Hurricane Katrina: Allocation and Use of $2 Billion for Medicaid and Other Health Care Needs
Published: 2007-02-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In February 2006, the Deficit Reduction Act of 2005 (DRA) appropriated $2 billion for certain health care costs related to Hurricane Katrina through Medicaid and the State Children's Health Insurance Program (SCHIP). The Centers for Medicare & Medicaid Services (CMS) was charged with allocating the $2 billion in funding to states directly affected by the hurricane or that hosted evacuees. GAO performed this work under the Comptroller General's statutory authority to conduct evaluations on his own initiative. In this report, GAO examined: (1) how CMS allocated the DRA funds to states, (2) the extent to which states have used DRA funds, and (3) whether selected states--Alabama, Louisiana, Mississippi, and Texas--anticipate the need for additional funds after DRA funds are expended. To conduct this review, GAO reviewed CMS's allocations of DRA funds to all eligible states, focusing in particular on the four selected states that had the highest initial allocation (released by CMS on March 29, 2006). GAO obtained data from Medicaid offices in the four selected states regarding their experiences enrolling individuals, providing services, and submitting claims; collected state Medicaid enrollment data; and analyzed DRA expenditure data that states submitted to CMS.
section_title: What GAO Found
paragraphs: As of September 30, 2006, CMS allocated $1.9 billion of the $2 billion in DRA funding to states. CMS allocated funds to: Category I--the nonfederal share of expenditures for time-limited Medicaid and SCHIP services for eligible individuals affected by the hurricane (32 states); Category II--expenditures for time-limited uncompensated care services for individuals without a method of payment or insurance (8 of the 32 states); and Category III--the nonfederal share of expenditures for existing Medicaid and SCHIP beneficiaries (Alabama, Louisiana, and Mississippi). CMS did not allocate funds to Category IV--for restoration of access to health care. After CMS reconciles states' expenditures with allocations, it will determine how to allocate the unallocated $136 million and unexpended funds from the $1.9 billion allocated to states. Of the $1.9 billion in allocated DRA funds, almost two-thirds of the 32 states that received these funds submitted claims totaling about $1 billion as of October 2, 2006. Claims from Alabama, Louisiana, and Mississippi for Category III accounted for about 85 percent of all claims filed. These initial results are likely to change as states continue to file claims for services. Of the four selected states, Louisiana and Texas raised concerns about their ability to meet future health care needs once the DRA funds are expended. Louisiana's concerns involved managing its Medicaid program across state borders as those who left the state remain eligible for the program. Texas was significantly affected by the number of evacuees seeking services, thus raising concerns among state officials about the state's future funding needs. CMS, Alabama, Louisiana, and Texas commented on a draft of this report. CMS suggested the report clarify the DRA funding categories, reallocation process, and communication strategy with states, especially Louisiana. Louisiana and Texas commented on their ongoing challenges, and Alabama provided technical comments. The report was revised as appropriate.

section_title: Letter
paragraphs: Hurricane Katrina, which made landfall along the Gulf coast of Louisiana  and Mississippi on August 29, 2005, was one of the largest natural disasters  in our nation’s history, disrupting the lives of hundreds of thousands of  individuals who suddenly lacked housing and access to basic health care  services. The states most directly affected by the hurricane—Alabama,  Louisiana, and Mississippi—were among the poorest areas in the United  States, even before Hurricane Katrina hit. Compared to the rest of the  United States, higher proportions of the nonelderly populations in these  directly affected states were enrolled in Medicaid, a program jointly  financed by the federal government and states to provide health care  coverage to certain categories of low-income individuals. The devastation  caused by Hurricane Katrina compounded the health care needs of these  communities, increasing the numbers of eligible beneficiaries for Medicaid  and adding large numbers of uninsured individuals. Additionally,  individuals displaced from their homes and jobs evacuated their home  states and moved to other states, such as Texas, which strained these  states’ health care resources.
During the first 3 weeks after the hurricane, the Centers for Medicare &  Medicaid Services (CMS), which oversees the Medicaid program,  announced that states could apply for demonstration projects—to be  approved by CMS—through which the federal government would fund its  share of expenditures for health care services for certain individuals  affected by the hurricane. CMS identified two categories of services  covered under these demonstration projects, both of which were subject  to time limitations. The first category allowed individuals affected by the  hurricane and eligible under an approved demonstration project to receive  benefits under Medicaid or the State Children’s Health Insurance Program  (SCHIP) for up to 5 months. The second category, known as  uncompensated care, allowed states to reimburse providers rendering  services from August 24, 2005, through January 31, 2006, to individuals  affected by the hurricane who had no other method of payment or  insurance. In February 2006, the Deficit Reduction Act of 2005 (DRA)  appropriated $2 billion to fund, among other purposes, these two  categories of services under approved demonstration projects. DRA  further specified that the $2 billion could be used for two additional  categories of expenditures that were not time-limited. With respect to the  third category, funds were available for the nonfederal (state) share of  expenditures for services provided to existing Medicaid and SCHIP  beneficiaries from certain areas of the directly affected states. Funds were  also available for the fourth category of restoring access to health care in  impacted communities. DRA did not specify how the $2 billion in  Hurricane Katrina relief funding would be allocated among the states;  rather, CMS was responsible for determining these allocations.
Because of broad congressional interest, we performed this work under  the Comptroller General’s statutory authority to conduct evaluations on  his own initiative. This report presents results of our work examining:   (1) how CMS allocated the DRA funds to states, (2) the extent to which  states have used DRA funds, and (3) whether Alabama, Louisiana,  Mississippi, and Texas anticipate the need for additional funds after DRA  funds are expended.
To conduct this work, we obtained documentation from CMS on its  allocation of DRA funds to states. We reviewed allocations for four  categories, as outlined below.
Category I—time-limited Medicaid and SCHIP services: This  category was for the nonfederal (state) share of expenditures associated  with Medicaid and SCHIP services (including administrative costs)  provided to individuals affected by Hurricane Katrina and eligible under an  approved demonstration project. Each state defined the populations  eligible for its demonstration project for individuals affected by the  hurricane. Funding is available through this category for services delivered  through June 30, 2006.
Category II—time-limited uncompensated care services: This  category contained funding for the total expenditures associated with  services (including administrative costs) provided to individuals affected  by Hurricane Katrina who did not have a method of payment or  insurance. Funding is available through this category for services  delivered through January 31, 2006.
Category III—existing Medicaid and SCHIP beneficiaries: This  category was designated to compensate states for the nonfederal (state)  share of expenditures associated with services provided to existing  Medicaid and SCHIP beneficiaries from certain areas of directly affected  states. The DRA did not specify any time limits on funding for services  delivered under this category. Funding is limited to the three directly  affected states—Alabama, Louisiana, and Mississippi.
Category IV—restore access to health care in impacted  communities: This category allowed for coverage of expenditures  provided for other purposes, if approved by the Secretary of HHS, to  restore access to health care in impacted communities. The DRA did not  specify any time limits on funding under this category.
We focused our review on four selected states that, as of March 29, 2006,  had received the highest allocations of DRA funding from CMS—Alabama,  Louisiana, Mississippi, and Texas. We selected March 29, 2006, because  this was the date on which CMS made its initial allocation of DRA funds to  states. We obtained data and information from Medicaid offices in these  states regarding their experiences enrolling individuals, providing services,  and submitting claims for services and administrative costs. We also  collected Medicaid enrollment data from the four selected states through  June 2006. In addition, we analyzed CMS data included in the Medicaid  Budget and Expenditure System (MBES) on DRA funding for the states  that received initial allocations as of March 29, 2006. Within the MBES, we  examined data that states submitted for expenditures that qualified for  DRA funding as of October 2, 2006. States submit all Medicaid data to  MBES electronically and must attest to its completeness and accuracy.  These data are preliminary in nature, in that they are subject to further  review and are likely to be updated as states continue to submit claims for  DRA funding. Nevertheless, we considered MBES data sufficiently reliable  for purposes of conducting a preliminary assessment of claims submitted  to date. We also contacted Medicaid officials in Arizona and Georgia to  ascertain why they had not submitted claims for DRA funding. We chose  Arizona and Georgia because they had not submitted claims data as of  June 2006, but were the only two states that had logged into MBES and  inserted placeholders for their claims data. We conducted our work from  April 2006 to October 2006 in accordance with generally accepted  government auditing standards.
subsections: section_title: Background
paragraphs: Medicaid and SCHIP are joint federal-state programs that finance health  care coverage for certain categories of low-income individuals. To qualify  for Medicaid or SCHIP, individuals must meet specific eligibility  requirements related to their income, assets, and other personal  characteristics such as age. Each state operates its program under a CMS- approved state plan.
Almost immediately after Hurricane Katrina, CMS announced in a State  Medicaid Director’s letter on September 16, 2005, that states could apply  for Medicaid demonstration projects authorized under section 1115 of the  SSA, through which the federal government would fund its share of  expenditures for health care services for certain individuals affected by  the hurricane. These demonstration projects provided for (1) time-limited  Medicaid and SCHIP services to allow states to quickly enroll eligible  individuals who were affected by the hurricane, and (2) time-limited  uncompensated care services—allowing states to pay providers rendering  services for individuals affected by the hurricane who do not have an  alternative method of payment or insurance. Interested states could apply  to CMS to offer demonstration projects for either or both categories, and  those receiving CMS approval were permitted to seek reimbursement for  the federal share of allowable expenditures for covered beneficiaries  under the demonstrations. To assist states in applying for these  demonstration projects, CMS convened a conference call with all state  Medicaid agencies to brief them on the agency’s September 16, 2005, letter,  discuss the application process, and provide information on other  implementation issues, such as benefits for evacuees and relevant federal  regulations regarding Medicaid eligibility.
For time-limited Medicaid and SCHIP services under the demonstrations,  states received approval to provide Medicaid and SCHIP coverage to  certain evacuees and affected individuals. In establishing eligibility for  this type of demonstration, states primarily used simplified eligibility  criteria that CMS developed to determine if affected individuals and  evacuees could enroll to receive time-limited Medicaid and SCHIP services  (see table 1).
States with approved demonstrations for time-limited uncompensated care  services could pay providers who delivered services to affected individuals  and evacuees who either did not have any other coverage for health care  services (such as private or public health insurance), or who had Medicaid  or SCHIP coverage but required services beyond those covered under  either program.
On February 8, 2006, the DRA appropriated $2 billion to be available until  expended for four funding categories—two categories associated with the  demonstration projects, and two additional categories of funding. DRA  applied time limits on the first two categories that were linked to the  demonstration projects—that is, services must have been provided by  certain dates. The DRA did not specify time limits for the two remaining  funding categories. (See table 2.)
States could receive allocations from CMS based on certain criteria  identified in the DRA, including whether they were directly affected by the  hurricane or hosted evacuees. States directly affected by the hurricane— Alabama, Louisiana, and Mississippi—and states that hosted evacuees  could receive DRA funding through Categories I and II, the nonfederal  share of expenditures for time-limited Medicaid and SCHIP services and  expenditures for time-limited uncompensated care services. In contrast, as  specified by DRA, funds for Category III, the nonfederal share of  expenditures for existing Medicaid and SCHIP beneficiaries, were  available only to certain areas in the directly affected states. These areas  were counties or parishes designated under the Robert T. Stafford Disaster  Relief and Emergency Assistance Act as areas eligible to receive federal  disaster assistance. According to a CMS official, shortly after Hurricane  Katrina, 10 counties in Alabama, 31 parishes in Louisiana, and 47 counties  in Mississippi were identified as eligible to receive such assistance and  were declared individual assistance areas. (See fig. 1.)
States receive reimbursement for their expenditures in each of the funding  categories through the submission of claims to CMS. To obtain  reimbursement of claims for services, providers first submit claims to  states for health care services provided to affected individuals and  evacuees. States then submit claims to CMS for DRA-covered expenditures  made for health care services provided to affected individuals and  evacuees under each of the DRA funding categories. In addition, although  the DRA was not enacted until February 8, 2006, CMS allowed funding to  be retroactive to August 24, 2005.
section_title: CMS Allocated DRA Funds to Three Funding Categories
paragraphs: As of September 30, 2006, CMS had allocated approximately $1.9 billion of  the total $2 billion in DRA funds to states that were directly affected by  Hurricane Katrina or that hosted evacuees in the aftermath of the storm.  CMS allocated funds to the first three categories: Category I—the  nonfederal share of expenditures for time-limited Medicaid and SCHIP  services; Category II—expenditures for time-limited uncompensated care  services; and Category III—the nonfederal share of expenditures for  existing Medicaid and SCHIP beneficiaries from designated areas of the  directly affected states. CMS chose not to allocate any DRA funding to  Category IV, for restoring access to health care in impacted communities.  CMS allocated the majority of DRA funding (78.3 percent of the $1.9 billion  allocated) to Category III, the nonfederal share of expenditures for  existing Medicaid and SCHIP beneficiaries, which, by law, was limited to  the three directly affected states (Alabama, Louisiana, and Mississippi).  CMS allocated funds to states on two occasions—an initial allocation of  $1.5 billion on March 29, 2006, and a subsequent allocation on   September 30, 2006. Both of these allocations were based on states’  estimates of their DRA expenditures. In the second allocation on  September 30, 2006, no state received less funding than it received in the  March 29, 2006, allocation, but allocations shifted among the DRA  categories.
subsections: section_title: CMS Allocated $1.9 Billion of DRA Funds to Three DRA Categories
paragraphs: As of September 30, 2006, CMS had allocated approximately $1.9 billion of  DRA funds to three DRA funding categories to 32 states. The majority of  the $1.9 billion allocation—about $1.5 billion (78.3 percent)—is for  Category III, existing Medicaid and SCHIP beneficiaries, which is limited  to the three directly affected states (Alabama, Louisiana, and Mississippi).  For Category I, time-limited Medicaid and SCHIP services, and Category II,  time-limited uncompensated care services, states received about   $102 million (5.5 percent of the total allocation) and about $302 million  (16.2 percent of the total allocation), respectively. (See fig. 2.) With regard  to Category I, 32 states received approval to extend time-limited Medicaid  and SCHIP coverage to individuals affected by Hurricane Katrina;  however, no states actually enrolled individuals in SCHIP. Therefore, only  Medicaid services were covered through this DRA funding category. Of  these 32 states, 8 states also received approval for Category II to pay  providers for rendering extend time-limited uncompensated care services  to individuals affected by the hurricane. CMS officials stated that the  agency approved the majority of states’ applications for demonstration  projects within 45 days of the hurricane.
Of the 32 states that received allocations totaling $1.9 billion, Louisiana  received the largest amount—44.6 percent (about $832 million) of the total  allocation. Combined, the 3 directly affected states—Louisiana, Alabama,  and Mississippi—received approximately 90 percent ($1.7 billion) of the  $1.9 billion allocated to states. While not a directly affected state, Texas  hosted a large number of evacuees and received about 7.6 percent   ($142 million) of the allocation. These 4 selected states together received  approximately 97.5 percent ($1.8 billion) of the $1.9 billion allocation. (See  table 3.)
section_title: CMS Provided Allocations to States on Two Occasions
paragraphs: CMS provided DRA allocations on two occasions, and both allocations  were based on states’ estimated DRA expenditures. CMS first allocated  $1.5 billion to 32 states on March 29, 2006. After the DRA was enacted in  February 2006, CMS requested states’ estimated fiscal year 2006  expenditures for three of the four DRA funding categories: Category I—the  nonfederal share of expenditures for time-limited Medicaid services;  Category II—expenditures for time-limited uncompensated care services;  and Category III—for directly affected states, the nonfederal share of  expenditures for existing Medicaid and SCHIP beneficiaries. CMS did not  request that the three directly affected states estimate expenditures for  Category IV—restoring access to health care in impacted communities.  CMS officials told us that they viewed restoring access to care as  discretionary in nature and not associated with direct service  expenditures. In the March 29, 2006, allocation, CMS fully funded 32 states’  estimated expenditures for DRA funding for Categories I and II, and also  provided the three directly affected states with allocations to  approximately half of their estimated expenditures for Category III.  Because allocations were based on states’ estimates, CMS withheld   $500 million of the $2 billion available for the initial allocation, anticipating  that allocations would need to be realigned.
In July 2006, CMS requested updated estimates of DRA expenditures for  fiscal year 2006 for the same three categories: the two time-limited  categories for Medicaid and uncompensated care services (Categories I  and II) and the existing Medicaid and SCHIP beneficiaries (Category III).  On September 30, 2006, CMS allocated an additional amount of about   $364 million to states, which, combined with the initial March 29, 2006,  allocation of $1.5 billion, provided a total allocation of approximately   $1.9 billion. This allocation was based on states’ updated estimated  expenditures for each of the three DRA categories for which CMS  provided funding. For the second allocation, each of the three directly  affected states received allocations of 100 percent of their updated  estimated expenditures for all three funding categories.
While CMS did not decrease any state’s allocation as a result of the July  2006 request for updated estimates, it did shift allocation amounts among  DRA funding categories when necessary for the September 30, 2006,  allocation. Therefore, each state received its allocation amount from  March 29, 2006, plus any additional funding included in the updated  estimated expenditures. As a result, some states that lowered their  subsequent estimates received more than they requested. For example,  Texas lowered its initial estimated expenditures from $142 million (its  March 29, 2006, estimate) to approximately $36 million. CMS did not  change Texas’ allocation from the amount the state received on March 29,  2006; thus, Texas retained an allocation of $142 million. Other states  received more than they were initially allocated. For example, Alabama  requested about $181 million initially, but gave CMS an updated estimate  of $248 million. CMS initially allocated Alabama approximately   $97 million, but increased its allocation to $248 million on September 30,  2006. (See table 4.)
As of September 30, 2006, $136 million in DRA funding remained available  for allocation. CMS officials stated that, during the first quarter of fiscal  year 2007, they plan to reconcile states’ expenditures submitted to CMS  with the allocation amounts provided to states on September 30, 2006.  After this reconciliation is completed, CMS will determine how to allocate  the remaining $136 million of available DRA funds and any unexpended  funds of the approximately $1.9 billion previously allocated to states.
section_title: States Have Submitted Claims for About Half of Total DRA Allocations
paragraphs: As of October 2, 2006, states had submitted to CMS claims for services— including associated administrative costs—totaling about $1 billion (or   54 percent) of the $1.9 billion in DRA funds allocated to them. The amount  of claims submitted and the number of states that submitted claims varied  by DRA category. Of the 32 states that received allocations from CMS, 22  states have submitted claims, including the 3 directly affected states. Some  state officials said they faced obstacles processing DRA-related claims.  While DRA-related expenditures varied by state, claims were concentrated  in nursing facilities, inpatient hospital care, and prescription drugs.
subsections: section_title: About Two-Thirds of Eligible States Have Submitted Claims for Reimbursement, Accounting for 54 Percent of Total Allocations
paragraphs: Of the 32 states that received DRA allocations, about two-thirds (22) had  submitted claims for expenditures to CMS as of October 2, 2006. The  submitted claims accounted for about 54 percent of CMS’s $1.9 billion  allocated to states. States that submitted claims for reimbursement did so  for amounts that ranged from about 7 percent to approximately 96 percent  of their allocations. (See table 5.) Each of the 4 selected states we  reviewed—Alabama, Louisiana, Mississippi, and Texas—had submitted  claims by this time.
Of the claims submitted for the two time-limited funding categories, 22 of  32 states submitted claims for Medicaid services (Category I) and 6 of 8  states submitted claims for uncompensated care services (Category II).  The claims submitted constituted approximately 20 percent of total  allocations to Medicaid and about 42 percent of total allocations to  uncompensated care services. Of the 4 selected states, 3 states—Alabama,  Mississippi, and Texas—submitted claims for Medicaid services, while all  4 selected states submitted claims for uncompensated care services. (See  table 6.)
Only the three directly affected states—Alabama, Louisiana, and  Mississippi—were eligible to receive DRA funding for existing Medicaid  and SCHIP beneficiaries (Category III). The claims submitted by the  directly affected states constituted approximately 58 percent of total  allocations to Category III. (See table 7.) In addition, claims from the three  directly affected states for existing Medicaid and SCHIP beneficiaries  accounted for about 85 percent of all DRA claims filed. While funds for  existing Medicaid and SCHIP beneficiaries were available for both  programs, about 98 percent of claims submitted were for Medicaid  expenditures.
It has taken longer than usual for states—both those directly affected by  the hurricane as well as states that hosted evacuees—to submit claims.  Typically, Medicaid expenditure reports are due the month after the  quarter ends. CMS officials estimated that about 75 percent of states  submit their Medicaid expenditures within 1 to 2 months after the close of  a quarter. However, data are not finalized until CMS and states ensure the  accuracy of claims. The process of states submitting claims for DRA- related expenditures has been more prolonged. As with other Medicaid  claims, states are permitted up to 2 years after paying claims to seek  reimbursement from CMS. Therefore, these initial results are likely to  change as states continue to file claims for services. As of October 2, 2006,  10 of 32 states that received allocations of DRA funding had not submitted  any claims even though fiscal year 2006 ended on September 30, 2006.
Some state officials told us that they were having difficulties submitting  claims because of various obstacles related to processing claims or  receiving claims from providers, including needing to manually process  claims or adapt computer systems to accommodate the new types of  claims being submitted. For example, Mississippi officials explained that  they were manually processing claims for time-limited uncompensated  care services because they did not have an electronic system for  processing such claims. Georgia officials reported that the state’s claims  processing system had to be adjusted in order to properly accept claims  for time-limited uncompensated care services. After such adjustments  were made, Georgia officials anticipated accepting these claims from mid- July through the end of August 2006. Alabama officials noted that they had  to specifically request that providers submit claims for the costs of  providing uncompensated care services they may have assumed would not  be reimbursable.
section_title: States’ Claims Were Concentrated in Three Service Areas
paragraphs: Claims that the four selected states submitted for Medicaid expenditures  in the three categories of DRA funding we reviewed varied, but were  typically concentrated in three service areas: nursing facilities, inpatient  hospital care, and prescription drugs. For example, all four selected states  had nursing facility services as one of their top four services for which  they submitted claims, while only Alabama had home and community- based services as one of its services with the highest expenditures. Of the  claims submitted by states, the proportions attributed to specific services  varied across the states. (See table 8.)
Alabama, Louisiana, and Mississippi submitted claims for the nonfederal  share of expenditures for SCHIP services to existing SCHIP beneficiaries.  Overall, the dollar amount of claims for SCHIP represented approximately  2 percent of the total value of claims submitted. As of October 2, 2006, the  top four SCHIP expenditures in Alabama were for physician services   (22.8 percent), prescription drugs (20.7 percent), inpatient hospital  services (13.4 percent), and dental services (12.1 percent). The top four  SCHIP expenditures in Louisiana were for prescription drugs   (45.4 percent), physician services (22.4 percent), outpatient hospital  services (12.5 percent), and inpatient hospital services (9.8 percent). For  Mississippi, all of the claims for DRA funds were for expenditures  associated with paying SCHIP premiums for certain enrollees.
section_title: Louisiana and Texas Raised Concerns Regarding Future Funding Needs
paragraphs: Two of our four selected states raised concerns about their ability to meet  the future health care needs of those affected by the hurricane once DRA  funds have been expended: Louisiana, which is eligible for DRA funding  for Category III services that may be provided beyond June 30, 2006; and  Texas, which is not eligible for such ongoing assistance. Of the three  directly affected states—Alabama, Louisiana, and Mississippi—only  Louisiana raised concerns that it would need additional funds to provide  coverage for individuals affected by the hurricane who evacuated the state  yet remain enrolled in Louisiana Medicaid. Alabama and Mississippi  officials did not anticipate the need for additional funding beyond what  was already allocated by CMS. In contrast, because Texas is eligible only  for the time-limited DRA funds from Category I and Category II, state  officials expressed concern about future funding needs in light of the  many evacuees remaining in the state. To learn more about this  population, the state commissioned a survey that indicated that evacuees  responding to the survey continue to have a high need for services,  including health care coverage under Medicaid and SCHIP.
subsections: section_title: Louisiana’s Concerns Centered on Its Ability to Administer and Fund Medicaid Coverage for Out-of-State Evacuees
paragraphs: Only the three directly affected states—Alabama, Louisiana, and  Mississippi—are eligible for DRA funds for Category III services, which  were designated to compensate states for the state share of expenditures  associated with services provided to existing Medicaid and SCHIP  beneficiaries from certain areas of directly affected states beyond   June 30, 2006. This additional DRA funding could potentially be available  from any unused funds of the $1.9 billion allocated on September 30, 2006,  and the $136 million remaining from the $2 billion appropriated. It is  unclear how much of the $1.9 billion allocation will be unused and thus  available for redistribution. Additionally, it is not yet known how the  remaining $136 million will be distributed, but CMS will make that  determination after reconciling states’ claims submitted during the first  quarter of fiscal year 2007 with the allocations. Of the three states eligible  for ongoing DRA funding, only Louisiana raised concerns that additional  funds will be necessary; Alabama and Mississippi did not anticipate  additional funding needs beyond those CMS already allocated.
Louisiana’s funding concerns were associated with managing its program  across state borders as evacuees who left the state continue to remain  eligible for Louisiana Medicaid. State officials acknowledged that their  immediate funding needs have been addressed by the September 30, 2006,  allocation; however, they remain concerned that they do not have the  financial or administrative capacity to serve their Medicaid beneficiaries  across multiple states. Louisiana officials also cited the difficulty of  maintaining what they characterized as a national Medicaid program for  enrolled individuals and providers living in many different states.
Louisiana has submitted claims for DRA funding for Category III for  existing Medicaid and SCHIP beneficiaries (individuals enrolled in  Louisiana Medicaid) who resided in 1 of the 31 affected parishes in  Louisiana prior to Hurricane Katrina, but evacuated to another state after  the hurricane, and who continue to reside in that state. Because many of  these evacuated individuals have expressed intent to return to Louisiana,  they have not declared residency in the state where they have been living  since Hurricane Katrina. Under these circumstances, these individuals  have continued to remain eligible for Louisiana Medicaid. However,  Louisiana officials were uncertain how long the state would be expected  to continue this coverage on a long-distance basis. While DRA funds cover  the nonfederal (Louisiana state) share of service expenditures for these  Medicaid and SCHIP beneficiaries (Category III), they are not designated  to include reimbursement for the administrative costs associated with  serving Louisiana Medicaid beneficiaries living in other states.
In particular, Louisiana officials noted the following difficulties, which  were also outlined in a May 15, 2006, letter to HHS and a May 26, 2006,  letter to CMS. These letters requested specific direction from CMS on the  issues presented as well as permission to waive certain federal Medicaid  requirements that Louisiana believes it has been unable to comply with. In  commenting on a draft of our report, Louisiana officials stated that as of  November 30, 2006, they had not received the written guidance that they  requested from CMS on the following issues:    Managing and monitoring a nationwide network of providers.  Covering individuals who have evacuated from the state but remain  eligible for Louisiana Medicaid requires the state to identify, enroll, and  reimburse providers from other states. According to Louisiana officials,  the state has enrolled more than 16,000 out-of-state providers in Louisiana  Medicaid since August 28, 2005. The state does not believe that it can  manage and monitor a nationwide network of providers indefinitely.  Therefore, Louisiana is seeking guidance from CMS to ensure that the  state is continuing to comply with federal Medicaid requirements for  payments for services furnished to out-of-state Medicaid beneficiaries.
Redetermining eligibility. Federal Medicaid regulations require that  states redetermine eligibility at least annually as well as when they receive  information about changes in individuals’ circumstances. Louisiana  officials indicated that they had received approval through its  demonstration project to defer redetermination processes through   January 31, 2006. Officials noted that they have more than 100,000  individuals from affected areas whose eligibility had not yet been  redetermined as of May 26, 2006. Officials say they do not want to take  beneficiaries who need coverage off the state’s Medicaid rolls for  procedural reasons, and thus would prefer to conduct mail-in renewals  and have a process for expedited reenrollment upon return to the state.  According to Louisiana officials, the state’s redetermination processes are  currently on hold while CMS examines the possibility of granting a waiver  for redetermining eligibility for individuals from the most severely affected  parishes around New Orleans.
Maintaining program integrity. Louisiana officials explained that  running a Medicaid program in multiple states raises issues of program  integrity. While some providers have contacted Louisiana Medicaid to  report that they have received payment from more than one state,  Louisiana officials believe that other providers are not reporting  overpayments. State officials indicated that they will conduct postpayment  claims reviews to ensure that double billing and other fraudulent activities  have not occurred. These officials estimated that this effort to review  claims could be time consuming, taking approximately 3 to 8 years to  complete. Because Louisiana believes that it is unable to ensure the  integrity of the program as long as it continues enrolling out-of-state  providers, the state requested specific direction from CMS on whether to  continue such enrollment efforts.
Ensuring access to services. Louisiana officials expressed a concern  about the state’s ability to ensure access to home and community-based  services in other states. Officials noted that some states have long waiting  lists for this type of long-term care, making it difficult for them to provide  services that assist in keeping individuals in the community rather than in  an institution. Additionally, as a requirement of providing home and  community-based services, measures are needed to protect the health and  welfare of beneficiaries. However, officials stated that Louisiana is not in  the position to assure the health and safety of individuals requiring these  services out of the state. Thus, the state asked CMS for direction on how  to continue operating its Medicaid program without violating the federal  requirement to assure the health and welfare of beneficiaries receiving  home and community-based services.
section_title: Texas Is Hosting Large Number of Evacuees Whose Future Plans Are Uncertain
paragraphs: While Texas is not a directly affected state and therefore not eligible for  DRA funding for any Medicaid or SCHIP services provided beyond   June 30, 2006, it has been significantly affected by the number of evacuees  seeking services, thus prompting concern among state officials regarding  the state’s future funding needs. To address the health needs of evacuees  entering the state, Texas enrolled these individuals into Medicaid under  Category I—providing time-limited Medicaid services for evacuees who  were eligible under an approved demonstration project. In comparison to  Alabama and Mississippi, which also enrolled evacuees into time-limited  Medicaid services, Texas enrolled the largest number of evacuees— peaking at nearly 39,000 individuals in January 2006. (See table 9).
Texas also submitted claims for Category II DRA funds for time-limited  uncompensated care services to evacuees, shortly after the hurricane.  Enrollment into this category grew steadily from 2,224 individuals in  October 2005 to 9,080 individuals in January 2006. Figure 3 shows the  enrollment patterns for the Texas Medicaid program, as well as Category I  and Category II services provided for the period following Hurricane  Katrina.
To better understand the characteristics, needs, and future plans of the  evacuee population, the Texas Health and Human Services Commission  contracted with the Gallup Organization to survey Hurricane Katrina  evacuees in Texas. Data from survey respondents indicated that, as of  June 2006, evacuees remaining in the state were predominantly adult  women who lived in low-income households with children and had  increasing rates of uninsurance since the hurricane. Despite the loss of  insurance coverage, the survey indicated that fewer evacuees received  Medicaid than previously expected and the loss of insurance primarily  affected children’s health coverage. Evacuees appear to be turning to  hospital emergency departments to meet their health care needs, as survey  respondents reported an increase in emergency room visits in the past   6 months. Texas officials confirmed that evacuees who were previously  eligible for the two DRA categories for time-limited coverage (Medicaid  and uncompensated care services) are beginning to present themselves to  local county facilities for their health care needs, thus straining local  resources to provide care for all Texas residents. Based on this survey,  Texas officials said they are concerned that they will continue to host an  evacuee population with high needs who do not have immediate plans to  leave the state. In particular, over half of the survey respondents believe  they will continue to reside in Texas in the next 6 months and half believe  they will still be there in 1 year. Texas was not a directly affected state and  is therefore not eligible for ongoing assistance through the DRA; funding  for Category I only covers services provided as of June 30, 2006, and  funding for Category II only covers services provided as of January 31,  2006.
section_title: Agency and State Comments and Our Evaluation
paragraphs: We provided copies of a draft of this report to CMS and the four states we  reviewed: Alabama, Louisiana, Mississippi, and Texas. We received written  general and additional comments from CMS (see app. II) and from  Louisiana and Texas (see apps. III and IV, respectively). Alabama provided  technical comments, while Mississippi did not comment on the draft  report.
In commenting on the draft report, CMS provided information on an  initiative it took to respond to Hurricane Katrina. The agency indicated  that HHS, which oversees CMS, worked closely with Louisiana’s  Department of Health and Hospitals to assist the state in convening the  Louisiana Health Care Redesign Collaborative, which will work to rebuild  Louisiana’s health care system. We did not revise the text of the report to  include information on this effort because it was beyond the scope of this  report. However, we have earlier reported on HHS efforts to help rebuild  Louisiana’s health care system.
CMS also commented on three issues: our characterization of the  categories of funding provided through DRA, our description of CMS’s  reconciliation process, and criticism it faced in communicating with the  states, particularly Louisiana and Texas, regarding program  implementation, coverage for out-of-state evacuees, and other issues.  These comments are addressed below.
CMS commented that we mischaracterized the categories of DRA funding  by specifying them in the report as Categories I, II, III, and IV. We  developed these four descriptive categories, which were derived from  provisions of the DRA, in order to simplify report presentation. However,  to respond to CMS’s comment, we included additional legal citations in the  report to better link the statutory language of the DRA with the categories  of funding presented in this report. We did not, however, adopt all of  CMS’s descriptions of DRA provisions as CMS presented some of the  descriptions inaccurately. In particular, CMS presented DRA sections  6201(a)(3) and 6201(a)(4) as providing federal funding under an approved  section 1115 demonstration project, but as stated in the report, such  approval is irrelevant to this funding.
CMS also commented that the report was misleading because it did not  fully describe the reconciliation process that will be used to allocate  remaining and unused DRA funds. Specifically, the agency indicated that  we did not explain that additional DRA allocations would be made to  states not only from the remaining $136 million in unallocated funds but  also from any unspent funds already allocated to states. The draft report  did contain a full explanation of the reconciliation process. However, to  address CMS’s comment, we clarified this process in the report’s  Highlights and Results in Brief.
Finally, CMS disagreed with statements in the draft report that Louisiana  had not received the requested direction detailed in letters written to HHS  on May 15, 2006, and CMS on May 26, 2006. Louisiana’s letters included  concerns and questions that arose after the state implemented its section  1115 demonstration project. CMS indicated that it provided and continues  to provide technical assistance to all states with section 1115  demonstration projects for Hurricane Katrina assistance beyond the states  reviewed in this report. In particular, immediately following the hurricane  CMS provided guidance to states through a conference call and a  September 16, 2005, letter sent to all state Medicaid directors that  explained the process of applying for the section 1115 demonstration  project, the benefits and eligibility criteria for evacuees, the  uncompensated care pool, and other pertinent information. We revised the  report to reflect the guidance that CMS provided to the states immediately  following the hurricane. CMS also commented that it worked with  Louisiana and the other hurricane-affected states on redetermining  eligibility through a conference call, and provided information to  Louisiana several times regarding regulations that the state should follow  for redetermining eligibility on an annual basis. Further, CMS indicated  that it provided technical assistance to Louisiana in its efforts to ensure  program integrity and access to health care services. While CMS may have  provided such assistance, from Louisiana’s perspective, it was not  sufficient to address the many issues the state is facing. In Louisiana’s  written comments, state officials maintained that as of November 30, 2006,  they had not received written guidance from CMS regarding the issues  outlined in their May 15, 2006, letter.
Comments from Louisiana and Texas centered on each state’s efforts to  assist those affected by the hurricane and the ongoing challenges that  exist as a result of Hurricane Katrina. In particular, Louisiana emphasized  the lack of response from HHS regarding its concerns about running its  Medicaid program in many states and related difficulties to ensuring the  program’s integrity. Texas commented on its continued need to provide  health care services to Hurricane Katrina evacuees given the results of a  survey conducted by the Gallup Organization, which indicated that most of  the evacuees still residing in Texas were uninsured as of June 2006.
Additional technical and editorial comments from CMS and the states  were incorporated into the report as appropriate.
We are sending a copy of this report to the Secretary of Health and Human  Services and the Administrator of CMS. We will make copies available to  others upon request. In addition, the report will be available at no charge  on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-7118 or allenk@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 contributions to this report are  listed in appendix V.
section_title: Appendix I: Deficit Reduction Act of 2005 Allocations to 32 States
paragraphs: Under the authority of the Deficit Reduction Act of 2005, the Centers for  Medicare & Medicaid Services (CMS) allocated funding totaling  approximately $1.9 billion to 32 states, as of September 30, 2006. The  agency allocated funds to all 32 states for the time-limited Medicaid  category of demonstration projects, to 8 of those 32 states for the time- limited uncompensated care category of demonstration projects, and to  the 3 directly affected states—Alabama, Louisiana, and Mississippi—for  the nonfederal share of expenditures for existing Medicaid and SCHIP  beneficiaries. The 4 states selected for this study—Alabama, Louisiana,  Mississippi, and Texas—received approximately 97.5 percent of the   $1.9 billion allocation. All allocations were based on estimates states  submitted for each of the funding categories in response to CMS’s   July 2006 request for updated estimates. (See table 10.)
section_title: Appendix II: Comments from the Centers for Medicare & Medicaid Services
section_title: Appendix III: Comments from the State of Louisiana Department of Health and Hospitals
section_title: Appendix IV: Comments from the State of Texas Health and Human Services Commission
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the contact named above, Carolyn Yocom, Assistant  Director; Jennie Apter; Laura M. Mervilde; JoAnn Martinez-Shriver; Sari B.  Shuman; and Hemi Tewarson made key contributions to this report.
section_title: Related GAO Products
paragraphs: Hurricane Katrina: Status of Hospital Inpatient and Emergency  Departments in the Greater New Orleans Area. GAO-06-1003.  Washington, D.C.: September 29, 2006.
Catastrophic Disasters: Enhanced Leadership, Capabilities, and  Accountability Controls Will Improve the Effectiveness of the Nation’s  Preparedness, Response, and Recovery System. GAO-06-618. Washington,  D.C.: September 6, 2006.
Hurricane Katrina: Status of the Health Care System in New Orleans  and Difficult Decisions Related to Efforts to Rebuild It Approximately 6  Months After Hurricane Katrina. GAO-06-576R. Washington, D.C.:   March 28, 2006.
Hurricane Katrina: GAO’s Preliminary Observations Regarding  Preparedness, Response, and Recovery. GAO-06-442T. Washington, D.C.:  March 8, 2006.
Statement by Comptroller General David M. Walker on GAO’s  Preliminary Observations Regarding Preparedness and Response to  Hurricanes Katrina and Rita. GAO-06-365R. Washington, D.C.:   February 1, 2006.