GAO/HEHS-00-135R Employee Screening by Medicare Contractors

United States General Accounting Office

Washington, DC 20548

Health, Education, and

Human Services Division

B-285112

June 30, 2000

The Honorable John L. Mica

Chairman, Subcommittee on Criminal Justice,

Drug Policy, and Human Resources

Committee on Government Reform

House of Representatives

Subject: Medicare: Contractors Screen Employees but Extent of Screening Varies

Dear Mr. Chairman:

In fiscal year 1999, the Health Care Financing Administration’s (HCFA) claims

administration contractors managed and processed more than $170 billion in feefor-service Medicare claims. Several of these contractors have recently settled

cases involving allegations of improper screening, processing, and payment of

Medicare claims as well as falsification of reports and documentation.1 Because

of your continued concern about the potential vulnerability of federal funds to

fraud, waste, and abuse by federal contractors, you asked us to examine the use

of employee screening measures by Medicare claims administration and program

safeguard contractors. 2Specifically, you asked us to identify (1) the requirements

HCFA has placed on Medicare contractors to conduct employee background

checks, (2) the steps Medicare contractors are taking to ensure that employees

are trustworthy in handling Medicare funds and sensitive information, and (3) the

costs to Medicare contractors of conducting background checks or using other

employee screening measures. 3

1

See Medicare Contractors: Despite Its Efforts, HCFA Cannot Ensure Their Effectiveness or Integrity

(GAO/HEHS-99-115, July 14, 1999) and Medicare: Improprieties by Contractors Compromised

Medicare Program Integrity (GAO/OSI-99-7, July 14, 1999).

2

For purposes of this letter, employee screening measures generally refer to activities employers

engage in to investigate prospective employees and monitor the activities of current employees.

Employee screening measures include all background checks as well as employee drug tests.

3

For purposes of this letter, employee background checks generally refer to activities employers

engage in to investigate prospective employees before extending an offer of employment or soon

thereafter. These include employment and education verifications, reference checks, credential

validations, criminal background checks, credit checks, and government debarment database

reviews.
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2 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

To address these questions, we examined the statutes, regulations, guidance, and

contractual language governing the relationship between HCFA and its Medicare

claims administration and program safeguard contractors. We also spoke to

officials from HCFA who are responsible for managing the agency’s Medicare

contractors. To obtain information regarding the steps Medicare contractors are

taking to screen their employees, we surveyed staff from a random sample of ten

of the Medicare claims administration contractors. We also interviewed staff

from two of the twelve program safeguard contractors, choosing two contractors

that do not also serve as claims administration contractors. We performed this

work between December 1999 and June 2000 in accordance with generally

accepted government auditing standards.

In brief, HCFA expects its contractors to exercise sound business judgment when

they make hiring decisions. As a result, the agency does not specifically require

its Medicare claims administration and program safeguard contractors to conduct

background checks or undertake other employee screening measures. However,

HCFA does advise its claims administration contractors to adopt personnel

selection safeguards, specifically employment verification and applicant

certifications. The agency also requires its claims administration contractors to

obtain fidelity bonds for certain employees. In addition, both Medicare claims

administration and program safeguard contractors are required to collect and

submit to HCFA conflict of interest information.

The Medicare claims administration and program safeguard contractors we

surveyed screen their employees as a common business practice without specific

requirements from HCFA to do so. Nearly all the contractors in our sample said

that they perform typical screening measures, such as employment and education

verification, reference checking, and credential validation. Most of the claims

administration contractors we spoke to also reported that they perform more

extensive screening measures, such as criminal background checks and drug

tests. In contrast, the two program safeguard contractors we surveyed indicated

that they do not conduct criminal background checks or require drug testing

unless such requirements are included in their contracts. Both claims

administration and program safeguard contractors reported that they rarely use

less traditional screening measures, such as credit checks and government

debarment and exclusion database reviews.

The costs associated with employee screening vary by the complexity and

urgency associated with each screening measure. However, the Medicare

contractors we surveyed could not calculate the total cost of their employee

screening measures. The fact that employee screening efforts are conducted and

continue to be recognized as a common business practice within the Medicare

contractor community suggests that such measures are considered worthwhile.
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3 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

BACKGROUND

The Medicare program is the nation’s largest insurer, covering nearly 40 million

beneficiaries at a total cost of more than $200 billion. More than 82 percent of the

beneficiaries elect to enroll in traditional Medicare, which pays claims on a feefor-service basis. In fiscal year 1999, traditional, fee-for-service Medicare

accounted for more than $170 billion of the program’s total expenditures.

HCFA administers its Medicare fee-for-service program with the help of

contractors. Medicare claims administration contractors, called intermediaries or

carriers, depending on the type of claims they process, pay an average of more

than $700 million for about 3.5 million fee-for-service claims each business day.

Intermediaries, selected from among organizations nominated by provider

associations, process and review claims for institutions such as hospitals and

skilled nursing facilities. Carriers, selected by the Secretary of the Department of

Health and Human Services (HHS), process and review claims submitted by other

health care providers, such as physicians, laboratories, and suppliers of durable

medical equipment.

Medicare claims administration contracts have features that distinguish them

from typical federal contracts. Medicare’s authorizing statute, the Social Security

Act, gives the Secretary of HHS contracting authority for Medicare claims

administration contracts outside the Competition in Contracting Act of 1984

(CICA) and its implementing regulations, known as the Federal Acquisition

Regulation (FAR). For example, CICA permits federal agencies to enter into cost

reimbursement or fixed price contracts. In addition, there is a presumption of full

and open competition under CICA. In contrast, the Social Security Act sets

qualification requirements for Medicare part B carriers and establishes a process

by which organizations are nominated to be part A intermediaries by associations

representing health care providers. In effect, these exceptions limit the pool of

contractor candidates to insurance companies. The Social Security Act also

provides for cost reimbursement under which contractors are reimbursed for the

necessary and proper costs of carrying out Medicare activities. Finally, the act

does not require that Medicare claims administration contractors be selected

competitively. As a result, HCFA has continued to contract with the same

entities. In fact, many of the claims administration contractors have served the

Medicare program since the program’s inception in 1966.

Program safeguard contracts are more in line with the general principles of CICA

and FAR. Under the contracting provisions of the Medicare Integrity Program,

HCFA has greater flexibility in selecting from among competing eligible entities

for the performance of Medicare program safeguard activities.4

Program

4

The Medicare Integrity Program was established by the Health Insurance Portability and

Accountability Act of 1996, Pub. L. No. 104-191, § 202, 42 U.S.C. § 1395ddd (1999).
B-285112

4 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

safeguard contractors protect the integrity of the Medicare program by carrying

out activities that include reviewing providers’ claims, auditing providers’ cost

reports, and performing Medicare secondary payer reviews to recover erroneous

program payments. These contractors can be paid under a variety of pricing

arrangements, including cost reimbursement, firm fixed price, and time and

materials. In addition, program safeguard contracts are awarded competitively;

however, HCFA can renew these contracts indefinitely without competition.

HCFA REQUIRES CONTRACTORS

TO IMPLEMENT SAFEGUARDS

OTHER THAN BACKGROUND CHECKS

According to HCFA officials responsible for managing the agency’s contractors,

HCFA expects its Medicare claims administration and program safeguard

contractors to be responsible in their hiring practices and does not specifically

require them to conduct background checks or use other employee screening

measures. However, in the manuals HCFA provides to its claims administration

contractors, HCFA advises them to implement personnel selection safeguards,

such as employment verification and applicant certifications. These manuals also

provide guidance to claims administration contractors regarding the requirements

HCFA includes in their contracts concerning (1) the retention of a fidelity bond

indemnifying Medicare funds from loss and (2) the collection and submission of

conflict of interest information. Further, in the contracts HCFA negotiates with

its program safeguard contractors, the agency includes a requirement for the

disclosure and mitigation of conflicts of interest.

The manuals HCFA publishes to provide guidance to its claims administration

contractors suggest that they implement minimum safeguards regarding

personnel selection. These safeguards include obtaining authorization to verify

the past employment record of prospective employees. By obtaining such

authorization and verifying an applicant’s employment history, claims

administration contractors will be able to confirm employment dates and job

descriptions and may be better able to identify discrepancies on an application

before extending an offer of employment. The HCFA manuals also refer to

applicant certifications, recommending that “the employment application . . .

provide for the applicant’s signed acknowledgement that falsification of his

application could be cause for dismissal at any time after employment.” 5

5

HHS, HCFA, Intermediary Manual, rev. 79, sec. 2920.3(A), “Intermediary Minimal Safeguards,” ch.

XI, part 2 (Baltimore, Md.: HCFA, 1974), and Carriers Manual, rev. 16, sec. 5210.3(A), “Carrier

Minimum Safeguards,” ch. III, part 2 (Baltimore, Md.: HCFA, 1974).
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5 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

Contractors With Access to Medicare

Funds Must Indemnify Losses

Because of claims administration contractors’ direct access to Medicare funds as

claims processors and payers, HCFA requires them to obtain fidelity bonds.

Fidelity bonds guarantee the return of Medicare funds taken by employee

embezzlement, theft, and other misdeeds. HCFA requires its claims

administration contractors to have bonds covering, at a minimum, employees who

certify claims for payment as well as employees who disburse funds in payment of

claims. When underwriting fidelity bond coverage, issuing institutions often

require information from applicants, including information concerning employee

screening measures and internal controls. As a result, HCFA’s fidelity bond

requirement for its claims administration contractors may indirectly impose a

requirement on these contractors to engage in some degree of employee

screening.

HCFA Requires Contractors to

Identify Conflicts of Interest

In its contracts, HCFA requires both its Medicare claims administration and

program safeguard contractors to submit data detailing any organizational and

employee conflicts of interest. This requirement ensures that HCFA and its

Medicare contractors are aware of any conflicts that may compromise a

contractor’s integrity. HCFA’s conflict of interest requirement works to prevent

Medicare contractors and their employees from using their positions to further

their private business interests and from accepting gifts or gratuities that may bias

the award of Medicare subcontracts.

Using a questionnaire, claims administration contractors are required by contract

to collect conflict of interest information from their employees. The information

collected must include (1) the names of officers and certain employees who have

received gifts, payment, or entertainment (other than what may be considered a

reasonable common business courtesy) from people or companies doing business

with the contractor involving Medicare funds and (2) the names of officers and

certain employees who have outside employment in organizations receiving

Medicare funds. This information must be compiled into a report, which the

claims administration contractors submit annually to their HCFA Regional Office.

HCFA also includes a detailed conflict of interest requirement in the contracts

that it negotiates with its program safeguard contractors. This requirement calls

for the disclosure and mitigation of actual, apparent, and potential conflicts of

interest that may negatively affect the perception of the integrity of the work the

contractor performs. HCFA requires its program safeguard contractors to

complete an Organizational Conflict of Interest Certificate when a proposal is first
B-285112

6 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

submitted.6This document is later incorporated into the program safeguard

contract as an attachment. The certificate must include a description of all the

program safeguard contractor’s business and contractual relationships or

activities that could be considered conflicts as well as a plan to mitigate such

conflicts. The contractor must also have a plan in place to monitor its compliance

and the compliance of its subcontractors. Additionally, HCFA requires its

program safeguard contractors to certify that all work performed under their

contracts is free of unresolved conflicts of interest.

MEDICARE CONTRACTORS SCREEN

THEIR EMPLOYEES, WITH SOME

CONDUCTING EXTENSIVE SCREENING

Our survey of ten Medicare claims administration contractors and two program

safeguard contractors suggests that Medicare contractors perform some form of

employee screening as a common business practice, although HCFA does not

specifically require this. Nearly all our survey respondents said that they use

screening measures typical of the hiring process, such as employment and

education verification, reference checking, and credential validation. Most of the

claims administration contractors we surveyed reported that they routinely

perform additional screening measures, such as criminal background checks and

drug tests. The two program safeguard contractors we surveyed were less

vigorous when it came to employee screening, often indicating that criminal

background checks or drug tests would be conducted only if required by contract.

Both claims administration and program safeguard contractors reported that they

rarely use less traditional screening measures such as credit checks and

government debarment database reviews.

Traditional Employee Screening

Measures Are Widely Used

Generally, employers carry out a variety of screening measures to ensure that

applicants meet the necessary qualifications for a given job. Confirming an

applicant’s past employment history and verifying an applicant’s academic record

are common checks used to assist an employer in making an informed hiring

decision. Reference checking is another screening measure employers often use

to obtain information about prospective employees. It is also common for

employers to validate a job applicant’s credentials or licenses to ensure that the

applicant satisfies the required job qualifications.

6

HCFA also requires a certificate to be submitted (1) when its contracting officers request

revisions in the certificate, (2) as part of a compliance audit performed by an independent auditor,

and (3) 45 days before there is any change in the information previously submitted.
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7 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

All our survey respondents, including both claims administration and program

safeguard contractors, told us that they verify an applicant’s past employment,

while eight of the eleven contractors that responded indicated that they check an

applicant’s education. All eleven of the claims administration and program

safeguard contractors that responded said they check an applicant’s references,

although one contractor indicated that it limits such checks to leadership

positions. In addition, nearly all our survey respondents, including both claims

administration and program safeguard contractors, reported that they validate the

credentials of job applicants.

Claims Administration Contractors

Conduct Additional Screening

Criminal background checks and drug testing are additional tools employers use

to investigate the background of prospective employees. Because they are more

intrusive, these tools are often limited to particular types of positions to protect

job applicants and current employees from discrimination and abuse. A little

more than half of the claims administration contractors we surveyed said that

they require criminal background checks and drug testing for all employees. The

program safeguard contractors we surveyed did not routinely conduct either

screening measure.

Private employers are generally not given access to law enforcement criminal

databases, although these employers can access criminal conviction records.

Such records must often be obtained county by county, requiring a trip to each

county courthouse and a search of the records each court maintains. Although

some states have statewide databases for public use, they are commonly

recognized to be inaccurate and incomplete, serving merely as depositories for

the counties that choose to participate.

Despite these limitations, most of the claims administration contractors we

surveyed reported that they conduct some kind of criminal background check as a

regular part of their hiring process. Some of these claims administration

contractors indicated that they limit the use of criminal background checks,

checking only certain positions or conducting checks only if applicants respond

on an application or an affidavit that they have been convicted of a crime. As

insurance companies, Medicare claims administration contractors may be

inquiring about past criminal convictions and conducting criminal background

checks to comply with the insurance fraud provisions of the Violent Crime

Control and Law Enforcement Act of 1994 (VCCLEA).7 Under this law, insurance

companies can be fined or their officers can be imprisoned if they employ

someone who has been convicted of a felony that involves dishonesty or a breach

7

18 U.S.C. § 1033.
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8 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

of trust.8Although HCFA does not require criminal background checks, Medicare

can indirectly benefit from the VCCLEA provisions and its claims administration

contractors’ compliance with them. 9 This occurs when contractors conduct

criminal background checks as a standard practice across the company, checking

employees who work on the private side of their business as well as those

working on Medicare claims processing.

Preemployment drug testing is yet another screening measure employers use to

help inform their hiring decisions and avoid potential problems, such as

workplace violence, accidents, absenteeism, poor productivity, and high health

insurance claims. Many states have enacted laws permitting particular kinds of

drug testing, job applicant testing being the most common. Other drug testing

may include testing based on reasonable suspicion, fitness for duty, completion of

a drug rehabilitation program, and on-the-job injuries or accidents. Some state

laws also permit testing employees randomly. Although some states actually

require employers to conduct drug tests for specific purposes, most states that

have enacted drug testing laws give employers the option of implementing testing

programs that meet certain conditions.10 Some of these conditions include the

collection and testing of samples by approved laboratories, the requirement that

test results be kept confidential, and the confirmation or verification of positive

test results. Many states also require employers to notify employees and

applicants of their drug testing policy by giving them a written statement that

describes the policy in detail. (See enclosures I and II for additional information

concerning state laws related to drug testing.)

Six of the ten claims administration contractors surveyed reported that they

require all applicants and employees to be tested for illegal drugs, while an

additional three are considering implementing a drug testing program. Both

program safeguard contractors indicated that they do not require preemployment

drug testing. One of these contractors added that it notifies its employees that

8

VCCLEA penalizes insurance companies that hire individuals with criminal felony convictions

involving dishonesty, breach of trust, or insurance fraud. Section 1033 (e)(1)(B) of title 18 states

that “any individual who is engaged in the business of insurance whose activities affect interstate

commerce and who willfully permits the participation” of any individual who has been convicted

of any criminal felony involving dishonesty or a breach of trust, or who has been convicted of an

offense under this section “shall be fined as provided in this title or imprisoned not more than 5

years, or both.”

9

Claims administration contractors act as payers rather than insurers when serving the Medicare

program. VCCLEA applies to employers engaged in the business of insurance, which is defined as

including the writing of insurance or the reinsuring of risk. See 18 U.S.C. § 1033(f)(1) and (2).

10At least eleven states (Alabama, Arkansas, Florida, Georgia, Idaho, Mississippi, Ohio, South

Carolina, Tennessee, Virginia, and Washington) require employers to conduct certain kinds of drug

tests in order to qualify for workers’ compensation insurance premium discounts.
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9 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

random drug testing can be implemented at any time. According to our survey

respondents, very few applicants or employees have tested positive for drugs.

However, most of the contractors we surveyed do not track the actual number of

individuals tested or the results of those tests and, therefore, could not provide us

with data. One claims administration contractor did have such data, reporting

three cases of positive test results of the 157 tests conducted in 1999.

The Use of Other Employee Screening

Measures Is Less Prevalent

Credit reports and government debarment and exclusion databases are also

sources of information regarding prospective employees. Credit reports, like

criminal conviction records, are sensitive and can be a discriminatory basis for

hiring decisions if the inquiry is not related to the required job qualifications.

Government debarment and exclusion databases assist federal agencies and their

contractors in identifying individuals or entities that have been debarred from

contracting with the federal government. In addition, claims administration

contractors should ensure that job applicants have not been excluded from the

Medicare or Medicaid programs because, if they fail to do so, they risk exposing

themselves to liability for civil monetary penalties.

Only four of the ten claims administration contractors we surveyed review an

applicant’s credit report when making hiring decisions. According to our survey

respondents, this review is often limited to upper level management positions or

positions in which an employee may have access to funds. Only two of the four

claims administration contractors that conduct credit checks indicated that such

checks are run on all job applicants. Neither program safeguard contractor

reported that it checks an applicant’s credit report. Only five of the eleven claims

administration and program safeguard contractors that responded reported that

they check government debarment and exclusion databases.

THE COSTS OF SCREENING

MEASURES VARY BY COMPLEXITY

AND RESPONSE TIME

According to many of the contractors we surveyed, the complexity and urgency

associated with a particular screening measure dictate its cost. Consequently,

expedited results and comprehensive examinations increase the price of criminal

background checks and drug tests. Because the Medicare contractors we

surveyed did not collect data concerning their use of employee screening

measures, we could not estimate the overall cost to the Medicare program if these

or other screening measures were required.

Our survey respondents indicated that the cost of a criminal background check

could range between $10 and $125, with the checks that involve multicounty
B-285112

10 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

reviews or prompt responses being the most expensive. The price range for drug

tests was identified as being between $30 and $90, with the price of retests falling

on the high end of this range. Just as with criminal background checks, more

comprehensive drug screens as well as expedited test results would increase the

price of the drug test.

The Medicare claims administration and program safeguard contractors we

surveyed were not able to calculate the total cost of their employee screening

measures. This was partly because of the contractors’ lack of data tracking the

number and use of criminal background checks and drug tests as well as the

contractors’ inability to isolate the costs of such screening measures from their

overall human resources budgets. The fact that employee screening efforts are

conducted and continue to be recognized as a common business practice suggests

that Medicare contractors consider such measures to be worthwhile.

AGENCY COMMENTS

In commenting on this correspondence, HCFA stressed its continuing

commitment to protect the Medicare trust fund from fraudulent and abusive

practices and activities. The agency expressed an intention to continue to

evaluate the effectiveness of its mechanisms to ensure that only competent and

trustworthy persons are selected to work for its Medicare contractors. HCFA

agreed that it does not require specific criminal background checks and drug tests

in its program safeguard contracts. However, HCFA said it used various tools,

such as the debarred, suspended, and sanctions lists and the Fraud Investigation

Database, to screen key contractor personnel. HCFA also said it will review its

program safeguard contract provisions to ensure that employees’ backgrounds are

adequately investigated. HCFA provided technical comments as well that we

incorporated where appropriate.

In its comments, HCFA expressed a desire to obtain access to the Federal Bureau

of Investigation’s National Crime Information Center, a nationwide criminal

justice information system that the agency could use to run criminal background

checks, not only on its contractor personnel but also possibly on providers and

their employees. According to HCFA, obtaining this access would require

legislative change, but it would provide the agency with another tool to ensure

that the agency is doing business with qualified and credible entities. Because a

review of this proposal was not within the scope of our work, it was not

addressed in this correspondence.

-----

We are sending copies of this report to the Honorable Nancy-Ann Min DeParle,

Administrator of HCFA, and other interested congressional committees. We will

also make copies available to others on request.
B-285112

11 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

Please contact me at (312) 220-7600 if you or your staff have any questions about

this letter. Major contributors to this correspondence were Sheila Avruch and

Erin Kuhls.

Sincerely yours,

Leslie G. Aronovitz

Associate Director, Health Financing and

Public Health Issues

Enc. – 2
ENCLOSURE I ENCLOSURE I

12 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

DRUG TESTS THE 50 STATES PERMIT OR REQUIRE

State

Job

applicant

Reasonable

suspicion

Fitness for

duty

Completion of

rehabilitation

program

On-the-job

injury or

post-accident Random

Alabama R

a RR R R X

Alaska X XX X X

Arizona

b X XX X X

Arkansas R

a RR R R X

Californiac, d, e X

a X X

Coloradoc X

a

Connecticut XX X X

f

Delawarec

District of

Columbiac

Floridab, e R RR R X

Georgiae R RR R R X

Hawaiig X

Idahog X XX X X X

Illinoisc, e X X

Indianac X XX X X X

Iowae X

a X X XX

Kansas

c, e X XX X X X

Kentuckyc
ENCLOSURE I ENCLOSURE I

13 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

State

Job

applicant

Reasonable

suspicion

Fitness for

duty

Completion of

rehabilitation

program

On-the-job

injury or

post-accident Random

Louisianae XX X X

Maineg X

a X X Xf

Marylande X

Massachusettsc X

h

X

h

Michiganc

Minnesotag X

a, b XX X X Xf

Mississippig X

a XX X X

Missouric

Montana

i XX X X X

b

Nebraska X

Nevadac, e

New Hampshirec

New Jerseyc X

New Mexico

c, e

New Yorkc X XX X X X

North Carolinag X

North Dakotac

Ohiob, e RR R R R

j

Oklahomag X

a XX X X X

Oregonc, e X
ENCLOSURE I ENCLOSURE I

14 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

State

Job

applicant

Reasonable

suspicion

Fitness for

duty

Completion of

rehabilitation

program

On-the-job

injury or

post-accident Random

Pennsylvaniac

Rhode Islandg X

a X

South Carolinac, e R

South Dakotac, e

Tennesseeg, e R

a RR R R X

Texasc

Utahb, e X

a X R X

Vermont X

k X X

Virginiac

Washingtone R

a X R R X

West Virginiac X X

Wisconsin

c, e

Wyomingc

Note: X = permitted.

R = required in order to qualify for a workers’ compensation insurance

premium discount.

a

An employer must extend an offer of employment before requiring an applicant to

submit to drug testing.

b

A drug testing policy must be applied equally to all employee classifications.

c

No law addresses applicant or employee drug testing by private employers specifically.

This information was derived from related state statutes and case law.

d

California case law indicates that there are no California statutes that prohibit, or place

general limitations on, employer-mandated drug testing. Loder v. City of Glendale, 927

P.2d 1200, 1211 (1997).
ENCLOSURE I ENCLOSURE I

15 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

e

State law refers to a drug testing policy or program for state and public employees,

applicants for state and public positions, and state contractors.

f

State law limits the use of random or arbitrary testing.

g

Only drug test policies that meet all the requirements of state law are permissible (unless

the testing is conducted pursuant to federal drug testing regulation).

h

Massachusetts case law suggests that preemployment, “for cause,” and random testing

are permissible. In addition, Massachusetts case law balances the general interest of

businesses to protect the safety of their employees with the privacy interests of

employees subject to random drug testing.

i

State law regarding drug testing refers only to employees engaged in the performance,

supervision, or management of work in a hazardous work environment, security position,

position affecting public safety, or fiduciary position for an employer.

j

This kind of testing is required only for Level 2 and Level 3 testing programs.

k

Applicant drug testing is permissible only if all the following conditions are met: (1) the

applicant is extended a conditional offer of employment, (2) the applicant receives notice

of the drug test, (3) the drug test is part of a physical exam, and (4) the test is

administered consistent with state law requirements.

Source: The information in this table was compiled by searching a commercial electronic

legal database and is limited by the search terms. In a few cases, we contacted the state

agencies responsible for labor and employment issues to confirm the information, or lack

of information, we discovered through the electronic search.
ENCLOSURE II ENCLOSURE II

16 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

FEATURES OF DRUG TESTING PROGRAMS

STATES FIND ACCEPTABLE

State

Written

policy

Collection

and testing

procedures by

approved

laboratories

Confirm

positive

results Confidentiality

Explain or

refute test

results

Results

and

refusal as

basis for

decision

to dismiss

or not to

hire

Employer

pays for

testing

Workers’

compensation

insurance

premium

discounts

Alabamaa, b, c XXX X X XX

Alaskac X X X X XXX

Arizona

d X X X X XXX

Arkansas X X X X XX X X

Californiae X XX

Coloradoe

Connecticut XX X X

Delawaree

District of

Columbiae

Florida X X X X XXX X

Georgiaa, b, c XXX X X XX

Hawaii X X X

f

X X

Idaho X X X X XXX X

Illinoise X

Indianae X

Iowa

a, b, c

XXX X X g X

Kansase X X

Kentuckye
ENCLOSURE II ENCLOSURE II

17 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

State

Written

policy

Collection

and testing

procedures by

approved

laboratories

Confirm

positive

results Confidentiality

Explain or

refute test

results

Results

and

refusal as

basis for

decision

to dismiss

or not to

hire

Employer

pays for

testing

Workers’

compensation

insurance

premium

discounts

Louisiana X X

h

X XX X

h

Maine

a, i

XXX X X g X

Maryland XXX X X

Massachusettse X

j

Michigane

Minnesota XXX X X g X

Mississippi

a, b, c X X X X XXX X

Missourie

Montana XXX X X

k

X

Nebraska XX X X

Nevadae

New

Hampshiree

New Jerseye X XX

New Mexicoe

New Yorke

X l

North

Carolina XX X

North Dakotae X

Ohioa, b, c, m

XXX X X

n
ENCLOSURE II ENCLOSURE II

18 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

State

Written

policy

Collection

and testing

procedures by

approved

laboratories

Confirm

positive

results Confidentiality

Explain or

refute test

results

Results

and

refusal as

basis for

decision

to dismiss

or not to

hire

Employer

pays for

testing

Workers’

compensation

insurance

premium

discounts

Oklahomaa X X X X XXX

Oregone X X

Pennsylvaniae

Rhode Island XXX X X g X

South

Carolina XX X X

South Dakotae

Tennessee X X X X XXX X

Texase X

Utah X X X X XX

Vermonta

XXX X X g

Virginiae

X X X

o

Washingtona, b, c

XXX X X g X X

West Virginiae

Wisconsine

Wyominge

Note: X = provision in state law.

a

An employee assistance program or information detailing employee assistance providers

or resources must be maintained.

b

Employee substance abuse education is required.
ENCLOSURE II ENCLOSURE II

19 GAO/HEHS-00-135R Employee Screening by Medicare Contractors

c

Supervisor training on detecting employee substance abuse, documenting and

collaborating signs of employee substance abuse, and referring abusing employees to

proper treatment providers is required.

d

Compliance with state law regarding drug testing is voluntary.

e

No law addresses employee or applicant drug testing by private employers specifically.

This information was derived from related statutes and case law.

f

Failure to adopt or adhere to the procedures identified invalidates the test result.

g

The law says that an employer shall not take adverse employment action so long as the

employee complies with the requirements of rehabilitation and successfully completes

such rehabilitation.

h

An employer may choose not to confirm a positive test result of a preemployment drug

screen test and offer the job applicant the opportunity to pay for confirmation of that

initial test.

i

The Department of Labor must approve the employer’s substance abuse policy.

j

Massachusetts case law favors drug testing procedures that ensure accuracy and do not

unreasonably interfere with an employee’s privacy.

k

No adverse action, including follow-up testing, may be taken by the employer if the

employee presents a reasonable explanation or medical opinion indicating that the

original test results were not caused by the illegal use of controlled substances.

l

Before taking adverse personnel actions, employers are encouraged to use employee

leave of absence and required attendance at a rehabilitation program along with a last

chance agreement requiring acceptable performance and attendance upon the employee’s

return.

m

In addition to the employee assistance program, Level 2 drug-free workplace program

employers are required to have established a referral relationship with an employee

assistance services provider, and Level 3 drug-free workplace program employers are

required to offer health care coverage to employees, which includes chemical

dependency counseling and treatment services.

n

Eligibility for the discount is limited to state fund employers.

o

To be eligible for workers’ compensation insurance premium discounts, an employer

must institute a drug-free workplace program that satisfies the criteria established by the

insurer.

Source: The information in this table was compiled by searching a commercial electronic

legal database and is limited by the search terms. In a few cases, we contacted the state

agencies responsible for labor and employment issues to confirm the information, or lack

of information, we discovered through the electronic search.

(201020)