Food Stamp Program: Options for Delivering Financial Incentives to Participants for Purchasing Targeted Foods
Published: 2008-07-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In fiscal year 2007, the Food Stamp Program provided about $30.4 billion in nutrition assistance benefits to 26.5 million individuals. Benefits are issued through Electronic Benefit Transfer (EBT) cards, similar to debit cards, to purchase eligible foods at authorized retail stores. The diets of many low-income individuals, like the U.S. population overall, do not meet federal dietary guidelines. One potential strategy for increasing the purchases of targeted foods that contribute to a healthy diet is to incorporate into the program financial incentives for purchasing these foods. GAO was asked to identify (1) what is known about the effectiveness of financial incentives and other approaches intended to increase the purchase of targeted foods, (2) the key factors to consider in designing a financial incentive program, and (3) options available to the U.S. Department of Agriculture's Food and Nutrition Service (FNS) for implementing financial incentives. GAO interviewed agency and state officials, retailers and associations, private EBT contractors, and other stakeholders; convened a panel of 17 experts; and conducted a literature review. In commenting on this report, FNS generally agreed with GAO's findings and concluding observations.
section_title: What GAO Found
paragraphs: A variety of approaches, including financial incentives and nutrition education, can increase the consumption of targeted foods, but little is known about the effectiveness of efforts to increase access to targeted foods. A few studies examining the effectiveness of financial incentives have demonstrated short-term positive effects on purchases, consumption, or weight loss. A study that reviewed 92 nutrition education studies found that most studies reported significant positive effects on consumption. Because of a lack of reported research, little is known about the effectiveness of approaches intended to improve access to targeted foods. Factors to consider in designing a program that delivers financial incentives through an additional food stamp allotment tied to the purchase of targeted foods include the following: (1) Selection of foods: Selecting which foods to promote could be a controversial and challenging part of designing an incentive program. (2) Incentive amount: The amount of the incentive will affect participant response and program costs. (3) Informing participants: Participants must be informed of the availability of incentives to take full advantage of a new incentive program. (4) Program monitoring and evaluation: Monitoring and evaluating the incentive program is critical to maintaining program integrity and determining the effects of the program. An incentive program could be implemented through either electronic or paper methods, and the different options would have implications for ease of implementation, program integrity, and cost. Electronic options include adding food benefits to the EBT cards currently used or to a separate card on the basis of the amount that participants spend on targeted foods. Providing incentives using existing EBT cards would build on the current checkout technology and process, and could require less time to complete transactions compared with using a separate card. However, delivering financial incentives to participants' EBT accounts on the basis of their purchases of certain foods would require several changes to the EBT system, such as modifications to retailer and EBT contractor software to separately track the amount spent on the targeted food items. Administering incentives using a separate card, such as an additional EBT card, may be more costly and complicated to implement. Alternatively, providing participants with paper vouchers for the purchase of targeted foods would not require changes to the EBT system, but could be more burdensome to use, increase fraud risk, and increase state administrative costs. With the new authority provided as part of the Food, Conservation, and Energy Act of 2008, FNS will have the opportunity to develop and administer a pilot incentive program and to determine both its effects on participant purchasing and consumption patterns and the costs associated with such a program.

section_title: Letter
paragraphs: The diets of many low-income individuals, like the U.S. population overall,  The diets of many low-income individuals, like the U.S. population overall,  do not meet federal dietary guidelines. The typical American diet includes  do not meet federal dietary guidelines. The typical American diet includes  higher-than-recommended intakes of fat, added sugars, and sodium and  higher-than-recommended intakes of fat, added sugars, and sodium and  lower-than-recommended servings of milk, whole grains, fruits, and  lower-than-recommended servings of milk, whole grains, fruits, and  vegetables. Poor eating habits can increase the risk of serious health  vegetables. Poor eating habits can increase the risk of serious health  problems, such as heart disease, cancer, stroke, diabetes, and  problems, such as heart disease, cancer, stroke, diabetes, and  hypertension. Changing food purchasing and consumption patterns,  hypertension. Changing food purchasing and consumption patterns,  therefore, might produce improvements in the nation’s health. The Food  therefore, might produce improvements in the nation’s health. The Food  Stamp Program (FSP), whose mission is to improve the nutrition of low- Stamp Program (FSP), whose mission is to improve the nutrition of low- income families, provides one possible vehicle for influencing dietary  income families, provides one possible vehicle for influencing dietary  patterns for large numbers of individuals. This program provided about  patterns for large numbers of individuals. This program provided about  $30.4 billion in food benefits to about 26.5 million individuals each month  $30.4 billion in food benefits to about 26.5 million individuals each month  during fiscal year 2007.  during fiscal year 2007.
The FSP is jointly administered by the U.S. Department of Agriculture’s  The FSP is jointly administered by the U.S. Department of Agriculture’s  (USDA) Food and Nutrition Service (FNS) and states. States generally  (USDA) Food and Nutrition Service (FNS) and states. States generally  administer the program from local offices where caseworkers determine  administer the program from local offices where caseworkers determine  whether households meet the program’s eligibility requirements, calculate  whether households meet the program’s eligibility requirements, calculate  monthly benefits for qualified households, and issue benefits through  monthly benefits for qualified households, and issue benefits through  Electronic Benefit Transfer (EBT) cards. These cards, similar to debit  Electronic Benefit Transfer (EBT) cards. These cards, similar to debit  cards, allow participants to purchase eligible foods at retail stores  cards, allow participants to purchase eligible foods at retail stores  authorized by FNS to accept FSP benefits. At the end of fiscal year 2007,  authorized by FNS to accept FSP benefits. At the end of fiscal year 2007,  about 165,000 retailers—ranging from large supermarkets to convenience  about 165,000 retailers—ranging from large supermarkets to convenience  stores and farmers’ markets—were authorized to accept FSP benefits. In  stores and farmers’ markets—were authorized to accept FSP benefits. In  addition to providing food assistance, states have the option to offer  addition to providing food assistance, states have the option to offer  federally funded nutrition education to FSP participants and eligible  federally funded nutrition education to FSP participants and eligible  nonparticipants. FNS also administers the Special Supplemental Nutrition  nonparticipants. FNS also administers the Special Supplemental Nutrition  Program for Women, Infants, and Children (WIC) through grants to the  Program for Women, Infants, and Children (WIC) through grants to the  states. Although benefits in this program are primarily delivered through a  states. Although benefits in this program are primarily delivered through a  paper-based voucher system, FNS has recently provided some states with  paper-based voucher system, FNS has recently provided some states with  funds to pilot an EBT system. The WIC program provides food, nutrition  funds to pilot an EBT system. The WIC program provides food, nutrition  education, and health care referrals to low-income pregnant and  education, and health care referrals to low-income pregnant and  postpartum women, infants, and children under aged 5 years who are  determined to be at nutritional risk. In fiscal year 2007, the WIC program  served an average of about 8.3 million women, infants, and children per  month, and federal program costs amounted to over $5.5 billion.
The Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill)  includes provisions authorizing USDA to fund pilot projects in the FSP to  assess whether healthier food purchases result from projects that provide  financial incentives, nutrition education, and improved access to healthy  foods, among other options. Given the variety of approaches available to  influence food purchases, you asked us to assess what is known about  their effectiveness in increasing purchases of targeted foods that could  contribute to a healthy diet. In addition, because the technical and  operational challenges of implementing a system of financial incentives at  the point of sale (POS) are largely unknown, you asked us to determine  the key factors to consider in designing such a program, options available  to implement financial incentives, and advantages and challenges involved  in their implementation. To address these issues, we examined the  following:  1.  What is known about the effectiveness of financial incentives and  other approaches intended to increase the purchase of targeted foods  that could contribute to a healthy diet?  2.  What are the key factors to consider in designing a program that  provides FSP participants with financial incentives to purchase certain  foods?  3.  What options are available to FNS for implementing financial  incentives, and what are the advantages and challenges involved in  implementing such options?
To identify recent studies that examine the effectiveness of nutrition  promotion approaches, we conducted a literature review and consulted  with USDA staff. We identified related studies published from January  2000 through February 2008 and conducted detailed reviews of 16 studies,  including reviews or summaries of original research from peer-reviewed  journals, published research from USDA’s Economic Research Service  (ERS), and studies of WIC farmers’ market programs. We reviewed each  study’s research methodology and determined that the studies were  reliable for the purposes of our work.
To understand the issues involved in designing a financial incentive  program, we interviewed representatives of stakeholder groups that would  be affected by implementation of an incentive program, including USDA  officials; officials from four states with WIC EBT experience (Ohio, Texas,  Washington, and Wyoming); officials from one state (California) that  passed legislation authorizing the provision of financial incentives to FSP  participants for purchasing targeted foods; three EBT contractors serving  almost all of the states; retailer associations and retailers representing  large chain and smaller independent grocery stores; food and nutrition  advocacy groups; and researchers. We also facilitated group discussions  about the options for delivering financial incentives and implementation  issues with state officials, retailers, and industry representatives at three  national conferences. To further explore financial incentive options and  implementation issues, we convened a panel of 17 experts representing  stakeholder groups that would be involved in implementing an incentive  program, including FNS, states, state EBT contractors, retailers, and  manufacturers of retailer checkout systems. Appendix I explains our  scope and methodology in more detail. We conducted this performance  audit from May 2007 through July 2008 in accordance with generally  accepted government auditing standards. Those standards require that we  plan and perform the audit to obtain sufficient, appropriate evidence to  provide a reasonable basis for our findings and conclusions based on our  audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives.
subsections: section_title: Background
paragraphs: The FSP is intended to help low-income individuals and families obtain a  more nutritious diet by supplementing their income with benefits to  purchase food. Most food items sold in grocery stores can be purchased  with FSP benefits, except for hot foods, tobacco products, and alcoholic  beverages. FNS pays the full cost of FSP benefits and shares the states’  administrative costs—with FNS usually paying approximately 50 percent.  FNS is responsible for promulgating program regulations and ensuring  that state officials administer the program in compliance with program  rules. States usually administer the program from local assistance offices  where staff determine whether households meet the program’s income  and asset requirements, calculate monthly benefits for qualified  households, and issue benefits to participants on an EBT card. The local  assistance offices often administer other benefit programs as well, such as  Temporary Assistance for Needy Families (TANF) and Medicaid.
subsections: section_title: Determination of Eligibility and Benefits
paragraphs: FSP eligibility is largely based on a household’s income and assets. To  determine a household’s eligibility, a caseworker first determines the  household’s gross income and net income. Gross income cannot exceed  130 percent of the federal poverty level for that year as determined by the  Department of Health and Human Services, and net income cannot exceed  100 percent of the federal poverty level (or about $20,652 annually for a  family of four living in the continental United States in fiscal year 2008).  Net income is determined by deducting a portion of specified expenses  from gross income, such as dependent care, medical needs, utilities, and  housing.
section_title: Use of Electronic Benefit Transfer Cards to Redeem FSP Benefits
paragraphs: Prior to EBT, participants used paper coupons to pay for allowable foods.  The Personal Responsibility and Work Opportunity Reconciliation Act of  1996 required each state agency to implement an EBT system to  electronically distribute FSP benefits. The last state completed its  implementation in fiscal year 2004. States are responsible for coordinating  and managing the EBT system in their state, but they generally award  contracts to private sector companies to develop and operate the system.  Under the EBT system, FSP participants receive an EBT card imprinted  with their name and account number. FSP benefits are automatically  credited to the participants’ accounts once a month. According to FNS,  more than half of the states use EBT cards to distribute benefits from  other federal programs, such as TANF cash assistance.
The EBT system uses magnetic strip EBT cards that work like commercial  debit cards and an online system where transactions are processed as they  occur. As shown in figure 1, to complete a FSP EBT purchase, the store  clerk totals the amount of eligible items on the cash register, and the  amount of the EBT purchase is entered into the retailer’s POS device. The  EBT card is then swiped through the POS device at the grocery checkout  counter, and the participant enters a PIN to access the account. POS  devices read the recipient identification information from the magnetic  strip on the back of the EBT card. That information, along with the total  amount of the EBT purchase, is sent to the state’s EBT contractor for  approval. Information about the items purchased is not transmitted  through the FSP EBT system. Electronically, the EBT contractor verifies  certain information and sends an authorization or denial back to the  retailer. The purchase amount is then subtracted from the participant’s  account balance and added to the retailer’s bank account through a  settlement process at the end of each business day. Retailers can also be  reimbursed for EBT purchases by using manual paper procedures if the  EBT system or an EBT card is inoperable or if the retailer does not have  access to telephone lines and electricity.
Retailers use different checkout systems to process EBT transactions.  Many large volume retailers have integrated checkout systems that  automatically identify and subtotal the FSP-eligible items when items are  scanned and display the EBT purchase amount on the POS device.  Retailers with scanning systems develop and maintain a computer file that  contains the prices associated with the Universal Product Codes (UPC)  and Price Look-Up (PLU) codes of the items sold in the store. The  computer file can be programmed to contain a FSP eligibility “flag”  associated with each item, which can help the retailer ensure that only  FSP-eligible items are purchased with EBT cards. Some retailers use  commercial POS equipment that can accept multiple payment types, such  as EBT, debit, and credit cards. Retailers that do not accept debit or credit  cards but average more than $100 in monthly FSP sales often have state- provided, stand-alone POS equipment that can only process EBT  transactions. These stand-alone devices are not integrated with the  retailer’s cash register system. Without a scanner and an integrated  checkout system, store clerks have to manually separate and subtotal the  eligible and ineligible items and manually enter the EBT purchase amount  in the POS device.
section_title: Characteristics of Authorized Retailers
paragraphs: FNS has the primary responsibility for authorizing and overseeing retailers  that accept FSP benefits. To become an authorized retailer, a store must  offer on a continuing basis a variety of foods in each of the four staple  food categories—meats, poultry, or fish; breads or cereals; vegetables or  fruits; and dairy products—or 50 percent of its sales must be in a staple  group, such as meat or bakery items. At the end of fiscal year 2007, about  165,000 retailers were authorized to accept FSP benefits. Large stores  redeem most of the FSP benefits, as shown in table 1. In fiscal year 2007,  supermarkets and superstores accounted for about 21 percent of the  authorized stores but redeemed about 85 percent of FSP benefits.
In addition to approving retailers to participate in the program, FNS  headquarters officials collect and monitor EBT transaction data to detect  suspicious patterns of transactions by retailers. As part of the monitoring  process, FNS collects each day’s FSP transaction data from the states’  EBT contractors and adds these data to its EBT transaction database for  analysis. Information on the amount of the transaction is reported.  Information on the items being purchased is not available through EBT.  The system scans these data to identify transactions or sets of transactions  that fit a certain set of criteria defined by established patterns of  fraudulent activity.
section_title: Adherence to Federal Dietary Guidelines
paragraphs: According to ERS, research has shown that the diets of most Americans  do not follow the pattern recommended by the 2005 Dietary Guidelines for  Americans and USDA’s MyPyramid. The federal dietary guidelines  describe a healthy diet as one that emphasizes fruits, vegetables, whole  grains, and fat-free or low-fat milk and milk products; that includes lean  meats, poultry, fish, beans, eggs, and nuts; and that is low in saturated fats,  trans fats, cholesterol, salt, and added sugars. Two cups of fruit   (4 servings) and 2½ cups of vegetables (5 servings) per day are  recommended for a reference 2,000-calorie intake, with higher or lower  amounts depending on the calorie level. The federal guidelines  recommend that total fat intake be between 20 percent and 35 percent of  daily calories, with most fats coming from sources of polyunsaturated and  monounsaturated fatty acids, such as fish, nuts, and vegetable oils.
As shown in figure 2, less than half of the U.S. population met specific  dietary guidelines for the consumption of many of the recommended food  groups and nutrients. A greater percentage of people in higher-income  households met recommendations for the consumption of certain food  groups and nutrients than did people living in lower-income households.  For example, 50 percent of those living in higher-income households met  the vegetable recommendations, compared with 42 percent in lower- income households.
Other research has examined how the diets of FSP participants compare  with the diets of low-income and higher-income individuals not  participating in the FSP. This research suggests that the diets of FSP  participants and income-eligible nonparticipants do not differ significantly.  An ERS-funded study found that FSP participants were more likely than  higher-income nonparticipants to have poor diets, on the basis of an  assessment of the intake of grains, vegetables, fruits, dairy, meats, fat,  cholesterol, and sodium as well as on the variety of foods consumed.
section_title: Nutrition Education
paragraphs: Nutrition education can be defined as any set of learning experiences  designed to facilitate the voluntary adoption of eating and other nutrition- related behaviors that are conducive to health and well-being. USDA, the  lead agency for the nation’s nutrition education efforts, funds and  administers a variety of nutrition education efforts. One program, the  Expanded Food and Nutrition Education Program (EFNEP), is specifically  designed to educate low-income families and youths about nutrition and  nutrition-related subjects. EFNEP is administered at the state level by  Cooperative Extension Service offices, which oversee the allocation of  federal EFNEP funds. In 2006, USDA reported that EFNEP delivered  nutrition education to 150,270 adults and 409,389 youths, and that 84  percent of the families served were at or below the federal poverty level.
While there is no legislative mandate for nutrition education, states can  provide nutrition education to FSP participants and eligible  nonparticipants, known as Food Stamp Nutrition Education (FSNE).  USDA reimburses states 50 percent of allowable nutrition education costs.  To provide nutrition education, the state agency administering the FSP  submits a state nutrition education plan. About one-half of the 93 agencies  implementing FSNE are affiliated with the Cooperative Extension Service,  which is the same entity that administers EFNEP. In 2007, 52 state  agencies had approved nutrition education plans for which more than $270  million in federal funds were approved.
section_title: Variety of Approaches Can Increase the Consumption of Targeted Foods
paragraphs: Recent research describes a variety of approaches to encourage healthy  eating habits, such as providing financial incentives and nutrition  education as well as improving access to targeted foods. Studies show that  financial incentives and nutrition education can increase the consumption  of targeted foods, although there is less reported research on financial  incentives. Little is known about the effectiveness of access approaches  due to a lack of reported research. Study limitations, including a lack of  data regarding cost and information on sustained effects, as well as  methodological differences among studies, make it difficult to compare  approaches or determine which approaches are the most effective.
subsections: section_title: Recent Research Describes a Variety of Approaches
paragraphs: A variety of approaches have been undertaken to increase the purchase  and consumption of targeted foods, and many combinations of approaches  have been studied. Financial incentives are used to make the purchase and  consumption of the targeted foods more affordable and appealing than  alternative food choices. Examples of financial incentives include  providing additional unrestricted food or cash benefits; providing targeted  financial incentives (e.g., price discounts at the POS, coupons or vouchers  for targeted foods, or financial rewards based on the adoption of the  desired behavior); or taxing foods on the basis of nutrient content.  Nutrition education approaches—including nutrition classes, counseling,  point-of-purchase information, and social marketing—attempt to increase  individual knowledge and skills (e.g., reading food labels and shopping) as  well as influence underlying food preferences. Access approaches focus  on increasing the availability of targeted foods or limiting the availability  of foods with low nutritional value. These approaches can vary by setting  (e.g., grocery stores, schools, workplaces, or communities); scope (e.g.,  individual or larger scale); target population (e.g., healthy or at risk of or  diagnosed with diet-related disease); and targeted foods.
The goal of these approaches is to influence one or more of the many  factors that affect adult food purchasing decisions, such as food prices,  household income, knowledge about food choices that contribute to a  healthy diet, and food availability. Taste and convenience also influence  food purchasing decisions. Figure 3 illustrates the theoretical effects of  these approaches on household food expenditures, eating habits, and  health.
section_title: Studies Show Financial Incentives and Nutrition Education Can Positively Affect the Consumption of Targeted Foods, but Little Is Known about Efforts to Improve Access
paragraphs: Several nutrition promotion studies have demonstrated positive effects on  the purchase or consumption of targeted foods. However, results vary and  changes in consumption patterns as a result of approaches may not be  substantial enough to meet federal dietary guidelines.
subsections: section_title: Financial Incentives
paragraphs: A review of research published as of April 2005 identified four studies of  financial incentive programs that were able to compare a group of  participants that received incentives with a similar group that did not in  order to identify program impact. All four studies demonstrated short-term  positive effects on the purchases of targeted foods, consumption, or  weight loss. The studies evaluated the provision of WIC farmers’ market  coupons, price discounts on low-fat items offered in school and work-site  vending machines, and payments contingent on weight loss. For example,  an evaluation of a Farmers’ Market Nutrition Program implemented in a  county in Michigan studied the following approaches with WIC and  Commodity Supplemental Food Program participants: education about the  use, storage, and nutritional value of fruits and vegetables; farmers’ market  coupons; both education and coupons; and no education or coupons. The  study found that after $20 in farmers’ market coupons were given to 564  low-income women, they self-reported a statistically significant increase in  fruit and vegetable consumption. This study also found that the maximum  impact of the intervention on attitudes about fruit and vegetable  consumption and intake was achieved through a combination of education  and coupons. Additional evidence from the WIC program suggests that  providing cash value vouchers for purchasing fruits and vegetables can  increase the consumption of these items. New York State found that 81  percent of the $5 checks that were provided to households with children  in the WIC program for the purchase of fruits and vegetables were  redeemed. Another study evaluated the effect of providing $10 vouchers  once a week for 6 months for fresh fruit and vegetable purchases at a  farmers’ market or supermarket. Participants in this study included 602  low-income women from the WIC program in Los Angeles. This study  found that participants increased their consumption of fruits and  vegetables and sustained the increase 6 months after the program ended.  The results of this study show that 90 percent of the coupons were  redeemed; farmers’ market participants showed an increase in the  consumption of 1.4 servings per 1,000 calories of consumed food, and  supermarket participants showed an increase of 0.8 servings per 1,000  calories of consumed food.
Economic research suggests that providing low-income households with  targeted financial incentives may be more effective at increasing fruit and  vegetable consumption than providing additional unrestricted cash or food  benefits. In a 2007 study, ERS estimated how spending on fruits and  vegetables by low-income households would change in response to  changes in the prices of fruits and vegetables, using statistical models and  data from the 1987-88 Nationwide Food Consumption Survey.  Specifically, ERS estimated that a 10 percent reduction in the price of  fruits and vegetables would result in increases in the amount purchased,  ranging from 6 percent to 7 percent, and would increase consumption by  the average FSP participant from 1.95 cups per day to an estimated 2.08  cups per day. A 20 percent reduction in price would raise consumption by  about ¼ cup, bringing total daily consumption up to 2.20 cups.
In contrast, another ERS study suggested that a modest increase in income  would not result in increased spending on fruits and vegetables in low- income households. ERS examined the relationship between increased  income, which could be spent on any food or nonfood item, and fruit and  vegetable expenditures in low-income households. This study found no  relationship between a 10 percent increase in income and expenditures on  fruits, vegetables, eggs, dairy products, or baked foods among low-income  households. However, ERS found a statistically significant relationship  between the additional income and expenditures for beef and frozen  entrees and other frozen prepared foods among low-income households,  possibly because of taste preferences and convenience.
California passed legislation in September 2006 authorizing the Healthy  Food Purchase Pilot Program, which includes the delivery of financial  incentives to FSP participants for purchases of fresh produce; however,  the pilot program has not been implemented. The pilot program aims to  increase access to fresh produce in selected low-income communities, in  part by adding a percentage of what FSP participants’ spend on fresh  produce back to their EBT accounts. The law requires the state agency to  consult with USDA’s ERS to design the pilot evaluation. The state  convened a workgroup made up of state and local health and FSP  administrators, information systems staff, retailers, and advocacy  organizations to begin discussions about the pilot. However, the California  state legislature did not provide funding as part of the legislation, and  implementation is on hold until funding is made available.
section_title: Nutrition Education
paragraphs: A review of 92 studies analyzed the results of nutrition education  approaches, including individual counseling; support groups; and classes  provided in school-based, work-site, community, and health care settings.  The review compared the results of studies that used similar outcome  measures and found that most studies reported that the approaches had  statistically significant effects on consumption, as shown in figure 4. For  example, more than three quarters of the studies reporting changes in fruit  and vegetable consumption (17 of 22) found significant increases in the  consumption of these foods, with an average increase of 0.6 servings per  day. Similarly, 86 percent of the studies reporting results for total fat and  87 percent of the studies reporting results for saturated fat found that the  approaches had a significant effect in reducing fat consumption. Of the  studies reporting results for total fat, groups receiving nutrition education  decreased fat intake more than groups that did not receive nutrition  education, representing an average decrease of 7.3 percent of daily  calories from fat. According to this review, approaches may be more  effective if educators help participants set goals and involve small groups  of participants.
Another review of 15 community-based nutrition education studies found  that increased fruit and vegetable consumption was reported in many  studies. According to the authors, the most effective approaches gave  clear messages, incorporated multiple strategies that reinforced the  messages, involved the family, were more intensive (e.g., multiple contacts  and multiple components) and provided over a longer period, and were  based on a theoretical framework. Another review of 44 nutrition  education studies suggested that small increases in the consumption of  fruits and vegetables can be achieved in a variety of ways. This review  found that fruit and vegetable consumption increased when participants  were provided with face-to-face education or counseling. Less intense  approaches, such as telephone contacts and computer-generated  information tailored to the participant, can also be effective. Increases in  fruit and vegetable consumption ranged from 0.1 to 1.4 servings per day in  approaches used for healthy adults. Nutrition education approaches  appeared to be more successful at positively changing dietary behavior  among populations at risk of or diagnosed with disease than among  general, healthy populations, according to two study reviews. According  to the study reviews, these approaches may be more successful because  (1) higher-risk individuals are more motivated to change and (2)  approaches with higher-risk populations, such as those offered in health  care settings, may be more intense than approaches used with lower-risk  populations in community, workplace, or school settings.
Providing nutrition information at the point of purchase—such as posters,  brochures, and shelf and food labels—is another nutrition education  approach that can positively affect food purchasing behavior, although the  results from reported research on this approach are mixed. In another  review of eight studies that used only information strategies (e.g., labels  and signs) to promote targeted items in a grocery store setting, five studies  reported increased sales of some of the targeted items. The grocery store  intervention studies that showed the greatest changes in behavior lasted  for 2 years, involved a large supermarket chain, and involved multiple  components. One of the studies reviewed found significant increases in  the sales of low-calorie or reduced-calorie foods after a 2-year effort  involving shelf labeling, pamphlets, and advertisements on television and  radio and in newspapers. The authors of this review concluded that  nutrition information approaches and financial incentives appear to be  more successful in settings where food choices are limited, such as  workplace cafeterias or school settings, rather than in grocery stores.  Food labels may also have an effect on dietary intake. In a study  estimating the effect of the Nutrition Labeling and Education Act of 1990,  which took effect in 1994 and made nutrition labeling mandatory for most  processed foods, researchers found that the new labels were associated  with a decrease in body weight and the probability of obesity among   non-Hispanic white women. The new labels were not associated with a  statistically significant decrease in body weight or the probability of  obesity among other groups of women or among men.
section_title: Access
paragraphs: We did not identify any recent studies evaluating the effects of approaches  designed to improve access to targeted foods, but there have been efforts  to address the availability of foods that contribute to a healthy diet.  California’s Healthy Food Purchase Pilot Program, which was not funded,  included proposed assistance for retailers to obtain refrigerated produce  display cases and technical assistance on the purchase, storage,  marketing, and display of fresh produce. The FSP authorizes farmers’  markets to accept FSP benefits, an approach that may increase the  availability of fresh fruits and vegetables. In 2007, 532 authorized farmers’  markets redeemed $1.6 million in FSP benefits, according to FNS.
Another access strategy that has been proposed but not implemented or  evaluated is to prohibit FSP participants from using their benefits to buy  foods with limited nutritional value. This strategy would require an FNS- approved waiver of FSP regulations. For example, Minnesota proposed  prohibiting the purchase of candy and soft drinks with FSP benefits. While  this strategy has not been implemented, FNS and ERS reports have  described several challenges to implementing this idea. For example,  FNS reported that food restrictions would increase program complexity  and cost, since either FNS or food manufacturers and producers would  need to assess and certify a large number of food products that meet new  federal standards. ERS reported that restricting purchases of “unhealthful”  foods and beverages may not be a promising strategy for dietary  improvement, in part because FSP participants may use their own money  to buy prohibited items or substitute the prohibited foods for other foods  similar to the prohibited items.
section_title: Lack of Information on Costs and Sustained Effects and Methodological Differences among Studies Make It Difficult to Identify the Most Effective Approaches
paragraphs: The studies reviewed provided little information about the cost or  sustainability of the nutrition promotion approaches. Five reviews of  studies found that cost information, such as total costs, cost per  participant, and the cost-effectiveness of the approach, was not reported.  In addition, few approaches were shown to be effective over a sustained  period of time, such as a year or more. For example, one review of studies  found that many approaches last only a few weeks, and studies have short  durations, which prevents researchers from identifying long-term effects.
The studies reviewed were designed differently, and they often used  different outcome measures to evaluate effects, thereby making it difficult  to compare the results of the approaches. For example, not all studies  used a control group to compare individuals receiving the intervention  with similar individuals who did not. Although measures of changes during  and after an intervention provide useful insights, without a control group  that does not participate in the intervention, it is difficult to directly  attribute any changes the researchers observed to the intervention. In  addition, three reviews of studies found that various outcome measures  were used, which prevented study comparisons and conclusions about the  most effective approaches. For example, one review found that studies  used various self-reported dietary assessment tools or sales data to  measure changes in consumption. A lack of standardized outcome data  has also been identified as a barrier to evaluating the effectiveness of  nutrition education activities, according to ERS. One review of studies that  was able to compare study results found that the dissimilarity across  studies was a major barrier to drawing comparisons and reaching broad  conclusions about the effectiveness of approaches.
The 2008 Farm Bill authorizes funding for pilot projects to evaluate health  and nutrition promotion in the FSP. The pilot projects may include  increased benefit allotments to participating households, increased access  to farmers markets, incentives for authorized retailers to increase the  availability of healthy foods, stricter retailer requirements to stock healthy  foods, incentives at the point of purchase for targeted foods, and select  school-based nutrition education strategies. All pilot projects require an  independent evaluation using rigorous methodologies, particularly random  assignment or other methods that are capable of producing scientifically  valid information regarding which activities are effective.
section_title: Factors to Consider Include the Selection of Targeted Foods, Incentive Amount, Participant Education, and Monitoring and Evaluation
paragraphs: There are several factors that must be taken into consideration in  designing a program that provides financial incentives for the purchase of  targeted foods in the FSP. These factors include the selection of foods to  target for promotion, the incentive amount, how participants would be  informed of the new benefit, and how the program would be monitored  and evaluated.
subsections: section_title: Selection of Foods to Promote Could Be Controversial and Challenging
paragraphs: Selecting the foods an incentive program is designed to promote could be  controversial. Various interests—such as food manufacturers,  nutritionists, participant advocacy groups, and states—may have differing  opinions about which foods should be targeted for promotion and which  should be excluded. Food manufacturers may want the targeted foods to  include a wide variety of products because they could see financial gain,  nutritionists may not agree on which foods are the healthiest, and  advocacy groups may not want FSP participants to be restricted in their  food choices. States may also advocate for locally grown or produced  foods to be targeted for promotion.
Developing a list of individual food items that either meet certain  nutritional criteria or contain a particular ingredient, such as whole grains,  would be challenging because the nutritive content of thousands of food  items would need to be evaluated to identify the eligible items. For  example, if low-fat items were targeted, retailers would need to identify  each of the items sold in their stores that meet that criteria. Similarly,  targeting all foods that contain whole grains may be difficult, given the  variety of foods that have whole grains as ingredients.
Expert panelists and many stakeholders we interviewed agreed that  providing incentives for a general food category that is relatively easy to  identify—such as fruits and vegetables—would be easier for participants  and retailers, rather than identifying and selecting specific items on a list.  However, using a general food category could allow some foods with less  nutritive value to be included in that category. For example, the nutritive  value of fruits and vegetables varies extensively from one to the other.  Offering incentives for purchasing all fruits and vegetables would include  frozen or canned items that may contain added sugar or salt, thereby  making them less healthy.
In addition, availability of the targeted foods may be limited in some areas,  depending on the foods selected. Some stakeholders we interviewed said  small retailers serving large urban areas may not stock certain foods, such  as fresh produce. State officials we interviewed commented that if fruits  and vegetables were the targeted foods, they should be eligible in any  form—canned, frozen, and fresh—because fresh produce may not be  equally available throughout the year or throughout the country.
section_title: Amount of the Incentive Will Affect Participant Response and Program Costs
paragraphs: Although financial incentives could take many forms, the amount would  need to be large enough to motivate FSP participants to change their  purchasing patterns by buying more of the targeted foods. The optimal  value of an incentive to increase purchases of targeted foods is not known  at this time, but as we have previously noted, ERS estimated in a study  that a 10 percent reduction in the price of fruits and vegetables would  result in a modest increase in fruit and vegetable consumption by the  average FSP participant, and that a 20 percent price reduction would have  a slightly larger effect. California proposed providing a larger incentive as  part of its Healthy Food Purchase Pilot Program, pending the availability  of state funds, equal to 30 percent or 40 percent of the amount that  participants spend for fresh produce.
The amount of the incentive would also affect the cost of the program.  ERS estimated that with a FSP caseload of 25.7 million participants at the  time of the study, the annual cost of a 10 percent price reduction would  range from $300 million, if the price reduction was restricted to fresh  produce, to $500 million, if all fruits and vegetables were discounted. The  cost of a financial incentive program could be contained somewhat by  setting a limit on the amount of targeted food purchases that would be  eligible for the incentive. The ERS study did not estimate how much of the  targeted foods participants would buy if there were a limit on the amount  of fruit and vegetable purchases that would be discounted. Depending on  the amount of funding available for such a program, policymakers may  have to choose between offering a small and potentially ineffective  incentive to a greater number of participants and offering a more  substantial incentive to a smaller number of participants.
section_title: Informing Participants Could Add to Caseworker and Nutrition Educator Responsibilities
paragraphs: To motivate participants to change their purchasing habits in response to  financial incentives, participants must first be informed of the availability  of incentives. Informing participants may increase the workload of the  local assistance offices. Caseworkers from local assistance offices could  inform new FSP participants when they apply for benefits and inform  existing participants when they visit the office to reapply for benefits.  Providing information through the mail is one way to advertise the  incentive to existing participants; however, processes would need to be in  place to correct home addresses if mail is returned. Information could also  be posted on FNS and state FSP Web sites. Other marketing options  include advertising in print, broadcast, and electronic mediums. Another  marketing idea, suggested by a few retailers, is to use shelf tags to identify  the targeted foods. However, use of this strategy would vary by retailer.
Educating participants on the nutrition and health benefits of buying more  of the targeted foods could enhance the effectiveness of financial  incentives, according to some research and stakeholders. An evaluation of  the effects of providing WIC participants with farmers’ market coupons  found that those who received both coupons and nutrition education  showed the greatest changes in attitudes about fruit and vegetable  consumption and intake. Expert panelists said that having an education  component is crucial to the success of an incentive program. In addition, a  retailer we interviewed emphasized that if the goal of this program is to  change purchasing patterns, participants need to understand why the  program is important to their families and their health. Officials from one  state also suggested it would be helpful to provide nutrition education  activities, such as food demonstrations, healthy recipe books, cooking  classes, and giveaways (e.g., cooking utensils). However, the FSNE  program does not currently reach all FSP participants. Educating all FSP  participants would be challenging and would likely increase the workload  of nutrition educators.
section_title: Decisions about Program Monitoring and Evaluation Would Affect USDA’s Ability to Protect Program Integrity and Determine the Effect of Incentives on Participant Food Choices
paragraphs: Program monitoring of day-to-day activities would be necessary to ensure  that providing financial incentives for targeted foods to FSP participants  does not erode program integrity. According to FNS officials, any new  incentive program would pose an increased risk of fraud. For example, a  FSP participant and retailer could agree to fraudulently claim that the  participant spent a certain amount of their EBT benefits on the targeted  foods. In this scenario, the retailer would ring up the targeted food  purchases, the participant would swipe their EBT card for the purchase  amount, and the retailer would give the participant a portion of the  purchase amount in cash and pocket the difference. FNS officials  suggested that limiting the amount of targeted food purchases that would  trigger the incentive may reduce the risk of fraud and the cost of the  incentive program (e.g., participants can receive incentives for purchasing  up to $50 of the targeted foods per month). FNS indicated that it would  need to incorporate any new program into its existing oversight activities  by monitoring the total amount spent on the targeted foods and developing  criteria to flag suspicious transactions. Since individual food purchases  cannot be monitored through the existing FSP EBT system and USDA has  a limited number of fraud investigators nationwide, any additional  oversight responsibility would create a new challenge, according to FNS  officials.
Piloting the program prior to full implementation and evaluating the  impact of the program are important steps to determining its  effectiveness. Two important considerations in evaluating a financial  incentive program are the research design and how results would be  measured.
Research design: Ideally, impact evaluations allow a reasonable  comparison of a participant group that received the financial incentives  with a similar group that did not receive the incentives to accurately gauge  the effect of the intervention. Appropriate sample sizes would need to be  determined to allow meaningful comparisons of these two groups.  However, alternative research designs could be used if randomly assigning  participants to comparison groups is not possible. For example,  researchers could use statistical techniques to isolate the effect of  financial incentives from other factors that affect purchasing behavior.
One expert panelist commented that isolating the impact of this price  change from other store promotions may be difficult given the many  factors involved. Any research design would have to take into account an  appropriate time frame for the pilot, allowing time for retailers to change  their operations to be able to implement the pilot and for participants to  change their purchasing habits in response to the incentives. In light of  these concerns, when ERS was consulted by California on its proposed  pilot, ERS suggested that the evaluation include a before-and-after review  of the purchases made by participants and nonparticipants, and that pilot  counties be randomly selected.
Measuring results: Researchers could measure changes in participants’  food purchases, consumption, or health outcomes to determine the effects  of a financial incentive program. Measuring health outcomes would  require tracking participants over an extended period. California’s  legislation authorizing a pilot incentive program requires researchers to  assess whether the pilot program resulted in FSP participants’ increased  purchases of fresh fruits and vegetables. FNS officials suggested that a  study could compare FSP participants’ purchases with federal dietary  guideline recommendations before and after an incentive program was  piloted. If the purpose of the program were to encourage a diet that meets  federal dietary guidelines and improves the health of participants, the  effect on participant’s consumption and health could also be examined.
Options for measuring changes in food purchasing behavior include  collecting participant-reported information or collecting food purchase  records from retailers. Understanding whether participants increased  their purchases of targeted foods would require gathering information on  how the participants spent their entire food budget, since participants may  pay for food several ways (e.g., cash, TANF cash benefits, EBT, or credit  cards) and shop at multiple stores. Researchers would need this  information to know if more targeted foods were being purchased or if  participants were substituting the new targeted benefits for money they  were already spending on those foods. Gathering this information may be  challenging, depending on how the financial incentives are delivered. For  example, FNS officials said one disadvantage of using paper vouchers is  that the redeemed vouchers may not be linked to the rest of the family’s  purchases or household demographic information. Using participant- reported information on purchases to measure effectiveness can be  problematic if participants cannot recall the information or if they  otherwise misreport purchases. Using purchase data to analyze changes in  purchases would be more accurate but could be difficult to collect and  analyze. For example, collecting purchase data would likely require  researchers to enter into data-sharing agreements with multiple retailers,  which would need to include provisions to protect participants’ privacy.  Data would need to be collected from multiple retailers on all of the food  items purchased by participants using all payment types. Also, food  purchases may not accurately reflect consumption.
section_title: Financial Incentives Could Be Implemented Electronically or Using Paper Methods, but Each Option Has Potential Implications for Ease of Implementation, Program Integrity, and Cost
paragraphs: An incentive program—delivered in the form of an additional FSP  allotment tied to the purchase of certain foods targeted for promotion— could be implemented through electronic or paper methods, and each of  the options would have implications for ease of implementation, program  integrity, and cost. Electronic options include providing additional FSP  benefits to the EBT cards currently used by FSP participants or to a  separate card on the basis of the amount participants spend on the foods  targeted for promotion. Alternatively, paper options for delivering  incentives include providing vouchers to be spent on the targeted foods or  coupons that would discount the prices of those foods.
subsections: section_title: Electronic Delivery of Incentives to Existing EBT Cards May Be Easy for Participants to Use, but Would Require Several Changes to the EBT System
paragraphs: Incentives provided electronically by using existing EBT cards would build  on the current checkout technology and process, may not require as much  time to check out as using a separate card, and could minimize the risk of  fraud. Online EBT for processing FSP transactions is operational  nationwide and national standards have been developed to promote  consistent transaction processing and allow interoperability, which means  that participants may use their EBT cards at any FNS-authorized retailer in  any state. According to expert panelists, financial incentives could be  added to existing EBT cards without requiring an additional card swipe  and PIN entry, thereby minimizing checkout time. Providing incentives  electronically on EBT cards could also minimize fraud risk by requiring  entry of a PIN to complete transactions.
Expert panelists preferred this option and cited its advantages in ease of  use for participants and program integrity. With this option, the retailer  would electronically or manually separate and subtotal the targeted food  purchases and the purchases of other eligible items, and the participant  would swipe the EBT card and enter the PIN once into the POS device, as  shown in figure 5. The purchase amount of the targeted foods and the  purchase amount of other FSP-eligible items would be communicated to  the EBT contractor who would calculate the financial incentive amount  and either immediately add it to the participant’s EBT account or  periodically add to the account after the purchase, such as at the end of  each business day. Participants could leave the store with a receipt  showing the amount of the financial incentive they just received or can  expect to receive.
This method may be relatively easy for a participant to use, but expert  panelists agreed that their preferred option would be a significant  undertaking and would require several changes to the EBT system, as  described in the following text:  Identifying purchases of targeted foods: To identify and subtotal  purchases of the targeted foods at the POS, retailers with scanning  systems would need to update the software used on their electronic cash  registers to include an additional field that would flag particular items as  the targeted foods eligible for incentives. Programming the additional field  would enable the cash register system to automatically ring up and  subtotal the targeted food purchase when the items’ product codes are  scanned. Maintaining an updated list of the eligible items could be  challenging because UPC and PLU codes can change when new products  are added or certain foods are included in special promotions. Also, fresh  produce vendors use varying PLU codes for the same fruits and  vegetables. Smaller retailers without scanning technology and a  computerized price file system would need to manually sort out and  subtotal up to three piles of food: one for the targeted foods that are  eligible for the incentive, one for other FSP-eligible items, and one for   non-FSP-eligible items.
Successfully implementing an incentive program depends in part on the  level of guidance retailers receive regarding foods that qualify for the  incentives. Generally, there are two ways that retailers could identify  which foods sold in their stores are the targeted foods eligible for  incentives: that is, (1) FNS or states could develop a detailed list of the  targeted foods and associated product codes or (2) FNS or states could  provide a broad definition of the targeted foods and retailers could decide  which of the foods in their stores would qualify. Retailer representatives  and state officials we interviewed preferred that the foods eligible for  incentives be defined at the federal level to assist retailers operating in  multiple states and to minimize the burden on states. Retailer  representatives on the expert panel said it would help retailers implement  the program if FNS provided a detailed list of the targeted foods and  associated product codes. However, FNS officials on the panel said FNS  lacks the resources to develop and maintain a detailed list and would  prefer to provide a more general definition of the foods targeted for  promotion.
Tracking purchases of targeted foods: The total amount spent on the  targeted foods must be tracked separately from other purchases to  calculate and apply the incentives to participants’ EBT accounts. To  process the transactions, expert panelists agreed that the total amount  spent on the targeted foods should be communicated through the EBT  system, rather than requiring retailers to complete additional reporting. A  few retailers commented that any ongoing reporting on individual  purchases in addition to the reporting that takes place during EBT  transactions at the POS would be burdensome, especially for smaller  retailers that may not have detailed accounting procedures. Tracking the  total amount spent on the targeted foods separately from other FSP- eligible items would require software modifications to retailers’ POS  devices.
Calculating and applying the incentive: To apply incentives to  participants’ EBT accounts, EBT contractors would need to develop  software for calculating and applying the incentives and to modify their  software to include a new transaction type that tracks the amount spent  on the targeted foods. The interface between the EBT contractors’ systems  and state information systems that contain benefit issuance data may need  to be modified. EBT contractors would also need to modify their retailer  and participant complaint processes, modify automated telephone  systems, and train customer service representatives to support the new  benefit.
Modifying and updating the retailer cash register systems and POS devices  could be challenging with different types of equipment and varying levels  of technical support. Smaller independent grocery stores that install and  maintain their own equipment may face significant challenges in making  technical changes if they do not have ongoing technical support. Some  smaller retailers with outdated equipment may need new equipment to use  updated software. However, supermarkets, which account for about   85 percent of FSP redemptions nationwide, may not experience as much  difficulty in modifying their systems because of in-house information  technology support. Table 2 summarizes the changes that would need to  be made by each affected group to implement the option preferred by  expert panelists. Some stakeholders, such as third-party processors that  help process EBT transactions, may also need to make operational  changes to implement this option. This broad list of required changes  points to the types of costs involved in developing an incentive program.  Expert panelists did not provide information on how much it would cost  to implement these changes because the costs would vary, depending on  the many program design decisions that would need to be made; however,  the costs could be significant. FNS officials said that they believe this  option may be more costly to implement than a paper voucher system.
section_title: Incentives Could Be Delivered Electronically to Separate Cards, but Implementation Could Add Cost and Complexity
paragraphs: Several types of cards separate from participants’ existing EBT cards  could be used to deliver financial incentives. Two alternatives include  issuing participants a new magnetic strip or smart EBT card that would be  used for purchases of the targeted foods. Under this type of system, a  FSP participant would receive additional benefits in a new targeted foods  account and be issued a new card to access the benefits. At check out, the  participant would swipe the new card and enter a PIN to purchase the  targeted foods and swipe their existing EBT card and enter that PIN for  the other FSP-eligible items. An amount equal to a percentage of what a  participant spends on the targeted foods could be added to a targeted food  account, as shown in figure 6.
A few stakeholders we interviewed suggested using smart cards to deliver  incentives because these cards have the capacity to record and track  purchases of individual items, which would be useful for monitoring and  evaluation purposes. The computer chip on the smart card could contain  the product codes of the specific targeted items. The grocery store clerk  would scan the items at check out, and the system could match each  item’s product code to a list of approved targeted food product codes. This  system would help ensure that only authorized food items are purchased  and receive the financial incentives. The smart card transaction would  require participants to enter a PIN, and the card could calculate and apply  the incentive amount.
Using separate cards to deliver incentives would be a more costly and  complicated option than using existing EBT cards, according to expert  panelists and some stakeholders we interviewed. State administrative  costs could increase to purchase and replace the new cards, particularly  smart cards, which cost more than magnetic strip EBT cards. Using a  separate magnetic strip EBT card would require the same technical  changes as using existing EBT cards; however, using smart cards would  require greater changes to the EBT system. Currently, only the total  amount spent on FSP-eligible items is tracked through the EBT system.  Changing the FSP EBT system to one that communicates information on  the individual items purchased would require significant and costly  modifications to retailer and EBT contractor information systems. In  addition, using a separate card may be more complicated for participants  and grocery store clerks to implement and add time at the register to  process the additional transactions, according to some stakeholders we  interviewed.
section_title: Paper Delivery of Incentives Would Not Require Changes to the EBT System, but Could Increase State Administrative Costs and Fraud Risk
paragraphs: Delivering incentives using paper methods, such as vouchers or coupons,  may be easier and less costly for some retailers to pilot because these  methods would not require changes to the EBT system, according to a few  of the retailers we interviewed. For example, one retailer suggested that  the state provide participants with paper coupons that would discount the  prices of certain foods because it would eliminate the need for retailers to  modify their checkout systems, and retailers could use a system similar to  the current process for redeeming manufacturers’ coupons. A retailer  representative that works with small grocery stores suggested that the  easiest and least expensive method to pilot an incentive program would be  for the state to provide participants with the coupons and reimburse  retailers when the coupons are redeemed, since none of the EBT-related  systems would need to be changed. Figure 7 illustrates one way that  financial incentives could be delivered using paper vouchers. In this  example, participants are provided with paper vouchers valued at $10,  which are to be spent on the targeted foods, rather than with a bonus that  is based on the amount spent on the targeted foods.
Paper vouchers have been used successfully to facilitate the purchase of  fruits and vegetables in other programs. FNS’s farmers’ market programs  and the WIC fruit and vegetable pilot program provided paper vouchers to  WIC participants and elderly individuals so that they could purchase fruits  and vegetables. For example, California piloted a program that provided  vouchers for fruit and vegetable purchases for low-income women  participating in the WIC program. A study evaluating the California WIC  fruit and vegetable pilot reported that low-income women used the  supplement almost fully and purchased a wide variety of fresh fruits and  vegetables with the vouchers. Stakeholders we interviewed also identified  projects funded with nonfederal dollars that provide supplemental  coupons to FSP participants to encourage them to purchase fresh produce  at farmers markets. For example, New York City’s Department of Health  and Mental Hygiene is partnering with farmers’ markets to distribute  Health Bucks—$2 coupons for fresh produce—to EBT customers who  spend $5 in local produce at the markets.
However, there are potential disadvantages to using paper methods to  deliver incentives. Participants might find paper options more burdensome  because they cannot carry over balances and may have to spend the entire  amount of the voucher in one shopping trip. In addition, participants may  not use the financial incentives if they perceive that a stigma is associated  with using paper vouchers at the grocery store. Although paper methods  would spare retailers from making software modifications, some of the  burden would be shifted to states to develop systems to collect the  coupons and reimburse retailers, which could increase state  administrative costs. Although any incentive program could affect fraud  risk, expert panelists and stakeholders we interviewed said paper options  could increase the risk of fraud because coupons can be exchanged for  cash or used by ineligible individuals more easily.
section_title: Concluding Observations
paragraphs: Changing individuals’ eating habits is difficult, given the many factors that  influence food choices. However, the pilot projects authorized in the  recent Farm Bill provide FNS with a unique opportunity to test whether  financial incentives would help low-income Americans purchase and  consume more of the foods that contribute to a healthy diet. Although  research has found that financial incentives and nutrition education both  show promise, not enough is known about the costs and long-term  effectiveness of these approaches, either alone or in combination.  Moreover, the financial incentives studied included coupons. Incentives  using the current EBT technology, although technically feasible, are  largely untested at this point. Also, the success of efforts to improve  dietary intake may hinge in part on the availability of targeted foods,  which may be limited in certain areas, such as small stores in large urban  areas. Little is known about efforts to increase access to healthy foods.  Only by testing these approaches, either alone or in combination, can the  costs of such a program be estimated. Depending on the approaches  selected for testing, estimates would need to include the costs of  developing and administering the program, changing retailer checkout  systems, training employees, educating participants, and providing  increased benefit amounts. Program outcomes, such as changes to  participant purchasing and consumption patterns, will also be challenging  to assess and will not be useful unless similar outcome measures are  developed that can be used across different projects to allow comparison.  Evaluating the long-term effect of the changes on the health of program  participants will likely prove to be even more difficult to assess. However,  given the evidence linking poor nutrition to adverse health outcomes,  finding cost-effective approaches to improve nutritional intake is  important. Unless careful attention is paid to estimating both program and  administrative costs as well as the effects, Congress and USDA will not  have the information required to judge whether the benefits outweigh the  costs.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the U.S. Department of Agriculture  for review and comment. On June 20, 2008, we met with FNS officials and  an ERS official to obtain their comments. In general, the officials agreed  with our findings and concluding observations. However, the officials  made some suggestions to enhance and clarify our report findings, which  we incorporated. First, FNS officials suggested that we further emphasize  the potential for fraud inherent in a financial incentive program and the  challenge FNS believes it would face in incorporating any additional  oversight responsibilities. FNS officials believe that any new incentive  program that involves the issuance of an additional benefit once targeted  foods are purchased would open up a new avenue for food stamp  trafficking. Second, FNS officials believe that the preferred option for  delivering financial incentives through the EBT system would be costly to  implement, perhaps even more costly than a paper voucher system. We  believe that each option for delivering the incentive would have cost  implications; however, without piloting such a program, it is not clear  which delivery method would be most costly. Third, FNS officials  suggested that we incorporate additional references to FNS reports that  directly relate to the topic of our report. Finally, FNS officials suggested  we incorporate full information about the assumptions and limitations of  ERS estimates of the cost of delivering financial incentives to FSP  participants on the basis of their purchases of fruits and vegetables. FNS  officials identified the following issues that may affect the accuracy of the  estimates: the age of the data, assumptions about participants’ purchasing  decisions, recent increases in food prices, continuing increases in FSP  participation, and whether the program would affect FSP participation. We  acknowledged the limitations of the ERS estimates in the report. FNS also  provided us with technical comments, which we incorporated where  appropriate.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Agriculture, and other interested parties. We  will also make copies available to others upon request. In addition, the  report will be available at no charge on GAO’s Web site at  http://www.gao.gov.
If you or your staff have any questions regarding this report, please  contact me at (202) 512-7215 or brownke@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributors to this  report are listed in appendix II.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of this report were to identify (1) what is known about the  effectiveness of financial incentives and other approaches intended to  increase purchases of targeted foods that could contribute to a healthy  diet; (2) the key factors to consider in designing a program that provides  Food Stamp Program (FSP) participants with financial incentives to  purchase certain foods; and (3) options available to the U.S. Department  of Agriculture’s (USDA) Food and Nutrition Service (FNS) for  implementing financial incentives, and the advantages and challenges  involved in implementing such options.
To address the first objective, we searched relevant databases, such as  ProQuest, National Technical Information Service, Wilson Social Science  Abstracts, and Sociological Abstracts. We also consulted with USDA’s  Economic Research Service (ERS) and FNS staff. We limited the scope of  our work by looking at studies published since 2000. Through this process,  we identified more than 100 studies published from January 2000 through  February 2008. We further narrowed the scope of our work to those  findings from studies published as reviews or summaries of original  research, ERS-published research, and studies of Special Supplemental  Nutrition Program for Women, Infants, and Children (WIC) farmers’  market programs. We conducted detailed reviews of the 16 studies that  met these criteria. Therefore, our results are not an exhaustive or  historical treatment of the topic. The studies reviewed included both  randomized controlled trials and nonrandomized controlled trials. Our  reviews entailed an assessment of each study’s research methodology,  including its data quality, research design, and analytic techniques, as well  as a summary of each study’s major findings and conclusions. We also  assessed the extent to which each study’s data and methods support its  findings and conclusions.
To address the second and third objectives, we interviewed  representatives of stakeholder groups that would be affected by  implementation of an incentive program, including USDA officials;  officials from four states with WIC Electronic Benefit Transfer (EBT)  (Ohio, Texas, Washington, and Wyoming); officials from one state  (California) that passed legislation authorizing the provision of financial  incentives to FSP participants for purchasing targeted foods; the three  EBT contractors serving almost all of the states; retailer associations and  retailers representing large chain and smaller independent grocery stores;  food and nutrition advocacy groups; and researchers. We also facilitated  group discussions about the options for delivering incentives and  implementation issues with state officials, retailers, and industry  representatives at three national conferences.
To further explore targeted food incentive options and implementation  issues, we convened a panel of 17 experts representing USDA, states,  retailers, EBT contractors, and manufacturers of retailer check out  systems. On November 6, 2007, we held a half-day meeting with these  panelists at our headquarters office in Washington, D.C. Before the day of  the meeting, we provided each panel member with a set of discussion  questions that covered specific topics, including the definition of foods  targeted for promotion, incentive delivery options, tracking purchases,  applying the incentive, and monitoring and evaluation. Each panelist was  provided with time to respond to each question and discuss the impact of  other panelists’ responses on the panelist’s stakeholder group interests.  We transcribed responses and made verifications to ensure that we had  accurately captured panel member statements. We identified the panelists  through external parties who work on the issues covered in this report. We  selected individuals who represent the different stakeholder groups that  would likely be involved in developing a targeted foods incentive program  for the FSP, if such a program was initiated. The panel included  representatives from USDA; two states (Maryland and Washington); four  retailers or retailer associations (Krasdale Foods, Kroger, National  Grocers Association, and Safeway); the three EBT contractors serving  almost all states (Affiliated Computer Systems, eFunds, and  JPMorganChase); and three other industry representatives (Electronic  Funds Transfer Association, IBM, and Verifone).
We conducted this performance audit from May 2007 through July 2008 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, individuals making key  contributions to this report include Kathy Larin (Assistant Director),  Susannah Compton, Neil Doherty, Kevin Jackson, Avani Locke, Ashley  McCall, Luann Moy, Andrew Nelson, Susan Offutt, Barbara Oliver, Scott  Pettis, Cathy Roark, Max Sawicky, Daniel Schwimer, Jay Smale, Rosemary  Torres-Lerma, and Kate van Gelder.
section_title: Related GAO Products
paragraphs: Electronic Payments: Many Programs Electronically Disburse Federal  Benefits, and More Outreach Could Increase Use. GAO-08-645.  Washington, D.C.: June 23, 2008.
Food Stamp Program: Use of Alternative Methods to Apply for and  Maintain Benefits Could Be Enhanced by Additional Evaluation and  Information on Promising Practices. GAO-07-573. Washington, D.C.:   May 3, 2007.
Food Stamp Program: FNS Could Improve Guidance and Monitoring to  Help Ensure Appropriate Use of Noncash Categorical Eligibility.   GAO-07-465. Washington, D.C.: March 28, 2007.
Food Stamp Program: Payment Errors and Trafficking Have Declined  despite Increased Program Participation. GAO-07-422T.   Washington, D.C.: January 31, 2007.
Food Stamp Trafficking: FNS Could Enhance Program Integrity by  Better Targeting Stores Likely to Traffic and Increasing Penalties.   GAO-07-53. Washington, D.C.: October 13, 2006.
Food Stamp Program: States Have Made Progress Reducing Payment  Errors, and Further Challenges Remain. GAO-05-245. Washington, D.C.:  May 5, 2005.
Food Stamp Program: Farm Bill Options Ease Administrative Burden,  but Opportunities Exist to Streamline Participant Reporting Rules  among Programs. GAO-04-916. Washington, D.C.: September 16, 2004.
Nutrition Education: USDA Provides Services through Multiple  Programs, but Stronger Linkages among Efforts Are Needed. GAO-04-528.  Washington, D.C.: April 27, 2004.
Food Stamp Program: Steps Have Been Taken to Increase Participation  of Working Families, but Better Tracking of Efforts Is Needed.   GAO-04-346. Washington, D.C.: March 5, 2004.