You are given two reports by the government agency.  

Report 1:
This report provides responses to frequently asked questions about the Temporary Assistance for Needy Families (TANF) block grant. It is intended to serve as a quick reference to provide easy access to information and data. Appendix B presents a series of tables with state-level data. This report does not provide information on TANF program rules (for a discussion of TANF rules, see CRS Report RL32748, The Temporary Assistance for Needy Families (TANF) Block Grant: A Primer on TANF Financing and Federal Requirements , by Gene Falk). On January 24, 2019, the President signed legislation ( P.L. 116-4 ) that funds TANF and related programs through June 30, 2019. The legislation permits states to receive their quarterly TANF grants for the 2 nd quarter (January through March) and 3 rd quarter (April through June) of FY2019. Additional legislation would be required to pay TANF grants in the final quarter (July through September) of FY2019. TANF programs are funded through a combination of federal and state funds. In FY2018, TANF has two federal grants to states. The bulk of the TANF funding is in a basic block grant to the states, totaling $16.5 billion for the 50 states, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, and American Indian tribes. There is also a contingency fund available that provides extra federal funds to states that meet certain conditions. Additionally, states are required to expend a minimum amount of their own funds for TANF and TANF-related activities under what is known as the maintenance of effort (MOE) requirement. States are required to spend at least 75% of what they spent in FY1994 on TANF's predecessor programs. The minimum MOE amount, in total, is $10.3 billion per year for the 50 states, the District of Columbia, and the territories. TANF was created in the 1996 welfare reform law, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA, P.L. 104-193 ). A TANF basic block grant amount—both nationally and for each state—was established in the 1996 welfare reform law. The amount established in that law for the 50 states, District of Columbia, territories, and tribes was $16.6 billion in total. From FY1997 through FY2016, that amount remained the same. It was not adjusted for changes that occur over time, such as inflation, the size of the TANF assistance caseload, or changes in the poverty population. During this period, the real (inflation-adjusted) value of the block grant declined by one-third (33.1%). Beginning with FY2017, the state family assistance grant was reduced by 0.33% from its historical levels to finance TANF-related research and technical assistance. The reduced block grant amount is $16.5 billion. Table 1 shows the state family assistance grant, in both nominal (actual) and real (inflation-adjusted) dollars for each year, FY1997 through FY2018. In real (inflation-adjusted) terms, the FY2018 block grant was 36% below its value in FY1997. Figure 1 shows the uses of federal TANF grants to states and state MOE funds in FY2017. In FY2017, a total of $31.1 billion of both federal TANF and state MOE expenditures were either expended or transferred to other block grant programs. Basic assistance—ongoing benefits to families to meet basic needs—represented 23% ($7.1 billion) of total FY2017 TANF and MOE dollars. TANF is a major contributor of child care funding. In FY2017, $5 billion (16% of all TANF and MOE funds) were either expended on child care or transferred to the child care block grant (the Child Care and Development Fund, or CCDF). TANF work-related activities (including education and training) were the third-largest TANF and MOE spending category at $3.3 billion, or 11% of total TANF and MOE funds. TANF also helps low-wage parents by helping to finance state refundable tax credits, such as state add-ons to the Earned Income Tax Credit (EITC). TANF and MOE expenditures on refundable tax credits in FY2017 totaled $2.8 billion, or 9% of total TANF and MOE spending. TANF is also a major contributor to the child welfare system, which provides foster care, adoption assistance, and services to families with children who either have experienced or are at risk of experiencing child abuse or neglect, spending about $2.2 billion on such activities. TANF and MOE funds also help fund state prekindergarten (pre-K) programs, with total FY2017 expenditures for that category also at $2.5 billion. TANF and MOE funds are also used for short-term and emergency benefits and a wide range of other social services. For state-specific information on the use of TANF funds, see Table B-1 and Table B-2 . TANF law permits states to "reserve" unused funds without time limit. This permits flexibility in timing of the use of TANF funds, including the ability to "save" funds for unexpected occurrences that might increase costs (such as recessions or natural disasters). At the end of FY2017 (September 30, 2017, the most recent data currently available), a total of $5.1 billion of federal TANF funding remained neither transferred nor spent. However, some of these unspent funds represent monies that states had already committed to spend later. At the end of FY2017, states had made such commitments to spend—that is, had obligated—a total of $1.8 billion. At the end of FY2017, states had $3.3 billion of "unobligated balances." These funds are available to states to make new spending commitments. Table B-3 shows unspent TANF funds by state. This number is not known. Federal TANF reporting requirements focus on families receiving only ongoing assistance . There is no complete reporting on families receiving other TANF benefits and services. Assistance is defined as benefits provided to families to meet ongoing, basic needs. It is most often paid in cash. However, some states use TANF or MOE funds to provide an "earnings supplement" to working parents added to monthly Supplemental Nutrition Assistance Program (SNAP) allotments. These "earnings supplements" are paid separately from the regular TANF cash assistance program. Additionally, TANF MOE dollars are used to fund food assistance for immigrants barred from regular SNAP benefits in certain states. These forms of nutrition aid meet an ongoing need, and thus are considered TANF assistance. As discussed in a previous section of this report, TANF basic assistance accounts for about 24% of all TANF expenditures. Therefore, the federal reporting requirements that pertain to families receiving "assistance" are likely to undercount the number of families receiving any TANF-funded benefit or service. Table 2 provides assistance caseload information. A total of 1.2 million families, composed of 3.1 million recipients, received TANF- or MOE-funded assistance in September 2018. The bulk of the "recipients" were children—2.3 million in that month. For state-by-state assistance caseloads, see Table B-4 . Figure 2 provides a long-term historical perspective on the number of families receiving assistance from TANF or its predecessor program, from July 1959 to September 2017. The shaded areas of the figure represent months when the national economy was in recession. Though the health of the national economy has affected the trend in the cash assistance caseload, the long-term trend in receipt of cash assistance does not follow a classic countercyclical pattern. Such a pattern would have the caseload rise during economic slumps, and then fall again during periods of economic growth. Factors other than the health of the economy (demographic trends, policy changes) also have influenced the caseload trend. The figure shows two periods of sustained caseload increases: the period from the mid-1960s to the mid-1970s and a second period from 1988 to 1994. The number of families receiving assistance peaked in March 1994 at 5.1 million families. The assistance caseload fell rapidly in the late 1990s (after the 1996 welfare reform law) before leveling off in 2001. In 2004, the caseload began another decline, albeit at a slower pace than in the late 1990s. During the recent 2007-2009 recession and its aftermath, the caseload began to rise from 1.7 million families in August 2008, peaking in December 2010 at close to 2.0 million families. By September 2018, the assistance caseload had declined to 1.2 million families. Table B-5 shows recent trends in the number of cash assistance families by state. Before PRWORA, the "typical" family receiving assistance has been headed by a single parent (usually the mother) with one or two children. That single parent has also typically been unemployed. However, over the past 20 years the assistance caseload decline has occurred together with a major shift in the composition of the rolls. Figure 3 shows the change in the size and composition of the assistance caseload under both AFDC (1988 and 1994) and TANF. In FY1988, an estimated 84% of AFDC families were headed by an unemployed adult recipient. In FY2016, families with an unemployed adult recipient represented 32% of all cash assistance families. This decline occurred, in large part, as the number of families headed by unemployed adult recipients declined more rapidly than other components of the assistance caseload. In FY1994, a monthly average of 3.8 million families per month who received AFDC cash assistance had adult recipients who were not working. In FY2016, a monthly average of 485,000 families per month had adult recipients or work-eligible individuals, with no adult recipient or work-eligible individual working. With the decline in families headed by unemployed adults, the share of the caseload represented by families with employed adults and "child only" families has increased. In FY2017, families with all adult recipients unemployed and families with employed adult recipients each represented 31% of all assistance families. The latter category includes families in "earnings supplement" programs separate from the regular TANF cash assistance program. "Child-only" families are those where no adult recipient receives benefits in their own right; the family receives benefits on behalf of its children. The share of the caseload that was child-only in FY2017 was 38%. In FY2017, families with a nonrecipient, nonparent relative (grandparents, aunts, uncles) represented 14% of all assistance families. Families with ineligible, noncitizen adults or adults who have not reported their citizenship status made up 9% of the assistance caseload in that year. Families where the parent received Supplemental Security Income (SSI) and the children received TANF made up 9% of all assistance families in FY2017. There are no federal rules that help determine the amount of TANF cash benefits paid to a family. (There are also no federal rules that require states to use TANF to pay cash benefits, though all states do so.) Benefit amounts are determined solely by the states. Most states base TANF cash benefit amounts on family size, paying larger cash benefits to larger families on the presumption that they have greater financial needs. The maximum monthly cash benefit is usually paid to a family that receives no other income (e.g., no earned or unearned income) and complies with program rules. Families with income other than TANF often are paid a reduced benefit. Moreover, some families are financially sanctioned for not meeting a program requirement (e.g., a work requirement), and are also paid a lower benefit. Figure 4 shows the maximum monthly TANF cash benefit by state for a single mother caring for two children (family of three) in July 2016. The benefit amounts shown are those for a single-parent family with two children. For a family of three, the maximum TANF benefit paid in July 2017 varied from $170 per month in Mississippi to $1,201 per month in New Hampshire. The map shows a regional pattern to the maximum monthly benefit paid, with lower benefit amounts in the South than in other regions. Only New Hampshire (at 60% of the federal poverty guidelines) had a maximum TANF cash assistance amount for this sized family in excess of 50% of poverty-level income. TANF's main federal work requirement is actually a performance measure that applies to the states, rather than individual recipients. States determine the work rules that apply to individual recipients. The TANF statute requires states to have 50% of their caseload meet standards of participation in work or activities—that is, a family member must be in specified activities for a minimum number of hours. There is a separate participation standard that applies to the two-parent portion of a state's caseload, requiring 90% of the state's two-parent caseload to meet participation standards. However, the statutory work participation standards are reduced by a "caseload reduction credit." The caseload reduction credit reduces the participation standard one percentage point for each percentage point decline in a state's caseload. Additionally, under a regulatory provision, a state may get "extra" credit for caseload reduction if it spends more than required under the TANF MOE. Therefore, the effective standards states face are often less than the 50% and 90% targets, and vary by state and by year. States that do not meet the TANF work participation standard are at risk of being penalized through a reduction in their block grant. However, penalties can be forgiven if a state claims, and the Secretary of HHS finds, that it had "reasonable cause" for not meeting the standard. Penalties can also be forgiven for states that enter into "corrective compliance plans," and subsequently meet the work standard. The 50% and 90% target standards that states face, as well as the caseload reduction credit, date back to the 1996 welfare reform law. However, the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) made several changes to the work participation rules effective in FY2007 The caseload reduction credit was changed to measure caseload reduction from FY2005, rather than the original law's FY1995. The work participation standards were broadened to include families receiving cash aid in "separate state programs." Separate state programs are programs run with state funds, distinct from a state's "TANF program," but with expenditures countable toward the TANF MOE. HHS was instructed to provide definition to the allowable TANF work activities listed in law. HHS was also required to define what is meant by a "work-eligible" individual, expanding the number of families that are included in the work participation calculation. States were required to develop plans and procedures to verify work activities. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ), a law enacted in response to the sharp economic downturn of 2007-2009, held states "harmless" for caseload increases affecting the work participation standards for FY2009 through FY2011. It did so by allowing states to "freeze" caseload reduction credits at pre-recession levels through the FY2011 standards. HHS computes two work participation rates for each state that are then compared with the effective (after-credit) standard to determine if it has met the TANF work standard. An "all-families" work participation rate is computed and compared with the all-families effective standard (50% minus the state's caseload reduction credit). HHS also computes a two-parent work participation rate that is compared with the two-parent effective standard (90% minus the state's caseload reduction credit). Figure 5 shows the national average all-families work participation rate for FY2002 through FY2017. For the period FY2002 through FY2011, states achieved an average all-families work participation rate hovering around 30%. The work participation rate increased since then. In FY2016, it exceeded 50% for the first time since TANF was established. However, it is important to note that the increase in the work participation rate has not come from an increase in the number of recipients in regular TANF assistance programs who are either working or in job preparation activities. This increase stems mostly from states creating new "earnings supplement" programs that use TANF funds to aid working parents in the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) or who have left the regular TANF assistance programs for work. Figure 6 shows which states did not meet the TANF all-families work participation standards from FY2006 through FY2017. Before FY2007, the first year that DRA was effective, only a few jurisdictions did not meet TANF all-families work participation standards. However, in FY2007, 15 jurisdictions did not meet the all-families standard. This number declined to 9 in FY2008 and 8 in FY2009. In FY2012, despite the uptick in the national average work participation rate, 16 states did not meet the all-family standard, the largest number of states that did not meet their participation standards in any one year since the enactment of TANF. FY2012 was the year that ARRA's "freeze" of the caseload reduction credit expired, and states were generally required to meet higher standards than in previous years. The number of jurisdictions that did not meet the all-families standard declined over the FY2012 to FY2017 period. In FY2017, two jurisdictions did not meet the all-family participation standard: Nevada and Guam. In addition to meeting a work standard for all families, TANF also imposes a second standard—90%—for the two-parent portion of its cash assistance caseload. This standard can also be lowered by caseload reduction. Figure 7 shows whether each state met its two-parent work participation standard for FY2006 through FY2017. However, the display on the table is more complex than that for reporting whether a state met or did not meet its "all family" rate. A substantial number of states have reported no two-parent families subject to the work participation standard. These states are denoted on the table with an "NA," indicating that the two-parent standard was not applicable to the state in that year. Before the changes made by the DRA were effective, a number of states had their two-parent families in separate state programs that were not included in the work participation calculation. When DRA brought families receiving assistance in separate state programs into the work participation rate calculations, a number of states moved these families into solely state-funded programs. These are state-funded programs with expenditures not countable toward the TANF maintenance of effort requirement, and hence are outside of TANF's rules. For states with two-parent families in their caseloads, the table reports "Yes" for states that met the two-parent standard, and "No" for states that did not meet the two-parent standard. Of the 28 jurisdictions that had two-parent families in their FY2017 TANF work participation calculation, 19 met the standard and 9 did not. Appendix A. Supplementary Tables Appendix B. State Tables

 

 Report 2:
Medicare pays for laboratory tests that are performed individually or in a group. For individual tests, laboratories submit claims to Medicare for each test they perform that is on the CLFS; tests are identified using a billing code. Prior to the implementation of PAMA in 2018, the payment rates on the CLFS were based on rates charged for laboratory tests in 1984 through 1985 adjusted for inflation. Additionally, 57 geographic jurisdictions had their own fee schedules for laboratory tests. CMS used the 57 separate fee schedules to calculate a national limitation amount, which served as the maximum payment for individual laboratory tests. Thus, the payment rate for an individual test was the lesser of the amount claimed by the laboratory, the local fee for a geographic area, or the national limitation amount for a particular test. Medicare pays bundled payment rates for certain laboratory tests that are performed as a group, called panel tests. Panel tests can be divided into two categories—those without billing codes and those with billing codes. Panel tests without billing codes are composed of at least 2 of 23 distinct component tests. Additionally, there are 7 specific combinations of these 23 component tests that are commonly used and have their own billing code. Prior to 2018, Medicare paid for both types of panel tests (those without or with a billing code) using a bundled rate based on the number of tests performed, with modest payment increases for each additional test conducted. For example, in 2017, Medicare paid $7.15 for panel tests with two component tests and $9.12 for panel tests with 3 component tests, with a maximum bundled payment rate of $16.64 for all 23 component tests. Prior to 2018, the Medicare Administrative Contractors would count the number of tests performed before determining the appropriate bundled payment rate. For those panel tests with a billing code, the payment rate was the same if laboratories used the associated billing code for the panel test or listed each of the component tests separately. After PAMA’s implementation in 2018, the 57 separate fee schedules for individual laboratory tests were replaced with a single national fee schedule. The payment rates for this single national fee schedule were based on private-payer rates for laboratory tests paid from January 1, 2016 through June 30, 2016. Specifically, the payment rate for an individual test was generally based on the median private-payer rates for a given test, weighted by test volume. Payment for panel tests also changed in 2018. For panel tests without billing codes, Medicare Administrative Contractors no longer counted the number of component tests performed to determine the bundled payment rate; instead, Medicare paid the separate rate for each component test in the panel. For panel tests with a billing code, the payment rate depended on how the laboratory submitted the claim. If a laboratory used the billing code associated with the panel test, Medicare paid the bundled payment rate for that billing code. If a laboratory submitted a claim for the panel test, but listed each of the component tests separately instead of using the panel test’s billing code, Medicare paid the individual payment rate for each component test. Table 1 below summarizes the changes to payment rates before and after 2018. Multiple types of laboratories receive payment under Medicare. The three laboratory types that received the most revenue from the CLFS in 2016 were independent laboratories, hospital-outreach laboratories, and physician-office laboratories. (See table 2.) Estimates of the size of the total U.S. laboratory market vary. For example, the Healthcare Fraud Prevention Partnership estimated that the laboratory industry received $87 billion in revenue in 2017, while another market report estimated the laboratory industry received $75 billion in revenue in 2016. Similar to Medicare, the three laboratory types that generally receive the most revenue overall are independent laboratories, hospital-outreach laboratories, and physician-office laboratories, when laboratory tests performed in hospital inpatient and outpatient settings were excluded. Estimates of revenue received by these laboratories also vary. For example, in recent years, estimates of the share of laboratory industry revenue generated by independent laboratories ranged from 37 percent to 54 percent. Additionally, estimates of revenue generated by hospital- outreach laboratories recently ranged from 21 to 35 percent, and physician-office laboratories ranged from 4 to 11 percent of total laboratory industry revenue. Private-payer rates for laboratory tests conducted by the three largest laboratory types generally vary by type and other characteristics, according to market reports and the laboratory industry officials we interviewed. Independent laboratories. These laboratories generally receive lower private-payer rates than other types of laboratories, according to industry officials we interviewed. Market reports we reviewed noted that about half of the independent laboratory market is dominated by two national laboratories and that these national laboratories provide more competitive pricing by performing a large volume of tests at one time. Medicare accounted for a smaller proportion of the revenue earned by these two national laboratories (12 percent), compared to other laboratories, according to another market report we reviewed. In contrast, a different market report noted that smaller, independent laboratories tend to earn more of their revenue from Medicare (34 percent). Hospital-outreach laboratories. These hospital-affiliated laboratories typically receive relatively higher private-payer rates, according to industry officials we interviewed. Although hospital- outreach laboratories perform tests similar to other laboratories, they can obtain above-average payment rates by leveraging the market power of their affiliated hospital when negotiating rates with private payers, according to industry officials and market reports. Hospital-outreach laboratories generally receive about 25 to 30 percent of their revenue from the Medicare CLFS. Physician-office laboratories. Physician-office laboratories typically receive higher private-payer rates than independent laboratories, according to a recent analysis by a laboratory industry association. This industry association also noted that the cost structure to operate in a setting such as a physician-office laboratory is different than in large independent laboratories, as the physician-office laboratory is unable to conduct a large number of tests at one time. Officials from another industry association we interviewed said that payment rates for these laboratories are generally dependent on the size of the physician practice group. These same officials told us that larger physician groups (e.g., 10 or more physicians) typically negotiate higher rates from private payers than smaller physician groups. Most physician-office laboratories received less than $25,000 in revenue per year from Medicare, according to CMS. Additionally, in 2013, the Department of Health and Human Services Office of Inspector General found that Medicare’s payment rates on the CLFS were higher than rates paid by some private health insurance plans. Specifically, it found that Medicare rates for laboratory tests were 18 percent to 30 percent higher than rates paid by certain insurers under health benefits plans for federal employees. Definition of Applicable Laboratories Required to Report Private-Payer Data to CMS CMS defined applicable laboratories as those meeting four criteria: (1) they met the definition of laboratory under regulations implementing the Clinical Laboratory Improvement Amendments of 1988; (2) they billed Medicare Part B under their own Medicare billing number, also called the national provider identifier; (3) more than 50 percent of their total Medicare revenues came from the Clinical Laboratory Fee Schedule (CLFS) and/or the Physician Fee Schedule; and (4) they received at least $12,500 in Medicare revenue from the CLFS from January 1, 2016, through June 30, 2016. CMS analyzed private-payer data it collected from about 2,000 laboratories to develop new payment rates for individual laboratory tests on the CLFS. PAMA defined laboratories required to report private-payer data, called applicable laboratories, as laboratories that meet certain criteria. (See sidebar.) Applicable laboratories with their own specific billing number, the NPI, submitted these data to CMS. If one organization operated multiple applicable laboratories, each with its own NPI, then the organization could report data to CMS for multiple applicable laboratories. CMS collected data from applicable laboratories on payments they received from private payers during the first half of 2016. Specifically, CMS collected data on (1) the unique billing code associated with a laboratory test; (2) the private-payer rate for each laboratory test for which final payment was made during the data collection period (January 1, 2016, through June 30, 2016); and (3) the volume of tests performed for each unique billing code at that private- payer rate. For the data CMS collected between January 1, 2017, and May 30, 2017, CMS relied on the entities reporting to CMS to attest to the completeness and accuracy of the data they submitted. CMS relied on each laboratory to identify whether or not it was an applicable laboratory and took steps to assist laboratories in meeting reporting requirements. According to CMS officials, they relied on laboratories to self-identify as applicable laboratories because they were unable to accurately identify the number of laboratories required to report. To assist laboratories, CMS issued multiple guidance documents to the industry outlining the criteria for being an applicable laboratory and describing the type of data CMS intended to collect. CMS also conducted educational calls when the proposed and final rules were issued and prior to the data collection period. CMS officials told us they conducted additional outreach activities, including holding conference calls with national laboratory associations and attending professional conferences. Officials said they used these outreach activities in addition to the guidance issued to inform laboratories of the reporting requirements for applicable laboratories, for example. In addition, CMS established a revenue threshold of $12,500 in an effort to reduce the reporting burden for entities that receive a relatively small amount of revenues under the CLFS. In its final rule, CMS noted that it expected that many of the laboratories that would be below this revenue threshold and, thus exempt from reporting data to CMS, would be physician-office laboratories. CMS also chose to use the NPI in its definition of applicable laboratory in the final rule to allow hospital- outreach laboratories that use their own NPI to submit data to the agency. In its proposed rule, CMS suggested using an alternative identification number to the NPI. However, according to the final rule, CMS chose to use the NPI in its definition of applicable laboratory to allow those hospital-outreach laboratories billing using their own NPI to submit private-payer data to the agency. According to CMS, at the end of the 5-month submission period, the agency had received data from approximately 2,000 applicable laboratories, representing a volume of almost 248 million laboratory tests; these data accounted for about $31 billion in revenue from private payers. CMS reported that the data it collected included private-payer rates for 96 percent of the 1,347 eligible billing codes on the CLFS. CMS used these data to calculate a median, private-payer rate, weighted by volume and phased in this change by limiting payment-rate reductions to 10 percent per year. Beginning in 2018, these new payment rates served as the single, national payment rate for individual laboratory tests. These payment rates were also used for the individual, component tests that make up panel tests and were used when laboratories billed Medicare for panel tests by listing the component tests separately. In general, the median payments rates, weighted for volume, that CMS calculated were lower than Medicare’s previous payment rates for most laboratory tests. According to our analysis, these median payment rates were lower than the corresponding 2017 CLFS national limitation amounts (the maximum that CMS would pay for laboratory tests) for approximately 88 percent of tests. Figure 1 below describes the percentage difference between these median payment rates and Medicare’s 2017 national limitation amounts for laboratory tests. The final payment rates that CMS calculated, which included the 10- percent, phased in, payment-rate reductions, will remain in effect until December 31, 2020; PAMA requires CMS to calculate new payment rates for the CLFS every 3 years. Reporting entities will next be required to submit data on private-payer rates to CMS in early 2020, for final payments made from January 1, 2019 through June 30, 2019. PAMA capped any reductions for the second 3-year cycle after implementation to a maximum of 15 percent per year. CMS did not collect private-payer data from all laboratories required to report this information and did not estimate how much data was not reported by these laboratories, according to agency officials. CMS relied on laboratories to determine whether they met data reporting requirements and submit data accordingly. CMS emphasized the importance of receiving data from all laboratories required to report by stating that it is critical that CMS collect complete data on private-payer rates in order to set accurate Medicare rates. However, agency officials told us that CMS did not receive data from all laboratories required to report. They also told us that CMS did not have the information available to estimate how much data was missing because not all laboratories reported or the extent to which the data collected were representative of all of the data that laboratories were required to report. Prior to collecting private-payer data, CMS estimated that laboratories subject to reporting requirements would receive more than 90 percent of CLFS expenditures to physician-office laboratories and independent laboratories. Specifically, based on its analysis of 2013 Medicare expenditures, CMS estimated that reporting requirements would apply to the laboratories that received 92 percent of CLFS payments to physician- office laboratories and 99 percent of CLFS payments to independent laboratories. After laboratories reported private-payer data, we analyzed the share of CLFS expenditures received by the laboratories that reported. Our analysis found that CMS collected data from laboratories that received the majority of CLFS payments to physician-office, independent, and other non-hospital laboratories in 2016. However, the laboratories that reported private-payer data received less than 70 percent of CLFS expenditures to physician-office, independent, and other non-hospital laboratories. Specifically, using Medicare claims data, we calculated that CMS collected data from laboratories that received 68 percent of 2016 CLFS payments to physician-office, independent, and other non-hospital laboratories. Although it did not collect complete data, CMS concluded that it collected sufficient private-payer data to set Medicare payment rates and that collecting more data from additional laboratories that were required to report would not significantly affect Medicare expenditures. This conclusion was based, in part, on a sensitivity analyses that CMS conducted of the effects that collecting certain types and amounts of additional data would have on weighted median private-payer rates and the effects those rates could have on Medicare payment rates and, thus, expenditures. Results from these analyses showed that Medicare expenditures based on the CLFS would have changed by 2 percent or less after collecting more data from the various types of laboratories. For example, CMS estimated that doubling the amount of private-payer data from physician-office laboratories would increase expenditures by 2 percent and collecting ten times as much data from hospital outreach laboratories would increase expenditures by 1 percent. (See fig. 2.) PAMA’s 10-percent limit on annual payment-rate reductions likely reduced the effect that incomplete private-payer data could have on the CLFS because this limit applied to most Medicare payment rates for laboratory tests. As demonstrated in figure 1, while 59 percent of tests had median private-payer rates that were at least 30 percent less than their respective 2017 national limitation amounts, CMS published Medicare rates for these tests for 2018 through 2020 that were reduced by only 10 percent per year as a result of this limit. For example, a hypothetical laboratory test with a 2017 CLFS national limitation amount of $10.00 and a median private-payer rate of $7.00 would result in CLFS rates of $9.00 in 2018, $8.10 in 2019, and $7.29 in 2020. Changes to median private-payer rates due to collecting more complete data or eliminating inaccurate data would have no effect on Medicare payment rates from 2018 through 2020 for this hypothetical test if they resulted in new median rates of $7.29 or less. Our analysis of the potential effects that collecting data from additional laboratories could have had on Medicare payment rates and expenditures found that the effect of CMS not collecting complete data would likely have been greater absent PAMA’s limits on annual reductions to Medicare payment rates. As a result, CMS may face challenges setting accurate Medicare rates if it does not collect complete data from all laboratories required to report in the future when PAMA allows for greater annual payment-rate reductions. To conduct this analysis, we used the private-payer data CMS collected to analyze the range of effects that collecting additional data could have on Medicare expenditures, assuming 2016 utilization rates remain constant. The extent of these effects depends on the amount of additional data CMS would need to collect to obtain complete data and whether the payment rates in these additional data would have been greater or less than the medians of the rates reported. For example, we estimated that if CMS needed to collect 20 percent more data for its collection to be complete, doing so could increase Medicare CLFS expenditures from 2018 through 2020 by as much as 3 percent or reduce them by as much as 3 percent depending on the payment rates in these additional data. However, if annual limits to Medicare payment-rate reductions were not applied, collecting these additional data could increase CLFS expenditures by as much as 9 percent or reduce them by as much as 9 percent. (See fig. 3 and app. II for additional information about these estimates.) As demonstrated in figure 2, CMS did analyze how collecting certain types and amounts of data from additional laboratories would affect Medicare expenditures. However, without valid estimates of how much more data these additional laboratories were required to report and how much these data would change median payment rates, it remains unknown whether CMS’s analyses estimate the actual risk of setting Medicare payment rates that do not reflect private-payer rates from all applicable laboratories, as mandated by PAMA. CMS could have compared the data it collected with independent information on the payment rates laboratories were required to report, for example. The independent information could be estimated by auditing a random sample of laboratories or could be estimated using data from third-party vendors, if these vendors could supply relevant and reliable information. We found that CMS mitigated challenges to setting accurate Medicare payment rates by identifying, analyzing, and responding to potentially inaccurate private-payer data. CMS addressed potentially inaccurate private-payer data and other data that CMS determined did not meet reporting requirements. CMS removed or replaced data from four reporting entities that appeared to have or confirmed having reported revenue—which is the payment rate multiplied by the volume of tests paid at that rate—instead of payment rates. We estimated that if CMS had included these data that CLFS expenditures from 2018 through 2020 would have increased by 7 percent. CMS removed data it determined were reported in error including duplicate submissions and submissions with payment rates of $0.00. We estimated that removing these data will change CLFS expenditures from 2018 through 2020 by less than one percent. CMS identified four other types of potentially inaccurate data that it determined would not significantly impact Medicare payment rates or expenditures and did not exclude them from calculations of median private-payer rates. CMS considered the following potentially inaccurate data to have met its reporting requirements: 1. data from 57 entities that reported particularly high rates in at least 60 percent of their data, 2. data from 12 entities that reported particularly low rates in at least 50 percent of their data, 3. data with payment rates that were 10 times greater than the 2017 national limitation amounts or 10 times less than these amounts, and 4. data from laboratories that may not have met the $12,500 low- expenditure threshold or that reported data from a hospital NPI instead of a laboratory NPI. We found that each of these four types of potentially inaccurate data would have changed estimated Medicare CLFS expenditures from 2018 through 2020 by 1 percent or less if CMS had instead excluded the data. To conduct this analysis, we recalculated Medicare rates after excluding each type of data and estimated Medicare expenditures assuming 2016 rates of utilization. Although weighted median private-payer rates were lower than Medicare’s 2017 national limitation amounts for 88 percent of tests, we estimated the total Medicare expenditures based on the 2018 CLFS would likely increase by 3 percent ($225 million overall) compared to 2016 expenditures, assuming test utilization remained at 2016 levels. This increase in estimated expenditures is due, in part, to CMS’s use of above-average payment rates as a baseline to calculate payment rates for those laboratory tests affected by PAMA’s annual payment-rate reduction limit of 10 percent. (See fig. 4.) When applying the 10-percent payment-rate reduction limit, CMS used as its starting point the 2017 national limitation amounts in order to set a single, national payment rate for each laboratory test. Thus, the Medicare payment rate for a test in 2018 could not be less than 90 percent of the test’s 2017 national limitation amount. However, prior to 2018, some payment rates were commonly lower than the national limitation amounts because they were based on the lesser of (1) the amount billed on claims, (2) the local fee for a geographic area, or (3) a national limitation amount, and because panel tests had different bundled payment rates. As a result, by reducing payment rates from national limitation amounts, CMS did not always reduce rates from what Medicare actually paid. Panel tests, in particular, frequently received bundled payment rates that differed substantially from national limitation amounts associated with their billing codes prior to 2018. We compared national limitation amounts, which represent maximum Medicare payment rates for tests, with the average amounts Medicare allowed for payment in 2016, which reflect actual Medicare payment rates. For example, figure 5 below shows that the 2017 national limitation amount for comprehensive metabolic panel tests ($14.49) was substantially higher than both the average amount Medicare allowed for payment in 2016 ($11.45) and the median payment rate laboratories reported receiving from private payers ($9.08). As a result, using the 2017 national limitation amount as a basis for payment reductions caused Medicare’s payment rate to increase from an average allowed amount of $11.45 in 2016, to a payment rate of $13.04 in 2018, instead of decreasing towards a lower median private- payer rate of $9.08. By increasing average payment rates rather than phasing in reductions to rates, CMS’s implementation may lead to paying more than necessary for some tests. Federal standards for internal control for information and communications require agency management to use quality information to achieve its objectives. Basing reductions on national limitation amounts rather than more relevant information on how much Medicare actually paid—such as the average allowable amounts in 2016, for example—could result in Medicare paying more than necessary by $733 million from 2018 through 2020, according to our estimates. In implementing PAMA, CMS eliminated bundled rates for panel tests that lack billing codes and started paying separately for each component test instead. CMS also implemented the 2018 CLFS in a manner that could lead to unbundling payment rates for panel tests with billing codes. If payment rates for all panel tests were unbundled, we estimated that Medicare expenditures could increase by $218 million for panel tests that lack billing codes and by as much as $10.1 billion for panel tests with billing codes from 2018 through 2020. CMS also estimated that there could be significant risks of paying more than necessary associated with unbundling and has taken initial steps to monitor these risks and explore possible responses, but had not yet responded to these risks as of July 2018. CMS Unbundled Payment Rates for Panel Tests without Billing Codes Beginning in 2018, CMS no longer uses bundled payment rates for panel tests without billing codes and instead pays laboratories individual payments for each component test that comprises these panel tests. However, CMS staff and members of its advisory panel discussed concerns with this approach. At an advisory panel meeting in 2016, CMS staff relayed concerns from stakeholders that CMS would not be able to collect valid data on private-payer rates for these panel tests. According to agency staff, stakeholders had informed CMS that private payers commonly use bundled payment rates for these panel tests, but laboratories would only be able to report unbundled payment rates for individual component tests. We estimated that unbundling these payment rates would increase Medicare expenditures from 2018 through 2020 by $218 million in comparison to the estimated Medicare expenditures over the same time period based on Medicare’s 2016 utilization and allowable amounts. For example, under the 2016 CLFS, Medicare paid approximately 435,000 claims for panel tests that included the laboratory tests assay of creatinine (HCPCS code 82565) and assay of urea nitrogen (HCPCS code 84520) at an average bundled payment rate of $6.82. In contrast, under the 2018 CLFS, these two component tests are reimbursed individually at $6.33 and $4.88, respectively, or $11.21 combined—a 63 percent increase. Despite concerns about the validity of available private-payer data on component tests for panel tests without billing codes, CMS used these data to set payment rates for component tests. CMS officials told us that they stopped using bundled payment rates for these panel tests because it is not clear that CMS has the authority to combine the individual component tests into groups for bundled payment as it did before 2018 due to PAMA’s reference to payments for each test. However, in July 2018, CMS officials told us the agency was reviewing its authority regarding this issue. CMS officials told us they are exploring alternative approaches that could limit increases to Medicare expenditures but had not yet determined what additional legal authority would be needed, if any, and did not know when CMS would make this determination. Agency officials told us that CMS has taken initial steps to monitor unbundling and explore possible responses, including the following: Monitoring unbundling: CMS has begun monitoring changes in panel test utilization, payment rates, and expenditures associated with its implementation of PAMA, according to officials. For example, CMS officials told us that preliminary data indicated that Medicare payments for individual component tests of panel tests has increased substantially in 2018, but, as of July 2018, it was too early to draw conclusions from these data because laboratories have up to one year to submit claims for tests. Collecting input on alternatives: In 2016, a subcommittee of an advisory panel that CMS established reviewed Medicare’s use of bundled payment rates for panel tests and published different approaches for CMS to consider implementing in combination with other changes to implement PAMA. CMS’s Implementation of PAMA May Have Allowed Unbundling of Payment Rates for Panel Tests with Billing Codes Beginning in 2018, laboratories that submit claims for any of the seven panel tests with billing codes by using the billing codes for the individual component tests now receive the payment rate for each component test, rather than the bundled rate. Prior to 2018, laboratories could submit claims for these panel tests either by using the specific codes for panel tests or by billing separately for each of the component tests, and, regardless of how laboratories submitted claims, Medicare Administrative Contractors would pay bundled payment rates based on how many of the 23 component tests were conducted. However, CMS instructed Medicare Administrative Contractors to stop bundling payment rates for tests that are billed individually on claims rather than billed on claims using codes for panel tests, beginning in 2018. CMS did so because it was not clear that CMS had the authority to combine the individual component tests into groups for bundled payment as it did before 2018 due to PAMA’s reference to payments for individual tests, according to agency officials. This change could potentially have a large effect on Medicare spending. For example, if a laboratory submitted a claim individually for the 14 component tests that comprise a comprehensive metabolic panel it would receive a payment of $81.91, a 528 percent increase from the 2018 Medicare bundled payment rate of $13.04 for this panel test. (See fig. 6.) Improving how reductions to payment rates for panel tests are phased in could mitigate, but not completely counteract, the effect of unbundling these payment rates. For example, for the comprehensive metabolic panel test described in figure 6, basing maximum reductions on 2016 average allowable amounts would result in a 2018 Medicare bundled payment rate of $10.31 instead of $13.04 and individual payment rates for the 14 component tests that total $56.06—a 32 percent decrease from $81.91 that Medicare would otherwise pay. If the payment rate for each panel test with a billing code were unbundled, we estimated that Medicare expenditures for these tests from 2018 through 2020 could reach $13.5 billion, a $10.1 billion increase from the $3.3 billion we estimated Medicare would spend using the bundled payment rates in the CLFS. Similarly, prior to implementing PAMA, CMS estimated that Medicare expenditures to physician-office, independent, and other non-hospital laboratories could potentially increase as much as $2.5 billion in 2018, alone if it paid for the same number of panel tests with billing codes as it did in 2016 but paid for each component test individually. These estimates represent an upper limit on the increased expenditures that could occur if every laboratory stopped using panel test billing codes and instead used the billing codes for individual component tests. We do not know the extent to which laboratories will stop filing claims using panel test billing codes. CMS officials also told us that they were aware of the risks associated with paying for the individual component tests instead of the bundled payment rate for a panel test with a billing code. However, CMS guidance, which was effective in 2018, continued to allow laboratories to use the billing codes for individual component tests rather than the billing code for the panel. CMS officials explained that this was due to PAMA’s reference to payments for individual tests, similar to CMS’s decision to stop paying bundled rates for panel tests without billing codes. At the time we did our work, CMS had not implemented a response to these risks but had taken some initial steps to monitor unbundling and consider alternative approaches to Medicare payment rates for these tests. HHS provided additional information on planned activities to address these risks in its written comments on a draft of this report. (See app. III.) CMS collected data on private-payer rates from laboratories that were required to report these data, but not all laboratories complied with the reporting requirement, and the extent of noncompliance remains unclear. PAMA’s provision directing CMS to phase in payment-rate reductions to Medicare payment rates likely moderates the potential adverse effects of incomplete private-payer data. However, in the future, failing to collect complete data could substantially affect Medicare payment rates because private-payer rates alone will determine Medicare payment rates. In addition, we estimated that Medicare expenditures on laboratory tests will be $733 million higher from 2018 through 2020, because CMS started phasing in payment-rate reductions from national limitation amounts instead of more relevant data on actual payment rates, such as average allowable amounts. Finally, changes to payment rates, billing practices, and testing practices could increase Medicare expenditures by as much as $10.3 billion from 2018 through 2020, if CMS does not address the risks associated with unbundling payment rates for panel tests. Agency officials indicated that it was unclear if PAMA limited CMS’s ability to combine individual component tests into groups for bundled payment, and, as of July 2018, CMS was reviewing this matter but did not know when it would make a determination. We are making the following three recommendations to CMS: The Administrator of CMS should take steps to collect all of the data from all laboratories that are required to report. If only partial data can be collected, CMS should estimate how incomplete data would affect Medicare payment rates and address any significant challenges to setting accurate Medicare rates. (Recommendation 1) The Administrator of CMS should phase in payment-rate reductions that start from the actual payment rates Medicare paid prior to 2018 rather than the national limitation amounts. CMS should revise these rates as soon as practicable to prevent paying more than necessary. (Recommendation 2) The Administrator of CMS should use bundled rates for panel tests, consistent with its practice prior to 2018, rather than paying for them individually; if necessary, the Administrator of CMS should seek legislative authority to do so. (Recommendation 3) We provided a draft of this report to HHS for review and comment. HHs provided written comments, which are reproduced in appendix III. HHS also provided technical comments, which we incorporated as appropriate. HHS concurred with our first recommendation to take steps to collect all data from laboratories required to report and commented that it is evaluating ways to increase reporting. In particular, in a November 2018 final rule, HHS changed the definition of an applicable laboratory, which it expects will increase the number of laboratories required to report data on private-payer rates to the agency. HHS neither agreed nor disagreed with our second recommendation to phase in payment-rate reductions that start from the actual payment rates Medicare paid prior to 2018. HHS noted that any changes to the phasing in of payment-rate reductions would need to be implemented through rulemaking. We estimated that by using the national limitation amounts as a starting point for these reductions, Medicare expenditures would increase by $733 million from 2018 through 2020. For this reason, we continue to believe CMS should revise these rates as soon as practicable and through whatever mechanism CMS determines appropriate. HHS neither agreed nor disagreed with our third recommendation to use bundled rates for panel tests. However, HHS commented that it is taking steps to address this issue. More specifically, for panel tests with billing codes, HHS is working to implement an automated process to identify claims for panel tests that should receive bundled payments, similar to the process used to bundle payment rates for these panel tests prior to PAMA’s implementation and anticipates implementing this change by the summer of 2019. In addition, HHS posted guidance on November 14, 2018, stating that the panel tests with billing codes, laboratories should submit claims using the corresponding code rather than the codes for the separate component tests beginning in 2019. To reduce the potential of paying more than necessary, we believe it is important that CMS implement its proposed automated process to allow for these payments as soon as possible. In contrast, for panel tests without billing codes, HHS commented that it is continuing to review its authority and considering other approaches to payment for these panel tests, such as adding codes to the CLFS. We estimate that unbundling the payment for these panel tests could increase Medicare expenditures by $218 million from 2018 through 2020 compared to expenditures based on Medicare’s 2016 utilization, and the actual amount could be higher if utilization increases. For this reason, we believe CMS should implement bundled payment rates for these panel tests to avoid excess payments. We are sending copies of this report to the appropriate congressional committees and the Administrator of CMS. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Table of Key Dates Related to Developing the New Payment Rates for the 2018 Clinical Laboratory Fee Schedule Event Centers for Medicare and Medicaid Services (CMS) issued the CLFS proposed rule. CMS issued responses to frequently asked questions regarding the CLFS proposed rule. CMS issued the CLFS final rule. CMS issued responses to frequently asked questions regarding the CLFS final rule. CMS held the joint Annual Laboratory Public Meeting and Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting. CMS issued laboratory billing codes subject to data collection and reporting. CMS issued guidance to laboratories for collecting and reporting data. CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting. CMS issued the CLFS data reporting template. CMS collected data on (1) the billing code associated with a laboratory test; (2) the private-payer rate for each laboratory test for which final payment was made during the data collection period (i.e., January 1, 2016, through June 30, 2016); and (3) the volume of tests performed for each billing code at that private-payer rate. CMS issued additional guidance for laboratories as the data collection period began. CMS issued the CLFS fee-for-service data collection user’s manual. CMS issued revised guidance to laboratories for collecting and reporting data. CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting. CMS released the proposed CLFS rates. CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting. Deadline for stakeholders to submit comments on the proposed CLFS rates to CMS. CMS issued the final CLFS rates. New CLFS rates became effective. Table 4 below demonstrates the challenges the Centers for Medicare & Medicaid Services (CMS) faces in setting accurate Medicare payment rates to the extent it does not collect complete data from laboratories on private-payer rates. Specifically, the table shows the potential effect that collecting additional data for each laboratory test could have on Medicare expenditures and how this effect could vary depending on (1) the amount of additional data collected, (2) payment rates in the additional data, and (3) limits to annual reductions in Medicare payment rates. These limits are in place from 2018 through 2023 to phase in changes to payment rates. In addition to the contact named above, Martin T. Gahart, Assistant Director; Gay Hee Lee, Analyst-in-Charge; Kaitlin Farquharson, Sandra George, Dan Lee, Elizabeth T. Morrison, Laurie Pachter, Vikki Porter, and Russell Voth made key contributions to this report.

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

Answer: The Temporary Assistance for Needy Families (TANF) block grant funds a wide range of benefits and services for low-income families with children. TANF was created in the 1996 welfare reform law (P.L. 104-193). This report responds to some frequently asked questions about TANF; it does not describe TANF rules (see, instead, CRS Report RL32748, The Temporary Assistance for Needy Families (TANF) Block Grant: A Primer on TANF Financing and Federal Requirements, by Gene Falk). TANF Funding and Expenditures. TANF provides fixed funding for the 50 states, the District of Columbia, the territories, and American Indian tribes. The basic block grant totals $16.5 billion per year. States are also required in total to contribute, from their own funds, at least $10.3 billion annually under a maintenance-of-effort (MOE) requirement. Though TANF is best known for funding cash assistance payments for needy families with children, the block grant and MOE funds are used for a wide variety of benefits and activities. In FY2017, expenditures on basic assistance totaled $7.1 billion—23% of total federal TANF and MOE dollars. Basic assistance is often—but not exclusively—paid as cash. In addition to funding basic assistance, TANF also contributes funds for child care and services for children who have been, or are at risk of being, abused and neglected. Some states also count expenditures in prekindergarten programs toward the MOE requirement. The TANF Assistance Caseload. A total of 1.2 million families, composed of 3.1 million recipients, received TANF- or MOE-funded assistance in September 2018. The bulk of the "recipients" were children—2.3 million in that month. The assistance caseload is heterogeneous. The type of family once thought of as the "typical" assistance family—one with an unemployed adult recipient—accounted for 32% of all families on the rolls in FY2016. Additionally, 31% of cash assistance families had an employed adult, while 38% of all TANF families were "child-only" and had no adult recipient. Child-only families include those with disabled adults receiving Supplemental Security Income (SSI), adults who are nonparents (e.g., grandparents, aunts, uncles) caring for children, and families consisting of citizen children and ineligible noncitizen parents. Cash Assistance Benefits. TANF cash benefit amounts are set by states. In July 2017, the maximum monthly benefit for a family of three ranged from $1,021 in New Hampshire to $170 in Mississippi. Only New Hampshire (at 60% of the federal poverty guidelines) had a maximum TANF cash assistance amount for this sized family in excess of 50% of poverty-level income. Work Requirements. TANF's main federal work requirement is actually a performance measure that applies to the states. States determine the work rules that apply to individual recipients. TANF law requires states to engage 50% of all families and 90% of two-parent families with work-eligible individuals in work activities, though these standards can be reduced by "credits." Therefore, the effective standards states face are often less than the 50% or 90% targets, and vary by state. In FY2017, states achieved, on average, an all-family participation rate of 53.0% and a two-parent rate of 69.5%. In FY2017, two jurisdictions did not meet the all-family participation standard: Nevada and Guam. This is a reduction from FY2012, when 16 states did not meet that standard. In FY2017, nine jurisdictions did not meet the two-parent standard. States that do not meet work standards are at risk of being penalized by a reduction in their block grant.