    [House Hearing, 106 Congress]
    [From the U.S. Government Publishing Office]

    THE FAILURE OF THE FEHBP DEMONSTRATION PROJECT: ANOTHER BROKEN PROMISE?

    =======================================================================

                                    HEARING

                                   before the

                       SUBCOMMITTEE ON THE CIVIL SERVICE

                                     of the

                                  COMMITTEE ON
                               GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED SIXTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 APRIL 12, 2000

                                   __________

                               Serial No. 106-195

                                   __________

           Printed for the use of the Committee on Government Reform

      Available via the World Wide Web: http://www.gpo.gov/congress/house
                          http://www.house.gov/reform

                       U.S. GOVERNMENT PRINTING OFFICE
    70-437                     WASHINGTON : 2001

    _______________________________________________________________________
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                         COMMITTEE ON GOVERNMENT REFORM

                         DAN BURTON, Indiana, Chairman
    BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
    CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
    CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
    ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
    JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
    STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
    JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
    THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
    DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington,
    MARK E. SOUDER, Indiana                  DC
    JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
    STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
    MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
        Carolina                         ROD R. BLAGOJEVICH, Illinois
    BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
    DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
    ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
    LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
    JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
    GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
    DOUG OSE, California                             ------
    PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont
    HELEN CHENOWETH-HAGE, Idaho              (Independent)
    DAVID VITTER, Louisiana

                          Kevin Binger, Staff Director
                     Daniel R. Moll, Deputy Staff Director
               David A. Kass, Deputy Counsel and Parliamentarian
                        Lisa Smith Arafune, Chief Clerk
                     Phil Schiliro, Minority Staff Director
                                     ------

                       Subcommittee on the Civil Service

                       JOE SCARBOROUGH, Florida, Chairman
    ASA HUTCHINSON, Arkansas             ELIJAH E. CUMMINGS, Maryland
    CONSTANCE A. MORELLA, Maryland       ELEANOR HOLMES NORTON, Washington,
    JOHN L. MICA, Florida                    DC
    DAN MILLER, Florida                  THOMAS H. ALLEN, Maine

                                   Ex Officio

    DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                          Garry Ewing, Staff Director
                 Jennifer Hemingway, Professional Staff Member
                             Bethany Jenkins, Clerk
                Tania Shand, Minority Professional Staff Member

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on April 12, 2000...................................     1
    Statement of:
        Carrato, Rear Admiral Thomas F., USPHS, director, Military
          Health Systems Operations, Tricare Management Activity; and
          William E. Flynn III, Director, Retirement and Insurance
          Programs, Office of Personnel Management...................    49
        Norwood, Hon. Charlie, a Representative in Congress from the
          State of Georgia; and Hon. Jim Moran, a Representative in
          Congress from the Commonwealth of Virginia.................     6
        Partridge, Colonel Chuck, U.S. Army, retired, co-chair,
          National Military and Veterans Alliance; Kristen L. Pugh,
          deputy legislative director, the Retired Enlisted
          Association, on behalf of the Military Coalition; and Hon.
          Randy ``Duke'' Cunningham, a Representative in Congress
          from the State of California...............................    23
    Letters, statements, etc., submitted for the record by:
        Carrato, Rear Admiral Thomas F., USPHS, director, Military
          Health Systems Operations, Tricare Management Activity,
          prepared statement of......................................    52
        Flynn, William E., III, Director, Retirement and Insurance
          Programs, Office of Personnel Management, prepared
          statement of...............................................    62
        Moran, Hon. Jim, a Representative in Congress from the
          Commonwealth of Virginia, prepared statement of............    11
        Morella, Hon. Constance A., a Representative in Congress from
          the State of Maryland, prepared statement of...............    19
        Partridge, Colonel Chuck, U.S. Army, retired, co-chair,
          National Military and Veterans Alliance, prepared statement
          of.........................................................    25
        Pugh, Kristen L., deputy legislative director, the Retired
          Enlisted Association, on behalf of the Military Coalition,
          prepared statement of......................................    33
        Scarborough, Hon. Joe, a Representative in Congress from the
          State of Florida, prepared statement of....................     7

    THE FAILURE OF THE FEHBP DEMONSTRATION PROJECT: ANOTHER BROKEN PROMISE?

                                  ----------

                           WEDNESDAY, APRIL 12, 2000

                      House of Representatives,
                     Subcommittee on the Civil Service,
                                Committee on Government Reform,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 2:14 p.m., in
    room 2203, Rayburn House Office Building, Hon. Joe Scarborough
    (chairman of the subcommittee) presiding.
        Present: Representatives Scarborough, Miller, Mica,
    Morella, and Norton.
        Staff present: Garry Ewing, staff director; Jennifer
    Hemingway, professional staff member; Bethany Jenkins, clerk;
    and Tania Shand, minority professional staff member.
        Mr. Scarborough. I would like to call this meeting of the
    House Civil Service Subcommittee to order. Good afternoon. I
    would like to welcome all of you here.
        Today, the subcommittee is going to scrutinize the
    administration's implementation of the demonstration project
    established in last year's Defense authorization bill to allow
    Medicare-eligible military retirees and certain others to
    enroll in the Federal Employees' Health Benefits Program.
        The purpose of this project is to test the FEHBP as an
    option of providing military retirees and others quality,
    affordable health care.
        When I assumed the chairmanship of this subcommittee, I
    stated that one of my highest priorities would be to improve
    the health care available to families to the men and women who
    serve or have served our Nation as part of the armed forces.
    Military retirees who are eligible for Medicare are
    particularly ill-served by the current military health care
    system. The overwhelming majority of them are locked out of
    TRICARE and the dwindling number of military treatment
    facilities that are still left where they can go. They are the
    only retired Federal employees who are expelled from their
    employer's health benefits program after a lifetime of
    dedicated service. Members of Congress are not. You can bet
    your life on that. Nor are retired civilian employees.
        Congress hears almost daily from military retirees and
    active duty personnel about their difficulties with this system
    and with TRICARE. For this reason, our subcommittee has
    carefully monitored the implementation of this demonstration
    project, including a hearing that we held last year on June 30,
    1999.
        The previous hearing focused on whether, as implemented,
    the demonstration project would fairly test the effectiveness
    of allowing the military community to access FEHBP. At the June
    30th hearing, Admiral Carrato told this subcommittee that 85
    percent of the eligible beneficiaries in the test sites would
    enroll. In fact, that was the Department of Defense's
    justification for severely limiting the total number of
    eligibles in test sites.
        I remember back a year ago, understanding that the admiral
    was only doing his job and only bringing the message to us that
    the DOD wanted him to bring to us, but I remember a year ago
    saying there was no way we would get anywhere close to 85
    percent, that there was no way we would get close to 50
    percent, and, in fact, that we would probably be lucky to get
    into double digits.
        Well, I think other members of this subcommittee agreed
    with me and the witnesses at the hearing. They were also very
    skeptical of that estimate, and, as it turns out a year later,
    for very good reason.
        The actual numbers are in, and with enrollment at roughly 4
    percent of those eligible actually enrolled. This abysmal
    number is in stark contrast to the size predicted by both the
    Congress and the administration, and it would have even been
    worse if DOD and OPM had not extended their enrollment system.
        Remember, I remained terribly concerned that the Department
    of Defense's decision to artificially limit the total number of
    eligible beneficiaries in the test sites has contributed to the
    dramatically depressed enrollment in this demonstration
    project.
        In addition, this subcommittee has been advised of a number
    of other deficiencies in the implementation of this
    demonstration project. These include unsatisfactory marketing
    to potential participants and an information center that could
    not answer the key questions that enrollees had and poorly
    planned health fairs.
        Consistent with my and this subcommittee's overall
    legislative priorities, I believe we have to keep our ongoing
    commitment to promote the health care needs of America's men
    and women in uniforms.
        The FEHBP demonstration project is a critical component of
    Congress' efforts to improve health care for our military
    retirees and their families, and I just hope that the
    Department of Defense will use this opportunity to show us that
    this truly was a good faith effort on their part to provide
    military retirees the choice of the FEHBP as an option to meet
    retirees' health care needs.
        The questions that I want and that I think we need answered
    today are as follows.
        Has FEHBP been given a fair test? If not, why?
        What should Congress do in light of the results of this
    year's open season?
        After all the testimony today, I certainly hope we will
    come to a better understanding of how we, as a committee, and
    we, as a Congress, can prevent such an abysmal failure over the
    next 12 months.
        [The prepared statement of Hon. Joe Scarborough follows:]

        [GRAPHIC] [TIFF OMITTED] T0437.001

        [GRAPHIC] [TIFF OMITTED] T0437.002

        Mr. Scarborough. With that, I would like to recognize the
    gentleman from Florida, former chairman of this subcommittee,
    John Mica.
        Mr. Mica.
        Mr. Mica. Thank you, Mr. Chairman.
        I didn't conceive, in my worst possible dreams, that the
    administration could screw up a demonstration project for the
    intent of this subcommittee, but I think they have managed to
    accomplish that.
        When we first launched this venture to provide FEHBP access
    to our dependents, retirees, and other families that didn't
    have access. We knew that there were gaps out in the service
    areas, and it doesn't take a rocket scientist to see that,
    because of base closures, because of shut-downs in DOD health
    care facilities and other changes in the structure of health
    care delivery by the Government, that there were people left
    out across the country in gaps.
        We proposed coverage and access to FEHBP on a broad basis.
    Of course, we were fought on that, and what we got as a result
    was a narrow demonstration project that maybe was destined to
    fail because it really didn't address the audience and those in
    need that we intended to serve.
        I am most disappointed in the way this whole demonstration
    project has been handled, most disappointed in the limited
    scope of making this available to many who are still in need.
    It is almost without a week or without time that I run into
    military dependents and others who do not have service or find
    service through TRICARE--or, as they term it, ``try to get
    care,'' sadly.
        We have launched a demonstration project that has not been
    successful and really didn't encompass the original intent of
    our desire to see that all of our personnel, retired and
    others, and their dependents, have access to health care on an
    affordable basis.
        So I hope this hearing will help us get back on track. I
    look forward to working with the subcommittee and the chairman
    in that regard.
        Thank you.
        I yield back.
        Mr. Scarborough. Thank you.
        Mr. Miller.
        Mr. Miller. I just wanted to thank you for having the
    hearing. I was here last year for the hearing. I am very
    disappointed and hope to find out some answers. I appreciate
    it, and I am just waiting as we are looking forward to hearing
    the straight talker come forward.
        Mr. Scarborough. All right. Thank you.
        Our first panel--two of which are going to be arriving
    shortly--is comprised of Charlie Norwood, Jim Moran, and Randy
    ``Duke'' Cunningham, three Congressmen who have, obviously,
    been very, very interested in this issue for some time.
        Representative Norwood represents Georgia's 10th District.
    He has dedicated much of his time and effort and energy this
    session to improving military health care, and, most
    importantly, introduced H.R. 3573, the Keep our Promises to
    Military Retirees Act, with Representative Childs. I am proud
    to be a cosponsor of that.
        Congressman Norwood, we are proud to have you here.

        STATEMENTS OF HON. CHARLIE NORWOOD, A REPRESENTATIVE IN
       CONGRESS FROM THE STATE OF GEORGIA; AND HON. JIM MORAN, A
      REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

        Mr. Norwood. Thank you very much, Mr. Chairman.
        I am proud that you are a cosponsor, as all but one of the
    members of your subcommittee, and as are 277 Members of
    Congress in a very bipartisan way.
        I thank you and the members of your subcommittee for the
    opportunity to testify today, frankly on an issue that is very
    near and dear to my heart, the health of our Nation's veterans,
    and military retirees, in particular.
        I represent, Mr. Chairman, a District much like yours. It
    has a very high concentration of military retirees and a very
    rich history of military service. Many of these men and women
    aren't just constituents. Many of these men and women I have
    known for years and are close friends, and I think I am very in
    touch with what is happening with their health care, and, in
    particular, what is happening in their health care around
    Eisenhower Army Hospital.
        As a Vietnam veteran, I have seen first-hand the sacrifices
    that our men and women in uniform make on a daily basis in
    order to keep this country safe and free.
        I appreciate the opportunity today to discuss the progress
    of the Federal Employees Health Benefits Program demonstration
    project, Mr. Chairman, but I have to disclose a bias up front
    on this issue. I don't very much like demonstration projects.
    It has been my experience that Congress only passes
    demonstration projects when we want to appease groups that we
    would like to help but just simply don't have the backbone to
    do so. The FEHBP demonstration project epitomizes that lack of
    backbone.
        We all know that the military health care system is in
    shambles, and if you are connected to it in any way and don't
    know that, shame on you. TRICARE is the worst HMO in the
    country. Many military retirees have little or no access to
    health care, and senior retirees are getting kicked out of the
    system altogether when they turn 65. So the question is: what
    do we do?
        Well, we pass an extremely limited and poorly planned
    demonstration project and hope that this problem will just go
    away. Mr. Chairman, this problem is not going to just go away.
    That is why I have introduced legislation supported by 275
    other Members that would expand the FEHBP option to all
    military retirees, not just those in places like Puerto Rico,
    New Orleans, and Humboldt County, CA.
        Grassroots military retirees from all across this Nation
    support this common-sense legislation because it addresses
    their concerns in a fair and equitable manner.
        I would like to send a message today to our visitors from
    the Department of Defense. You all know, I hope, that I am as
    staunch a defender of the military as there is in this
    Congress. I will fight tooth and nail every day to ensure that
    we have the best-trained, most well-equipped military in the
    world. Our men and women in uniform certainly deserve nothing
    less, not to mention the security of this country. But we in
    Congress need your help in addressing the vital issue of health
    care for retirees.
        I hear over and over again the red herring thrown up that
    expanding the choice of FEHBP to all retirees would somehow
    hurt military readiness, but I will tell you what hurts
    military readiness: the fact that many retirees are reluctant
    now to encourage new recruits to enter the military in the
    first place, because they feel like they have been shafted by
    their Nation.
        In the military academies, much deference is given to the
    legacies, the sons and daughters of academy graduates, and the
    one reason for that is common sense to realize that those who
    come from families with rich and honorable military traditions
    generally make very good soldiers, sailors, airmen, and
    Marines.
        But how much do we hurt the military readiness when those
    graduates are reluctant to encourage their sons and daughters
    to enter the military, as I hear is so often the case these
    days? How much is the retention rate being hurt by the fact
    that those now in the military see every day that the promises
    made to their predecessors are broken on a consistent basis?
        Again, I will do everything I can to help our Defense
    Department, but I want to ask their help today. When I look at
    the egregious mismanagement of a simple demonstration project
    that contributed greatly to its failure, I can only wonder, Mr.
    Chairman, whether or not it was, in fact, deliberate
    incompetence. To what end, I can only speculate, but I suspect
    that some turf war is being played out at the expense of the
    health and well-being of the men and women who sacrificed
    nearly their entire adult lives for the freedom and security
    that we all enjoy today.
        We need to end these shenanigans and work together to do
    what is right for the military retirees of this Nation.
        Mr. Chairman, I want to commend you and your dedication to
    this issue. Your passion for veterans' health care is, frankly,
    second to none in Congress. I look forward to working with all
    of this subcommittee as we continue to address this issue.
        Every Congressperson simply needs to ask themselves a
    simple question: would you trade your FEHBP health care plan
    for TRICARE? And, if we think TRICARE is so great, if it is so
    adequate for the men and women who serve this Nation, then I
    suggest we also offer it to ourselves and see if we really
    think that is the kind of health care that we need.
        Now, I didn't come up and Ronnie Shows didn't come up with
    this solution. It is important to note this was worked out
    talking to the men and women who are retirees. What they need
    to hear from us is they need a signal that this country does
    care about their services. They need to know that we are going
    to keep our word.
        Make no mistake about it, we gave them our word. I don't
    care what anybody comes to this table and says, the Federal
    Government, through its recruitment team in the military, sold
    this to our military retirees that, ``If you will just come
    serve with us as a career, we may get you killed, we will
    certainly send you all over the Nation and all over the world
    and your family life won't be very good, we are not going to
    pay you much, and we will even, if you live through it, give
    you a small retirement, and,'' we said, ``We will give you very
    good health care when you retire.''
        It is time this country stood up and kept its word to what
    I consider the patriots of America.
        I thank you, Mr. Chairman.
        Mr. Scarborough. Thank you, Mr. Norwood.
        I appreciate, again, your leadership. You are right, a
    promise was made and a promise has been broken, and I think the
    fact that the Secretary of Defense is now saying that publicly,
    that every member of the Joint Chief's staff is saying that I
    think gives us an opening. We are not fighting. We are
    certainly not fighting the men and women that run our military
    and the Pentagon. I think we need to get moving.
        Thank you for your help on that.
        Congressman Moran, thank you.
        Mr. Moran. Thank you, Chairman Scarborough. It is nice to
    see you and Mr. Mica and Mr. Miller, and I thank you for your
    abiding interest in this issue.
        Good testimony, Charlie.
        Mr. Norwood. Thank you.
        Mr. Moran. Boy, that was compelling.
        As you know from previous appearances before this
    committee, I have worked with many of you to establish the
    Federal Employees Health Benefits Plan as a demonstration
    program for military retirees over the age of 65. I would
    rather it not be a demonstration program, unless it is a
    universal demonstration program. We ought to just do it. But we
    are trying to at least get our foot in the door with a
    demonstration project.
        The measure received overwhelming response--292 cosponsors.
    If that isn't overwhelming response, I don't know what is. It
    certainly illustrated the commitment of the Members of Congress
    to provide for the health care needs of our military retirees.
        With approximately 1.4 million Medicare-eligible military
    retirees in the country, we cannot ignore the health care needs
    of this population. It is irresponsible, from a public policy
    standpoint, but also from a moral standpoint.
        I don't need to remind any of you--and Mr. Norwood said it
    far more eloquently than I can--of the sacrifices that military
    retirees have made to their country. They saved our country.
    This is the base. We have climbed on their shoulders. They gave
    us democracy and free enterprise.
        But, as they face escalating costs and challenges in
    getting health care coverage, we shouldn't turn our backs on
    them, and that is exactly what we are doing.
        In the past year, there has been a groundswell of support
    in all of our Congressional Districts for improving health care
    coverage for the military retirees. The Military Coalition of
    Service Retirement Organizations has done a terrific job. All
    of the organizations have done a terrific job in terms of
    developing grassroots support.
        I am supportive of wider efforts to strengthen health care
    coverage for all military retirees, but we also need to achieve
    that balance between maximizing the best health care benefit
    for retirees that we can while balancing the financial costs
    that are incurred by covering a very fast-growing population of
    retirees.
        There is no question that the number of people are
    increasing dramatically, so we have got to make sure that when
    we make a commitment we can follow through on the commitment,
    that we are going to have the money available.
        Because the FEHBP plan has such a proven record of success
    among civilian employees and retirees, it is a logical choice
    to extend it as an option to military retirees. Many of us have
    large number of constituents who are military retirees, and we
    are familiar with the enormous difficulties that those retirees
    are experiencing in accessing affordable health care,
    especially when they need it the most.
        In the past few Congresses, a number of us have sponsored
    legislation to grant Medicare-eligible military retirees the
    option of participating in FEHBP, and that was what H.R. 205
    did. Once they became eligible for Medicare, they were being
    denied access to the military health care system and shut out
    of military medical treatment facilities because they were
    placed last on the priority list for receiving care, so we
    created a system where military retirees, once they reach the
    point in life where they need health care the most are given
    the least from their former employer. It is the only large
    organization in the country, maybe in the world, that does not
    provide health insurance upon retirement if they had it while
    they were employed.
        So our legislation ensures that retirees, whether they have
    served their Nation in the armed forces or as a civilian
    employee, they are treated with the same dignity and have an
    equal opportunity to have participated in the FEHBP.
        As many of you know, we have an extraordinary rate of
    satisfaction with FEHBP. DOD cannot be the only organization
    that kicks its people out of its health insurance program once
    they need it the most. They don't do it with civilian
    employees, and so they shouldn't do it with military employees,
    enlisted employees.
        Let me skip some of this stuff. I have got too much down
    here.
        What we are trying to do is to ensure that we have an
    option, in addition to Medicare subvention, it doesn't subvent
    Medicare subvention. These are complementary approaches, but I
    don't think Medicare subvention, alone, is going to address the
    need. The majority of Medicare-eligible military retirees don't
    live within catchment areas surrounding a medical treatment
    facility. I don't bill Medicare subvention, alone, will make
    available more resources to ensure that all who need care can
    be accommodated.
        FEHBP is nationwide and can ensure this, and DOD can also
    benefit from this legislation because it has the ability to
    bill third-party insurers for the direct care it provides to
    cover the retirees in military medical treatment facilities.
        In order to achieve a worthwhile demonstration program, OPM
    and DOD have to ensure that enrollment is at least 66,000
    beneficiaries. I thought that was too much. But when we hear it
    is only 1,800 people, employees, that is a laugh. It is comical
    to think that they would think that that is an adequate
    demonstration. The main reason is that no one in their right
    mind is going to leave their insurance program, enroll in
    FEHBP, if they can't be sure that after 2 years they are not
    going to get cutoff. That doesn't make sense. Military retirees
    are not crazy. They understand. They are responsible. They can
    read. And they certainly are not going to leave their family
    without health insurance if a demonstration program sunsets, so
    we need to address that.
        The limited scope of the demonstration project, even if it
    gets up to 3,000 enrollees, is not adequate. It doesn't give us
    a fair demonstration. We can't use the results. OPM and DOD
    have to improve their marketing and educational efforts to
    achieve a full participation rate authorized by law; 66,000 was
    minimal. At least get it up to 66,000.
        We have sent a letter to DOD, which I am going to include
    for the record, to Dr. Bailey, who is the Assistant Secretary
    for Health Affairs, detailing our concerns with the
    implementation of the demonstration. We highlighted the
    insufficient marketing of the demonstration, including
    inadequate mailings and educational information provided to
    eligible retirees, and the reasons why we think that we had an
    unacceptably low response rate.
        I commend the Department of Defense for adding two
    additional test sites to the FEHBP demonstrationsite, but I
    have got to say I am disappointed. These two sites, even though
    one of them is in Georgia and another is in Iowa, they don't
    necessarily represent a large enough geographic area with a
    sufficient number of participants. We need larger areas to be
    tested.
        The DOD needs to get out to town hall meetings, needs more
    effective oversight. They need to be able to cross State lines
    to reach their participation rates. They need to do much more.
    Basically, they need to get serious about this demonstration
    program.
        Mr. Chairman, our Nation's leading military service
    organizations have endorsed this bill. They recognize that
    allowing the Medicare-eligible military retirees to join the
    FEHBP is a fair and efficient means by which we can live up to
    our prior promises. I hope you will agree--and I trust that you
    will--that this approach represents part of a solution to a
    serious health care problem, that the demonstration project is
    a critical first step in providing our Nation's military
    retirees with high-quality, reasonably priced health care.
        I appreciate your consideration, and we look forward to
    working with the subcommittee, as well as OPM and DOD and the
    executive branch, to ensure a full and fair test of the FEHBP
    demonstration, and we will include this letter for the record,
    because the letter, since it was written with the help of
    staff, was far more articulate than I can be, and so we will
    put that in for the record, as well, Mr. Chairman.
        Thank you for your attention, and the members of the panel.
        Mr. Scarborough. And thank you for your very articulate
    testimony.
        [The prepared statement of Hon. Jim Moran follows:]

        [GRAPHIC] [TIFF OMITTED] T0437.003

        [GRAPHIC] [TIFF OMITTED] T0437.004

        [GRAPHIC] [TIFF OMITTED] T0437.005

        [GRAPHIC] [TIFF OMITTED] T0437.006

        Mr. Scarborough. I think I know the answer to this
    question, obviously, from your testimony, but I am going to ask
    both of you to just give me briefly your insights on what has
    gone wrong with the way DOD and OPM has implemented this
    program. Of course, Representative Moran, you started that.
    Obviously, they were predicting 85 percent, they only came up
    81 percent short at 4 percent. What caused that gap and what
    can we do to improve it over the next year?
        Mr. Moran. Obviously, lack of marketing effort, lack of
    information, and lack of reasonableness. They are not going to
    join it if they can't be confident that it is going to be
    sustained. They are not going to put their families in the
    lurch losing their health insurance.
        I am amazed we only have 2,000 to 3,000 enrollees. Charlie,
    being a doctor, I think can add additional perspective.
        Mr. Scarborough. Let me ask you briefly, what can this
    program do to ensure sustainability to somebody coming in--you
    talked about it. Obviously, military retirees aren't crazy,
    aren't dumb. They know that it doesn't make sense for them to
    get a new program when the carpet can be yanked out from
    underneath them 2 years from now.
        Mr. Moran. DOD will own this program, and understand it
    needs to be done. It will get it done. The Defense Department
    can get done whatever it wants to get done. I think the issue
    is whether or not it wants to do this right, adequately, and in
    a way that will prove that we were right--that this program
    works and should complement the existing level of military
    health insurance.
        Mr. Norwood. Mr. Chairman, I think we ought to be of as
    much help to DOD as we can, and, in doing so, in this dadgummed
    demonstration project, and pass 3573. Then you will find that
    many, many military retirees will use this as an option because
    there is stability to it once you pass that language.
        It is of great interest to me that when CBO scored our bill
    they scored it at $9 billion the first year. Now, that will be
    on a declining amount, because we are losing 1,000 veterans a
    day, but they scored it at $9 billion based on a 50 percent
    participation. In other words, 50 percent of the retirees would
    choose to go into FEHBP rather than using TRICARE.
        Now, my gut tells me that is probably a little high, but
    somebody has it wrong when we have a demonstration project with
    4 percent or less joining up, and CBO is, on the other hand,
    saying at least 50 percent are going to sign up on the FEHBP
    plan once we codify it into law and give them the stability
    they need.
        I agree with Congressman Moran. Why in the world would
    somebody sign up when they don't know for sure what is going to
    happen at the end of the project 2 or 3 years later.
        What made that even worse, the information system available
    to them was just absolutely confusing to people who would call
    to try to find out. In other words, they were of no help.
        That is why we have got such a mess with the demonstration
    project now, Mr. Chairman.
        Mr. Scarborough. What is the fastest, quickest way--and I
    am going to lob this off to you first, Mr. Norwood, and then,
    Mr. Moran, let you answer it--what is the best way for us to
    assure that we can keep the promise to the men and women in
    uniform and their dependents to give them the health care that
    they deserve?
        Mr. Norwood. Well, I and the other veterans and retirees
    across this country think that the fastest, surest way is to
    end this demonstration project and go to the floor and pass
    3573. Bingo.
        Mr. Scarborough. You see this demonstration project as a
    detriment to that effort?
        Mr. Norwood. Well, it is being used by those, whoever they
    may be, wherever they may be, who don't want to keep our
    promises, to talk negatively about us going into FEHBP. But I
    will just tell you honestly, I would like to know the civilian
    employees that would rather go into TRICARE rather than FEHBP.
        Mr. Scarborough. Right.
        Mr. Norwood. You find me a few.
        Mr. Scarborough. All Members of Congress, as you said.
        Mr. Norwood. Well, I can guarantee you Members of Congress
    won't want to do that.
        Mr. Scarborough. Right.
        Do you know how many men and women who served in World War
    II are dying daily?
        Mr. Norwood. Yes. We are losing 1,000 a day.
        Mr. Scarborough. 1,000 a day. So if we go another year with
    the failed demonstration project that only pulls in 4 percent,
    5 percent, 10 percent, that means we are going to lose almost
    half a million by the time we come back next year.
        Mr. Norwood. And if you will listen, Mr. Chairman, once a
    week I go to the floor and talk about one of those families
    personally that has, in fact, run into a great deal of problem
    with their health care as they go into their latter years and
    having so many health care problems. In fact, many of the cases
    I bring up personally are people who have died simply because
    they did not get proper health care.
        Mr. Scarborough. In our field hearing in Florida a week or
    two ago, it was the belief of Congressman Cummings, myself, and
    many that testified that the Federal Government is just simply
    doing a slow roll. It is cheaper to just sit back, with all
    these people dying, than to provide them health care in their
    final years. Do you all agree with that?
        Mr. Norwood. Yes. Yes. If you wait long enough, the patient
    will die and you don't have to pay for the care.
        Mr. Scarborough. Congressman Moran.
        Mr. Moran. We are sort of doing that on the notch issue. I
    hope we don't do it on the issue of military retirees.
        I agree with Mr. Norwood. H.R. 3573 is a better bill. I
    would rather just do it. But I also have to say, you know, we
    need to pass this supplemental that included $4 billion for
    military health care, that the Senate shouldn't be messing
    around with it.
        We are not going to have the money in the 2001 budget. It
    is not in the budget resolution. We are not going to have that
    latitude within the Defense appropriations bill to do it in
    2001.
        We can't just pass the legislation. We have got to be
    prepared to fund it.
        Mr. Scarborough. Right.
        Mr. Moran. And it is going to be substantial. We are
    talking about $9 billion a year. That is why DOD has been
    reticent to do it. But I think it is the right thing to do. I
    think we ought to do it.
        Mr. Scarborough. Does that price go down over time, again,
    with a lot of these veterans getting older and older and
    passing on?
        Mr. Norwood. Yes, Mr. Chairman. It will decline.
        Mr. Scarborough. Significantly.
        Mr. Norwood. That price goes away at some point.
        Mr. Scarborough. So it is not a $9 billion this year and
    then going up. It actually will go down.
        Mr. Norwood. One of the few things I have ever known in
    Congress that was passed that the cost would go down.
        Mr. Scarborough. Yes.
        Mr. Moran. The only caveat--and I don't disagree with Mr.
    Norwood--is that we will still have military retirees coming
    into the system every year, and we want to maintain our
    military force. I don't think that it is too much now. It is at
    a minimal level, as far as I am concerned. But the cost of
    medical care also is going to go up. That is a variable, and we
    just have to be prepared to meet the cost as it is incurred.
        Mr. Scarborough. Last question I want to ask you all--and
    if you want to comment on that, you can--the last question that
    I have for you pertains to the alternative that is coming up in
    the Senate that the majority leader supports, and that is
    Senator--I think it is Senator Warner's bill, which is a
    compromise on yours.
        What are the positives or negatives on that bill?
        Mr. Norwood. Mr. Chairman, I don't pay a lot of attention
    to what they do in the Senate, but my understanding is that it
    is too little too late. It is just simply not adequate enough
    to get to the problem.
        Congressman Moran is right--more people will be coming into
    the system. But what we all need to keep in mind is that our
    bill addresses retirees differently who were part of the
    military pre-1956 versus those post-1956, and that we do more
    for those pre-1956. In other words, we pay their entire cost,
    as was promised.
        In 1956, Congress basically says, ``OK, we will furnish you
    your health care, but it is based on a space-available basis,''
    and on that basis those that are post-1956 have to pay part of
    their health care, just like we do.
        I don't really like that very much. I don't think that was
    the trade, but that is how the bill ended up.
        So yes, more will be coming on, but this has a declining
    cost to it all the way out.
        Mr. Scarborough. Thank you.
        I would like to now recognize the gentlelady from the
    District of Columbia, Ms. Norton.
        Ms. Norton. Thank you, Mr. Chairman. I have no questions
    for my colleagues here, because I could not agree more with
    what I was able to hear of their testimony. I apologize I
    didn't hear it all. I will be far more interested in the
    response of our third panel with the OMB and the TRICARE
    management people, because this is mystifying to me and it
    demands an explanation, and I think the Members have raised
    just the right questions.
        Thank you.
        Mr. Scarborough. Thank you.
        I would like to recognize now the Congresslady from
    Maryland, Mrs. Morella.
        Mrs. Morella. Thank you, Mr. Chairman. I appreciate your
    having this hearing.
        I think it is important for us to recognize whether the
    demonstration programs we establish do work, and I thank my
    colleagues for being here to indicate what the intention was
    and their feeling of dissatisfaction with what we had.
        It appears to me that there was a concern about the fact
    that the number was a demonstration program but a limited
    number fell far, far under that number, and that education was
    necessary, further information and marketing, and so, again, I
    look forward to hearing why, how, and what we can do in the
    future.
        I thank you for being here.
        I ask unanimous consent that an opening statement be put in
    that record.
        Thank you, Mr. Chairman.
        Mr. Scarborough. Without objection, thank you.
        [The prepared statement of Hon. Constance A. Morella
    follows:]

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        Mr. Scarborough. Congressman Mica.
        Mr. Mica. I thank my colleagues. Mr. Moran and I served
    together. I think he was the ranking member when we initiated
    some of this. Our intent at the beginning was to have total
    coverage. We got beaten down. They said the sky would fall,
    that people would be signing up in droves, that it would be the
    end of the world and sliced bread as we knew it. None of that
    occurred.
        It is sad, though, in the meantime that tens of thousands
    have been denied care and that our original intent was to
    provide coverage to that gap.
        I can't totally blame DOD, because others lobbied that the
    sky would fall, too, that this would become some type of
    incredible burden, and organizations ran around behind our back
    and said it had to be done on a very narrow basis, and how much
    harm it would do. It is sad that they have left these people
    behind.
        Now we need to get this demo behind us, open this up to
    everyone, to people who need it, fill in the gaps, and meet our
    commitment to these people that served this country and their
    dependents.
        Thank you, Mr. Chairman.
        Mr. Scarborough. Thank you, Mr. Mica.
        Next we will recognize the gentleman from Florida, Mr.
    Miller.
        Mr. Miller. I appreciate your statements and am very
    supportive.
        Mr. Moran, you have a lot to do on the Federal employee
    health plan, and one of the reasons, I guess, the demonstration
    project was thought about was that we don't want to destroy
    something like that. Does that concern you? I mean, to jump
    totally into it, which I think is a concept--but, you know, to
    go to a $9 billion addition to Federal employee health benefit,
    what does it do with that plan? Do you have concerns about the
    fact that they have failed here on a simple demonstration
    project?
        Mr. Moran. Well, it is an excellent question, Mr. Miller.
    We do keep two different pools so that we would not compromise
    the civilian rates for civilian employees. We don't think that
    it is going to adversely affect the overall insurance rate if
    you did melt both pools, but we keep them separate.
        Mr. Miller. For the administrative structures?
        Mr. Moran. That is right. And they are large enough that
    you don't lose economies of scale by doing so. But we do that
    so that it--for one thing, we didn't want any opposition from
    the civilian employee ranks, and I don't think we have it, and
    there is no reason that we would. It is the same benefit
    structure, but we will separate the two pools.
        Mr. Miller. Like my colleagues, I am glad you are here, but
    we are really looking forward to the next panels to get some
    answers, maybe.
        Thank you.
        Mr. Moran. Thanks.
        Mr. Scarborough. Thank you. I thank both of you for coming
    today, and certainly also greatly appreciate the fact that you
    all are helping Congress and the administration remember a
    promise that has been forgotten and has been broken to the men
    and women that have protected our country for so long. Thank
    you for your work and your testimony.
        Mr. Moran. Thank you, chairman.
        Mr. Norwood. Thank you, Mr. Chairman.
        Mr. Scarborough. Next, I would like to call up panel two.
    They are Chuck Partridge and Kristen Pugh.
        Colonel Partridge currently serves as co-director of the
    National Military and Veterans Alliance. He has been the
    legislative counsel for the National Association of Uniformed
    Services since May 1984. Colonel Partridge's military career
    spanned 31 years of enlisted and commissioned services in the
    Reserve and active forces. He served in Vietnam, Germany, and
    Korea, and in several installations in the United States.
        Kristen Pugh currently serves as deputy legislative
    director of the Retired Enlisted Association. Today she is
    going to be testifying on behalf of the Military Coalition.
        Both Colonel Partridge and Ms. Pugh testified at our
    previous hearing on the demonstration project. Both have been
    involved in the demonstration project from the very start and
    worked very hard to create it. I would like to welcome them
    back for their comments today.
        Colonel Partridge.

     STATEMENTS OF COLONEL CHUCK PARTRIDGE, U.S. ARMY, RETIRED, CO-
      CHAIR, NATIONAL MILITARY AND VETERANS ALLIANCE; KRISTEN L.
        PUGH, DEPUTY LEGISLATIVE DIRECTOR, THE RETIRED ENLISTED
      ASSOCIATION, ON BEHALF OF THE MILITARY COALITION; AND HON.
     RANDY ``DUKE'' CUNNINGHAM, A REPRESENTATIVE IN CONGRESS FROM
                        THE STATE OF CALIFORNIA

        Colonel Partridge. Thank you, Mr. Chairman. It is a
    pleasure to be here. And it is also a pleasure to hear the line
    of questioning and hear the testimony of the Members of
    Congress before us.
        With base hospital closures, reduction in medical
    personnel, perennial medical funding shortfalls, the increasing
    lack of available health care continues to be a major concern
    to active and retired personnel, alike. In fact, the situation
    will clearly get worse as additional hospitals are converted to
    clinics and medical personnel downsizing continues.
        Furthermore, each year the Secretary of Defense proposes
    additional rounds of base closures. Sooner or later, more
    closures will occur. This means hospitals will close and
    additional thousands of retirees will lose their health care
    benefit.
        Our members remain concerned that the Department of Defense
    has no plan that the promised health care benefit will be in
    place by a certain date. In fact, military retirees are the
    only Federal employees that do not have a lifetime benefit.
    That is why we support providing FEHBP as an option. This is
    also why H.R. 3573 in the House and S. 2003 in the Senate have
    such strong grassroots support. Those bills would solve the
    problem.
        FEHBP is widely available. There is a variety of plans and
    options. Its availability is not dependent on troop deployment
    or base closures. It is widely accepted by physicians and other
    providers. And it is cost effective for DOD, with low
    administrative costs.
        Military hospitals and associated networks should remain
    the primary source of care for military personnel and their
    families and beneficiaries who could be guaranteed care.
    However, the FEHBP option is badly needed to ensure that
    everyone who served and was promised a health care benefit have
    access to a DOD-sponsored health care program.
        Regarding the demonstration program, specifically, based on
    information received from our members and the test sites, there
    are several reasons for a low participation rate. They include
    lack of aggressive marketing by DOD. Initial explanations at
    the health fairs did not fully cover the interaction of FEHBP
    plans with the Medicare program. This was remedied during a
    second round of health fairs, and the fact that the enrollment
    period was extended, but by that time a lot of people had made
    up their minds.
        A 3-year limit on the demonstration also deterred
    enrollees. They were concerned that the test would fail and not
    be extended and they would be faced once again with changing
    health plans.
        Thus, we believe that allowing those who enrolled to remain
    in the program, even if FEHBP is not adopted worldwide, would
    allay these fears.
        One feature of the test which locked FEHBP enrollees out of
    military treatment facility was also a deterrent. We believe
    that enrollees should no longer have fully paid care in MTF but
    should be allowed access with FEHBP being billed for the care,
    to include prescription drugs. This would allow MTF commanders
    to be reimbursed for space-available care, result in more-
    effective use of MTFs, and contribute to medical readiness by
    making these people available for the graduate medical
    education programs. Further, it would allow DOD to recover part
    of the premium cost.
        The geographic limitations of the test also contributed to
    the lack of participation. Our recommendation last year and the
    recommendation this year is that the geographical limits be
    removed, and, if you are going to continue a test rather than
    make it permanent, raise the cap. Set the cap at some level and
    then enroll people until the cap is hit. That would give you a
    much better test, because, as has been stated, the current test
    proves nothing. It was flawed, and now we don't have sufficient
    data on which to base the decision.
        The requirement to establish a separate risk pool for such
    a small population also could result in higher premiums;
    however, we would like to state that this was avoided by some
    carriers who decided to establish the same rate regardless of
    the risk so that they could get some feel for what this meant
    for military retirees.
        Mr. Chairman, the National Military Veterans Alliance, the
    National Association for Uniformed Services, and the Society of
    Military Widows thank you for holding these hearings and thank
    you for letting us testify.
        Mr. Scarborough. Thank you, Colonel Partridge, for all your
    hard work and your testimony.
        [The prepared statement of Colonel Partridge follows:]

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        Mr. Scarborough. Ms. Pugh, welcome back.
        Ms. Pugh. Thank you very much. Good afternoon, Chairman
    Scarborough, Mr. Mica, and Mr. Miller.
        The Military Coalition appreciates the opportunity to
    discuss reasons we believe have led to the dismal enrollment
    numbers in FEHBP 65 tests. Today, of course, 2,562
    beneficiaries, about 4 percent of the 66,000 enrollees
    authorized by Congress, have enrolled in this test. This number
    reflects the extended enrollment period from December 1999
    through March 2000.
        To better understand the reasons why retirees, both
    enlisted and officers, were and were not enrolling in FEHBP 65,
    in January the Military Coalition sent 7,410 health surveys to
    affiliated eligible association members residing in test sites
    offering FEHBP 65 only. For those 2,622 that responded, only 13
    percent enrolled, while the other 87 percent did not enroll.
        In one question, those not participating could mark one or
    more reasons for non-enrollment, and many entered additional
    comments explaining why they chose not to enroll. Some of these
    conclusions that were drawn--the Coalition believes the
    extremely low participation rate is contributed to a variety of
    reasons, to include lack of timely delivery of accurate and
    comprehensive information about FEHBP 65 to eligible retirees.
        The first health fairs sponsored by DOD were not conducted
    until the first week of November, a month later from the
    targeted TMA marketing plan. The fairs were planned hastily,
    with little or no notification for eligible enrollees.
        Reading comments from those surveyed, ``The town hall
    meetings were very unsatisfactory. No one had answers to
    questions.'' ``The town hall meetings were poorly planned and
    publicized.'' I believe this is the reason for such a poor
    participation in the program.
        Also, the call centers lacked knowledgeable specialists to
    provide answers to simple questions and to send adequate
    educational materials.
        Survey comments: ``Requested forms and information to
    enroll, but never received information.'' ``Getting information
    was very frustrating. The DOD information center did not appear
    to ever get a grasp of what the program was all about.''
        There was fear of venturing into an unknown health care
    program with the worry they would have to change plans again
    when the test authority expired in 2002. The limited, 3-year
    test deterred many eligible beneficiaries from enrolling.
        Survey comments: ``Just couldn't risk having to try to get
    insurance at age 73 should the demonstration fail to be
    renewed.'' ``FEHBP 65 program may not last.'' Another quote,
    ``I plan on enrolling in FEHBP 65 when the program becomes
    available to all military retirees on a regular basis, not a
    test basis.''
        Beneficiaries were concerned about pre-existing medical
    conditions if the tests terminated and they needed to resume
    their Medigap coverage.
        There was a lack of understanding by the target population
    about FEHBP, including the potential cost savings of their
    existing Medicare supplemental insurance if they were to opt
    for an alternative.
        Beneficiaries were concerned about the benefits provided
    under the various FEHBP plans to those enrolled in Medicare
    part B. DOD marketing materials failed to adequately highlight
    that copays and deductibles are waived for fee-for-service
    plans for Medicare eligibles enrolled in part B. Virtually all
    potential enrollees, 93 percent, are enrolled in Medicare part
    B.
        DOD did not market FEHBP in a timely manner to a population
    of members new to the FEHBP plan, unlike Federal civilian
    retirees.
        There was a 10 percent error rate in DOD's first mail-out,
    but to date DOD has made no effort to correct this data base.
        Finally, it is in the opinion of the coalition that if DOD
    wanted this program they would have marketed appropriately to
    this population of eligible enrollees.
        Marketing material from past and future DOD programs
    demonstrate their lack of commitment to properly market the
    FEHBP 65 test.
        The TRICARE senior prime test and TRICARE senior supplement
    were illustrated in glossy and informative marketing materials
    that are attractive to the customer and user friendly, too. A
    post card, a nice brochure, and a nice book--I might want to
    participate in--in comparison to the inadequate, misleading
    materials sent to FEHBP 65.
        If I was a retiree and I received this, I would probably
    throw it away because I have TRICARE on it, and if you are over
    65 you can't enroll in TRICARE, and this was a post card that
    came out that was due on July 15th that didn't come out until
    August 15th.
        In conclusion, the coalition recommends a guaranteed
    enrollment beyond the test date, an aggressive education and
    marketing program, mailings to all eligible beneficiaries in
    each site, and expansion in number of enrollees in the upcoming
    years for a truly fair assessment of FEHBP 65.
        Thank you.
        Mr. Scarborough. Thank you. We appreciate the testimony.
        [The prepared statement of Ms. Pugh follows:]

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        Mr. Scarborough. I wanted to start by asking you all a
    question. You two have obviously been key leaders in the
    implementation of this, as far as lobbying for it, encouraging
    better efforts by DOD and OPM. Let me ask both of you to
    separately grade DOD and OPM on their implementation of the
    program.
        I see you smiling, but what would it be? You have been
    there from the beginning?
        Ms. Pugh. I will answer first. I guess, on the very
    beginning, if we can walk back to the July hearing that we had,
    there were great concerns of what OPM's role was, as well as
    the Department of Defense.
        The information provided--there was a true disconnect,
    because DOD, in the very beginning, did not know. They thought
    the health fairs were going to be sponsored by us or the health
    insurance companies. That is a disconnect. The material that
    was provided from them we never reviewed before it was sent
    out. There was no real commitment.
        The information from OPM is the information that they
    provide to all Federal employees, and if you haven't retired as
    a Federal civilian servant you don't know what those numbers
    mean. You don't know. When you look at a chart, you don't
    understand it.
        So I feel that DOD did very poor marketing, and OPM put out
    what they needed that was provided and required by law.
        Mr. Scarborough. Colonel Partridge.
        Colonel Partridge. I will underline that. Our concern all
    along was that the selection of the sites were done on a random
    basis, probably for good reason, but that helped in the failure
    of it. It is just not a passing grade in terms of laying a
    program out that we could get behind early on, get our people
    informed, and help inform.
        Mr. Scarborough. Throughout the process--and I know you
    talked about a disconnect--throughout the process, did you find
    DOD and OPM responsive to military retiree groups, concerns
    that you had? Let us talk about that dialog. Let us talk about
    the disconnect, particularly with DOD, who thought that you all
    were going to be implementing these health fairs or sponsoring
    the health fairs. How responsive were they to your concerns?
        Colonel Partridge. Once we saw where this was going, we
    went over and began to express our concern at the staff level,
    and I think at that point they began to react, but it was too
    late.
        Much of the material was already out there. People had
    already made up their mind by the time we started the second
    round.
        Ms. Pugh. I guess another thing to add, too, is concerning
    the fact that we knew where we were in July. We needed to take
    our time and start marketing in August, and one post card did
    not provide any adequate information. We needed to start doing
    health fairs then.
        Again, when you do a health fair in November and the
    November enrollment season starts 10 days later or 5 days later
    and you weren't notified of that health fair, how can you make
    a decision in 2 months?
        Mr. Scarborough. Hearing your testimony, it sounds like
    marketing may have been the biggest effect. Is that a fair
    assessment of your testimony? Was poor marketing----
        Ms. Pugh. It is a very fair assessment.
        Mr. Scarborough. That was part of it?
        Ms. Pugh. Not only just the marketing aspect, but the
    education materials behind the marketing. As I pointed out in
    my testimony, people didn't really understand the protections
    on the Medigap policy.
        Mr. Scarborough. Yes.
        Ms. Pugh. If you are over 65, the last thing you want to be
    doing is dropping the current plan that you have to go into a
    program where you don't know if you will be protected.
        I guess the caveat is the insurance carries out there, the
    Medigap, couldn't answer that question, nor could the call
    center.
        As an example, one of my members called me and I sent him
    the law that he would be protected on the Medigap policy.
        Mr. Scarborough. Yes.
        Ms. Pugh. That should have been done at the very beginning.
        Mr. Scarborough. Right.
        Colonel Partridge, marketing problems?
        Colonel Partridge. Yes, sir.
        Mr. Scarborough. Do you think that was the main problem?
        Colonel Partridge. Marketing was a major problem, but the
    policy was also a problem. The short duration, the way it was
    designed--in other words, if you enrolled the first year, you
    have 3 years.
        Mr. Scarborough. Right.
        Colonel Partridge. If you wait till the second year, you
    have 2 years. If you enroll the third year, you have 1 year,
    and the fact that they couldn't continue in the program.
        I think the fact that they knew it was a test and they
    would have to get out was a major factor.
        Mr. Scarborough. And how do we get around that? I mean,
    here we are a year into it. Again, if you look at the number,
    we have lost over 300,000 World War II veterans in the past
    year who were short-changed, who had their promises broken to
    them, just like my grandfather did as a veteran of World War II
    and the Korean War. He died bitter at the Government because
    the Government broke the promise.
        Are we going to be wasting another 2 years? I mean, even
    with the best of marketing, is there any way to make this
    program work with only 2 years left?
        Colonel Partridge. No. I would say that the odds are
    greatly against us. If we leave the program just as it is,
    leave the 2-years as it is, tell people, ``You are going to
    have to get out of this program at the end,'' I don't see how
    we can fix it at this point.
        Mr. Scarborough. What if DOD tries to improve the program
    and we still only have 2 years?
        Colonel Partridge. I think the 2-year limit is a major
    factor. I think that will, in itself, be a major deterrent
    against people signing up.
        Mr. Scarborough. Is there any way around that, or not?
        Colonel Partridge. Of course, what we would like to do is
    make it permanent. One way to fix that is, if you enroll in the
    program, you are in for the rest of your life, whether we
    continue the program or not.
        So let us say suppose we had 66,000 people enrolled in it--
    and you have got what in the Federal plan, several million? I
    mean, what difference? There would be no reasonable cost there.
    You could allow that to happen. Let them stay in.
        Of course, our view would be let us go ahead and make it
    permanent, and if you want to control the cost, control the
    cost by setting caps of who can enroll in it each year.
        Mr. Scarborough. Ms. Pugh, are we kidding ourselves by
    thinking that we can now improve marketing a year into the
    program and do all these other wonderful things and set up
    better call centers and set up better health fairs while still
    not providing a lifetime benefit? Are we kidding ourselves
    saying that there is any way to make this work?
        Ms. Pugh. I think, on the first note, we have already
    marketed to this population, so they are already turned off.
        Mr. Scarborough. Right.
        Ms. Pugh. So I don't know how we capture that population
    again, No. 1.
        No. 2, with 2 years left, again, the same conclusions are
    going to be drawn from retirees--dropping current health care,
    what they already know to go into something for 2 years.
        I think the only thing--and what Colonel Partridge
    indicated to, as well--is expanding it and making it a
    permanent program, or, at the very least, grandfather the
    population now and then in the future so there is a sense of
    security that they can go into this program for their life.
        Mr. Scarborough. OK.
        Mr. Miller.
        Mr. Miller. That sounds good.
        Do you have any feeling about the 4 percent, that 1,600? Do
    you have any sense of what their experience is so far?
        Ms. Pugh. Yes, I do. I told you I did a survey, and----
        Mr. Miller. That is great you did a survey.
        Ms. Pugh. Yes. And we can provide and place in the record
    the information that we received. But, going through some of
    the comments, from even people that enrolled I went through
    some comments. People still were uncertain when they enrolled
    in the program. They took a chance, is basically what they
    said. So that is one conclusion.
        Some of the other observations were reasons why people
    didn't participate is maybe they already had a FEHBP, and that
    is----
        Mr. Miller. These are the ones that already participate?
        Ms. Pugh. Are participating.
        Mr. Miller. So that 4 percent, which I know is not a very
    large sample to talk about--I mean, 1,600 people signed up.
        Ms. Pugh. Some of the survey responses, people are very
    content. They are very content from the FEHBP product. Going
    into it, they were wary, but now, being in the program, they
    are very happy to see that they have a pharmacy benefit and a
    true wrap-around to the Medicare coverage.
        A caveat to that is we have got some people who responded
    to the survey who already are retired civilian employees, and
    they indicated in their comments, ``We are so happy to see, for
    the first time, that some of the people that we served
    alongside get to have this benefit.''
        Mr. Miller. When they get to choose, do they have similar
    choices that we, as Federal employees, have?
        Ms. Pugh. Yes.
        Mr. Miller. The same type of choices?
        Ms. Pugh. Yes.
        Mr. Miller. But they don't pay--you know, we have a
    different rate. We choose whichever plan we want, the more we
    pay.
        Ms. Pugh. The rates were adjusted because it is a separate
    risk pool.
        Mr. Miller. Right.
        Ms. Pugh. Actually, we were surprised. Some of the rates
    were a little lower, and that is actuary work done by the
    insurance carrier. But they do have to pay. I mean, DOD pays
    the 72 percent and they have to pay the rest of the percentage.
        Mr. Miller. Better marketing, information, and the
    guarantee that they are going to be able to stay in the
    demonstration--for those that sign up, they are good for the
    rest of their lives, as long as they want to. And then, if we
    could enlarge the size of the pool--what about the question of
    the sites selected. I don't think Florida got selected, did we?
        Mr. Scarborough. No, and I am having a hard time figuring
    out why.
        Mr. Miller. I think three of us from Florida are on this
    committee.
        Mr. Scarborough. Well, that is why.
        Mr. Miller. But what impact--I think you said that it was a
    random selection process. How much of a problem was the sites
    to you?
        Colonel Partridge. My only point there was that perhaps by
    deliberately picking sites, which might have been politically
    unfeasible from the prospect of DOD, but by actually picking
    sites, even with a small number we could have gotten a better
    test than the random selection, because the way the random
    selection process worked, it truly was random. I am sure that
    just by a little analysis and judgment we might have been able
    to have done a better test. I don't know for sure.
        Ms. Pugh. And, just to add to that point, we have always
    said, from the very beginning, working with this committee and
    the staff on this committee, especially, we should never have
    had sites, per se. It should have just been opened up
    nationally with 300,000 enrollees eligible to participate,
    because we are seeing 66,000. We have a little under 2,600 who
    enrolled.
        Mr. Miller. Do you see problems if we opened it up
    nationally to, say, 300,000, rather than target it? I mean, the
    logic was you wanted to have certain geographic regions that
    are fairly compact to work with, but do you see any problems
    why that would work if you just said anyone in the country that
    wanted to join it could do it?
        Ms. Pugh. From the very beginning, no, I don't. And
    actually the language in the Senate side, S. 2087 that the
    chairman referred to earlier, does have a provision to give DOD
    authority to drop those barriers, but it still limits the
    enrollment to 66,000. We have always said to open it up.
        Colonel Partridge. The good part about doing that
    nationwide is that you could start the enrollment and control
    it by caps and suppose, after you finish the enrollment period,
    you have got 50,000 people waiting to get in, then you would
    know that. The way we do it now, we don't know. We don't really
    know who wants it and didn't get it. It is just not there.
        Mr. Cunningham has a bill, H.R. 113, that would have done
    that. It would have removed the geographical limits, as would
    the current bill in the Senate.
        Mr. Miller. Thank you, Mr. Chairman.
        Mr. Scarborough. I thank you, Mr. Miller.
        I would like to welcome Congressman Cunningham here.
        Why don't we do this--let me thank you all for coming and,
    again, helping us out from the very beginning, and we will
    dismiss you now.
        I have got a couple other questions that I am going to
    forward to you all in writing. If you could return them to me
    in a couple weeks, that would be great.
        Thanks again.
        While we are changing panels, Congressman Cunningham, we
    certainly would appreciate your testimony and invite the third
    panel up.
        Mr. Cunningham. Thank you, Mr. Chairman. I am going to be
    blunt.
        Mr. Scarborough. What a departure, Randy. [Laughter.]
        Duke is going to be blunt. Can you believe that? Next you
    are going to tell me Mike is going to be blunt.
        Mr. Cunningham. We are going to draw that trail in the
    sand, line in the sand, whatever you want to call it.
        I know that the previous panels have covered what the
    problems are. We have FEHBP for Federal workers, and the bottom
    line is we don't have it for Federal workers in the military
    that have substandard living, where the children are ripped out
    of the schools, the family can't make investments because they
    are moved all over the country, they are asked to go on, in
    this administration, multiple deployments and ripped away from
    their families, and in many cases they don't come back because
    they are killed and the children are left without fathers or
    mothers in many cases, and that is just wrong.
        Regardless of what it takes, it is time that we, as a
    Nation, live up to our word and give our military retirees,
    veterans, the health care that has been promised to them.
        If you have a civilian worker that gets this and a military
    that goes out and fights for this country and makes these
    sacrifices, it is just wrong, whatever it takes.
        If you want to get it--and I told you I would be frank--you
    need to get rid of a White House that has an anti-military
    bias, and we plan on doing that. I have talked to both Governor
    Bush and John McCain and people on the Senate side, and we are
    going to make this happen after November and we are going to
    push it through and we are going to support our military and we
    are going to support our veterans. And I am tired of excuses
    from both Republicans and Democrats on why we can't do this and
    giving in to it.
        If you need to take a look, yes, lift the artificial
    geographical and numerical demonstration limits. This was a
    plan that was failed to doom--and we said it--when the
    administration limited us in the scope in which we wanted to do
    this and they said it would cost too much.
        We need to get this done, and we need to take those limits
    off for the same reasons that the testimony was given before
    and why it failed.
        Not only was it not marketed a couple of months before--and
    I don't fault DOD that much, because I know the problems they
    have had with 149 deployments all over the country and looking
    at what their budgets are and looking at the limits that they
    have to take care of their people.
        The subvention bill was my bill. TRICARE is a Band-aid.
    Where it is available, then it is not a bad program, but in
    many cases it is not. And those are Band-aids, and it is time
    that we go forward and move with this damn thing.
        We need to lift the prohibitions on the MTFs and FEHBP
    participants and allow those military facilities to charge
    FEHBP plans for retiree services. That hasn't been done, and we
    can do that.
        You ask, ``Is it legitimate to go out and market a plan
    with 2 years?'' And I agree with the previous thing. No,
    because when you tell people that they may not even be able to
    get back into their original plans if they go on this pilot
    program, they are scared, and they are not going to do it. I
    sure wouldn't do it.
        Until we come up and we extend the timeline and we open
    this thing up, it is going to be a waste of time, but the
    bottom line, Mr. Chairman, is we need to open this thing up and
    give the military Federal retirees the same as civilian.
        I can have a secretary, when I was in the military, work
    side by side with me, and they are good. She can get FEHBP, I
    cannot as a military retiree, and that is wrong.
        I yield back, Mr. Chairman.
        Mr. Scarborough. Thank you very much, Congressman
    Cunningham.
        Thank you, once again, for your hard work and for your
    testimony before this committee. If you can stick around, I
    look forward to you answering some questions.
        Rear Admiral Carrato, welcome back. We are happy to have
    you here again. We had you in Florida a few weeks ago and had
    you here last year and certainly look forward to your
    testimony.
        Same with you, Mr. Flynn. Welcome back.
        Rear Admiral Carrato.

    STATEMENTS OF REAR ADMIRAL THOMAS F. CARRATO, USPHS, DIRECTOR,
        MILITARY HEALTH SYSTEMS OPERATIONS, TRICARE MANAGEMENT
     ACTIVITY; AND WILLIAM E. FLYNN III, DIRECTOR, RETIREMENT AND
           INSURANCE PROGRAMS, OFFICE OF PERSONNEL MANAGEMENT

        Admiral Carrato. Mr. Chairman, Mr. Miller, I appreciate the
    opportunity to discuss our progress in implementing the FEHBP
    demonstration program.
        The demonstration makes FEHBP enrollment available to
    certain military health system beneficiaries, principally
    military retirees who are Medicare eligible and their family
    members.
        The Department of Defense has worked closely with OPM in
    implementing this program.
        Pursuant to the statute, last year we selected eight sites
    for the program, told eligible beneficiaries about the program,
    and conducted an open enrollment season coincident with the
    usual FEHBP open season in November and December for health
    care enrollment effective January 2000.
        Enrollment during the open season was very low. Through
    December 30, 1999, there were about 1,300 enrollees. This
    represented less than 2 percent of the total eligible
    population.
        We were very concerned by the low enrollment and wanted to
    make sure everyone had gotten the word and understood the
    opportunity. The Department worked with OPM to develop an
    additional mailing for late December to do three things: to
    emphasize the significance of the opportunity, to clarify the
    relationship of FEHBP plans to Medicare coverage, and to
    provide additional time for beneficiaries to consider
    enrolling.
        This was in keeping with normal OPM policy to provide
    additional time for beneficiaries to enroll, even after open
    season has technically ended, if they have not had sufficient
    time to consider the opportunity.
        In addition to the mailing, DOD arranged and conducted 18
    town hall meetings across the eight demonstrationsites during
    January 2000. I would like to acknowledge the participation of
    Congresswoman Kay Granger, Congressman Richard Burr, and
    Congressman Mike Thompson in our town meetings, as well as the
    help and participation of several other congressional staff
    members.
        As a result of the additional marketing, over 1,000 more
    beneficiaries are covered by the demonstration. Nearly half of
    the growth of enrollment was in Puerto Rico, where there were
    308 persons covered as of December 30 and over 950 as of early
    April.
        Actual enrollment has fallen far short of even the most
    modest estimates of participation. The Department shares the
    committee's concern about the level of enrollment.
        We take congressional mandates seriously and have spent
    over $4 million in establishing the mechanisms to support the
    program and market it effectively to eligible beneficiaries.
    This represents an investment of over $50 per eligible person,
    or, looked at another way, over $1,700 for every enrollee in
    the demonstration.
        GAO is conducting a beneficiary survey to evaluate in
    detail why beneficiaries enrolled or not, and we would defer to
    their findings in this regard.
        We would point out that enrollment response has been the
    best in those sites with very limited access to military health
    care--Puerto Rico; Greensboro, NC; and the northern California
    area.
        Given that enrollment falls far short of the levels
    authorized for the demonstration, the Department believes that
    it would be appropriate to add two more sites to the
    demonstration, bringing the total number of sites to the
    statutory maximum of ten.
        On April 6 we randomly chose two seed counties for the new
    sites in the three TRICARE regions still available. The
    statutory authority limits us to one site per TRICARE region,
    so only regions 3, 11, and the central region were eligible.
    The counties chosen at random were Coffee County, GA and Adair
    County, IA. We are going to be adding counties to these seed
    counties to reach 25,000 additional eligibles per site.
    Enrollment in the new sites will begin in the fall 2000 open
    season.
        The Department, in cooperation with OPM, has made a
    concerted, sustained effort to get the word out, to fully
    inform beneficiaries about this important opportunity, and to
    give them adequate time and support in their decisionmaking. We
    are gaining valuable information about beneficiary preferences
    and desires, and we look forward to GAO's detailed findings on
    the beneficiary survey.
        As the Department conducts these tests--FEHBP, TRICARE
    senior, and other approaches for meeting the health care needs
    of our senior beneficiaries--we always remember the substantial
    sacrifices that these people made for their country. We take
    increased devotion to our daily tasks from their honorable
    service, and we keep in mind their fallen comrades who gave
    their last full measure of devotion.
        Thank you.
        Mr. Scarborough. Thank you, Admiral.
        [The prepared statement of Admiral Carrato follows:]

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        Mr. Scarborough. Mr. Flynn.
        Mr. Flynn. Thank you, Mr. Chairman and Mr. Miller and other
    members of the subcommittee. We appreciate very much your
    invitation to appear before you today.
        I want to discuss OPM's perspective on the initial
    enrollment results under the Federal employees health benefits
    demonstration project for Medicare-eligible military retirees
    and members of their families.
        Enrollment in the demonstration project to date is slightly
    under 1,700 new members, encompassing a little over 2,500
    people. From a total eligible base of about 66,000, these
    initial results, as you have heard this afternoon, are,
    admittedly, disappointing.
        Both OPM and the Department of Defense have invested
    considerable resources and cooperated closely on every aspect
    of implementation. We believe our experience has demonstrated
    that we can and will do things even better in the second year,
    and we welcome the opportunity today to discuss that with you.
        At the outset, we made two basic decisions in undertaking
    implementation of this project.
        First, we felt it was important to carry out the pilot
    program so that, as much as possible, it looked just like the
    Federal Employees Health Benefits Program.
        Second, we acknowledged that this group would need special
    information. Unlike Civil Service retirees, these individuals
    were largely unfamiliar with the Federal Employees Health
    Benefits Program and how it worked.
        With these factors in mind, we in the Department of Defense
    divided up our respective responsibilities to run the project
    and reflected that in a memorandum of understanding. We
    developed a substantial set of materials tailored to the
    population covered by the project, and we provided copies of
    those materials to the subcommittee, and I would be happy to
    answer any questions you might have about them.
        In addition, both the Department of Defense and our staff
    worked with representatives of the military coalition and
    alliance groups in sharing information as implementation of the
    project progressed.
        While marketing did go beyond the conventional scope of
    activities for regular Civil Service retirees, only about 500
    persons were enrolled by the official close of the 1999 open
    season. Because of this, as Admiral Carrato has mentioned, we
    allowed belated open season enrollments, with coverage and
    premiums taking effect retroactive to January.
        These figures suggest that we should increase even more the
    amount of information needed to introduce this program to
    individuals who are not familiar with it. Persons making this
    choice clearly want more information not only about the Federal
    Employees Health Benefits Program, but also about how it
    compares with available alternatives. Similarly, more direct
    contact with eligible individuals before the open season seems
    warranted.
        However, lack of familiarity with the Federal Employees
    Health Benefits Program is only one of the dynamics in this
    project. Anecdotal evidence suggests that many eligibles may
    not perceive our program as the preferred option. For example,
    of over 66,000 people contacted, only about 3,600 requested
    enrollment materials.
        Similarly, as you have heard, enrollment rates in the
    project show that areas such as Greensboro, NC; Dallas, TX; and
    Humboldt County, CA were higher than project sites where
    military treatment facilities are located. This suggests that,
    when access to military treatment facilities is available,
    individuals are less likely to sign up for the Federal
    Employees Health Benefits Program.
        As well, Medicare eligible retirees with zero premium
    Medicare plus choice HMO contract coverage might prefer that
    arrangement.
        And, since the project is limited to 3 years, as you have
    heard again this afternoon, there is evidence that individuals
    were reluctant to sign up because of a concern about being
    uninsured at the end of the project.
        And, as you have heard this afternoon, the law does
    expressly entitle beneficiaries to reacquire coverage without
    preexisting condition limitations when they no longer
    participate in the project. Nonetheless, it seems clear that
    some individuals are concerned about this.
        Your invitation asked us to talk about the difficulties
    that low enrollment could create for participants in health
    plans. As you know, and in testimony before this subcommittee
    last year, we anticipated that possibility and consulted with
    the health plans to develop a risk mitigation strategy to help
    insulate premiums from the impact of utilization. In most
    cases, that seems to have had the desired effect, as you have
    heard earlier, about the premiums and their relative position
    to the regular FEHBP premium.
        Certainly, we share your concerns about where we go from
    here to improve this project, and I have outlined some actions
    that seem warranted. In addition, the GAO survey that has been
    mentioned will be useful in understanding the interests of this
    population and planning improvements for the future.
        Mr. Chairman, that concludes my statement. I would be happy
    to answer any questions you or the other Members may have.
        Thank you.
        Mr. Scarborough. Thank you. We appreciate your testimony.
        [The prepared statement of Mr. Flynn follows:]

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        Mr. Scarborough. Let us talk, Admiral, first of all, about
    marketing. Again, to recap--and I know you have heard this
    before, but we had a discussion last year about the turn-out,
    and I had said it was going to be low, you had said that DOD
    believed it would be as much as 85 percent, and, quite frankly,
    I was right, you were wrong. But I think the one thing that I
    think you probably couldn't even foresee last year was just how
    bad your marketing was going to be. I mean, you may have spent
    $4 million on marketing this thing, or DOD may have, but they
    sure didn't spend any money on marketing materials.
        Our last panel showed this to us. Again, the TRICARE
    materials are exceptional. I think I could even convince a few
    dumb Members of Congress to get into TRICARE after reading
    this. But you look at the FEHBP thing. Seriously, I mean, first
    of all, unmarked. A lot of them didn't know where it was coming
    from. This card is just absolutely unbelievable. I mean,
    compare it to this. There is absolutely no comparison. And on
    this FEHBP material you actually--I mean, this seal, it was
    done on somebody's computer, and it wasn't even a good computer
    that it was done on. There is pixelation here. I don't want to
    get in great detail, but I guarantee you you could buy a $500
    computer at Office Depot and put something together that looks
    better than this.
        I mean, we understand. This matters. We have got e-mails up
    from people that called in and threw it away and looked at it
    as junk mail, and I don't think it is being too cynical to
    believe that somebody putting these materials together really
    didn't care whether people read it or not, and if it got thrown
    away that was a win for DOD.
        How do you explain marketing materials this bad? And please
    don't tell me that you are in charge of printing or anything
    like that. Hopefully it is somebody else over at the DOD. But,
    I mean, it is awful. I mean, do you agree with me that this
    stuff is not the top-quality material that you would prefer
    come out to promote this project?
        Admiral Carrato. Let me start by saying I am responsible
    for this demonstration program and I put an excellent team in
    place to implement this program, in cooperation with OPM. On
    the DOD side, there is largely the team that is responsible for
    other 65 demonstrations, so I can tell you that we made every
    effort to make this a successful program.
        Mr. Scarborough. Did you sub out this work?
        Admiral Carrato. Let me just draw a distinction between
    marketing and education. For TRICARE senior prime, we were
    actually involved with educating, marketing, bringing people
    into a Medicare plus choice plan, the DOD Medicare plus choice
    plan. The purpose of these activities was to get the word out
    that there was this opportunity to enroll in FEHBP, and
    marketing really is largely a function of the individual plan,
    choices, so the individual plans would have large
    responsibility for marketing.
        What we wanted to do was fully inform our beneficiaries
    that this was an option. We wanted to let them know that this
    program was in place. We needed to let them know about health
    fairs and really wanted them to take full advantage of the
    literature and the marketing materials from the plans that
    participated in FEHBP.
        To directly answer your question, in retrospect we probably
    should have paid more attention to those materials, and we
    certainly will do that next go-round.
        Mr. Scarborough. There are, again, e-mails up here, and I
    want to read briefly one or two of them, because, again, the
    biggest concern is that the DOD sent out materials without
    letterhead or a seal indicating its involvement or sponsorship.
        According to one eligible member from Camp Pendleton, they
    wrote, ``The mailing came in an unmarked envelope. The contents
    included an FEHBP general description, with no indication of
    the sender, no letterhead or signature block; a frequently
    asked question sheet about DOD FEHBP; and a list of town hall
    meetings--again, no indication of the sender. The entire
    mailing appeared to be junk mail.''
        Another beneficiary from Dallas, talking about the lack of
    notification, stated, ``I have read all the mailings, called
    all the phone numbers, checked all the Websites to no avail. I
    attended a town hall meeting last November and it was a
    farce.'' And this is a real insult--``There was more order in a
    Washington cocktail party, with people talking to each other
    all at once, and no one to whom you could even ask a question.
    I left in disgust. I have yet to meet a single individual who
    can discuss this program intelligently. I have no idea who was
    responsible for 'getting the word out,' but he stumbled
    badly.''
        How do you respond to the inability of an eligible
    beneficiary to distinguish this congressionally mandated
    mailing with what they called ``junk mail.'' I think, again,
    our previous panel said that is a concern that others have had.
        Admiral Carrato. Yes. Sir, honestly, at last year's hearing
    I did rely on some estimates. Ours were based on GAO and CBO
    estimating up to 83 percent enrollment in the program, and the
    great enthusiasm with which this demonstration authority was
    received by certainly the leadership of our coalition and
    alliance organizations, I did think we would have significant
    enrollments, and I am greatly disappointed by the effort.
        In terms of the town hall meetings and the health fairs,
    when we discovered that the enrollment rates were as low as
    they turned out to be, as we looked at the initial results from
    the open season--and we had been communicating since January
    with the coalition and alliance, requesting their assistance
    and getting the word out through their channels--we immediately
    called a meeting with representatives, including Ms. Pugh and
    Colonel Partridge, and said, ``Look, how do we get this thing
    turned around?'' We met with Members of Congress. Congressman
    Burr, as I mentioned before, was very interested. ``What do we
    do?''
        We got together with Mr. Flynn's shop and decided to go out
    with some additional materials.
        One of the big concerns--and I guess I underestimated
    this--is the fact that this is a new program and, dealing with
    this population, it does take some time to feel comfortable
    with the decision you are going to make, particularly when it
    involves a demonstration.
        We asked if we could work together and prepare some
    additional material that would clarify the relationship between
    Medicare and FEHBP, and we worked with OPM to do that and
    worked with the coalition, able to extend the period. And,
    working with some Members, we were able to establish a whole
    new round of town hall meetings, which we held in January.
        So I think we learned a great deal of lessons, which is the
    purpose of a demo. We reacted, I think, very quickly to try and
    get additional educational material out to our beneficiaries to
    make them know what this program offered.
        It offers a very, very rich supplement to their Medicare
    benefit. We think it represents an outstanding deal.
        Mr. Scarborough. Congressman Cunningham, let me ask you to
    help me out here, because obviously Admiral Carrato is a good
    man. He has committed his life to military service. In fact, we
    are trying to help him out. I mean, we are trying to help you
    out. We are trying to help out the men and women, not only who
    are military retirees now, but the people that are going to be
    retired 10 years, 20 years, 30 years from now to make sure we
    keep the promise that we made to them.
        What happened? I mean, where is the disconnect here? I
    mean, comment on what you have heard today.
        We have certainly heard your testimony, but you are,
    obviously, representing San Diego and the District where my
    late grandfather lived. I mean, you have seen this from the
    ground floor. What happened here? Were there some people that
    just weren't as interested in this succeeding as Congress? I
    guarantee you 99 percent of the people here believe, or was it
    just people shooting themselves in the foot?
        Mr. Cunningham. Mr. Chairman, as I stated, it is not all
    DOD's fault. Sometimes many of us feel like Billy Mitchell when
    he said that we need air power, and someone said, ``Well, I
    will put a ship out there and we will bomb it,'' and you know
    what the result was.
        When we testified at the beginning of FEHBP, we told the
    committees what would be required. When the White House limited
    us and told us what the marketing--you know, how they were
    going to market it, how they were going to limit it, they
    weren't going to let people go to military facilities that
    existed, and then the scare tactics--if you join this pilot
    program, you may not be insured after the program dies--they
    are scared. And you may have an education program going one
    way, but on the other side you have got a negative program that
    is more powerful in fear.
        That was not handled well, in my opinion.
        Second, the cost analysis that came out to scare people
    off, you take a look and it was their own testimony. People
    with TRICARE, people with other programs aren't as likely to go
    to this if they have the facility there. But a lot of our
    retirees are not covered, and TRICARE is terrible for them.
        Yet, they said if 100 percent of these people come into the
    FEHBP it is going to break the bank, and that is just not true,
    so the analysis was flawed, itself.
        If you take a look at Medicare part B, many of those people
    were not informed that in other plans that there were
    copayments and deductibles, and the fairs--when you have a
    fair, and a week later you have to make that decision--you
    know, I have town hall meetings myself, and I know probably
    every Member, Republican or Democrat, does, too. How many
    people out of your population do you have at those town hall
    meetings? And then, if you don't have someone there that is
    organized, that knows the system, that can brief the system--
    and it is called marketing. Are you going to sell cars? Are you
    going to sell Chevys? Are you going to sell Toyotas? If your
    marketing is flawed and you are working in an uphill way,
    anyway, if you had an old car in 1970's, and American-made car
    that was a Toyota without shine, you had a hard time selling
    that car.
        It is the same thing with FEHBP. If you tell our retirees
    that FEHBP will be their plan, like it is for civilians, to
    help them with Medicare, I guarantee you they are going to
    accept it, but if they have doubts in that they are not going
    to accept it because they are scared. That was the flaw,
    itself, in this.
        Mr. Scarborough. Is there any way around that? Let me ask
    you that question on that. Is there any way that we can make
    this program succeed by people coming in now knowing that they
    can only be in it for 2 years?
        Mr. Cunningham. Yes. We will after November, because we
    will open up the plan. Guaranteed.
        Mr. Scarborough. OK. Let me ask you one final question
    here. I wanted to talk about Medicare coverage. It wasn't until
    after the initial enrollment period was closed that the DOD
    included in its materials information that was still without
    letterhead or signature block, clear information about Medicare
    coverage. Mention was made in the frequently asked questions
    provided by the Department; however, neither the plan brochure
    nor the initial mailing was adequate information specified.
        Participants were told that Congress--when they called the
    telephone center, they were referred to the providers,
    themselves, for questions pertaining to Medicare.
        Mr. Cunningham. Mr. Chairman, would you yield just for 1
    second on that?
        Mr. Scarborough. Sure.
        Mr. Cunningham. I have got to leave, and there is one other
    point I wanted to make.
        Mr. Scarborough. Right.
        Mr. Cunningham. If you drive out to Bethesda, look at the
    big signs that talk about ``TRICARE is the plan.''
        Mr. Scarborough. Yes.
        Mr. Cunningham. Go to Balboa and San Diego. You look at the
    big signs, the marketing that makes you want to join those
    programs.
        Mr. Scarborough. Right.
        Mr. Cunningham. There is nothing at our military hospitals
    or facilities or anything to help market this plan.
        I am sorry. I have got to leave.
        Mr. Scarborough. OK. Thank you.
        Mr. Cunningham. Thank you.
        Mr. Scarborough. Let me ask you, Admiral, why was this
    important feature not highlighted in the marketing materials,
    particularly in the plan brochure that was passed out to
    potential enrollees?
        Admiral Carrato. I think there are two questions in there.
    The first was clarification of the relationship to Medicare.
        We originally used some material that OPM had prepared,
    standard material for Federal annuitants, and we quickly
    discovered that that did not satisfy the requirement for
    someone who had not been familiar with FEHBP, so we worked
    together to get a concise statement out that explained the
    relationship of this program to Medicare, so that is the answer
    to the first question. We learned, we reacted, got the message
    out.
        The second issue is really sort of a fine technical point,
    and that has to do with Medigap coverage, and in the early
    1990's the Government decided that Medigap Medicare
    supplemental plans needed to be regulated, and after that
    regulation was implemented--I think it was about 1991--there
    were 10 approved Medigap coverages. The provision in the
    statute allows you to return to that coverage with no
    preexisting penalties.
        The issue and the reason some individuals were told to talk
    to their coverer, their insurer, was that some of this
    population actually had purchased supplemental plans pre-dating
    the early 1990 change in statute, so we didn't want to provide
    misleading information, and that is why we recommended that the
    enrollee contact their insurer to get the complete answer on
    it.
        Mr. Scarborough. Let me ask you, because I am going to have
    to run to some votes here--and I hope both of you don't mind, I
    am going to have some written questions provided to you, and if
    you could answer in the next couple of weeks that would be
    great.
        Let me ask you the same question--and if I could get a
    brief response--do you think it is possible for this program to
    succeed in the next 2 years with enrollees knowing that they
    may only be able to be in the program for 2 years before being
    kicked out.
        Admiral Carrato. I will try and be brief.
        Mr. Scarborough. Go ahead.
        Admiral Carrato. I think the answer is what we heard in
    Pensacola from the representative of TROA. I think one of the
    most powerful marketing tools in the military health system is
    chats at a club over the back fence, and I think when we have
    some word of mouth with people who have enrolled and are
    satisfied with the program, I think that might help get the
    message out and boost enrollments.
        I think we will certainly make every effort we can, working
    together with OPM and our coalition and alliance partners, and
    we will do everything we can to make it more successful.
        Mr. Scarborough. Mr. Flynn, do you think you can be more
    successful? Do you think you will be successful at all, again,
    with people knowing that they can be kicked out in 2 years?
        Mr. Flynn. Clearly, Mr. Chairman, we have heard that
    concern. I have to treat it as a valid concern because of the
    wide number of people who said it. I think, nonetheless, we can
    do better. I do think, however, that sense of it being a pilot
    and people thinking that they won't have coverage after will
    have an influence on how successful we can be.
        Mr. Scarborough. OK. Admiral, last question. The $64,000
    question. You said you can do a better job. Are you going to
    get your 83 percent next year when we have this hearing?
        Admiral Carrato. Just to show you I am not a complete
    idiot, no comment, sir. [Laughter.]
        Mr. Scarborough. Oh, come on. I am offended, even though I
    do have last year's testimony here where you predicted--in
    highlighter--83 percent.
        Admiral Carrato. I predict we will do better, sir.
        Mr. Scarborough. Will we get to 50 percent?
        Admiral Carrato. That is CBO's prediction in their scoring
    of the bill.
        Mr. Scarborough. CBO says 50 percent?
        Admiral Carrato. Yes, sir.
        Mr. Scarborough. OK. And you are confident we are going to
    get there?
        Admiral Carrato. We will do better, sir.
        Mr. Scarborough. Well, I hope we do much, much, much
    better.
        I thank both of you for coming on this very, very important
    subject, and I look forward to discussing it with you again.
        We are adjourned.
        [Whereupon, at 3:51 p.m., the subcommittee was adjourned.]