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EXAMINATION OF FISCAL MANAGEMENT AND THE ALLOCATION OF 

CARE ACT RESOURCES

Health Resources and Services Administration

HIV/AIDS Bureau

5600 Fishers Lane, Suite 7-05

Rockville, MD 20857

Telephone 301.443.1993

w w w. h a b . h r s a . g o v

Free copies are available at www.hab.hrsa.gov

or may be obtained by contacting the HRSA Information Center: 1.888.ASK.HRSA.

Prepared with assistance from Impact Marketing + Communications under HRSA Contract #231-01-0052

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C O N T E N T S

Study 1: Ryan White CARE Act Reauthorization 2005: Title I and Title II Health 

S e rvices Expenditure Patterns 1

Study 2: Examination of Key Fiscal Issues Related to Grantees of the Ryan White

C o m p rehensive AIDS Resources Emergency Act 9

Study 3: Assessing the Impact of the Ryan White CARE Act Title II Emerging

Communities Formula Grant Pro g r a m 3 5

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I N T R O D U C T I O N

Since its initial passage in 1990, the Ryan White Comprehensive AIDS Resources Emergency (CARE) Act

has been critical in ensuring access to HIV care and treatment for hundreds of thousands of persons living

with HIV/AIDS and their families. Today, the CARE Act remains a cornerstone of the Federal effort to fight

HIV/AIDS and continues to provide a critical safety net for over 571,000 individuals affected by HIV/AIDS

who are uninsured or underinsured each year.

With approximately 40,000 new HIV infections each year in the United States, but fewer AIDS deaths (as

the result of remarkable new treatments), more people than ever are living with HIV/AIDS—more people

who need the care and services funded by the CARE Act. Increasingly, these are historically underserved

populations, including racial and ethnic minorities. Responding to these individuals and families, who

depend on the CARE Act for essential health and support services, involves a number of challenges:

+ The ever- i n c reasing cost of health care, particularly the cost of highly active aantire t roviral therapy (HAART )

+ An increasing demand on the CARE Act as a primary source for long-term ambulatory and supportive care

+ Changes in the underlying health care financing system that surrounds CARE Act programs.

Each CARE Act reauthorization offers the U.S. Department of Health and Human Services an opportunity

to assess how it can make the CARE Act even more effective at responding to changes in the epidemic and

appropriately targeting resources. These policy studies attempt to improve our understanding of how the

above challenges affect CARE Act programs and the people they serve.

The Health Resources and Services Administration’s (HRSA) HIV/AIDS Bureau is responsible for implementing the CARE Act. It is in partial fulfillment of this responsibility that the monograph Examination of

Fiscal Management and the Allocation of CARE Act Resources is published. The goals for the monograph are to

expand on current knowledge; inform policy-related, administrative, and legislative decision making; and

provide technical assistance to CARE Act grantees and providers that will enhance the quality and reach of

their programs.

The monograph focuses on CARE Act spending. It identifies the services that major payers (such as Medicaid

and Medicare) cover and describes who is eligible for those services. Geographic and funding factors that

a ffect the shift in treatment patterns for HIV are also discussed. The ultimate goal is to ensure maximum

re t u rn on CARE Act spending—and to ensure that CARE Act funds are used only when no other source of

payment is available.

Three policy studies are included in this booklet:

1. Ryan White CARE Act Reauthorization 2005: Title I and Title II Health Services Expenditures Patterns

2. Examination of Key Fiscal Issues Related to Grantees of the Ryan White CARE Act

3. Assessing the Impact of the Ryan White CARE Act Title II Emerging Communities Formula Grant Pro g r a m .

Findings and recommendations from these studies will help inform HRSA’s administrative pro c e d u res, technical assistance, and training activities; improve service delivery; and enhance interg o v e rnmental re l a t i o n s h i p s

between Federal agencies and among Federal, State, and local jurisdictions. HRSA grantees are encouraged to

read these re p o rts and to incorporate findings and recommendations into their ongoing planning and pro g r a m

activities. HRSA welcomes feedback from readers on the usefulness of this monograph for their work.
RYAN WHITE CARE ACT REAUTHORIZATION 2005: TITLE I

AND TITLE II HEALTH SERVICES EXPENDITURES PATTERNS

RUTH FINKELSTEIN

STUDY1
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Purpose of the Study

To investigate whether the allocation of Ryan White Comprehensive AIDS Resources Emergency (CARE) Act

funds for health care services by States and eligible metropolitan areas has changed through time and

whether such allocations are responsive to differences in the HIV health care environments. The study

hypothesized that Title I and Title II proportional expenditures on health care services would increase over

time and that CARE Act Title I and Title II jurisdictions with better resourced HIV health care environments

would spend proportionately less CARE Act money on health care services because those services would be

covered by other payers. It also hypothesized that jurisdictions with poorly resourced HIV health care environments would spend more CARE Act money on health care services to make up for such deficiencies.

Background

One central tenet of the Ryan White CARE Act is that flexibility and decision making at the local level are

essential to respond to variations in the needs, capacity, and resources in different jurisdictions. This local

control and flexibility have been driven by the recognition that the existing services and resources available

to care for people living with HIV/AIDS (PLWHA) are different in different places. Moreover, historically,

much emphasis has been placed on the differing characteristics of HIV epidemics in different locations,

which have been driven by different modes of transmission and effects on different populations. As medical

treatments for HIV have improved, however, and as these “different” HIV epidemics have increasingly converged, it has become possible to define a continuum of care for PLWHA throughout the country. Local planning in Titles I and II (and grants through Titles III and IV) can be conceptualized to identify specific, unmet

needs of PLWHA in the jurisdiction and existing resources and capacities to meet those needs and to prioritize CARE Act funds to fill identified gaps. Logically, therefore, a structured relationship should exist

between the existing local HIV health care environment and the services funded through the CARE Act.

Allocation of Title I and II resources to fund health care services represents a critical opportunity to investigate the appropriateness of local planning decisions for a number of reasons. First, since the enactment of

the CARE Act, and particularly since the advent of highly active antiretroviral therapy in 1996, both the

effectiveness and the cost of HIV primary care have increased because consistent participation in HIV primary care enhances longevity and decreases morbidity and mortality.

1,2,3 Local health care environments vary

from State to State and even within States. For HIV care and services, this variation is driven principally by

enormous variation in State Medicaid programs (including covered populations, covered services, and reimbursement structures and levels).4 Medicaid is estimated to cover 44 percent of people living with HIV and

55 percent of people living with AIDS (PLWA) nationwide.4 Second, local HIV health care environments vary

by the availability of publicly funded HIV health care (based on the existence of public hospitals and community health centers) and existence and the quality of HIV care capacity as well as the access of PLWHA

to private insurance. Thus, local jurisdictions differ in their capacity to provide HIV health care services and

the quality, accessibility, and affordability of such services. This variation makes it possible to examine

whether differences in local health care environments are related to different decisions about how to allocate Title I and Title II funds.
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Methodology

To explore these hypotheses, this study looked at trends in Title I and Title II health care spending over a

3-year period, analyzed the relationship between health care spending and variables in local health care

environments, constructed a typology of health care environments and spending patterns, and conducted

case studies to better understand the relationships between the health care environment and CARE Act

spending. The dependent variable (health care services spending) was defined broadly in accordance with

Health Resources and Services Administration (HRSA) guidance. Because the focus was on discretionary

spending, the trend analysis and the health care environment analysis excluded funds earmarked for specific services, such as the AIDS Drug Assistance Program (ADAP) earmark, and included all discretionary

spending from the base award, carryover, Minority AIDS Initiative, and emerging communities awards in

the dependent variable. The ADAP earmark was, of course, included in the independent variables describing the health care environment. Independent variables describing the HIV health care financing environment were based on secondary sources that could provide uniform data across jurisdictions. The study

examined characteristics of Medicaid, other CARE Act titles, the adequacy of the ADAP program, and other

major Federal programs providing PLWHA health care services, including the Department of Veterans

Affairs, National Institutes of Health, Indian Health Service, and Medicare, and estimates of the proportion

of AIDS-related services covered by private insurance.

The trend analyses focused on Title I and II expenditure data submitted to HRSA for fiscal years (FYs) 2000

t h rough 2002, the most recent years for which data were available. Data were analyzed for trends in expend i t u res related to broad service categories—health care services, support services, and nonserv i c e

categories—and for the pro p o rtion of total expenditures related to each category. The study then examined

the relationship between health care spending in FY 2002 and the health care financing enviro n m e n t .

Results from this analysis were used to create a typology of the HIV health care environments so that CARE

Act jurisdictions could be characterized across a uniform set of variables. Finally, case studies of 12 jurisdictions were conducted to illuminate how planning and re s o u rce allocation by grantees respond to the

HIV health care environment and to changes in that environment. In addition, the case studies pro v i d e

i n f o rmation that helps interpret other findings about trends in health care spending and the re l a t i o n s h i p

between the health care environment and spending by Title I and Title II grantees.

L i m i t a t i o n s

The study findings are subject to several limitations. Trend analysis data were incomplete and inconsistent in

several cases. More o v e r, it is likely that diff e rent jurisdictions attributed expenditures to service categories diff e re n t l y. Indeed, a related limitation of the trend analysis is that it relies on only three data points. The health

c a re environment analysis also was subject to limitations: because uniform secondary data sources were lacking, it was impossible to include all key features of the HIV health care environment. Even when uniform data

w e re available, the data sets were not always complete or consistently re p o rted. The typology was created by

t r a n s f o rming a continuous variable (the health care environment re s o u rce score) into a categorical variable

(high, medium, low) in order to sort the jurisdictions meaningfully. Doing so, however, created the possibility

that the “bottom” of one group is more closely related to the “top” of another group than to the mean of the

g roup in which it was classified. Finally, the health care environment score and the typologies are based on

c ross-sectional data for FY 2002. As the case studies confirmed, this snapshot in time fails to capture re c e n t

changes in the environment or in how planning decisions might have responded to such changes.
Despite its limitations, the study supports some general conclusions about trends in spending and how key

features of the HIV health care environment relate to proportional spending of CARE Act funds on health

care services.

Major Findings

Health Care Spending Tre n d s

No significant changes were observed in the pro p o rtional spending of discre t i o n a ry Title I and Title II

funds on health care services from FY 2000 to FY 2002. Although the total money spent on health care

i n c reased, pro p o rtional health care expenditures did not increase as expected. This finding is consistent

with and lengthens the trend line developed by Young et al. in their analysis of FY 1996 through FY 2000

e x p e n d i t u re data.5 Significant variation was found among jurisdictions in pro p o rtional health care serv i c e s

spending as well as, in some jurisdictions, temporal changes. When the ADAP earmark was included in

the analysis, pro p o rtional health care spending did increase each year. However, this increase is driven by

the earmark and Federal regulation of the CARE Act, not State and local decision making. Because the

study focused on local and State discre t i o n a ry spending, the ADAP earmark was excluded from subsequent

analyses (except as a component of the health care environment). Although no trend emerged in health

c a re services spending, systematic trends were found in specific service categories, particularly decre a s e d

spending on services associated with care for the acutely ill (e.g., home health care, hospice services). This

finding, also consistent with those of Young et al., likely reflects the decline in prevalence of PLWHA with

end-stage disease. Despite this minor trend, the big picture was revealed to be one of relative stasis in prop o rtional spending.

Relationship Between the HIV Health Care Environment and Pro p o rtional Health Care Expenditure s

The analysis sought to identify significant relationships between individual features in the health care financing environment (Medicaid, other insurance, other CARE Act titles, the adequacy of the ADAP program, and

other major Federal programs providing health care to PLWHA) and health care services expenditures in FY

2002. Basic demographic variables (percentage of population living in poverty and number of PLWA) were

included to roughly characterize the HIV epidemic in each jurisdiction. All of these variables were then used

to create a composite typology that characterized jurisdictions as having a high, medium, or low HIV health

care financing environment. The study also explored the relationship between these types and CARE Act

health care service expenditures.

Analysis of the relationship between individual variables in the health care environment and CARE Act

health care expenditures yielded few relationships. For Title I, no significant relationships were detected

between any characteristics of the health care environment and health care expenditures. For Title II, relationships were found in the expected direction for two characteristics. States that had higher income thresholds for people to qualify for their Medicaid medically needy program and States that had no medically

needy program spent more Title II money on health care services than did States with a lower threshold for

eligibility for medically needy programs. In addition, States that had a higher number of special Medicaid

programs for PLWHA had lower proportional Title II spending on health care services than did States with

few or no special programs.

As Table 1 illustrates, when jurisdictions are classified into broad types of health care environments, a full

distribution of CARE Act health care spending may be found within each type. The typologies further

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Table 1. Health Care Service Environment and Proportion of Award Spent in Health Care

Service Allocations

Health Care Environment Score Title II Title I

Low Oregon 14.2 Portland, OR 24.4

Nebraska 16.3 Las Vegas, NV 36.7

Hawaii 29.0 St. Louis, MO 38.0

Arkansas 31.3 Kansas City, MO 38.6

Vermont 37.7 West Palm Beach, FL 39.9

Alaska 38.7 New Orleans, LA 40.1

Kansas 39.0 Fort Worth–Arlington, TX 42.2

Texas 40.6 Norfolk, VA 54.4

Colorado 42.3 Austin, TX 54.5

South Carolina 46.5 San Antonio, TX 59.3

Kentucky 46.7 Denver, CO 68.7

Montana 49.7

Idaho 54.0

Alabama 54.4

New Mexico 71.4

Wyoming 78.5

Indiana 85.0

Nevada 87.5

Medium Maine 00.1 Minneapolis–St. Paul, MN 8.6

Washington 19.5 Vineland–Millville–Bridgeton, NJ 24.6

Missouri 30.1 Sacramento, CA 34.2

Wisconsin 35.0 Seattle, WA 35.2

Iowa 38.0 Hartford, CT 36.4

North Carolina 39.9 Jersey City, NJ 38.1

Rhode Island 44.2 Orange Co., CA 39.5

Utah 47.2 Phoenix, AZ 40.3

North Dakota 47.4 Riverside–San Bernardino, CA 48.2

Delaware 51.9 M i d d l e s e x – S o m e r s e t – H u n t e rdon, NJ 51.0

Louisiana 55.5 Jacksonville, FL 51.9

Virginia 55.5 San Jose, CA 53.1

Arizona 63.7 Orlando, FL 56.0

New Hampshire 67.6 Houston, TX 57.8

Tennessee 72.1 Cleveland–Lorain–Elvira, OH 58.7

Oklahoma 76.9 Dallas, TX 62.7

Mississippi 88.7 Fort Lauderdale, FL 63.3

Tampa–St. Petersburg, FL 68.8

High Massachusetts 16.5 Oakland, CA 23.4

Pennsylvania 16.7 Boston, MA 24.5

Connecticut 26.9 San Diego, CA 29.0

District of Columbia 37.6 Detroit, MI 31.5

Florida 50.7 Philadelphia, PA 36.0

Illinois 51.2 Newark, NJ 41.1

New York 52.4 New Haven, CT 42.9

Minnesota 58.6 Baltimore, MD 44.5

Michigan 62.3 Washington, DC 46.1

Ohio 66.3 Santa Rosa–Petaluma, CA 47.7

Maryland 69.3 Chicago, IL 52.3

California 73.0 Nassau–Suffolk, NY 52.3

New Jersey 74.2 San Francisco, CA 52.7

Georgia 80.3 New York, NY 54.6

Bergen–Passaic, NJ 56.7

Duchess County, NY 58.3

Miami, FL 62.9

Los Angeles, CA 67.3

Atlanta, GA 74.4

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demonstrate the absence of a structured or predictable relationship between local health care financing environments and the proportion of Title I and Title II funds expended on health care services. The case studies did, however, reveal instances of spending that were responsive to the health care environment but were

not detected by the statistical analysis. For example, several jurisdictions used carryover funds to address

shortfalls in other funding, such as ADAP or coverage for a specific test disallowed by Medicaid.

Table 1 shows clearly that in each health care environment—high, medium, and low—discretionary expenditures on health care services vary dramatically, from lows of under 20 percent of the award to highs of

more than 80 percent in Title II programs and from less than 25 percent to more than 65 percent in Title I

programs. Table 2 confirms that no trend or pattern toward a relationship exists between proportional health

care spending and the adequacy of the health care financing environment. The slight nonsignificant trend

suggested goes in the wrong direction for both Title I and II—that is, the more resources in the health care

environment, the greater the proportional spending on health care services from Titles I and II. 

Table 2. Health Care Service Allocations by Health Care Environment Typology Score

Title I

Health Care Typology Score

Low Medium High F p

N 11 18 19 0.082 ns

Mean 45.2 46.0 47.6

Standard Deviation 12.6 15.2 14.1

Title II

N 18 17 14 0.324 ns

Mean 47.9 49.0 53.7

Standard Deviation 21.2 21.8 19.9

ns=not significant.

R e c o m m e n d a t i o n s

Policy Implications and Options

Resource allocations for Title I and, to a lesser extent, Title II are relatively impervious to local health care

financing conditions.

Possible Policy Options

+ Reduce the local planning and resource allocation functions in Title I or in Titles I and II of the CARE

Act. Such action would require legislative change.

+ Continue to support local planning but establish more comprehensive guidance about how it should be

accomplished.

+ Continue local planning but legislatively require a hierarchy of allocations to ensure the prioritization of

health care services.

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Comprehensive planning at the State and local level is difficult and complex.

Possible Policy Options

+ Reexamine what information and knowledge are expected at what levels of government and planning.

+ Develop a comprehensive, Web-based resource guide for all facets of comprehensive planning, including links to local data and resources.

+ Reduce the administrative burden of planning by recognizing that new systems of planning and coordination should replace or integrate existing ones.

+ Work with grantees to improve collaboration between Title I and Title II within each State.

Discretionary planning focuses primarily on increases from the previous award rather than on the whole

award.

Possible Policy Options

+ Eliminate all restrictions, earmarks, and set-asides within Title I and Title II. Such action would require

legislative change.

+ R e q u i re zero-based planning at regular intervals so that grantees plan for and reallocate the entire port f o l i o .

R e f e re n c e s

1 Marconi KM, Jacobsen JM. Trends in the use of primary health care and case management among HIVpositive individuals. [Abstract]. Assoc Health Services Res. 1999;16:160.

2 Mocroft A, Ledergerber B, Katlama C, et al. Decline in the AIDS and death rates in the EuroSIDA study:

An observational study. Lancet. 2003;362(9377):22–29.

3 Bartlett JG, deMasi R, Quinn J, Moxham C, Rousseau F. Overview of the effectiveness of triple combination therapy in antiretroviral-naive HIV-1 infected adults. AIDS. 2001;15(11):1369–1377.

4 Institute of Medicine. Public Financing and Delivery of HIV/AIDS Care: Securing the Legacy of Ryan White.

Washington, DC: National Academies Press; 2004.

5 Young S, Conviser R, Marconi KM, Wieland M. Trends and responsiveness in national resource allocation for needed HIV services: A five-year (1996–2000) analysis. J Health Soc Policy. 2003;17(4):1–14.

EXAMINATION OF KEY FISCAL ISSUES RELATED

TO GRANTEES OF THE RYAN WHITE CARE ACT

STUDY2

JULIA HIDALGO AND WENDY WARCOLIK-MOODY 
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Purpose of the Study

The HIV/AIDS Bureau (HAB) of the Health Resources and Services Administration (HRSA) contracted with

Positive Outcomes, Inc. (POI) to (1) closely examine three legislatively mandated requirements of the Ryan

White Comprehensive AIDS Resources Emergency (CARE) Act to provide HRSA with a clearer understanding of congressional intent to share HIV costs with grantees and the primary payers of HIV-infected persons’

care, including State, municipal, and other payers; and (2) provide HAB with a better understanding of

whether and how these mandated requirements are being met by grantees during times of change in health

care financing and during an economic downturn. The three fiscal requirements are maintenance of effort

(MOE), matching funds, and payer of last resort (PLR).

B a c k g ro u n d

State and Local Funding Crisis

In recent years, the Ryan White CARE Act has operated in a highly dynamic, constrained financing environment. At the Federal level, HAB has experienced flattening in Congressional appropriations except for

funds allocated to AIDS Drug Assistance Programs (ADAPs). At the same time, State and local taxes as a percentage of gross domestic product are at their lowest levels since the late 1980s. State, county, and local governments throughout the United States report significant fiscal crises. The National Association of State

Budget Officers reports that beginning in fiscal year (FY) 2001, States experienced the worst budgetary situation in 60 years.1 From FY 2001, State revenues declined for eight consecutive quarters, with slight recent

growth among some States. The decline of personal income tax and other State revenue sources contributed

to the fiscal crisis. Although revenue appears to be improving among some States, other States project large

budget shortfalls in FY 2005 because of decreased tax revenue. In 30 States with shortfalls, deficits range

from $39 billion to $41 billion or about 7 percent to 8 percent of State expenditures. Current deficits were

offset by one-time-only Federal Medicaid funds to help State governments cover sharply rising Medicaid

expenditures. Although State tax revenue is projected to increase for some States, rising Medicaid expenditures are likely to continue to result in budget shortfalls without additional Federal funding intervention. 

Although some States have raised taxes to offset their deficits, the principal solution taken by States has

been to cut spending. Real per capita State spending dropped by $56.9 billion (5 percent) between 2001

and 2004. States have taken several approaches simultaneously. Many States have reduced spending

t h rough acro s s - t h e - b o a rd cuts of all State programs. Other spending cuts have come in the form of elimination or significant reduction of funding for specific programs. Public health programs, including

HIV/AIDS prevention, surveillance, and treatment, have experienced significant reductions in State funding. Most States also have reduced spending through one-time-only savings: layoffs, cutting vacancies, and

reducing services. One-time-only savings help initially to reduce deficits, but they do not yield long-term

solutions to insufficient re v e n u e .

Medicaid programs, the fastest growing component of State budgets, have attempted to slow growth in

expenditures by reducing the number of new and ongoing beneficiaries, eliminating optional benefits, or

reducing payments to providers. Many Medicaid programs have narrowed eligibility criteria, eliminated programs, reduced benefits, lowered payments to providers, capped utilization, added or increased beneficiary

cost-sharing, and expanded mandatory managed care enrollment. To reduce rapid growth in pharmaceutical

expenditures, Medicaid programs have eliminated drugs from their formularies, capped the number of refills
allowed, re q u i red use of generic medications, and restricted the number of retail pharmacies participating in

Medicaid. At the same time, State-only health insurance programs have been cut or eliminated, including

health insurance pools, medically needy or indigent programs, and pharmacy assistance programs (PA P s ) .

Some States have also eliminated enrollment of parents from the State Childre n ’s Health Insurance Program. 

Although no single source of county and local public funding data is available, a survey conducted by the

National Association of Counties in 2003 found that almost three-quarters (72 percent) of responding counties had budget deficits.2 Reductions in State funding for State-mandated programs were reported by 56 percent of responding counties. One-quarter of responding counties were planning to decrease public health

funding. County and local governments depend heavily on Federal and State funding, so recent cuts in

funding from those sources have exacerbated declines in local tax revenue. Hospital tax districts, the home

of some CARE Act grantees, have also experienced sharp drops in tax revenue and Medicaid and other thirdparty reimbursement (TPR) while the number of their uninsured patients has risen rapidly.

CARE Act Fiscal Require m e n t s

Since the authorization of the CARE Act in 1990, Congress has had an implicit expectation that State and

local governments, other funders, grantees, and subgrantees3 would share the financial burden of HIV treatment and support services.4 The expectation that States would contribute financially to HIV services was

underscored through the CARE Act maintenance of effort and match requirement. Congressional intent that

the CARE Act be the PLR and that CARE Act clients with financial means contribute through copayments

has been incorporated in the CARE Act since its authorization. 

Table 1 illustrates that the three fiscal re q u i rements have variable application to the titles of the CARE Act. While

the match re q u i rement relates only to Title II, the MOE re q u i rement relates to Titles I, II, III, and the Dental

Reimbursement Program (DRP). The PLR re q u i rement relates to all Titles of the CARE Act but not to the DRP.

Table 1. Three CARE Act Fiscal Requirements, By Title and Part F

Part F: Dental

Reimbursement

Fiscal Requirement Title I Title II Title III Title IV Program

Matching Funds* +

Maintenance of Effort + + +

Payer of Last Resort + + + +

*The matching fund requirement applies only to Title II grantees with more than one percent of the U.S. AIDS cases 

reported for the two most recent fiscal years.

When Congress authorized the CARE Act in 1990, it was impossible to predict that widespread financial

downturns would trigger significant public funding crises at the State and local levels. Although many

grantees are committed to ensuring State and local HIV services funding, the need to sustain basic public

functions and address broad fiscal requirements has created substantial pressure on grantees to eliminate or

reduce funding for HIV services. At the same time, grantees and subgrantees are more dependent than ever

on CARE Act funding because other sources for support of HIV services are eroding. In moving toward

reauthorization of the CARE Act in 2005, HAB staff wishes to have a comprehensive understanding of

congressional intent of the CARE Act’s fiscal requirements and the challenges that grantees are encountering in meeting those requirements.

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P roject Goals

1. Examine three legislatively mandated requirements to provide HRSA with a clearer understanding of congressional intent to share HIV costs with grantees and primary payers of HIV-infected persons’ care.

2. Provide HAB with a better understanding of whether and how these mandated requirements are being

met by grantees during times of change in health care financing and during an economic downturn.

Case Study Sites

New York, NY 

Newark, NJ 

Boston, MA

Cleveland–Loraine–Elvira, OH 

Austin, TX 

San Francisco–CA/San Jose, CA (Santa Clara County)

M e t h o d o l o g y

Qualitative case study methods were used to undertake an in-depth analysis of the impact of the three fiscal

requirements on HIV-infected persons, their care, and the finance and delivery systems that undertake that

care. Case study methods were used to identify and assess the contextual issues related to direct care, policies, and programmatic issues. These activities were conducted in 2003 and 2004.

Several approaches were undertaken, involving six steps: 

1. A structured script was used to guide focus groups of approximately 70 Title I and II grantees at grantee

meetings convened in July and August 2003.

2. An electronic mail solicitation requesting comments regarding the three fiscal requirements was transmitted to all CARE Act grantees.

3. Interviews were conducted with HAB staff responsible for the management of the titles of the CARE Act

and the DRP.

4. Telephone interviews were conducted with State ADAP staff regarding supplemental ADAP funding.

5. Intensive case studies were conducted in six communities.

6. Interviews were conducted with representatives of the Department of Veteran Affairs (VA) and the U.S.

Department of Housing and Urban Development. 

The various routes available for CARE Act grantees to participate in the study made it difficult to compute a

response rate among grantees or subgrantees or clearly define the denominator. As a result POI did not estimate the percentage of grantees or subgrantees that provided specific feedback.
The case studies broadly describe the impact of the three fiscal requirements on large populations of HIVinfected individuals and HIV care systems that receive CARE Act funding. Funds were available to conduct

six case studies. The resulting case studies are illustrative of, but are not generalizable to, all CARE Act

grantees and subgrantees throughout the United States. Composite economic indicators were developed by

POI to identify communities in which there had been a recent documented downturn in the economy. The

criteria used to select the case study sites include the following:

+ Regional dispersion so that communities in the West, Southwest, Central, Southeast, and Northeast were

included among the sites selected. Not all States within these regions experienced recent financial documented downturns, however, based on the economic indicators studied.

+ Location in a State with more than 1 percent of the U.S. AIDS cases reported for the two most recent fiscal years.

+ Location in a State with a Title II match requirement.

+ Location in a State in which there has been a documented downturn in the economy, as based on composite economic indicators.

+ Location in a metropolitan statistical area that qualifies as a Title I eligible metropolitan area.

+ Title I, II, III, IV, and DRP funding in the community.

+ Willingness of the Title I and Title II grantee lead agencies to participate in the case study.

To conduct the case studies, POI staff sent invitations to the Title I grantee’s lead agency in each of the communities initially selected for participation in the case studies. A similar invitation was sent to the State’s Title

II program in which the community of interest is located. The invitations outlined the case study methods

to be used and stressed the voluntary nature of participation in the assessment. Once the Title I and II

grantees agreed to participate in the case study, key informants were identified. A representative from each

of the CARE Act grantees was asked to participate in an onsite interview. The Title I, III, and DRP representatives were asked to address issues regarding MOE and PLR. The Title II representative was asked to

address issues regarding match, MOE, and PLR. The Title IV representatives were asked to address PLR

issues. If more than one Title III, Title IV, or DRP was operating in the community of interest, two grantees

from each CARE Act program were randomly selected for participation in the case study.

Before the site visits, the HIV financing and delivery system of each case study community was assessed

using secondary information from several sources:

+ Match and MOE data for the 3 years of previous CARE Act grant applications were obtained for the

selected communities, and trends were computed. 

+ The most recent grant applications were obtained from HAB. Titles I, II, III, and IV and DRP grantees

operating in the selected communities provided their PLR policies and procedures before the site visits.

+ A CARE Act Data Report (CADR) for each agency in the communities of interest funded by the CARE

Act was obtained to gain background information regarding the insurance coverage of clients served,

types of services provided that might be covered by third-party payers, and other client-based data.

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+ 14 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +

+ TPR data were obtained for the case study communities. A summary of the Medicaid State Plan was

obtained from HRSA to identify which services are covered in the Medicaid fee-for-service program and

managed care contracts. Information was also obtained from State-funded health insurance pools, hospital tax districts, county or local medical indigent pools, or other publicly funded programs.

+ An Internet search of major local newspapers published in the communities of interest was conducted

to identify current or recent crises in public financing.

+ A structured interview instrument was used to conduct onsite or telephone interviews. 

L i m i t a t i o n s

Several limitations hampered this study: 

+ The State and local financing environments in which the CARE Act operates were highly volatile during

the study period. While the funding of public financing systems stabilized in some communities, in

others the economic environment continued to worsen. The absence of a nationwide State and local

public financing monitoring system made it difficult to monitor closely the impact of the State and local

financing system on CARE Act–funded systems.

+ No “real time” data were available to monitor the extent to which CARE Act grantees were able to adhere

to match and MOE requirements. Because grantees reported on expenditures that occurred 2 years previously, a grantee might not meet the match and MOE requirements in the most recent “reporting year”

but may have subsequently met its match and MOE requirements. 

+ Enforcement of the PLR policies by CARE Act grantees and subgrantees is complex. Numerous thirdparty payers fund services for people who are HIV infected. Their eligibility requirements and covered

benefits vary significantly, and rapidly shifting program modifications took place during the study

period. State Medicaid programs greatly modified their eligibility, covered benefits, and payment policies, and HAB and the VA drafted a policy regarding the coverage of veterans by CARE Act grantees and

subgrantees.

+ Some grantees and subgrantees were reluctant to be interviewed because they were concerned about disclosing their inability to comply with certain HAB policies or considered the policies to be an impediment

to meeting the needs of HIV-infected people in their communities. To address the concerns of grantees

and subgrantees, POI agreed not to disclose the names of the States or communities in which they

worked. This accommodation precluded POI from providing specific examples of policies and practices

that might be of interest to readers of this re p o rt .
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Major Findings

Title II Matching Funds

The Title II matching fund requirement was introduced in the 1990 CARE Act authorization. States and territories (except Puerto Rico) with greater than 1 percent of the aggregate number of total U.S. AIDS cases

must match CARE Act Title II funds.5 The match ratio is $1 in non-Federal funds for every $5 in Title II

grant funds in the first through fourth year of Title II funding. The match ratio increases to $1 in nonFederal funds for every $2 in Title II funds for the fifth and subsequent years. Matching funds may be in

cash or in-kind fairly evaluated funds, including physical plant, equipment, or services.

States are asked to estimate how they will make their match in their proposed budget submission to HAB.

However, in their final Financial Status Report (FSR), which is due 90 days after the end of the budget

period, States must show their match expenditure in relation to the amount of federal funds expended. FSRs

are submitted to the HRSA Grants Management Office for review. In addition, the match requirement is a

component of the A-133 audit compliance requirements. The failure to meet this requirement should be

noted in the A-133 audit compliance document that is submitted by all States to the Department of Health

and Human Services Audit Center. If a State has not met its match requirement, this should have been

reported to HAB. To date HAB staff are not aware of HAB receiving such a notification.

Through extensive interviews, focus groups, and electronic mail correspondence, many Title II grantees

reported that the match requirement has been effective in either avoiding or minimizing cuts to State HIV

budgets. Nonetheless, the match requirement did not prevent the cutting of State funds during recent financial crises. Grantees interviewed by POI reported that beginning in FY 2002, HIV expenditures dropped

significantly as a result of across-the-board cuts and elimination or significant reduction of HIV program

spending. Some State funds generated by the cuts were used to offset State deficits, while others were reallocated to Medicaid, education, and other State programs. Several other States reported that some HIV

programs were specifically cut by incoming gubernatorial teams that were not supportive of HIV programs.

Some grantees reported, however, that during the past 12 to 24 months, they have experienced difficulty

sustaining their matches. Growing State fiscal deficits have increased the need to continue across-the-board

cuts or to initiate cuts of specific programs, such as HIV programs, that were not cut in earlier cost-cutting

rounds. As ADAP earmark funds have increased, Title II grantees reported, it has become difficult to sustain

and increase their matches because of State budgetary crises. State Title II grantee staff reported that they

are not in control of their HIV program budgets or the budgets of Medicaid and other programs that contribute to the match. Grantee staff also reported that in negotiating with budget policy makers, their HIV

budgets had to compete with education, Medicaid, public safety, and transportation programs. Community

advocacy for HIV budgets is reported to have waned considerably, making it difficult to make the case during budget negotiations that HIV funding should be sustained while other budgets are cut. 

States experiencing cuts in funding reported a significant reduction in their capacity to support HIV prevention, care, and surveillance programs. Loss of support for HIV and AIDS surveillance activities is likely

to result in decreased case counts used to allocated CARE Act Title I and II funds. As a result, decreases in

State and local funds could ultimately result in decreased CARE Act formula-based awards. 
+ 16 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +

The CARE Act includes no provision for HAB to waive the match requirement for States unable to meet their

matches. The penalty made available by Congress to enforce the match requirement is reducing the grantee’s

award. In focus groups conducted by POI, some Title II grantees expressed concern that if the match

requirement is not enforced, it will be difficult in the future to convince policy makers that the match

requirement must be met. They expressed concern that a lack of enforcement of the match requirement may

be seen by State officials as an opportunity to cut additional HIV funds, as they might believe no negative

impacts would result.

Policy Options

HAB might consider several policy options related to the Title II match requirements.

Retain the Title II match re q u i rement as it currently exists in the CARE Act.

Likely impact: Some grantees likely would be unable to meet their match re q u i rement. The only option

c u rrently available for enforcement of the match re q u i rement is to reduce the Federal grant award. States

might be given an opportunity to revisit their match submissions, recompute their matches, and re s u b m i t

their match figures. Some States considering a cut to State-funded HIV services might be more likely not

to cut HIV funds if active enforcement is undertaken by HAB. Other States may be so significantly in

deficit that the threat of the loss of Federal HIV funds is not sufficient to outweigh their need to balance

their budgets or fund other programs perceived as being more critical. Among States that must revisit their

submitted match expenditures, some delay in grant award would occur, leading to delayed initiation of

contracts with subgrantees and periods in which services were unfunded or suspended.

Eliminate the Title II match re q u i rement as it currently exists in the CARE Act. Title II

grantees would no longer be re q u i red to document and submit match data to HAB.

Likely impact: State funds for HIV programs including prevention and surveillance likely would be cut

in States that have avoided cuts because of the match requirement. Some grantees reported that this

option would lead to significant reduction in HIV funds not only at the State level but also among local

governments that contribute to the match. Moreover, once these funds were eliminated, it is unlikely

that they would be restored in future periods of prosperity without significant grassroots advocacy. HIV

service programs would likely be significantly destabilized, if not eliminated entirely. Clinical, medication, case management, and other essential services would be eliminated, resulting in significant

increases in morbidity and mortality among HIV-infected people and, perhaps, resulting in a rise in

resistant virus among those who do not receive treatment for HIV disease.

A change in Title II of the CARE Act would establish a waiver program to be administere d

by HAB. Grantees would submit a waiver application to HAB stating the rationale for the

waiver and the plan to re s t o re State and other funds in a proposed future grant year.

Grantees would also have to demonstrate that the State or terr i t o ry was not petitioning for

a waiver in an eff o rt to supplant State funds with Federal funds.

Likely impact: Most States or territories experiencing fiscal crises or wishing to reduce HIV-related

spending for other reasons likely would submit a waiver. It would be difficult for a grantee to reasonably assure HAB that HIV funds would be restored, particularly if the funds cut were outside the direct

control of the HIV program or department in which it is located. In addition, it might be unrealistic to

expect the commitment made in the waiver to be considered binding if changes in State or territorial
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leadership occurred as a result of elections or other factors. Additionally, because of their own fiscal

shortfalls, other sources of expenditures used in the match (e.g., local governments or hospital tax

districts) likely would put pressure on the Title II grantee to request a waiver. Waived expenditures likely would result in significant losses of revenue to HIV services programs, which would impede the programs’ ability to maintain their capacity.

Modify the match rate by using an index that would adjust the rate of the match re q u i rement based on nationally available economic indicators.

Likely impact: Although this approach would provide limited relief for some States, it might be difficult

to identify an index that would be considered equitable by the various stakeholders. Moreover, an index

would likely have to rely on economic indicators that are nationally available. At least 12 to 24 months

of data would be needed for analysis. As a result, a jurisdiction might have experienced a financial

downturn 2 years ago and been allowed to waive its match requirement even if its fiscal situation subsequently improved significantly. In FY 2004, for example, this would be the scenario for many States

that experienced fiscal crises that have since abated.

R e q u i re a greater level of documentation re g a rding the sources and nature of State and

other funds used to make up matching funds. Those data should be sufficiently precise to

be auditable. An assurance should also be requested that the State and other funds used to

make up the match are not also being used by the State to meet other Federal match

re q u i rements.

Likely impact: Additional documentation should require only a slight modification to the documentation now required. Most grantees should have sufficiently detailed information readily available to them

to meet expanded documentation requirements. 

Consider changes to the match and MOE simultaneously.

Likely impact: Any change to the Title II match requirement must be considered in light of its impact on

the MOE requirement. Because many States use the match funds as part of their MOE, any effort to

eliminate or modify the match would also affect the MOE requirement.

Maintenance of Eff o rt

The MOE requirement was introduced in the original CARE Act legislation in 1990. Grantees are required

to maintain a level of HIV expenditures for services at an amount that is equal to the levels of expenditures

in the preceding year. The MOE provision under Titles I, II, and III states that the Secretary “shall not make

a grant under this subsection if doing so would result in a reduction of State funding allocated for such purposes.”3 Federal funding can be decreased, but not directly as a result of a reduction in other Federal funds,

including reduction in CARE Act funds received by Title I, II, or III grantees.

Information regarding the method used to calculate the MOE was initiated by Title I and II grantees in 1997

and data submissions in 1998. The extent to which States, counties, and cities have invested in HIV infrastructure has changed considerably since that time. Although some grantees have adjusted their MOE figures, many have done so only slightly over the years or have reported the same amount of funds for the past

3 to 4 years. Moreover, some grantees claimed no MOE. Although those grantees and their jurisdictions may

well support HIV-related activities with non–CARE Act funds, they have not reported an MOE because they

do not want to be held to that expenditure level in future years.
+ 18 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +

Among State Title II grantees, the reported MOE amounts vary greatly (from $50,000 to $37 million). Three

Title II grantees did not report an MOE. Many of the State Title II grantees that reported difficulty in sustaining their matches also reported having trouble sustaining their MOE. The exceptions were those States

that initially reported low MOE in their first Title II grant application and did not significantly increase their

MOE subsequently. Eight Title II grantees did not meet their MOE in their initial FY 2003 Title II applications, although several were able to restore their MOE in subsequent submissions to HAB.

Among Title I grantees, the MOE varies greatly (from $1,000 to $91 million); four grantees reported no

MOE amount. Title I grantees reported using a process to determine the MOE that is similar to the mechanism used by Title II grantees in quantifying their MOE.

Many Title I grantees re p o rted having difficulty in meeting their MOE. Many Title I grantee staff that POI interviewed re p o rted that county and city governments were experiencing substantial deficits as a result of inadequate tax revenue, decreased Federal and State funding, and outlays for public safety related to homeland secur i t y. Many of the agencies contributing to Title I MOE, including hospital tax districts, also were re p o rted to be

experiencing deficits. Seven Title I grantees did not meet their MOE in their FY 2003 applications but did meet

the re q u i rements in their FY 2004 grant applications. Several additional Title I grantees re p o rted that they

would be unable to meet their MOE re q u i rements in their FY 2005 Title I grant applications.

Because of growing deficits at the local government level, several grantees reported that agencies and jurisdictions contributing to the MOE effort had cost-shifted to reduce their deficits. Their MOE level appears to

be sustained; however, the estimated figure includes costs for personnel that do not provide management,

administrative, or direct services related to HIV programs. Such cost-shifting has been identified and discontinued in some but not all cases.

Some Title I and II grantees expressed concern that the MOE requirement is not an equal burden. In the

current fiscal environment, grantees that have not contributed an MOE are unlikely to do so without a statutory requirement. Grantees with relatively high MOE levels reported that they are bound to expenditure

levels that are difficult or impossible to sustain.

The CARE Act Title I and II MOE requirement was not accompanied by an enforcement mechanism.

Therefore, HAB staff cannot directly penalize grantees that fail to meet their MOE requirement. HAB project officers do, however, contact grantees that fail to meet their MOE to determine the barriers to meeting

the requirement. They advise them regarding possible funding streams that might be used to make up the

shortfalls in reporting MOE figures.

MOE submissions are retrospective: Title I and II grantees report on expenditures that occurred 2 years previously. HAB staff reported that the retrospective nature of MOE reporting makes enforcing the requirement

difficult. Moreover, the documentation provided regarding the sources of funds making up the MOE is

limited and difficult to audit and evaluate. In reviewing the MOE documentation provided by Title II

grantees, it appeared that some grantees have maintained their effort through supplanting of Federal funds.

In turn, Title I submissions appear to document supplanting of Title I funds with State and CARE Act funds,

including funds obtained through Titles II and III.
The Title III Early Intervention Services program and the DRP also have an MOE requirement that prohibits

“any reduction in State funding allotted” to the DRP. These references constitute a technical error that may

be addressed in 2005 CARE Act reauthorization language. 

Policy Options

Retain the Title I and II MOE requirements as they currently exist in the CARE Act.

Likely impact: It is likely that some grantees will be unable to meet their MOE requirement. No option

is currently available for enforcement of the MOE requirement by HAB. If some jurisdictions became

aware of the lack of enforcement mechanism, they might consider cutting HIV funding to account for

deficits or to shift funds to higher priority services. Loss of non-Federal HIV funds would be likely to

significantly undermine HIV prevention, services, and surveillance activities throughout the United

States. HIV-infected people would be likely to experience dramatic reductions in or elimination of

services essential to sustaining life and eliminating morbidity. It is also likely that HIV service programs

would have to end or significantly reduce their services, effectively dismantling HIV service infrastructure in many communities and States. 

Retain the CARE Act MOE requirements as they currently exist and establish an enforcement

mechanism, such as withholding a portion of a grantee’s award equivalent to the amount of MOE

that is not met by the grantee. 

Likely impact: Withholding a portion of a grantee’s award may result in some disruption of direct service. HAB might notify the grantee that the last quarter of the award will be withheld, giving the grantee

at least 9 months to restore the MOE shortfall. Among grantees with significant fiscal crises, however,

it may be unlikely that funds would be restored. As a result, funds for direct services are likely to be

reduced.

Eliminate the MOE requirement for all CARE Act programs. 

Likely impact: It is likely that funds for HIV programs, including prevention and surveillance pro g r a m s ,

would be cut in jurisdictions that have avoided cuts due to the MOE re q u i rement. In some jurisdictions,

grantees re p o rt that this option would result in significant reductions in HIV funding at all levels of the

publicly funded health care system. More o v e r, once these funds were eliminated, it is unlikely that they

would be re s t o red in future periods of economic re c o v e ry unless significant grassroots advocacy were

u n d e rtaken. HIV programs likely would be significantly destabilized or forced to discontinue serv i c e .

Clinical, medication, case management, psychosocial support, and other essential services would be

eliminated, resulting in significant increases in morbidity and mortality among HIV-infected people.

Changes in CARE Act Title I and II statutory language would establish an MOE waiver program

to be administered by HAB. Grantees would submit a waiver application to HAB stating the

rationale for the waiver and the plan to restore State and other funds in a proposed future grant

year. Grantees would also have to demonstrate that the grantee was not petitioning for a waiver

in an effort to supplant State or local funds with Federal funds. 

Likely impact: Many Title I and Title II grantees experiencing fiscal crises or wishing to reduce HIVrelated spending for other reasons would be likely to submit waivers. It would be difficult for a grantee

to assure HAB that HIV funds would be restored, particularly if the funds cut were outside the direct

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c o n t rol of the HIV program or department in which it is located. In addition, it might be unrealistic to

expect the commitment made in the waiver to be considered binding if changes in government leadership

o c c u rred as a result of elections or other factors. Additionally, pre s s u re likely would be put on the grantee

to request a waiver of non-Federal sources of expenditures to help other governmental units address their

own fiscal shortfalls. Waived expenditures likely would result in significant losses of revenue by subgrantees, possibly compromising their ability to sustain their capacity and organizational solvency.

Require a greater level of documentation regarding the sources and nature of funds used to make

up the MOE. 

Likely impact: Grantees reported a high level of frustration with HAB reporting requirements and other

administrative activities that they perceive as being unfunded mandates. Additional documentation,

however, should require only a slight modification to the MOE documentation now required. Most

grantees should have sufficiently detailed information readily available to them to meet expanded documentation requirements. In requesting additional documentation, HAB would be much more likely to

identify and deter efforts to supplant State or local funds with Federal funds.

Retain the MOE requirement and expand it to include Title III, Title IV, and the DRP. CARE Act

policies on shifting costs to the Federal government should be consistent throughout the CARE

Act. Documentation regarding MOE should be requested consistently by each HAB title or program to ensure that the sources and nature of the funds used for the MOE are documented and

that supplanting of funds can be readily identified. 

Likely impact: Grantees that are not currently required to report MOE data would likely be concerned

about the additional reporting and other administrative activities needed to meet the new requirement.

Although some additional data would be needed to meet the reporting requirement, the reporting burden would likely be minimal. Documentation would afford HAB staff the ability to identify and deter

efforts to supplant State or local funds with Federal funds.

Consider changes to the match and MOE requirements simultaneously.

Likely impact: Any change to MOE must be considered in light of its impact on the Title II match requirement. Because many States use the match funds as part of their MOE, any effort to eliminate or modify

the MOE requirement would also significantly influence the Title II match requirement.

Payer of Last Resort

The PLR requirement was introduced in the initial authorization of the CARE Act and is found in Parts A,

B, C, and F of the act. Implementation of this requirement has been addressed primarily in grant guidance

and in additional instructions disseminated in December 2002 to CARE Act grantees.6 No specific enforcement mechanism is outlined in the CARE Act.

The PLR requirement was outlined in the December 2002 letter to CARE Act grantees from the HAB

Associate Administrator. The letter covers HAB policies regarding billing to third-party payers and other

sources, cost of billing third-party payers, retrospective billing for incurred costs, case management payments, use of TPR to support subgrantee programs, crediting of subgrantee budgets for TPR by subgrantees

and retention of those revenues, use of TPR by subgrantees, Medicaid provider status, Medicaid professional

credentialing requirements, allowable costs associated with development of billing capacity and credentialing of staff, and application of a sliding fee scale. In focus groups, numerous interviews, and electronic mail
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + 21

consultations with POI, CARE Act grantees and subgrantees reported that they were either unaware of the

CARE Act PLR policies or unsure about how to implement them. CARE Act grantees tend to be notified of

CARE Act PLR policies through grant guidance. For example, although Title III EIS grantees are instructed

in grant guidance to participate in Medicaid and maximize reimbursement available from third-party payers, no specific mechanisms are provided to implement the policy. Grantees also reported that they do not

provide specific requirements regarding implementation of the PLR by their subgrantees. 

CARE Act grantees and subgrantees commonly receive funds from the Centers for Medicare and Medicaid

Services (CMS), the Substance Abuse and Mental Health Services Administration (SAMHSA), the Housing

Opportunities for Persons With AIDS program, the VA, the Centers for Disease Control and Prevention, and

other Federal agencies. They also commonly receive State and local government funds. CARE Act grantees

and subgrantees reported that these funders have informed them that they are the PLR and that CARE Act

funds should be expended before their funds are used. 

Grantees and subgrantees reported that cost-shifting occurs between CARE Act programs, each of which

claims that they are the PLR. For example, some subgrantees reported that they have been told that they

would no longer be eligible for Title I or Title II funds upon award of Title III or Title IV funds. 

Grantees and subgrantees reported that they have received conflicting advice from HAB project officers and

technical assistance providers regarding CARE Act TPR requirements. Subgrantees also reported that they

receive conflicting advice from grantees regarding PLR policies.

Sliding Fee Scale

One component of the PLR is the assignment of copayments to CARE Act clients. The CARE Act specifies

that if a direct service grantee (e.g., Titles III or IV) or subgrantee of Title I or II charges for services, it must

do so using a sliding fee schedule that is made available to the public. Application of cost-sharing among

Federally funded clients is consistent with other Federal health care programs. 

CARE Act grantees or subgrantees may use their discretion in the case of clients subject to a charge, to

assessing the amount to be charged, including imposing only a nominal charge for the provision of service.

The grantee or subgrantee must take into consideration the medical expenses of clients in assessing the

amount of the charge. 

Individual, annual aggregate charges to clients receiving CARE Act services must conform to statutory limitations, applying to the annual charges imposed for all CARE Act services regardless of whether they are

considered enrollment fees, premiums, deductibles, cost-sharing, copayments, coinsurance, or other

charges. This requirement applies to all subgrantees from which a client receives CARE Act services. The

grantee can waive the requirement for a subgrantee if it does not impose a charge or accept payment from

any third-party payer, including payment under any insurance policy or any Federal or State health benefits program. The intent of the sliding fee scale is to establish a ceiling on the amount of charges to clients

of services funded and to share the cost of services with clients who have financial means. To determine the

amount to be paid by clients, a simple application requesting annual gross salary of the individual or family

can be used to establish a baseline for establishing a fee cap. 

CARE Act grantees and subgrantees described the act’s sliding fee scale policy as complex and burdensome.

In interviewing CARE Act grantees and their subgrantees, POI learned that sliding fee scales rarely were
applied in the manner outlined by Congress in the CARE Act. A small portion of HIV programs in agencies

with mandatory sliding fee scales (e.g., federally qualified health centers, hospital tax districts, county health

systems) did apply sliding fee scales, but the scales applied might vary from those specified by the CARE

Act. Facilities commonly request out-of-pocket payments, collect the payments, and assign a patient to collections if he or she does not make the out-of-pocket payments on a timely basis. CARE Act grantees and

subgrantees reported that some agencies with mandatory sliding fee scales have aggressive collection

processes that often require intervention by case managers or legal aid attorneys. 

In other community-based and CARE Act–funded agencies without a culture in which sliding fee scales are

applied, the CARE Act sliding fee scale requirement was reported to be impractical and not used. No single

point of eligibility determination or accounting for out-of-pocket payments is available to determine when

the maximum amount is reached. Clients were reported to be unable to maintain the records necessary to

document their out-of-pocket payments. Reception personnel were reported to feel uncomfortable asking

for out-of-pocket payments, particularly from unemployed patients without health insurance. 

Some CARE Act–funded grantees and subgrantees reported that they are structurally unable to collect outof-pocket cash payments from clients. Their agencies’ policies prohibit them from handling cash, some

reception staff have criminal records or are located at unsecured desks, or they have no secure means of

transporting cash to the bank. HIV programs in large institutions reported that although their agencies can

accept credit card payments, their accounting systems do not specifically track out-of-pocket payments

made by their clients, and the funds are not returned to their budgets as grant income. These barriers are

encountered in small and large institutions.

Several HIV programs have assessed the cost of implementing the CARE Act sliding fee scale policy. They

reported that the additional costs associated with ensuring the physical security of employees handling cash,

safe transport of cash to the bank, staff training, and accounting charges far outweigh the income projected

to be generated by applying the sliding fee scale.

The CARE Act stresses that care should not be withheld from clients who do not have the means to pay their

copayments based on the sliding fee scale. Several grantees and subgrantees interviewed by POI staff re p o rt e d

that some clients refuse to pay their copayments because they are aware that they cannot be refused serv i c e s .

The CARE Act includes no enforcement mechanism to ensure application of the sliding fee scale policy. FSRs

cannot be used to accurately estimate the amount of grant income that should have been generated by outof-pocket payments resulting from the sliding fee scale. In addition, it is difficult to differentiate grant

income generated by the sliding fee scale versus the cost-sharing mechanism of third-party payers (e.g.,

copayments and deductibles). Grantees and subgrantees do not submit data to HAB that would allow accurate calculation of the amount of grant income that should be generated. Similarly, it is difficult for grantees

to assess whether their subgrantees are collecting sufficient out-of-pocket payments from eligible clients. 

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Policy Options

Maintain the sliding fee policy, but redefine the cost-sharing mechanism now described in the

CARE Act. A nominal out-of-pocket payment similar to a fixed copayment would be charged for

each CARE Act–funded service provided to eligible clients. 

Likely impact: The same structural barriers that have impeded implementation of the current sliding fee

scale likely would be encountered in implementing this option. Written guidance and TA might be provided to help grantees and subgrantees implement this policy.

Require direct service CARE Act–funded agencies to collect out-of-pocket payments unless they

demonstrate through a waiver process that they are unable to collect cash or credit card payments. Direct service grantees would submit their brief waiver applications to HAB, and subgrantees would submit their waiver applications to their grantees.

Likely impact: CARE Act grantees and subgrantees reported that the CARE Act’s current administrative

requirements are burdensome and constitute unfunded mandates not covered by their administrative

caps. Some grantees and subgrantees likely would consider the sliding fee scale waiver process to be

burdensome. Additionally, HAB and grantee staff would experience some additional burden because of

the added tasks of processing waiver applications and enforcing the sliding fee scale policy.

Require grantees and subgrantees to demonstrate, as a condition of award, that grant income

generated by the sliding fee scale, TPR, or other source is returned to the CARE Act–funded HIV

program. Consistent with the CARE Act, grant income would not be used to offset institutional

financial support. 

Likely impact: The accounting systems of institution-based HIV programs, such as universities, may be

unable to be modified rapidly to comply with the policy. An unintended consequence might re s u l t

f rom better tracking of HIV program revenue and expenditures by their institutions. Some HIV programs re p o rted that their budgets are not easily evaluated by their institutions. As a result, the extent

to which they are financially insolvent and dependent on institutional support is not readily appare n t .

If financial systems are improved, the level of insolvency might result in closure or reduction of program operations.

Provide grantees and subgrantees with TA and training to help them implement the existing legislative requirements.

Likely impact: Grantees and subgrantees are likely to welcome TA and training to help them implement

the existing legislative requirements, particularly if practical recommendations and strategies are tailored to their operational environments. 
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Eligibility Determination, Coordination of Benefits and Participation in Third - P a rt y

Reimbursement: Backgro u n d

HAB’s policies regarding eligibility determination and participation in TPR systems were outlined initially in

an August 10, 2000, policy letter. A subsequent letter from the HAB Associate Administrator outlined HAB’s

policies in a question-and-answer format. Enforcement by HAB of these requirements is primarily through

response to grant guidance. Review of grant income in FSRs and CADR data collected by HAB staff may also

be used to assess whether grantees and subgrantees are adhering to these requirements. These data are insufficient to estimate the extent of TPR revenue that might be expected if grantees or subgrantees adhered to

these requirements. Moreover, substantial variability exists between and among health care markets in

health insurance enrollment among CARE Act clients, covered benefits, and payment levels. In Titles III and

IV, periodic site visits by HAB staff and consultants assess TPR and other fiscal issues. These visits, however, are commonly spaced over several years and some grantees and subgrantees may not be visited very frequently. HAB staff may therefore be unable to assess the extent to which TPR policies are implemented.

Eligibility Determ i n a t i o n

Policy: CARE Act grantees and providers should facilitate their clients’ enrollment in other TPR programs for which they may be eligible for benefits. To facilitate client enrollment, CARE Act–funded

agencies should provide information about enrollment options and re f e rral for eligibility determ i n a t i o n .

Findings

Many CARE Act grantees and subgrantees reported that there commonly is no single point of eligibility

determination information and assistance for their clients. Rather, clients and their case managers or other

advocates must seek information from myriad agencies, many of which change their eligibility criteria on an

annual or more frequent basis. Criteria for enrollment are highly variable and include such requirements as

geographic residency; U.S. citizenship; legal residency status; age [e.g., Temporary Assistance to Needy

Families (TANF); Medicare]; tribal membership (e.g., Indian Health Service); race/ethnicity (Minority AIDS

Initiative); family composition (e.g., TANF); veteran status; previous financial contributions by the client

[e.g., Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI)]; employment status and employer insurance purchasing arrangements (for employer-based insurance plans); preexisting

medical conditions, disability, and employability (e.g., SSI); income; assets; HIV serostatus; CD4 count;

annual or lifetime utilization of benefits; and criminal convictions. The application materials required for

enrollment are not always readily available and often require a reading level beyond the client’s capability.

Few CARE Act grantees reported establishing multiagency processes to ensure that all new clients enrolled

in CARE Act services are uniformly and accurately screened for eligibility for public and commercial health

insurance, income maintenance, and entitlement programs. None of the grantees interviewed has systematically identified key sources of eligibility determination and TPR in its community and communicated the

contact information to its subgrantees. Rather, staff of CARE Act direct service grantees and subgrantees have

established their own processes for screening, information gathering and referral, and helping clients gain

eligibility. In discussing the processes used to screen and refer clients, CARE Act grantee and subgrantee staff

reported that highly variable effort is made to assist clients. Some agencies act as advocates for their clients

in their efforts to enroll in non-CARE Act programs. Among other agencies, program staff might suggest that

a client seek enrollment in a program but provide little information about how to undertake an application.
Interviews with many line staff in case study sites revealed a lack of knowledge about eligibility options for

people living with HIV/AIDS and limited understanding of other non-HIV systems for which their clients

might be eligible, such as HUD non-HIV housing programs, mental health and drug treatment programs,

vocational rehabilitation, and food and nutrition programs.

In interviewing grantees and subgrantees throughout the United States, POI found that many grantees and

subgrantees assume that CARE Act–funded case managers will help clients who are eligible with entitlement

and other programs. Case managers reported, however, that their caseloads are far too large for them to be

able to become familiar with the eligibility criteria and application procedures of the myriad programs for

which their clients might be eligible. Many case managers reported that although they attempt to inform

clients at initial intake that they may be eligible for a program, it is impossible to help actively all clients

apply successfully to the programs for which they are eligible. Case managers also reported that rapidly

growing caseloads hinder them from systematically redetermining clients’ changes in status that might trigger eligibility in another program. As a result, clients may experience significant changes in income, employment, or disability status but are not aware that the changes may make them eligible for public or commercial third-party insurance coverage or income assistance. Case managers also reported that they lack the

time for and access to online eligibility verification systems (EVSs) to confirm that their clients are retaining

their health insurance and other coverage. Some clients reportedly lose Medicaid benefits, for example,

because they are unaware of redetermination appointments.

In conducting case studies across the United States, POI identified high rates of turnover among CARE Act–-

funded case managers. Because of low entry-level salaries, newly employed case managers tend to be relatively inexperienced and unfamiliar with the eligibility criteria for key health insurance, disability, and

income maintenance programs. As a result of their high caseloads, new case managers commonly do not

have the time available to receive training regarding benefits coordination.

Several CARE Act grantees pointed out that many of their subgrantees do not have the staff or expertise to

undertake client eligibility screening for health insurance, income maintenance, or disability benefits. They

suggested that the HAB policy puts an unrealistic burden on many CARE Act–funded agencies and that

clients “fall through the cracks” because of the lack of coordination among CARE Act–funded programs, the

absence of a single source of CARE Act eligibility determination, and the scarcity of communitywide, automated, CARE Act client–based information systems.

CARE Act grantees and subgrantees who participated in the interviews reported broad variations throughout the United States in the nature and frequency of their programs’ redetermination efforts. HAB policy

requires the periodic redetermination of CARE Act clients, both to continue participation in the program

and to identify other sources of third-party payment for which those clients might enroll. HAB has not recommended a uniform time period within which redetermination should take place; which agency or agencies are responsible for redetermination; or which “triggers” are highly suggestive of a change in disability,

employability, or other factors pertinent to assessing eligibility for commercial disability insurance, SSI, or

SSDI. Some CARE Act providers reported uniformly reassessing clients at each visit. Other clients are redetermined only on admission to a hospital for an initial AIDS-related opportunistic infection or other condition; hospital discharge planning staff initiate the determination.

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State ADAPs eligible for supplemental funds and those with waiting lists were interviewed by POI staff. Most

State ADAP staff reported that they rely heavily on community-based case managers to screen clients for eligibility for ADAP, Medicaid, and other programs. Few of the State ADAPs conduct routine training with

community-based case managers regarding ADAP. ADAP staff also reported that they did not routinely communicate with community-based case managers to ensure that consistent, accurate, and timely screening,

referral, and application preparation was taking place for enrollment in public or commercial health insurance or income maintenance programs.

Several case study participants observed that the number of HIV-infected, employed people seeking CARE

Act services has increased because many employers no longer can purchase affordable health insurance for

their employees. They also report that many employers are hiring employees who are not eligible for health

insurance benefits. At the same time, some commercially insured people seek CARE Act services to avoid

disclosure of their HIV serostatus to their employer-based health insurance plans.

CARE Act grantees and subgrantees throughout the United States expressed considerable confusion regarding application of PLR among veterans. As a result, some State ADAPs, CARE Act grantees, and subgrantees

have denied CARE Act services to veterans. To clarify its position regarding veterans, HAB recently released

a policy designed to clarify the HAB’s expectation that veterans should be able to access CARE Act programs.7 As with the coordination of benefits with third-party payers, it is likely that case managers and other

staff of CARE Act grantees and subgrantees will have insufficient knowledge of the VA system to provide

well-grounded information and referral. The responsibility for HIV-infected veteran information and referral services may be viewed by CARE Act grantees as an unfunded mandate for which they have insufficient

resources and expertise.

Many CARE Act grantees reported that gaining enrollment in publicly funded disability programs, including SSI, is very difficult. The Social Security Administration (SSA) delegates the evaluation and processing

of disability claims to States. State-by-state SSI denials by States for HIV-infected applicants are not made

available by SSA. Based on POI’s case study interviews, however, the processing time and denial rates for SSI

applications vary considerably. Numerous case managers, patient advocates, and legal aid staff reported that

initial denial of SSI claims is common, and substantial legal intervention is required to contest claims.

Several HIV care providers reported that State disability staff reported that clients may not submit a claim

more often than once a year, an inaccurate interpretation of SSA policy. Denials for applications are often a

result of what SSI determination personnel deem to be insufficient medical documentation of inability to

sustain gainful employment due to disability and a sufficient level and duration of disability.

SSDI eligibility is triggered in part by documentation of a disability lasting in excess of 12 months, so documentation of the onset of disability in SSI applications is important. Despite the critical pathway to

Medicaid and Medicare coverage and income maintenance that SSI afford, few ADAP or other CARE Act

grantees reported that they have collaborated with State disability or SSA staff to increase the number of

accepted SSI claims. At the Federal level, HAB staff reported that they have not collaborated with SSA to

improve the award rates of SSI claims among HIV-infected people.

CARE Act grantees and subgrantees reported that many of their clients have benefited clinically from antiretrovirals and some clients are now able to return to employment. Many of those clients are reluctant to do

so, however, because they do not want to lose their Medicaid or Medicare coverage. 
The Ticket to Work/Work Incentives Improvement Act of 1999 (TWWIIA) includes an option for States to

undertake demonstration projects to provide Medicaid to workers with potentially severe disabilities, such

as HIV/AIDS, who are not yet disabled but whose health conditions could be expected to cause disability.

Only two States have been awarded TWWIIA approval, and only one project has been implemented.

The client’s role in eligibility determination is not addressed well by many of the CARE Act grantees and

subgrantees interviewed by POI. Some care providers assume that their clients are able to navigate the system, read, complete forms, and advocate for themselves. Determination processes that relied heavily on

clients appeared to be unsuccessful, however. Paperwork that was viewed as important among providers

often was not a high priority among clients who struggled with medical and personal challenges. 

Policy: Until a CARE Act client is enrolled in Medicaid, grantees and subgrantees may provide services with CARE Act grant funds.

F i n d i n g s

Among CARE Act grantees and subgrantees with access to Medicaid EVSs, this policy has been implemented

successfully. The HIV programs closely follow the course of their clients’ applications and are commonly

aware of the clients’ dates of application and enrollment (i.e., the period in which retrospective Medicaid

billing may take place). Some grantees and subgrantees, however, do not have access to EVS. 

Policy: Grantees and subgrantees are expected to explore out-stationing opportunities with State

Medicaid agencies to place State eligibility workers at their sites. 

F i n d i n g s

Few CARE Act grantees or subgrantees participating in the case studies were aware that State Medicaid

eligibility workers could be out-stationed at their programs. The few agencies that had arranged for outstationed workers were in large institutions (e.g., hospitals, community health centers) that had arranged for

eligibility workers for their business offices.

Policy: If a client is determined to be ineligible for Medicaid or other payers or if the services pro v i d e d

a re not eligible for TPR, CARE Act grantees or subgrantees may use grant funds to provide those services without the need first to bill third - p a rty sources, thus making the CARE Act grant the PLR.

F i n d i n g s

For the most part, CARE Act grantees and subgrantees are aware of and adhere to this policy. However, several grantees in case study communities require as a condition of participation in CARE Act–funded services

that HIV-infected clients receive a “notice of Medicaid rejection” letter before services can be initiated.

Several State ADAPs also have adopted this approach in screening applicants. This process may take several months and HIV-infected clients may wait long periods before CARE Act–funded services are initiated. 

In all the case study sites, an elimination or significant reduction in the capacity of publicly funded non-HIV

housing, mental health, substance abuse treatment, and pantry and nutrition programs has occurred over

the past 5 years. As a result, CARE Act clients are not able to obtain these services outside of the CARE Act

system of care and supportive services. Many of the CARE Act grantees interviewed commented that significant and avoidable cost-shifting to the CARE Act has resulted. 

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Policy: Once a CARE Act client has been determined to be eligible for Medicaid enrollment, the

grantee or subgrantee must bill Medicaid for any services rendered as of the client’s effective date of

Medicaid enrollment.

F i n d i n g s

CARE Act grantees without access to the Medicaid EVS reported that they sometimes are not aware of the

outcomes of their clients’ applications to Medicaid. Clients are reported to sometimes be confused about the

differences between Medicaid and CARE Act–funded services. As a result, clients do not make their CARE

Act–funded HIV providers aware of changes in their insurance status.

T h i rd - P a rty Reimbursement

Policy: If a CARE Act–funded agency does not provide a service covered by its State Medicaid program, there is no expectation that the grantee or subgrantee obtain a Medicaid provider number.

F i n d i n g

Several State Medicaid programs have placed a moratorium on issuance of additional provider numbers.

Moratoriums are common for mental health and substance abuse provider numbers. 

Policy: CARE Act funds may be used to pay for the costs of preparing to become certified as Medicaid

providers. HAB considers this use of CARE Act funds to be an allowable cost for CARE Act grantees

and subgrantees. CARE Act capacity development funds may be used for this purpose.

F i n d i n g s

Several grantees and subgrantees interviewed by POI staff for the case studies reported that the costs

incurred to become certified as Medicaid providers can be substantial. The agency and its staff must meet

State licensing standards (as well as licensing requirements in county and city jurisdictions, in some cases).

Other requirements include availability of telephone coverage on a 24-hour basis; numerous regulations;

billing, accounting, and reporting systems that must be established or upgraded; malpractice and other liability insurance that must be obtained; quality assurance processes that must be put in place; capacity to

e n roll a defined number of clients that must be ensured; and Health Insurance Portability and

Accountability Act and other electronic data transmission requirements that must be met. Several mental

health and substance abuse programs interviewed, for example, would have had to terminate their line staff

and supervisors to meet Medicaid credentialing requirements. 

With flat or reduced CARE Act funding available for most grantees, many Planning Councils and consortia

are unable to commit sufficient capacity development funds to assist subgrantees in becoming Medicaid

providers. Among grantees allocating funds for this purpose, the amount of funding available has been

insufficient to cover the costs required. 

Policy: If an agency receives CARE Act funds for services that are eligible for TPR and grant funds,

the agency must have a system in place to bill and collect from third-party payers. 

F i n d i n g s

Some grantees and subgrantees reported being confused as to what services are eligible for TPR from

Medicaid or other third parties. Medicaid, Medicare, other publicly funded payers, and commercial payers
vary considerably in their covered benefit packages. Even within programs such as Medicaid, covered benefits may vary by assistance category (e.g., TANF, SSI, etc.), by fee-for-service versus managed care programs,

by county, and for waiver demonstration versus nondemonstration services.

Some community-based CARE Act–funded grantees and subgrantees tend to build billing systems. In several agencies, billing staff had insufficient management oversight and trained supervision. Many agencies

interviewed have insufficient funds to employ credentialed billing personnel. Moreover, the volume of

billings were insufficient to warrant employment of full-time claims-processing staff. 

Policy: CARE Act grantees and subgrantees must bill all available sources of TPR and negotiate the

best TPR rates possible if they provide covered services to clients enrolled in a third-party payer.

F i n d i n g s

Some grantees and subgrantees acknowledged that they do not bill all available sources of TPR because the

cost of generating the claim is greater than the expected payment amount. Additionally, some clients have

requested that their employer-based insurance plans not be billed to prevent disclosure of their HIV infection. Other grantees and subgrantees reported that it is easier to draw upon grant funding to pay for the

service than to seek TPR. 

CARE Act–funded programs can bill for services only if they are contracted to participate in health insurance plans and managed care organizations (MCOs). Some CARE Act grantees and subgrantees reported

unsuccessful attempts to enroll as providers in commercial indemnity insurance plans and Medicaid and

commercial managed care plans. Those plans were reported to be concerned about adverse selection resulting from contracting with HIV care providers that might attract HIV-infected patients to enroll in their plans.

In addition, HIV specialty clinics are viewed as being more expensive than community-based primary care

physicians or infectious disease specialists. Nonparticipating HIV specialty clinics and other medical

providers reported having insufficient capacity to serve referred patients seeking “out-of-plan” specialty care.

Many CARE Act grantees and subgrantees that provide billable services reported that they bill aggressively

third-party payers but that payments are getting increasingly slower. They reported that payers tend to reject

claims upon initial submission for nonexistent or spurious causes. In some cases, payers required substantial documentation for claims. Failure to document prior authorization or standing orders often is a rationale for rejecting claims, despite the completion of necessary paperwork at the time the service was provided.

Although grantees and subgrantees reported that they routinely research and resubmit their claims, this

process can extend the period between service and payment by many months.

Although HAB encourages CARE Act grantees and subgrantees to negotiate TPR rates, HIV care pro v i d e r s

t h roughout the United States re p o rtthat they have no bargaining power with Medicaid programs, health insurance plans, or MCOs. More o v e r, Medicaid programs in several large States have rolled back re i m b u r s e m e n t

rates. In several other large States, Medicaid payment rates have not been increased in more than a decade. As

a result, Medicaid rates no longer keep pace with steadily increasing personnel and operating costs.

In the past 15 years, State Medicaid programs, MCOs, and commercial insurance plans have established

several model HIV reimbursement systems .Many of these programs have not been fully implemented,

however, as a result of the absence of mandatory enrollment or because budget neutrality is no longer

achievable, given sharp increases in HIV-related medication costs. 

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Despite HAB’s funding of TA and tool development, most of the CARE Act direct service grantees and

subgrantees interviewed by POI were unaware of the actual cost of their services. Several grantees and subgrantees reported that they cannot access detailed overhead and related cost data from their institutions or

that their accounting systems were not sufficiently flexible to report costs specific to their HIV program. As

a result, grantees and subgrantees were unable to apply the tools developed by HAB. 

Policy: CARE Act grantees and subgrantees are expected to bill third-party payers what it costs them

to provide a particular service.

F i n d i n g s

HAB expects that CARE Act grantees and subgrantees treat payment from third-party payers as payment in

full. This policy has resulted in considerable concern among many of the HIV clinical providers interviewed

by POI. Grantees and subgrantees in agencies ranging from large teaching hospitals to small, communitybased organizations reported that TPR falls far short of their costs. 

Most of the HIV medical providers interviewed report that they routinely perform services in medical visits

for insured patients that that are not compensated by third-party payers. While an insurer may pay for a 15-

minute medical examination, for example, the typical medical examination may take 30 to 60 minutes.

Moreover, some medical services are outside the scope of their CARE Act contracts. Such services include

medication education, adherence counseling, and secondary prevention counseling. Medical providers

report that TPR falls far short in covering the expense of the medical visits as well as the complexity of the

services provided.

Care Act–funded medical providers in case study communities reported that a new patient visit might well

exceed 60 to 80 minutes, but third-party payers may pay only for a 30-minute visit. Third-party payers tend

to pay clinical grantees and subgrantees at levels that are inadequate to compensate for highly intensive

medical visits. 

There was a lack of awareness among many CARE Act grantees and subgrantees paid by third-party payers

that if a payer caps services, they might use CARE Act funds to purchase additional units of service.

Examples of these capped services include home health visits and home hospice visits.

Most of the CARE Act–funded HIV clinics that attempted to adhere to TPR payment-in-full policies reported

that their costs far exceeded their TPR revenue. Until recently, these clinics had benefited from considerable

institutional support to make up the difference. As more institutions have experienced multidepartmental

revenue loses, however, HIV clinics reported that institutional support has been cut or eliminated. 

Many CARE Act–funded agencies interviewed by POI reported that TPR failed to keep pace with sharply

rising costs, such as increasing salaries and fringe benefits. Similarly, throughout U.S. urban health care markets, collective bargaining and personnel shortages resulted in significant increases in nursing and ancillary

personnel salaries.

Due to the financial pressures experienced by CARE Act subgrantees, several grantees reported allowing balance-billing by making up the TPR shortfalls with grant funds. In some case study communities, subgrantees

were not routinely billing TPR because the cost of generating the bill exceeded the expected payment. In

those situations, the subgrantees charged grant funds for the services instead.
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In several case study communities, HAB’s recent announcement about essential core services has made implementation of the TPR re q u i rements more complex.8 C o re services include primary medical care, HIV- re l a t e d

medications, mental health treatment, substance abuse treatment, oral health, and case management. Except

for case management, these services are commonly covered by Medicaid and other payers. Several unintended consequences were encountered. Among Title I and Title II programs in States with high rates of third -

p a rty enrollment among CARE Act clients, simultaneous implementation of core services funding and TPR as

payment in full has contributed to budgetary shortfalls among providers. Because core services are the most

likely services to be covered by TPR, grantees and subgrantees are expected to accept payment that is not offset by grant funds. At the same time, grantees may accrue large amounts of unexpended CARE Act funds. In

contrast, in States with Medicaid programs that cover only the most indigent disabled or TANF populations

or that offer narrow benefit packages, CARE Act core services are not covered and grantees and subgrantees

can legitimately use CARE Act funds to pay for care .

Policy: CARE Act grantees and subgrantees may use CARE Act funds while Medicaid eligibility determination is pending. They must retroactively bill Medicaid for CARE Act–funded services provided

to Medicaid beneficiaries during the retroactive enrollment period.

F i n d i n g s

Many CARE Act clinical grantees and subgrantees reported that they adhered to this policy. For the most

part, their billing systems allow retroactive billing. POI also found, however, that some State ADAPs and

Title I PAPs do not have billing systems that can accurately execute retroactive billing.

Several State Medicaid programs had suspended retroactive billing for medications and other covered benefits in response to rapidly growing financial deficits.

Policy: HAB discourages CARE Act grantees from reducing grant funding for their subgrantees that

collect TPR. Rather, grantees should encourage their subgrantees to maximize their CARE Act funds

and collect TPR. Grantees and subgrantees are encouraged to use TPR grant income to expand or

enhance HIV services to current clients and to identify and enroll new clients in the subgrantees’

service categories. TPR collected by CARE Act grantees and subgrantees should be used within the

organization where the funds were collected if a broader range of services is needed, if existing clients

need enhanced levels of service, or if new uninsured or other clients need services. Only when the

subgrantee demonstrates no legitimate need should its CARE Act funds made up for by TPR be

returned to the grantee or offset from its next award.

F i n d i n g s

Most CARE Act grantees interviewed by POI reported that they adhere to this policy. Current flat or

decreased grant awards to some CARE Act grantees, however, mean that TPR grant income is being used to

sustain current capacity and meet the needs of existing clients. Losses in revenue and increased demand for

services among existing clients have led some CARE Act grantees and subgrantees to be unable to initiate

services for new clients on a timely basis. Waiting times for appointments for case management intake and

new, nonurgent patient visits by some grantees and subgrantees exceed 6 weeks.

Policy: The parent institution or agency receiving a CARE Act grant must report TPR funds generated

by the HIV program and return or credit these funds to the program’s budget. No legal authority

exists to retain and spend CARE Act funds for purposes other than for approved HIV services. Where
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TPR is generated by CARE Act–funded services, those payments must be used for HIV-related

services. TPR funds resulting from collection efforts by the CARE Act–funded grantee or subgrantee

must be used to pay for HIV/AIDS services to eligible clients.

F i n d i n g s

Some CARE Act–funded HIV programs in large institutions reported that they do not have separate accounting line items for their programs. As a result, TPR funds are returned to the general accounting system or to

the department or program in which they are administratively assigned. As a result, programs are unable to

determine if, when, and how much has been paid on their TPR claims. Moreover, some institutions were

unwilling or unable to adjust their accounting systems to correct this problem. 

Policy: CARE Act–funded grantees and subgrantees should staff their programs to ensure quality of

care and maximize TPR. Existing programs should evaluate the costs and benefits of adjusting their

staffing mix over time to determine whether staffing changes will, in the long term, be beneficial to

the quality of care provided to clients.

F i n d i n g s

As CARE Act–funded community-based HIV service organizations were established in many communities,

they have tended to employ paraprofessional and nonprofessional staff to provide such services as mental

health and substance abuse counseling. Although some of these services might otherwise be eligible for

reimbursement by Medicaid and other payers, the absence of credentialed personnel precluded participation in provider networks.

Policy: If a CARE Act client is enrolled in Medicaid and Medicaid covers the type of case management

the grantee or subgrantee provides, Medicaid should reimburse for those services. State Medicaid

programs vary regarding the specific type of case management that is reimbursed, the frequency of

services to be reimbursed, and the qualifications of case managers.

F i n d i n g s

HAB recommends that grantees or subgrantees verify whether Medicaid reimburses for the type of case management they offer. Case management and other covered benefits may be identified by reviewing the State’s

Medicaid plan on the CMS Web site.9 The State Medicaid Plans tend to be complex, however, and information regarding covered benefits is sometimes hard to identify.

Policy Options

Maintain the current CARE Act re q u i rements re g a rding eligibility determination. 

Likely impact: The current CARE Act system relies heavily on a case management system whose staff may

not be trained sufficiently in the eligibility re q u i rements of entitlement programs, third - p a rty insurance,

and disability income programs. HIV care systems throughout the United States re p o rted that case managers’ caseloads are very high, waiting time for new case management systems is increasing, turnover in

personnel is increasing significantly, and the focus is on crisis management because there is insuff i c i e n t

time to address clients’ underlying issues. Further reliance on case managers to ensure rapid enro l l m e n t

in entitlement programs, third - p a rty insurance, and disability income programs would be challenging.
Establish a single point of entry into CARE Act services that is responsible for screening eligibility for entitlement programs, third-party insurance, disability income programs, and manufacturers’ pharmaceutical access programs. The single point of entry would be staffed by trained,

experienced eligibility determination workers and attorneys. The determination system would be

responsible for intake and periodic redetermination would be undertaken on a regular basis or when a

major change in status is likely to trigger a change in eligibility status. The determination system would

be responsible for maintaining a CARE Act client’s records, establishing an automated system that

would use software to assist in identifying programs for which the client is eligible, and coordinating

benefits with CARE Act providers. The determination workers would focus not only on CARE Act and

Medicaid program eligibility assessment but also on other public and commercial systems. The determination system would enhance the role of case managers by freeing them to focus on issues for which

their training and skills are most optimally used. Funding for the system would be achieved through a

slight adjustment to the distribution of funds from Title I, Title III, Title IV, and the DRP to Title II.

Additionally, funds might be sought through the CMS’s Federal match for administrative costs of the

Medicaid program. 

Likely impact: The demands on case managers employed using CARE Act funding would be reduced. The

shift in funds needed to create the determination system would thus be offset by fewer re q u i rements to

employ case managers, client advocates, and attorneys. New funds would be needed to purchase or build

c o re eligibility determination software that could be easily adjusted for unique State or local entitlement,

insurance, or disability income programs. Once fully operational, the eligibility determination system

likely would reduce re d u n d a n c y, result in higher rates of enrollment in non-CARE Act programs, and

i n c rease TPR revenue received by CARE Act–funded agencies providing billable serv i c e s.

Establish a task force with the SSA to identify mechanisms to ensure consistent application of

SSI to ensure enrollment of disabled HIV-infected applicants. The task force would be made up of

representatives of HAB and SSA along with HIV medical experts, consumers, and other key stakeholders. The task force would review factors associated with variability in SSI enrollment rates, factors associated with denials, timeliness of applications and denial grievance processes, and patterns of insufficient medical documentation and other application requirements. 

Likely impact: Implementation of this option is likely to result in an increase in SSI enrollees who would

benefit from disability income and Medicaid benefits. In turn, CARE Act–funded programs would experience increased TPR.

Maintain the current PLR policy in the CARE Act. 

Likely impact: HAB and its grantees do not have effective mechanisms to assess the extent to which this

policy is implemented or to enforce it. Maintenance of the current policy is likely to result in highly

variable implementation of the policy. Written guidance and TA might be provided to assist grantees

and subgrantees to implement this policy.

Enforce the current PLR policy in the CARE Act. 

Likely impact: Enforcement of the current policy would require additional routinely reported data from

grantees and subgrantees. Institutions would have to be required to provide written assurance that TPR

was being returned to the HIV program. Auditing the submitted data and the assurances of returned

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revenue would likely be difficult. Ensuring that institutions did not offset the institutional outlays with

TPR also would be difficult but important. Written guidance and TA might be provided to assist

grantees and subgrantees to implement this policy.

Eliminate the current PLR policy from the CARE Act. 

Likely impact: Negligible impact is likely to result if the current policy is eliminated. Agencies that currently seek TPR to maximize their CARE Act grant funds are likely to continue to seek payment from

third-party payers. Agencies that are currently unable to pursue TPR probably would not be affected.

Establish mechanisms within the DHHS to address barriers to implementing the PLR policy.

Likely impact: Similar to the policy drafted by HAB and the VA, a policy would be established to identify PLR among HAB, SAMHSA, CMS, and other relevant Federal agencies. In developing the policy, any

unresolved legal issues regarding the PLR policy (e.g., balanced payments) would need to be resolved.

Expand TA and training to ensure that CARE Act grantees and subgrantees can undertake TPR

a c t i v i t i e s .

Likely impact: Expanding TPR among CARE Act grantees and subgrantees would require substantial

expansion of existing TA and training efforts. Funds to provide ongoing training would be needed to

address the intermediate and advanced needs of CARE Act grantees and subgrantees.

R e f e rences

1 National Association of State Budget Officers. The Fiscal Survey of State: April 2004. Washington, DC:

National Governors Association; 2004.

2 Clark R. Counties in Crisis: A Survey of Current Budgetary Situations Facing America’s Counties. Washington,

DC: National Association of Counties; 2004.

3 For the purposes of this report, subgrantees include agencies receiving funds from CARE Act grantees

through contracts and fee-for-service reimbursement arrangements.

4 Public Health Service Act Section 2605(a)(6) applicable to Emergency Relief for Areas with Substantial

Need for Services (Title I); Section 2617(b)(6)(F) applicable to CARE Grant Program (Title II); and

Section 2664(f)(1) applicable to Early Intervention Services (Title III).

5 For the purposes of this report, “State Title II grantees” refers to States and territories receiving CARE Act

Title II funds.

6 Managed Care and Health Services Financing Technical Assistance Center. Ryan White Comprehensive

AIDS Resources Emergency (CARE) Act Third Party Reimbursement (TPR) Frequently Asked Questions.

Rockville, MD; 2002. Available at: http://www.hrsa.gov/tpr/TA-HIV-AIDS-Billing-FAQs.htm.

7 HIV/AIDS Bureau. Policy Notice-04-01 Ryan White CARE Act and Veterans. December 14, 2004. Available

at: http://hab.hrsa.gov/law/0401.htm.

8 HIV/AIDS Bureau. CARE Act HIV Emergency Relief Grant Program Title I Eligible Metropolitan Areas

Competing Continuation Awards, HRSA-05-010, CFDA No. 93.914, Program Guidance, Fiscal Year 2005.

Rockville, MD: HRSA; 2004. 

9 Available at: www.cms.gov/medicaid/tollfree.asp.
ASSESSING THE IMPACT OF THE RYAN WHITE CARE ACT TITLE

II EMERGING COMMUNITIES FORMULA GRANT PROGRAM 

STUDY3

BOYD GILMAN, SHAWN ALDRIDGE, SHELLY HARRIS, SONJA HOOVER,

AND SEAN SQUIRE
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Purpose of the Study

To evaluate the administration and implementation of the Ryan White Comprehensive AIDS Resources

Emergency (CARE) Act Title II Emerging Communities Formula Grant program and to analyze its effect on

planning and the delivery and use of services for people living with HIV and AIDS (PLWHA).

B a c k g ro u n d

The Emerging Communities Supplemental Grant program was created by Section 2620 of the Ryan White

CARE Act Amendments of 2000 to provide relief to cities experiencing significant growth in their local HIV

epidemics but ineligible for direct assistance under Title I of the CARE Act. Their ineligibility was the result

of a combination of factors. The CARE Act Amendments of 1996 had changed the threshold formula for

Title I eligibility from total cumulative AIDS cases (which included people who had died from the disease)

to total AIDS cases reported over the most recent 5-year period for which data are available. Congress made

this change to provide a more accurate estimate of the actual burden of care faced by communities. The

intent of the authorizing legislation was also to limit the expansion of Title I cities and to address the evolving needs of potentially new Title I cities that had already established a developed infrastructure through the

use of Title II funds. 

At the same time that the Title I formula change was introduced, however, new highly active antiretroviral

therapy (HAART) for HIV disease also began to be used widely. HAART dramatically altered local HIV epidemics. Successful application of new therapies in communities where access to those therapies was nearly

universal and where people were being brought into care early in their HIV disease both slowed disease progression and significantly reduced the number of people developing AIDS. As long as eligibility remained

based only on recent reported AIDS cases, not on combined HIV and AIDS cases, communities that successfully implemented the “early intervention” principles of the CARE Act were less likely to qualify for Title

I funds even though their combined HIV/AIDS epidemics continued to grow. The Emerging Communities

Supplemental Grant program was created to help correct this historical inequity in the CARE Act by providing vital resources to help these communities address their burdens of care.

D e s c r i p t i o n

The Emerging Communities Supplemental Grant program defines emerging communities (ECs) as metropolitan statistical areas (MSAs) that were ineligible for Title I funds, had a population of at least 500,000,

and reported to the Centers for Disease Control and Prevention (CDC) a total of 500 to 1,999 AIDS cases

during the most recent 5-year reporting period. Qualifying communities are divided into two tiers: those

reporting 1,000 to 1,999 AIDS cases (Tier 1) and those reporting 500 to 999 AIDS cases (Tier 2).1 The program is funded by withholding the greater of $10 million or 50 percent of the Title II funding increase from

the base Title II award allotment. A minimum of $5 million is allocated to each tier and distributed proportionately among the qualifying communities on the basis of their percentage of total AIDS cases in that

tier category. The purpose of the two tiers and the 50–50 split in program funds between them was to guarantee that a significant portion of the supplemental funding was directed toward the few communities with

the largest incidence of HIV and AIDS and, thus, most likely to have been adversely affected by the change

in the Title I eligibility criterion.
M e t h o d o l o g y

One of the principal aims of the study was to investigate the impact of uncertainty and variability in program eligibility and funding on planning and the delivery and use of services for PLWHA. Specific topics of

concern were as follows:

+ Fluctuations in funding reflecting changes in Title II base appropriations

+ Fluctuations in eligibility as a result of the number of reported AIDS cases

+ Fluctuations in award amounts based on number of reported AIDS cases, number of qualifying communities in total, and number of qualifying communities in each tier

+ The possibility of “penalizing” communities with declining numbers of AIDS cases by loss of eligibility

+ Allocation of Title II base appropriations in States with EC funding

+ The impact of Title III and IV grants and Medicaid benefits on the structure of the program and impact

of funding fluctuations on the system of care

+ The impact of funding fluctuations on long-range planning processes designed to determine and coordinate funding and service needs among all local areas

+ Disproportionate funding to some ECs relative to Title I eligible metropolitan areas (EMAs).

Sites Selected

Baton Rouge, LA* Indianapolis, IN Nashville, TN*

Cincinnati, OH Jackson, MS Richmond–Petersburg, VA

El Paso, TX Lakeland–Winter Park, FL* Rochester, NY*

Greenville–Spartanburg–Anderson, SC Louisville, KY Salt Lake City–Ogden, UT

Harrisburg–Lebanon–Carlisle, PA* Milwaukee–Waukesha, WI Trenton, NJ

*Site visit

The evaluation was based on multiple qualitative re s e a rch methods, including a review of existing pro g r a m

documentation, telephone discussions with key informants in States and communities that either curre n t l y

have an EC or had an EC that later lost its eligibility, and in-person discussions with a wider range of key

i n f o rmants in a subset of ECs previously contacted by telephone. Fifteen sites were chosen for the telephone discussions based on their tier eligibility pattern, geographic re p resentation, and the number of ECs

and EMAs in the State. Tier eligibility patterns were used to capture a range in annual funding variation.

A dispro p o rtionate number of ECs were selected from States that (1) had a large percentage of their population living in rural areas, (2) were located in the South, (3) had relatively high rates of povert y, and (4)

had a high pro p o rtion of racial and ethnic minorities. Many ECs are located in these States, and PLW H A

in these States face significantly greater barriers to services than do those living in other regions of the

c o u n t ry.

2 Nonetheless, the sites selected for telephone discussions were drawn from all regions of the count ry. Follow-up site visits were conducted at five of the ECs contacted by telephone. The purpose of the site

visits was to collect more in-depth information from key informants; follow up on issues raised during telephone discussions; and test the generalizability and validity of issues, concerns, and re c o m m e n d a t i o n s

identified by informants. 

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During both data collection phases, four types of informants at the ECs were contacted: Title II directors,

EC or consortium administrators, and provider and consumer representatives who were involved in the EC

planning process. The data collection techniques consisted of semistructured, in-depth discussions.

Discussion domains were based on the objectives of the evaluation and covered the following topics: (1) the

impact of the EC program on other Title II programs in the State, (2) Title II and EC planning structures

and procedures, (3) the impact of variability in eligibility and award amount, (4) the impact of the EC program on the delivery of services, (5) the impact of the EC program on access to and use of services, (6) the

need for technical assistance from HRSA, and (7) recommended policy and program changes.

L i m i t a t i o n s

The 40 communities that have qualified for funding under the EC program over the past 4 years vary widely

in terms of their eligibility, funding, planning, and service provision. Although it was not feasible to include

all ECs in the evaluation, information from the 15 sites chosen was nonetheless considered indicative of the

key characteristics and issues confronting the EC program. Moreover, the EC program operates within the

context of other CARE Act titles and non-CARE Act health service programs. An effort was made to capture

the critical interactions between the ECs and these other programs, but a thorough study of the broad program effects and interactions was beyond the scope of this assessment. 

Major Findings

The study’s findings are based on the experiences and perceptions of informants from the 15 communities

included in the evaluation. 

Many ECs experienced tremendous uncertainty and fluctuations in year-to-year eligibility. Of the 15

ECs included in the study, 1 remained in Tier 1 and 5 remained in Tier 2 throughout the first 4 years of the

program. Of the remaining nine, changes in the number of reported AIDS cases caused two to fall from Tier

1 to Tier 2, two to fall from Tier 1 to Tier 2 and then to requalify for Tier 1, and four to lose program eligibility altogether.

Variation in program eligibility led to large fluctuations in annual funding amounts. ECs that became

ineligible lost total funding, whereas those that regained eligibility had their funding re s t o red, sometimes on

a year-to-year basis. ECs that switched from Tier 1 to Tier 2 went from sharing a $5 million “pie” with sometimes as few as only 1 other community to sharing a $5 million tier allocation with upwards of 30 other communities. A commensurate increase in annual funding was realized if an EC regained Tier 1 eligibility. Even

ECs that remained in the same tier throughout the 4-year period experienced major annual swings in funding as other communities moved in and out of the same peer gro u p .

Variation in annual funding amounts created obstacles to effective planning. Unexpected declines in

annual funding amounts made it difficult to engage in long-term planning, write contracts, hire providers,

and implement monitoring and evaluation activities.

Variation in annual funding amounts disrupted the provision and use of services for PLWHA and

engendered distrust among some providers and consumers in the community. Sharp decreases in annual funding amounts led to elimination of newly created services and damaged trust among community
providers and consumers. Even unexpected increases in funding made it difficult to implement comprehensive plans, given the uncertainty in the availability of future funds.

The EC program exacerbated disparities in per capita funding usually associated with Title I, even

between qualifying communities with similar numbers of AIDS cases. Per case funding amounts in the

current year were $1,052 for Tier 1 ECs and $313 for Tier 2 ECs. As a result, one EC with 1,005 reported

AIDS cases is receiving more than 3 times the amount of funding on a per capita basis than another EC with

only 33 fewer cases. Moreover, the discrepancy in per case funding between Tiers 1 and 2 is widening over

time as relatively fewer ECs qualify at the upper level.

The EC program may have fostered duplicative planning processes and structures. Four of the 15

States had EC-specific planning processes and structures to plan for EC funding. Two others conducted special EC planning activities during their first year of eligibility, but in subsequent years they incorporated

planning for EC funds into established processes for base Title II funds. The nine other States felt that conducting EC-specific planning would be duplicative and reported that their established Title II processes were

adequate for this purpose. 

The EC program may have affected broader Title II planning processes at statewide and regional levels.

Although respondents re p o rted that the EC program had no effect on broad Title II planning processes, 9 of

the 15 States re d i rected base Title II funding from other sources to EC areas to offset losses in EC funding for

1 or more years to minimize disruption in client services. Furt h e rm o re, shifts in MSA designations may aff e c t

not only EC eligibility but also State and regional planning. Three States identified challenges resulting fro m

having ECs with MSA regions that diff e red from established health planning or consortia regions or fro m

shifting MSA designations that could affect EC funding eligibility and, as a consequence, allocation of Title II

base funding to EC and non-EC areas.

Late notice of EC award and receipt of EC funding affected programs’ ability to effectively plan for and

use EC funding. Notice of EC award and actual receipt of funding came too late for some States and ECs to

be able to incorporate the information into their established planning activities. This resulted in situations in

which (1) awardees felt the EC funding was not planned for and, thus, not used effectively; (2) providers had

less than a full year to expend the funds; and (3) the funding was placed in large but important programs that

could quickly absorb the additional funds, such as the AIDS Drug Assistance Program (ADAP) or primary medical care networks, thus allowing the States to avoid having to re t u rn unspent monies.

Areas that have access to a mix of base Title II, EC, Title III, and Title IV program funds had the

potential to develop comprehensive service programs. Having Title II, Title III, and Title IV programs

and supplemental EC funding in one service region allowed programs to provide a more comprehensive

service package while minimizing duplication of services, thus maximizing limited resources. Having Title

III programs was viewed as especially beneficial because their existence allows at least a portion of Title II

funds to be shifted from primary medical care to supportive services that help maintain clients in care. Joint

planning among the title programs is critical for this approach to work, but it occurred with only a few of

the 15 participating ECs. Supplemental EC funding was seen as a way of further expanding the ability to fill

funding gaps and provide a more comprehensive package of services.

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EC funds were used both to expand existing medical and support services and to establish a wide

range of new services to infected populations with unique health care and other social service needs.

Program money was used to fund a wide variety of services, including traditional services such as primary

care, medication assistance, case management, housing, transportation assistance, emergency services, and

food assistance, as well as new services to better meet the needs of communities with special needs.

Innovative and special needs programs and services included permanency planning to assist children in the

event of a parent’s death, transitional planning for people released from correctional facilities, substance

abuse counseling and treatment, outreach and education, nutritional counseling, pastoral counseling, home

visits to assist in medication adherence, and translation services.

The EC program contributed to an increase in client access to and utilization of medical and support

services in qualifying communities. Program funds resulted in an increase in the number of people using

services and an increase in the frequency and range of services being used by clients already in care. Waiting

lists and times were reduced as a result of the availability of additional funds. The utilization of primary care

services was enhanced by the availability of support services such as adherence counseling, child care, housing assistance, and transportation. Program funds were often used to target women, infants, and children;

the homeless; substance abusers; migrant workers; minority populations; incarcerated persons; and other

populations facing historical barriers to care.

R e c o m m e n d a t i o n s

Refocus Reforms on Title I

The CARE Act Amendments of 2000 included a provision establishing the EC program to help address

funding disparities to non-EMA States caused in part by the Title I program. Although the program partially

addresses these funding disparities, it creates the same type of funding disparities caused by Title I, but for

urban and rural areas that do not qualify as eligible EC MSAs or that do not meet the EC AIDS case criteria.

As such, the EC program imperfectly functions somewhere between the Title II base–funded program and

the Title I program. The EC program is only a partial solution toward achieving greater parity and equity

across communities. Reform efforts should instead focus on addressing the disparities and inequities caused

by the Title I program. Although the Title I program played a critical role in mounting a rapid response in

the major cities where the epidemic was concentrated in its early years, HIV and AIDS have now imposed

a health care burden on every region of the country. Today, more appropriate mechanisms than the Title I

program may need to be developed for funding HIV/AIDS services in large metropolitan areas while equitably addressing HIV/AIDS care needs in all urban and rural settings throughout the United States and its

territories. It is against this backdrop that the following continuum of recommendations for the EC program

is proposed.

R e t u rn EC Funds to Title II Base

Ideally, the EC program should be eliminated and the funds returned to Title II base appropriations for allocation to States as part of their general award. Given the funding inequities and disparities caused by double counting of AIDS cases among the CARE Act titles, however, HRSA should consider recommending the

elimination of the EC program and the establishment of a new Emerging Community State Formula Grant

Program using the funds that currently support the EC program. The purpose of this program would be to

provide supplemental Title II funding to States with qualifying ECs under the rationale that States with communities currently defined as emerging communities may be disproportionately affected by HIV and AIDS.
These funds would be planned for through the States’ established Title II planning processes, but there

would be no requirement that they be used in the EC area. The only stipulation would be that the funds

could not be used in Title I EMA areas in the State. These funds would essentially be supplemental Title II

base funds and, as such, would not have to be tracked or reported separately.

Recommended Reforms

Eliminate tiers

Allocate proportionally across ECs

Restrict funding to non-EMA areas

Phase out funding due to loss of eligibility

Allow carryover of funds

Allow multiyear contracts

Require quick disbursement of funds

Use HIV/AIDS cases in allocation formula

Base future appropriations on relative resource needs of EC areas

Include incidence of HIV and poverty in eligibility criteria

The reasons for eliminating the EC program are as follows:

+ The EC program disrupts existing long-range planning processes that have been designed to identify and

coordinate funding and service needs among all local areas.

+ EC planning is often burdensome to local communities and may be duplicative of existing Title II efforts,

particularly when MSAs span multiple consortia, each with its own Title II planning structure and needs

assessment and planning processes. MSAs that span State boundaries create uniquely onerous planning

challenges.

+ Double counting of AIDS cases creates funding inequities between ECs and non-EC areas and between

States that have ECs and States that do not; it further exacerbates the funding inequities between States

that have ECs and Title I EMAs and those that do not.

+ The designation of an area as an EC does not necessarily identify a geographic area or jurisdiction with

HIV/AIDS care and support needs that are significantly greater than those of a non-EC. Moreover, the

use of MSA designation as a primary criterion is imperfect. MSAs vary greatly in their size and demographic composition, their designations are somewhat subjective, and their boundaries and composition

shift over time. (This criticism can be applied to EMAs as well.)

+ Although EC funds are earmarked for use in the designated EC area, State Title II programs have the

option of using the funds to replace the base Title II funding going into the EC area and reallocate the

base funds to other areas or uses, thus circumventing the intent of the program. 

+ Separate tracking and reporting of EC funds constitutes an additional and unnecessary administrative

burden for local consortia and State programs. 

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The specific mechanics for replacing the existing EC program with a new Emerging Community State

Formula Grant Program are as follows:

+ Eliminate the two tiers and allocate the EC funds directly to the State as grantee based on the number

of reported AIDS cases across all qualifying communities in the State as a proportion of the number of

reported AIDS cases in all qualifying communities nationally.

+ Phase in the funding changes resulting from the pro p o rtional allocation by limiting the increases or

d e c reases to any given EC to 25 percent per year. Doing this will minimize disruptions to existing pro g r a m s

and minimize funding increases that may exceed the absorptive capacity of the local service system

+ After the tier system has been eliminated, the current EC program should be dismantled through a similar phased-out approach, whereby funding to current qualifying ECs is reduced by 25 percent so that

within 4 years, the current program has been eliminated completely. During this process, the funds can

be reallocated to the Emerging Community State Formula Grant Program in the same fashion.

+ During this phase-out period, the loss of funds to communities that become ineligible should also be

limited to 25 percent per year to minimize disruption of services and damage to community trust. In

this way, the removal of funds because of loss of eligibility would be gradual, spanning a period of 4

years. Once the current EC program has been eliminated and the new supplemental State program has

been fully phased in, the temporary limits on funding decreases would end. 

R e f o rm the EC Pro g r a m

Eliminating the EC program may not be feasible at this time. Short of eliminating the EC program, making

the following refinements to the supplemental grant program would achieve greater stability and equity in

funding. Most of the following recommendations entail changes to the authorizing legislation, which only

Congress can make. Therefore, HRSA should include them in its recommendations to Congress under the

FY 2005 CARE Act reauthorization.

+ Eliminate the two tiers and allocate the EC funds proportionately according to the number of cases

across all communities. To minimize disruption of services caused by the elimination of the dual-tier

structure, increases or decreases in funding as a result of proportional allocation should be limited to 25

percent per year. Once the full effect of the tier elimination has been realized, this temporary funding

guarantee should be terminated.

+ Institute a general cap on annual funding reductions to minimize the disruption caused by unexpected

withdrawal of funds when an EC loses eligibility. Under this temporary funding protection, ECs that lose

eligibility because their AIDS cases fall below 500 would eventually lose all funding under the supplemental program.

+ Release the number of CDC-reported AIDS cases for all current and newly eligible ECs by the October

prior to the next CARE Act fiscal year so that communities can adequately prepare for the identification

of needs and the allocation of funds.

+ Make clear to States and ECs that they may carry over funds after the initial year of award. A carryover

provision would facilitate needs assessment, contracting, and monitoring and evaluation procedures.

+ Encourage States and communities to write provider contracts spanning 2 or 3 years at a time. Doing so

would provide for better planning and greater continuity in the provision of care and help engender

greater trust and commitment on the part of providers. Longer-term contracts would need to be made

conditional on continued Federal appropriations for the EC program at the same level.
+ Require that States disburse funds within a fixed period of time following award notification and that

they provide contractors with adequate time to spend the funds. Delays in disbursement create major

challenges in implementing provider contracts and delivering services. The notification, award, and disbursement process should be made more transparent and systematic, and States should be held accountable for disbursing funds within a time period specified by HRSA.

+ Require Title I, II, III, and IV grantees that provide services in the affected geographic area to participate

in the local EC planning process. Doing so would help facilitate the coordination and efficient use of EC

resources.

+ Replace the provision that guarantees the EC program one-half of any increase in Title II base appropriations with something more representative of the actual proportion of AIDS cases in qualifying MSAs.

HRSA should urge Congress to reevaluate this allocation formula and tie the proportion of EC funds to

the resource needs of ECs relative to non-EC communities.

+ Use both HIV and AIDS counts in the allocation formula for EC funds. Including HIV counts in the allocation formula would help ensure that program resources are targeted to communities facing the greatest demand for medical and support services. It would also help ensure that resources are focused on

subpopulations with the highest incidence of newly diagnosed cases. The last of the States and municipalities have just recently implemented an HIV reporting system to the CDC. Although the reliability,

comparability, and completeness of the records have not yet been established, HRSA should consider

using the EC program to pilot test the use of HIV counts for allocation of funds. (The Institute of

Medicine recently submitted a major report to HRSA outlining the strengths and weaknesses of using

HIV cases for resource allocation.3)

+ Base allocation decisions on HIV and AIDS cases in active care. Doing so would focus funds on programs

whose resources are actually being used. It would also provide an incentive for communities to reach out

to infected populations that are currently not receiving care and are often disenfranchised from systems

of care, and get them into treatment programs. Moreover, HRSA should base allocations on point of service to account for client relocation after testing.

+ Review the EC definition, eligibility criteria, and funding formula to ensure that they adequately capture

what constitutes an emerging community and that the formula allocates funding proportionately to the

needs of the community. The allocation formula should reflect the community’s incidence and prevalence of HIV and AIDS, the incidence of poverty, the proportion of the population without health insurance, and the resource demands of the particular geographic area.3

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References

1 An MSA is defined by the U.S. Office of Management and Budget as a county or group of contiguous

counties that contains at least one city of 50,000 inhabitants or more or a county or group of contiguous counties that contains an urbanized area of at least 50,000 inhabitants and a total population of at

least 100,000 inhabitants (75,000 in New England) based on the most recent census data. MSA boundaries and EC definitions may change based on shifts in demographics as measured by the census data.

2 National Alliance of State and Territorial AIDS Directors. Southern States Manifesto: HIV/ADS and STDs in

the South: A Call to Action. Southern State AIDS/STD Directors Work Group; 2003.

3 Institute of Medicine. Measuring What Matters: Allocation, Planning and Quality Assessment for the Ryan

White CARE Act. Washington, DC: National Academies Press; 2003.

Health Resources and Services Administration

HIV/AIDS Bureau

5600 Fishers Lane, Suite 7-05

Rockville, MD 20857

Telephone 301.443.1993

w w w. h a b . h r s a . g o v