Tuesday
March 17, 1998
 FOOD ASSISTANCE

 Information on Selected
Aspects of WIC

 
Statement of Robert A. Robinson, Director
Food and Agriculture Issues,
Resources, Community, and Economic
Development Division

Mr. Chairman and Members of the Committee:

   I am pleased to be here today to discuss our recently completed reviews of
the Special Supplemental Nutrition Program for Women, Infants, and Children
(WIC).  WIC provides federal grants to states for supplemental foods, health care
referrals, and nutrition education for low-income pregnant, breast-feeding, and
postpartum women; infants; and children up to age 5 who are at nutritional risk.
The food benefits are typically provided in the form of vouchers that can be
exchanged for WIC-approved food items at authorized stores.  The federal WIC
cash grants to states totaled $3.7 billion in fiscal year 1997.

   My testimony today is based on our three recently completed reviews of WIC.
These reviews addressed the (1) reasons that states had for not spending all of their
federal grant funds, (2) efforts of WIC agencies to improve access to WIC benefits
for working women, and (3) various practices states use to lower the costs of WIC
and ensure that the incomes of WIC applicants' meet the program's eligibility
requirements for participation.  We are also currently reviewing WIC's experiences
with rebates from the manufacturers of infant formula.  This statement contains
information on the scope of this ongoing work.

   In summary, we found the following:

   -- States had unspent WIC funds for a variety of reasons.  In fiscal year 1996,
      these funds totaled about $121.6 million, or about 3.3 percent of that year's
      $3.7 billion WIC grant.  Some of these reasons were associated with the way
      WIC is structured.

   -- Virtually all the directors of local WIC agencies report that their clinics have
      taken steps to improve access to WIC benefits for working women.  The two
      most frequently cited strategies are (1) scheduling appointments instead of
      taking participants on a first-come, first-served basis and (2) allowing a
      person other than the participant to pick up the food vouchers or checks,
      as well as nutrition information, and to pass these benefits on to the
      participant.

   -- The states are using a variety of cost containment initiatives that have saved
      millions of dollars annually for WIC and enabled more individuals to
      participate in the program.  Some of these initiatives include obtaining
      rebates on WIC foods, limiting participants' food choices to lowest cost
      items, and limiting the number of stores that participate in WIC.

UNSPENT WIC FUNDS

   In June 1997, we reported on the results of our interviews with state WIC officials
in 8 states that had unspent federal funds in fiscal year 1995 and 2 states that did
not have unspent funds that year.  These state officials identified a variety of
reasons for having unspent federal WIC funds that were returned to the U.S.
Department of Agriculture's (USDA) Food and Nutrition Service (FNS) for
reallocation.  In fiscal year 1996, the states returned about $121.6 million, or about
3.3 percent, of that year's $3.7 billion WIC grant for reallocation to the states in the
next fiscal year.  For example, the federal grant is the only source of funds for the
program in most states.  Some of these states prohibit agency expenditures that
exceed their available funding.  As a result, WIC directors reported that they must
be cautious not to overspend their WIC grant.  Because WIC grants made to some
states are so large, even a low underspending rate can result in millions of returned
grant dollars.  For example, in fiscal year 1995, California returned almost $16 million
in unspent WIC funds, which represented about 3 percent of its $528 million federal
grant.  Unlike California, New York State had no unspent grant funds in fiscal year
1995.  New York was one of 12 states that supplemented its federal WIC grant with
state funds that year and hence did not have to be as cautious in protecting
against overspending its federal grant.  Overall, the group of states that
supplemented their WIC grants in fiscal year 1995 returned a smaller percentage of
their combined WIC funds than did the states that did not supplement their federal
grants.

   States also had unspent federal funds because the use of vouchers to
distribute benefits made it difficult for states to determine program costs until the
vouchers were redeemed and processed.  Two features of the voucher distribution
method can contribute to the states' difficulty in determining program costs.  First,
some portion of the benefits issued as vouchers may not be used, thereby reducing
projected food costs.  Participants may not purchase all of the food items specified
on the voucher or not redeem the voucher at all.  Second, because of the time it
takes to process vouchers, states may find after the end of the fiscal year that their
actual food costs were lower than projected.  For example, most states do not
know the cost of the vouchers issued for August and September benefits until after
the fiscal year ends because program regulations require states to give participants
30 days to use a voucher and retailers 60 days after receiving the voucher to submit
it for payment.  The difficulty in projecting food costs in a timely manner can be
exacerbated in some states that issue participants 3 months of vouchers at a time
to reduce crowded clinic conditions.  In such states, vouchers for August benefits
could be provided as early as June but not submitted for payment until the end of
October.

   Other reasons for states having unspent WIC funds related to specific
circumstances that affect program operations within individual states.  For
example, in Texas the installation of a new computer system used to certify WIC
eligibility and issue WIC food vouchers contributed to the state's having unspent
funds of about $6.8 million in fiscal year 1996.  According to the state WIC director,
the computer installation temporarily reduced the amount of time that clinic staff
had to certify and serve new clients because they had to spend time instead
learning new software and operating procedures.  As a result, they were unable to
certify and serve a number of eligible individuals and did not spend the associated
grant funds.  In Florida, a hiring freeze contributed to the state's having unspent
funds of about $7.7 million in fiscal year 1995.  According to the state WIC director,
although federal WIC funds were available to increase the number of WIC staff at
the state and local agency level, state programs were under a hiring freeze that
affected all programs, including WIC.  The hiring freeze hindered the state's ability
to hire the staff needed to serve the program's expanding caseload.

   Having unspent federal WIC funds did not necessarily indicate a lack of need
for program benefits.  WIC directors in some states with fiscal year 1995 unspent
funds reported that more eligible individuals could have been served by WIC had it
not been for the reasons related to the program's structure and/or state-specific
situations or circumstances.

WIC ACCESS FOR WORKING WOMEN

   On the basis of our nationwide survey of randomly selected local WIC
agencies, we reported in October 1997 that these agencies have implemented a
variety of strategies to increase the accessibility of their clinics for working women.
The most frequently cited strategies--used by every agency--are scheduling
appointments instead of taking participants on a first-come, first-served basis and
allowing other persons to pick up participants' WIC vouchers.  Scheduling
appointments reduces participants' waiting time at the clinic and makes more
efficient use of the agency staff's time.  Allowing other persons, such as baby-sitters
and family members, to pick up the food vouchers for participants can reduce the
number of visits to the clinic by working women.  Another strategy to increase
participation by working women used by almost 90 percent of local agencies was
issuing food vouchers for 2 or 3 months.  As California state officials pointed out,
issuing vouchers every 2 months, instead of monthly, to participants who are not at
medical risk reduces the number of visits to the clinic.  Three-fourths of the local WIC
agencies had some provision for lunch hour appointments, which allows some
working women to take care of their visit during their lunch break.

     Other actions to increase WIC participation by working women included
reducing the time spent at clinic visits.  We estimated that about 66 percent of local
WIC agencies have taken steps to expedite clinic visits for working women.  For
example, a local agency in New York State allows working women who must return
to work to go ahead of others in the clinic.  The director of a local WIC agency in
Pennsylvania allows working women to send in their paperwork before they visit,
thereby reducing the time spent at the clinic.  The Kansas state WIC agency
generally requires women to participate in the program in the county where they
reside, but it will allow working women to participate in the county where they work
when it is more convenient for them.

     Other strategies adopted by some local WIC agencies include mailing
vouchers to working women under special circumstances, thereby eliminating the
need for them to visit the clinic (about 60 percent of local agencies); offering
extended clinic hours of operation beyond the routine workday (about 20 percent
of local agencies offer early morning hours); and locating clinics at or near work
sites, including various military installations (about 5 percent of local agencies).

      Our survey found that about 76 percent of the local WIC agency directors
believed that their clinics are reasonably accessible for working women.  In
reaching this conclusion, the directors considered their clinic's hours of operation,
the amount of time that participants wait for service, and the ease with which
participants are able to get appointments.  Despite the widespread use of
strategies to increase accessibility, 9 percent of WIC directors believe accessibility is
still a problem for working women.  In our discussions with these directors, the most
frequently cited reason for rating accessibility as moderately or very difficult was
the inability to operate during evenings or on Saturday because of lack of staff,
staff's resistance to working schedules beyond the routine workday, and/or the lack
of safety in the area around the clinic after dark or on weekends.

     Our survey also identified several factors not directly related to the accessibility
of clinic services that serve to limit participation by working women.  The factors
most frequently cited related to how working women view the program.
Specifically, directors reported that some working women do not participate
because they (1) lose interest in the program's benefits as their income increases,
(2) perceive a stigma attached to receiving WIC benefits, or (3) think the program is
limited to those women who do not work.  With respect to the first issue, 65 percent
of the directors reported that working women lose interest in WIC benefits as their
income rises.  For example, one agency director reported that women gain a sense
of pride when their income rises and they no longer want to participate in the
program.  Concerning the second issue, the stigma some women associate with
WIC--how their participation in the program makes them appear to their friends
and co-workers--is another significant factor limiting participation, according to
about 57 percent of the local agency directors.  Another aspect of the perceived
stigma associated with WIC participation is related to the so-called "grocery store
experience."  The use of WIC vouchers to purchase food in grocery stores can
cause confusion and delays for both the participant-shopper and the store clerk at
the check-out counter.  For example, Texas requires its WIC participants to buy the
cheapest brand of milk, evaporated milk, and cheese available in the store.  Texas
also requires participants to buy the lowest-cost 46-ounce fluid or 12-ounce frozen
fruit juices from an approved list of types (orange, grapefruit, orange/grapefruit,
purple grape, pineapple, orange/pineapple, and apple) and/or specific brands.
In comparing the cost of WIC-approved items, participants must also consider such
things as weekly store specials and cost per ounce in order to purchase the lowest-
priced items.  While these restrictions may lower the dollar amount that the state
pays for WIC foods, it may also make food selections more confusing for
participants.  According to Texas WIC officials, participants and cashiers often have
difficulty determining which products have the lowest price.  Consequently, a
delay in the check-out process may result in unwanted attention for the WIC
participant.  Finally, more than half of the directors indicated that a major factor
limiting participation is that working women are not aware that they are eligible to
participate in WIC.  Furthermore, local agency officials in California and Texas said
that WIC participants who were not working when they entered the program but
who later go to work often assume that they are then no longer eligible for WIC and
therefore drop out of the program.
 
CONTAINING PROGRAM COSTS

     In September 1997, we reported that the states have used a variety of
initiatives to control WIC costs.  According to the WIC agency directors in the 50
states and the District of Columbia we surveyed, two practices in particular are
saving millions of dollars.  These two practices are (1) contracting with
manufacturers to obtain rebates on WIC foods in addition to infant formula and (2)
limiting authorized food selections by, for example, requiring participants to select
brands of foods that have the lowest cost.  With respect to rebates, nine state
agencies received $6.2 million in rebates in fiscal year 1996 through individual or
multistate contracts for two WIC-approved foods--infant cereal and/or infant fruit
juices.  Four of these state agencies and seven other state agencies--a total of 11
states--reported that they were considering, or were in the process of, expanding
their use of rebates to foods other than infant formula.  In May 1997, Delaware, one
of the 11 states, joined the District of Columbia, Maryland, and West Virginia in a
multistate rebate contract for infant cereal and juices.  Another state, California,
was the first state to expand its rebate program in March 1997 to include adult
juices.  California spends about $65 million annually on adult juice purchases.
California's WIC director told us that the state expects to collect about $12 million in
annual rebates on the adult juices, thereby allowing approximately 30,000 more
people to participate in the program each month.

     With respect to placing limits on food selections, all of the 48 state WIC
directors responding to our survey reported that their agencies imposed limits on
one or more of the food items eligible for program reimbursement.  The states may
specify certain brands; limit certain types of foods, such as allowing the purchase of
block but not sliced cheese; restrict container sizes; and require the selection of
only the lowest-cost brands.  However, some types of restrictions are more widely
used than others.  For example, 47 WIC directors reported that their states'
participants are allowed to choose only certain container or package sizes of one
or more food items, but only 20 directors reported that their states require
participants to purchase the lowest-cost brand for one or more food items.  While
all states have one or more food selection restrictions, 17 of the 48 WIC directors
responding to our questionnaire reported that their states are considering the use of
additional limits on food selection to contain or reduce WIC costs.

     Separately or in conjunction with measures to contain food costs, we found
that 39 state agencies have placed restrictions on their authorized retail outlets
(food stores and pharmacies allowed to redeem WIC vouchers--commonly
referred to as vendors) to hold down costs.  For example, the prices for WIC food
items charged by WIC vendors in Texas must not exceed by more than 8 percent
the average prices charged by vendors doing a comparable dollar volume of
business in the same area.  Once selected, authorized WIC vendors must maintain
competitive prices.  According to Texas WIC officials, the state does not limit the
number of vendors that can participate in WIC.  However, Texas' selection criteria
for approving a vendor excludes many stores from the program.  In addition, 18
WIC directors reported that their states restrict the number of vendors allowed to
participate in the program by using ratios of participants to vendors.  For example,
Delaware used a ratio of 200 participants per store in fiscal year 1997 to determine
the total number of vendors that could participate in the program in each WIC
service area.  By limiting the number of vendors, states can more frequently monitor
vendors and conduct compliance investigations to detect and remove vendors
from the program who commit fraud or other serious program violations, according
to federal and state WIC officials.  A July 1995 report by USDA's Office of Inspector
General found that the annual loss to WIC as a result of vendor fraud in one state
could exceed $3 million.  The WIC directors in 2 of the 39 states that reported
limiting the number of vendors indicated that they are planning to introduce
additional vendor initiatives, such as selecting vendors on the basis of competitive
food pricing.

     We also found that opportunities exist to substantially lower the cost of special
infant formula.  Special formula, unlike the regular formula provided by WIC, is
provided to infants with special dietary needs or medical conditions.  Cost savings
may be achieved if the states purchase special infant formula at wholesale instead
of retail prices.  The monthly retail cost of these special formulas can be high--
ranging in one state we surveyed from $540 to $900 for each infant.  These high
costs occur in part because vendors' retail prices are much higher than the
wholesale cost.  Twenty-one states avoid paying retail prices by purchasing the
special formula directly from the manufacturers and distributing it to participants.
For example, Pennsylvania turned to the direct purchase of special infant formula
to address the lack of availability and high cost of vendor-provided formulas.  It
established a central distribution warehouse for special formulas in August 1996 to
serve the less than 1 percent of WIC infants in the state--about 400--who needed
special formula in fiscal year 1996.  The program is expected to save about
$100,000 annually.  Additional savings may be possible if these 21 states are able to
reduce or eliminate the authorization and monitoring costs of retail vendors and
pharmacies that distribute only special infant formula.  For example, by establishing
its own central distribution warehouse, Pennsylvania plans to remove over 200
pharmacies from the program, resulting in significant administrative cost savings,
according to the state WIC director.

     While the use of these cost containment practices could be expanded, our
work found that a number of obstacles may discourage the states from adopting or
expanding these practices.  These obstacles include problems that states have with
existing program restrictions on how additional funds made available through cost
containment initiatives can be used and resistance from the retail community when
states attempt to establish selection requirements or limit retail stores participating in
the program.  First, FNS policy requires that during the grant year, any savings from
cost containment accrue to the food portion of the WIC grant, thereby allowing the
states to provide food benefits to additional WIC applicants.  None of the cost
savings are automatically available to the states for support services, such as
staffing, clinic facilities, voucher issuance sites, outreach, and other activities that
are funded by WIC's NSA (Nutrition Services and Administration) grants.  These
various support activities are needed to increase participation in the program,
according to WIC directors.  As a result, the states may not be able to serve more
eligible persons or they may have to carry a substantial portion of the program's
support costs until the federal NSA grant is adjusted for the increased participation
level--a process that can take up to 2 years, according to the National Association
of WIC Directors.  FNS officials pointed out that provisions in the federal regulations
allow the states that have increased participation to use a limited amount of their
food grant funds for support activities.  However, some states may be reluctant to
use this option because, as one director told us, doing so may be perceived as
taking food away from babies.

   FNS and some state WIC officials told us that limiting the number of vendors in
the program is an important aspect of containing WIC costs.  However, they told us
the retail community does not favor limits on the number of vendors that qualify to
participate.  Instead, the retail community favors the easing of restrictions on
vendor eligibility thereby allowing more vendors that qualify to accept WIC
vouchers.  According to FNS officials, the amount that WIC spends for food would
be substantially higher if stores with higher prices were authorized to participate in
the program.  To encourage the further implementation of WIC cost containment
practices, we recommended in our September 1997 report that FNS work with the
states to identify and implement strategies to reduce or eliminate such obstacles.
These strategies could include modifying the policies and procedures that allow
the states to use cost containment savings for the program's support services and
establishing regulatory guidelines for selecting vendors to participate in the
program.  FNS concurred with our findings and recommendations.  We will continue
to monitor the agency's progress made in implementing strategies to reduce or
eliminate obstacles to cost containment.

   Our survey also collected information on the practices that the states are using
to ensure that program participants meet the program's income and residency
requirements.  The states' requirements for obtaining income documentation vary.
Of the 48 WIC directors responding to our survey, 32 reported that their state
agencies generally require applicants to provide documentation of income
eligibility; 14 reported that their states did not require documentation and allowed
applicants to self-declare their income; and 2 reported that income
documentation procedures are determined by local WIC agencies.  Of the 32
states requiring income documentation, 30 reported that their documentation
requirement could be waived under certain conditions.  Our review of state
income documentation polices found that waiving an income documentation
requirement can be routine.  For example, we found that some states requiring
documentation of income will waive the requirement and permit self-declaration
of income if the applicants do not bring income documents to their certification
meeting.  While existing federal regulations allow the states to establish their own
income documentation requirements for applicants, we are concerned that
basing income eligibility on the applicants' self-declarations of income may permit
ineligible applicants to participate in WIC.  However, the extent of this problem is
unknown because there has not been a recent study of the number of program
participants who are not eligible because of income.  Information from a study that
FNS has begun should enable that agency to determine whether changes in states'
requirements for income documentation are needed.  Regarding residency
requirements, we found that some states have not been requiring proof of
residency and personal identification for program certification, as required by
federal regulations.  In our September 1997 report, we recommended that FNS take
the necessary steps to ensure that state agencies require participants to provide
identification and evidence that they reside in the states where they receive
benefits.  In February 1998, FNS issued a draft policy memorandum to its regional
offices that is intended to stress the continuing importance of participant
identification, residency, and income requirements and procedures to ensure
integrity in the certification and food instrument issuance processes.  Also, at the
request of FNS, we presented our review's findings and recommendations at the EBT
[Electronic Benefit Transfer] and Program Integrity Conference jointly sponsored by
the National Association of WIC Directors and FNS in December 1997.  The
conference highlighted the need to reduce ineligible participation and explored
improved strategies to validate participants' income and residency eligibility.

IMPACTS OF REBATES FOR WIC INFANT FORMULA

   FNS requires the states to operate a rebate program for infant formula.  By
negotiating rebates with manufacturers of infant formula purchased through WIC,
the states greatly reduce their average per person food costs so that more people
can be served.  At the request of the Chairman of the House Budget Committee,
we are currently reviewing the impacts that these rebates have had on non-WIC
consumers of infant formula.  Specifically, we will report on (1) how prices in the
infant formula market changed for non-WIC purchasers and WIC agencies after
the introduction of sole-source rebates, (2) whether there is any evidence
indicating that non-WIC purchasers of infant formula subsidized WIC purchases
through the prices they paid, and (3) whether the significant cost savings for WIC
agencies under sole source rebates for infant formula have implications for the use
of rebates for other WIC products.

                              - - - - -

Thank you again for the opportunity to appear before you today.  We would be
pleased to respond to any questions you may have.