Centers opting for FTCA coverage may decide to purchase a supplemental or “gap” policy to cover events not covered by FTCA. Claimants may also file suit if HHS fails to respond to their claims within 6 months of receipt. For example, a policy with coverage limits of $1 million/$3 million will pay up to $1 million for each claim and no more than $3 million for all claims annually. More Centers Plan to Use FTCA Coverage to Reduce Their Costs

While most eligible centers did not rely on FTCA coverage during the demonstration period, centers now seem to be taking greater advantage of the opportunity to reduce their costs. During the demonstration period, all centers were required to apply for FTCA coverage but did not necessarily cancel their private comprehensive malpractice insurance. As of March 21, 1997, 452 of 716 eligible centers have applied for FTCA coverage. HRSA has told centers to cancel private comprehensive malpractice insurance when they come under FTCA but remains uncertain, as it was in the demonstration period, about which FTCA-covered centers have actually terminated that insurance and are thus not paying for duplicate coverage. Centers were also given greater assurance that the federal government would cover their claims. Of the approximately 716 centers currently eligible for this coverage, 264 of the eligible centers, or 37 percent of them, have not applied for it. Few FTCA Health Center Claims Resolved to Date

Few of the 138 FTCA claims filed against health centers since the beginning of FTCA coverage have been resolved. Although the number of FTCA claims filed against centers has increased since the demonstration period began in 1993, only five settlements have been made and all have been relatively small. HRSA Recommends Capping Payments Made on Behalf of FTCA-Covered Centers to Limit Federal Liability

HRSA has drafted a legislative proposal limiting the federal government’s liability for FTCA claims filed against migrant and community health centers. Although HRSA collected data from centers regarding their insurance costs and savings under FTCA, we found that these data were not reliable for determining whether centers canceled their private comprehensive malpractice insurance and reduced their costs. For 22 of the 32 claims involving FTCA-covered centers that have resulted in federal lawsuits, HHS had not responded to the claimants or contacted them to discuss a settlement during the 6-month period. Although the law extending FTCA coverage to centers does not direct HRSA to provide risk management, HRSA officials acknowledge both the need to minimize the federal government’s potential liability and provide risk management services to centers. The growth in FTCA coverage offers both the challenge of a greater federal liability to manage and a new opportunity to help community and migrant health centers improve the quality of their care. We are sending copies of this report to the Director of the Office of Management and Budget, the Secretary of Health and Human Services, and interested congressional committees. However, we did not independently verify the status of these claims.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the implementation of Federal Tort Claims Act (FTCA) coverage for community health centers, focusing on the: (1) health centers' use of FTCA coverage; (2) status of claims filed against FTCA-covered centers through March 21, 1997; and (3) Department of Health and Human Services' (HHS) management of FTCA for community and migrant health centers, and its efforts to reduce claims through risk management programs.

What GAO Found

GAO noted that: (1) the permanent authorization of FTCA coverage, the greater availability of supplemental policies to cover incidents not covered under FTCA, and the reports of some centers already realizing substantial savings have contributed to the willingness of many centers to now obtain FTCA coverage; (2) although the Health Resources and Services Administration (HRSA) required centers to apply for FTCA coverage during the demonstration period, centers were not compelled to cancel their private comprehensive malpractice insurance; (3) although HRSA does not have complete data on center participation during the 3-year demonstration period, it appears that most centers retained their private comprehensive malpractice insurance during this time; (4) because these centers were covered by both FTCA and their private policies, they did not reduce their insurance costs; (5) of the 716 centers eligible for FTCA coverage, 452 have elected this coverage and are now required to cancel their private comprehensive malpractice insurance; (6) despite this level of participation, a significant number of centers have not reapplied for FTCA coverage since its recent extension; (7) as of March 21, 1997, 264 of the 716 centers eligible for FTCA coverage, or 37 percent, had not applied for it; (8) since the demonstration period began in 1993, there have been 138 claims filed against FTCA-covered centers alleging damages of more than $414 million; (9) however, the actual amount of the federal government's liability for these claims is unclear; (10) as of March 21, 1997, only five claims have been settled, with total payments of $355,250; (11) at the recommendation of HHS' Office of Inspector General, HRSA developed a legislative proposal that, if enacted, would limit the federal government's liability to $1 million for claims filed against FTCA-covered centers; (12) by extending FTCA coverage to centers, the federal government has assumed potential liabilities that need oversight and careful management; (13) HHS could improve its administration of FTCA coverage for community and migrant health centers by strengthening data collection efforts and claims management practices; (14) HHS has 6 months in which to either deny a claim or make a settlement offer before a claimant may file suit in federal court; (15) for 22 of the 32 claims that have resulted in federal lawsuits, HHS had not attempted to respond to the claimants during this 6-month period; and (16) risk management services can help centers minimize liability by reducing their financial exposure to claims.