the clinic every 1 to 2 weeks, during which the family discusses with health care providers the weaning schedule and demonstrate how they administer the infant’s medication  Health care providers told us that they also encourage the family to continue providing non-pharmacologic treatment to the infant  After weaning is complete, the infant continues to follow-up at the clinic every 1 to 2 months until the infant reaches 12 to 18 months of age  Literature we reviewed indicated that other outpatient treatment clinics or programs such as the one in Vermont have been established or considered in other states  Specifically, four studies we reviewed described instances in which infants began their treatment in the hospital but completed their treatment through a dedicated outpatient program in Florida, Ohio, and Pennsylvania  Each study noted that the inpatient-to- outpatient approach can result in a shorter hospital length of stay  For example, one 2015 study found that infants who began treatment in a hospital and completed their treatment in an outpatient setting stayed in the hospital an average of 11 days, compared to infants who completed treatment in the hospital, where the stays averaged about 25 days  However, the studies also noted that the inpatient-to-outpatient approach resulted in a longer overall treatment duration across the two settings  Neonatal withdrawal centers to treat NAS Some stakeholders we interviewed, including health care providers, described examples of neonatal withdrawal centers in two states, where infants with NAS can continue pharmacologic treatment after their discharge from the hospital  Health care providers in these facilities told us that in Washington and West Virginia, some infants with NAS who began treatment in a hospital may be referred to these facilities, where they reside until they complete treatment and are discharged from the facility  These providers explained that in these facilities, the infants are placed in nursery rooms, where health care providers can monitor them and administer and adjust their medication as needed  In addition, nursing staff or other caregivers are responsible for providing continuous non-pharmacologic treatment, and mothers are encouraged to visit and continue this care  For example, health care providers told us that in Washington, two to three infants may share a nursery room where trained caregivers provide them with non-pharmacologic treatment  In West Virginia, health care providers said infants are typically placed in individual nursery rooms where nurses provide them with non- pharmacologic treatment  The rooms in the West Virginia facility are also equipped with a rocking chair to encourage mothers to visit and provide this care as well  Health care providers told us that the facility currently offers one nursery room equipped with a bed to help prepare mothers on what to expect after discharge; they also said that they encourage mothers to spend the night prior to the infant’s discharge from the facility  (See text box below)  Treating infants with neonatal abstinence syndrome (NAS) in a neonatal withdrawal center One health care provider from a neonatal withdrawal center told us that the practice of rooming-in helps to facilitate the bond between the mother and infant  He also said that rooming-in allows health care providers to model care for the mothers and for mothers to learn how to care for their infants with NAS  Health care providers told us that the facility currently offers one nursery room equipped with a bed to help prepare mothers on what to expect after discharge and that they encourage mothers to spend the night prior to the infant’s discharge from the facility  One health care provider told us that one mother, after staying overnight with her infant, realized that she was not prepared to take care of her infant and consequently gave up custody of the infant  Because of rooming-in, health care providers were able to ensure that the infant was safe because the mother came to this realization at the facility, rather than alone at home  Although the lack of physical space at the facility currently makes it difficult to accommodate rooming-in for the entire course of the infant’s treatment, these providers noted the importance of this practice and that they are committed to parental involvement when treating infants with NAS at their facility  Figure 2 depicts nursery rooms in the neonatal withdrawal center in West Virginia  Efforts are also underway to open a neonatal withdrawal center in Arizona and Ohio, according to stakeholders we interviewed  Stakeholders we interviewed and the literature we reviewed suggest some limitations as well as benefits of treating infants with NAS in non- hospital settings, including factors to consider in these settings  Health care providers from one of the hospitals we visited in Vermont told us that their hospital is the only one in the state that allows infants with NAS to complete pharmacologic treatment through the Vermont outpatient clinic because they have established the necessary infrastructure to ensure families’ compliance and safe practices at home  These providers said that they worked with one local pharmacy to ensure proper dispensing of the medication  Additionally, these providers measured the amount of medication left over at each follow- up visit with the families  Some state and perinatal collaborative officials told us that neonatal withdrawal centers may not be the best environment to treat infants with NAS because these settings may limit a mother’s access to her infant, since she may not always be allowed to reside with the infant  Such limits, according to officials, do not facilitate bonding between mother and infant  Another state perinatal collaborative official, as well as health care providers and staff, told us that neonatal withdrawal centers may be better for treating infants with NAS because the environment is quieter and less stimulating than hospital settings, such as NICUs  Several studies we reviewed also emphasized that the inpatient-to- outpatient approach requires ongoing coordination, communication, and commitment from multidisciplinary providers, as well as the families  These studies highlighted instances in which these approaches reduced the length of the infants’ stay in a hospital, though the studies emphasized that more work needs to be done to determine whether these are the optimal approaches for infants with NAS, as well as the potential long-term benefits of such approaches  Medicaid pays for NAS treatment services provided in the non-hospital settings we identified in certain states, according to CMS officials and other stakeholders we spoke with, but generally pays for these services separately, in contrast with the single bundled payment paid to hospitals  State officials and health care providers in the non-hospital settings we examined described various ways in which Medicaid covered services they provided to treat infants with NAS  For example: Outpatient follow-up clinic in Vermont  State officials and staff at this facility told us that the Vermont Medicaid program pays for an infant’s outpatient physician visits using a fee-for-service payment schedule  They added that the Vermont Medicaid program also pays for the infant’s medication used in pharmacologic treatment and explained that the pharmacy that dispenses the medication bills Medicaid for these services  Neonatal withdrawal center in Washington  Health care providers at this facility told us that the Washington Medicaid program or their contracted managed care plans pay for physician visits using a fee- for-service payment schedule, noting that the facility decided to stop billing Medicaid for medical supplies because of the low reimbursement  Additionally, these providers suggested that because the facility does not meet the Medicaid standards required for receiving payment for hospital inpatient, nursing, or other covered facility services, the facility is ineligible to receive Medicaid payment for the costs of room and board  These providers said that they receive funding for the cost of these services through state appropriations, foster care payments, city contracts, grants, and private donations  Neonatal withdrawal center in West Virginia  State officials and health care providers at this facility told us that West Virginia pays for NAS services through two mechanisms, depending on whether the infant is in foster care  Specifically, if the infant is in foster care, the facility receives a bundled payment from the state Medicaid program and the Bureau of Children and Families  However, if the infant is not in foster care, the state Medicaid program pays for physician visits using a fee-for-service schedule  Additionally, the facility can receive payment under a per diem rate that is negotiated with state Medicaid managed care plans  The health care providers said that they also receive funding through grants and private donations to help cover the costs of NAS services  Stakeholders we interviewed and literature we reviewed suggest that the costs of treating infants with NAS in non-hospital settings were lower than treating them in hospital settings  However, supporting data and research of the costs in different settings are anecdotal or otherwise limited  For example: Health care providers from the neonatal withdrawal center in Washington told us that their facility could treat infants at a lower average cost per day than could hospitals—at about $700 per infant per day compared to an average cost of about $1,500-2,500 per infant per day in a hospital  These providers said that this cost savings is in part due to their limited staffing of nurses and their ability to leverage specially trained caregivers to provide infants with non-pharmacologic treatment and hands-on care, such as feeding and bathing  These providers also said they use volunteers to help with household duties, such as laundry and replenishing supplies  A health care provider from the neonatal withdrawal center in West Virginia conducted a study that found that the average daily charges per infant were about $400 in their facility, compared to about $2,600 in a special care nursery and $4,000 in a NICU  Two studies we reviewed found that inpatient-to-outpatient treatment approaches reduced hospital costs for NAS treatment; however, these studies were not generalizable and did not account for the duration of treatment across the two settings  Specifically, one study found that an inpatient-to-outpatient treatment approach reduced hospital length of stay by 55 percent—estimated to save hospitals $396 million annually—compared with treatment provided solely in a hospital  The second study found that infants who received care for NAS through an inpatient-to-outpatient treatment approach had an average length of stay of 13 days and cost about $14,000, while an inpatient- only approach had an average length of stay of 25 days and cost about $28,000  The 32 stakeholders we interviewed and the literature we reviewed identified several recommended practices for addressing NAS—that is, treating women with opioid use disorders during pregnancy or treating infants diagnosed with NAS after birth  The most frequently recommended practices were (1) prioritizing non-pharmacologic treatment, such as allowing the mother to reside with the infant during treatment, to facilitate the mother-infant bond; (2) educating mothers on prenatal care, treatment for NAS, and available resources for after an infant’s discharge; (3) educating health care providers on the stigma faced by women who use opioids during pregnancy and on how to screen for and treat NAS; and (4) using a protocol in a hospital or non-hospital setting for screening and treating infants with NAS  These recommended practices are described in more detail below  Volunteer programs to provide non- pharmacologic treatment for neonatal abstinence syndrome (NAS) Some stakeholders told us that some hospitals have established volunteer cuddler programs that train volunteers to help provide some of these non-pharmacologic treatments—-namely, swaddling, feeding, soothing, and coddling infants  However, health care providers at some facilities noted that volunteers are not necessarily available during late shifts  indicated that non-pharmacologic treatment may (1) facilitate the mother- infant bond, (2) reduce the severity of NAS symptoms, (3) reduce the need for pharmacologic treatment, and (4) reduce the length of an infant’s hospital stay  For example, two of the articles we reviewed noted that rooming-in has been shown to help decrease the need for pharmacologic treatment, the number of admissions to the NICU, and the length of an infant’s hospital stay  Additionally, 17 of the stakeholders we interviewed and nine articles we reviewed recommended that mothers be allowed to breastfeed while their infants are treated for NAS, as it helps to build a bond between the mother and infant  Most of these articles also noted that breastfeeding has been shown to reduce the severity of NAS  Educating mothers on prenatal care, treatment for NAS, and resources for after an infant’s hospital discharge  Most stakeholders we interviewed and several of the literature articles we reviewed recommended providing comprehensive, ongoing education to mothers on prenatal care and treatment for NAS and on the resources that are available after an infant’s discharge  (See text box below)  The stakeholders and literature indicated that this education may (1) facilitate a non-combative relationship between the mother and health care providers; (2) help to reassure and support the mother, who may feel responsible for the infant’s suffering, in addition to facilitating treatment of NAS; and (3) help the mother understand her infant’s behavior and develop greater confidence in her parenting skills  For example, one article noted that an infant’s withdrawal behavior, such as fisting, back arching, and jaw clenching, may be misinterpreted by the mother as dislike of touch, and that educating mothers on these behaviors can help alleviate feelings of guilt  Education for mothers on prenatal care, treatment for neonatal abstinence syndrome (NAS), and resources for after an infant’s hospital discharge Explaining to the mother during the prenatal period what she can expect when the infant is born to help ensure she understands the effects of and treatment for NAS; Informing the mother about non-pharmacologic treatment techniques that can help reduce the severity of the infant’s NAS symptoms; Modeling good parenting skills, such as demonstrating how to comfort an infant who may be crying inconsolably for hours because of withdrawal; and Informing the mother about contraception for preventing future pregnancies  Educating health care providers on the stigma faced by women who use opioids during pregnancy, and how to screen for and treat NAS  Most stakeholders we interviewed and several of the literature articles we reviewed recommended educating health care providers, including providers who are not addiction specialists, on both the stigma faced by women who use opioids during pregnancy as well as on how to screen for and treat infants with NAS  The stakeholders and literature indicated that this education may: (1) improve care so that mothers with opioid use disorders feel more comfortable seeking and obtaining prenatal care, (2) help health care providers know how to recognize NAS symptoms to help ensure infants receive appropriate treatment, and (3) allow for more consistency among these providers in NAS screening and treatment  For example, 26 stakeholders told us that educating health care providers about stigma is important because provider attitudes affect how and if pregnant women obtain prenatal care and treatment for their opioid use disorders, which can affect the severity of NAS  Additionally, several articles we reviewed noted the importance of educating and training clinicians on how to administer the screening tools used to identify infants with NAS, which helps ensure infants are identified and receive optimal care  Using a protocol for screening and treating infants with NAS  While there is no single national standard of care for screening and treating NAS, most stakeholders we interviewed and several of the literature articles we reviewed recommended that hospital and non-hospital settings use a protocol to screen for and treat infants with NAS  The stakeholders and literature indicated that having a protocol can help: (1) identify infants at risk for NAS, (2) ensure that care is provided consistently, and (3) reduce the length of stay for infants receiving pharmacologic treatment  For example, the stakeholders we interviewed explained that a standard protocol also helps health care providers understand the tools used to assess the severity of NAS; know the types of medication used in treatment, including amounts and duration; and learn how to wean the infant off these medications  Similarly, one article we reviewed noted that infants who were treated at facilities that adopted standard treatment protocols experienced shorter durations of pharmacologic treatment compared with infants who were treated at facilities that did not use a standard protocol  Stakeholders we interviewed and literature we reviewed identified several challenges health care providers face in their efforts to address NAS  The most frequently cited challenges included (1) the use of multiple substances by pregnant women, which can exacerbate NAS; (2) the stigma faced by women who use opioids during pregnancy, which may affect whether they seek prenatal care to address NAS, among other things; (3) hospital staff burden and limited physical capacity to care for infants with NAS; (4) limited coordination of care for mothers and infants with NAS; and (5) gaps in research and data on NAS  These challenges are described in more detail below  The use of multiple substances by pregnant women, which can exacerbate NAS  Most stakeholders we interviewed and some of the literature we reviewed noted that the use of multiple substances by pregnant women, including opioids—referred to as maternal polysubstance use—can be a challenge, and some stated that the use of these substances can exacerbate NAS symptoms  According to the stakeholders, the substances can include methamphetamines, nicotine, alcohol, cocaine, marijuana, benzodiazepines, and Gabapentin  The stakeholders and literature indicated that maternal polysubstance use can lead to multiple conditions in the infant—such as prematurity or Hepatitis C—that can exacerbate NAS symptoms and prolong the length of an infant’s hospital stay  For example, one expert noted that many women with opioid use disorders are also heavy cigarette smokers, and the nicotine typically exacerbates NAS withdrawal symptoms  Additionally, officials from a hospital and non-hospital setting we visited told us that they had developed a separate protocol for treating infants exposed to multiple substances that includes the use of several medications to address the more severe NAS withdrawal symptoms  Stigma faced by women who use opioids which may affect whether they seek prenatal care to mitigate the severity of NAS, among other things  Most stakeholders we interviewed and several of the literature articles we reviewed noted that the stigma faced by pregnant women with opioid use disorders is a challenge in addressing NAS  The stakeholders and literature indicated that stigma may: (1) prevent pregnant women from seeking substance use treatment or prenatal care; (2) prevent them from disclosing their drug use to health care providers during pregnancy; or (3) cause the women to fear punitive effects, such as losing custody of their children, being detained, or losing their jobs  For example, officials from one perinatal quality collaborative told us that these women may fail to seek care because of stigma, which can ultimately make it more difficult for health care providers to build relationships with these women and identify infants at risk for NAS  Hospital staff burden and limited physical capacity to care for infants with NAS  According to most stakeholders we interviewed and some literature we reviewed, staff burden and a limited physical capacity at facilities can pose challenges for addressing NAS  The stakeholders and literature indicated that there is increased burden on staff to care for these infants because they require frequent, personal attention  For example, the stakeholders explained that a hospital may have to increase the number of nurses on duty in order to provide the care the infants need  Health care providers at one hospital said that nurses still struggle to care for infants with NAS, even with additional staff, because these infants are overstimulated, cry, and do not eat or sleep well  As a result, they require much time and one-on-one attention—including cuddling— from nurses  With respect to physical capacity, some stakeholders told us that limited physical capacity can make it difficult to (1) find space in the facility where the infants can be protected from high levels of stimulation and (2) facilitate the mother-infant bond  For example, some stakeholders told us that hospitals may not have a dedicated space for rooming-in, making it more difficult to facilitate bonding between mothers and infants  Limited coordination of care for mothers and infants with NAS  Most stakeholders we interviewed explained that the lack of coordination among health care providers and others for the mother and infant with NAS during the prenatal period, after the infant is born, and following the infant’s discharge can be a challenge  This coordination includes organizing patient care activities and sharing information among health care providers, social workers, and all other participants concerned with the mother and infant’s care  The stakeholders indicated that this lack of coordination can make it difficult for families to get the resources or support they need  (See text box below)  For example, some stakeholders told us that women may miss health care visits because of a lack of access to enabling services such as transportation or child care  Limited coordination of care for mothers and infants with neonatal abstinence syndrome (NAS) One expert told us that there is a disproportionate number of infants with NAS born in rural areas  Infants in these areas may be discharged from the hospital without many follow-up services, such as transportation and care coordination  Gaps in research and data on NAS  Some stakeholders we interviewed noted that gaps in research and data on NAS make it challenging to conduct research on the affected population and fully understand the magnitude of the problem  The stakeholders indicated that there are gaps in adequate research and data on (1) the different types of treatment approaches for NAS; (2) the extent and effects of maternal polysubstance use among pregnant women; (3) the long-term effects of prenatal drug exposure, including the effects seen in childhood and adolescence; and (4) the efforts to ensure more consistent provider diagnosis and screening, such as through an improved screening tool  For example, the stakeholders told us that gaps in research and data may contribute to a lack of a national standard of care for screening and treating infants with NAS  According to some stakeholders, this may result in missed opportunities for identifying and treating infants with NAS  Some stakeholders also told us that because of gaps in research on the long- term effects of prenatal drug exposure, there is limited information on the types of services that infants with NAS may need in early childhood  Additionally, some stakeholders noted they found that because NAS was not consistently diagnosed and coded in medical records using diagnosis codes, the condition may be under-reported, and researchers may be limited in their ability to track these infants  In May 2017, HHS published the Protecting Our Infants Act: Report to Congress, which—among other things—presents a strategy that identifies key recommendations related to addressing NAS  Specifically, HHS’s strategy—known as the Protecting Our Infants Act: Final Strategy—made 39 recommendations related to the prevention, treatment, and related services for NAS and prenatal opioid use  Of the 39 recommendations HHS made in its report, we found that 28 of them directly relate to the recommended practices or challenges that we describe above  For example, the Strategy recommends the following: promoting non-pharmacologic treatment, such as rooming-in; providing continuing medical education to health care providers for managing and treating infants with NAS, such as on NAS treatment protocols; conducting research on the long-term effects of prenatal drug exposure so that appropriate services can be developed for infants with NAS; and establishing clear definitions of NAS and standardizing the use of diagnosis codes to collect more meaningful and actionable data on NAS  According to the Strategy, the recommendations will be used to inform planning and policy across HHS  However, HHS does not include any information in the Strategy on how the department and other stakeholders will implement the recommendations  Specifically, HHS does not include in its Strategy the following: the explicit priorities among the numerous recommendations and associated efforts the department has initiated related to NAS; timeframes for partial or full implementation of these recommendations; clear roles and responsibilities for the recommendations, such as the extent to which HHS will need to rely on the medical community and federal and public stakeholders for implementation; and the methods that will be used to assess the department’s progress in implementing any of these recommendations  HHS officials told us that they expect to develop a separate plan to guide implementation of the recommendations and that efforts to develop this plan were likely to begin in July 2017  However, as of September 2017, HHS could not provide any documentation that it had started to develop this implementation plan or establish a timeline for completing the plan; nor was HHS able to provide any information on what the plan may include  Having such a plan in place is important to ensure priorities are known and responsibilities are clear so that agencies and stakeholders can take appropriate action  Federal internal control standards call for agencies to have defined objectives clearly as part of their objective- setting process and to assign roles and responsibilities for achieving these objectives  Objectives defined in specific and measurable terms allow for the assessment of performance toward achieving objectives  Furthermore, leading principles on sound planning we have identified in our prior work call for developing robust plans to achieve agency goals  Until HHS finalizes an implementation plan that includes specific priorities, timeframes, responsibilities, and methods for evaluating progress, it is at risk of not being able to provide reasonable assurance that it can successfully implement these recommendations in a timely manner and assess the effectiveness of its efforts  The rising opioid crisis has caused a significant increase in the number of infants born and diagnosed with NAS, a condition that affects infants and their families, hospitals, and other health care providers who are treating them  The increase in infants born with NAS also increases medical and other treatment costs experienced by the federal government and states  HHS recently published a strategy with key recommendations that have the potential to address some of the challenges related to treating NAS  However, HHS lacks a sound plan for implementing these recommendations  The absence of such planning raises questions about whether and when HHS will be able to implement these recommendations in a timely manner and be able to assess its progress  The Secretary of HHS should expeditiously develop a plan—that includes priorities, timeframes, clear roles and responsibilities, and methods for assessing progress—to effectively implement the NAS-related recommendations identified in the Protecting Our Infants Act: Final Strategy  (Recommendation 1) We provided a draft of this report to HHS for review, and HHS provided written comments, which are reprinted in appendix III  HHS also provided technical comments, which we incorporated as appropriate  In its written comments, HHS concurred with our recommendation to expeditiously take steps to address NAS and re-stated that its Strategy will be used to inform planning and policy across HHS  Specifically, HHS said that as part of its broader initiative to address the opioid crisis, the department will develop and implement a plan—that will include priorities, timeframes, roles and responsibilities, and methods for assessing progress—to address as appropriate and possible, the NAS-related recommendations in its Strategy  HHS also stated that full implementation would be contingent on funding, though it provided no information on how much funding was needed or how the funding would be used  Developing a plan to guide implementation can help the department determine what resources, if any, are needed to implement the recommendations in its Strategy  We are sending copies of this report to the appropriate congressional addressees, the Secretary of Health and Human Services, and other interested parties  In addition, the report will be available at no charge on GAO’s 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 at iritanik@gao gov  Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report  GAO staff who made major contributions to this report are listed in appendix IV  To address our first three audit objectives to describe care settings for treating infants with neonatal abstinence syndrome (NAS), Medicaid payment for NAS treatment, and the recommended practices and challenges for addressing NAS, we selected 32 stakeholders based on their relevant experience to cover a range of perspectives on NAS  Specifically, these stakeholders included those from site visits we conducted to four states—Kentucky, Vermont, West Virginia, and Wisconsin  We selected these states because they met the following criteria: 1  the state had one of the top 10 highest incidence rates of NAS, according to data from the Centers for Disease Control and Prevention (CDC) for 2013, the most recent year of publicly available data; 2  the state provided variation in United States geographic regions with high rates of NAS, as of 2012; 3  more than 40 percent of births in the state were financed by Medicaid, according to a 2016 Kaiser Family Foundation Medicaid Budget Survey; and 4  the state has a perinatal quality collaborative—a state or multi-state network of teams working to improve health outcomes for mothers and infants—with work related to NAS, which we identified through the American College of Obstetricians and Gynecologists  As part of these site visits, we interviewed (1) officials from each of the four states, including Medicaid officials, Maternal and Child Health Directors, and Women’s Services Coordinators; (2) representatives from the four state perinatal collaboratives; (3) health care providers (including physicians or nurses) from eight hospitals of varying levels of care (two hospitals in each state), which were selected based on recommendations from the state perinatal collaboratives because of the hospitals’ experience treating NAS; and (4) officials from a residential treatment facility in each of the four states that provide prenatal and postpartum care to mothers, which were also selected based on recommendations from the state perinatal collaboratives regarding the facilities’ experience with pregnant women with opioid use disorders and their infants with NAS  In addition to our site visits, we selected 12 additional stakeholders that included health care providers or administrators in non-hospital settings across the United States; officials from medical specialty societies; and experts  Specifically, we spoke with (1) health care providers (including physicians or nurses) or administrators from four non-hospital settings in Arizona, Ohio, Washington, and West Virginia, which were selected based on recommendations from stakeholders we interviewed and on the availability of such settings and their experience treating NAS; (2) health care providers from five medical specialty societies, including the American Academy of Pediatrics, the American College of Obstetricians and Gynecologists, the American Society of Addiction Medicine, MedNAX (a network of physicians that specialize in neonatal care, including NAS treatment), and the National Association of Neonatal Nurses; and (3) three experts, including the authors of published literature we reviewed  We interviewed each of these 32 stakeholders and requested information from stakeholders about treating infants with NAS, including the utilization of available hospital and non-hospital care settings and associated costs of treatment services  For example, we requested protocols for screening and treating infants with NAS from hospital and non-hospital care settings  We reviewed available protocols provided by hospitals and a non-hospital care setting  We also reviewed available information reported by state officials, hospital and non-hospital providers, and state perinatal collaboratives on the utilization of hospital and non-hospital care settings, the facilities’ cost of treating NAS in hospital and non-hospital settings, the lengths of stay for treating infants with NAS, or the amount of Medicaid payments for treating infants with NAS  We discussed the information provided by stakeholders and examined the information for obvious errors  The information obtained from these stakeholders is not generalizable to other states or other hospital and non-hospital settings  In addition, in some cases, stakeholders used different methods to collect the information they reported, including information on Medicaid payments; as a result, the information reported by stakeholders is not directly comparable  Additionally, we interviewed officials from HHS, including those from the Centers for Medicare & Medicaid Services (CMS) and HHS’s Behavioral Health Coordinating Council—which includes officials from the Substance Abuse and Mental Health Services Administration (SAMHSA), the Indian Health Service, the Centers for Disease Control and Prevention (CDC), and the Food and Drug Administration, among others—concerning NAS treatment services, settings of care, Medicaid payment, and recommended practices and challenges related to addressing NAS  We also conducted a comprehensive literature review to identify relevant studies on NAS published in peer-reviewed journals from January 2013 to December 2016  We searched more than 40 databases for research published in relevant peer-reviewed journals, including BIOSIS Previews®, Embase®, Gale Group Health Periodicals Database, MEDLINE®, and New England Journal of Medicine  Key search terms included “neonatal abstinence syndrome,” “neonatal opioid withdrawal syndrome,” and “newborn infants ” After excluding duplicates, we identified and reviewed 325 abstracts  For those abstracts we found relevant, we obtained and reviewed the full study and selected 40 that were relevant to (1) hospital and non-hospital settings and related treatment services for infants with NAS; (2) the costs associated with treating infants with NAS, including Medicaid payments for services in these care settings; or (3) recommended practices and challenges for addressing NAS  We examined the methodologies for each of these studies and interviewed some of their authors  We determined that the studies were sufficiently reliable for our audit objectives  For a complete list of the studies we reviewed, see below  To examine our last audit objective on HHS’s strategy related to addressing NAS, we interviewed agency officials and reviewed agency documents on the agency’s efforts to develop a strategy  Specifically, we interviewed relevant officials from CMS and HHS’s Behavioral Health Coordinating Council concerning their efforts to develop a strategy related to addressing NAS  In reviewing relevant HHS documents, we focused on HHS’s Protecting Our Infants Act Report to Congress, which includes a strategy to address identified gaps, challenges, and recommendations related to NAS and prenatal opioid use  In addition, we reviewed the relevant standards for internal control in the federal government and the relevant criteria from GAO’s body of work on effectively managing performance under the Government Performance and Results Act (GPRA) of 1993 and the GPRA Modernization Act of 2010  Allocco, E , M  Melker, F  Rojas-Miguez, C  Bradley, K  A  Hahn, and E  M  Wachman  “Comparison of Neonatal Abstinence Syndrome Manifestations in Preterm Versus Term Opioid-Exposed Infants ” Advances in Neonatal Care, vol  16, no 5 (2016)  Artigas, V  “Management of Neonatal Abstinence Syndrome in the Newborn Nursery ” Nursing for Women’s Health, vol  18, issue 6 (Dec  2014/Jan  2015)  Asti, L , J  S  Magers, E  Keels, J  Wispe, and R  E  McLead  “A Quality Improvement Project to Reduce Length of Stay for Neonatal Abstinence Syndrome ” Pediatrics, vol  135, no  6 (2015)  Busch, D  W  “Clinical management of the Breast-Feeding Mother-Infant Dyad in Recovery from Opioid Dependence ” Journal of Addictions Nursery, vol  27, no  2 (2016)  Casper, T  and M  Arbour  “Evidence-Based Nurse-Driven Interventions for the Care of Newborns with Neonatal Abstinence Syndrome ” Advances in Neonatal Care, vol  14, no  6 (2014)  Chau, K  T , J  Nguyen, B  Miladinovic, C  M  Lilly, T  L  Ashmeade, and M  Balakrishnan  “Outpatient Management of Neonatal Abstinence Syndrome: A Quality Improvement Project ” The Joint Commission Journal on Quality and Patient Safety, vol  42, no  11 (2016)  Cirillo, C  and K  Francis  “Does Breast Milk Affect Neonatal Abstinence Syndrome Severity, the Need for Pharmacologic Therapy, and Length of Stay for Infants of Mothers on Opioid Maintenance Therapy During Pregnancy?” Advances in Neonatal Care, vol  16, no 5 (2016)  Clark, L  and A  Rohan  “Identifying and Assessing the Substance- Exposed Infant ” MCN in Advance (2015)  Demirci, J  R , D  L  Bogen, and Y  Klionsky  “Breastfeeding and Methadone Therapy: The Maternal Experience ” Substance Abuse, vol  36, no  2 (2015)  Edwards, L  and L  F  Brown  “Nonpharmacologic Management of Neonatal Abstinence Syndrome: An Integrative Review ” Neonatal Network, vol  35, no  5 (2016)  Gregory, K  E  “Caring for the Infant with neonatal Abstinence Syndrome in a Community-Based Setting ” The Journal of Perinatal & Neonatal Nursing, (2014)  Grim, K , T  E  Harrison, and R  T  Wilder  “Management of Neonatal Abstinence Syndrome from Opioids ” Clinics in Perinatology, (2013)  Hahn, J , A  Lengerich, R  Byrd, R  Stoltz, J  Hench, S  Byrd, and C  Ford  “Neonatal Abstinence Syndrome: The Experience of Infant Massage ” Creative Nursing, vol  22, issue 1 (2016)  Hall, E  S , S  L  Wexelblatt, M  Crowley, J  L  Grow, L  R  Jasin, M  A  Klebanoff, R  E  McClead, J  Meinzen-Derr, V  K  Mohan, H  Stein, and M  C  Walsh  “A Multicenter Cohort Study of Treatments and Hospital Outcomes in Neonatal Abstinence Syndrome ” Pediatrics, vol  134, no  2 (2014)  Hall, E  S , S  L  Wexelblatt, M  Crowley, J  L  Grow, L  R  Jasin, M  A  Klebanoff, R  E  McClead, J  Meinzen-Derr, V  k  Mohan, H  Stein, and M  C  Walsh  “Implementation of a Neonatal Abstinence Syndrome Weaning Protocol: A Multicenter Cohort Study ” Pediatrics, vol  136, no

ground_truth: Electronic forms of payment have become increasingly available, convenient, and cost efficient due to technological advances in digitization and data processing. Anecdotal reporting and certain analyses suggest that businesses and consumers are increasingly eschewing cash payments in favor of electronic payment methods. Such trends have led analysts and policymakers to examine the possibility that the use and acceptance of cash will significantly decline in coming years and to consider the effects of such an evolution. Cash is still a common and widely accepted payment system in the United States. Cash's advantages include its simplicity and robustness as a payment system that requires no ancillary technologies. In addition, it provides privacy in transactions and protection from cyber threats or financial institution failures. However, using cash involves costs to businesses and consumers who pay fees to obtain, manage, and protect cash and exposes its users to loss through misplacement, theft, or accidental destruction of physical currency. Cash also concurrently generates government revenues through "profits" earned by producing it and by acting as interest-free liabilities to the Federal Reserve (in contrast to reserve balances on which the Federal Reserve pays interest), while reducing government revenues by facilitating some tax avoidance. The relative advantages and costs of various payment methods will largely determine whether and to what degree electronic payment systems will displace cash. Traditional noncash payment systems (such as credit and debit cards and interbank clearing systems) involving intermediaries such as banks and central banks address some of the shortcomings of cash payments. These systems can execute payments over physical distance, allow businesses and consumers to avoid some of the costs and risks of using cash, and are run by generally trusted and closely regulated intermediaries. However, the maintenance and operation of legacy noncash systems involve their own costs, and the intermediaries charge fees to recoup those costs and earn profits. The time it takes to finalize certain transactions—including crediting customer accounts for check or electronic deposits—can lead to consumers incurring additional costs. In addition, these systems involve cybersecurity risks and generally require customers to divulge their private personal information to gain system access, which raises privacy concerns. To date, the migration away from cash has largely been in favor of traditional noncash payment systems; however, some observers predict new alternative systems will play a larger role in the future. Such alternative systems aim to address some of the inefficiencies and risks of traditional noncash systems, but face obstacles to achieving that aim and involve costs of their own. Private systems using distributed ledger technology, such as cryptocurrencies, may not serve the main functions of money well and face challenges to widespread acceptance and technological scalability. These systems also raise concerns among certain observers related to whether these systems could facilitate crime, provide inadequate protections to consumers, and may adversely affect governments' ability to implement or transmit monetary policy. The potential for increased payment efficiency from these systems is promising enough that certain central banks have investigated the possibility of issuing government-backed, electronic-only currencies—called central bank digital currencies (CBDCs)—in such a way that the benefits of certain alternative payment systems could be realized with appropriately mitigated risk. How CBDCs would be created and function are still matters of speculation at this time, and the possibility of their introduction raises questions about the appropriate role of a central bank in the financial system and the economy. If the relative benefits and costs of cash and the various other payment methods evolve in such a way that cash is significantly displaced as a commonly accepted form of payment, that evolution could have a number of effects, both positive and negative, on the economy and society. Proponents of reducing cash usage (or even eliminating it all together and becoming a cashless society) argue that doing so will generate important benefits, including potentially improved efficiency of the payment system, a reduction of crime, and less constrained monetary policy. Proponents of maintaining cash as a payment option argue that significant reductions in cash usage and acceptance would further marginalize people with limited access to the financial system, increase the financial system's vulnerability to cyberattack, and reduce personal privacy. Based on their assessment of the magnitude of these benefits and costs and the likelihood that market forces will displace cash as a payment system, policymakers may choose to encourage or discourage this trend.

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



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



Report 2:  4 (2015)  Holmes, A  V , E  C  Atwood, B  Whalen, J  Beliveau, J  D  Jarvis, J  C  Matulis, and S  L  Ralston  “Rooming-In to Treat Neonatal Abstinence Syndrome: Improved Family-Centered Care at Lower Cost ” Pediatrics, vol  137, no  6 (2016)  Jones, H  E , K  Deppen, M  L  Hudak, L  Leffert, C  McClelland, L  Sahin, J  Starer, M  Terplan, J  M  Throrp Jr , J  Walsh, and A  A  Creanga  “Clinical Care for Opioid-Using Pregnant and Postpartum Women: The Role of Obstetric Providers ” American Journal of Obstetrics & Gynecology, vol  210, issue 4 (2014)  Jones, H E , C  Seashore, E  Johnson, E  Horton, K E  O’Grady, K  Andringa, M  R  Grossman, B  Whalen, and A V  Holmes  “Brief Report: Psychometric Assessment of the Neonatal Abstinence Scoring System and the MOTHER NAS Scale ” American Journal on Addictions, (2016)  Kraft, W K , M  W  Stover, and J  M  Davis  “Neonatal Abstinence Syndrome: Pharmacologic Strategies for the Mother and Infant ” Seminars in Perinatology, vol  40, issue 3 (2016)  Krans, E  E , G  Cochran, and D  L  Bogen  “Caring for Opioid Dependent Pregnant Women: Prenatal and Postpartum Care Considerations ” Clinical Obstetrics and Gynecology, vol  58, no  2 (2015)  Lee, J , S  Hulman, M  Musci Jr , and E  Stang  “Neonatal Abstinence Syndrome: Influence of a Combined Inpatient/Outpatient Methadone Treatment Regimen on the Average Length of Stay of a Medicaid NICU Population ” Population Health Management, vol  18, no 5 (2015)  MacMullen, N  J , L  A  Dulski, and P  Blobaum  “Evidence-Based Interventions for Neonatal Abstinence Syndrome ” Pediatric Nursing, vol  40, no  4 (2014)  Maguire, D  J , “Mothers on Methadone: Care in the NICU ” Neonatal Network, vol  32, no  6 (2013)  Marcellus, L  “Supporting Women with Substance Use Issues: Trauma- Informed Care as a Foundation for Practice in the NICU ” Neonatal Network, vol  33, no 6 (2014)  McKeever, A  E , S  Spaeth-Brayton, and S  Sheerin  “The Role of Nurses in Comprehensive Care Management of Pregnant Women with Drug Addiction ” Nursing for Women’s Health, vol  18, no 4 (2014)  Meyer, M  and J  Phillips  “Caring for Pregnant Opioid Abusers in Vermont: A Potential Model for Non-Urban Areas ” Preventive Medicine, vol  80 (2015)  Newnam, K  M  “The Right Tool at the Right Time: Examining the Evidence Surrounding Measurement of Neonatal Abstinence Syndrome ” Advances in Neonatal Care, vol  14, no 3 (2014)  Orlando, S  “An Overview of Clinical Tools Used to Assess Neonatal Abstinence Syndrome ” Journal of Perinatal and Neonatal Nursing, vol  28, no 3 (2014)  Patrick, S W , M M  Davis, C U  Lehman, and W O  Cooper  “Increasing Incidence and Geographic Distribution of Neonatal Abstinence Syndrome: United States 2009 to 2012 ” Journal of Perinatology, vol  35 (2015)  Patrick, S W , H C  Kaplan, M  Passarella, M M  Davis, and S A  Lorch  “Variation in Treatment of Neonatal Abstinence Syndrome in U S  Children’s Hospitals, 2004-2011 ” Journal of Perinatology, vol  34, no  11 (2014)  Patrick, S W , J  Dudley, P R  Martin, F E  Harrell, M D  Warren, K E  Hartmann, E W  Ely, C G  Grijalva, and W O  Cooper  “Prescription Opioid Epidemic and Infant Outcomes ” Pediatrics, vol  135, no 5 (2015)  Patrick, S W , R  E  Schumacher, J  D  Horbar, M  E  Buus-Frank, E  M  Edwards, K  A  Morrow, K  R  Ferrelli, A  P  Picarillo, M  Gupta, and R  F  Soll  “Improving Care for Neonatal Abstinence Syndrome ” Pediatrics, vol  137, no  5 (2016)  Reece-Stremtan, S , and K  A  Marinelli  “ABM Clinical Protocol #21: Guidelines for Breastfeeding and the Drug-Dependent Woman, Revised 2015 ” Breastfeeding Medicine, vol  10, no 3 (2015)  Shaw, M  R , C  Lederhos, M  Haberman, D  Howell, S  Fleming, and J  Roll  “Nurses Perceptions of Caring for Childbearing Women Who Misuse Opioids ” The American Journal of Maternal-Child Nursing, vol  41, no  1 (2016)  Sublett, J  “Neonatal Abstinence Syndrome: Therapeutic Interventions ” The American Journal of Maternal-Child Nursing, vol  38, no  2 (2013)  Sutter, M  B , L  Leeman, and A  Hsi  “Neonatal Opioid Withdrawal Syndrome ” Obstetrics and Gynecology Clinics of North America, vol  41, issue 2 (2014)  Teague, A  H , A  J  Jnah, and D  Newberry  “Intraprofessional Excellence in Nursing: Collaborative Strategies for Neonatal Abstinence Syndrome ” Neonatal Network, vol  34, no 6 (2015)  Terplan, M , A  Kennedy-Hendricks, and M  S  Chisolm  “Prenatal Substance Use: Exploring Assumptions of Maternal Unfitness ” Substance Abuse: Research and Treatment (2015)  Tolia, V  N , S  W  Patrick, M  M  Bennett, K  Murthy, J  Sousa, P  B  Smith, R  H  Clark, and A  R  Spitzer  “Increasing Incidence of the Neonatal Abstinence Syndrome in U S  Neonatal ICUs ” The New England Journal of Medicine, vol  372, no  22 (2015)  Wiles, J  R , B  Isemann, L  P  Ward, A  A  Vinks, and H  Akinbi  “Current Management of Neonatal Abstinence Syndrome Secondary to Intrauterine Opioid Exposure ” Journal of Pediatrics, vol  165, no  3 (2014)  The Department of Health and Human Services (HHS) has published several guidance and educational resources related to neonatal abstinence syndrome and prenatal opioid use  According to HHS, these documents serve as tools to help stakeholders, including state entities and health care providers, and policymakers  Examples of these resources are listed below  Centers for Disease Control and Prevention (CDC), Pregnancy and Opioid Medications Factsheet, accessed June 8, 2017, https://www cdc gov/drugoverdose/pdf/pregnancy_opioid_pain_factsheet- a pdf  CDC Public Health Grand Rounds, Primary Prevention and Public Strategies to Prevent Neonatal Abstinence Syndrome (Atlanta, GA: CDC, last updated August 18, 2016), accessed July 19, 2017, https://www cdc gov/cdcgrandrounds/archives/2016/August2016 htm  CDC, Treating for Two: Safer Medication Use in Pregnancy Initiative (Atlanta, GA: CDC, last updated May 5, 2016), accessed June 8, 2017, https://www cdc gov/pregnancy/meds/treatingfortwo  Department of Health and Human Services, Opioids: The Prescription Drug & Heroin Overdose Epidemic (Washington, D C , last reviewed March 24, 2016), accessed June 8, 2017, https://www hhs gov/opioids/index html  Department of Health and Human Services, National Center for Substance Abuse and Child Welfare, Resources & Topics on Neonatal Abstinence Syndrome, accessed June 8, 2017, https://www ncsacw samhsa gov/resources/opioid-use-disorders-and-me dication-assisted-treatment/neonatal-abstinence-syndrome aspx  Jean Y  Ko  et al , “CDC Grand Rounds: Public Health Strategies to Prevent Neonatal Abstinence Syndrome,” Morbidity and Mortality Weekly Report (Centers for Disease Control and Prevention, March 10, 2017), accessed June 8, 2017, https://www cdc gov/mmwr/volumes/66/wr/mm6609a2 htm  National Institute on Drug Abuse, Principles of Substance Abuse Prevention for Early Childhood: A Research Based Guide (last updated March 2016), accessed June 8, 2017, https://www drugabuse gov/publications/principles-substance-abuse-prev ention-early-childhood/principles-substance-abuse-prevention-early-child hood  National Institute on Drug Abuse, Substance Use in Women (last updated September 2016), accessed June 8, 2017, https://www drugabuse gov/publications/research-reports/substance-use-i n-women/summary  Reddy, Uma M  J  M  Davis, Z  Ren, and M  F  Greene, “Opioid Use in Pregnancy, Neonatal Abstinence Syndrome, and Childhood Outcomes: Executive Summary of a Joint Workshop ” Obstetrics and Gynecology, vol  130, issue 1 (July 2017)  Substance Abuse and Mental Health Services Administration, A Collaborative Approach to the Treatment of Pregnant Women with Opioid Use Disorders  HHS Publications No  (SMA) 16-4978  Rockville, MD: Substance Abuse and Mental Health Services Administration, 2016  Substance Abuse and Mental Health Services Administration, “Advancing the Care of Pregnant and Parenting Women With Opioid Use Disorder and Their Infants: A Foundation for Clinical Guidance,” Rockville, MD: Substance Abuse and Mental Health Services Administration, 2016  Substance Abuse and Mental Health Services Administration, “Methadone Treatment for Pregnant Women ” HHS Publication No  (SMA) 14-4124 (Rockville, MD: Substance Abuse and Mental Health Services Administration, revised 2014)  In addition to the contact named above, Rashmi Agarwal, Assistant Director; Amy Leone, Analyst-in-Charge; Melissa Duong; Krister Friday; Jacquelyn Hamilton; Giao N  Nguyen; and Laurie Pachter made key contributions to this report  Drug Control Policy: Information on Status of Federal Efforts and Key Issues for Preventing Illicit Drug Use  GAO-17-766T  Washington, D C : July 26, 2017  Medicaid Expansion: Behavioral Health Treatment Use in Selected States in 2014  GAO-17-529  Washington, D C : July 21, 2017  VA Health Care: Actions Needed to Ensure Medical Facility Controlled Substance Inspection Programs Meet Agency Requirements  GAO-17-242  Washington, D C : February 15, 2017  Highlights of a Forum: Preventing Illicit Drug Use  GAO-17-146SP  Washington, D C : November 14, 2016  Opioid Addiction: Laws, Regulations, and Other Factors Can Affect Medication-Assisted Treatment Access  GAO-16-833  Washington, D C : September 27, 2016  Drug Enforcement Administration: Additional Actions Needed to Address Prior GAO Recommendations  GAO-16-737T  Washington, D C : June 22, 2016  Office of National Drug Control Policy: Progress toward Some National Drug Control Strategy Goals, but None Have Been Fully Achieved  GAO-16-660T  Washington, D C : May 17, 2016  Veterans Justice Outreach Program: VA Could Improve Management by Establishing Performance Measures and Fully Assessing Risks  GAO-16-393  Washington, D C : April 28, 2016  State Marijuana Legalization: DOJ Should Document Its Approach to Monitoring the Effects of Legalization  GAO-16-1  Washington, D C : December 30, 2015  Prescription Drugs: More DEA Information about Registrants’ Controlled Substances Roles Could Improve Their Understanding and Help Ensure Access  GAO-15-471  Washington, D C : June 25, 2015  Mental Health: Better Documentation Needed to Oversee Substance Abuse and Mental Health Services Administration Grantees  GAO-15-405  Washington, D C : May 12, 2015  Prenatal Drug Use and Newborn Health: Federal Efforts Need Better Planning and Coordination  GAO-15-203  Washington, D C : February 10, 2015  Medicare Program Integrity: CMS Pursues Many Practices to Address Prescription Drug Fraud, Waste, and Abuse  GAO-15-66  Washington, D C : October 24, 2014  Office of National Drug Control Policy: Office Could Better Identify Opportunities to Increase Program Coordination  GAO-13-333  Washington D C : March 26, 2013  Child Welfare: States Use Flexible Federal Funds, But Struggle to Meet Service Needs  GAO-13-170  Washington, D C : January 30, 2013 
Report 2:  Better selection criteria for its lender reviews could, in turn, improve identification and remediation of such noncompliance, helping ensure that the 7(a) program serves its target population  Representatives at 8 of the 11 lenders that we contacted said they believed that SBA’s current credit elsewhere criteria are adequate in targeting small business borrowers who cannot obtain credit at reasonable terms  Representatives of these lenders also agreed that the criteria generally serve the types of small businesses that would otherwise have trouble obtaining conventional credit, such as new businesses or those with a shortage of collateral  One lender representative told us its most commonly used criterion related to the overall time in business because of the higher risk of failure  Another lender representative cited the lack of collateral as the most common criterion used  Additionally, representatives at an industry association told us that one of the most commonly used criteria was the one related to loan maturity and many small businesses seek 7(a) loans because they offer repayment terms of up to 10 years, compared to 1 to 3 years for conventional loans  Representatives of two other lenders suggested that the credit elsewhere criteria should not be overly prescriptive, which could limit lenders’ ability to make 7(a) loans to some businesses  For example, one representative said the credit elsewhere criteria should remain flexible because banks have different lending policies  In addition, representatives at three lenders indicated that they were hesitant to use the “other factors” criterion  One lender believed the requirement was open to interpretation and could be used inappropriately with lenders determining their own individual conventional loan policies  Another lender commented that the criterion was vague and rarely used by his institution, noting that SBA should provide some additional guidance on its use  Lenders consider multiple factors in determining whether to offer small businesses a conventional loan or a 7(a) loan, according to stakeholders with whom we spoke  For example, representatives at an industry association stated that a bank goes through several analyses to determine what loan product to offer the borrower  These representatives stated that the credit elsewhere requirement is embedded in the analysis a bank performs, such as whether the borrower qualifies for a loan and has a financial need for an SBA loan and whether the 7(a) program is right for that borrower  Representatives at two other lenders also stated that many small businesses have already been turned down for conventional loans before they seek a 7(a) loan  One representative noted that the “reasonable rates and terms” component of the 7(a) program was important as it allows lenders to look more broadly at a borrower’s needs  For instance, the representative explained, lenders can assess whether repayment terms are reasonable given a particular borrower’s situation and the resources the borrower will have to repay the loan  Economic conditions also affect lending policies, including whether borrowers qualify for a conventional loan, according to representatives at seven lenders with whom we spoke  For example, during the recent economic downturn, banks tightened their underwriting standards for small businesses and were less willing to lend without a government guarantee, according to one lender representative  SBA has issued revised primary operational guidance for the 7(a) program, effective January 1, 2018  As discussed previously, lenders are required to make a determination that the desired credit is not available to the applicant from nonfederal sources  Under the previous guidance, the lender had to determine that some or the entire loan was not available from nonfederal sources or the resources of the applicant business  However under the revised guidance, the scope of nonfederal sources a lender must review was further defined to include sources both related and unrelated to the applicant  The updated guidance states that lenders must consider: Nonfederal sources related to the applicant, including the liquidity of owners of 20 percent or more of the equity of the applicant, their spouses and minor children, and the applicant itself; or Nonfederal sources unrelated to the applicant, including conventional lenders or other sources of credit  Representatives of five lenders told us they have been determining how to interpret the new procedures with a few stating they would like additional guidance, including what information to retain in the file  Representatives of two lenders stated that there is some ambiguity in how to determine nonfederal resources and how to assess whether small business owners have too many available liquid resources to qualify for a 7(a) loan  One representative said that lenders can have different interpretations of what constitutes “available resources,” which is not specified in the new SOP  As a result, he said, there may be some confusion about how to assess family members of the borrower who have high net worths and whether the borrower should decline a family member contribution to qualify for an SBA loan  A representative of one lender stated that lenders will not know what SBA expects until loans are approved under the new procedures, default, and are then reviewed  Another lender’s representative suggested additional guidance on documentation, such as whether the bank must obtain a personal financial statement for each owner of the business  A SBA staff told us SBA has provided multiple training presentations to SBA staff, lenders, and trade associations on the statutory changes to the credit elsewhere requirements and standard operating procedure updates  These have included a presentation at a trade association conference, four monthly conference calls for SBA staff, and two conference calls for SBA lenders  SBA staff said SBA also plans to hold monthly training sessions with SBA field offices, quarterly training sessions with the industry, and at least four training sessions in 2018 at lender trade conferences  Additionally, a representative from an industry association told us it is providing industry training on SBA’s revised procedures, including the credit elsewhere liquidity requirement  SBA’s 7(a) loan program is required to serve creditworthy small business borrowers who cannot obtain credit through a conventional lender at reasonable terms, and SBA largely relies on lenders with delegated authority to make credit elsewhere determinations  However, although there is a high rate of lender noncompliance with the credit elsewhere documentation requirement, SBA does not require its reviewers to document their assessment of the policies and procedures lenders use to meet the requirement  Without better information from lender reviews on how lenders are implementing the requirement to document their credit elsewhere decisions, SBA may be limited in its ability to promote compliance with requirements and, in turn, use such information to help ensure that 7(a) loans are reaching their target population  Furthermore, SBA does not routinely collect or analyze information on the criteria used for credit elsewhere justifications to evaluate patterns in lender practices  SBA recently began collecting some information on lenders’ use of the criteria, but this information is limited, and SBA does not analyze the information that it does collect to better understand lenders’ practices  Without more robust information and analysis, SBA may be limited in its ability to understand how lenders are using the credit elsewhere criteria and whether 7(a) loans are reaching borrowers who cannot obtain credit from other sources at reasonable terms  We are making the following three recommendations to SBA  The Administrator of SBA should require reviewers to consistently document their assessments of a lender’s policies and practices  (Recommendation 1) The Administrator of SBA should use its on-site and off-site reviews to routinely collect information on lenders’ use of credit elsewhere criteria as part of its monitoring of lender practices related to the credit elsewhere requirement  (Recommendation 2) The Administrator of SBA should analyze information on lenders’ use of credit elsewhere criteria obtained from its reviews to identify lenders that may be at greater risk of noncompliance and to inform its selection of lenders for further review for credit elsewhere compliance  (Recommendation 3) We provided a draft of this report for review and comment  SBA’s written comments are reprinted in appendix IV  SBA generally agreed with the recommendations  SBA also provided additional comments on certain statements in the draft report, which are summarized below with our responses  SBA noted that the draft Highlights did not discuss how credit elsewhere is determined for nondelegated loans  We have not revised the Highlights in response to this comment because our review focused on delegated lenders  In the body of the report we note that approximately 70 percent of 7(a) loans are approved under delegated authority  We also refer to SBA’s nondelegated loans in the report for additional context  According to SBA, the statement on our draft Highlights did not fully reflect its monitoring of lender compliance  SBA identified a variety of reviews it uses in addition to on-site reviews by third party contractors, which we discuss in the body of the report  We have modified the Highlights to reflect these other reviews  Also in reference to the draft Highlights, SBA stated that it provides oversight on every on-site lender review and that an SBA employee is present as a subject-matter expert on every review  We revised the Highlights by adding that SBA provides oversight to the on-site reviews conducted by third-party contractors  In response to a statement in our draft report that SBA guarantees loans to small businesses for working capital and other general business purposes, SBA commented that working capital generally is not the primary purpose for SBA-guaranteed loans  We did not revise the statement because SBA’s SOP 50 10 5 (version J) specifies that SBA’s 7(a) loan proceeds may be used for permanent working capital and revolving working capital, among other things  In relation to a footnote in our report that mentions two lender reviews for which we did not receive documentation, SBA stated that on February 15, 2018, it provided documentation to us related to the reviews and that we had confirmed its receipt  However, the text in the footnote in question refers to two targeted lender reviews from 2016 that included corrective actions  The information SBA provided to us on February 15, 2018, was related to on-site reviews conducted in 2016  As a result, we did not revise the footnote  SBA’s letter also contained technical comments that we incorporated as appropriate  We are sending copies of this report to congressional committees, agencies, and other interested parties  In addition, this report will be available at no charge on our website at http://www gao gov  If you or your staff members have any questions about this report, please contact me at (202) 512-8678 or shearw@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 V  This report discusses (1) 7(a) lending to selected categories of small business borrowers from fiscal years 2007 through 2016; (2) how the Small Business Administration (SBA) monitors lenders’ compliance with the credit elsewhere requirement; (3) the extent to which SBA evaluates trends in lender practices related to the credit elsewhere requirement; and (4) lenders’ views on the criteria used to determine eligibility for 7(a) loans and other issues related to the 7(a) program  For background on the 7(a) program and the credit elsewhere requirement, we reviewed the legislative history of the 7(a) program and our previous reports  We also interviewed officials from SBA’s Office of Credit Risk Management on guidance provided to 7(a) lenders  For background on constraints in the small business credit market, we reviewed recent academic literature on the characteristics of small businesses that historically have had more difficulty accessing credit  In addition, we reviewed recent studies published by the Federal Reserve Banks of Atlanta; Cleveland; Kansas City; and New York  To describe the population of borrowers served by the 7(a) program, we selected characteristics (such as gender, minority status, and percentage of new business) that we used in our 2007 report and that were the subject of the recent studies by Federal Reserve Banks  We obtained and analyzed SBA loan-level data to describe 7(a) loans and borrowers  Specifically, SBA provided us with 581,393 records from its administrative data systems, which contained information on all loans approved and disbursed in fiscal years 2007 through 2016  The SBA data included various types of information describing each loan, including the total gross approval amount; the amount guaranteed by SBA; the loan term; and the interest rate; delivery method; and status of the loan  The SBA data also included information on borrower characteristics: Age of business  Firms were classified as new (less than 2 years in operation) or existing  Gender  Firms were classified as 100 percent male-owned; 50 percent or greater women owned; 50 percent or less women-owned; or “unknown ” Information on gender was voluntarily provided by borrowers  Economically distressed area  We identified borrowers in economically distressed areas by matching borrower zip codes provided by SBA to those in the 2011 through 2015 American Community Survey  We defined distressed areas as zip codes where at least 20 percent of households had incomes below the national poverty line  In about 1 percent of the cases, we were unable to classify a lender because a zip code had changed or had insufficient population to report a poverty rate  We consider 1 percent of unmatched cases to be low by data reliability standards  Race/ethnicity  Borrowers were placed in one of nine categories of race/ethnicity, including an “unknown” category  We aggregated these to create minority, nonminority, and undetermined categories  The minority category included all borrowers who reported being a race/ethnicity other than white  The nonminority category included borrowers who reported being white  Information on race was voluntarily provided by borrowers  Industry  Firms were assigned a North American Industrial Classification code  These six-digit codes begin with a two-digit sector code that we used to draw more general conclusions about industries  Geographic information  The data provided the state where the borrower is located  In addition, we obtained information from SBA on loan- and lender-level Small Business Risk Portfolio Solution scores (predictive scores) provided by Dunn & Bradstreet and Fair Isaac Company, for loans approved in fiscal year 2016, the latest available  We were able to obtain predictive scores for approximately 81 percent of the loans for which SBA had provided other information  According to SBA, some loans may not have been disbursed at the time we obtained the predictive scores and, as a result, we do not have scores associated with these loans  We analyzed the information to determine the range of predictive scores and the range of average predictive scores by lender  To assess the reliability of loan-level data on borrower and loan characteristics and predictive scores we received from SBA, we interviewed agency officials knowledgeable about the data and reviewed related documentation  We also conducted electronic testing, including checks for outliers, missing data, and erroneous values  We determined that the data were sufficiently reliable for the purposes of describing the characteristics of borrowers who received 7(a) loans and the distribution of predictive scores  To assess how SBA monitors lenders’ compliance with the credit elsewhere requirement and criteria, we reviewed SBA’s standard operating procedures and other guidance on 7(a) program regulations and lender oversight  Specifically, we reviewed SOP 50 10 5 (versions I and J) on Lender and Development Company Loan Programs, SOP 50 53(A) on Lender Supervision and Enforcement, and SOP 51 00, On-Site Lender Reviews/Examinations, as well as information and policy notices related to the credit elsewhere requirement  Additionally, we interviewed representatives including those at SBA’s Office of Capital Access and Office of Credit Risk Management on lender oversight and lender review processes  We reviewed all the on-site lender review reports (40 reviews), including corrective actions or requirements related to the credit elsewhere requirement (documentation for 11 lenders), and targeted review reports that had credit elsewhere findings (7 reviews) that SBA conducted in fiscal year 2016  We also interviewed officials and reviewed recent reports from SBA’s Office of Inspector General  To assess the extent to which SBA evaluates trends in lender practices related to the credit elsewhere requirement, we interviewed SBA officials and reviewed documentation for SBA’s online portal for loan origination  We also incorporated information from interviews with a nongeneralizable, nonrepresentative sample of 7(a) lenders, which we discuss below  To obtain lenders’ views on the criteria used to determine eligibility for 7(a) loans and other program-related issues, we interviewed SBA staff including from the Office of Capital Access, and representatives of the National Association of Government Guaranteed Lenders; American Bankers Association; Independent Community Bankers Association; and National Federation of Independent Businesses  We also interviewed 11 banks (one bank provided written responses) in order to obtain the lender perspective of credit elsewhere  Nine of the banks were selected by us using a random process that concentrated on larger lenders  These nine lenders selected by us represent about 13 percent of the loans approved and 16 percent of the dollars approved in 2016  In addition, we interviewed two additional banks that represented an industry group – one larger bank and one small bank  Although we partially selected at random, the lenders we interviewed should not be considered generalizable because of the small number  We conducted this performance audit from August 2017 to June 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  In this appendix, we provide information on the total amount and number of approved 7(a) loans and the top eight industry sectors receiving 7(a) loans  Data are also presented on fiscal year 2016 loan volume by state and per capita  As shown in figure 6 below, the total amount of approved 7(a) loans decreased during the period associated with the Great Recession (2007 through 2009)  From fiscal year 2009 on, the total amount of approved 7(a) loans increased until a decline in fiscal year 2012  During this timeframe, the American Recovery and Reinvestment Act of 2009 and the Small Business Jobs Act of 2010 provided fee relief and higher guaranties  The Small Business Jobs Act of 2010 also provided a temporary increase in Small Business Administration (SBA) Express loan limits to $1 million (instead of $350,000)  These programs have since expired  7(a) Loans by North American Industry Classification System (NAICS) code  Table 1 shows the largest eight industrial sectors by proportion of the total amount of 7(a) loans approved, using the NAICS code  The combined share of the top eight sectors declined slightly from 85 percent to 80 percent of the total lending from fiscal years 2007 through 2016, with an average of 82 percent  During this period, the Accommodation and Food Services sector had the largest average share of total loan amount at 17 percent, followed by the Retail Trade sector at 15 percent  Approved loan amount and per capita dollars by state  As shown in figure 7, California; Texas; Florida; Georgia; and New York received the highest total of approved loan dollars in fiscal year 2016  The average approval amount across all loans was $380,619  Georgia and Arkansas had the largest average approval amount in 2016  Also, during this period, Utah; Colorado; Georgia; California; and Washington received the highest per capita approved loan dollars  In fiscal-year 2016, creditworthiness varied widely among 7(a) program borrowers  We analyzed creditworthiness using the Small Business Administration’s (SBA) Small Business Risk Portfolio Solution score (predictive score), which ranges from 70 to 300, with 300 indicating the least risky loan  According to SBA, loans with scores above 180 are considered “lower risk,” scores between 140 and 179 are considered “moderate risk,” and scores 139 and lower are considered “higher risk ” There did not appear be differences in score based on the gender of the borrower or the age of the business  While SBA relies on the Predictive Score data to identify lenders that may pose excessive risk to the SBA 7(a) portfolio, the data also provide potential insights related to lender implementation of the credit elsewhere requirement  Variation  We found that some 7(a) borrowers were much more creditworthy than others  In 2016, the only year for which we obtained data, the predictive score at origination varied widely among borrowers  In 2016, the scores of borrowers ranged from a low of 91 to a high of 246  However, most scores were between 171 and 203, and the median score was 188  Race/ethnicity  We found that there were slight differences in creditworthiness by race/ethnicity, with median scores ranging from 180 to 189 depending on the category  Specifically, loans to African Americans in 2016 had a median score of 180, and loans to Hispanics had a median score of 183  In contrast, loans to whites had a median score of 188, and loans to Asian and Pacific Islanders had a median score of 189  Lender size  We found that lenders with larger numbers of SBA loans tended to have slightly more creditworthy borrowers  The top 5 percent of lenders had a median average score of 187, whereas the bottom 75 percent of lenders had a median average score of 182 5  Among the top 5 percent of lenders (with 374 loans per lender on average, collectively representing about 70 percent of the loans approved), the average score ranged from 171 to 195  Among all lenders, the average score ranged from 116 to 233  However, because many lenders only approved one or two loans in 2016, the average may reflect very few borrowers for that lender, making it difficult to tell whether the scores reflect a real difference between lenders  In addition to the contact named above, Harry Medina (Assistant Director); Janet Fong (Analyst in Charge); Benjamin A  Bolitzer; Gita DeVaney; David S  Dornisch; Amanda D  Gallear (intern); Marc W  Molino; Jennifer W  Schwartz; and Tyler L  Spunaugle made key contributions to this report 

ground_truth: As the opioid crisis has increased in recent years, so has the number of pregnant women who use opioids, which can result in NAS. A recent peer-reviewed study found that cases of NAS have grown nearly five-fold between 2000 and 2012 and that most infants with NAS are covered under Medicaid. The Comprehensive Addiction and Recovery Act of 2016 includes a provision for GAO to examine NAS in the United States and related treatment services covered under Medicaid. This report 1) describes the hospital and non-hospital settings for treating infants with NAS and how Medicaid pays for services, 2) describes recommended practices and challenges for addressing NAS, and 3) examines HHS's strategy for addressing NAS. GAO reviewed HHS documentation and interviewed HHS officials. GAO also conducted site visits to four states—Kentucky, Vermont, West Virginia, and Wisconsin—selected based on several factors, including incidence rates of NAS and geographic variation. GAO interviewed stakeholders from 32 organizations, including health care providers and state officials in the selected states. The prenatal use of opioids or other drugs can produce a withdrawal condition in newborns known as neonatal abstinence syndrome (NAS). Health care providers, state officials, and other stakeholders told GAO that most infants with NAS are treated in the hospital—such as in a neonatal intensive care unit—though some may be referred to a non-hospital setting—such as a neonatal withdrawal center with nursery rooms—to complete their treatment. The table below provides more information on settings for treating infants with NAS and on how Medicaid pays for services in these settings. According to stakeholders GAO interviewed and literature reviewed, there are several recommended practices and challenges associated with addressing NAS. The most frequently recommended practices included prioritizing non-pharmacologic treatment to infants—treatment that does not involve medications—such as allowing the mother to reside with the infant during treatment; educating mothers and health care providers on treatment of NAS, among other things; and using a protocol in the hospital or non-hospital setting for screening and treating infants with NAS. The most frequently cited challenges included the maternal use of multiple drugs—or polysubstance use—as it can exacerbate NAS symptoms; stigma faced by pregnant women who use opioids; hospital staff burden and limited physical capacity to care for infants with NAS; limited coordination of care for mothers and infants with NAS; and gaps in research and data on NAS, such as research on the long-term effects of the condition. In May 2017, the Department of Health and Human Services (HHS) published a strategy document that makes key recommendations to address NAS. The Strategy recommends, for example, that health care providers receive continuing education on managing and treating infants with NAS and promote non-pharmacologic treatment. According to HHS officials, these recommendations will inform planning and policy across the department. However, HHS has yet to determine how and when the recommendations will be implemented, including establishing priorities; the roles and responsibilities of other federal, state, and public stakeholders; implementation timeframes; and methods for assessing progress. HHS officials told GAO that they expect to develop an implementation plan sometime in 2017 but had no timeline for doing so. Without a plan that clearly specifies how HHS will implement the Strategy and assess its progress, the department increases the risk that its recommendations for addressing NAS will not be implemented. HHS should expeditiously develop a plan for implementing the recommendations included in its strategy related to addressing NAS. HHS concurred that it should expeditiously address NAS, but noted implementation of the strategy is contingent on funding.