Background

Over the course of the last quarter century, the epidemic has spread to  every region of the country. HIV and AIDS cases have been reported in all  states, the District of Columbia, and U.S. territories, but the impact of the  epidemic varies by region and within states. The South is estimated to  have the highest cumulative number of diagnosed AIDS cases, people  living with AIDS, and deaths from AIDS. In 2003, 7 of the 10 states with the  highest estimated rates of individuals living with HIV were located in the  South.
The CARE Act was enacted in 1990 to respond to the needs of individuals  and families living with HIV or AIDS and to direct federal funding to areas  disproportionately affected by the epidemic. Titles I and II of the act  provide base funding to affected EMAs and states based on the proportion  of each jurisdiction’s caseload of AIDS cases. These titles also establish  other types of grants to provide supplemental funding. For example, Title  II includes Severe Need grants for states with demonstrated need for  supplemental funding to support their ADAPs. Title II also includes  funding for emerging communities that are affected by AIDS but do not  have the 2,000 AIDS cases reported in the last 5 calendar years in order to  be eligible for Title I funding as EMAs. In order to address the impact of  the disease on racial and ethnic minorities, Minority AIDS Initiative grants  are distributed through both Title I and Title II to EMAs and states.
Metropolitan areas heavily affected by HIV or AIDS have always been  recognized within the structure of the CARE Act. We previously found  that, with combined funding under Title I and Title II, states with EMAs  receive more funding per AIDS case than states without EMAs. To adjust  for this situation, the 1996 reauthorization instituted a two-part formula for  Title II base funding that takes into account the number of AIDS cases that  reside within a state but outside of any EMA’s jurisdiction. Under this  distribution formula, 80 percent of the Title II base grant is based upon a  state’s proportion of all AIDS cases, and twenty percent of the allocation is  based on the number of AIDS cases within that state’s borders but outside  of EMAs. A second provision included in 1996 protected the eligibility of  EMAs. The 1996 CARE Act amendments provided that once a jurisdiction  is designated an EMA, that jurisdiction is “grandfathered” so it will always  receive some amount of funding under Title I even if its reported number  of AIDS cases drops below the threshold for eligibility. Hold-harmless  provisions and the grandfather clause were maintained in the 2000  reauthorization of the CARE Act. Table 1 describes selected CARE Act  formula grants for Titles I and II.
The 2000 reauthorization specified that CARE Act Title I and Title II  funding formulas should use HIV case counts as early as fiscal year 2005 if  such data were available and deemed “sufficiently accurate and reliable”  by the Secretary of Health and Human Services (HHS). The 2000  reauthorization also required that HIV data be used no later than the  beginning of fiscal year 2007. In June 2004 the Secretary of HHS  determined that HIV data were not yet ready to be used for the purposes of  allocating formula funding under Title I and Title II of the CARE Act. The  Secretary cited a 2004 Institute of Medicine (IOM) report, which identified  several limitations in the ability of states to provide adequate and reliable  HIV case counts for use in CARE Act formula allocations.

	CARE Act Funding Provisions Result in Disproportionate Funding

Some CARE Act provisions have led to jurisdictions receiving different  amounts of funding per AIDS cases. The counting of AIDS cases within  EMAs once to determine Title I funding and once again to determine Title  II funding results in states with EMAs receiving more funding per AIDS  case than states without an EMA. In addition, Emerging Communities  grants are awarded to eligible communities that are separated into two  tiers based on each community’s AIDS cases reported in the most recent 5  calendar years. Because one half of the total Emerging Communities grant  award is allocated to each tier regardless of the total number of reported  AIDS cases in each tier, a disproportionate amount of funding per case  was distributed among the grantees in fiscal year 2004.

		Counting AIDS Cases within EMAs Twice Results in Unequal Funding per Case Across States

States with EMAs receive more funding per AIDS case than jurisdictions  without EMAs because cases within EMAs are counted twice. The number  of AIDS cases used to allocate CARE Act Title I base grants for EMAs is  also used in the allocation of 80 percent of Title II base grants for states.  The remaining 20 percent is based on the number of AIDS cases in each  state outside of any EMA. This 80/20 split was established by the CARE  Act’s 1996 amendments to address the fact that states with EMAs received  more funding per case than states without EMAs. However, even with the  80/20 split, states with EMAs still receive more funding per AIDS case.  States without an EMA receive no funding under the Title I distribution,  and thus, when total Title I and Title II CARE Act funds are considered,  states with EMAs receive more funding per AIDS case.  Appendix I shows  the combined fiscal year 2004 funding for all Title I and Title II funding  received by each state.
Table 2 illustrates the effect of counting EMA cases twice by comparing  the relationship between the percentage of a state’s AIDS cases that are  within an EMA’s jurisdiction and the amount of funding a state receives  per AIDS case. Table 2 shows that as the percentage of a state’s AIDS  cases within EMAs increases, the total Title I and II funding per AIDS case  also increases for the state. For example, states with no AIDS cases in  EMAs received on average $3,592 per AIDS case. States with 75 percent or  more of their cases in EMAs received on average $4,955 per AIDS case, or  38 percent more funding than states with no EMA. If the total Title I and  Title II funding had been distributed equally per AIDS case among all  grantees, each state would have received $4,782 per AIDS case.
The impact of counting EMA cases twice is that states with similar  numbers of AIDS cases can receive different levels of combined Title I and  Title II funding. For example, for fiscal year 2004 funding, Connecticut had  5,363 AIDS cases while South Carolina had 5,563 AIDS cases. However,  Connecticut had two EMAs that accounted for 91.3 percent of its cases  while South Carolina had none. Connecticut received $26,797,308 ($4,997  per AIDS case) in combined Title I and Title II funding while South  Carolina, with 200 more cases, received $20,705,328 ($3,722 per AIDS  case). Connecticut received 29 percent more funding than South Carolina,  a difference of $6,091,980, or $1,275 per AIDS case.

		The Tiered Allocation of Title II Funds for Emerging Communities Results in Funding Disparities Among States

The two-tiered division of Emerging Communities grants results in  disparities in funding per case among states. In addition to the base grants  for states, Title II provides a minimum of $10 million in supplemental  grants to states for communities with populations greater than 50,000 that  have a certain number of AIDS cases in the last 5 calendar years. The  funding is equally split so that half the funding is divided among the first  tier of communities with 500 to 999 reported cases in the most recent 5  calendar years while the other half is divided among a second tier of  communities with 1,000 to 1,999 reported cases in that period. The funding  is then allocated within each tier by the proportion of reported cases in the  most recent 5 calendar years in each community.
In fiscal year 2004, the two-tiered structure of Emerging Communities  funding led to large differences in funding per case because the total  number of AIDS cases in each tier was not equal. Twenty-nine  communities qualified for Emerging Communities grants in fiscal year  2004. Four of these communities had between 1,000 and 1,999 reported  cases and 25 communities had between 500 and 999 cases. This meant that  4 communities with a total of 4,754 reported cases split $5 million while 25  communities with a total of 15,994 cases split the remaining $5 million.  This resulted in the 4 communities receiving $1,052 per reported case  while the other 25 received $313 per reported case. These 4 communities  received 236 percent more funding per case than the other 25. If the total  $10 million Emerging Communities funding had been distributed equally  per case among the communities, each would have received $482 per  reported case. Table 3 lists the 29 emerging communities along with their  AIDS case counts and funding.

	Hold-Harmless Provisions and Grandfather Clause Benefit Certain Grantees

Titles I and II of the CARE Act both contain provisions that benefit certain  grantees by protecting their funding levels. Title I has a hold-harmless  provision that guarantees that the Title I base grant allocated to an EMA  will be at least as large as a legislated percentage of a previous year’s  funding. The Title I hold-harmless provision has primarily benefited one  EMA. Title I also contains a grandfather clause that has resulted in a large  number of EMAs maintaining funding despite no longer meeting the  eligibility criteria. One hold-harmless provision for Title II ensures that the  total of Title II and ADAP base grants awarded to a state will be at least as  large as the total of these grants it received the previous year. This  provision has had little impact thus far, but it has the potential to reduce  the amount of funding to states with severe need in ADAPs because it is  funded out of amounts reserved for that purpose. The hold-harmless  provision and the grandfather clause in Title I and the hold-harmless  provisions in Title II protect grantees from decreases in funding from one  year to the next, but they also make it more difficult to shift funding in  response to geographic movement of the disease.

		Title I Hold-Harmless Provision Has Primarily Benefited One EMA

In fiscal year 2004, the Title I hold-harmless provision primarily benefited  the San Francisco EMA. The hold-harmless provision guarantees each  EMA a specified percentage, as legislated by the CARE Act, of the base  grant it received in a previous year regardless of how much a grantee’s  caseload may have decreased in the current year. An EMA’s base funding  is determined according to its proportion of AIDS cases. If an EMA  qualifies for hold-harmless funding, that amount is added to the base  funding and distributed together as the base grant. The San Francisco  EMA received $7,358,239 in hold-harmless funding, or 91.6 percent of the  hold-harmless funding that was distributed. The second largest beneficiary  was Kansas City, which received $134,485, or 1.7 percent of the hold- harmless funding. Table 4 lists the fiscal year 2004 hold-harmless  beneficiaries.
The funding impact of the hold-harmless provision varies among the EMAs  that benefit but it can be substantial. In order to place hold-harmless  funding in perspective, it is helpful to consider how much of an EMA’s  Title I base grant was made up of hold-harmless funding. EMAs that did  not receive hold-harmless funding received approximately $1,221 in base  grant funding per AIDS case. Fiscal year 2004 base grant funding per AIDS  case in EMAs that received hold-harmless funding ranged from $1,223  (Newark) to $2,241 (San Francisco). Thus, San Francisco received $1,020  more in base grant funding per AIDS case than did EMAs that did not  receive hold-harmless funding. This hold-harmless funding represents  approximately 46 percent of San Francisco’s base grant. Because of its  hold-harmless funding, San Francisco, which had 7,216 AIDS cases in  fiscal year 2004, received a base grant equivalent to what an EMA with  approximately 13,245 AIDS cases (84 percent more) would have received  based on the proportion of cases. Kansas City, the second largest hold- harmless grantee, received about what an EMA with 9 percent more AIDS  cases would have received.
The San Francisco EMA’s 2004 hold-harmless funding was linked to  cumulative AIDS cases used to determine fiscal year 1995 funding. In fiscal  year 2004 San Francisco was guaranteed to receive 89 percent of its fiscal  year 2000 Title I base grant, but San Francisco’s 2000 allocation was also  held harmless under the 1996 CARE Act reauthorization. Under the 1996  reauthorization, EMAs were guaranteed 95 percent of their 1995 base grant  in fiscal year 2000. San Francisco was the only EMA to qualify for hold- harmless funding in 2000 because it was the only EMA that would have  received less than 95 percent of its fiscal year 1995 base grant. This means  that in fiscal year 2004 San Francisco was guaranteed approximately   85 percent of its fiscal year 1995 base grant of $19,126,679. Prior to the  1996 reauthorization, funding was distributed among EMAs on the basis of  the cumulative count of diagnosed AIDS cases (that is, all cases reported  in an EMA both living and deceased since the beginning of the epidemic in  1981). Because the application of the Title I hold-harmless provision for  San Francisco dates back to the 1996 reauthorization, San Francisco’s  Title I base grant is determined in part by the number of cumulative cases  in the San Francisco EMA as of 1995.

		Grandfathering Maintains Eligibility for EMAs That No Longer Meet Certain Eligibility Criteria

More than one half of the EMAs received Title I funding in fiscal year 2004  even though they were below Title I eligibility thresholds. These EMAs’  eligibility was protected under a CARE Act grandfather clause. Under a  grandfather clause established by the 1996 amendments to the CARE Act,  once a metropolitan area’s eligibility is established, the area remains  eligible for Title I funding even if the number of reported cases in the most  recent 5 calendar years drops below the statutory threshold. We found  that in fiscal year 2004, 29 of the 51 EMAs did not meet the eligibility  thresholds, but their Title I funding was protected by a grandfather clause  (see table 5). The number of reported AIDS cases in the most recent 5  calendar years in the 29 EMAs ranged from 223 to 1,941. Title I funding  awarded to these 29 EMAs was about $116 million, or approximately 20  percent of the total Title I funding.
As discussed earlier, some metropolitan areas are designated as emerging  communities because their caseloads are not large enough to make them  eligible for Title I funding as EMAs. However, some emerging communities  had more reported AIDS cases in the last 5 years than some of the EMAs  that have been grandfathered. For example, for fiscal year 2004 Memphis,  a designated emerging community, had 1,588 reported AIDS cases during  the most recent 5 calendar years, which is more than the number of cases  reported in 26 EMAs. This results in variability in funding per case caused  by grandfathering EMAs.

		Title II Hold-Harmless Funding Could Diminish ADAP Severe Need Grants in the Future

A Title II hold-harmless provision could diminish ADAP Severe Need grant  amounts in the future because the provision and the grants are funded  from the same set-aside of funds. If larger amounts are needed to fund the  hold-harmless provision in the future, the Severe Need grant states could  get less than the grant amounts they would otherwise receive.
Fiscal year 2004 was the first time that any states triggered this Title II  hold-harmless provision, which was established by the 2000 amendments.  Severe Need grants are funded by setting aside three percent of the total  CARE Act Title II funding for ADAPs. The Title II hold-harmless  provision, also funded by the 3 percent set-aside for Severe Need grants,  guarantees that the total of Title II and ADAP base grants made to a state  will be at least as large as the grants made the previous year. In fiscal year  2004 eight states became eligible for this hold-harmless funding. To  provide these jurisdictions with hold-harmless funding, HRSA officials told  us they used funds from the 3 percent set-aside for Severe Need grants. In  2004, the 3 percent set-aside for Severe Need grants was $22.5 million. Of  these funds, $1.6 million, or 7 percent, was used to provide this Title II  hold-harmless protection. (See table 6.) The remaining $20.8 million, or 93  percent of the set-aside amount, was distributed in Severe Need grants.
The potential exists for this Title II hold-harmless provision to diminish  the size of Severe Need grants in the future if larger amounts are needed to  fund the hold-harmless protections. The total amount of Severe Need grant  funds available in fiscal year 2004 to distribute among the eligible states  was less than it would have been without the hold-harmless deduction. In  fiscal year 2004 not all 25 of the states eligible for Severe Need grants  made the required match in order to receive the grant. Consequently, the  size of the severe need grants received by each state was not less than  what they would have received if all eligible states made the match. In  future years, if all of the eligible states make the match, and if there are  also states that qualify to receive hold-harmless funds, the Severe Need  grant states would get less than the amounts they would have otherwise  received.

	Funding Impact of Using HIV Case Counts Would Depend on the Adequacy of HIV Reporting Systems and the Number of Reported HIV Cases

If HIV case counts had been used with AIDS case counts in allocating Title  II base funding, about half of the states would have received increased  funding and the other half would have received less funding. Under the  2000 CARE Act reauthorization, HIV case counts are required to be  included in CARE Act funding formulas no later than fiscal year 2007.  While all states have established HIV case reporting systems, there are  currently characteristics of these systems that limit the use of HIV case  counts in the distribution of CARE Act funds. In order to gauge the  funding impact of using the data as they currently exist, we developed two  theoretical approaches for doing so. Using these two approaches, we  found that some fiscal year 2004 Title II base funding would have shifted  to southern states if HIV case counts had been used with AIDS case counts  in the distribution of funds. We also found that funding would tend to  shift to jurisdictions with older HIV reporting systems, regardless of their  location. Changes in funding due to the inclusion of HIV cases would be  largely offset, at least initially, if the funding formulas retained hold- harmless and minimum grant provisions.

		Current HIV Case Reporting Systems Have Limitations for Providing Case Counts for Funding Allocations

In its 2004 report, IOM identified several limitations in the ability of states  to provide HIV case counts for use in CARE Act funding allocations.  Among these limitations, IOM found that the maturity of HIV case  reporting systems varies widely across states. The earliest HIV reporting  systems were established in Colorado, Minnesota, and Wisconsin in 1985,  while five jurisdictions implemented their systems since 2003. Case  reporting systems need time to become fully mature and operational, and  it takes time to make practitioners aware of the requirement to report new  HIV cases and the methods for doing so. Existing cases also need to be  reported and entered into the system. States with newer systems may not  have collected and entered data on existing cases, and, consequently, may  underreport the number of HIV cases in the state. Underreporting of HIV  cases could result in jurisdictions receiving less funding than they would  be entitled to based on the actual number of HIV and AIDS cases.
IOM also found that differences in how states report HIV case counts to  CDC could preclude their use in the distribution of CARE Act funds. Some  state HIV case reporting systems are name-based while others are code- based. Currently, CDC will only accept name-based case counts.  Therefore, state-reported HIV cases that use codes rather than names  would not be counted in allocating CARE Act funds, if HIV case counts  were used in funding formulas. Twelve states, the District of Columbia,  and Philadelphia, PA, have some form of a code-based system rather than  a name-based system. CDC does not accept the code-based data  principally because methods have not been developed to make certain that  a code-reported HIV case is only being counted once across all reporting  jurisdictions. Table 7 shows whether state HIV case counts are accepted  by CDC and the year in which each state established its HIV reporting  system.

		The Use of HIV Case Counts in Funding Formulas Would Change the Distribution of CARE Act Funds

While we are aware of some of the limitations of HIV data, we used two  approaches to examine the potential impact of using HIV cases in addition  to AIDS cases on fiscal year 2004 Title II base grant distributions. We  conducted this analysis in light of the CARE Act requirement that HIV case  counts be used for the distribution of Title I and Title II formula grants no  later than fiscal year 2007. Some CARE Act fiscal year 2004 funding would  have shifted if HIV and AIDS case counts had been used to allocate the  funds. Our analyses indicate that at most 14 percent of CARE Act Title II  base funding would have shifted, with southern states being the primary  beneficiaries. Changes could have resulted from the number of reported  HIV cases and AIDS cases in each jurisdiction or differences in state HIV  case reporting systems. However, many of the funding changes in our  model would have been negated if we had applied hold-harmless and  minimum grant provisions.

			Methodological Approaches Used

We used two approaches to examine the impact of using HIV cases in  addition to AIDS cases on funding for Title II base grants in the 50 states,  the District of Columbia, and Puerto Rico. We chose Title II base grants to  illustrate the effect of using HIV case counts in funding formulas. Under  the first approach, we used HIV case counts in addition to AIDS case  counts for the 36 jurisdictions from which CDC accepted HIV data. We  then supplemented these data with only the AIDS case counts CDC  received from the other jurisdictions because CDC does not accept their  HIV data. Consequently, for some states and metropolitan areas we used  HIV and AIDS case counts, but for others we used only AIDS case counts.  This approach reflects the data that would be used if funding allocations  were based on the HIV and AIDS case counts currently received by CDC.  Under the second approach, we used the same HIV and AIDS case counts  for the 36 jurisdictions as our first approach, but supplemented these data  with the HIV case counts collected by the other 15 states and the District  of Columbia from which CDC did not accept HIV data. We obtained these  HIV case counts directly from these jurisdictions. For both approaches, we  calculated the percentage of cases in each jurisdiction and estimated the  fiscal year 2004 Title II base grant that each would have received. Our  initial analyses assume that funding was distributed equally per AIDS case  and that there were no hold-harmless or minimum grant provisions. We  then estimated the impact of the hold-harmless and minimum grant  provisions. Although there are limitations associated with each of the  approaches, they indicate the general impact of using HIV and AIDS cases  to distribute all CARE Act formula funding.

			Impact on Title II Base Grants

Both approaches indicated that there would be some shifting of funds if  HIV and AIDS case counts had been used to allocate CARE Act Title II  base grants, with southern jurisdictions generally being among the areas  that would have received increased funding. Under the first approach— using HIV and AIDS cases from 36 jurisdictions and only AIDS cases from  16 jurisdictions—about 14 percent or $38.9 million of Title II base grants  would have shifted among grantees. Twenty-seven grantees would have  received additional funding in their Title II base grants if HIV and AIDS  cases had been used to allocate funding instead of just AIDS cases. Of the  27 that would have received more funding, 12 were in the South.  Jurisdictions outside the South that would have received more funding  include Colorado, New Jersey, and Ohio. All 3 would have each received  more than $2 million in additional funding. Funding increases would have  ranged from less than $50,000 in Iowa to almost $5 million in North  Carolina, or from less than 5 to almost 100 percent. Twenty-five grantees  would have received less funding. California, Georgia, and Illinois would  have received the largest decreases in Title II base grants. Decreases  would have ranged from about $100,000 in Idaho and Wyoming to almost  $12 million in California. Percentage decreases would have ranged from  less than 5 percent in New York to almost 80 percent in Montana.
The second approach — including the code-based HIV counts — yields a  smaller shift in funding. Under this approach, approximately 10 percent or  $28.4 million of fiscal year 2004 Title II base grants would have shifted. Of  the 26 grantees that would have received additional funding, 11 are in the  South. Funding increases for the 26 grantees that would have received  additional funding would have ranged from less than $50,000 in Maine to  about $4 million in North Carolina, or from 5 percent in Washington to 80  percent in Colorado. Among the states benefiting from this funding  approach, Maryland, North Carolina, and Virginia would each have  received increases of more than $2 million. Twenty-six grantees would  have received less funding. California, New York, and Georgia, would have  received the largest decreases. Decreases would have ranged from less  than $50,000 in Iowa to $5 million in California. Percentage decreases  would have ranged from less than 5 percent in Florida, Illinois, New  Mexico, and Utah to 65 percent in North Dakota. Appendix II shows the  results of these analyses for each state.

			Differences in Case Reporting Systems Would Affect Distributions

One explanation for the changes in funding allocations when HIV and  AIDS cases are used instead of only AIDS cases is the maturity of state HIV  case reporting systems. We found that those states that would benefit from  the use of HIV cases tend to be those with the oldest HIV case reporting  systems. Those states with the oldest reporting systems include 11  southern states whose HIV reporting systems were implemented prior to  1995. As shown in table 8, states with long histories of collecting HIV case  counts tend to have many more HIV cases compared with their number of  AIDS cases than do states with less mature reporting systems. This is  likely because states with newer systems do not have reports on many  cases of HIV diagnosed before their reporting systems were established.  This can be illustrated by comparing Wisconsin and Delaware, 2 states  with similar numbers of AIDS cases. Wisconsin began reporting HIV cases  in 1985 while Delaware began in 2001. As of June 2003, the 909 reported  HIV cases in Delaware was about 40 percent less than the 1,518 reported  AIDS cases. In Wisconsin, there were about 50 percent more reported HIV  cases and AIDS cases, or 2,287 HIV cases and 1,507 AIDS cases. This  variability could be reduced as Delaware identifies more preexisting HIV  cases. However, the variability between HIV cases and AIDS cases would  remain if there was a difference in the actual number of HIV cases.
Under either approach, jurisdictions that would receive increased funding  allocations because of the use of HIV and AIDS case counts might do so  because other jurisdictions did not yet have an accurate measure of HIV  case counts. The larger the proportion of HIV cases within the total  number of HIV and AIDS cases in a jurisdiction, the more a jurisdiction  would benefit from the use of HIV cases in funding allocations. However,  this increased funding could simply be the effect of a state’s older  reporting system, and not necessarily due to actual differences in the  number of HIV cases. IOM has reported that it could take from 18 months  to several years after the implementation of an HIV reporting system  before there would be valid estimates of the number of people living with  HIV. However, table 8 suggests that it could take even longer to get  accurate case counts. The data in table 8 suggest that as an HIV case  reporting system matures, it will record a higher ratio of HIV cases to AIDS  cases. One state official we spoke with said that it could take 5 to 6 years  before a reporting system’s HIV case counts were complete.

		Changes in Funding Would be Limited Initially if Certain Formula Provisions Were Maintained

Changes in funding caused by shifting to HIV cases and AIDS cases would  be negated, at least initially, if the current hold-harmless or minimum grant  amounts were maintained. Consider the situation in which a state received  $2 million in its Title II CARE Act base grant award based on its AIDS case  count. In the following year, the formula is changed so that HIV and AIDS  cases are used to determine funding allocations, and the state is then only  entitled to $1 million. However, there is a hold-harmless provision that  guarantees the state 98 percent of what it received the previous year. The  state would receive 98 percent of its $2 million allocation, or $1.96 million,  largely offsetting the reduction in funding due to the shift to HIV and AIDS  cases. Minimum award amounts could also affect the impact of using HIV  and AIDS counts. If a jurisdiction qualified for $100,000 formula funding  using HIV and AIDS case counts, but the minimum award was $500,000,  the jurisdiction would not receive less funding because of the change to  HIV and AIDS counts.
Under our first approach, 5 percent of Title II base grants would shift  among grantees if the hold-harmless and minimum grant provisions were  maintained while 14 percent would shift if they were not included. Under  our second approach, 4 percent would shift instead of 10 percent.  California, which would have had large reductions under both approaches  if the hold-harmless provision was not maintained, would have had no  change in funding under either approach if the current hold-harmless  provisions were maintained. Appendix III shows the results of these  analyses for each state.

	State ADAP Eligibility Criteria and Funding Sources Vary Widely

Among state ADAP programs, there is wide variation in the eligibility  criteria used to determine who is covered for ADAP services and in the  funding sources available beyond each state’s Title II ADAP base grant.  States have flexibility in determining their ADAP program eligibility  standards, including the income eligibility ceilings for ADAP clients, caps  on spending per client, and the HIV and AIDS drugs included in their  formulary. As a result, an individual eligible for ADAP services in one state  may not be eligible in another. There is also wide variability in the  additional funding sources that ADAPs may receive to help fund their  programs. Beyond each state’s Title II ADAP base grant for providing HIV  and AIDS medications and related services, additional ADAP funding  sources may include Title II Severe Need grants, non-federal transfers of  Title II state or Title I EMA funds, state contributions, and other funding  sources. States with waiting lists for ADAP services do not fit any  particular pattern of eligibility criteria and funding sources.

		Eligibility Criteria Contribute to Coverage Differences Among States

States set different eligibility criteria for their ADAP programs, so a person  with HIV or AIDS at a certain income level and needing medication  assistance may be an eligible ADAP client in one state, but not in another.  Eligibility also varies among state Medicaid programs, which may provide  HIV and AIDS services and drug assistance. The interaction between these  two programs can affect which clients are eligible for ADAP services, and  many individuals seeking ADAP coverage may not be aware that they are  eligible for drug assistance through Medicaid.
One eligibility requirement where there is considerable variation among  state ADAPs is the client income ceiling. The income ceilings among 52  state ADAPs for fiscal year 2004 ranged from the most restrictive at 125  percent of the federal poverty level, or $11,638, in North Carolina to the  most generous at 556 percent, or $51,764, in Massachusetts. Eleven states  had eligibility ceilings at 200 percent or less of the poverty level.
Another eligibility criterion where there is wide variation among state  ADAPs is the number of HIV and AIDS drugs covered under a state  program’s drug formulary. The number of drugs included in ADAP  formularies in fiscal year 2004 varied widely from Colorado with 20 drugs  to four state ADAPs—Massachusetts, New Hampshire, New Jersey, and  Washington—with open drug formularies. Thirty-nine ADAPs had 100 or  fewer drugs, including 15 with fewer than 50 drugs on their formularies.  The CARE Act allows states to purchase health insurance to cover HIV and  AIDS drugs for their clients. HRSA requires an ADAP to demonstrate that  the insurance includes coverage for drugs comparable to those on the  state’s ADAP formulary.
Determining whether an individual is eligible for state ADAP or state  Medicaid services is important because the ADAPs serve as the  individual’s HIV and AIDS drug assistance program of last resort. Medicaid  programs provide HIV and AIDS health care services, including  medications, to eligible disabled individuals with low incomes. If an  individual is eligible for a state’s Medicaid drug assistance, the state ADAP  should not provide the same services under its program. Twenty-three  ADAPs reported requiring clients to have been denied Medicaid eligibility  before the ADAP will cover them. To ensure that a prospective or current  ADAP client is not eligible to be served by Medicaid, 42 of the 52 state  ADAPs reported in ADAP grant year 2004 that they used a case manager  review process to monitor an ADAP client’s Medicaid eligibility, and 40 of  the 52 ADAPs also reported using computer access to eligibility  determinations to verify a client’s Medicaid and ADAP eligibility.
Because it is important to ensure continuing therapy for HIV and AIDS  clients once they begin taking medications, states may limit the number of  ADAP clients they serve to prevent a budget shortfall. This could result in  eligible clients being on an ADAP waiting list. States also use a variety of  ADAP eligibility restrictions to limit the number of clients they serve. Of  the 52 state ADAPs, 36 reported eligibility restrictions for ADAP grant year  2004, and 20 of the 36 used more than one. The restrictions most used  were (1) an annual cap on individual incomes by 20 ADAPs, (2) a  limitation on an individual’s assets by 16 ADAPs, (3) capping ADAP  enrollment by 7 ADAPs, (4) sliding scale copayments paid by individuals  by 7 ADAPs, and (5) capping the amount expended per client for all HIV  and AIDS drugs by 6 ADAPs. Appendix IV provides a state-by-state  summary of the reported restrictions.

		A Large Percentage of ADAPs’ Funds Received from Sources Other than the ADAP Base Grant

In addition to their Title II ADAP base grants, 46 of the 52 states ADAPs  received funding from other sources for their programs in fiscal year 2004.  There were five sources of additional funding across these 46 state ADAPs:  (1) $20.8 million in Title II Severe Need grants (including $4.5 million in  state match funds), (2) $26.9 million from Title II state funding transfers,  (3) $10.9 million from Title I EMA funding transfers, (4) $194.8 million in  state contributions, and (5) $169.3 million in other funds. When the  additional funding source totals are compared among states as a  percentage of the ADAP’s CARE Act base grant, and as an amount per  AIDS case, there is a significant range among the states. Appendix V  provides a state-by-state summary of additional ADAP funding and the  base grant and per AIDS case comparisons.
State ADAPs that received funding from sources other than their Title II  base grant award include    Sixteen of the 25 states eligible for ADAP Severe Need grants received  grant amounts ranging from about $37,000 in Montana to about $6 million  in Texas. States eligible for these grants must agree to match 25 percent of  the funds.
Eighteen ADAPs reported receiving transfers from their states’ Title II  base grants ranging from about $65,000 in Maryland to $12.2 million in  California.
Nine of the 24 states with EMAs reported receiving Title I fund transfers  from their EMAs for their ADAPs ranging from more than $65,000 for  Nevada to about $6 million for New York.
Thirty-five ADAPs reported receiving state contributions from their states  ranging from about $8,000 in Ohio to about $64 million in California.
Thirty-two ADAPs reported other funding sources ranging from about  $7,000 in Montana to $64.5 million in New York. Other funding sources  include additional funds from drug rebates and HRSA approved carryover  of ADAP CARE Act funds from one year to the next.
Among states with additional funding sources, there is a significant range  in amounts per AIDS case and percentages of the ADAP base grants. The  highest amount of additional funding received per AIDS case was $3,604,  or 171 percent of the base grant in Idaho and the lowest was $61 per AIDS  case, or 3 percent of the base grant in the District of Columbia. ADAPs in  six states did not receive any additional funding—Iowa, New Hampshire,  New Mexico, Tennessee, Utah, and Wyoming.

		Eligibility Criteria and Funding Sources Also Vary Among States with Waiting Lists

During fiscal years 2002 through 2004, some states had people eligible for  their ADAPs’ services on waiting lists and the states with ADAP waiting  lists have remained relatively static in fiscal years 2002 through 2004.  Sixteen, or about one-third, of the 52 states had ADAP waiting lists for at  least 1 month during these 3 years. Seven of the 16 states had ADAP  waiting lists in all 3 years. (See table 9.)
The funding sources and eligibility criteria for states with waiting lists  have varied just as considerably as for states without waiting lists, and  there is no clear pattern between a state’s funding sources or eligibility  criteria and the existence of a waiting list. While 33 states that received  additional funds did not have an ADAP waiting list in 2004, 13 of the 14  states with waiting lists also received additional funding beyond their  ADAP base grant. For example, for    Title II Severe Need grants: Eight of the 16 states that received Severe  Need grants had waiting lists. Three of the 9 eligible states that did not  apply for Severe Need grants in 2004—Alaska, Iowa, and South Dakota— also had ADAP waiting lists.
Title I EMA transfers: One state ADAP of the nine that received a Title I  transfer—Colorado—had an ADAP waiting list.
Title II state transfers: Eight of the 18 ADAPs receiving Title II transfers  had waiting lists.
State funds: Nine of the 35 ADAPs that received state funds had waiting  lists.
Other funding: Of the 32 ADAPs reporting other funding sources, 10 had  ADAP waiting lists.
Of the 14 states with ADAP waiting lists, 5 were among the top 10 for  additional funding per AIDS case received—Idaho (1), South Dakota (2),  Oregon (3), North Carolina (7), and Colorado (8). The remaining 9 states  with waiting lists and their per AIDS case ranks were Montana (12),  Alabama (18), Nebraska (23), Indiana (24), West Virginia (28), Kentucky  (33), Arkansas (34), Alaska (42), and Iowa with no additional funds.
There also seems to be no clear pattern between eligibility criteria—such  as a low income eligibility ceiling or a limited drug formulary—and a  waiting list of clients that a state ADAP deems eligible but is unable to  serve. For example, for    Client income eligibility levels: North Carolina with the most restrictive  level at 125 percent of the poverty level had a waiting list, and  Massachusetts with the most generous level at 556 percent had no waiting  list.
Eligibility restrictions: Among the seven ADAPs that capped their  ADAP enrollment, six had waiting lists. Five ADAPs that capped the  amount they expend per client for all HIV and AIDS drugs included two  states with waiting lists.
Drug formularies: Among the 39 ADAPs with 100 or fewer drugs on their  formularies, 13 had waiting lists.
When eligible clients are on state ADAP waiting lists, there are limited  medication assistance options available to help them until they can be  served by the ADAP. HRSA officials told us that case managers, who are  not ADAP employees, are to assist ADAP-eligible clients in accessing  options to act as stopgaps until clients can be provided ADAP services.  Among the options are pharmaceutical manufacturers’ patient assistance  programs that provide free or cost-reduced drugs and non-ADAP  pharmacy assistance programs provided by some EMAs using their Title I  funds.

	Concluding Observations

The services provided under the Care Act have filled important gaps in  communities throughout the country, but as Congress reviews this act, we  believe it is important to understand how variable this funding can be.  Today I have highlighted a few of the issues that are relevant to this  review. For each of these issues, we found that the provisions of the CARE  Act have impacted the extent to which funds have been distributed in  proportion to the incidence of HIV and AIDS. It is clear that the level of  funding available per case is quite variable depending upon where an  individual lives. The way cases from EMAs are counted twice, the tiered  allocation of funds to Emerging Communities, the hold-harmless  provisions, and the grandfathering of EMAs have all resulted in  considerably more funding going to some communities than others with  equivalent numbers of cases. The inclusion of HIV cases in the funding  formulas, while improving on the basis for funding allocations by  reflecting cases that have not progressed to AIDS, would also result in  variable funding depending upon the type and maturity of the reporting  system used in each state. In addition, the flexibility given to states to shift  funds, establish eligibility criteria, place limits on the medications covered,  and cap enrollment, has resulted in great variability for ADAP services  depending upon where an individual lives.
Mr. Chairman, this completes my prepared statement. I would be happy to  respond to any questions you or other members of the subcommittee may  have at this time.

	Contact and Acknowledgments

For future contacts regarding this testimony, please call Marcia Crosse at  (202) 512-7118. Other individuals who made key contributions include  Robert Copeland, Louise Duhamel, Cathy Hamann, James McClyde, Opal  Winebrenner, and Craig Winslow.

Appendix I: Combined CARE Act Title I and Title II Funding by State, Fiscal Year 2004

	Combined Title I and

Total Title I and Title II  awards per AIDS case State received a Title II base award of $500,000, the minimum it could receive based on the number  of AIDS cases in the state.
State received a Title II base award of $200,000, the minimum it could receive based on the number  of AIDS cases in the state.

Appendix II: Estimated Funding Changes Using HIV and AIDS Cases without Hold- Harmless and Minimum Grant Provisions

	Change in Title II case funding if CDC-

Change in Title II base funding if HIV case  accepted HIV case counts and AIDS case  counts from all states and AIDS case counts  counts were used to distribute funding  were used to distribute funding   State received a Title II base award of $500,000, the minimum it could receive based on the number  of AIDS cases in the state.
State received a Title II base award of $200,000, the minimum it could receive based on the number  of AIDS cases in the state.

Appendix III: Estimated Funding Changes Using HIV and AIDS Cases with Hold- Harmless and Minimum Grant Provisions

	Change in Title II base funding if CDC-

Change in Title II base funding if HIV case  accepted HIV case counts and AIDS case  counts from all states and AIDS case counts  counts were used to distribute funding  were used to distribute funding   State received a Title II base award of $500,000, the minimum it could receive based on the number  of AIDS cases in the state.
State received a Title II base award of $200,000, the minimum it could receive based on the number  of AIDS cases in the state.

Appendix IV: ADAP Program Eligibility Restrictions Reported by 52 ADAPs, ADAP Grant Year 2004

Appendix V: Additional ADAP Funding and its Percentage of the CARE Act Title II ADAP Base Grants and per AIDS Case by State

Title II non- ADAP base  A State was not eligible for a grant.
B State did not have an EMA.

Related GAO Products

Ryan White CARE ACT: Ti e I Funding or San Francisco.  f 189R. Washington, D.C.: August 24, 2000.
Ryan White CARE Act: Opportunities to Enhance Funding Equity. GAO/T- HEHS-00-150. Washington, D.C.: July 11, 2000.
HIV/AIDS: Use of Ryan Whie CARE Act and Other Asssance Grant Funds. GAO/HEHS-00-54. Washington, D.C.: March 1, 2000.
HIV/AIDS Drugs: Funding Imp catons o New Combna on Therapes or  Federal and State Programs. GAO/HEHS-99-2. Washington, D.C.: October  14, 1998.
Revisng Ryan Whie Funding Formulas. GAO/HEHS-96-116R. Washington,  D.C.: March 26, 1996.
Ryan White CARE Act o 1990: Opporunities to Enhance Funding Equity.  GAO/HEHS-96-26. Washington, D.C.: November 13, 1995.
Ryan White CARE Act: Access o Services by Mnori es, Women, and i tit Substance Abusers. GAO/T-HEHS-95-112. Washington, D.C.: July 17, 1995.
Ryan White CARE Act o 1990: Opporunites Are Avaiabe to Improve  Funding Equiy. GAO/T-HEHS-95-126. Washington, D.C.: April 5, 1995.
Folowup on Ryan Wh e Testmony. GAO/HEHS-95-119R. Washington,  it D.C.: March 31, 14, 1995.
Ryan White CARE ACT of 1990: Opportun ies Are Avaiabe o Improve  Funding Equiy. GAO/T-HEHS-95-91. Washington, D.C.: February 22, 1995.
Ryan White Funding Formulas. GAO/HEHS-95-79R. Washington, D.C.:  February 14, 1995.
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Summary:
Why GAO Did This Study

The Ryan White Comprehensive AIDS Resources Emergency Act (CARE Act) was enacted in 1990 to respond to the needs of individuals and families living with the Human Immunodeficiency Virus (HIV) or Acquired Immunodeficiency Syndrome (AIDS). In fiscal year 2004, over $2 billion in funding was provided through the CARE Act, the majority of which was distributed through Title I grants to eligible metropolitan areas (EMA) and Title II grants to states, the District of Columbia, and territories. Titles I and II use formulas to distribute grants according to a jurisdiction's reported count of AIDS cases. Title II includes grants for state-administered AIDS Drug Assistance Programs (ADAP), which provide medications to HIV-infected individuals. GAO was asked to discuss the distribution of funding under the CARE Act. This testimony presents preliminary findings on (1) the impact of CARE Act provisions that distribute funds based upon the number of AIDS cases in metropolitan areas, (2) the impact of CARE Act provisions that limit annual funding decreases, (3) the potential shifts in funding among grantees if HIV case counts were incorporated with the AIDS cases that are currently used in funding formulas, and (4) the variation in eligibility criteria and funding sources among state ADAPs.

What GAO Found

Under the CARE Act, GAO's preliminary findings show that the amount of funding per AIDS case varied among states and metropolitan areas in fiscal year 2004. Some CARE Act provisions that distribute funds based on the AIDS case count within metropolitan areas result in differing amounts of funding per case. In particular, when a state or territory has an EMA within its borders, the cases within that EMA are counted twice during the distribution of CARE Act funds--once to determine the EMA's funding under Title I, and once again to determine a state's Title II grant. The hold-harmless provisions under Titles I and II guarantee a certain percentage of a previous year's funding amount, thus sustaining the funding levels of CARE Act grantees based upon previous years' measurements of AIDS cases. Title I's hold-harmless provision for EMAs has primarily benefited the San Francisco EMA, which received over 90 percent of the fiscal year 2004 Title I hold-harmless funding. San Francisco alone continues to have deceased cases factored in to its allocation, because it is the only EMA with hold-harmless funding that dates back to the mid-1990s when formula funding was based on the cumulative count of diagnosed AIDS cases. If HIV case counts had been incorporated with AIDS cases in allocating Title II funding to the states in fiscal year 2004, about half of the states would have received an increase in funding and half of the states would have received less funding. Many of those states receiving increased funding would have been in the South, a region that includes 7 of the 10 states with the highest estimated rates of individuals living with HIV. However, wide variation in the maturity of states' HIV reporting systems could limit the adequacy of their HIV case counts for the distribution of CARE Act funding. Among state ADAPs, there is wide variation in the criteria used to determine who is eligible for ADAP medications and services, and in the additional funding received beyond the Title II grant for each state ADAP. States have flexibility to determine what drugs they will cover for their ADAP clients and what income level will entitle a person to eligibility, among other criteria, and the resulting variation can contribute to client coverage differences among state ADAPs. There is similar variation in additional funding sources and eligibility criteria among states that have established waiting lists for eligible clients. The Centers for Disease Control and Prevention and the Health Resources and Services Administration provided comments on the facts contained in this testimony and GAO made changes as appropriate.