Older Americans Act: Options to Better Target Need and Improve Equity

What GAO Found

We found that:

• States use a variety of factors to distribute OAA intrastate funding to AAAs and local service providers. All states that use intrastate funding formulas--which help determine the distribution of funds within a given state--use one or more demographic measures of need to target funding for OAA titles III and VII services. Factors included age, income, rural residence, disability impairment status, and minority status to indicate need for OAA services.

• The current statutory funding formula could better meet generally accepted equity standards in targeting greatest economic and social need for services by addressing differences among states with respect to the (1) needs of the elderly population, (2) cost of services to address those needs, and (3) capacity of individual states to finance needed services. Funds are currently allotted to states according to the relative proportion of older individuals, and states with similar populations are treated the same, irrespective of need. We presented three options for revising the formula using generally accepted equity standards to illustrate a range of possibilities. The first, the partial beneficiary equity option, distributes funds based on the state's population in need of services by measuring older adults with limitations in their ability to maintain an independent lifestyle; the second, the full beneficiary equity option, accounts for differences in the costs of key inputs for providing services, such as wages, food, and office space; and the third, the taxpayer equity option, further accounts for state resource capacity.

• Modifying the formula under a partial beneficiary option using activities of daily living (ADL) limitations as a need measure could result in a number of states seeing changes in their allotments and we presented several transition measures for moderating the impact of such changes. Under the partial beneficiary equity option, states with disproportionately high elderly populations with ADL limitations--as well as low-income states--would receive larger increases in their allotments. At the same time, states currently receiving the small state minimum could see larger decreases in their allotments. However, if transition measures such as a phase-in or hold harmless provision, minimum allotment, or funding floors and ceilings are implemented, the effect on states can be tempered.

Why GAO Did This Study

The Older Americans Act of 1965 (OAA) was enacted to help older individuals remain in their homes and communities as long as possible. Based on formulas specified in law, the Department of Health and Human Services' (HHS) Administration on Aging (AOA) awards grants to fund services for older individuals. State and local agencies are responsible for planning, developing, and coordinating services within each state, as well as distributing OAA grant funds to local Area Agencies on Aging (AAA) through intrastate funding formulas developed by each state in accordance with OAA requirements. Services funded by titles III and VII OAA grants, as well as by other sources, provide a broad range of vital assistance to older adults and include congregate and home-delivered meals, home-based care, transportation services, and elder abuse, neglect, and exploitation prevention programs. In fiscal year 2012 approximately $1.4 billion and $22 million, respectively, was provided for services and programs under title III and title VII of the OAA. In fiscal year 2010--the most recent year for which data are available--these funds were used to serve nearly 11 million older Americans and their caregivers. While all adults age 60 and over are eligible for services, the OAA title III requires programs to target or prioritize service to older individuals with the greatest economic and social need. The OAA defines such need as (1) living below the poverty threshold; (2) having physical or mental disabilities that pose risk for institutional placement; or (3) cultural, social, or geographic isolation, including isolation caused by language, race, or ethnic status.

Given current fiscal pressures, it is increasingly important to ensure that program funds align with greatest economic and social need, especially considering that demographic studies show that older Americans will make up an increasing proportion of the country's population in the next few decades. Specifically, U.S. census projections estimate the number of Americans age 65 and over will increase from 40 million in 2010 to 72 million in 2030. Accordingly, the number of those eligible and in need of services like those provided under OAA title III and VII programs will increase as well. In 2011, we issued a report examining unmet need for OAA title III services showing that many older adults who may be in need of meals or home-based care may not receive assistance from title III programs or from other sources. Despite the growing need for these services as the population ages, it is anticipated that the funding level for these programs at the federal level will remain relatively flat in fiscal year 2013--as it has for at least the last 9 years.

In light of concerns about the growing demand for these vital OAA services combined with current federal fiscal constraints, Congress asked us to assess the current formula used to allot OAA funds to the states and explore options to better ensure that the needs of the growing older adult population are met. Specifically, our study examined (1) how intrastate funding formulas take into account older adults with greatest economic and social need as defined by OAA, (2) options for modifying OAA title III and VII statutory funding formulas to better target older adults with the greatest economic and social need under generally accepted equity standards, and (3) what effect, if any, might these formula modifications have on states' program allotments and what transition measures could be used to ease the implementation of modifications.

For more information, contact Charles Jeszeck at (202) 512-7215 or jeszeckc@gao.gov.