Input:
	Background

Black lung benefits include both cash assistance and medical benefits.  Maximum cash assistance payments generally ranged from about $650  to $1,300 per month in fiscal year 2017, depending on the number of  dependents the miner has. Miners receiving cash assistance are also  eligible for medical benefits that cover the treatment of their black-lung- related conditions, which may include hospital and nursing care,  rehabilitation services, and drug and equipment charges, according to  DOL documentation. DOL estimates that the average annual cost for  medical treatment in fiscal year 2017 was approximately $6,980 per  miner.
There were about 25,700 total beneficiaries (primary and dependents)  receiving black lung benefits during fiscal year 2017 (see fig. 1). The  decrease in the number of beneficiaries over time has resulted from a  combination of declining coal mining employment and an aging  beneficiary population, according to DOL officials. Further, black lung  beneficiaries could increase in the near term due to the increased  occurrence of black lung disease and its most severe form, progressive  massive fibrosis, particularly among Appalachian coal miners, according  to HHS officials.
Black lung claims are processed by DOL’s Office of Workers’  Compensation Programs. Contested claims are adjudicated by DOL’s  Office of Administrative Law Judges, which issues decisions that can be  appealed to the Benefits Review Board. Claimants and mine operators  may further appeal these agency decisions to the federal courts. If an  award is contested, claimants can receive interim benefits, which are  generally paid from the Trust Fund according to DOL officials, while their  claims are in the appeals process. Final awards are either funded by mine  operators—who are identified as the responsible employers of  claimants—or the Trust Fund, when responsible employers cannot be  identified or do not pay. In fiscal year 2017, black lung claims had an  approval rate of about 29 percent, according to DOL data. Of the 19,430  primary black lung beneficiaries receiving benefits during fiscal year 2017,  64 percent (12,464) were paid from the Trust Fund, 25 percent (4,798)  were paid by liable mine operators, and 11 percent (2,168) were receiving  interim benefits, according to DOL officials.
Black Lung Disability Trust Fund revenue is primarily obtained from mine  operators through the coal tax. The coal tax is imposed at two rates,  depending on whether the coal is extracted from underground or surface  mines. The current tax rates are $1.10 per ton of underground-mined coal  and $0.55 per ton of surface-mined coal, up to 4.4 percent of the sales  price. Therefore, if a ton of underground-mined coal is sold for less than  $25, than the tax paid would be less than $1.10. For instance, if a ton of  underground-mined coal sold for $20, than it would be taxed at 4.4  percent of the sales price, or $0.88. To a lesser extent, the Trust Fund  also receives other miscellaneous revenue from interest payments, and  various fines and penalties paid by mine operators, among other sources,  according to DOL documentation. Coal tax revenue is collected from mine  operators by Treasury’s Internal Revenue Service and then transferred to  the Trust Fund where it is then used by DOL officials to pay black lung  benefits and the costs of administering the program.
Trust Fund expenditures include, among other things, black lung benefit  payments, certain administrative costs incurred by DOL and Treasury to  administer the black lung benefits program, and debt repayments. When  necessary for the Trust Fund to make relevant expenditures under federal  law, the Trust Fund borrows from the Treasury’s general fund. When this  occurs, the federal government is essentially borrowing from itself—and  hence from the general taxpayer—to fund its benefit payments and other  expenditures.

	Multiple Factors Have Challenged Trust Fund Finances Resulting in Growing Debt

Multiple factors have challenged Trust Fund finances since it was  established about 40 years ago. Its expenditures have consistently  exceeded its revenue, interest payments have grown, and legislative  actions taken that were expected to improve Trust Fund finances did not  completely address its debt. Combined black lung benefit payments and  program administrative costs exceeded Trust Fund revenue every year  for the program’s first decade (fiscal years 1979 through 1989), resulting  in the accrual of debt. During the Trust Fund’s first three fiscal years in  particular, revenue covered less than 40 percent of the Trust Fund’s  combined benefit payments and administrative costs. For instance, in  fiscal year 1980, the Trust Fund received about $251 million in revenue  and paid about $726 million in black lung benefits and administrative  costs.
Beginning in 1982, revenue increased as a result of the Black Lung  Benefits Revenue Act of 1981 that doubled the coal tax rates from $0.50  to $1 per ton of underground-mined coal and from $0.25 to $0.50 per ton  of surface-mined coal, up to 4 percent of the sales price. Even with the  tax rate increase, combined benefit payments and administrative costs  continued to exceed revenue throughout the 1980s (see fig. 2). As a  result, the Trust Fund borrowed from Treasury’s general fund to cover the  annual differences between its expenditures and revenues, and by fiscal  year 1989 the Trust Fund’s outstanding debt to Treasury’s general fund  exceeded $3 billion.
Beginning in fiscal year 1990, Trust Fund revenue generally began to  exceed combined benefit payments and administrative costs, and, in fact,  total Trust Fund cumulative revenue collected from fiscal years 1979 through 2017 exceeded total cumulative benefit payments and  administrative costs incurred during these years. However, interest owed  from earlier years of borrowing led to more borrowing and debt. From  fiscal years 1979 through 1989, the Trust Fund borrowed—primarily  through 30-year term loans according to Treasury officials—from  Treasury’s general fund at interest rates that varied from about 6.5  percent to about 13.9 percent. In fiscal year 1985, for instance, the Trust  Fund paid about $275 million in interest, which was equal to about half of  the total revenue collected that year. Since fiscal year 1990, revenue  has generally exceeded combined benefit payments and administrative  costs, although interest payments on the Trust Fund’s outstanding debt  kept the fund in a position whereby its total expenditures continued to  exceed its total revenues. As a result, the principal amount of the Trust  Fund’s total outstanding debt to Treasury’s general fund increased and  exceeded $10 billion by fiscal year 2008.
Legislation has been enacted over the years that was expected to  improve Trust Fund finances:  In 1981, the Black Lung Benefits Revenue Act of 1981 doubled the  coal tax rates from $0.50 cents to $1 per ton of underground-mined  coal, and from $0.25 cents to $0.50 cents per ton of surface-mined  coal, up to 4 percent of the sales price (as mentioned previously).
In 1986, the Consolidated Omnibus Budget Reconciliation Act of 1985  established a 5 year moratorium on interest accrual with respect to  repayable advances to the Trust Fund (which we refer to as annual  borrowing from Treasury’s general fund), and increased the coal tax  rates to $1.10 per ton of underground-mined coal, and $0.55 per ton  of surface-mined coal (up to 4.4 percent of the sales price), where  they have remained since.
In 2008, the EIEA included provisions that were expected to eliminate  the Trust Fund’s debt. Specifically, EIEA (1) generally extended the  coal tax rates at their current rates until December 31, 2018 (after  which they are scheduled to decrease to their original levels of $0.50  per ton of underground-mined coal, and $0.25 per ton of surface- mined coal, up to 2 percent of the sales price); (2) provided for a one- time federal appropriation toward Trust Fund debt forgiveness (about  $6.5 billion, according to DOL data); and (3) provided for the  refinancing of the Trust Fund’s debt that was not forgiven as a result  of EIEA (which we refer to as the Trust Fund’s legacy debt).  Specifically, the Trust Fund’s legacy debt was refinanced with more  favorable interest rates, according to DOL data. Interest rates on the  refinanced legacy debt range from about 1.4 percent to about 4.5  percent.
The forgiveness and refinancing of Trust Fund debt along with extending  the current coal tax rates through 2018 were expected to result in annual  tax revenue that could be used to pay down interest and principal on the  Trust Fund’s legacy debt, according to DOL and Treasury officials. These  officials said that models showed that debt would be eliminated by fiscal  year 2040; however, they noted that coal tax revenue has been less than  originally projected due, in part, to the 2008 recession and increased  market competition from other energy sources. As a result, the Trust  Fund’s total expenditures continued to exceed revenue and the Trust  Fund borrowed from Treasury’s general fund each year from fiscal years  2010 through 2017 to cover debt repayments expenditures. In fiscal year  2017, the Trust Fund’s total principal amount of outstanding debt, which  includes its legacy debt and the amount borrowed from Treasury’s  general fund that year, was about $4.3 billion (see fig. 3).

	Trust Fund Borrowing Will Likely Continue to Increase through 2050, and Multiple Options Could Reduce Future Debt

		Trust Fund Borrowing Will Likely Continue to Increase through 2050

Trust Fund borrowing will likely continue to increase from fiscal years  2019 through 2050 due, in part, to the scheduled coal tax rate decrease  of about 55 percent that will take effect in 2019 and declining coal  production, according to our moderate simulation. We simulated the  effects of the scheduled 2019 tax rate decrease on Trust Fund finances  through 2050, and in this report, we generally present the results of a  moderate case set of assumptions (see table 1). These simulations are  not predictions of what will happen, but rather models of what could  happen given certain assumptions. For more information on our  simulation methodology see appendix I. In addition to the moderate case  assumptions, we also simulated how Trust Fund debt could change  through 2050 given various other assumptions, and the full range of  results for all of our simulations are presented in appendix II.
Our moderate case simulation suggests that Trust Fund revenue may  decrease, from about $485 million in fiscal year 2018 to about $298  million in fiscal year 2019, due, in part, to the scheduled approximate 55  percent decrease in the coal tax. Our simulation, which incorporates EIA  data on future expected coal production, also shows that annual Trust  Fund revenue will likely continue to decrease beyond fiscal year 2019  due, in part, to declining coal production. Domestic coal production has  declined from about 1.2 billion tons in 2008 to about 728 million tons in  2016, according to EIA. Based on these projections, our moderate  simulation shows that Trust Fund annual revenue may continue to  decrease from about $298 million in fiscal year 2019 to about $197 million  in fiscal year 2050 (see fig. 4).
With the scheduled 2019 tax rate decrease, our moderate case simulation  suggests that expected revenue will likely be insufficient to cover  combined black lung benefit payments and administrative costs, as well  as debt repayment expenditures. Specifically, our moderate case  simulation suggests that revenue may not be sufficient to cover  beneficiary payments and administrative costs from fiscal years 2020  through 2050 (see fig. 5). For instance, in fiscal year 2029, simulated  benefit payments and administrative costs will likely exceed simulated  revenue by about $99 million. These annual deficits will likely decrease  over time to about $4 million by fiscal year 2050 due, in part, to the  assumed continued net decline in total black lung beneficiaries. Our  simulation also therefore suggests that Trust Fund revenue may not be  enough to also cover the debt repayment expenditures it must continue to  make through fiscal year 2040, per the payment schedule established  following the 2008 EIEA.
Our moderate simulation suggests that the amount borrowed by the Trust  Fund will likely increase from about $1.6 billion in fiscal year 2019 to  about $15.4 billion in fiscal year 2050 (see fig. 6). Although the Trust  Fund’s legacy debt decreases through fiscal year 2040, total Trust Fund  expenditures—including combined benefit payments and administrative  costs as well as debt repayments—will likely continue to exceed revenue  which will require continued annual borrowing from Treasury’s general  fund. However, the amount borrowed by the Trust Fund could vary  depending, in part, on future coal production and the number of new  beneficiaries and could range between about $6 billion and about $27  billion in 2050, according to our simulations (see appendix II).

		Adjusting Coal Tax Rates, Forgiving Interest, and Forgiving Debt Are Options That Could Improve the Trust Fund’s Future Financial Position

We simulated three options that can affect Trust Fund finances through  fiscal year 2050. Specifically, we simulated the effects of (1) adjusting the  coal tax, (2) forgiving interest, and (3) forgiving debt. In each of the  simulations, we compared the results of the option to a baseline in which  the coal tax rates will decrease by about 55 percent, which we refer to as  the scheduled 2019 tax rate decrease. We compare interest and debt  forgiveness options to a baseline which assumes the scheduled 2019 tax  rate decrease has taken effect, and that there is no interest or debt  forgiveness. The simulated options are not intended to be exhaustive and  we are not endorsing any particular option or combination of options.

			Adjust Coal Tax Rates

Using the moderate case, we simulated four options: (1) implementing the  2019 coal tax rate reduction to $0.50 per ton of underground-mined coal  and $0.25 per ton of surface-mined coal; (2) maintaining the current coal  tax rates of $1.10 per ton for underground-mined coal and $0.55 per ton  of surface-mined coal; (3) reducing the tax rates by 25 percent (from  $1.10 and $0.55); and (4) increasing these tax rates by 25 percent (see  fig. 7). Increasing the tax rates by 25 percent was the only option that  eliminated simulated Trust Fund debt by fiscal year 2050, according to  our moderate case simulation.
We simulated three interest forgiveness options including forgiving  interest on (1) legacy debt, (2) annual borrowing, and (3) all debt. Our  moderate case simulation suggests that forgiving interest will not  eliminate simulated debt by fiscal year 2050 (see fig. 8).
We simulated two debt forgiveness options by forgiving principal and  interest on (1) legacy debt and (2) all debt. Our moderate case simulation  suggests that both debt forgiveness options would reduce simulated Trust  Fund borrowing by fiscal year 2050, but these options would not eliminate  debt altogether as simulated revenue will likely not be enough to cover  simulated expenditures (see fig. 9). In these cases, the Trust Fund will  need to continue borrowing from Treasury’s general fund to cover annual  deficits, and thus accumulate debt.
While adjusting coal tax rates and forgiving interest or debt could reduce  the Trust Fund’s simulated borrowing by 2050, implementing them could  affect the coal industry or general taxpayers, according to stakeholders  we interviewed. For instance, a coal industry representative noted that  maintaining the coal tax at its current rate would continue to burden the  coal industry and increasing the tax would exacerbate the burden at a  time when coal production has been declining. Treasury officials noted  that the costs associated with forgiving Trust Fund interest or debt would  be borne by the general taxpayer since Treasury borrows from taxpayers  to lend to the Trust Fund as needed. These officials also said that  making a one-time federal appropriation to forgive interest or debt would  be the most transparent way to satisfy the Trust Fund’s outstanding debt  to Treasury’s general fund.
In addition to the simulations, other options could affect the financial  position of the Trust Fund including reducing black lung benefits,  eliminating or adjusting the coal tax cap, or creating a variable coal tax.  Our moderate case simulation suggests that completely eliminating black  lung benefits as of fiscal year 2019 could reduce the Trust Fund’s  borrowing from Treasury’s general fund in fiscal year 2050 from about  $15.4 billion to about $6.4 billion. However, doing so would generally  mean that coal tax revenue would be collected solely to fund the  repayment of Trust Fund debt. Another option could be to eliminate or  adjust the coal tax cap, which currently prevents mine operators from  paying a coal tax of more than 4.4 percent of the price per ton of coal  sold. If the coal tax cap were eliminated, for instance, mine operators  would pay $1.10 per ton of underground-mined coal and $0. 55 per ton of  surface-mined coal regardless of price sold, which could increase  revenue. As an additional option, changing the structure of the coal tax  to flexible rates that change based on an annual actuarial assessment of  the Trust Fund could help to ensure that coal mine operators pay the  necessary amount of tax to cover Trust Fund expenditures, without  resulting in a Trust Fund balance or deficit.

		Multiple Options Could Reduce Future Trust Fund Debt and Would Distribute the Financial Burden Differently Among General Taxpayers and Industry

Multiple options could reduce the Trust Fund’s future debt and distribute  the financial burden among the coal industry and general taxpayers. We  simulated whether various coal tax and debt forgiveness options could  balance the Trust Fund by fiscal year 2050, whereby its simulated  revenue would be sufficient to cover its simulated expenditures. These  options were selected, in part, based on interviews with Trust Fund  stakeholders and the availability of DOL and other data. We approached  these simulations from two perspectives. First, we simulated how much  Trust Fund debt would need to be forgiven based on various coal tax  rates. Second, we simulated the average tax collected per ton needed to  balance the Trust Fund by 2050, based on certain debt forgiveness  options. The simulated options are not intended to be exhaustive and we  are not endorsing any particular combination of options.
Our first set of options using the moderate case simulations are based on  the current coal tax rates of $1.10 per ton of underground-mined coal and  $0.55 per ton of surface-mined coal, and show the amount of debt  forgiveness in fiscal year 2019 needed to balance the Trust Fund by fiscal  year 2050 based on certain tax rates (see fig. 10). Specifically, our  moderate case simulations show the following:  Increasing current coal tax rates by 25 percent could balance the  Trust Fund by 2050 and would likely require no debt forgiveness. For  this option, the simulated coal tax revenue would likely be sufficient to  cover simulated Trust Fund expenditures, including combined benefit  payments and administrative costs, as well as debt repayments.  However, this option would place the burden solely on the coal  industry that would be paying higher taxes at a time when coal  production has been declining.
Maintaining current coal tax rates could balance the Trust Fund by  2050 if coupled with about $2.4 billion of debt forgiveness. This option  would distribute the burden among the coal industry and general  taxpayers.
Decreasing current coal tax rates by 25 percent could balance the  Trust Fund by 2050 if coupled with about $4.8 billion in debt  forgiveness. This option would burden the coal industry less than  maintaining the current tax rates, but would increase the burden on  general taxpayers.
Decreasing current tax rates by 55 percent, which we refer to as the  scheduled 2019 tax rate decrease, would balance the Trust Fund by  2050 if coupled with about $7.8 billion in debt forgiveness. This figure  comprises the Trust Fund’s total simulated outstanding debt in fiscal  year 2019 ($6.6 billion), and an additional about $1.2 billion that would  be required because the Trust Fund will accrue additional debt from  fiscal years 2020 through 2050, according to our moderate case  simulations. The coal industry would bear some of the financial  burden of this option, while also placing a financial burden on general  taxpayers.
Our second set of options using moderate case simulations show the  change in average coal tax revenue collected per ton to balance the Trust  Fund by fiscal year 2050 based on certain debt forgiveness options (see  fig. 11). Specifically, our moderate simulations show the following:
Forgiving the Trust Fund’s legacy debt would allow for an average tax  collected of about $0.59 per ton to balance the Trust Fund by 2050.  Based on certain assumptions, this could be accomplished with a tax  of $0.88 per ton on underground-mined coal and $0.44 per ton on  surface-mined coal.
Forgiving all Trust Fund debt would allow for an average tax collected  per ton of coal sold of $0.47 per ton to balance the Trust Fund by  2050. Based on certain assumptions, this could be accomplished with  a tax of $0.70 per ton on underground-mined coal and a tax of $0.35  per ton of surface-mined coal.

	Agency Comments

We provided a draft of this report to the Departments of Labor (DOL),  Treasury, and Health and Human Services (HHS) for review and  comment. DOL, Treasury, and HHS provided technical comments, which  we incorporated as appropriate.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time we will send copies of this report to the  appropriate congressional committees, the Secretaries of Labor,  Treasury, and Health and Human Services, and other interested parties.  In addition, the report will be available at no charge on GAO’s web site at  http://www.gao.gov.
If you or your staff should have any questions about this report, please  contact me at (202) 512-7215 or brownbarnesc@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 key  contributions to this report are listed in appendix III.

Appendix I: Black Lung Disability Trust Fund Simulation Methodology

We examined the extent to which (1) Black Lung Disability Trust Fund  (Trust Fund) debt may change through 2050 and (2) selected options to  improve its future financial position. We interviewed officials from the  Departments of Labor (DOL), Treasury, and Health and Human Services  (HHS), as well as representatives from the National Mining Association  and the United Mine Workers of America. We then selected options to  simulate based, in part, on these interviews and the availability of DOL  and other data. These options included adjusting the coal tax, forgiving  interest on some or all Trust Fund debt, forgiving some or all Trust Fund  debt, or various combinations of these options. The options we simulated  are not intended to be exhaustive and we are not endorsing any particular  option or combination of options. Our simulations are based on various  assumptions and simulate Trust Fund revenues and expenditures from  fiscal years 2016 through 2050. To develop these simulations, we used  actual and projection data from (1) DOL for fiscal years 2015 through  2040; (2) Treasury’s Office of Tax Analysis for fiscal years 2011 through  2015; (3) the Department of Energy’s Energy Information Administration  (EIA) for calendar years 2015 through 2050; and (4) the Office of  Management and Budget for fiscal year 2017.

	Black Lung Benefit Expenditures

To simulate future Trust Fund benefit expenditures, we simulated the  number of beneficiaries each fiscal year, and the annual average amount  of benefits received (cash assistance and medical benefits). To simulate  the numbers of beneficiaries, we used DOL data on the (1) age  distributions of miner and widow beneficiaries for fiscal year 2015; (2)  mortality rates by age for miner and widow beneficiaries as of fiscal year  2015; and (3) numbers of beneficiaries—including married miners, single  miners, widows, and miners receiving medical benefits only—in fiscal  year 2015. We assumed—as DOL does in its Black Lung Budget and  Liability Model—that all miners are men, all widows are women, and all  spouses are 3 years younger than the miner. We also assumed that the  age distribution of single miners is the same as for married miners, and  that the age distribution of new miner and widow beneficiaries is the same  as for miner and widow beneficiaries during fiscal year 2015. We used  DOL’s mortality rates to simulate the number of beneficiaries of each age  and type in each year, and used those numbers to then simulate the total  number of beneficiaries of each type each year (see table 2).
We also assumed that there will be no new medical-benefit-only recipients.
Formula  The number of married miner beneficiaries age a in fiscal year y is equal to the number of new  married miner beneficiaries age a in fiscal year y plus the number of married miner  beneficiaries age a-1 in fiscal year y-1 who survived and whose spouse survived. The total  number of married miner beneficiaries in fiscal year y is then the sum of the number of married  miner beneficiaries of all ages in fiscal year y. Finally, we averaged the number of married  miner beneficiaries by averaging the prior fiscal year’s total and the current fiscal year’s total.
The number of single miner beneficiaries age a in fiscal year y is equal to the number of new  single miner beneficiaries age a in fiscal year y plus the number of single miner beneficiaries  age a-1 in fiscal year y-1 who survived plus the number of married miner beneficiaries age a-1  in fiscal year y-1 who survived but whose spouse did not survive. The total number of single  miner beneficiaries in fiscal year y is then the sum of the number of single miner beneficiaries  of all ages in fiscal year y. Finally, we averaged the number of single miner beneficiaries by  averaging the prior fiscal year’s total and the current fiscal year’s total.
The number of widow beneficiaries age a in fiscal year y is equal to the number of new  beneficiaries who are widows age a in fiscal year y plus the number of widow beneficiaries age  a-1 in fiscal year y-1 who survived plus the number of married miner beneficiaries age a+2 in  fiscal year y-1 who did not survive but whose spouse did survive. The total number of widow  beneficiaries in fiscal year y is then the sum of the number of widow beneficiaries of all ages in  fiscal year y. Finally, we averaged the number of widow beneficiaries by averaging the prior  fiscal year’s total and the current fiscal year’s total.
The number of MBO beneficiaries of age a in fiscal year y is equal to the number of MBO  beneficiaries of age a-1 in fiscal year y-1 who survived. The total number of MBO beneficiaries  only in fiscal year y is then the sum of the number of MBO beneficiaries of all ages in fiscal  year y. Finally, we averaged the number of MBO beneficiaries by averaging the prior fiscal  year’s total and the current fiscal year’s total.

	Coal Tax Revenues

To simulate future coal tax revenue, we used Treasury and EIA data to  calculate (1) the amounts of underground and surface-mined coal taxed  at fixed dollar amounts of $1.10 and $0.55 per ton, respectively, in 2015;  (2) the amounts of underground and surface-mined coal taxed at variable  dollar amounts per ton equal to 4.4 percent of the price in 2015; and (3)  average prices of underground and surface-mined coal taxed at 4.4  percent of the price in 2015. We then used EIA data on projected  amounts of total coal production, underground-mined coal production,  lignite coal production, and coal exports, as well as projected average  coal prices, for the period from 2015 through 2050 to simulate future coal  tax revenues (see table 3).
We simulated other Trust Fund expenditures and revenues, including  administrative costs and debt repayments (see table 4). For our  simulations, total Trust Fund expenditures are the sum of black lung  benefits (cash assistance and medical benefits), total administrative  costs, repayment of interest and principal on outstanding debt to  Treasury’s general fund, and other expenditures. Total Trust Fund  revenues are the sum of coal tax revenue and other miscellaneous  revenue, and exclude annual borrowing from Treasury’s general fund.  Annual borrowing from Treasury’s general fund is the difference between  total Trust Fund expenditures and revenues and is assumed to be repaid  with interest the following year. If total revenues are greater than total  expenditures, then the Trust Fund has a balance and would not have to  borrow that year. In this case, we assumed that the Trust Fund will earn  interest on that balance at the same rate on which interest would accrue  on annual borrowing.
We simulated how the scheduled 2019 tax rate decrease and various  options including adjusting the coal tax, forgiving debt interest, and  forgiving debt principal and interest may affect Trust Fund finances  through fiscal year 2050 (see table 5). The options listed are not intended  to be exhaustive and we are not endorsing any particular option or  combination of options.
We simulated option combinations for coal tax rates, interest forgiveness,  and debt forgiveness to demonstrate how potential financial adjustments  could affect future Trust Fund borrowing from Treasury’s general fund  through fiscal year 2050. For options that involve adjusting coal tax rates,  we estimated the amount of debt that would need to be forgiven in fiscal  year 2019 for the Trust Fund’s revenues to be sufficient to cover its  expenditures through fiscal year 2050, assuming the Trust Fund does not  borrow from Treasury’s general fund after fiscal year 2018. To do so, we  first calculated the real discounted present value of Trust Fund  expenditures for fiscal years 2019 through 2050, including benefit  payments, administrative costs, legacy debt repayments, and repayment  of annual borrowing from Treasury’s general fund. Second, we calculated  the real discounted present value of Trust Fund revenue for the same  period, including coal tax revenue and other miscellaneous revenue.  Third, we calculated debt forgiveness as the difference between the real  discounted present value of Trust Fund expenditures from the first  calculation and the real discounted present value of Trust Fund revenues  from the second calculation. When the amount of debt forgiveness is  greater than the amount of debt outstanding, the Trust Fund would need  an additional cash inflow in addition to forgiveness of all outstanding debt.  Amounts of debt forgiveness less than zero suggest that no debt  forgiveness is required.
For options involving forgiving debt (interest or principal), we estimated  the average tax per ton of coal that, if implemented in fiscal year 2019,  would provide the Trust Fund sufficient revenue to cover its expenditures  through fiscal year 2050, assuming the Trust Fund does not receive any  advances from Treasury’s general fund after fiscal year 2018. To do so,  we first calculated the real discounted present value of Trust Fund  expenditures for the period from fiscal year 2019 through fiscal year 2050,  again including benefit payments, administrative costs, legacy debt  repayments, and repayment of annual borrowing from Treasury’s general  fund, minus the real discounted present value of miscellaneous revenues  for the same period. Second, we calculated the real discounted present  value of coal production for the same period. Third, we calculated the  average tax per ton of coal as the first amount divided by the second  amount.
To assess the sensitivity of each option, we ran each simulation 36 times  using four different sets of assumptions about the numbers of future  beneficiaries and nine different sets of assumptions about future coal production and prices (see table 6). Doing so provided a range of  estimates about the Trust Fund’s future borrowing needs and provided  insight on the sensitivity of its overall financial position relative to its  various expenditures and revenues. The analysis also provided a range  of estimates of the amount of debt forgiveness needed to bring the Trust  Fund into balance by fiscal year 2050, assuming various coal tax rates,  and the average tax collection per ton needed to do the same, and  assuming various amounts of debt forgiveness.
From the range of estimates that resulted from our sensitivity analysis, we  selected cases with moderate expectations related to future Trust Fund  expenditures and revenue. Specifically, for future expenditures, we  assumed an average growth rate of new black lung beneficiaries for fiscal  years 2003 through 2015 as a moderate case that reflects historical  experience. For future revenue, we used a moderate coal production  outlook based on EIA’s reference case, which reflects moderate  expectations about future coal production based on various assumptions  about economic growth, oil prices, technological innovation, and energy  policy.

Appendix II: Results of GAO’s Black Lung Disability Trust Fund Simulations

We summarized the results of our simulations by showing the extent to  which the Black Lung Disability Trust Fund’s (Trust Fund) balance—the  sum of tax revenue and miscellaneous revenue less expenditures—may  change in fiscal year 2050 for each option simulated. For example, with  the scheduled 2019 tax rate decrease, our moderate case simulations  suggest that the Trust Fund would likely have a deficit in fiscal year 2050  of about $15.4 billion.
Multiple options could reduce the Trust Fund’s future debt and distribute  the financial burden among the coal industry and general taxpayers. We  simulated how various coal tax and debt forgiveness options could  balance the Trust Fund by fiscal year 2050, whereby its simulated  revenue would be sufficient to cover its simulated expenditures. We  approached these simulations from two perspectives. First, we simulated  how much Trust Fund debt would need to be forgiven based on various  coal tax rates. Second, we simulated the average tax collected per ton  needed to balance the Trust Fund by 2050, based on certain debt  forgiveness options.
For our first set of simulations, we calculated the amount of debt  outstanding in fiscal year 2019 and the amount that would likely need to  be forgiven in fiscal year 2019 for the Trust Fund to have sufficient  revenues to cover its expenditures by fiscal year 2050, assuming that it  does not borrow from Treasury’s general fund after fiscal year 2018. For  example, before any options are implemented, our moderate case  simulations suggest that the Trust Fund’s outstanding debt in fiscal year  2019—including both legacy debt and annual borrowing from Treasury’s  general fund—would likely be about $6.6 billion (after discounting and  adjusting for inflation). Therefore, with implementation of the coal tax rate  decrease of about 55 percent as scheduled in calendar year 2019, about  117.7 percent of that debt would need to be forgiven to balance the Trust  Fund. In other words, balancing the Trust Fund would require forgiveness  of $6.6 billion and an additional cash inflow of about $1.2 billion because  the Trust Fund will accrue additional debt from fiscal years 2020 through  2050, according to our moderate case simulations (see table 8).
For our second set of simulations, we estimated the average tax per ton  of coal that, if implemented in fiscal year 2019, would likely provide the  Trust Fund sufficient revenues to cover its expenditures in fiscal year  2050, assuming that it does not borrow from Treasury’s general fund after  fiscal year 2018. For example, if all principal and interest on Trust Fund  legacy debt is forgiven, as of 2019, the estimated average tax that  balances the Trust Fund is about $0.59 per ton (see table 9). Based on  certain assumptions, this could be accomplished with a tax of $0.88 per  ton on underground-mined coal and $0.44 per ton on surface-mined  coal.

Appendix III: GAO Contact and Staff Acknowledgments

	GAO Contact

	Staff Acknowledgments

In addition to the contact named above, Blake Ainsworth (Assistant  Director), Justin Dunleavy (analyst-in-charge), Angeline Bickner,  Courtney LaFountain, and Rosemary Torres Lerma made key  contributions to this report. Also contributing to this report were James  Bennett, Melinda Bowman, Lilia Chaidez, Caitlin Cusati, Holly Dye, Alex  Galuten, Carol Henn, John Lack, Emei Li, Almeta Spencer, Kate van  Gelder, and Shana Wallace.

Output:
Why GAO Did This Study

With revenue of about $450 million in fiscal year 2017, the Trust Fund paid about $184 million in benefits to more than 25,000 coal miners and eligible dependents. However, the Trust Fund also borrowed about $1.3 billion from the Treasury's general fund in fiscal year 2017 to cover its debt repayment expenditures. Adding to this financial challenge, the coal tax that supports the Trust Fund is scheduled to decrease by about 55 percent beginning in 2019. GAO was asked to review the financial positon of the Trust Fund and identify options to improve it.
This report examines (1) factors that have challenged the financial position of the Trust Fund since its inception and (2) the extent to which Trust Fund debt may change through 2050, and selected options that could improve its future financial position. GAO reviewed Trust Fund financial data from fiscal years 1979 through 2017. GAO also interviewed officials from the Departments of Labor, Treasury, Health and Human Services (HHS) and representatives of coal industry and union groups. Using assumptions, such as the about 55 percent coal tax decrease and moderately declining coal production, GAO simulated the extent to which Trust Fund debt may change through 2050. GAO also simulated how selected options, such as forgiveness of debt, could improve finances. The options simulated are not intended to be exhaustive. Further, GAO is not endorsing any particular option or combination of options.
GAO provided a draft of this report to DOL, Treasury, and HHS. The agencies provided technical comments, which were incorporated as appropriate.

What GAO Found

Multiple factors have challenged Black Lung Disability Trust Fund (Trust Fund) finances since it was established about 40 years ago. Its expenditures have consistently exceeded its revenues, interest payments have grown, and actions taken that were expected to improve Trust Fund finances did not completely address its debt. When necessary to make expenditures, the Trust Fund borrows with interest from the Department of the Treasury's (Treasury) general fund. Because Trust Fund expenditures have consistently exceeded revenue, it has borrowed almost every year since 1979, its first complete fiscal year, and as a result debt and interest payments increased. Legislative actions were taken over the years including (1) raising the rate of the coal tax that provides Trust Fund revenues and (2) forgiving debt. For example, the Energy Improvement and Extension Act of 2008 provided an appropriation toward Trust Fund debt forgiveness; about $6.5 billion was forgiven, according to Department of Labor (DOL) data (see figure). However, coal tax revenues were less than expected due, in part, to the 2008 recession and increased competition from other energy sources, according to DOL and Treasury officials. As a result, the Trust Fund continued to borrow from Treasury's general fund from fiscal years 2010 through 2017 to cover debt repayment expenditures.
GAO's simulation suggests that Trust Fund borrowing will likely increase from fiscal years 2019 through 2050 due, in part, to the coal tax rate decrease of about 55 percent that will take effect in 2019 and declining coal production. The simulation estimates that Trust Fund borrowing may exceed $15 billion by 2050 (see figure). However, various options, such as adjusting the coal tax and forgiving interest or debt, could reduce future borrowing and improve the Trust Fund's financial position. For example, maintaining the current coal tax rates and forgiving debt of $2.4 billion could, under certain circumstances, balance the Trust Fund by 2050, whereby revenue would be sufficient to cover expenditures. However, a coal industry representative said that maintaining or increasing the coal tax would burden the coal industry, particularly at a time when coal production has been declining. Further, Treasury officials noted that the costs associated with forgiving Trust Fund interest or debt would be paid by taxpayers.


Input:
	Selected VA Medical Centers’ Reviews of Providers’ Clinical Care Were Not Always Documented or Timely

We found that from October 2013 through March 2017, the five selected  VA medical centers required reviews of a total of 148 providers’ clinical  care after concerns were raised about their care, but officials at these  medical centers could not provide documentation to show that almost half  of these reviews were conducted. We found that all five VA medical  centers lacked at least some documentation of the reviews they told us  they conducted, and in some cases, we found that the required reviews  were not conducted at all. Specifically, across the five VA medical  centers, we found the following:
The medical centers lacked documentation showing that one type of  review—focused professional practice evaluations (FPPE) for  cause—had been conducted for 26 providers after concerns had been  raised about their care. FPPEs for cause are reviews of providers’  care over a specified period of time, during which the provider  continues to see patients and has the opportunity to demonstrate  improvement. Documentation of these reviews is explicitly required  under VHA policy. Additionally, VA medical center officials confirmed  that FPPEs for cause that were required for another 21 providers  were never conducted.
The medical centers lacked documentation showing that retrospective  reviews—which assess the care previously delivered by a provider  during a specific period of time— had been conducted for 8 providers  after concerns had been raised about their clinical care.
One medical center lacked documentation showing that reviews had  been conducted for another 12 providers after concerns had been  raised about their care. In the absence of any documentation, we  were unable to identify the types of reviews, if any, that were  conducted for these 12 providers.
We also found that the five selected VA medical centers did not always  conduct reviews of providers’ clinical care in a timely manner. Specifically,  of the 148 providers, the VA medical centers did not initiate reviews of 16  providers for 3 months, and in some cases, for multiple years, after  concerns had been raised about the providers’ care. In a few of these  cases, additional concerns about the providers’ clinical care were raised  before the reviews began.
We found that two factors were largely responsible for the inadequate  documentation and untimely reviews of providers’ clinical care we  identified at the selected VA medical centers.
First, VHA policy does not require VA medical centers to document all types of reviews of providers’ clinical care, including retrospective reviews, and VHA has not established a timeliness requirement for initiating reviews of providers’ clinical care.
Second, VHA’s oversight of the reviews of providers’ clinical care is  inadequate. Under VHA policy, networks are responsible for  overseeing the credentialing and privileging processes at their  respective VA medical centers. While reviews of providers’ clinical  care after concerns are raised are a component of credentialing and  privileging, we found that none of the network officials we spoke with  described any routine oversight of such reviews. This may be in part  because the standardized tool that VHA requires the networks to use  during their routine audits does not direct network officials to ensure  that all reviews of providers’ clinical care have been conducted and  documented. Further, some of the VISN officials we interviewed told  us they were not using the standardized audit tool as required.
Without adequate documentation and timely completion of reviews of  providers’ clinical care, VA medical center officials lack the information  they need to make decisions about providers’ privileges, including  whether or not to take adverse privileging actions against providers.  Furthermore, because of its inadequate oversight, VHA lacks reasonable  assurance that VA medical center officials are reviewing all providers  about whom clinical care concerns have been raised and are taking  adverse privileging actions against the providers when appropriate. To  address these shortcomings, we recommended that VHA 1) require  documentation of all reviews of providers’ clinical care after concerns  have been raised, 2) establish a timeliness requirement for initiating such  reviews, and 3) strengthen its oversight by requiring networks to oversee  VA medical centers to ensure that such reviews are documented and  initiated in a timely manner. VA concurred with these recommendations  and described plans for VHA to revise existing policy and update the  standardized audit tool used by the networks to include more  comprehensive oversight of VA medical centers’ reviews of providers’  clinical care after concerns have been raised.

	Selected VA Medical Centers Did Not Report All Providers to the NPDB or to State Licensing Boards as Required

We found that from October 2013 through March 2017, the five VA  medical centers we reviewed had only reported one of nine providers  required to be reported to the NPDB under VHA policy. These nine  providers either had adverse privileging actions taken against them or  resigned or retired while under investigation before an adverse privileging  action could be taken. None of these nine providers were reported to  state licensing boards as required by VHA policy.
The VA medical centers documented that these nine providers had  significant clinical deficiencies that sometimes resulted in adverse  outcomes for veterans. For example, the documentation shows that one  provider’s surgical incompetence resulted in numerous repeat surgeries  for veterans. Another provider’s opportunity to improve through an FPPE  for cause had to be halted and the provider was removed from providing  care after only a week due to concerns that continuing the review would  potentially harm patients.
In addition to these nine providers, one VA medical center terminated the  services of four contract providers based on deficiencies in the providers’  clinical performance, but the facility did not follow any of the required  steps for reporting providers to the NPDB or relevant state licensing  boards. This is concerning, given that the VA medical center documented  that one of these providers was terminated for cause related to patient  abuse after only 2 weeks of work at the facility.
Two of the five VA medical centers we reviewed each reported one  provider to the state licensing boards for failing to meet generally  accepted standards of clinical practice to the point that it raised concerns  for the safety of veterans. However, we found that the medical centers’  reporting to the state licensing board took over 500 days to complete in  both cases, which was significantly longer than the 100 days suggested in  VHA policy.
Across the five VA medical centers, we found that providers were not  reported to the NPDB and state licensing boards as required for two  reasons.
First, VA medical center officials were generally not familiar with or  misinterpreted VHA policies related to NPDB and state licensing board  reporting. For example, at one VA medical center, we found that  officials failed to report six providers to the NPDB because they were  unaware that they had been delegated responsibility for NPDB  reporting. Officials at two other VA medical centers incorrectly told us  that VHA cannot report contract providers to the NDPB. At another VA  medical facility, officials did not report a provider to the NPDB or to any  of the state licensing boards where the provider held a medical license  because medical center officials learned that one state licensing board  had already found out about the issue independently. Therefore, VA  officials did not believe that they needed to report the provider. This  misinterpretation of VHA policy meant that the NPDB and the state  licensing boards in other states where the provider held licenses were  not alerted to concerns about the provider’s clinical practice.
Second, VHA policy does not require the networks to oversee whether VA medical centers are reporting providers to the NPDB or state licensing boards when warranted. We found, for example, that network officials were unaware of situations in which VA medical center officials failed to report providers to the NPDB. We concluded that VHA lacks reasonable assurance that all providers who should be reported to these entities are reported.
VHA’s failure to report providers to the NPDB and state licensing boards  as required facilitates providers who provide substandard care at one  facility obtaining privileges at another VA medical center or at hospitals  outside of VA’s health care system. We found several cases of this  occurring among the providers who were not reported to the NPDB or  state licensing boards by the five VA medical centers we reviewed. For  example, we found that two of the four contract providers whose contracts  were terminated for clinical deficiencies remained eligible to provide care  to veterans outside of that VA medical center. At the time of our review,  one of these providers held privileges at another VA medical center, and  another participated in the network of providers that can provide care for  veterans in the community. We also found that a provider who was not  reported as required to the NPDB during the period we reviewed had their  privileges revoked 2 years later by a non-VA hospital in the same city for  the same reason the provider was under investigation at the VA medical  center. Officials at this VA medical center did not report this provider  following a settlement agreement under which the provider agreed to  resign. A committee within the VA medical center had recommended that  the provider’s privileges be revoked prior to the agreement. There was no  documentation of the reasons why this provider was not reported to the  NPDB under VHA policy.
To improve VA medical centers’ reporting of providers to the NPDB and  state licensing boards and VHA oversight of these processes, we  recommended that VHA require its networks to establish a process for   overseeing VA medical centers to ensure they are reporting to the NPDB  and to state licensing boards and to ensure that this reporting is timely.  VA concurred with this recommendation and told us that it plans to  include oversight of timely reporting to the NPDB and state licensing  boards as part of the standard audit tool used by the networks.

	GAO Contact and Staff Acknowledgments

If you or your staff members have any questions concerning this  testimony, please contact me at (202) 512-7114 (williamsonr@gao.gov).  Contact points for our Office of Congressional Relations and Public  Affairs may be found on the last page of this statement. Other individuals  who made key contributions to this testimony include Marcia A. Mann  (Assistant Director), Kaitlin M. McConnell (Analyst-in-Charge), Summar  C. Corley, Krister Friday, and Jacquelyn Hamilton.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.

Output:
Why GAO Did This Study

This testimony summarizes the information contained in GAO's November 2017 report, entitled VA Health Care: Improved Policies and Oversight Needed for Reviewing and Reporting Providers for Quality and Safety Concerns ( GAO-18-63 ).

What GAO Found

Department of Veterans Affairs (VA) medical center (VAMC) officials are responsible for reviewing the clinical care delivered by their privileged providers—physicians and dentists who are approved to independently perform specific services—after concerns are raised. The five VAMCs GAO selected for review collectively required review of 148 providers from October 2013 through March 2017 after concerns were raised about their clinical care. GAO found that these reviews were not always documented or conducted in a timely manner. GAO identified these providers by reviewing meeting minutes from the committee responsible for requiring these types of reviews at the respective VAMCs, and through interviews with VAMC officials. The selected VAMCs were unable to provide documentation of these reviews for almost half of the 148 providers. Additionally, the VAMCs did not start the reviews of 16 providers for 3 months to multiple years after the concerns were identified. GAO found that VHA policies do not require documentation of all types of clinical care reviews and do not establish timeliness requirements. GAO also found that the Veterans Health Administration (VHA) does not adequately oversee these reviews at VAMCs through its Veterans Integrated Service Networks (VISN), which are responsible for overseeing the VAMCs. Without documentation and timely reviews of providers' clinical care, VAMC officials may lack information needed to reasonably ensure that VA providers are competent to provide safe, high quality care to veterans and to make appropriate decisions about these providers' privileges.
GAO also found that from October 2013 through March 2017, the five selected VAMCs did not report most of the providers who should have been reported to the National Practitioner Data Bank (NPDB) or state licensing boards (SLB) in accordance with VHA policy. The NPDB is an electronic repository for critical information about the professional conduct and competence of providers. GAO found that
selected VAMCs did not report to the NPDB eight of nine providers who had adverse privileging actions taken against them or who resigned during an investigation related to professional competence or conduct, as required by VHA policy, and
none of these nine providers had been reported to SLBs.
GAO found that officials at the selected VAMCs misinterpreted or were not aware of VHA policies and guidance related to NPDB and SLB reporting processes resulting in providers not being reported. GAO also found that VHA and the VISNs do not conduct adequate oversight of NPDB and SLB reporting practices and cannot reasonably ensure appropriate reporting of providers. As a result, VHA's ability to provide safe, high quality care to veterans is hindered because other VAMCs, as well as non-VA health care entities, will be unaware of serious concerns raised about a provider's care. For example, GAO found that after one VAMC failed to report to the NPDB or SLBs a provider who resigned to avoid an adverse privileging action, a non-VA hospital in the same city took an adverse privileging action against that same provider for the same reason 2 years later.