1.) Methodology for Allocating CHS Funds

IHS uses three primary methods—base funding, annual adjustments, and  program increases—to determine the allocation of CHS funds to the IHS  area offices, which then distribute the funds to individual CHS programs. 2.) 3 years. IHS’s Allocation of CHS Funds Varied Widely across IHS Areas in Fiscal Year 2010

CHS funding varied widely across IHS area offices in fiscal year 2010. Total CHS funding for fiscal year 2010 ranged across the 12 area offices  from nearly $17 million to more than $95 million. Per capita CHS funding for fiscal year 2010 varied  widely, ranging across the area offices from $299 to $801. In addition, per  capita CHS funding was sometimes not related to areas’ dependence on  CHS for the provision of IHS-funded inpatient services. Base funding, which is based solely on funding from the prior year,  accounts for the great majority of CHS funds and therefore maintains any  funding variations. For example, in fiscal year 2010, the year in which IHS  received its largest program increase, base funding accounted for   82 percent of total CHS funds allocated to IHS area offices. The active user estimates that IHS  used to allocate program increases therefore included an unknown  proportion of patients who had not received contract health services, but  rather had received only direct care services. IHS Has Taken Few Steps to Address the Funding Variation within the CHS Program

IHS has taken few steps to evaluate the funding variations within the CHS  program. IHS officials told us that they have not evaluated the  effectiveness of base funding and the CHS Allocation Formula in meeting  the health care needs of American Indians and Alaska Natives across the  IHS areas and they do not plan to do so with respect to the determination  of base funding amounts. Without such assessments, IHS cannot  determine the extent to which the current variation in CHS funding reflects  variation in health care needs. The workgroup recommended that an evaluation of the current CHS  Allocation Formula be postponed until at least fiscal year 2013. The  workgroup members said that the CHS program had only begun  receiving substantial increases in fiscal years 2009 and 2010, and the  full impact of these increases needed to be reviewed before making  recommendations to change the formula. In contrast, we found that  IHS has used the formula to allocate program increases, at least in  part, in 5 years since 2001. IHS’s Ability to Address Funding Variations Is Limited by Statute

Federal law restricts IHS’s ability to reallocate funding should the agency  desire to do so. In addition, the  Indian Health Care Improvement Act imposes a congressional reporting  requirement for proposed reductions in base funding for any recurring  program, project, or activity of a service unit of 5 percent or more.officials told us that no such proposal to reallocate base funding has been  transmitted to the Congress. IHS can improve the equity of how it allocates program increase funds to  areas through improvements in its implementation of the CHS Allocation  Formula, primarily by using counts of actual CHS users rather than by  using the current method of estimating the number of overall IHS users,  which now includes patients who never used a CHS service, and by  refining the access to care factor to account for differences in available  health care services at IHS and tribally operated facilities. However,  because of the predominant influence of base funding and the relatively  small contribution of program increases to overall CHS funding, it would  take many years to achieve funding equity just by revising the methods  for distributing CHS program increase funds. Matter for Congressional Consideration

In order to ensure an equitable allocation of CHS program funds, the  Congress should consider requiring IHS to develop and use a new  method to allocate all CHS program funds to account for variations across  areas that would replace the existing base funding, annual adjustment,  and program increase methodologies, notwithstanding any restrictions  currently in federal law. Recommendations for Executive Action

To make IHS’s allocation of CHS program funds more equitable, we  recommend that the Secretary of Health and Human Services direct the  Director of the Indian Health Service to take the following three actions for  any future allocation of CHS funds:  require IHS to use actual counts of CHS users, rather than all IHS  users, in any formula for allocating CHS funds that relies on the  number of active users;  require IHS to use variations in levels of available hospital services,  rather than just the existence of a qualifying hospital, in any formula  for allocating CHS funds that contains a hospital access component;  and develop written policies and procedures to require area offices to  notify IHS when changes are made to the allocations of funds to CHS  programs. In its comments, HHS concurred with two of  our recommendations and did not concur with one recommendation.
Why GAO Did This Study

IHS, an agency in the Department of Health and Human Services (HHS), provides health care to American Indians and Alaska Natives. When care at an IHS-funded facility is unavailable, IHSs CHS program pays for care from non-IHS providers if the patient meets certain requirements and funding is available. The Patient Protection and Affordable Care Act requires GAO to study the administration of the CHS program, including a focus on the allocation of funds. IHS uses three primary methods to determine the allocation of CHS funds to the 12 IHS geographic area offices: base funding, which accounts for most of the allocation; annual adjustments; and program increases, which are provided to expand the CHS program. GAO examined (1) the extent to which IHSs allocation of CHS funding varied across IHS areas, and (2) what steps IHS has taken to address funding variation within the CHS program. GAO analyzed IHS funding data, reviewed agency documents and interviewed IHS and area office officials.

What GAO Found

The Indian Health Services (IHS) allocation of contract health services (CHS) funds varied widely across the 12 IHS geographic areas. In fiscal year 2010, CHS funding ranged from nearly $17 million in one area to more than $95 million in another area. Per capita CHS funding for fiscal year 2010 also varied widely, ranging across the areas from $299 to $801 and was sometimes not related to the areas dependence on CHS inpatient services, as determined by the availability of IHS-funded hospitals. The allocation pattern of per capita CHS funds has been generally maintained from fiscal year 2001 through fiscal year 2010. This is due to the reliance on base fundingwhich incorporates all CHS funding from the prior year to establish a new base each yearand accounts for the majority of funding. In fiscal year 2010, when CHS had its largest program increase and base funding was the smallest proportion of funding for any year, base funding still accounted for 82 percent of total CHS funds allocated to areas. Further, allocations of program increase funds are largely dependent on an estimate of CHS service users that is imprecise. IHS counts all users who obtained at least one service either funded by CHS or provided directly from an IHS-funded facility during the preceding 3-year period. This count therefore includes an unknown number of individuals who received IHS direct care only and who had not received contract health services.
IHS has taken few steps to evaluate funding variation within the CHS program and IHSs ability to address funding variations is limited by statute. IHS officials told GAO that the agency has not evaluated the effectiveness of base funding and the CHS Allocation Formula. Without such assessments, IHS cannot determine the extent to which the current variation in CHS funding accurately reflects variation in health care needs. While IHS has formed a workgroup to evaluate the existing formula for allocating program increases, the workgroup recommended, and the Director of IHS concurred, that the CHS Allocation Formula for distributing program increases would not be evaluated until at least 2013. The workgroup members maintained that the CHS program had only begun receiving substantial increases in fiscal years 2009 and 2010, and the full impact of these increases needed to be reviewed before making recommendations to change the formula. However, GAO found that IHS has used the formula to allocate program increases, at least in part, in 5 years since 2001. GAO also concluded that, because of the predominant influence of base funding and the relatively small contribution of program increases to overall CHS funding, it would take many years to achieve funding equity just by revising the methods for distributing CHS program increase funds. Further, federal law restricts IHSs ability to reallocate funding, specifically limiting reductions in funding for certain tribally-operated programs, including some CHS programs, and imposing a congressional reporting requirement for proposed reductions in base funding of 5 percent or more. According to IHS officials, no such IHS proposal to reallocate base funding has ever been transmitted to the Congress.

What GAO Recommends

GAO suggests that Congress consider requiring IHS to develop and use a new method to allocate all CHS program funds to account for variations across areas, notwithstanding any restrictions now in federal law. GAO also recommends, among other things, IHS use actual counts of CHS users in methods for allocating CHS funds. HHS concurred with two of GAOs recommendations, but did not concur with the recommendation to use actual counts of CHS users. GAO believes that its recommendation would provide a more accurate count of CHS users.