Input:
	Background

After the Cold War, DOD’s base structure was larger than required to meet changing national security needs. Consequently, the Congress enacted two separate laws that instituted base closure rounds in 1988, 1991, 1993, and 1995. Through these four BRAC rounds, DOD has closed or scheduled to close 311 bases, installations, and activities and realigned or planned to realign an additional 112 bases. Table 1 shows the number of closures and realignments for each BRAC round.
As a result of military base downsizing, DOD has had to phase down base operations, expedite the sale or transfer of unneeded base property for future reuse, properly account for cost and savings attributable to base closures, and perform environmental cleanup of contaminated property no longer needed. Because of congressional interest in the impact of base closures on DOD and affected states and communities, we have issued several reports on these issues. In August 1996, we reported on the status of bases closed during the BRAC 1988, 1991, and 1993 rounds. In February 1995, we reported on the environmental impact at DOD closing bases. In November 1994 and August 1995, we reported on property reuse issues arising from the BRAC 1988 and 1991 rounds. In March 1993 and April 1996, we reported on BRAC cost and savings issues.
The severity of contamination at a large number of BRAC bases has turned environmental cleanup into a major challenge for DOD. Before BRAC, DOD had begun addressing environmental contamination at its active military bases through ongoing compliance and restoration programs. Types of hazardous waste found at military installations include solvents and corrosives; paint strippers and thinners; metals, such as lead, cadmium, and chromium; and unique military substances, such as nerve agents and unexploded ordnance. Contamination has usually resulted from storage and disposal practices that were accepted at the time but which have proved damaging to the environment.
Cleanup issues faced at closing bases are similar to those at active bases. Base closures have underscored the importance and urgency of environmental cleanup. Because cleanup is, in most instances, a prerequisite for the title transfer of BRAC property to nonfederal parties, DOD must begin to address environmental issues early in the closure process to expedite property transfer. In doing so, DOD must comply with existing federal and state laws and regulations. Two federal environmental statutes—the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Resource Conservation and Recovery Act (RCRA)—and state laws and regulations govern most of the environmental compliance and restoration activities at closing bases. In general, CERCLA governs the cleanup of inactive waste sites, and RCRA regulates the management of facilities that treat, store, and dispose of hazardous wastes. Appendix I summarizes selected federal and state laws and regulations pertinent to BRAC environmental cleanup.
The Congress established separate BRAC funding accounts to help ensure that DOD could devote high-priority attention to base closure and property transfer. Although the Congress appropriates overall funding for BRAC based on DOD budget requests and not directly for environmental cleanup purposes, it may specify either maximum (ceiling) or minimum (floor) dollar amounts to be used for environmental efforts in any given budget year. DOD uses overall BRAC appropriations to allocate funds to the services based on requirements in each of several BRAC subaccounts, including the environmental subaccount. This subaccount includes multiyear funding for each of the BRAC rounds, thereby allowing the services greater flexibility in executing the environmental cleanup program. Further, with a floor, unneeded funds from other BRAC subaccounts may be transferred into the environmental subaccount throughout the year. With a ceiling, environmental funding can be shifted into other subaccounts. We review BRAC budget account issues on an annual basis; we issued our latest report in July 1996 on the validity of DOD’s fiscal year 1997 BRAC budget submission.

	Environmental Cleanup Is Costly

The cleanup of contaminated base property has been costly, and with the majority of base cleanup work still to be done, costs will continue to grow. Although $3.4 billion had been allocated for BRAC environmental cleanup through March 1996, it is likely that costs will exceed $11 billion before cleanups are completed well into the next century. In the earlier years of the BRAC program, the Congress had expressed concern about DOD’s slow progress in obligating funds for environmental cleanup. Our analysis shows that in recent years DOD has greatly increased the rate at which it has obligated funds. As of September 1995, for example, DOD had obligated 96 percent of available funds, which was substantially higher than the 50-percent rate 2 years earlier.
Through March 1996, DOD had allocated $3.4 billion, obligated $2.8 billion, and expended $1.6 billion on BRAC environmental cleanup. Tables 2 and 3 show these amounts by BRAC round and military component, respectively.
Appendix II provides additional detail on allocations, obligations, and expenditures by military component for each BRAC round.

		Estimated BRAC Environmental Program Costs Will Be Substantial

The estimated cost for the BRAC environmental cleanup program is uncertain but will be much higher than amounts allocated thus far. The $3.4 billion allocation through March 1996 included only initial funding for BRAC 1995 bases and was insufficient to complete cleanup at prior round BRAC bases. Even though the Congress has established a 6-year period for closing a base, there are no statutory deadlines for the cleanup process. All indicators point to cleanups extending well into the next century. At the time of our review, DOD did not have a total BRAC environmental cleanup cost but was in the process of collecting the data to make such a projection. Our analysis showed that many base cleanups are expected to be very costly. Available DOD data indicate, for example, that cleanup costs for 27 closing bases will likely exceed $100 million each. Further, with the use of available DOD financial data, we estimate that the total cost is likely to exceed $11 billion, as shown in table 4.
Our total cost estimate was based on the best available data at the time of our review, but we believe the estimate is likely to be conservative for several reasons. First, environmental cleanup cost estimates for many of the 1995 BRAC bases are based on projected costs developed while they were active installations. DOD officials told us that cost estimates for these bases would likely increase as additional environmental studies are performed, more work is identified, and cleanup timelines are accelerated. Second, according to DOD officials, certain Navy and Air Force environmental compliance costs that are funded under the BRAC program are not included in the above estimate. Finally, previous DOD estimates were generally understated. For example, in September 1994, DOD reported that it would cost about an additional $3.1 billion to complete base-level environmental cleanups of its 1988, 1991, and 1993 BRAC bases. However, in September 1995, that estimate had increased to $4.7 billion.

		Obligations Have Increased Recently, but Significant Funding Remains Unexpended

In recent years, DOD has significantly increased the rate at which it has obligated environmental funds for the BRAC program. As shown in figure 1, DOD obligated $2.5 billion, or 96 percent, of the $2.6 billion available for the BRAC environmental program as of September 1995. In comparison, DOD had obligated 50 percent of the funding available in September 1993. Low obligation rates in the early years of the BRAC program raised concerns on the part of the Congress.
DOD officials offered a variety of reasons for the low obligation rate in the early BRAC years and the high obligation rate in recent years. First, during the early BRAC years, DOD officials acknowledged they (1) were probably overly optimistic in the level of funds requested, (2) did not have all the necessary expertise to better estimate requirements and timing, and (3) were slow in actually obligating funds through existing contract mechanisms. Second, because BRAC funds are available for use on a multiyear basis, there was no overriding pressure to quickly obligate funds. Due in large part to heightened congressional interest in the issue, however, DOD made a concerted effort to increase obligations. Further, with the expiration of BRAC 1988 funds on September 30, 1995, DOD focused its attention on obligating as much of the available money as possible for remaining BRAC 1988 cleanup requirements.
Although the obligation rate has increased and the relative amount of unobligated funds has decreased, a large unexpended balance of funds remains. As of September 1995, BRAC environmental expenditures were about 48 percent of obligations—a modest increase from the 34-percent rate existing in September 1993. DOD officials told us that the large amount of unexpended funds was typical of other environmental programs and were relatively low because of (1) widespread service use of large cost-reimbursable contracts for environmental work where major projects are in the early stages and (2) the lag involved in contractor payments and subsequent reporting in the financial system. DOD officials also told us that the services had been able to obligate funds quicker through the use of large cost-reimbursable contracts than through previous contracting vehicles. However, because the contracts are often for time-consuming studies or site cleanups, expenditures have a tendency to lag well behind the obligated amounts.
Further, the gap between expenditures and obligations has widened, since many projects are deferred or planned for execution in later years. As this practice continues, there is greater uncertainty as to when and how much of the funds will actually be spent. Charleston Naval Shipyard officials, for example, told us they were expending funds at a slower rate than expected because of uncertain cleanup requirements and state regulatory reviews that were delaying many contracted site contamination surveys. In addition, at Pease Air Force Base, BRAC officials, citing that available BRAC 1988 funds were due to expire, obligated about $8 million in September 1995 for future environmental monitoring and operating requirements extending into fiscal year 1998. The amount of this money that will actually be spent will not be known for several years.

	Key Factors Drive the High Cost of Cleanup

Our review of selected base closure sites and other analysis showed that BRAC environmental costs are driven by several key factors. Among these factors are (1) the large number of contaminated sites and associated extent of contamination, (2) the requirements of federal and state environmental laws and regulations, (3) the lack of cost-effective cleanup technology, and (4) property reuse plans.

		Identifying Full Extent of Contamination at BRAC Sites Is Difficult and Costly

The sheer magnitude of the BRAC program, coupled with the severe soil and water contamination that has developed over decades of base operations, is a key cause for the high cost of cleanup. The closing bases have a large number of contaminated sites, and it often becomes very difficult and costly to determine the full extent and severity of site contamination. Further, the number of BRAC contaminated sites has grown as more bases have been selected for closure and additional contaminated sites have been identified. In addition, further study often reveals a number of areas of environmental concern on the bases, thereby increasing fund expenditures to resolve the concerns. DOD officials told us that typically after a base is slated for closure, the likelihood increases that additional contaminated sites will be identified as more investigative work is performed. For example, before the closure of Pease Air Force Base, Air Force officials had identified 18 contaminated sites; as the closure process progressed and more investigative work was performed, the number of sites grew to 55. Table 5 shows the number of BRAC contaminated sites and their disposition.
DOD officials told us that the extent of site contamination is often difficult, time-consuming, and costly to detect and may not be fully determined until environmental cleanup is actually underway. At Pease Air Force Base landfill sites, for example, it was not known whether contaminants existed below the water table level until excavation was underway. Also, according to Army officials, the Army spent over $45 million—$20 million more than originally estimated—for radioactive contamination cleanup at the Army Material Technology Laboratory in Massachusetts. The cost underestimation was due largely to difficulties in accurately determining the extent of the contamination caused by the reactor.
Unexploded ordnance is another concern for many closing bases. At Mare Island Naval Shipyard, for example, potential unexploded ordnance sites, which include dredge ponds and the waterfront, are the result of decades of ordnance manufacturing, storage, and disposal. Navy engineers estimate that cleaning up these sites could cost about $60 million.

		Environmental Laws and Regulations Contribute to High Costs

The requirements of federal and state environmental laws and regulations have a significant impact on the cost of environmental cleanup. Under the existing environmental legal framework, DOD must comply with cleanup standards and processes associated with existing laws, regulations, and executive orders in conducting assessments and cleanups of its base closure property. Although CERCLA and RCRA are two of the primary drivers for the BRAC environmental program and the ones that impact most closing bases, other laws or executive orders, such as the Endangered Species Act or Executive Order 11990 (Protection of Wetlands), are directed to more unique areas of concern that may exist at a BRAC base. At Pease Air Force Base, for example, BRAC officials had to consider threatened and endangered species, sensitive habitats, wetlands, and historic sites in their cleanup plans. In response to the requirements to protect wetlands, these officials were creating a 2.5-acre wetlands parcel at a cost of about $100,000 to replace wetlands destroyed during cleanup at another site. Further, environmental laws and regulations vary by state and often have more stringent requirements that tend to increase cost. For example, California’s standard for clean drinking water is 10 times more stringent than the federal standard, thereby increasing cleanup costs when this standard is applied.
BRAC officials told us that the current assessment and cleanup process, as dictated by legal requirements, was complex, costly, and time-consuming. This description is consistent with our findings in our review of high-priority site cleanup efforts at active bases. For example, under CERCLA, DOD follows a detailed four-phase process—preliminary assessment, site inspection, remedial investigation/feasibility study, and remedial design/remedial action—in cleaning up property for transfer. Embodied in the process are extensive requirements for documentation, studies, and the need to interact frequently with Environmental Protection Agency (EPA) and state officials and the public. BRAC officials told us that cleanups could require sustained action over many years—10 years in many cases—to achieve targeted goals. Site studies can take 4 or more years to complete, remedial designs may require 3 years, and cleanup may take another 3 years. Delays are frequent as federal and state regulators review and approve documents.
An inherent part of the process that has undergone criticism is the amount of time and money devoted to base contamination studies. Our prior work on environmental issues, for example, showed that DOD has spent large amounts of money on studies but that actual cleanup progress has been slow. We recognize that the cleanup process is driven largely by regulation and involves time-intensive steps. Therefore, many of the BRAC sites have not reached the actual cleanup stage while several sites have been closed out as a result of study. The Congress has expressed concern and directed DOD to establish a goal to limit, by the end of fiscal year 1997, spending for administration, support, studies, and investigations to  20 percent of the funding for its active base program. No such restriction has been enacted for the BRAC program. Although DOD does not have readily available data that show overall funding devoted to studies at BRAC bases, officials have stated that the amount has been substantial. However, DOD now states that more funding is being devoted to actual cleanups, particularly for earlier round BRAC bases. Our review of the six bases we visited indicated considerable amounts of money are being expended on studies. Pease Air Force Base officials estimated, for example, that about one-half of the $140 million they expected to spend would be for studies.

		Available Cleanup Technology Is Not Always Cost-Effective

The technology used to clean contaminated property can be a key cost factor. In many cases, a cost-effective cleanup technology may not be available. Cleaning up unexploded ordnance, for example, may be not be practical or affordable, especially when there are large parcels of property. Removal work can involve burning and clearing thousands of acres to apply existing cleanup techniques, which are labor-intensive, dangerous, time-consuming, and costly. For example, preliminary estimates by the Army Corps of Engineers indicate that cleaning up unexploded ordnance at Fort Ord may cost over $200 million. Most of the cost would be attributable to an 8,000-acre impact range. “Pump and treat” systems, which are shown in figure 2 and commonly used to treat groundwater contamination, can also cost millions and, depending on site conditions, be only marginally effective in some cases. Further, such systems may need to operate for decades after the base has closed and the property has been transferred. As this occurs, DOD continues to incur costs for operating and maintaining the system as well as monitoring water quality results. At Norton Air Force Base, for example, the Air Force spent over $10 million between 1980 and 1992 to investigate contamination of a groundwater plume that extends beyond the base boundary and threatens water supplies in a nearby community. A small-scale pump and treat system was initially installed in 1989; beginning in 1991, a larger-scale pilot system was constructed and subsequently upgraded in 1995. Further, in March 1993, the Air Force contracted for a $5.5-million pump and treat system to be located near the base boundary, and in August 1994, it increased the funding by $1.6 million. Even though the project was costly, its effectiveness was not certain, and Air Force officials agreed to modify the system to treat the off-base water or reimburse the community if the remediation action was not effective.

		Property Reuse Plans Impact Costs

Intended property reuse can also increase the costs associated with cleaning up contaminated property. In particular, reuse plans are a major determinant most often in the cleanup standard levels (e.g., residential or industrial) used as criteria in cleanup plans. Cleanup of a site that will be transferred to the Department of Interior for nonpublic use, for example, will typically not be as thorough or costly as a site that will be used for residential purposes.
We noted several cases in which reuse or public concern associated with reuse has, or could, impact costs. For example, the Air Force has been conducting site investigations since 1982 in search of radioactive wastes in soils and groundwater on or near Norton Air Force Base. In fiscal year 1995, it obligated $2.7 million, and in May 1996 was planning to obligate an additional $185,000. The Air Force cited high community interest, scrutiny, and review as significant in its search for the waste. At Lowry Air Force Base, a change the community has proposed for the 77-acre landfill site could cost the Air Force an additional $1 million to $5 million for cleanup. The Air Force had originally planned for limited use (e.g., nature trails) at the site; however, in March 1996, the redevelopment authority identified alternative uses for the property, such as a golf course and facility to be used along with the adjacent existing golf course or polo and soccer fields.
Air Force officials told us they were studying these alternatives because they would require more extensive and costlier remediation actions.

	Opportunities for Reducing Cleanup Costs and Their Impact on Programmatic Goals

Potential options exist for reducing the cost of cleanup. We are not taking a position on these options because of policy and legislative implications associated with them. Rather, we are presenting them in the context of tradeoffs they represent so that congressional and defense decisionmakers have the information for their consideration as they explore ways to reduce program costs while achieving environmental cleanup goals. The options we analyzed are (1) deferring or extending certain cleanup actions, (2) modifying existing laws and regulations, (3) adopting more cost-effective cleanup technologies, and (4) sharing costs with transferees.

		Deferring or Extending Cleanup Actions

Deferring or extending certain cleanup actions for those sites where there is no immediate danger to human health or the environment has the potential for reducing environmental costs at closing bases. Under current policy, DOD is advocating an expedited approach to BRAC cleanups in the interest of making property quickly available to communities and others for reuse. Because of the higher priority given to cleanups, DOD officials told us that preclosure cleanup schedules are typically accelerated after a base is slated for closure. However, although accelerating cleanup may offer faster transfer possibilities, it may also cause program cost increases, according to DOD officials. For example, McClellan Air Force Base officials estimate that their cleanup efforts, originally targeted to cost between $705 million and $925 million through fiscal year 2034, could cost $1.2 billion to $1.8 billion under an accelerated program ending in fiscal year 2018. The officials said longer time frames allow for more cost-effective sequencing of the cleanup work and the use of new technologies that become available.
Deferring or extending cleanup within acceptable bounds of risk may decrease costs but not without programmatic tradeoffs and cost risks. It would delay transfer of property to users and be contrary to the spirit of the President’s base closure community reinvestment program, announced in July 1993, for the economic recovery of those communities affected by the closure process. Delaying cleanup could promote significant community dissatisfaction and delay reuse—even for clean parcels that may be adjacent to contaminated property.
It must be recognized that, on a case-by-case basis, deferring or extending cleanups may increase costs. Because DOD may be required to retain unneeded property for a longer period of time, it may incur added caretaker costs. However, according to DOD officials, the caretaker costs would be relatively minor in comparison to the cleanup cost. Further, environmental costs may increase if contamination spreads or is not otherwise contained while cleanup is deferred.
Deferring or delaying cleanup at certain sites requires that a priority system be in place to provide decisionmakers with a means to determine the sequence in which projects are funded. The order in which sites are cleaned can impact the overall cost of environmental cleanup. DOD has stated that its highest priorities for BRAC environmental cleanup are for those sites that pose an immediate danger to human health or the environment or are needed for prompt reuse. With regard to protecting health and the environment, in September 1994, DOD issued guidance for a prioritization framework, referred to as Relative Risk Site Evaluation, that categorizes contaminated sites into high-, medium-, and low-relative risk groups. Relative risk is based on an evaluation of contaminants, hazards, pathways, and receptors in groundwater, surface water, sediment, and surface soils. Even though relative risk categorizations are important, service officials said that relative risk is one of many factors they consider in prioritizing funding at BRAC bases. Other considerations include reuse plans; cultural, social, and economic factors; and statutory requirements and legal agreements. These officials said that, with the exception of immediate health and safety threats, reuse plans are often the most important factor for funding and that some sites with lower environmental risk are funded in the interest of reuse.
Although most interested parties we spoke to endorsed the need for setting priorities, many had concerns about DOD’s current efforts. For example, EPA officials were concerned about the (1) lack of objectivity in DOD’s relative risk model, (2) large number of sites not included in the evaluation, and (3) lack of regulatory involvement in the development of the criteria. State environmental representatives were also concerned that a large number of sites, some of which may be high priority, had not been evaluated. One state official indicated many states had already established cleanup priorities that may differ from DOD’s because of differences in risk evaluations. DOD officials told us that the use of Restoration Advisory Boards, as advisors in the prioritization process, have had strong input in community-based decisions, taking into account risk and other factors. We did not evaluate the effectiveness of these efforts.

		Modifying Existing Laws and Regulations

Modifying laws and regulations that must be considered when performing environmental cleanup at closing bases could ease the severity of requirements and help reduce costs. However, the benefits of modifying certain aspects of existing laws and regulations may not be achieved without tradeoffs. For example, easing cleanup standards and associated requirements may increase environmental risk and create unacceptable danger to human health and the environment, thereby increasing public resistance and dissatisfaction.
DOD has supported a number of proposed legislative and administrative changes that would reduce the cost of environmental cleanup and expedite the closure process. Many of these have been debated by the Congress in the past and are still under consideration. In this regard, DOD supports efforts to improve the remedy selection process by using realistic site-based risk assumptions and foreseeable future land uses in the decision-making process. According to Navy environmental officials, emphasizing site-based risk assumptions over specific cleanup standards has the potential for reducing costs. Further, DOD supports wider use of generic or presumptive remedies in certain cases to reduce lengthy study time and cost. DOD also supports legislative revision as to what constitutes an uncontaminated parcel and further clarification that such parcels be excluded from placement on the National Priorities List. This revision would reduce cost and allow more expedited transfer of uncontaminated property. EPA has indicated its support for many of DOD’s proposals, but state officials and private representatives we talked to were more skeptical.
Changing regulatory requirements can have a significant impact on costs, as illustrated by recent changes being recommended in California’s approach to remediating contamination resulting from leaking underground fuel storage tanks. In late 1995, a report by the Department of Energy’s Lawrence Livermore National Laboratory, California, concluded that, where soil conditions were favorable, natural processes, rather than other cleanup actions, could be relied on to clean up petroleum contaminants left by leaking underground fuel storage tanks. The report estimated that traditional cleanup costs had been averaging $150,000, thereby prompting state water control board officials to recommend the use of natural processes for cleanup of those sites where contamination was deemed to be of low risk.
If these same procedures were used at DOD facilities where favorable soil conditions existed, costs could be reduced. At Norton Air Force Base, the Air Force has spent about $5 million to remediate about 20,000 cubic yards of contaminated soil at former underground storage tank sites. Air Force officials estimate that about 20 percent of the cleanup may not have been needed and could have been left to natural processes. At Pease Air Force Base, officials estimated that about $2.5 million was spent to clean up fuel contaminated soils around 10 pumphouses. Figures 3 and 4 show underground tank removal operations at Pease Air Force Base. At Mare Island Naval Shipyard, Navy officials estimate that about 50 underground storage tanks and about 42,000 feet of abandoned underground fuel lines require cleanup at an estimated cost of $26.9 million. Under the new policy for underground storage tank cleanups, this estimate may be reduced to $13.5 million. However, Air Force and Navy officials noted that the new policy is not statewide at this point and is being adopted only in certain regions of the state.
In another example, bases were once required, before the issuance of EPA guidance in September 1993, to develop cleanup plans for certain groundwater problems, even though the proper technology was not available. However, EPA guidance now recognizes that some groundwater cleanups are technically not possible. According to Air Force BRAC officials, the Air Force was thus permitted to cease further consideration of several remedial actions proposed for one site contaminated by a waste solvent that could not be removed with known technology. The officials said this change saved between $2.3 million and $7 million, depending on which remedial action alternative would have been selected.

		Developing and Using More Cost-Effective Technology

New and more cost-effective technology may offer cost reduction potential for cleaning up groundwater, unexploded ordnance, and other contaminants. The Congressional Budget Office has reported that (1) DOD could reduce costs by delaying expensive remediation projects when contamination posed no imminent threat and cost-effective technology was lacking and (2) in the long run, new cleanup technologies represented the best hope of addressing environmental problems with available DOD funds. The replacement of many of the current remediation technologies with more cost-effective methods of environmental cleanup could have a significant effect on reducing the cost of cleanup.
However, although new technologies may offer significant cost reduction potential, there are programmatic tradeoffs or risks involved with awaiting for the emergence of more cost-effective technology. First, because many BRAC bases are being cleaned up under accelerated schedules, many new technologies now under development may not be available for widespread use for years after the technology is needed. Awaiting for new technology would thus delay program progress. Second, newer technology may not be more cost-effective than existing technology. Third, the outlook for DOD research and development funding of new technology may not be as optimistic as in previous years, as DOD’s budget has been drastically reduced for this activity in the last 2 fiscal years. Last, contractors and regulators who have become comfortable with certain cleanup methods may be reluctant to adopt new technologies and unwilling to risk using an unfamiliar cleanup technology.
Our discussions with interested parties showed a wide range of views on environmental technology issues. The likelihood that entirely new technologies will quickly and inexpensively solve major contamination site problems is slim, according to Air Force and Navy environmental program managers. They said more gains could be made by improving and refining cleanup standards and existing technologies. Army officials told us that, with the exception of unexploded ordnance, they had the technology needed for addressing most contamination at their BRAC bases. EPA officials told us that new technology could reduce the costs of cleanup and that deferring cleanup until new technology becomes available might be an option in certain situations. One state regulator said that new technology was needed for many contaminants because no cost-effective treatment was available and some prevalent problems were not being addressed. Another state official said that, except for unexploded ordnance and groundwater contamination, the services had the necessary technology and should not delay cleanups.

		Sharing Costs With Transferees

Allowing the receiving party, or transferee, to pay fully or in part for environmental cleanup would reduce DOD’s costs, but there are several barriers to achieving cost reduction in this manner. Existing legislation to encourage sharing costs has not been effective, in part, because of unknown future liabilities and difficulty establishing the value of the property. According to DOD officials, communities have not expressed an interest in assuming the cost of cleanup to receive property more quickly because there is apparently little incentive to do so.
Current legislation allows DOD to transfer property without cleaning it up, provided that the recipient agrees to do so. Specifically, section 2908 of the National Defense Authorization Act for Fiscal Year 1994  (P.L. 103-160) authorizes DOD to enter into an agreement to transfer by deed real property or facilities with any person who agrees to perform all environmental restoration, waste management, and all environmental compliance activities that are required under federal and state laws, administrative decisions, agreements, and concurrences. However, this transfer may be made only if DOD certifies to the Congress that cleanup costs are equal to or greater than the fair market value of the property or facilities. If, however, the cleanup costs are lower, the recipient must pay the difference between the fair market value and such costs. Although less revenue would be received from the property transfer, DOD would not incur the cost of cleanup.
Officials we talked to were unaware of any instances in which property had been transferred under the above provision. They cited a number of reasons for this situation, including (1) difficulty in determining the fair market value of property to be transferred, (2) little incentive for investors to assume the risks of unknown liabilities, and (3) stipulations that the transferee gives up the right for future indemnification if further contamination is found.

	Agency Comments and Our Evaluation

We requested written comments on a draft of this report from DOD, but none were received. However, officials from the Office of the Deputy Under Secretary of Defense (Environmental Security), Under Secretary of Defense (Comptroller), and the Navy provided us with oral comments.
DOD concurred with the findings and the general tone of the report. The officials, however, offered a number of technical clarifications to improve the accuracy of the report. We considered their comments and have made changes as necessary in the appropriate sections of this report. For example, DOD commented that our use of specific environmental terminology was inconsistent throughout the report. We agree and have clarified our use of the terms.

	Scope and Methodology

To determine the amount of money devoted to the BRAC environmental program, we interviewed DOD and military service comptroller officials and reviewed documentation that tracked BRAC financial information. We analyzed data to determine the relative growth over time in the amounts of money allocated, obligated, and expended for cleanup efforts. We inquired as to the rationale underlying financial growth trends. To determine the estimated total cost for the BRAC environmental program, we aggregated (1) actual DOD fund allocations through fiscal year 1995 for all BRAC rounds, (2) estimated base program completion costs reported in the Defense Environmental Restoration Program Annual Report to Congress for Fiscal Year 1995, and (3) estimated program management costs through completion.
To find out how funds are being used and gain insight as to why cleanup efforts are so costly, we visited six closing bases, interviewed DOD headquarters and base-level BRAC officials, discussed cleanup actions with selected state and community representatives, reviewed base cleanup documentation, and observed site cleanup actions underway. Our base-level visits were intended to get a mix of military services’ 1988, 1991, and 1993 BRAC round bases that had obligated significant funds for environmental cleanup. We did not visit 1995 BRAC round bases because, at the time our review, DOD was in the early stages of the closure process at these bases and had not obligated significant BRAC funds for environmental efforts. We visited the following BRAC bases: Norton Air Force Base, California; Pease Air Force Base, New Hampshire; Army Material Technology Laboratory, Massachusetts; Fort Ord, California; Charleston Naval Shipyard, South Carolina; and Mare Island Naval Shipyard, California.
We also visited the following military service agencies involved in the award and management of contracts associated with environmental study and cleanup actions: Air Force Center for Environmental Excellence, Texas; Army Environmental Center, Maryland; Army Corps of Engineers, Sacramento District, California; and Naval Facilities Engineering Command, Engineering Field Activity (West), California.
To identify potential opportunities and tradeoffs for reducing environmental costs, we analyzed a number of cost reduction proposals that have surfaced in recent years. We reviewed documentation to include past work by us, DOD, the Congressional Budget Office, and the Congressional Research Service, along with congressional efforts to revise existing environmental legislation. We discussed cost and programmatic tradeoffs with affected parties, including BRAC officials; EPA officials; community environmental representatives; and state environmental officials overseeing BRAC issues in California, New York, South Carolina, and Texas.
We performed our work between April 1995 and May 1996 in accordance with generally accepted government auditing standards.
Unless you publicly announce its contents earlier, we plan no further distribution of this report until 10 days after its issue date. At that time, we will send copies to other congressional committees; the Secretaries of Defense, the Air Force, the Army, and the Navy; the Director, Office of Management and Budget; the Administrator, EPA; and other interested parties. We will also make copies available to others on request.
If you have any questions, please call me on (202) 512-8412. Major contributors to this report are listed in appendix III.

Selected Environmental Laws and Regulations Pertinent to Cleanup at Closing Bases

	Base Closure and Realignment Act of 1988 (P.L. 100-526, 102 Stat. 2623) and the Defense Base Closure and Realignment Act of 1990 (P.L. 101-510, 104 Stat. 1808), 10 U.S.C. 2687

Requires the Department of Defense (DOD) to comply with a variety of laws—including the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and National Environmental Policy Act—to effect federal real property disposal at most base realignment and closure (BRAC) installations.
Defines the roles for the Environmental Protection Agency (EPA), state agencies, and DOD components. CERCLA section 120 compliance is required for all federal facilities, including BRAC bases. Requires for property transfer that all remedial action necessary to protect human health and the environment has been taken. Also requires the federal government to assume financial responsibility for any additional cleanup of DOD-caused pollution discovered in the future.
Sets criteria for an installation’s inclusion on the National Priorities List (NPL).
Authorizes DOD components to conduct site investigations and cleanups.
Used as the basis for the Defense Environmental Restoration Program. Authorizes removal of unexploded ordnance and unsafe buildings and debris on BRAC bases.
Defines the process for examining potential impacts to the environment that may result from disposition of BRAC installation property. Requires that reuse alternatives are identified and characterized and that the environmental impacts associated with each are disclosed.
CERCLA section 120(a)(4) states that “State laws concerning removal and remedial actions, including State laws regarding enforcement, shall apply to removal and remedial action at facilities owned or operated by a department, agency, or instrumentality of the United States when such facilities are not included in the National Priorities List.”
Other relevant federal environmental laws Resource Conservation and Recovery Act (RCRA),  42 U.S.C. 6901, et seq.
Establishes the framework for managing solid wastes, including hazardous substances. Applies to both NPL and non-NPL installations.
Regulates specific chemical substances, including polychlorinated biphenyls and asbestos.
Federal Water Pollution Control Act (“Clean Water Act”),  33 U.S.C. 1251, et seq.
Regulates discharges of pollutants into waters. Requires the establishment of criteria and standards to protect water quality. Requires federal permits for dredge and fill operations.
Safe Drinking Water Act, 42 U.S.C. 300f, et seq.
Establishes regulations to protect human health from contaminants in drinking water.
Regulates releases of pollutants into the air.
Federal Insecticide, Fungicide, and Rodenticide Act,  7 U.S.C. 135, et seq.
Establishes a registration program for pesticides. Governs disposal of pesticides.
Protects and preserves access to religious sites of Native Americans.
Protects historic or archaeological resources threatened by federal dams or construction projects. (continued)
Governs activities and facilities that may threaten protected birds.
Requires federal agencies to observe state Coastal Zone Management Plans for activities near shorelines.
Protects the habitat of threatened or endangered species by controlling land use and regulating construction.
Requires federal agencies to consider the effect of their land and water use activities on fish and wildlife.
Establishes a program for the preservation of designated historic properties throughout the nation.
Establishes a national goal of no net loss of wetlands. Provides for mitigation of negative effects of water resource projects on fish and wildlife.
Preserves and protects the free-flowing condition of designated rivers.

Environmental Cleanup Allocations, Obligations, and Expenditures by BRAC Round and Military Component

Major Contributors to This Report

	National Security and International Affairs Division, Washington, D.C.

	Los Angeles Regional Office

Lionel C. Cooper, Jr.
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Output:
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the costs of the Department of Defense's (DOD) environmental cleanup efforts under the base realignment and closure (BRAC) process, focusing on the: (1) reasons that cleanups are so costly; and (2) potential for reducing costs and the impact on program goals.

What GAO Found

GAO found that: (1) as of March 1996, DOD had allocated about $3.4 billion for the BRAC environmental cleanup program; (2) as more bases are closed and more cleanup actions are underway, program costs are likely to increase significantly; (3) although DOD has not computed a total cost estimate for the program, available DOD financial data indicate that program costs are likely to exceed $11 billion; (4) the key reasons for the high cost of closing base cleanups include the large number of contaminated sites and difficulties associated with types of contamination, requirements of federal and state laws and regulations, lack of cost-effective cleanup technology for certain contaminants, and intended property reuse; (5) DOD has identified over 5,300 potentially contaminated sites at its BRAC bases; (6) the laws and regulations DOD must abide by in expediting property transfer for reuse have proven to be time- consuming, complex, and costly; (7) technology limitations in cleaning property of certain contaminants (such as unexploded ordnance) have proved costly; (8) options for reducing cleanup costs at closing bases include deferring or extending certain cleanup actions, modifying existing laws and regulations, adopting more cost-effective cleanup technologies, and sharing costs with the ultimate user of the property; (9) all of these options may adversely impact programmatic goals, thereby presenting decisionmakers with difficult choices in developing a cost-effective environmental cleanup program; (10) deferring or extending cleanup actions may delay property transfer and reuse, hurt the economic revitalization of communities affected by the closure process, and harm the environment and health as well; (11) modifying law and regulations may increase environmental risk, thereby increasing public resistance and dissatisfaction; (12) adopting more cost- effective technologies may delay the program because new technologies currently under development may not be available for years and the new technologies may not be more cost- effective than existing technologies; and (13) sharing costs with the ultimate user could present problems because of unknown future liabilities and difficulty establishing the value of the property.


Input:
	Background

Studies have shown that uninsured children are less likely than insured children to get needed health and preventive care. The lack of such care can adversely affect children’s health status throughout their lives. Without health insurance, many families face difficulties getting preventive and basic care for their children. Children without health insurance or with gaps in coverage are less likely to have routine doctor visits or have a regular source of medical care. When they do seek care, they are more likely to get it through a clinic rather than a private physician or health maintenance organization (HMO). They are also less likely to get care for injuries, see a physician if chronically ill, or get dental care. They are less likely to be appropriately immunized to prevent childhood illness—which is considered by health experts to be one of the most basic elements of preventive care.
The Medicaid program is the major public funding source for children’s health insurance. It is a jointly funded federal-state entitlement program that provides health coverage for both children and adults. It is administered through 56 separate programs, including the 50 states, the District of Columbia, Puerto Rico, and the U.S. territories. States are required to cover some groups of children and adults and may extend coverage to others. Children and their parents must be covered if they receive benefits under the Aid to Families With Dependent Children (AFDC) program. Children and adults may also be eligible for the program if they are disabled and have low incomes or, at state discretion, if their medical expenses are extremely high relative to family income.
Beginning in 1986, the Congress passed a series of laws that expanded Medicaid eligibility for pregnant women on the basis of family income, and for children on the basis of family income and age. Before these eligibility expansions, most children received Medicaid because they were on AFDC. Before 1989, coverage expansions were optional for states, although many states had expanded coverage. Starting in July 1989, states had to cover pregnant women and infants with family incomes at or below 75 percent of the federal poverty level. Two subsequent federal laws further expanded mandated eligibility for pregnant women and children. By July 1991, states were required to cover (1) pregnant women, infants, and children up to 6 years old with family income at or below 133 percent of the federal poverty level and (2) children 6 years old and older born after September 30, 1983, with family income at or below 100 percent of the federal poverty level. Current law expands the group of poor children over 6 years old eligible for Medicaid year by year until all poor children up to 19 years old are eligible in the year 2002. In addition, states may expand Medicaid eligibility for infants and children beyond these requirements by either phasing in coverage of children up to 19 years old more quickly than required, by increasing eligibility income levels, or both. (See table II.2 for current eligibility levels in states.)
These expansions partially fueled the increase in Medicaid costs in the 1990s, but children still represent less than one-fourth of Medicaid expenditures. In 1994, nondisabled children represented a large percentage of Medicaid recipients—49 percent—compared with the percentage of Medicaid expenditures for medical care that they accounted for—16 percent. Nonetheless, Medicaid’s overall cost and the rate of cost increases have raised concerns about the program’s impact on the federal budget. Medicaid costs are projected to increase from about $156 billion in 1995 to $243 billion by the year 2000, according to the Congressional Budget Office. The Congress has recently considered different options to lower the cost of the program, including removing guaranteed eligibility for some types of current recipients and giving capped funding to the states as block grants.

	Health Insurance Coverage for Children at Lowest Reported Level Since 1987

In 1994, the percentage of children with private health insurance reached the lowest level reported in the last 8 years—65.6 percent or 46.3 million children. (See fig. 1 and table II.1.) Mirroring this trend, the percentage of children who were uninsured rose to its highest reported level since 1987—14.2 percent or 10 million children. (See figs. 2 and 3 and table II.1.) Compared with adults 18 to 64 years old, for whom private insurance coverage has slightly increased in the last 2 years, coverage for children appears to be decreasing.

		Decreased Coverage Reported Despite Increase in Parents Working Full-Time

The estimated decrease in children’s coverage occurred although slightly more children were reported to be in families with a parent who worked full-time in 1994 than in 1993. Children of a parent who worked full-time for the entire previous year are more likely to have private health insurance than other children. However, in 1994, almost 25 percent of children with a parent working full-time did not have privately funded employment-based health insurance. Almost 12 percent of children with a parent working full-time were uninsured.
Children whose parents worked at less than a full-time job for the entire year were worse off for health insurance than children whose parents did not work at all in 1994. Only 37 percent had employment-based insurance (36.8 percent). More children of parents who worked less than full-time all year were uninsured (21.7 percent) than were children of parents who did not work at all in 1994 (14.6 percent). This is because children of parents who are not working tend to be enrolled in Medicaid.

		More Poor Children Estimated as Uninsured in 1994 Compared With 1993

A higher percentage of poor children were reported as uninsured in 1994—22.3 percent—than in 1993—20.1 percent. In contrast, reported rates of being uninsured did not differ significantly between 1993 and 1994 for children above poverty. (See table 1.)

	Medicaid Continues to Be a Significant Source of Coverage for Children, but Many Eligible Children Do Not Enroll

In 1994, Medicaid covered 22.9 percent of U.S. children—16.1 million children. This number was lower than the Bureau of the Census estimated in 1993. The difference may be due partially to a reduction in the number of children on AFDC (who are automatically eligible for Medicaid) and partially to changes in CPS methodology that reduced the 1994 estimate, relative to the 1993 estimate. (See app. I.)
Nevertheless, Medicaid’s role as an insurer for children in working families not depending on welfare has grown. In 1994, 62 percent of children on Medicaid had a working parent. Thirty percent of children on Medicaid had a parent who worked full-time for the entire previous year and another 18.8 percent had a parent who worked full-time but for less than the entire year. Another 13 percent had a parent who worked part-time. Only 38 percent had no working parent. In 1994, more than 50 percent of the children on Medicaid did not receive AFDC or other public assistance.

		At Least 30 Percent of Uninsured Children Eligible for Medicaid by Federal Mandate

Many uninsured children who are eligible for Medicaid do not enroll. Present law mandates eligibility for children from birth to 5 years old with income at or below 133 percent of the federal poverty level and for poor children born after September 30, 1983. This means that poor children under 13 years old are now eligible and, year by year, more poor children will become eligible until all poor children under 19 years old will be eligible in 2002. States have the option to expand age and income eligibility beyond this mandate for pregnant women, infants, or children, and 40 states have done so. (See table II.2 for states that have expanded eligibility beyond federal requirements.)
We estimate that 14.3 million children in 1994 were eligible for Medicaid by federal mandate because of their age and family income. Of those children, 11.4 million had private or public insurance coverage and 2.9 million were uninsured (20.3 percent). The 2.9 million uninsured, Medicaid-eligible children accounted for 30 percent of all uninsured children.
Compared with children on Medicaid, higher percentages of uninsured, Medicaid-eligible children had a working parent in 1994 (80.4 percent). Almost three-fourths of these uninsured, Medicaid-eligible children lived in the South (41 percent) or the West (30.4 percent). Over one-half were African-American (21.7 percent) or Hispanic (34.7 percent).

		More Uninsured Teens Will Become Eligible for Medicaid Coverage in the Next 6 Years

Poor teens under 19 years old will be phased into Medicaid eligibility in the next 6 years if current federal Medicaid eligibility mandates for children are maintained. In 1994, an estimated 4.1 million children 13 to 18 years old were poor. In 1994, 32 percent of poor teens 13 to 18 years old—1.3 million teens—were uninsured.

		Parents May Not Enroll Eligible Uninsured Children in Medicaid for Various Reasons

As we have previously reported, there are several possible reasons why families may not enroll their children in Medicaid. First, low-income families may not know that their children could be eligible for Medicaid even if a parent works full-time or if the family has two parents. A study that interviewed current AFDC recipients and former recipients who had begun working found that 41 percent of AFDC recipients and 23 percent of former recipients did not understand that a parent could work full-time and receive AFDC for his or her children and an even larger percentage did not understand that children in two-parent families could be eligible for Medicaid.
Families participating in other programs for low-income persons also have low rates of Medicaid enrollment. In 1992, only 48 percent of the women, infants, and children enrolled in the Special Supplemental Program for Women, Infants, and Children (WIC) were enrolled in Medicaid, even though over 72 percent were in families with incomes below 130 percent of the federal poverty level. In 1993, only 68 percent of children in Head Start, an early childhood education program for low-income children, were enrolled in Medicaid.
Second, getting enrolled in Medicaid is difficult for low-income families. In a previous report, we found that many Medicaid applicants never complete the eligibility determination process and about one-half are denied for procedural reasons; that is, applicants did not or could not provide the basic documentation needed to verify their eligibility or did not appear for eligibility interviews. Finally, some families may not seek Medicaid until they face a medical crisis or may not want to enroll in Medicaid because they consider it a welfare program and therefore stigmatizing.
States can obtain federal matching funds to conduct outreach programs about the Medicaid program. States determine their own outreach programs—both the amount and the focus. According to one Health Care Financing Administration (HCFA) official, Medicaid outreach to children’s families has focused more on encouraging the use of preventive care by enrolled children than on informing nonenrolled families that their children might be eligible. Some states do try to inform low-income families that they can get health insurance for their children through Medicaid—either by using informational billboards, 800 telephone referral numbers, or other means. In addition, HCFA and the Agency for Children and Families have developed a cooperative agreement to work together and with states and localities to improve outreach to families of potentially eligible low-income children, particularly those enrolled in federally funded child care and Head Start programs.
Fiscal pressures may have made some states less interested in expanding the number of children receiving Medicaid than they were several years ago. Even though children represent a relatively small percentage of Medicaid expenditures (about 16 percent of expenditures are for nondisabled children under 21 years old), growth in the number of children on Medicaid has contributed to program expenditure increases. Medicaid spending increases have become one of the largest budget problems for states—representing 19.4 percent of state expenditures in 1994.

	Conclusions

Private health insurance is overwhelmingly employment-based in the United States, but many children do not get this benefit even if their parents work. Health insurance is less likely to be offered in the firms that employ low-income workers. If health insurance is available through work but is costly for workers, it is less likely to be affordable for low-income workers.
Part of the reason that families with children may have difficulty affording health insurance is that many children live in low-income families. Twenty-four percent of children lived in poor families in 1994, and another 21 percent lived in families with income between 101 and 200 percent of the federal poverty level. Moreover, families with employer-sponsored health insurance have faced sharply rising costs over the last decade to purchase family coverage through their employer. These rising costs may prove to be much more of a burden for lower-income families.
Private health insurance coverage has continued to decrease for children. As private coverage has decreased, Medicaid has become a more important source of health insurance coverage, especially for children in working families. Nevertheless, despite the expansion in public insurance funding, 10 million children were uninsured in the United States in 1994. Even more notable, the largest percentage of uninsured children were in families with a working parent or parents. In addition, at least 30 percent of uninsured children were eligible for Medicaid, which means that many uninsured children are not getting the advantage of publicly funded insurance.
As long as private coverage continues to decrease for children, the number of children uninsured or on Medicaid will continue to grow. This strains public resources—either to pay for Medicaid coverage or to provide direct care or subsidies to hospitals to care for the uninsured. In the past, providers have had various sources of funds to recoup some of the cost of caring for the uninsured patient. In the era of managed care and cost-cutting, it is becoming more difficult for hospitals and physicians to care for patients without insurance. As these trends continue, it will likely become even more difficult to get care without insurance.
Medicaid cost increases are pressuring states and the federal government toward different types of program changes. Changes to the Medicaid program that remove guaranteed eligibility or alter the financing and responsibilities of the federal and state governments may strongly affect health insurance coverage for children in the future. Other types of changes that strengthen the private insurance market may also have significant effects on children’s coverage in the future.

	Agency Comments

We did not seek agency comments because this report does not focus on agency activities. We did, however, discuss relevant sections of this report with responsible officials in the Department of Health and Human Services, HCFA, and the Department of Commerce, Bureau of the Census. They offered technical suggestions that we included where appropriate in the report.
As agreed with your office, we plan no further distribution of this report for 30 days. At that time, we will make copies available on request. Please contact me at (202) 512-7114 or Michael Gutowski at (202) 512-7128 if you or your staff have any further questions. This report was prepared by Michael Gutowski, Sheila Avruch, and Paula Bonin.

Changes in the CPS and Their Effect on Estimated Insurance Coverage and Other Methodological Considerations

The Bureau of the Census has made recent efforts to improve the accuracy and ease of administering the CPS. These changes should improve estimates of coverage, particularly for children. However, these changes can affect the estimates reported. As a result, estimates for 1994 and subsequent years may not be entirely equivalent to those for previous years. Several changes completely or partially implemented this year appear to have affected specific estimates of health insurance coverage.

	CPS Improved, but Estimates Before 1994 May Not Be Comparable

Census reworded and reordered existing questions about health insurance and added new ones for the March 1995 CPS, which reports 1994 data. This was done as part of changing to a computer-assisted telephone interviewing methodology. Census also changed the sample frame—or types of families sampled to get a statistically representative estimate—from one based on the 1980 census to one based on the 1990 census. These changes appear to have affected the 1994 estimates of the percentage of people (particularly children) whose private insurance coverage is employer-based versus privately purchased and the percentage of children on Medicaid compared with previous years’ estimates.
Most people in the United States who have private insurance get their insurance through their employer or union. The previous CPS questionnaire asked first whether a person had any private insurance, then if that person was the policyholder. Only after that did the questionnaire ask whether the insurance was obtained through an employer or union. The new questionnaire first asks directly whether a person has private insurance through an employer or union. The questionnaire then asks about private, individually purchased coverage.

	Private Insurance Comparable, but Type of Private Insurance May Not Be

Officials at Census believe that the 1994 estimate of overall private insurance agrees well with previous years’ estimates, and the estimates for individually purchased insurance and employment-based insurance are superior to previous years’ estimates. However, the number of people who report that their private insurance came from an employer or union has increased, while the number who report that their private insurance was individually purchased has decreased. Therefore, because these apparent differences may be due to the questionnaire change rather than actual changes in the composition of private insurance coverage, comparisons of employment-based or private individual coverage in 1994 to previous years may not be appropriate to understand trends in coverage. This is why we compared private coverage rather than employment-based coverage of children over time in this report.
In addition, we are using a different definition of children on Medicaid for this report than our previous report and correspondences. For this report, our group of children on Medicaid are children with any Medicaid coverage, even if they also have employment-based coverage. Previously, we had excluded children with Medicaid coverage who also had employment-based insurance in the same year from the Medicaid group. We considered employment-based insurance their primary source of coverage and included them in that group. But defining insurance coverage this way led to a lower overall number and percentage of children with Medicaid coverage. Therefore, for this report, we are including children with both private and Medicaid coverage reported in both categories. Figure 1 shows the overlap.

	Medicaid Estimates for Children May Be Affected by Decreases in AFDC Enrollment Rates and Change in Sampling Frame

In the past, researchers have been concerned that the CPS underreports Medicaid coverage, because CPS estimates of Medicaid enrollment have historically been lower than HCFA numbers on Medicaid program enrollment. Even if the CPS underreported Medicaid enrollment, consistent estimates can be useful to follow overall insurance trends over time. However, the calendar year 1994 CPS estimates of Medicaid coverage for children are lower than the calendar year 1993 estimates. This is puzzling to some researchers who have used the CPS in the past because HCFA data on Medicaid program enrollment showed an increase in coverage between fiscal year 1993 and fiscal year 1994. The apparent drop may be partially due to a reported drop in the number of children enrolled in AFDC and it may also be due to the change in the CPS sampling frame.
Between 1993 and 1994 the percentage of children who were reported to be receiving AFDC or other assistance dropped from 10.6 percent to 9.6 percent—about 600,000 fewer children. Because children on AFDC are entitled to Medicaid coverage, Census assigns Medicaid coverage to AFDC children even if their parents do not report them as receiving Medicaid. This partially explains why Medicaid coverage may have appeared to decrease. Department of Health and Human Services’ data also show a small drop in the average monthly enrollment of children in AFDC between calendar years 1993 and 1994, although because of the differences between months included in calendar years and fiscal years, the drop does not show up in fiscal year data until fiscal year 1995. In fiscal year 1995, average monthly enrollment of children continued to drop.
Medicaid coverage also may have appeared to decrease because Census changed the sample frame—or types of families that Census interviews—from one based on the 1980 census to one based on the 1990 census. Because the March 1995 CPS was a transitional one for the sample frame, half the families were chosen based on the 1980 frame and half were chosen based on the 1990 frame. The percentage of children on Medicaid was lower in the half chosen from the 1990 frame (22.3 percent) than the half chosen from the 1980 frame (23.4 percent). While the sample chosen from the 1990 frame should be a more accurate report of Medicaid coverage, the differences between the two parts of the sample indicate that reported differences between 1993 and 1994 Medicaid coverage levels may be due in part to sampling frame changes rather than actual changes in coverage.
Other types of health insurance coverage did not appear to be affected much by sampling frame differences. Health insurance coverage estimates for workers with private insurance or with CHAMPUS were almost the same in the two halves of the sample frame.
Another issue with the 1993 estimate of children with Medicaid coverage—which Census informed us has been resolved—concerns miscoding. Last year, Census officials discovered some children appeared to be miscoded as receiving Medicaid. Census officials attempted to fix this through editing the CPS data tape, but the edited 1993 data tape may still contain inadvertently included data that show some children in the group with Medicaid who should not be in that group. According to Census, the coding issue was resolved for the 1994 estimates.

	Effect on Comparing 1994 With Our Previous Estimates

These changes in reported coverage make some comparisons with our previous reports and others’ reports based on the CPS problematic. While the estimate of the uninsured should not be affected to any great extent by changes in the questionnaire, estimates of employment-based insurance and private, individually purchased insurance are not comparable from 1994 to previous years. However, estimates of private insurance (the combination of both) appear more comparable. Therefore, for this letter we are reporting on comparisons of private coverage. Similarly, whether private coverage came from employment or individual purchase can affect other estimates when using a hierarchy to assign one source of coverage. In addition, we are reporting children on Medicaid if they had any Medicaid coverage (including those who also had employment-based coverage) because this definition of Medicaid coverage should not be as affected by the questionnaire change and is more comparable to previous years’ data and better captures the full extent of U.S. children enrolled in Medicaid.

	Methodology for Matching Children and Determining Parental Work Status

To determine characteristics of children’s parents, we followed a methodology discussed in our previous report (see app. II of Health Insurance for Children: Many Remain Uninsured Despite Medicaid Expansion (GAO/HEHS-95-175)). We matched children to a parent (18 to 64 years old) in their household (or a related adult who served as a parent, such as a grandparent or sister) and then linked that parent to a spouse, if any. We matched about 98 percent of children, but fewer Medicaid and uninsured children matched (about 96 percent) than did children with employment-based insurance. We determined parental work status by searching for a parent with the highest work status—full-time all year, less than full-time all year, or not working. Figures 1 through 4 and table II.1 are based on the total number of children—that is, unmatched children. Any discussions of employment status of parents are based on matched children, as are figure 5 and table 1.

Insurance Status of Children, 1987-94, and Medicaid Eligibility, by State, 1996

Age under which children are eligible (continued)
Age under which children are eligible (continued)

Related GAO Products

Medicaid: Spending Pressures Spur States Toward Program Restructuring (Testimony, GAO/T-HEHS-96-75, Jan. 18, 1996).
Health Insurance for Children: State and Private Programs Create New Strategies to Insure Children (GAO/HEHS-96-35, Jan. 18, 1996).
Medicaid and Children’s Insurance (GAO/HEHS-96-50R, Oct. 20, 1995).
Health Insurance for Children: Many Remain Uninsured Despite Medicaid Expansion (GAO/HEHS-95-175, July 19, 1995.)
Medicaid: Spending Pressures Drive States Toward Program Reinvention (GAO/HEHS-95-122, Apr. 4, 1995).
Medicaid: Restructuring Approaches Leave Many Questions (GAO/HEHS-95-103, Apr. 4, 1995).
Medicaid: Experience With State Waivers to Promote Cost Control and Access Care (GAO/HEHS-95-115, Mar. 23, 1995).
Uninsured and Children on Medicaid (GAO/HEHS-95-83R, Feb. 14, 1995).
Block Grants: Characteristics, Experience, and Lessons Learned (GAO/HEHS-95-74, Feb. 9, 1995.)
Health Care Reform: Potential Difficulties in Determining Eligibility for Low-Income People (GAO/HEHS-94-176, July 11, 1994).
Medicaid Prenatal Care: States Improve Access and Enhance Services, but Face New Challenges (GAO/HEHS-94-152BR, May 10, 1994).
Employer-Based Health Insurance: High Costs, Wide Variation Threaten System (GAO/HRD-92-125, Sept. 22, 1992).
Access to Health Insurance: State Efforts to Assist Small Businesses (GAO/HRD-92-90, May 14, 1992).
The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent.
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Each day, GAO issues a list of newly available reports and testimony.  To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists.

Output:
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the number of uninsured Medicaid-eligible children in 1994.

What GAO Found

GAO found that: (1) the percentage of children without health insurance was 14.2 percent in 1994; (2) the percentage of children with private health insurance has steadily decreased since 1987; (3) while there has been a decline in coverage for poor children, coverage for nonpoor children has remained stable; (4) Medicaid coverage for children was lower in 1994 due to methodological changes in the Current Population Survey; (5) there were 2.9 million Medicaid-eligible children that were not enrolled in Medicaid in 1994; (6) these children represented 30 percent of all uninsured children from birth to 5 years old, and had family incomes that fell below the federal poverty level; (7) the number of children eligible for Medicaid will increase in the next 6 years to include poor teens aged 13 to 19 years old; and (8) Medicaid will cover even more uninsured children as soon as the families of eligible uninsured children learn that they qualify for Medicaid.