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. 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. 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.) 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. 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. 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. 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. 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. 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. 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. 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. 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.) 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. 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.

Summary:
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. 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.