[Senate Hearing 109-387]
[From the U.S. Government Publishing Office]
S. Hrg. 109-387
THE PRESENT AND FUTURE COSTS OF
DEPARTMENT OF DEFENSE HEALTH CARE,
AND NATIONAL HEALTH CARE TRENDS IN THE CIVILIAN SECTOR
=======================================================================
HEARING
before the
SUBCOMMITTEE ON PERSONNEL
of the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
APRIL 21, 2005
__________
Printed for the use of the Committee on Armed Services
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COMMITTEE ON ARMED SERVICES
JOHN WARNER, Virginia, Chairman
JOHN McCAIN, Arizona CARL LEVIN, Michigan
JAMES M. INHOFE, Oklahoma EDWARD M. KENNEDY, Massachusetts
PAT ROBERTS, Kansas ROBERT C. BYRD, West Virginia
JEFF SESSIONS, Alabama JOSEPH I. LIEBERMAN, Connecticut
SUSAN M. COLLINS, Maine JACK REED, Rhode Island
JOHN ENSIGN, Nevada DANIEL K. AKAKA, Hawaii
JAMES M. TALENT, Missouri BILL NELSON, Florida
SAXBY CHAMBLISS, Georgia E. BENJAMIN NELSON, Nebraska
LINDSEY O. GRAHAM, South Carolina MARK DAYTON, Minnesota
ELIZABETH DOLE, North Carolina EVAN BAYH, Indiana
JOHN CORNYN, Texas HILLARY RODHAM CLINTON, New York
JOHN THUNE, South Dakota
Judith A. Ansley, Staff Director
Richard D. DeBobes, Democratic Staff Director
______
Subcommittee on Personnel
LINDSEY O. GRAHAM, South Carolina, Chairman
JOHN McCAIN, Arizona E. BENAJAMIN NELSON, Nebraska
SUSAN M. COLLINS, Maine EDWARD M. KENNEDY, Massachusetts
SAXBY CHAMBLISS, Georgia JOSEPH I. LIEBERMAN, Connecticut
ELIZABETH DOLE, North Carolina DANIEL K. AKAKA, Hawaii
(ii)
?
C O N T E N T S
__________
CHRONOLOGICAL LIST OF WITNESSES
The Present and Future Costs of Department of Defense Health Care, and
National Health Care Trends in the Civilian Sector
april 21, 2005
Page
Coburn, Hon. Tom A., a U.S. Senator from the State of Oklahoma... 1
Chu, Hon. David S.C., Under Secretary of Defense for Personnel
and Readiness; Accompanied by Hon. William Winkenwerder, Jr.,
M.D., Assistant Secretary of Defense for Health Affairs........ 8
Blumenthal, Dr. David, M.D., Director, Institute for Health
Policy, Massachusetts General Hospital, Boston, Massachusetts.. 28
Galvin, Dr. Robert S., M.D., Director, Global Health Care,
General Electric Company....................................... 33
Hosek, Susan D., Senior Economist and Co-Director Center for
Military Health Policy Research, RAND Corporation.............. 39
(iii)
THE PRESENT AND FUTURE COSTS OF
DEPARTMENT OF DEFENSE HEALTH CARE, AND NATIONAL HEALTH CARE TRENDS IN
THE CIVILIAN SECTOR
----------
THURSDAY, APRIL 21, 2005
U.S. Senate,
Subcommittee on Personnel,
Committee on Armed Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 1:42 p.m. in
room SR-232A, Russell Senate Office Building, Senator Lindsey
Graham (chairman of the subcommittee) presiding.
Committee members present: Senators Graham and E. Benjamin
Nelson.
Other Senators present: Senator Coburn.
Committee staff member present: Leah C. Brewer, nominations
and hearings clerk.
Majority staff members present: David M. Morriss, counsel;
and Diana G. Tabler, professional staff member.
Minority staff member present: Gerald J. Leeling, minority
counsel.
Staff assistants present: Nicholas W. West and Pendred K.
Wilson.
Committee members assistants present: Meredith Moseley,
assistant to Senator Graham; and Eric Pierce, assistant to
Senator E. Benjamin Nelson.
OPENING STATEMENT OF SENATOR LINDSEY O. GRAHAM, CHAIRMAN
Senator Graham. This hearing will come to order. I will
defer my opening statement. Would you like to make an opening
statement?
Senator Ben Nelson. I'll defer as well, Mr. Chairman.
Senator Graham. We know Senator Coburn's time is valuable,
and we appreciate him coming to the committee, Senator Doctor
Coburn, I very much appreciate you coming and offering your
views on how we can better deliver military health care to our
force in a more efficient, responsible manner.
So, Dr. Coburn, thank you for coming.
STATEMENT OF HON. TOM A. COBURN, A U.S. SENATOR FROM THE STATE
OF OKLAHOMA
Senator Coburn. Mr. Chairman, and Senator Nelson, thank you
for giving me the opportunity to talk about something that's
very dear to my heart, and that's caring for patients. It
doesn't matter whether they're in the military or anywhere
else.
We're faced with a dilemma in our country. If I may, I'm
just going to speak off the cuff here for a minute.
This country is going to spend $2.3 trillion this year on
health care. It's the highest percentage of any nation in the
world as far as the percentage of gross domestic product (GDP).
We're going to spend 40 percent more per person on health care
than anybody else does in the world, and yet we're not
healthier. When we talk about care for our veterans and care
for our military, this same thing applies. We're at 8 percent
of the Pentagon's cost for care for our military today. It's
going to go to 10, and it's probably going to go higher, if in
fact, we don't start addressing health care in general in this
country, and specifically the care for those people who serve
our country.
I would put forward to you, the people who deserve the best
care in this country are our military and our veterans--not the
worst care. By that, I'm not saying that they have received the
worst care. But I'm convinced that we need to have a new
paradigm, in terms of how we look at health care.
The first question we need to ask ourselves is, how do we
do this better? Spending this much money, can't we do it
better? There's a lot of areas in which we can do better.
In preparing for this testimony, I asked the military to
give us what the percentage was paid on TRICARE in terms of
profits to the Health Maintenance Organizations (HMOs). They
don't know that answer, and I understand that they may not know
that answer, but I think that's an important thing because,
when you look at the $2.3 trillion that we're spending, about
$300 billion of it is pure profit that goes into insurance,
managed care, and everything else. Out of that $2.3 trillion,
$700 billion never goes to help anybody get well. That's a
tragedy in this country, when we have 40 million Americans that
don't have any health insurance, their coverage is coming to
the emergency room (ER), which is burdening our ERs. We have to
do better.
I want to talk about TRICARE a little bit. I didn't qualify
for TRICARE, nobody in Muskogee, Oklahoma qualified for
TRICARE, because the HMO only allowed people in Tulsa to
participate. So, if you were a military family--I delivered the
children of many military families--you had to drive 60 miles
to get TRICARE.
Senator Graham. Why was that?
Senator Coburn. Because the HMO didn't decide they wanted
to have any more people in their network, even though my group
and my partners were well-qualified. What happens is, the
Services break down--for health care to be available, it has to
be accessible, and to say you have to drive a distance to be
able to attend that is wrong. That doesn't mean that the people
running TRICARE made a mistake, it means that the system under
which we're operating, where they're trying and they're doing
the best they can to save dollars is wrong.
Take Austin Heart Hospital out in Kileen, Texas, and in
Temple, Texas you have Scott White. At Scott White, less than a
third of the doctors are qualified under TRICARE. Scott White
is one of the best hospitals in the southwest area, and yet,
when somebody in the military needs help, Austin Heart Hospital
takes care of them because they're hooked up to TRICARE, but in
Temple, Texas, Scott White didn't for those particular reasons.
So, here you have a specialty hospital, which pays taxes on
their investment and everything else, and here you have a
government-subsidized hospital with no taxes and no profit, and
they don't, as a general rule, accept TRICARE. I'm not going
after them, I'm just using this as an example to say that we
have a health care system that's broken, and it's broken for
our military, and it's broken for everybody else. By focusing
on it, I think there's probably five or six things you should
hear from me.
I think there are five things that have to happen in this
country before we're going to fix the problems for military
health care and everyone else, and I don't believe you can fix
the problems for military health care or veteran's health care
until you address these five issues.
There isn't any emphasis on prevention in this country.
Grandma's right--an ounce of prevention is worth a pound of
cure, and let me just give you two examples.
We now know, through repeated studies, that children who
are exposed to high fructose corn syrup that comes from
Nebraska and Oklahoma, have twice the lifetime risk of diabetes
as children who ate the same things sweetened with sugar beet
or cane sugar. Now, if that's true, why wouldn't we immediately
make sure everyone in the country knew that? Where's the
mechanism for them to know that? Where's the prevention that is
out there to teach the American people what they need to know
about making healthy lifestyle choices? Where's the leadership?
What I'm proposing to you is we need to have leadership on
prevention in this country.
The second example I will give you is this: There are now
good studies that say you can cut your risk of colon cancer in
half if you're an adult, which is 189,000 cases a year. It's
the second leading cause of death in this country from cancer.
We can cut that in half by taking three over-the-counter
medicines: Caltrate D, folic acid, and an aspirin--but yet how
many people in America know that? That is a legitimate role for
the Federal Government under which it's totally failing in
terms of prevention today.
Prevention is undermined also because we don't pay for
prevention care when we go to practitioners or providers. I
don't care whether it's a nurse practitioner or a doctor,
there's no recognition in the current procedural terminology
(CPT) codes for true prevention, counseling and treatment, and
that's a key part of any future solution to health care. If you
look at the numbers in 2060, half of the dollars that are going
to be spent in Medicare are going to be for diabetes alone, so
if we could cut the rate of diabetes in half, you could cut
half the cost of Medicare in 2060. We have a $43 trillion
unfunded liability in Medicare alone. That's going to balloon
up every year as our population ages, and we don't do things on
the basis of prevention.
The second thing we need to do is we need to improve the
quality of care by practitioners. The way we do that is to
reward good behavior, and punish bad behavior economically. You
do that through best practices, and Information Rx. You put the
patient in the game, you make them participate in knowledge of
what is good for them and what is not good for them. The way
you do that is by cutting, if they'll participate in the
Information Rx stuff, they need to know to lessen the risk,
then you make it less costly for them. If the doctor
participates on the basis of best practices, you make it more
rewarding.
We don't need a government mandate that says you have to do
this, that, and the other. What we need is to use that common
thing--greed can resolve technological difficulties and natural
human behavior, incentivizing to do the right thing, and we
don't have that now.
The benefit from that will be better care, less cost, more
satisfied providers, and more satisfied patients. Where it has
been done in two trials right now, the cost of health care in
the first year alone went down 32 percent. The outcomes were
far improved, the practitioner satisfaction was higher, and the
patient satisfaction was higher.
The third thing we need to do is to have competition at
every level in medicine, and that means every stakeholder has
to give. That means you need to be able to look at a doctor and
say, ``Is he good, or isn't he?'' That means doctors need to be
weighted, that means the poor doctors need to get out, the good
doctors need to get better, and they need to get rewarded for
being better, and we put them into the game for improving
quality. We know all of that information now, the doctors are
worried about, ``How do you make that, when I have outliers or
patients that are complicated?'' You only compare them to other
people that have patients that are complicated, but the fact
is, the medical profession is going to have to be rated and
charged by community, so they can decide who they want to go
to. That's fair, it happens in every other area of life, so
there is no problem with that, and that will spur better
competition, higher level of excellence and performance, and
less waste.
The fourth thing we need to do is to have a truly
competitive drug market. We don't have that today, but that's a
topic for another hearing. But the fact is, Americans subsidize
the drugs for the rest of the world and they subsidize the vast
majority of the research for the rest of the world. The
administration does not do a good job of protecting their
intellectual patents and their intellectual property, and we
need to do that. We also need to demand that there are
competitive markets here, and I can give you plenty of proof
that there's not if I get the opportunity.
Finally you have to reconnect the patient into the game by
making them have to make a discretionary decision on whether or
not they're going to utilize the health care system. You cannot
do that unless you incentivize preventative care at the same
time, which means you have to create a basis that everybody
gets a comprehensive exam on a timely basis, so they will not
ignore prevention and care, and risk screening. You can
incentivize, and I'll give you a great example. In my office,
as soon as medical savings accounts were set up, we created
medical savings accounts, the vast majority of the employees
that were in my office have $3,000 or $4,000 in their medical
savings account, above the level of their deductible. In other
words, even if they had a catastrophic event, they still have
$3,000 or $4,000 left in it, which gives them discretion on
where to spend it. Do they want to spend it on eyeglasses for
their kid, or do they want to get braces on their child? Or do
they want to have a test that maybe they don't need? The other
thing that happens is they don't just take the price at which
it's offered, they say, ``Hey, I'm paying cash for this, what's
your best price?''
I can give you examples of how, when you put the market
economy into it, a $25,000 procedure just a month ago on a
patient in my office, we got done for $2,800 by him negotiating
to pay cash. You can see the cost savings are out there.
Remember, we have a lot of facilities and we're not utilizing
them. If you start utilizing this capital investment in a way
that tonight, running magnetic resonance imaging (MRI) scans at
night, doing ultrasounds at night, where we take this capital
investment, but we're not using it at other periods of time,
we're going to save tremendous amounts of money.
I believe that we ought to have competition in the mix, and
I believe that we ought to allow the consumer to drive that,
and that also goes for the military consumer. I will go back to
what I said, that they ought to have the best care there is,
but the way to get that is not to throw money at it and not to
micromanage it like a Soviet-style bureaucracy, but let what we
use in the rest of the country to allocate scarce resources, do
the same thing in the military. We can do it. You can't just do
it in the military, we have to do it everywhere because we're
not going to have the funds for the military--whether it's for
health care or future defense of our country--if we don't fix
health care anyway. So, we have to look at this as not just
fixing military health care, we have to look at it as fixing
health care in total.
The last thing that I would tell you if I was in the
military--and I served my country--whether I was a veteran
today or an Active-Duty military or retiree, if you gave me a
card and told me to go where I want, and let me negotiate it,
you would be giving me the service back that I gave my country.
You can do that in a competitive framework and probably save
money, if you use Medicare reimbursement as the rate, and I'll
tell you why. Because most of us want to care for the military
and their families, we recognize their contribution to our own
freedom, and our own benefit that we derive from that
contribution. I would tell you that if you set that up
tomorrow, and you ran all the numbers that they run on TRICARE
today and ran it through at Medicare rates, you would save
several billion dollars in health care costs for the military,
and you would get as good, or better, care.
With that, I'll answer any questions you might have.
Senator Graham. Thank you, that was very compelling,
Senator Coburn. Let's say that we had this card, and you
reimbursed at Medicare rates, what kind of availability
problem, if any, would you have among physicians?
Senator Coburn. I don't think so, if they're military.
Again, I think it goes back to the idea that we have an
obligation to serve. Run a test on it, put it into an area,
say, ``Here's your card, you're eligible, here's the deal,
we've made a commitment to cover you, let's see what it will
save.''
Senator Graham. What is your view from a physician's point
of view about TRICARE, in terms of its efficiency? Is it
something that you would like? What is your view of the
physician community's view of TRICARE?
Senator Coburn. I don't think it's any different than any
other HMO program we see. We see micromanagement that costs
time in the doctor's office, it interferes with care, and that
is not TRICARE, that's all of them. The point is, we will never
have enough resources to manage it tightly enough, and remember
you're dealing with people that can find the holes. They're not
really dummies, or they wouldn't have made it through medical
school and residency. They're going to find the holes. They're
going to find another hole, you're going to plug a hole,
they're going to find another hole, and you're going to plug
another hole. All of that is money that is spent that should be
going to help people who don't have health care today. They're
not bad. The other thing is, management of health care systems
is profit-driven for the managers, but not for anybody else.
They make more money if they spend less money. Is that what we
really want?
Senator Graham. Senator Nelson?
Senator Ben Nelson. Well, thank you, Dr. Coburn. Senator
Coburn, as you look at the whole system, what do you think we
can do here--the administration has selected Social Security, I
don't have a quarrel with that--but what can we do without this
being driven from the top down, as well as from the legislative
side as well? We can't take the entire health care system on
just in this committee. Do you have any thoughts about how we
might address all of it?
Senator Coburn. I'm presently working on a total health
care reform bill for the whole country that is based on the
principles of quality, accessibility, availability,
competition, and accountability. But competition is the key.
Competition is a very controversial subject up here today. Take
competition of specialty hospital versus the non-specialty
hospitals for example. That's a big fight up here right now.
It's a big fight because you have tax paying specialty
hospitals who pay real estate taxes and income taxes, against
subsidized hospitals who don't want them, but what's the
outcome? The outcome is, the quality is far superior, the cost
is far less, and the patient satisfaction is far superior.
So, here we have competition, and what's happened, where
you see a specialty hospital in town, where you don't, where
they're competing, the costs aren't coming down at the
government-subsidized hospital, because they have to compete.
The quality starts going up. The outcomes start improving. Why?
Because they have to compete for the patients. So, I believe,
we wipe the slate clean, we sit down and every stakeholder has
to talk about how they get it. The large corporations in this
country are spending a ton of money for health care. They're a
big stakeholder, they want to see these costs go down. These
two towns where we're running the system now, a 30-percent
reduction in the cost with better care, without having anything
to do with drug prices and without having anything to do with
tort system. There is no impact on those two--and they've
dropped the cost by a third. That's in Oklahoma, and the same
system is being replicated in a couple of places in Virginia.
If it will work there, it will work anywhere. But it's based on
the incentive of, ``How do I get paid more?''
The whole physician complex is falling apart in this
country. This year at the University of Maryland, I believe,
they have no one going into obstetrics/gynecology (OB/GYN) for
their residencies. Johns Hopkins is half full, and that's true
across the country. Only 60 percent of the slots were filled in
obstetrics in this country. In other high risk areas, there's
no one going into it. Doctors are retiring at 50 years of age
because they're through fighting the system, and it's not just
liability, it's not just the tort system, they're tired of
fighting with the management companies that tell them,
answering the phone call from somebody on a computer screen
whose never put their hand on a patient, saying ``Here's what
you have to do.''
That is what we're approaching now, trying to control the
costs. We're trying to control the costs, but doctors aren't
great. But we have real problems in terms of continuing medical
education, but if you tie quality outcomes to payment and best
practices, guess what's going to happen? You're going to have
people enjoying their work again, not retiring, spending more
time with the patient. The average time in the private sector,
when you walk into a doctor's office before you're interrupted
by the doctor is 7.9 seconds. Why? Because they're feeling--the
only thing a doctor has is time--that's the only thing they
have to sell. As their revenues have gone down and the costs
have gone up, what they're trying to do is cram in more
patients, which is going to lead to poorer quality. The worst
thing it does is to undermine the art of medicine. People, a
lot of times, don't understand what that is. Medicine is 60
percent science and 40 percent art, and anyone who has been
trained over the last 50 years in this country up to about 1990
knows that.
Now, we're training a different type of doctor today, who
does tests, and it's a clinical situation rather than a total
care type situation. Look the adage in medicine, ``If you'll
spend the time with your patients, your patients will tell you
what's wrong with them.'' We're not spending any time with our
patients. That is one of the reasons that malpractice errors
are up. They're incentivizing doctors not to spend time with
their patients, rather than to spend time and listen and ask.
Quality is going to go down, and it's going to continue to
decline, so we're losing our most experienced doctors that are
leaving, retiring, or quitting. We're having people who come in
now that are committed to a 40-hour workweek, rather than
taking care of folks, and we're seeing that this whole thing is
going to implode. So I believe we have to wipe the slate clean
for the stakeholders in the room, and rewrite the look of this
and use what we have done to allocate scarce resources in the
past in this country, which is competitive modeling.
Senator Graham. There's a lot to think about. Well done, we
really appreciate it, and we'll try to incorporate some of your
ideas to improve health care for veterans and our Active-Duty,
Guard, and Reserve people.
Senator Coburn. Give them real choice based on quality.
Senator Graham. Thank you very much, Tom. Dr. Chu?
Thank you for your attendance today, both of you. Senator
Nelson, do you have a statement you would like to make?
Senator Ben Nelson. First, Mr. Chairman, I want to thank
you for holding the hearing. Obviously, health care is vital to
all Americans and certainly very vital to our military and to
our retirees. I appreciate the fact that you're holding this
hearing. We want to make sure that we not only have it
available, but we have the best health care available. We just
heard Senator Coburn give us a primer on what we need to do.
I'm looking forward to Dr. Chu and Dr. Winkenwerder and their
responses to some of what we have been told, but also laying
out the health care for veterans and for our Active-Duty,
Guard, and Reserve units at the present time. So thank you very
much, Mr. Chairman, thank you gentlemen.
Senator Graham. Thank you, Senator. I will defer any
comments, and look forward to hearing from both of you.
STATEMENT OF HON. DAVID S.C. CHU, UNDER SECRETARY OF DEFENSE
FOR PERSONNEL AND READINESS; ACCOMPANIED BY HON. WILLIAM
WINKENWERDER, JR., M.D., ASSISTANT SECRETARY OF DEFENSE FOR
HEALTH AFFAIRS
Dr. Chu. Thank you, Mr. Chairman and Senator Nelson. It's a
privilege to be here this afternoon, to be joined by my
colleague, Dr. Winkenwerder, Assistant Secretary for Health
Affairs. We have a joint statement that I hope you will be
willing to accept for the record. Let me, if I might, offer a
few introductory comments, and then turn to Dr. Winkenwerder to
talk specifically about the cost of the current program, which
is the focus of your request, and our forecast about the likely
future cost of the current program.
As you appreciate, the Defense Health Program is the
vehicle by which Congress and the country provides the
financial resources to the military health system, and that
system in turn has two significant responsibilities. First, to
care for those who wear the country's uniform, particularly
when they are deployed in missions supporting our national
interest, currently, and especially in the Central Command area
of operations; and second, that same system provides a benefit.
It provides medical care not only to the uniformed person, but
also to his or her family and importantly, to those who have
retired from military service under the TRICARE program.
I think you are familiar with how we have transformed
medicine for deployed forces. In the past, we used to take the
medical care system forward and treat patients in theater. We
have completely reinvented that system, with the operations in
Afghanistan and Iraq, in which the emphasis now is on
stabilizing the patient there, and bringing him or her promptly
back to a safe haven where he or she can receive the best
possible definitive care. I think their testimony endorses that
choice. It allows--among other things--the family to be at
their bedside during the recovery period which, as we all
appreciate, is very important to the eventual healing.
We recognize that the personnel system for those that
return from theater needs to be at the same high level of
functioning. That is one of the reasons we have opened this
joint operation center for the severely wounded, as a capstone
of the individual service programs to deal with the personnel
needs of the injured service man and woman.
Let me spend a few minutes speaking to the benefit mission,
if I might, of the military health system. As you appreciate,
this is a benefit that grew up over the decades. If you look
back to the second World War, just before that war and the
period immediately afterwards, it was a benefit provided de
facto, often without statutory foundation, all on a space-
available basis. Indeed it was the fact that space was not
available to all dependents of Active-Duty servicemembers--at
least as I understand the history--that led Congress in 1956 to
enact the statute that authorized the CHAMPUS program, or a
third party payer type classic insurance program in the
Department. That evolved over the years with legislation. In
the mid-1980s, Congress authorized what is now the TRICARE
program, which provides three different levels of benefit,
depending upon the family's, or retiree household's choice.
I'm impressed at how far TRICARE has come. I had the
privilege of serving this Department just before it was
inaugurated. I remember the early days of the program. In the
early days, the program was not well-regarded by our
beneficiary population. Only a third--less than a third--of the
population was willing to rate it 8 or higher in quality, on a
scale of 1 to 10, with 1 low and 10 high.
Today that number is well over half of our beneficiaries--
so they rate it. In fact, we're being paid, in an interesting
way, an enormous compliment--others seek to join this program:
Congress has authorized that through TRICARE for Life for those
retirees over 65 years of age and otherwise restricted to
Medicare under previous statute. Now we have the TRICARE
Reserve Select Program, which importantly is due to the
leadership of members of this committee, and forged, really by
this committee in last year's authorization conference, which
we have just started, and we're looking forward to bringing to
fruition.
In short, we have come a long way. At the same time, that
progress has brought with it substantial cost. There are a
variety of factors that drive this cost, and Dr. Winkenwerder
is going to touch on those factors, but in the end--in the end,
the most important factor affecting the cost of medical care in
the Department of Defense (DOD) is what we decide are the
benefit parameters for our military service personnel and our
retired military personnel.
Thank you, Mr. Chairman.
Bill.
Dr. Winkenwerder. Thank you, David. Mr. Chairman and
distinguished members of the subcommittee, thank you for the
opportunity to discuss the Military Health System.
We have submitted broader comments for the record, but what
I would like to do is take time here today to speak
specifically to the rising cost and the expenditure, and those
attendant issues. This issue is of vital importance to
Congress, as I think Senator Coburn so eloquently said. It's
also of importance to our health care beneficiaries, to the
DOD, and to the future of our Nation.
I'm referring to the rising cost of our health care
program, and the trends that we see taking shape in military
medicine, and therefore the sustainability of our military
health benefit.
As Senator Coburn just said, increased health costs are not
unique to the military health system. It's a national concern
and we're struggling with it. I commend you for taking this on,
because it's an issue that some people do not want to take on.
For the Military Health System, our goal is to provide world-
class health care for those who have served and continue to
serve our country. Let me just say, the DOD is firmly committed
to protecting the health of all servicemembers, and all of our
beneficiaries, now numbering more than 9 million. We are
determined that we will always have an outstanding health
benefit, and one that provides outstanding quality care.
Expenses for the Defense Health Program are growing
rapidly, and some have noted and has been in the press
recently, our program has essentially doubled in size in just
the past 4 years, from about 18 billion, to 36 billion this
year. It now appears that our total budget is likely, if the
current trends continue--and we don't see any reason, pending
any change that they wouldn't continue--that this will exceed
$50 billion within 5 years. If these current trends continue,
we estimate that by fiscal year 2010, approximately 70 percent
of our health budget will be spent for retiree health care.
The facts show that our expansion of health benefits, such
as those for our senior retirees underlies this growth, and
that growth could put today's operations and sustainment at
risk. Expansion of the benefit has also led to an increase in
pharmacy costs, our total pharmacy program has increased 500
percent since 2001, approaching $6 billion this year. We are
now implementing the new TRICARE Reserve Select Program for
guardsmen, reservists, and their families. We believe this is a
needed benefit that properly recognizes those who have served,
who may require support during their transition to and from
Active service, and we urge Congress to allow us to implement
this new benefit before making further new changes.
I want you to know the Department has acted to better
manage limited resources, and I'll talk about just a couple of
the things we've done. We are implementing performance-based
budgets and prospective payment, we are improving our pharmacy
program with the uniform formulary, and using Federal pricing
for our retail pharmacy network, as we have for our mail-order
and military treatment facility outlets. Our new TRICARE
contracts, in fact, address Senator Coburn's comments, are
designed to leverage private sector methods to control
purchased health care costs.
Still, management actions alone, even dramatic ones in my
judgment, will not stem the rapid growth in our spending, and
that is because benefit expansion and rising utilization are
the driving forces in sending these costs upward. Our benefit
structure has not kept pace with changes in the private sector,
or in the industry, and enrollment fees and cost shares have
not increased in 10 years. Cost differences between TRICARE and
employer-based private plans, or even Federal employee plans,
which are excellent plans, those differences have grown. For
example, the Federal employees' cost during the period of 1999
to 2004, that 5-year period, have increased 57 percent, for
example, for Kaiser Permanente in the mid-Atlantic, in this
local region, and 87 percent for Blue Cross Standard. While
those same cost shares have remained absolutely unchanged for
TRICARE. This has persuaded a growing number of our
beneficiaries to drop their private coverage, and to fully rely
upon TRICARE. The low out-of-pocket costs and outstanding
benefits are driving, I believe, that nearly all of our
retirees will rely on TRICARE, rather than their employer-based
plans, in just a few years.
Simply put, we face a tremendous challenge with a benefit
design that does not always reward efficiencies of care, and
that is increasingly out of step with employer plans. Many in
the private sector have turned to disease management and
changes in benefit design, and while others have turned to
Health Savings Accounts (HSA), or consider Health Savings Plans
that reward individuals who manage their spending, and we too
believe that we must find a solution that will enable us to
sustain a fiscally sound health program for all of our
beneficiaries over the long term.
We will continue to benchmark our program with the private
sector, to ensure an optimal balance between innovation and the
need to sustain ongoing commitments to our beneficiaries. We
will work closely with the leadership of the DOD and with you,
Mr. Chairman, and with the committee as we seek viable options
to contain costs, while ensuring an outstanding health benefit.
Let me just close in saying, the mission of the U.S.
military has always been to defend our country and the freedoms
in place by our Nation. Many servicemembers have devoted their
entire careers to serving our Nation, 20 to 30 years or more,
some have served bravely in combat--we can never thank them
enough for their dedicated service. What we can do is offer the
best medical care possible to these patriots and to their
families. We've made a commitment to provide them exceptional
care while on Active Duty, and in retirement, just as they made
the promise to defend our freedoms. We will deliver.
Mr. Chairman, the military health system has a great
mission, it is a precious national asset, and I'm honored with
the opportunity to lead it, and with that I say thank you, and
we would be glad to answer your questions.
[The joint prepared statement of Dr. Chu and Dr.
Winkenwerder follows:]
Joint Prepared Statement by Hon. David S.C. Chu and Dr. William
Winkenwerder
Mr. Chairman, distinguished members of this subcommittee, thank you
for the opportunity to discuss the Military Health System (MHS). Today,
the Armed Forces of the United States have more than 275,000 service
men and women deployed around the world in support of our national
military commitments, including those serving in Afghanistan and Iraq.
The Department of Defense (DOD) is firmly committed to protecting the
health of these and all servicemembers, before, during and after their
deployment and to our other health care beneficiaries, who now number
more than 9 million.
When we assumed our positions in the DOD, we faced the tragic
events of September 11, and our Nation was about to embark on the
military campaign in Afghanistan against the Taliban and al Qaeda.
Then, within a very short period, our country suffered suspected
internal anthrax attacks against Members of Congress, the media and
others. From those events, we found that the country had a very limited
supply of anthrax and smallpox vaccine, and limited means to detect a
domestic attack by such bioweapons. Also during that period following
September 11, there was neither a Department of Homeland Security (DHS)
nor a Northern Command, and almost no concept of ``interagency''
collaboration. Efforts to improve intelligence gathering and analysis
had barely begun.
Internationally, Saddam Hussein and his brutal sons, other Baathist
henchmen, and terrorists were relatively free to come and go as they
pleased, and to carry out attacks on innocent people in the Middle East
and elsewhere around the world.
In short, the world had arrived at a very dangerous point in time.
In many respects during that period, we were just beginning to
understand the scope and nature of our new enemy. In just a little more
than 3 years, the United States has met several stern tests--tests of
will, conviction and sacrifice. We have come a long way. Today, there
are many signs of success and hope. Clearly, we are seeing the
beginnings of a new and perhaps hopeful future for the Middle East. As
an example of this change, we have seen Palestinians democratically
elect a leader for Palestine who is now working with the Israelis; a
democratically elected government in Afghanistan that continues its
path of rebuilding a bright future for its citizens; and, for the first
time in more than 50 years, more than 8 million Iraqi citizens, in
defiance of insurgents, recently voted to begin the developmental
process of creating an elected government. We are also beginning to see
positive changes in countries such as Lebanon, Pakistan, Libya, and
Saudi Arabia. Terrorists are on the run and finding fewer and fewer
places to hide. In Afghanistan and Iraq, and elsewhere, the United
States has killed or captured thousands of terrorists and we continue
to face a vicious and malignant insurgency--a mix of old regime
loyalists and new fanatics. We do not stand alone, but are engaged with
many other countries in this international fight. Although Iraq is
still a battleground, it continues its rebuilding efforts, not only the
result of the war, but also to repair more than 30 years of designed
neglect by Saddam Hussein.
Not long ago, Dr. Winkenwerder had the opportunity to visit
servicemembers and our medical staffs who are so hard at work in
Afghanistan, and to compare the conditions found there now to what he
observed there just 2 years ago. He reported that morale was high and
the performance of our people--superior. We know you too salute the
extraordinary efforts of these honorable troops who truly are serving
our Nation so well. During his time in Afghanistan, Dr. Winkenwerder
also had the opportunity to meet with President Hamid Karzai. Without
question, he found him an outstanding leader who, with our help and the
help of other allies, continues unparalleled progress toward creating a
better life for his country and its citizens.
Throughout all of these world events since September 11, 2001, the
leadership of the U.S. military has had a clear and consistent message
to our men and women in uniform--we will take care of you because you
are facing dangers and hardships daily as you go about the task of
carrying out our Government's missions, protecting Americans, and
advancing the cause of freedom and democracy in the world. Throughout
the DOD, the men and women of the Military Health System contribute
every day to the care and comfort of our servicemembers. These medical
professionals, from the doctors and scientists to nurses, technicians
and medics work around the clock keeping America's military fit, safe,
healthy, and protected so that it can carry out its mission--a mission
that, perhaps, has never before been as complex, challenging, or far-
reaching as we find today. At the same time, these medical
professionals also are defining, preparing and participating with
others at the national level in improving the Nation's medical
emergency preparedness should the unthinkable happen. As some have put
it, we are the ``go-to team'' on the other end of that 911 phone call
when local, State, or other Federal assets are overwhelmed.
MILITARY HEALTH SYSTEM FUNDING
Before describing our military health activities, we would like to
address our Defense health funding situation and highlight initiatives
to manage costs. Defense Health Program (DHP) costs continue to rise
due to increased utilization of the MHS. The fiscal year 2006 DHP
funding request is $19.8 billion for Operation and Maintenance (O&M),
Procurement and Research, Development, and Test and Evaluation
Appropriations to finance the MHS mission. We project total military
health spending to pay for all health-related costs including personnel
expenses, and retiree health costs, to be $33 billion for fiscal year
2006. To fund this growth, the O&M Appropriation submission is 11
percent more than the fiscal year 2005 appropriated amount. This
funding growth is the result of benefit changes for our beneficiaries,
to include the Reserve components, increased health care costs in the
private sector, and the decision of MHS-eligible beneficiaries, mainly
our retirees, to drop private insurance coverage and rely upon TRICARE.
The Department has taken several actions to better manage
resources. The MHS is implementing performance-based budgeting,
focusing on the value of services delivered rather than using old cost
reimbursement methods. We are introducing an integrated pharmacy
benefits program that uses a standardized formulary that is clinically
and fiscally sound. Federal pricing of pharmaceuticals in the TRICARE
retail pharmacy program will help significantly to contain costs.
Quality management programs continue to ensure that care provided is
clinically appropriate and within prescribed standards.
Performance-Based Budgeting
With this budgeting approach, we intend to base Military Treatment
Facility (MTF) budgets on workload output such as hospital admissions,
prescriptions filled and clinic visits, rather than on historical
resource levels such as number of staff employed, supply costs, and
other materials. We are in the first year of a planned 4 year
transition to this new prospective payment system which will provide
incentives and financial rewards for efficient management.
Integrated Pharmacy Benefits Program
The redesign of our pharmacy programs into a single, integrated
program, beginning in June 2004, simplifies and allows us to more
effectively manage this $5.5 billion program. We are standardizing
formulary management, achieving uniform access to all medications,
enhancing portability, and involving beneficiaries in formulary
decisionmaking. We will promote the use of more cost-effective products
and points of service. Application of Federal pricing for the retail
pharmacy benefit will allow the DOD to obtain manufacturer refunds for
medications obtained through our broad retail network. We currently use
Federal pricing for mail order and MTF pharmacy services.
Quality Management Programs
We continue to improve the quality of care delivered throughout the
MHS, employing sound management practices and metrics to ensure
appropriateness of care. We monitor the health of our population using
Healthy People 2010 goals as a benchmark, and we measure the quality of
care provided using Joint Commission on Accreditation of Health Care
Organizations Oryx indicators.
Our new health care contracts use best-practice principles to
improve beneficiary satisfaction and control private sector costs.
Civilian contract partners must manage enrollee health care and can
control their costs by referring more care to MTFs. In concert with
these new contracts, and the implementation of the prospective payment
system, we need the flexibility to flow funds between MTFs and the
private sector. Currently, MTF revised financing funds are in the
private sector budget activity group. Restricting the movement of DHP
funds does not allow MTFs to use these revised financing funds to
increase productivity and workload without prior-approval
reprogramming. We appreciate the congressional intent to protect direct
care funding. However, the current restrictions on funding adversely
affect MTFs as well as care in the private sector. We urge you to allow
the MHS to manage our funds as an integrated system. Funds must be
allowed to flow on a timely basis to where care is delivered. We seek
your help in restoring this much needed management flexibility.
BATTLEFIELD MEDICINE SUCCESS
Today, military medicine is saving hundreds of lives that
previously would have been lost on the battlefield. Better training,
advanced equipment, and talented and dedicated soldiers, sailors,
airmen, and marines also contribute to this success. Fewer than 2
percent of wounded servicemembers who make it to a source of medical
care die of their wounds. This is the lowest figure in the history of
warfare. On its own, this milestone is a remarkable accomplishment. It
was achieved due to the proficiency and professionalism of our medical
personnel who have advanced battlefield medicine and medical
transportation to new levels of capability. Our people are also doing
an extraordinary job preventing illnesses and maintaining health. This
progress is mirrored in our disease and non-battle injury rates that
are only about 4 percent in Iraq--which also are the lowest in military
history; this 4 percent is about 50 percent less than that experienced
during the 1991 Gulf War.
Despite these historically low rates, the DOD continues to seek
even better ways to care for our servicemembers. We have new programs
and initiatives, for example, to take care of the severely wounded.
While servicemembers are surviving injuries in record numbers, we now
must treat and care for those severely injured as we help them return
to productive lives. Among these new programs are the Assistive
Technology Centers for amputees at Walter Reed and Brooke Army Medical
Centers, and others such as the Army's Disabled Soldier Support System
(DS\3\). General Bill Fox, Commander of Brooke Army Medical Center, the
Army Vice Chief of Staff, and the Sergeant Major of the Army, opened
the Brooke Amputee Care Center this January. The aim of this Care
Center is to return patients to their ``highest possible level of
activity.'' It does so by incorporating a full range of amputee care at
one site, including services for orthopedics, rehabilitation,
occupational therapy, physical therapy and prosthetics. It also offers
these servicemembers quick access to social work and Department of
Veterans' Affairs (VA) counselors, when needed. The Walter Reed and
Brooke centers also provide an opportunity for additional research in
rehabilitation and prosthetic design. Walter Reed Army Medical Center,
the Department's first amputee care center, has cared for more than 200
troops from operations in Iraq and Afghanistan. The combined effort of
the Centers' staffs is remarkable and it's just amazing to see these
health professionals attain their goals of returning seriously injured
servicemembers to a ``tactical level of athleticism,'' including such
activities as running track, bicycling, wall-climbing, and rappelling.
It is also satisfying to see the optimism and ``true grit'' of our
injured and wounded warfighters as they meet the challenges of their
particular situation.
IMPROVING MENTAL HEALTH SERVICES
During the past decade, we have learned valuable lessons. Among
these are identifying and gaining a better understanding of the health
effects of deployments and operations; we are happy to report that the
DOD has made great progress in these important areas. To date in the
current conflict, servicemembers have completed more than 1 million
pre- and post-deployment health assessments. Nearly 90 percent of this
information is collected and transmitted to the United States
electronically. This information helps us to improve follow-up care and
treatment, ensures our people get the care they need, and assists the
Department with its medical planning efforts.
War is always a difficult undertaking. Stress, uncertainty,
separation from loved ones, daily risk of death or bodily harm and,
frankly, witnessing of horrible events--take a mental toll on many of
our servicemembers. These mental health issues strike even our
strongest and most brave. This is a challenge we must meet--and we
believe we are doing so in a concerned, straightforward and timely
fashion. The DOD today has a better understanding than ever before of
the effects of combat and other rigors of war on our servicemembers. In
recent years, the military services began deploying combat stress
control teams at the unit level and using them far forward in combat
zones. These specialized teams do a fantastic job; they are making a
real difference. They are part of the forward edge of our health care
continuum, which extends back to include post-deployment health
assessments, family support services, and reintegration into home life.
Another lesson that we've learned is that the period of highest
risk for mental and family readjustment problems may be weeks after
someone returns home. With this in mind and in consideration of the
potential for physical health issues to arise once servicemembers
return, we recently directed an additional post-deployment health
assessment--a follow-up program that expands upon our previous efforts.
We recognize that no one who goes to war remains unchanged. However,
not everyone is affected in the same way and not everyone has mental
health or readjustment issues. But, some, a minority, do have health
issues, and their health is our concern. This new effort will include a
short interview questionnaire to be filled out by all servicemembers--
including reservists and guardsmen, 3 to 6 months after they have
returned home. Once they complete the questionnaire, servicemembers may
be referred to a health care provider to discuss issues of concern and
obtain needed assistance. The intent of this program is to help
determine the health status or personal situation of the servicemember
with a focus on discovering any readjustment issues or problems. To get
to the heart of issues, counselors will ask such questions as: ``How
are you doing?'' ``How is your family?'' If things are not well, we
want our servicemembers to know that help is available. We believe that
with this new disciplined and caring process, we can reach those who
may need help and make a real difference where it is needed. There
remains a common, general public perception in our country--a stigma--
regarding the need for mental health services. We believe that through
this new, follow-on reassessment tool, we reduce this ``stigma'' as an
issue or barrier to needed care.
MILITARY VACCINE PROGRAM
In this war on terrorism, the Department has had programs to
protect our servicemembers against the threat of Smallpox and Anthrax,
which we believe to be two potential bioterrorism weapons of concern.
To date, we have vaccinated more than 1.3 million DOD members against
Anthrax and over 700,000 for Smallpox. These programs have an
unparalleled safety record and are setting the standard for others in
the civilian sector. Our Anthrax program currently is on hold, the
result of a Federal district court judgment last October. We worked
with the Department of Health and Human Services, the Food and Drug
Administration (FDA), and the Court to restart this important program,
and I am optimistic that shortly we will return to providing our
servicemembers this vital protection. Our servicemembers deserve the
protection the Anthrax vaccine provides.
BIO-THREATS
We want you and the world to know that the Department is at the
forefront of science, research and development for medical
countermeasures to biological threats, and for sensors, detectors and
surveillance systems to protect all of us from a chemical or biological
or radio-nuclear attack. For example, just 3 years ago, the Pentagon
had a research idea--an environmental detection system to detect
airborne pathogens. Today, this vital protection system, known as
Biowatch, has been installed in more than 30 cities throughout the
Nation, including Washington DC. Additionally, the President's Project
BioShield program provides nearly $6 billion to develop an effective
stockpile of protective vaccines and drugs. Similarly, we played a key
role in developing the ``National Interagency Biodefense Campus''
(NIBC) at Fort Detrick, Maryland, to accelerate research on medical
countermeasures. We are most pleased to recognize the outstanding
leadership of Fort Detrick's Major General Martinez-Lopez in developing
the NIBC. This project also involves close coordination with the
Departments of Homeland Security and Health and Human Services and
other Federal agencies.
Finally, on the research front, the Department continues its work
on other vaccines and measures that have great promise toward
effectively combating such diseases as HIV/AIDS, tuberculosis and
malaria. Not only do these efforts hold great potential with
significant benefits to our servicemembers, but they can help in
worldwide humanitarian efforts as well.
HUMANITARIAN OPERATIONS
Natural disasters and humanitarian issues are constantly a
challenge to the world. The Department's medical assets often provide
unique capabilities not found elsewhere. The recent tsunami in South
Asia was unprecedented in its devastation. A worldwide response
developed very quickly to support those affected by that incredible
disaster. In cooperation with many other nations and multi-national
groups, the U.S. has been a major contributor to the relief efforts.
Once again, the Department and the MHS demonstrated substantial and
unique capabilities of support for humanitarian operations; we helped
make a major difference to the people of South Asia. Dr. Winkenwerder
had the opportunity to observe part of DOD's effort when he recently
visited Indonesia and our crew aboard the U.S.N.S. Mercy, our hospital
ship that also is hosting a number of non-government agencies providing
humanitarian aid and support. He was very impressed with those
operations and we find it encouraging, especially the precedent of
partnering the U.S. military and Federal Government with non-government
organizations to provide much needed care. The result has been
strengthened good will and trust between our Nation and those we
assisted.
MEDICAL ETHICS AND DETAINEE HEALTH CARE
In the shadow of these great accomplishments, and the outstanding
reputation of U.S. military medicine, have come allegations and reports
that a few members of the military health care team may not have acted
properly or met their ethical obligations. These allegations and
reports are deeply disturbing to us and to the leaders of military
medicine. We want you to know that these reports have been fully
investigated (some investigations and findings are still pending) and
our policies and guidance and training have been reviewed and, where
needed, revised. We have been addressing these matters in a
straightforward way, and making whatever improvements are needed. Our
message to all levels of the military medical community is that, at all
times, our people always must do the right thing and they must always
act ethically. For the medical care provided to detainees under U.S.
control, we will rely on the professional judgment of our medical
staffs and ensure that the standards provided to detainees is
comparable to that provided to U.S. members. Importantly, you should
know that the lives of hundreds of insurgents and detainees have been
saved by superior medical care and treatment provided by U.S. military
personnel, often under the same trying conditions we find in treating
our own people. We expect our military medical personnel to report
suspected detainee mistreatment, including any mistreatment noted
during interrogation sessions. Investigations are ongoing and should we
discover violations, we will hold people accountable. Currently, the
Army and Joint Chiefs of Staff are addressing several recommendations
from the various reports and investigations regarding medical issues
for detainees in Iraq and Afghanistan. Additionally, over this last
year, military leaders in Iraq have made numerous improvements
regarding medical care of detainees. For example, the MTF at Abu Ghraib
has been expanded to include a 210-person, 52-bed field hospital. Above
all, our policies, simply stated, require that all detainees be treated
humanely. U.S. law and policy condemn and prohibit torture, and U.S.
personnel are required to follow this policy and applicable law.
HEALTHY CHOICES FOR LIFE
We believe that the long-term, life-style choices people make can
affect positively the readiness of our forces. To encourage these
positive life-style choices, we have embarked on a new effort, one that
reflects our commitment to fostering healthy lifestyles among our
servicemembers and other beneficiaries of the Military Health System.
It is clear that we must work harder and smarter to reduce the
negative affects of unhealthy behavior choices. Indeed, the negative
effects on our military community of destructive choices are a cause
for concern. For example, according to DOD cost estimates, tobacco use
by the Active-Duty Force generates a $1.6 billion annual expense in
medical care. Combined with the adverse consequences of obesity and
binge drinking, the health of our military population suffers
significantly. Force readiness depends on the good health of members of
our Armed Forces. Long-term success in efforts to promote healthy
choices among our members and their families could be among our most
valuable and enduring efforts.
While individual health is a personal responsibility--developing
and maintaining a healthy and fit force is everyone's responsibility.
Our patients tell us that we--the Department--are their most trusted
sources of advice in such matters. Knowing that, we believe we can help
our military members and their families make a difference in their
life-style choices.
In that spirit, over the next 2 years, through a demonstration
project called ``Healthy Choices for Life,'' we will focus on building
healthier communities through education, intervention and treatment. We
have an enthusiastic team of health professionals working with others
in the Department to meet this challenge. Our goal is to significantly
improve members' health through lifestyle changes, thus enhancing the
readiness of the Armed Forces, and eventually reducing the cost to our
military health system that adverse choices impose.
TRICARE, THE MILITARY HEALTH PLAN
The TRICARE Program, our health care plan for our 9 million
beneficiaries has now fully transitioned to new regional alignment and
contracts, which include incentives for positive outcomes based on
improved customer service. This transition was a momentous
accomplishment and required dedicated work by a highly-motivated
professional team. Today's contracts have a stronger customer service
focus, apply best commercial practices, and support our MTFs--indeed,
our military medical facilities remain at the core of our system.
In spite of our efforts to manage more efficiently, total spending
for the MHS, including the Retiree Accrual Fund, will reach $36 billion
in 2005. Spending has essentially doubled in just the past 4 years! Our
program growth is very rapid, and it appears likely to exceed $50
billion within 5 years. Additionally, if current trends continue, over
75 to 80 percent of that spending will be for individuals no longer on
Active-Duty or their family members. The expansion of benefits, such as
those for our senior retirees, contributes to the growing size of our
budget. But, so do other program elements. For example, our total
pharmacy program has increased five-fold, that's 500 percent since 2001
and now stands at over $5 billion annually. Our leaders of military
medicine must apply full attention and best management efforts to these
matters. We have informed the Service Chiefs and Vice Chiefs, Service
secretaries, and other department leaders, including Secretary
Rumsfeld, of the facts about our spend patterns, cost trends, funding
needs, how we are addressing cost increases, and more. Through these
efforts, we have achieved a much better understanding about the
financial aspects of our Defense health program and have received solid
funding commitments. As a result of these exchanges, we are confident
about the state of our program in the near term.
However, looking to the medium to longer term, quite candidly, we
are concerned. We face tremendous challenges with a benefit design that
does not always reward the efficient use of care. Further, we are
increasingly out of step with the benefit design approaches and trends
of the private sector. We must address these issues, engage in
constructive dialogue, and do what is right for our current and our
future generations. My primary goal is to ensure the military has a
high quality, yet affordable, health benefit program for the long term.
SHARING INITIATIVES WITH DVA
We continue to explore new avenues of partnership with the VA. Our
executive council structure serves as the setting in which the DOD
jointly set strategic priorities, monitor the implementation of those
priorities and ensure that appropriate accountability is incorporated
into all joint initiatives.
The Joint Executive Council recently reviewed and updated the Joint
Strategic Plan (JSP) for fiscal year 2005 which includes goals and
objectives for the year, as well as performance metrics in the
following areas:
Leadership commitment and accountability
High quality health care
Seamless coordination of benefits
Integrated information sharing
Efficiency of operations
Joint contingency/readiness capabilities
We have worked closely with the VA to initiate the demonstrations
projects required by the National Defense Authorization Act of Fiscal
Year 2003, as well as the Joint Incentive Fund (JIF) projects required
by the same legislation. Seven demonstrations are now underway, twelve
incentive fund projects are in varying stages of initiation and 56 new
JIF proposals have been submitted for review.
We are especially pleased with our work with the VA for the
seamless, responsive, and sensitive support to soldiers and marines as
they return to duty or transition from Active-Duty to veteran status.
An important aspect of this transition is having the individual medical
records available when a separated servicemember presents at a VA
hospital for the first time. We made significant strides forward by
transferring to DOD electronic health information of servicemembers who
leave Active Duty to a central repository at the VA Austin Automation
Center. Through this repository, VA clinicians and claims adjudicators
have access to DOD laboratory results, radiology results, outpatient
pharmacy data, allergy information, discharge summaries, consult
reports, admission, disposition and transfer information, elements of
the standard ambulatory data records and demographic data. To date, we
have transferred this electronic health information on more than 2.9
million separated servicemembers to this repository, and the VA has
accessed more than 1 million of those records. We believe that this
collaborative effort with the VA has been going extremely well and
together, the DOD and VA are improving services to our veterans.
RESERVE COMPONENTS HEALTH BENEFITS
At your direction, we are implementing the new TRICARE Reserve
benefits that will ensure the individual medical readiness of members
of the Guard and Reserve, and contribute to the maintenance of an
effective Reserve component force. The Guard and Reserve are doing an
outstanding job and they deserve an outstanding benefit. We will
provide that for them. We have made permanent their early access to
TRICARE upon notification of call-up, and their continued access to
TRICARE for 6 months following Active-Duty service for both individuals
and their families. We are implementing the TRICARE Reserve Select
(TRS) coverage for Reserve component personnel and their families who
meet the requirements established in law. TRS is a premium-based health
care plan, at very attractive rates, available to eligible members of
the National Guard and Reserves who have been activated for a
contingency operation, on or after September 11, 2001. This program
will serve as an important bridge as the Reserve and Guard members move
back to other employment and the utilization of the private health care
market.
THE WAY AHEAD
As we begin the second 4 years of this administration, it is an
appropriate time to contemplate the way ahead for our Military Health
System. The mission is clear--to support our men and women fighting the
global war on terrorism, the people who are helping to bring security
and freedom to Iraq and Afghanistan, and to care for our Armed Forces
wherever they serve around the world. Our top priorities for our health
system today are simple. First, to continue to do our utmost to care
for servicemembers who go in harm's way. Second, to ensure our health
benefit remains intact, affordable and effective. We have challenged
the leadership of the Military Health System to be creative and
diligent in the pursuit of these missions and priorities. We will
advance our programs to care for our deployed heroes--our returning
wounded from Iraq and Afghanistan will have special focus. We have made
great strides in this direction, but further improvements are possible.
The Department continues to lead and cooperate with other Federal
partners in the biodefense of our country and supporting the
enhancement of emergency medical preparedness.
We will follow through on our TRICARE governance implementation and
together address remaining and emerging issues in our new framework. In
key areas we have worked with our private sector partners to identify
needed policy changes--and to soon implement these changes.
We will work to complete the medical readiness review, and
implement the final recommendations of the Base Realignment and Closure
Commission to be released later this year.
We will fully implement our strategic and business planning
processes to ensure we effectively address readiness, capital needs,
and changing infrastructure. These processes are not simply a window
for us in Washington, but a productive way for MTFs, regional
directors, and TRICARE managers to manage for the next 10 years or
more.
We will pursue higher levels of system efficiency and clinical
effectiveness and deploy information technologies and management
systems that support greater performance, clarity and accountability.
We will implement critical new initiatives such as revised financing,
prospective payment, diagnosis-related groups (DRGs), improved billing
and coding, and the Composite Health Care System II (CHCS II).
The MHS enjoys a position of national leadership with respect to
information technology. Our electronic health record system is the most
sophisticated and far reaching of any in the world. We are on track to
implement it fully within the next 24 months. Today, on average, nearly
20,000 patient visits daily are being captured by this new system. We
have an opportunity, even an obligation, to lead--and so we will.
SUPPORT TO THE SEVERELY WOUNDED
Each of the Services has initiated an effort to ensure that our
seriously wounded servicemembers are not forgotten--medically,
administratively, or in any other way. To facilitate a coordinated
response, the Department has established the Military Severely Injured
Joint Support Operations Center (JSOC). We are collaborating, not only
with the military services, but also with other departments of the
Federal Government, nonprofit organizations, and corporate America, to
assist these deserving men and women and their families.
A number of our severely injured servicemembers will be able to
return to duty, thanks to their dedication and commitment, and the
phenomenal quality of military medicine. Some, however, will transition
from the military and return to their hometowns or become new members
of another civilian community. These are capable, competent, goal-
oriented men and women--the best of our Nation. We will ensure that
during their rehabilitation we provide a ``case management'' approach
to advocate for the servicemember and his or her family. From the JSOC
here in Arlington, Virginia, near the seat of government, to their
communities across America, we will be with them. This will continue
through their transition to the VA, and the many other agencies and
organizations providing support to them. Our goal is to provide long-
term support to ensure that no injured servicemember is allowed to fall
through the cracks.
CONCLUSION
The military medical community has often been a powerful influence
in building national relationships that foster freedom and liberty.
Today, we also directly support our servicemembers who fight to help
others secure their freedom. We face real challenges in the months and
years ahead in this fight for freedom and liberty. Our Military Health
System is truly a precious national asset, and we are most pleased to
have the opportunity to help shape and lead it. The men and women of
the MHS have worked very hard at research, to protect, to care for and
to treat, to manage and to lead. The reason military medicine has
succeeded and why it will continue to succeed goes beyond `hard work'--
it goes to the will and character of the American people. We are
confident that our mission--caring for the uniformed servicemembers who
keep this Nation safe and secure, and to care for their families--has
no greater calling or cause!
The DOD has made tremendous progress in force health protection and
surveillance since the Gulf War, and quite a bit since the beginning of
Operation Iraqi Freedom. The groundwork has been laid for even greater
progress in the near future and we are firmly committed to continued
improvement in protection for the health of our servicemembers and in
the everyday care and support for all of our beneficiaries. The medical
personnel of our combined services have our heartfelt appreciation and
full support for their outstanding work.
Thank you.
Senator Graham. Thank you very much, there's a lot to
ponder here. I've kind of flamed the debate for myself here a
moment, a couple of things you said jumped out at me, Dr.
Winkenwerder. You said by 2010, 70 percent of military health
care will be consumed by retirees, if nothing changes. You also
indicated that there has been zero increase in cost sharing in
the TRICARE system, and compared that to other programs in the
civilian sector where it's kind of 57 to 87 percent, is that
right?
Dr. Winkenwerder. Yes, sir.
Senator Graham. What ideas do you have about changing that?
How can we address that problem in a fair way?
Dr. Winkenwerder. Well, to be candid, our first step has
been to educate everyone, both within the Department, and we
spend quite a lot of time doing that with our military
leadership to make sure that we all have agreement that we have
a problem. That is part of this process, and there are lots of
different approaches, at least many. I think it is fair to say,
as Senator Coburn said, providing a notion that people are sort
of engaged with their health care.
Senator Graham. Does Congress have to approve any
increases, is that the way the law is structured now?
Dr. Winkenwerder. For certain aspects, yes, and for others,
we would currently control the authority to do so. But I would
just say that it would be our view that any change that we want
to make would be best done in cooperation, and in consultation
with you, and certainly with others.
Senator Graham. About best practices? I understand your
testimony to be that some of your new contracts are going to
incorporate a best practice requirement.
Dr. Winkenwerder. Yes, that's correct.
Senator Graham. Does it have any financial incentive?
Dr. Winkenwerder. Yes it does.
Senator Graham. Similar to what Dr. Coburn suggested?
Dr. Winkenwerder. We are currently, with the new contracts,
using financial incentives to improve what some people call the
administrative processes, timeliness of claims, payment
accuracy of claims payment, answering phone calls, being
responsive, and even satisfaction of the beneficiaries, and
that has certainly gotten people's attention here in the first
6 months of the contract. The next phase, we do not have this
in the current contracts, but I think Senator Coburn makes a
very good point. He's exploring how to incentivize good
clinical performance, that is, the right kinds of practices
within health care.
Senator Graham. Do you have any suggestions about a HSA
component to TRICARE that would be unique to the military? Do
you have any ideas along those lines?
Dr. Chu. Let me, if I could, answer that. I've asked that
the DOD look at that issue, just as a matter of simple justice.
We offer it now to our civil employees in the Department, and
Dr. Winkenwerder is one of them, I might add. It is not
straightforward, and much as Dr. Winkenwerder indicated, as far
as other health care benefit plans, I think we want to do this
in partnership with Congress if we're going to proceed. We
could do some parts of the necessary steps with authority that
the Secretary of Defense has, but we cannot necessarily do all
of it.
Senator Graham. Let me understand what you just said, Dr.
Chu, if you're a DOD civilian you'll have a self savings
account opportunity?
Dr. Chu. Congress gave the entire nation--and with that
statute also Federal civil employees, and that included of
course DOD civil employees. We're looking hard at how to offer
such an option on a voluntary basis, again, your choice, to
military households.
Senator Graham. I will now recognize Senator Nelson.
Senator Ben Nelson. The legislation, Dr. Chu, you're
talking about authorizing civilian employees does not,
apparently, extend to the military? Do you think that was an
oversight on our part, or is this something we have learned
since?
Dr. Chu. I think it reflects the fact that the military
benefit is culled out in statute, a separate set of statutes,
and governed by those statutes. So if we were going to offer a
thoughtful HSA plan, from the research we've done thus far--and
we're not finished with that review--we would probably need
some additional statutory authority. There are also some
significant administrative issues, about how you run a system
like ours with two very different plans like this in place at
the same time.
Senator Ben Nelson. You would have a ``QuadCare'' or
something like that, you would have to have another plan, I
mean, keeping it symmetrical, of course, to deal with that.
There would be a different kind of plan because obviously you
would have high deductibles in place, et cetera. It might not
be a bad idea to try and explore to see if that kind of a
system would work for the military as well, perhaps a pilot
project or something, would that be appropriate?
Dr. Chu. That is one way to proceed, yes sir.
Senator Ben Nelson. If you had your druthers what would be
a way to proceed?
Dr. Chu. I would first like to complete our due diligence
as to what are the constraints and issues you would have to
confront successfully in order to mount a good program. It may
be that if it is voluntary, you could offer it on a broad basis
to start with, and that the pilot would really consist of
seeing how many people were interested in an option of this
sort, but we've not reached that point yet.
Senator Ben Nelson. Mr. Chairman, I neglected to ask to
have my full statement placed in the record.
Senator Graham. Absolutely.
[The prepared statement of Senator Ben Nelson follows:]
Prepared Statement by Senator E. Benjamin Nelson
Thank you for holding this hearing, Mr. Chairman. Health care is a
vitally important aspect of serving in the military. When we send our
young men and women into combat, we know that some will be injured and
wounded. When that happens, we owe it to them to ensure that we provide
them with the very best health care available. At the same time,
servicemembers and their families also have health care needs that must
be met. Quality health care is one of the most important quality of
life benefits that we provide to our servicemembers and their families.
At the outset, I want to commend the military's health care
professionals for the incredible medical care they are providing to
troops wounded in Iraq and Afghanistan. Many seriously wounded soldiers
and marines who would have died on the battlefield in earlier conflicts
are alive today because of the world-class medical care they received.
They were kept alive by highly-skilled medics who provided immediate
care, enough to keep them alive until they could be evacuated to
facilities where highly sophisticated, cutting edge, care was
available. As I understand it, seriously wounded soldiers and marines
are quickly moved from the combat zone to the Landstuhl Regional
Medical Center in Germany where they are stabilized, then evacuated to
the United States, where they receive the very latest in medical care.
Our military health care system is the very best there is, and we
intend to keep it that way.
Providing this health care is expensive, and the cost grows each
year. Cost of health care is not an issue that is limited to the
military--the cost of health care is a major issue that our society is
grappling with. I recently met with Dr. Winkenwerder who expressed the
Department of Defense's (DOD) concern about future medical cost growth,
which could reach $50 billion in 5 years. We in Congress share that
concern. The DOD and Congress need to work together to control military
health care costs, but we must do so in ways that do not cut benefits
or degrade the quality of care provided to those who are wounded while
fighting our wars.
I join the chairman in recognizing one of our own, Senator Coburn,
to get his insights on efficient delivery of health care and how it
might apply to the Defense Health Program (DHP). I look forward to the
testimony of Secretary Chu and Dr. Winkenwerder about how the DHP is
functioning and any ideas they have for improvements. I am anxious to
hear from the experts on our last panel on their insights into national
health care trends and what they portend for the DHP.
Thank you Mr. Chairman. I look forward to the testimony from our
witnesses.
Senator Ben Nelson. I do want to compliment you, Dr. Chu,
on what's been done with the care of our wounded personnel and
soldiers and those who have been wounded in Iraq and certainly
in Afghanistan. I've toured Landstuhl and seen what you've been
able to do in stabilizing and getting to that base for the
appropriate kind of care. Certainly our soldiers and all who
are engaged in this conflict certainly have a lot better care.
The obvious casualty numbers are lower than they would
otherwise be, and I certainly want to commend you and all the
military and the civilian personnel who have made this
possible, to save lives, and to save as much of the health as
they can of those who have been wounded.
Dr. Chu. Thank you, sir--a great credit to the men and
women in the field who are doing that hard work as we speak.
Senator Graham. Thank you.
One last line of inquiry, when you talk about expanding
TRICARE, or about TRICARE just in general, do you get a lot of
input from the community that is being serviced? I have a
billing statement here, and this is anecdotal, but it's just
used to illustrate a point where the service for the TRICARE
patient was $4,557 for some institutional care, and TRICARE
paid $8,475.81. They paid twice what the bill was requested,
and we've been told that the code allowed that much payment for
the service, and no one thought to see if it actually came
under the code. This, I'm sure, happens in all managed care
systems, but our next panel has been very direct in their
testimony to the committee about waste and inefficiency. What
efforts, if any, do we have ongoing to look at problems like
this, to better police TRICARE and to make sure that before we
reform the benefits schedules, which I think we have to do,
that we look at bringing more efficiencies to the table, and
find out where our money is going?
Dr. Winkenwerder. Well, thank you for that question, that's
a great question. I can tell you that nothing bothers me more
than to know that either someone has taken advantage of our
program, and therefore of the military, and our beneficiaries,
and the United States taxpayers, or that mistakes were made
that waste peoples' money. We have a number of audit programs
in place to try to prevent that type of incident. I'd be
interested in looking into that incident, to make sure we can
follow up on it. We want to make sure that we pay what we're
supposed to pay and that we don't pay what we're not supposed
to pay, and this goes to a variety of situations.
Senator Graham. How do your reimbursement rates compare to,
say, Medicare?
Dr. Winkenwerder. Typically, we're right at our standard,
which is the same as Medicare pays now. Our contractor health
plans that we work with such as Humana, Tri-West, and
Healthnet--those are the big three--are free to negotiate
something that might be less than that, but it will depend upon
the area of the country. In some areas, they may pay more than
that, because of the negotiation, but I do want to refer back
to Senator Coburn's concern about the access. We have had some
issues in access, and we attended to those. We have a very
large network nationally, with over 212,000 physicians, but if
you go to certain pockets in certain local areas it is
possible, yes, that there could be problems.
But, we've instituted a new process of doing this, at the
beneficiary groups' suggestion. There are 20 areas in the
country every year that go out and survey the medical providers
and the doctors, to ask if they're taking TRICARE, and if
they're not, why, and what's going on, and that's been very
valuable to encourage our contractor partners to say, ``Look,
we need to expand, we need to make sure that we have sufficient
providers here.'' The long and the short of it is, at least one
measure is asking our beneficiaries themselves about how
satisfied they are with access, and it is not decreasing, it's
actually improving, slightly, a few percentage points. I think
that is a good news story. But it doesn't mean that there
aren't problems.
Senator Graham. What are your audits about waste and
inefficiency showing? What are they telling us?
Dr. Winkenwerder. I would have to get back to you with a
specific report on that, and I would be glad to do that.
[The information referred to follows:]
TRICARE has multiple controls in place to ensure accurate payment
of claims and appropriate expenditure of taxpayer dollars.
One of these controls is the requirement for prepayment review. The
contractors use this strategy to prevent payment for questionable
billing practices. Providers are placed on prepayment review as part of
the administrative actions taken by the contractors. This process
allows for a close review of the services rendered and often requires
the suspect provider to submit medical documentation to support billed
services. In calendar year 2004, prepayment review resulted in a cost
savings of $7.3 million.
Another control is TRICARE's rebundling software, a commercial
software package used by all managed care support contractors. The
software is designed to detect and correct the billing practice known
as unbundling, fragmenting or code gaming. This practice involves
separate reporting of the component parts of a procedure instead of
reporting a single code which includes the entire comprehensive
procedure. An example of an improper billing that is detected with this
software is in billing for a hysterectomy. A proper code for a
hysterectomy would be represented by a 58150 which would reimburse at
about $2,700. An unbundled billing would contain multiple line items
and codes such as lysis of adhesions, exploratory surgery, dilation and
curettage, tying of tubes, coming out to over $7,500. This practice is
improper, has been condemned as inflationary by professional medical
groups and is a misrepresentation of the services rendered. Every claim
is run through this system of checks and balances. This product does
not set coverage or benefit policy--it merely audits the claims prior
to payment for appropriate coding. Rebundling software has saved
millions of dollars in erroneous payments each year. During calendar
year 2004, $95 million in fraudulent/abusive billings were stopped
across all contracts.
TRICARE also mandates that each contractor have a fraudulent claims
investigation unit or anti-fraud unit to identify and investigate any
pattern of suspicious or any potential fraudulent billings. Artificial
intelligence software is also a contract requirement to facilitate data
mining to identify questionable billing practices. In calendar year
2004, there were $6 million in fraud judgments for TRICARE. Another
$2.29 million were identified for administrative recoupment.
TRICARE has established a cost recovery contract as well to
determine the extent of potential overpayments to providers for
Medicare Cost Report periods during calendar years 1992-1997. The audit
identified $32 million for recoupment involving 2,160 hospital
providers. Tricare Management Activity (TMA) is in the process of
establishing the next round of cases, consisting of an estimated 550
new cases with a net value of approximately $7.3 million. This contract
is administered by TMA's Contract Operations Division.
An employee at TRICARE has developed a retrospective auditing tool
that is required to be used by all managed care support contractors.
The software has identified and accounted for almost $100 million in
recoupments or offsets nationally since 1996.
The areas I've covered briefly represent just some of the many
additional controls TRICARE has in place to ensure fiscal
responsibility--controls in addition to the strong contract performance
requirements and financial disincentives for erroneously paid claims.
Dr. Winkenwerder. I know we regularly recover money into
the more than tens of millions--it's probably well over a $100
million a year--in this type of activity, so it is an important
source of cost avoidance that we keep our eye on, and that we
set targets to ensure that we're not being taken advantage of.
I will say one other thing about our administrative costs,
and that is that--because I'm familiar, having worked with Blue
Cross/Blue Shield in the past--that our administrative costs as
a percentage of a total health care dollar are lower than just
about any health plan that I'm aware of in the past. Some of
that is because we don't have to spend dollars on marketing, or
advertising, and I think our size also gives us some economy of
scale, so we actually have a pretty good administrative cost
structure. That is not to say we can't drive it down, we're
trying to drive it down through more electronic claims, and
electronic commerce and that type of thing, but I did want to
just make that one point.
Dr. Chu. If I could add, Senator, on this question of
auditing, just for the reasons you're implying--we have a very
strong partnership with the Department's Inspector General (IG)
on this front. It is a very vigorous program of review. Second,
on the question of efficiency, that's the reason Dr.
Winkenwerder recommended, and we have adopted, this prospective
payment system for our own treatment facilities, that we staff
and run ourselves. In the past they would be paid on inputs,
depending on the number of people on staff. It's largely
backward--looking in terms of budgeting, based on what you have
last year, and then what you anticipate for next year. In the
future--this is a 4-year transition--but in the future they'll
be paid based on the anticipated work load by diagnosis, and
they'll be paid, essentially, those same Medicare rates that
anybody else would pay, and what that is, is already identified
for us inside the Department. Some of our hospitals look very
good, and they would make a ``profit'' if they were in the
private sector. Some of our hospitals probably have some
significant work to do to bring themselves up to the standard,
and that's the purpose of this 4 year transition.
Senator Graham. That's terrific, Senator Nelson, anything
more?
Senator Ben Nelson. Dr. Chu, under laws that we've passed
the last couple of years, the Reserves, and the families, have
become eligible for this military TRICARE benefit, up to 90
days prior to mobilization in order to make sure--among other
things--that the military personnel are ready to go. Now, the
Reserve Officer's Association reports complaints that units are
being ordered to Active-Duty using group orders, and when they
attempt to enroll in TRICARE, they're told that they need an
individual order to enroll. But, they don't get individual
orders until they arrive at the mobilization station. We seem
to have an impossible situation, where you can't quite get
there with what was intended. So, even though they are
eligible, they just can't get individual orders until they
actually report for Active-Duty, is there anything we can do?
Or were you aware that we are running into this sort of a snag?
Dr. Chu. I had not heard of that until your staff mentioned
it earlier this afternoon. We'd be delighted to look into that
and make sure we get the situation put on the right footing.
[The information referred to follows:]
The Service/Reserve component personnel activities are currently
recording eligibility for TRICARE coverage for Reserve component
members and their family members in the Defense Enrollment Eligibility
Reporting System (DEERS) when the Reserve component issues delayed
effective-date Active-Duty orders, up to 90 days before the member is
scheduled to report to Active-Duty. The DEERS transaction by the
personnel activities is all that is required for the member and their
family members to be covered by TRICARE; action by the member is
neither required nor possible to get TRICARE.
Nonetheless, eligibility for TRICARE coverage as recorded in the
DEERS by personnel departments is frequently confused with enrollment
into TRICARE Prime as a result of an enrollment application submitted
by a beneficiary to the TRICARE regional contractor. (TRICARE Prime is
an option similar to civilian HMOs that names a primary care provider
for each eligible beneficiary who will serve as his or her Primary Care
Manager.) Eligibility in DEERS, not orders, is the prerequisite to
TRICARE Prime enrollment. DOD policy was revised last year to ensure
that mobilizing Reserve component members do not apply for enrollment
into TRICARE Prime until reaching their final duty station where a
Primary Care Manager can be named for them. However, their eligible
family members are welcome to apply for enrollment into a TRICARE Prime
program as soon as they become eligible in the DEERS depending upon
local availability.
In my memoranda of January 7, 2004, and February 11, 2005, to the
Assistant Secretaries of Military Departments for Manpower and Reserve
Affairs, I provided guidance on recording eligibility in DEERS for
National Guard and Reserve members, and their eligible dependents. The
guidance directed the Services to provide electronic files to DEERS of
eligible members who have been issued either an individual mobilization
order or are on a unit alert order with approved annex identifying
individuals to whom individual mobilization orders will be issued.
While guidance has already been published that should preclude the
reported problem, I will reissue guidance to reinforce the need to
record eligibility in DEERS, with the appropriate effective date, as
soon as an approved order has been issued.
Senator Ben Nelson. Obviously sometimes putting in place
something that directs something like this to get done runs
into a hurdle, or runs into a snag, and this is clearly one of
those situations, because it's not intended to do what was an
unintended result, which I hope we can resolve.
Dr. Chu. Yes, sir, and if your office can provide details
of which units thought they were so disadvantaged, that would
help us track it down more quickly.
Senator Ben Nelson. We'd be happy to do that. Now Dr.
Winkenwerder, I have a little bit of questioning about mental
health counseling. It's always going to be an issue we deal
with when it comes to health care. One question as it relates
to servicemember health care, and another as it relates to
families, dependents.
Apparently, a recent Army study found that incidents of
major depression, generalized anxiety, and post-traumatic
stress disorder (PTSD) were significantly higher after combat
duty in Iraq or Afghanistan. Obviously, we know that many who
need that kind of care don't necessarily seek it because of the
stigma that's attached to it. In March of this year, you issued
a memorandum to the Assistant Secretaries for all of the
Services, directing them to extend the Pentagon's current post-
deployment health assessment process to include a reassessment
of global health, and then with a specific emphasis on mental
health, to occur 3 to 6 months post-deployment. Do you know
what has happened as a result of your directive?
Dr. Winkenwerder. Yes, Senator, thank you for asking that
question. This is an area that has been a real concern for me
and a real priority.
We're placing people in difficult situations, in stress, in
combat and it goes on. Group after group, and it's a tough
situation, so I think we're doing a number of things. We have
Combat Stress Control Teams in theatre, who focus on
identifying mental health concerns right up front, immediately
after deployment. This latest step that we've taken that really
came as a suggestion from our front line people--it wasn't an
idea that came out of my office said, ``Look, we really think
we need to have everybody go through this sort of screening
procedure, with a questionnaire and a face-to-face interaction
at about 3 months, because that's when it seems like we're
seeing some family adjustment problems, or some social
problems, or anger or alcohol, and we can really help people if
we do this,'' and I asked them, I said, ``Do you think we
should make it mandatory?'' The answer was ``yes.''
So, in the Services, many times--I think you know having
served on the Armed Services Committee when we tried to put a
big new program like this into place--there's some resistance
and so forth, people really welcome this idea, and so I just
was briefed on it this week. We're on schedule, we believe, to
implement this starting in June. It will roll out over the
summer months, and it will be a permanent thing from now on, so
we'll look forward to finding out what we've learned from this.
We will also be reaching out to the guardsmen and reservists,
even people who have separated, we're going to contact them by
phone or by e-mail or by whatever means possible to make sure
we make contact.
Senator Ben Nelson. I think that's an excellent approach,
and I hope that you will keep us advised as to how it turns
out. I have one further question on this as it relates to the
family members. Apparently there's some challenge with certain
families, and civilian health care providers don't accept
TRICARE, and so you end up with some people who are stranded
without the TRICARE available to help them on some of the
mental health counseling they need. Are you aware of that, and
is there anything that has been done to date?
Dr. Winkenwerder. I would have to take that specific
concern and get back to you on it.
[The information referred to follows:]
One of the most important things that TRICARE can do is to help
beneficiaries locate a provider who will treat them. The TRICARE
Regional Offices, along with the regional Managed Care Support
Contractors, can find a TRICARE authorized provider for beneficiaries.
Admittedly, we have access to care challenges particularly in rural
areas. Through TRICARE Standard, the fee-for-service coverage option in
TRICARE, we serve about 2.5 million beneficiaries under age 65, many of
whom live in rural areas. TRICARE Standard is an important component of
the TRICARE triple option benefit that provides more freedom of choice
of provider at a somewhat higher cost than TRICARE Prime or TRICARE
Extra. TRICARE Standard has worked well for Active-Duty families,
retirees, and their families for over 35 years, and the Department is
committed to enhancing and improving it. Unlike TRICARE Prime, with its
uniform access requirements for enrollees, TRICARE Standard access
varies from place to place, depending on proximity of military health
care and the extent of the local civilian health care system.
Moreover, we are pleased with recent survey results which show that
providers are accepting TRICARE patients. In accordance with Section
723 of the National Defense Authorization Act for Fiscal Year 2004, DOD
conducted a survey of physicians in 20 market areas around the U.S.
regarding their acceptance of new TRICARE patients. Beneficiary groups
identified these areas as having the greatest anecdotal evidence of
access problems. These areas included over 11,000 physicians located in
Anchorage, AK; Boise, ID; Colorado Springs, CO; Fredericksburg, VA; Las
Vegas, NV; Rochester, NY; Atlanta, GA; Bainbridge Island, WA; Buffalo,
NY; Cheyenne, WY; Fayetteville, TN; Greensboro, NC; Jackson, MS;
Laurel, MS; Meridian, MS; Philadelphia, PA; Portland, OR; Princeton,
NJ; Utica, NY; and Williamsburg, VA. Survey data showed that most
doctors were accepting new TRICARE patients. Since these areas
represented the locations where there were beneficiaries' greatest
concerns about access to care, the results suggested that we do not
have major problems with access.
We will continue, however, to work hard to find ways to improve
access to care for TRICARE Standard users. The surveys required by
Section 723 of National Defense Authorization Act for Fiscal Year 2004
will continue over the next few years, and we should get additional
important information to help focus our efforts.
In addition, to address immediate needs for counseling,
servicemembers may access the Department's Military OneSource, a
program designed to help servicemembers and their families deal with
issues such as personal and family readiness, emotional well-being,
addiction and recovery, and parenting and child care. Through Military
OneSource, master's level consultants are available 24 hours a day, 7
days a week, 365 days a year. Anyone may call to speak with a
consultant, or they may go online to access information or to e-mail a
consultant. Consultants are available to discuss confidential issues
relating to emotional and mental health.
Finally, in locations where there may be inadequate access to
network providers, members and their dependents may seek care from any
authorized TRICARE mental health care provider. If members are enrolled
in TRICARE Prime or TRICARE Prime Remote Active Duty Family Member
(TPRADFM), and they are referred to a non-network provider, TRICARE may
pay up to the legal liability amount (Champus Maximum Allowable Charge
(CMAC) plus 15 percent). If not enrolled in Prime or TPRADFM, members
and their dependents may use TRICARE Standard. For reservists and their
dependents under the Reserve Demonstration, TRICARE will waive their
Standard deductible and pay 115 percent of CMAC to nonparticipating
providers.
Dr. Winkenwerder. I have not been informed that, that at
least, is a broad issue, but we would be glad to look into it.
Senator Ben Nelson. We'll try to get you some more
information on that. Finally, I think in fiscal year 2001, the
National Defense Authorization Act required the DOD to conduct
a demonstration project, authorizing licensed mental health
counselors to practice independently, and I think back in March
27, 2003, you provided a letter in which you stated that the
Department will submit its final report to Congress in March
2005. We might have missed the March date. Do you have some
idea?
Dr. Winkenwerder. Yes, sir, I know that report is coming to
my office right now. I literally just began to read it. It is a
big report. I wanted to make sure I really understood it well
before we reported back to you, but it should be to you within
a couple of weeks.
Senator Ben Nelson. Can we count on that for summer
reading, maybe? [Laughter.]
Dr. Winkenwerder. Yes, plenty of time for summer reading.
Senator Ben Nelson. Thank you.
Senator Graham. One last question, what is the
administrative cost of TRICARE?
Dr. Winkenwerder. I can't give you a precise number, but it
is in the single digits. But some of it depends upon how you
define administrative costs. Let me just say, for example, the
cost to have Surgeons General of the Army, Navy, and Air Force
and the TRICARE office--not all of that is administration, some
of that is what you would call ``Leadership'' or ``Direct
Support'' to the troops--and if you're talking about the
purchased care aspects, the TRICARE networks and so forth,
again it is well below a 10-percent number. The typical number,
again, in the private sector that I'm familiar with is around
12, 13, 14 percent, so we think we're several percentage points
below that.
But I'm a believer that, again, as I said, as more and more
electronic commerce and more and more efficient ways of doing
things are derived, we ought to be able to drive that number
down continually. So, we look to do that.
Senator Graham. Thank you. Anything Dr. Chu?
Dr. Chu. No, sir. Thank you very much.
Senator Graham. Thank you, you've been very helpful. Our
next panel? Thank you both.
We want to thank you all very much for coming today and
your patience, it's been a very good hearing thus far,
I appreciate your participation. Dr. Blumenthal, Dr. Galvin
and Ms. Hosek? Thank you all for coming, and if you don't mind,
for the record, just introduce yourself and your organization,
and we'll start with Dr. Blumenthal and take testimony.
Dr. Blumenthal. My name is David Blumenthal, I'm a
practicing general internist and also Professor of Medicine and
Health Care Policy at Harvard Medical School, and also direct
an Institute for Health Policy at Massachusetts General
Hospital in Boston.
Dr. Galvin. I'm Dr. Robert Galvin, Director of Global
Health Care for General Electric.
Ms. Hosek. Susan Hosek, I'm a Senior Economist at RAND, and
I am co-Director of RAND's Center for Military Health Policy
Research.
Senator Graham. Again, we're very lucky to have you all, we
appreciate it, Dr. Blumenthal?
STATEMENT OF DR. DAVID BLUMENTHAL, M.D., DIRECTOR, INSTITUTE
FOR HEALTH POLICY, MASSACHUSETTS GENERAL HOSPITAL, BOSTON,
MASSACHUSETTS
Dr. Blumenthal. Mr. Chairman, Senator Nelson.
It's a privilege to be here and to share my views on the
military health system and the cost problems you're facing. I
will summarize my remarks and request that the full text be
submitted for the record.
I'm not an expert on the military health system, I study
other aspects of the health care system, but it is my
understanding in listening to the testimony today, it's
confirmed that the military is now venturing into joining the
problems that the rest of our health care system is dealing
with, and I would like to focus on those with the hope that it
provides some lessons for your efforts to deal with the
military's particular issues.
The area I would like particularly to concentrate on is the
one that I think is most relevant to TRICARE for Life, your
programs for older retirees, those over 65, because they--in
many ways--constitute for the rest of the American health care
system, the biggest challenge that we face, that is, older
Americans, and the burden of illness that they live with. The
challenge is how to get value for our money for expenditures
for an aging population that is living longer with chronic
illness and has ever greater and more complicated opportunities
for treatment, with more bio-medical information and technology
to treat them. That is both our blessing, and from a financial
standpoint, our curse.
I don't think there are any magic or silver bullets here. I
think you're in for a long struggle as the rest of us are, and
the rest of our health care system. There are no simple
solutions. This is a campaign that has to be waged over a long
period of time with many efforts at trial and error and
experimentation.
Let me talk a little bit about the sources of cost
increases as I perceive them, for elder Americans. As you are
well aware, the Medicare Program experiences very marked cost
increases year to year. These in the earlier years of this
decade have ranged from 6 to 11 percent annually, and that's
about how they've run through most of the history of the
Medicare program. As you well know, Medicare beneficiaries have
considerable burden of co-payments, so co-payments are not an
instant solution to the containing health care costs.
When you think about the cost of this population I think
you should think about three things. First of all, you should
think about chronic illness, a second thing you should think
about is technology, and the third thing you should think about
is opportunities for improvement in the area of chronic
illness. It is chronic illness that is overwhelmingly the cause
of higher costs for our older population.
If you look at the Medicare program, Medicare beneficiaries
with five chronic conditions cost 15 times as much per year as
those with no chronic conditions--15 times. Those with five
chronic conditions account for two-thirds of all Medicare
expenditures. If you have five chronic conditions, that portion
of our Medicare population that has five chronic conditions----
Senator Graham. Is that per person?
Dr. Blumenthal. Two-thirds altogether, and 96 percent of
Medicare spending goes to individuals with one or more chronic
condition. The second point I wanted to make is about
technology. If you look at why expenditures are increasing year
to year on these patients with chronic conditions, the reason
is we're doing more and different things for them. One example
of these more and different things, which is well known to the
public, is coronary angioplasty and stinting for narrowed
coronary arteries, the kind of procedure that Vice President
Cheney has gone through. We didn't have that 20 years ago. It
saves lives, and it's expensive, and we pay for it, and ought
to pay for it.
Another example is a new way of screening for a condition
called abdominal aneurysm, which is the swelling of a major
artery in the stomach, and if it bursts, it is almost certainly
fatal. We now screen for that and can operate on it, and
prevent its bursting and save lives. We didn't know how to do
that, just a few years ago. So these things are available to
us. It's very hard to say ``no'' to them, and the march of
technology is very hard to turn back once it gets going.
A third point that I want to mention has to do with
opportunities for improvement, and I think my colleagues will
say more about that. The first thing is that Medicare has
obvious inefficiencies, and perhaps the most clear example of
that, or illustration of that is the fact that our country pays
twice as much for the care of an older person in Baton Rouge or
Miami each year than it does in Oregon or Minneapolis. So twice
as much in one place than another with no evident explanation
to the illness of the beneficiary, and no evident impact on the
outcome of the beneficiary. That differential implies there's
opportunity for cost saving.
The other point I want to make is that we can treat our
elderly patients better than we do. There's obvious evidence
that they don't often get the care they need.
There are opportunities for quality improvement, and
Senator Coburn referred to those, and I think my colleagues
will also refer to them--what are some ways in which we might
think about dealing with these, both the opportunities and the
problems?
I want to say that all of these are partial solutions and
they are hopeful aspects of the health care system, but much
remains to be learned about them. One is through health
information technology, this has been a very important aspect
of the President's program. I think it offers opportunities to
conserve funds and improve quality if implemented, and the
military already, I think, has made a major effort to do that
within their military health system.
A second is a program or set of programs called Disease
Management, which aim to bring--for the chronically ill--a
whole bunch of services together and mobilize them, organize
them and apply them in a timely and effective way. There's a
lot of experimentation with that going on in the Medicare
program right now, and the military system should track and
learn from those experiments.
You heard something about pay for performance, I think Dr.
Galvin, in particular, will say more about that. You've heard
something about reporting publicly about the quality of care
and performance, and Dr. Galvin will say more about that as
well. I consider that a promising strategy.
Finally, I think the military has something to learn about
the Veterans' Health Administration (VHA). The VHA has
undergone a remarkable transformation in the last 10 years in
terms of both the quality and efficiency of care that it
provides. It suggests that in some respects and in some
settings, organized systems of care have major advantages in
caring for the chronically ill elderly. I think this is a very
important undertaking that you're engaged in, trying to bring
efficiency into your military health system while preserving
the benefits, and maximizing the health of the armed services
and their retirees. I am grateful as an American that you're
involved in this, and look forward to answering any questions
you may have.
[The prepared statement of Dr. Blumenthal follows:]
Prepared Statement by Dr. David Blumenthal
Mr. Chairman, members of the Subcommittee on Personnel, it is a
pleasure and a privilege to appear before you today to discuss the
current status of the Military Health System (MHS) of the United States
Armed Forces. My name is David Blumenthal. I am a practicing general
internist in Boston, Massachusetts, as well as Professor of Medicine
and Health Care Policy at Harvard Medical School and Director of the
Institute for Health Policy at Massachusetts General Hospital and the
Partners Health System, also in Boston. I also direct the Harvard
University Interfaculty Program for Health System Improvement.
Like all Americans, I recognize the critical importance of the MHS
to maintaining a strong national defense. Nothing is more vital to the
readiness of our Armed Forces than caring promptly and well for the
illnesses and injuries sustained by the men and women who volunteer to
serve. Furthermore, given the uncertainties associated with obtaining
health insurance in our civilian sector, the assurance of retiree
health coverage provides an increasingly important tool for recruiting
qualified individuals to our volunteer military. Therefore, the
interest of this subcommittee in the health of our MHS should be
welcomed by all Americans.
Before proceeding, I want to make clear to the subcommittee that I
am not an expert on the MHS, and for that reason, I do not intend to
comment directly on its accomplishments and challenges. Rather, what I
propose to do is highlight some on-going trends in the U.S. health
system generally that may be relevant to thinking about the MHS. From
my limited understanding, developments in the civilian health system of
the U.S. are becoming more important to the MHS since an increasing
number of beneficiaries of the MHS are receiving care outside military
facilities. This is particularly true, I believe, for one very
important group: military retirees over 65 who are eligible for the
Medicare program, and are now able to enroll in TRICARE for Life (TFL).
The involvement of the MHS in caring for Medicare-eligible Americans
means that the Department of Defense (DOD) is getting to know up-close
and personally some of the most difficult problems facing the Medicare
program and the American health care system generally: how to get value
for expenditures on the care of an aging population that is living
longer with chronic illness in an age of exploding medical knowledge
and technology. This is a challenge facing not only the MHS and the
U.S. health care system, but every industrialized country around the
world, and it is the challenge on which I would like to focus my
remarks today.
To eliminate any possible suspense, let me go right to the bottom
line. There are no silver bullets, no shining examples of success, for
dealing with the increasing costs associated with the care of Americans
generally and older Americans in particular. The MHS has entered
territory where, to use military analogies, the fight will be waged
foxhole by foxhole over the long term. Don't expect any brilliant
maneuvers, any Inchon-style landings, to sweep away the problem of
increasing health care costs for the elderly. Rather, to get the best
value for the dollar in its new commitment to older military retirees,
the DOD will be forced to experiment, innovate, try and often fail--
unless it chooses to give up territory by reducing its involvement in
the care of this demanding population group.
COSTS OF CARE FOR OLDER AMERICANS.
Though I will not dwell on the benefits of care for older Americans
in the U.S. today, I would like to balance my subsequent remarks by
noting the enormous progress that our health care system and its health
care professionals have made in improving the health and health care of
Americans generally and older Americans in particular. Indeed, the
availability of those benefits--seen in increased life expectancy for
the over 65, reduced rates of disability for that population, increased
survival from particular illnesses like cardiovascular disease and
stroke--is what makes the cost challenge so difficult. If the benefits
were not so clear and palpable, it would be easier simply to reduce our
investments in health care for this population. Furthermore, if those
benefits did not exist, it would be less distressing to note another
problem that plagues our civilian health care system: its failure,
despite all that we spend, to provide beneficial services to many older
Americans who need them.
The costs of care within the Medicare program have increased
steadily since the program's inception in 1965. In the first 3 years of
this decade, growth rates in spending ranged from 6 to almost 11
percent annually. Several salient observations about the costs of care
for older Americans within our civilian health care sector should be
kept in mind as the executive branch and Congress consider approaches
to containing costs within TFL.
First, the costs of care in the United States generally, and for
older Americans in particular, reflect overwhelmingly the costs of
caring for chronic illnesses, such as high blood pressure, heart
disease and cancer. I would expect that TFL's costs will reflect this
same phenomenon. The care of individuals with chronic conditions
accounts for 78 percent of health expenditures in the United States.
Individuals with more than one chronic condition account for a hugely
disproportionate share of national health care spending. Patients with
more than 5 chronic conditions have annual average health care bills
that are 15 times that of individuals with no chronic conditions. Those
with more than one chronic condition account for 96 percent of Medicare
spending; those with more than five account for two thirds. Thus, there
is no way to find a solution to the cost problems of TFL without
improving the way we care for the chronically ill elderly military
retiree.
Second, when we drill down to find out why costs are increasing for
Americans--and especially those with chronic illnesses--we find that
about 50 percent of the annual increase in costs can be attributable to
doing more and different things for patients. The remaining 50 percent
result from inflation generally, from incremental inflation in the
medical sector (so called medical inflation), and from the aging of the
population. What does doing more and different things mean? Let me give
you some concrete examples from the care of patients with
cardiovascular disease.
One example is the use of angioplasty and the placement of stents
in the coronary arteries of patients who have narrowing of those
arteries. We now routinely perform this procedure for patients in the
midst of heart attacks. Twenty years ago, there were no stents. Only
recently has it become clear that using them in the midst of a heart
attack saves lives. The procedure is extremely expensive, but it
produces clear benefits.
Another example is screening for so-called abdominal aortic
aneurysms, which are weaknesses in the walls of one of the main
arteries that carries blood pumped from the heart to other organs of
the body. Such aneurysms can burst suddenly, and the result is massive
internal hemorrhage and almost certain death. It is now clear that by
screening older patients for these aneurysms and operating on them when
we find them, we can prevent their rupture and save lives. We didn't
know this 10 years ago. The cost is very large.
A third example of doing more and different things is screening
older Americans for cancer of the colon using colonoscopies. Twenty
years ago, colonoscopies were done only when patients displayed
symptoms of possible illness. Now they are done every 10 years for
everyone over 50, and more frequently if people have a family or
personal history of colon cancer or polyps.
I could give you many other examples of changes in health care
practice that have contributed to the growing costs of caring for older
Americans, especially those with chronic illness. The point is that
care costs more in part because, as economists would say, the product
we are buying has changed: it is a more complex and in certain ways
higher quality product than it was 10 or 20 years ago.
A third general point to keep in mind about trends in health care
for older Americans is that it needs improvement, and that this is
likely to be the case for the care purchased on behalf of TFL
beneficiaries as well. There are at least two ways in the health of
older Americans falls short.
The first way is that it is wasteful. Despite all the positive
things I have noted about health care of our elderly, it is quite clear
that it could be delivered at lower cost. This is most apparent in the
huge variations in health care expenses per capita in different
geographic regions of the United States. Medicare spends more than
twice as much each year to take care of older Americans in Miami or
Baton Rouge than it does in Eugene, Oregon or Minneapolis. There is
absolutely no evidence that these differences in spending make the
elderly in Baton Rouge healthier than in Minneapolis--indeed, there is
some evidence to the contrary. The best predictor of Medicare spending
per capita seems to be not the intrinsic health needs of patients but
the number of doctors and hospitals in the community.
The second way in which the health care of older Americans could be
improved is by making sure that they get the best care we know how to
provide. Many studies demonstrate that the quality of health care
provided older Americans is deficient. Heart attack victims often don't
get the drugs they should; diabetics don't get their blood sugar tested
or their eyes examined regularly; patients with asthma, depression or
heart failure don't get indicated medications.
This, then, is the new terrain in which the MHS must wage its
campaign to care for TFL beneficiaries: a health care system that is
dominated by the needs of the chronically ill, that is doing more and
better things for them than ever, but at the same time, is in many ways
wasteful and plagued by quality deficiencies. The question that TFL
must address, like many other stakeholders, is how to care for this
demanding population in a way that preserves the best aspects of our
private health care system while improving on its problems.
IMPROVING HEALTH CARE FOR OLDER AMERICANS
As I have already indicated, we do not have a stockpile of proven
weapons for accomplishing this demanding set of objectives. What we
have is some interesting ideas and some ongoing experiments. Some of
these ideas are powerful; some of the experiments are promising. The
MHS also seems well positioned to take advantage of some of these ideas
and experiments.
The first idea--already well on its way to widespread testing--is
greater reliance on information technology to improve quality and
reduce costs of care for all patients, including the older chronically
ill. Health information technology (HIT) is a health care priority for
the current administration because of its promise to improve the
coordination and integration of health care, and thereby, to prevent
waste and improve quality of services. The evidence supporting the
benefits of HIT is far from complete or conclusive, but the technology
has a compelling logic that makes the current emphasis justified. The
MHS already has a robust HIT system for the facilities it operates, and
this gives it an advantage in providing care within those facilities to
TFL patients. This is one of several reasons that directing TFL
beneficiaries to MHS owned and operated health care settings makes a
good deal of sense.
A second idea is to mobilize resources effectively in the care of
chronically ill patients through several promising strategies. One is
the use of so-called disease management techniques. These involve a
variety of tools: reminders to patients, reminders to doctors, the
creation of community-based support systems for involving families in
the care of chronically ill patient, greater reliance on home care, and
the use of information technology. The goal is to weave them into a
coordinated plan of attack for making certain the chronically ill
patients get the right care at the right time, nothing more, and
nothing less. The Medicare program has embarked on an unprecedented
national experiment to test the value of disease management programs.
TFL should watch that experiment closely and be prepared to learn from
its lessons. Indeed, the TFL may want to launch its own experiments
tailored to its own special circumstances.
Still a third idea is the pay for performance strategy, which my
colleague on this panel, Dr. Robert Galvin, will discuss in detail.
This is another approach that is both untested and compelling in its
intuitive appeal. Medicare is also experimenting extensively with this
approach, and it would be worthwhile for the MHS to develop similar
efforts that are adapted to its own circumstances. In this regard,
another experiment that TFL should watch closely is under way in the
United Kingdom. In its new contract with the Nation's general
practitioners, the British National Health Service has promised to
increase payments to GPs by up to 30 percent if they meet specified
quality goals. The effects of this program on the costs as well as the
quality of care will be extremely interesting to watch.
A fourth idea, related to the third, is public reporting of quality
and cost performance by health care providers. The limited evidence
concerning quality reporting suggests that it stimulates some health
care organizations and providers to examine their own quality and
efficiency, and that the result may be improved performance in certain
respects.
A fifth idea is to try, as the MHS is already, to care for as many
patients as possible within its own health care facilities. There are a
number of reasons for doing this. One reason is the example of the
Veterans Health Administration (VHA) which is increasingly
demonstrating that a large, centralized, public health care system can
deliver services to chronically ill patients in ways that are higher in
quality and at least as efficient as the fee for service system. The
MHS may be able to replicate the success of the VHA in caring for older
patients. Another example of the potential advantages of organized
systems of care in managing the problems of older, chronically ill
Americans is the Kaiser Permanente System, which has pioneered in a
number of reforms to improve the efficiency and quality of care,
including HIT and disease management.
These initiatives, approaches and programs offer some hope that TFL
and other stakeholders in the U.S. health care system can manage the
central health care problem of our time: providing the older
chronically ill the benefits of modern health care services in an
affordable way. Achieving victory in this struggle will require as much
ingenuity and perseverance, and perhaps more, than any other mission
facing the Armed Forces of the United States. But it is well worth the
effort.
Thank you for your attention. I would be pleased to answer any
questions you may have.
Senator Graham. Dr. Galvin?
STATEMENT OF DR. ROBERT S. GALVIN, M.D., DIRECTOR, GLOBAL
HEALTH CARE, GENERAL ELECTRIC COMPANY
Dr. Galvin. Mr. Chairman, thank you. Senator Graham,
Senator Nelson, I appreciate the opportunity to tell you how
leading employers in the private sector are managing their
health care costs. I mentioned my formal title before and what
I do at GE is somewhat similar to Dr. Winkenwerder's role with
DOD, but on a smaller scale. It's oversight of the design,
operations, and financial performance of the health benefits we
offer our employees plus looking after their overall health.
I was impressed, trying to think through how I could
contribute today--and excuse my voice by the way, my cold
hasn't healed--at how similar some of the challenges are
between DOD and GE because we have highly-trained, well-
educated work forces, and the healthier they are, the more
productive they are. I think the military is the same way.
Second, despite our size and our profitability, and the size of
your budget, these health care costs hurt, they squeeze, and
it's a very significant pressure that we have to deal with all
the time. Third, and probably most significant, is the daunting
challenge of trying to reign in these excess costs while
keeping people happy, while doing the right thing in terms of
benefits and not alienating our work forces. These are
significant challenges.
Let me say at the outset, that unfortunately I don't have
the answer. We certainly have not found the answer to this set
of challenges but I'm going to share with you today a couple of
ideas we have tried to implement and which I think have been
positive.
I would say right off the bat that one thing we have
learned is how critically important communication is. Whenever
we have to make benefit choices, whenever we have to make
decisions that aren't uniformly popular, what we have found is
that the more we can do face-to-face communication, the better
it goes. I think that one of the most important lessons that
former CEO Jack Welch taught was that when you repeated your
message to the point where you were tired of hearing yourself
talk, that meant you were about half-way towards getting your
message across. Because health care is always personal, the
more we can communicate about charges that address cost
increases, the better off we are.
Health care costs are rising rapidly today for many
reasons. As benefit managers on the employer side are trying to
manage these costs, we tend to separate the causes of cost
increases between those we can't do much about--technology,
aging--and those where we think good management can make a
difference.
I'm going to focus on two of those today--benefit design,
which I'll go over quickly, and then how we can use procurement
to address waste in the health care system that you've heard
described in previous testimony.
There are several other areas that drive costs, and by not
discussing them I don't mean to give them short shrift.
Population health, as Senator Coburn was talking about, Senator
Graham, you spoke about on the financial control issue, which
is a very big issue in a complicated trillion dollar plus
system, but given that I have limited time, I'm going to go
ahead and focus on the two aforementioned areas.
On the benefit design issue the private sector has a
saying, that ``benefit design is destiny.'' We spent a lot of
time thinking about benefit design, because it is like the
blueprints of a house, and essentially, what you do with your
benefit design, the cost sharing, and the richness of your
design, is going to very much dictate your experience. Now, you
can still control it after you've done this, but we spent a lot
of time thinking about it, and we really look at three areas.
The first area is satisfaction, because by definition
health benefits are supposed to be ``a benefit.'' It is
supposed to lead to satisfied employees, so we do annual
satisfaction surveys, we take them very seriously. I, as the
leader at GE, spend about an entire day every 6 months reading
through the individual comments that people make, and it turns
out that a lot of people that take the time to write are
unhappy, but I think you learn a lot about how to have more
people more satisfied.
A second issue which is very important is the relative
value of the design versus what else people can get, the
richness or value. We always term that as ``No good deed goes
unpunished,'' and what I mean by that is, in the impulse to be
very generous and to give great benefits, and to not have
people pay much, we end up creating two difficulties.
The first involves an insurance term known as adverse
selection, which means basically that people who have a greater
need for medical care will seek the richer, most generous plan.
Lots of employers, like GE, eventually have gone to the extent
of saying to our employees, ``If you could get coverage through
us now, for example, and choose not to, then you're going to
pay us a fee for the year.'' But, it's, I think, pretty
significantly happening, although I'm no expert in the military
health system, in this new retiree plan that you have.
The second feature is cost-sharing. We know very clearly
that the use of health services is ``elastic'' and evidence is
actually very good, it came out of RAND a long time ago, that
the less people pay for services, the more they use. Now,
conversely, the more they pay, the less they use. You do have
to be very careful in health care because if you charge too
much, some of the stuff they don't do is the stuff they need
for chronic diseases. But we pay a lot of attention to this.
The overall feeling in the private sector is that the
sharing between the employer and the employee should be
somewhere around 70 percent employer, 30 percent employee. We
do a lot of benchmarking to make sure that happens. We do
updates of cost sharing at GE, we collectively bargain every 3
years, but many companies without collective bargaining
obligations do it every year. It's not a way of penalizing the
beneficiary but simply saying, to keep this viable, we need to
maintain this ratio.
I'm going to move from benefit design because we've talked
about it before and I'd like to address procurement, and how we
can address waste in the health care system. I think Senator
Coburn and Dr. Blumenthal mentioned it, but over the last 5
years, the Institute of Medicine and others have come up with
some startling findings, particularly startling to those of use
who grew up in this health care system, and consider it the
best anywhere, which is about half the time, people aren't
getting treatments they need to get. About 30 percent of the
tests that are ordered and procedures that people are getting
are probably not necessary, and probably don't yield value.
That, very interestingly, as Dr. Blumenthal mentioned, not only
are there differences between States for the same outcome, how
many services are used, we see it in the same towns. In every
major market that we're in we can look and see that some
hospitals----
Senator Graham. Do best practices address this?
Dr. Galvin. Yes, they do, and I'm going to get into pay for
performance, which I think is all about best practices. The
impacts of getting to best practices are real. If you take the
couple of billion dollars we're spending at GE, or the $36
billion you spent and take the 30 percent waste--they could
even cut that in half--there's a lot of money out there. So, I
think the question to us is what do we do about getting at that
waste. The Institute of Medicine (IOM) had a lot of reasons,
and Dr. Blumenthal mentioned one of them, which is information
technology, and they're all very important. One of the ideas
that I think is particularly relevant to organizations like GE
and the military and Congress is that they felt that there was
a failure of procurement, that the people purchasing these
health care benefits were not holding the system accountable,
and were not being clear about what it was we wanted from the
system. This is not necessarily just the health plan, this is
in claims statement. This isn't whether there are enough
doctors, this is actually about what's happening in terms of
what procedures are being done, and how much things cost.
So, we took that on a number of employers, started
something called the Leapfrog Group, which is a non-profit
corporation. There are about 150 employer members, as is
Medicare, and we decided we were going to try to figure out how
to apply procurement processes to make things better. What we
decided was to include in our contracts with health plans, as
the three that TRICARE has, two features that we were going to
make a condition of doing business with us, and then we were
going to measure contract administration to make sure it would
be done.
The first feature is transparency. Transparency simply
means that we ought to have publicly available information
about the performance of doctors and hospitals. It's remarkably
the case that we have very little today. I should say that
there isn't a lot of scientific proof that if that kind of
information is available, that waste will necessarily go away
and quality will get better, but on the business side, we
believe if you can't measure something, you can't manage it,
and we think there's enough validity in this idea to move
forward on this. Some interesting data from our own population
is that only 35 percent of GE employees are going to hospitals,
when we measured them, that are the best and most efficient.
That means 65 percent of our employees aren't going to these
facilities. When we asked our employees, ``If we gave you
information what would you do?'' Eighty percent of them said
they would use that information to change providers, but in
many of these handwritten notes that accompanied the survey,
they said, ``But I don't have any information.'' So that was
part of the importance of transparency.
The second feature that we put in contracts pay for
performance. As Senator Coburn mentioned, there's no connection
between performance and payment on our current payment system.
The best hospital doing bypass surgeries get paid by Medicare
exactly the same as the worst hospital doing bypass surgeries.
I think it is a cardinal rule in procurement that you get what
you pay for.
We started a program with a number of large employers
called Bridges for Excellence, where physicians that do better
get rewarded for treating chronic conditions, as Dr. Blumenthal
mentioned. I have a couple of more points, and then I will end.
There's a lot of interest in this, Mark McClellen, the
administrator of Medicare favors these ideas as do Medicare
Payment Advisory Commission (MedPAC) and the House Ways and
Means Subcommittee on Health. In closing, let me say that we
have an opportunity to actually make the system better. Better
benefits design is one thing, but I think also procurement,
which the military knows very well, and we at GE do, is
important. Now the DOD has been a Leapfrog member, as far as I
know they haven't included that language in their contracts
with health plans, and I would encourage that as a way to get
things better. Thank you.
[The prepared statement of Dr. Galvin follows:]
Prepared Statement by Dr. Robert S. Galvin
Senator Graham, Senator Nelson, and distinguished subcommittee
members, I appreciate the opportunity to share with you today how
leading employers in the private sector are addressing the problem of
rising health care costs. My name is Robert Galvin, and my title is
Director, Global Health, for General Electric (GE). In this position I
am responsible for the design, operations and financial performance of
the health benefits GE offers its employees, family members, and
retirees as well as for the overall health of this population. Our
population totals about a million people with an annual expenditure
exceeding $2 billion.
The challenges that the Military Health System (MHS) and a company
like GE face in addressing health care costs are actually quite
similar, outside of the direct care you provide. We both have highly
trained workforces and keeping them healthy is critical for the optimal
functioning of the operation; also, despite our relative sizes, rising
health care costs represent significant pressure on our budgets; and
third, both of us face the daunting challenge of trying to restrain
excessive health care costs while not alienating our workforces or
delivering them a less-than-outstanding health benefit in the process.
Let me say at the outset that we have not found a ``silver bullet''
to solve these challenges. What we have found is that a combination of
flawless execution of purchasing basics plus a willingness to be
innovative, using purchasing clout to address fundamental problems in
our health care system, yield the optimal results. Probably our most
important learning is that because tough decisions are often necessary,
and health care is always `personal,' a sense of trust between those
making decisions on benefits and those who use the benefits is
critically important. We have learned that constant, candid
communication is the key--and that when we believe we have communicated
enough, we are probably only half the way there.
In my testimony today, I will focus on issues pertaining to the
actual management of costs from the point of view of the purchaser.
Other panel members will focus on the broader policy issues and trends
facing the U.S. health care system or the actual details of the
Military Health System.
Health care costs are rising rapidly today for many reasons.
Employers find it useful to distinguish between those causes over which
we have little control, e.g. increased costs due to advances in
technology and an aging population, and those over which we believe
sound management practices can have an influence. Two areas have the
biggest impact.
(1) Benefit Design
(2) Using Procurement to Address Waste in the Health Care
System
Although several other areas are important, e.g. population health,
financial controllership, etc., due to my limited time today, my focus
will be on the two aforementioned topics.
BENEFIT DESIGN
Designing the health benefit is a very important function. At GE,
our philosophy is to: (1) protect people from the financial
consequences of catastrophic illness; (2) offer coverage for medical
services that are evidence-based, including preventive services, and to
(3) maintain a reasonable level of cost sharing. We monitor our design
in two ways: we perform annual satisfaction surveys to make sure we are
meeting the needs of our employees; and we use an outside benefits
consulting firm to benchmark the value of our design. Because we
operate in very competitive markets, we need to offer a rich enough
package to attract and retain employees but not so rich that we put
ourselves at a competitive disadvantage with respect to our cost base.
An unintended consequence of having too rich a benefit package is
that beneficiaries will drop other coverage available to them and
preferentially choose the richest plan. Several large employers have
now added a substantial fee for employees who could get other coverage,
e.g. through a spouse, but choose to go with the richer plan offered by
the large employer. The richness of your TRICARE for Life plan, though
designed with the best intentions, could suffer from this unintended
consequence.
Cost sharing is a key feature of health benefit design.
Benchmarking data show that for most large employers, the desired split
between company and employee payment is 70 percent/30 percent. This
means that, overall, the company pays for 70 percent of the bill and
the employee pays the other 30 percent. Having a reasonable amount of
cost sharing is critical because there is well-accepted evidence that
the demand for health services is elastic: very low payments by
consumers lead to predictable increases in the amount of services used.
On the other hand, higher payments lead to the use of fewer services,
and some of the avoided services may have been necessary ones. It is
not in anyone's best interest for these services to be reduced. Finding
the right amount of overall cost sharing is an ongoing challenge.
It is worth noting that those employers who have a very low level
of cost sharing are the ones facing the greatest problems with health
care increases.
Although increases in cost sharing are never enthusiastically
received, most companies devote significant resources to educate
employees about rising health care costs and to explain why a
reasonable amount of cost sharing is, indeed, reasonable. These
companies have found that with the right explanations, their workforces
are willing to accept reasonable changes.
ADDRESSING WASTE IN THE HEALTH CARE SYSTEM
A series of startling findings about the quality and efficiency of
the health care system have emerged over the past 5 years. Experts from
the Institute of Medicine (IOM) and the RAND Corporation have
discovered that:
Overall, adults receive only about 55 percent of
recommended care;
Unnecessary procedures and services accounts for over
30 percent of health spending; and
There is wide variation on performance between doctors
and hospitals.
The quality shortfalls have real consequences: the IOM found that
up to 100,000 preventable deaths occur in our hospitals annually.
Looking at just the waste, what this means to a company like GE is that
several hundred million dollars may be spent on unnecessary services.
So even with a state-of-the-art benefit design, we are still spending a
lot of money unnecessarily. If you apply the same percentage to the
annual spend of the MHS, you will get a very high number.
Why is there such waste and variation in quality in our health
system, long lauded as ``the best in the world?'' A series of papers
published by the Institute of Medicine over the past decade concludes
that there are multiple reasons for our system performance. For
purposes of today's testimony, let me focus on one of these: the fact
that those who purchase health care have not demanded more and have not
held the system accountable for what it delivers.
The IOM recommended that purchasers of health care use their buying
clout to drive changes in two areas: first, transparency, i.e. pushing
for the public release of performance measurement of doctors and
hospitals, and second, payment reform. One of the significant changes
over the past decade is that metrics have been developed that can
measure quality at the level of doctors and hospitals. While it is true
that these measures are still being perfected, most private sector
employers believe that they are accurate enough for public release.
Although there is little scientific data to cite, it is common sense in
the business world that what is measured is managed, and that making
public the performance of doctors and hospitals will spur improvement.
Health services experts have continuously demonstrated that there are
significant differences between doctors and hospitals in how well and
how efficiently they deliver medical care. Our analysis shows that in
every major market that GE has employees the same level of quality is
available at prices that differ by 30-40 percent. Our data shows that
only 35 percent of our hospital admissions occur at hospitals that
score highest on both cost and efficiency. When we ask our employees,
over 80 percent say they want this kind of information and will use it
to make decisions about who to see and where to go for treatment.
Our payment system to doctors and hospitals is such that
reimbursement is divorced from performance. In Medicare hospitals that
perform superbly at a specific procedure are paid identically to those
with much lower performance. The same is true for doctors. Again,
although there is no clear scientific proof that paying for performance
will increase quality and efficiency, it is a cardinal rule of
procurement that you get what you pay for. Several large employers have
developed a program called Bridges-to-Excellence, which rewards
physicians who demonstrate the highest quality. Although researchers
are currently evaluating this program, actuarial models predict
substantial savings for employers and significant bonuses for high-
performing physicians.
GE believes that there are substantial savings available from
making performance available to the public and changing the payment
system. The Pacific Business Group on Health, a private sector
purchasing coalition based in California and representing 3 million
covered lives, reported on research findings which showed that up to 17
percent of premium could be saved if employees and family members chose
to see those providers with the best performance scores. Actuarial
modeling in the Medicare program, and presented in testimony at recent
hearings at the Way and Means Subcommittee on Health, suggests that
with relatively little movement of patients to high-scoring doctors and
hospitals, savings of 3-4 percent in the Medicare program are possible.
These themes of transparency and pay-for-performance are strongly
supported by Mark McClellan, CMS Administrator, as well as by Med PAC.
How would health care purchasers go about catalyzing this kind of
change? The answer: through the procurement process. Several years ago,
a number of private and public sector purchasers formed the Leapfrog
Group, now 150 members strong, to bring about this kind of change in
health care purchasing. The Leapfrog Group's strategy is for each of
its members to insist on transparency and pay-for-performance in its
contracts with health plans. If enough purchasers include this language
in their contracts, health plans will then change their contracts with
doctors and hospitals, insisting on data release and paying for
performance. Though the Department of Defense (DOD) has been an ex-
officio Board member of Leapfrog, TRICARE has not included the
aforementioned language in its health plan contracts.
The findings on waste and variations in quality refer to the
private sector health care system. The MHS has its own doctors and
hospitals, and I am not aware of data related to their performance.
However, I am aware of the performance data from the Veterans Hospital
Administration (VHA) health system, which has transformed itself over
the past 10 years into a system that produces the highest quality of
any system in the United States. The VHA outperforms the private sector
delivery system consistently by 15-20 percent on quality measures and
probably by that much on efficiency. In the absence of the kind of
culture change and investment in information technology that the VHA
has undergone, it is unlikely that the MHS delivery system performs as
well. However, to the extent that the MHS commits itself to VHA-level
improvement, or that military personnel use the VHA health system, it
is likely that substantial savings, and improvements in quality, are
possible.
SUMMARY
In summary, the issue of health care costs is of great importance
to private sector employers. The Human Resource Policy Association, the
trade association representing the Senior Human Resource professionals
for the largest 200 companies, has made healthy care its number one
priority. This Association is promoting the practices I have outlined
in my testimony today.
The Military Health System and GE face many similar challenges.
Although state-of-the art benefit design, aggressive procurement and
working with the delivery system to improve value has not solved the
health care cost problem, it has certainly made health care more
affordable and arguably has helped improve care. Given TRICARE's size,
if it were to adopt the Leapfrog health plan language and implement the
Bridges-to-Excellence program, I believe that the DOD could not only
impact its own health costs, but contribute substantially to the
improvement of the entire U.S. health care system.
Thank you for asking me to be with you here today.
Senator Graham. Thank you very much.
Ms. Hosek.
STATEMENT OF SUSAN D. HOSEK, SENIOR ECONOMIST AND CO-DIRECTOR
CENTER FOR MILITARY HEALTH POLICY RESEARCH, RAND CORPORATION
Ms. Hosek. I, too, am honored, and it's a pleasure to be
here this afternoon. I've been at RAND for over 30 years, and
during all that time, I spent at least part of my time studying
the military health system. It's really astonishing to me to
see the changes that have occurred over that period. Dr. Chu
mentioned the program started out as space-available care and I
came onto the picture as an observer and a student some time
after that. But, it's really remarkable the changes that have
occurred.
I'm going to talk about three issues this afternoon. I'm
going to make some comments on cost, and the cost trends that
the DOD is experiencing. Then I'm going to talk about benefit
design. I'm going to discuss it in the specific context of
TRICARE and focus, in particular, on under age 65 retired
beneficiaries, where I think there may be some opportunities
for some cost savings.
Finally, I'm going to talk about the organizational
structure. Various people, but especially Dr. Galvin, has
talked about better management of the system and that the
organization of the military health system today is probably
not ideal for carrying out those kinds of management
initiatives in the future. I will come to that at the end of my
talk.
We've heard a lot about cost growth. One of the exercises I
did in preparing for this presentation was to take a look at
the Congressional Budget Office's information on costs in the
military health system, going back over the past 15 years, and
compared those with the civilian sector. In both cases what you
see is a 4-percent per year increase after adjusting for
inflation, and that adds up pretty quickly.
What's interesting about it is that the U.S. health care
system has experienced that kind of real cost growth for more
than five decades, so this has been going on for a long time.
It's pinching ever harder, but this is not a new phenomenon. As
others have mentioned, the military health system is simply
experiencing the same cost growth as everyone else, not just in
the United States, but in other countries as well.
Now, as you've heard, civilian employers have been reacting
to this cost growth. If you look at all civilian employers, you
see a rather pronounced trend towards shifting higher fractions
of health care costs to employees, and that's taken several
forms.
One form is increasing premiums, increasing cost sharing,
and importantly reducing or eliminating retiree health
benefits, which was an important part of the military benefit.
The result is that today TRICARE is a very attractive health
plan compared to most employer health plans. As Dr.
Winkenwerder mentioned, there's substantial evidence that the
beneficiaries are noticing this, and that more of them are
turning to TRICARE instead of an employer option for their
health care.
There's a very obvious reason why every retiree under 65
who's working might prefer TRICARE to their employer plan, and
that's the premium contribution. If you look at all employer
health plans, and this information came from the Kaiser Family
Foundation Survey that's done every year, there's an annual
average contribution by the employee to enroll in the employee
plan of over $2,600 a year. TRICARE currently charges nothing
for the extra, or standard, $460 premium contribution for
retirees, and TRICARE hasn't changed since the 1990s when the
program was implemented. We don't actually know how many
retirees have given up employee health coverage in order to use
TRICARE. That's something that I know that Drs. Chu and
Winkenwerder are quite interested in finding out more about.
But we can get an idea, looking at some relatively recent
survey data on military retirees. I focused on those who are
under 65 and working full-time.
Now, if they weren't military retirees and didn't have
access to TRICARE, we know from other studies that almost all
of these people would be covered by employer health insurance.
Yet 35 percent of them are paying the $460 to enroll in TRICARE
Prime and fully two-thirds of them are getting at least some of
their care from the military health system. So even this group
of people whom you might expect to be most reliant on employer
plans, are in fact, increasingly reliant on TRICARE, and it's
easy to understand why.
Now, the problem is, this results in a situation where
there's a high cost to DOD, but most of the benefit is not
accruing to the beneficiary, it is, in fact, accruing to the
employer. Dr. Galvin may be benefiting from some of this. Now,
what can we do about this? Well, one obvious solution is to
increase the TRICARE premium contributions and make them more
comparable, but that would be a huge benefit cut, and I suspect
it would be rather difficult to do, especially right now. There
may be other ways to approach this.
Dr. Galvin mentioned that they actually penalize employees
for using their plan when they could be using another one. What
I'm going to suggest you think about is the opposite of that,
which is compensating military retirees under age 65 who
participate in their employer health plan for the out-of-pocket
costs that they face in those plans. This could take the form
of a Health Savings Account, and so we come back to that idea.
It could also take other forms.
Senator Graham. Excuse me, if you're under 65 and you're
working with GE, you would pay what? If you would go with GE?
Ms. Hosek. You would set up a Health Savings Account, so
these would be presumably tax-exempt dollars, and the retiree
would use those to cover their out of pocket costs in their
employer plan. Now, this would be a voluntary option, so they
could stay in TRICARE or they could stay with their employer
plan, but they would get some coverage for their out of pocket
costs. It's just a way of using a carrot approach.
Senator Graham. I'm sorry, go ahead.
Ms. Hosek. There are other benefits you could offer.
Currently there's no benefit for long-term care, and that's one
option. Another would be to increase the retirement annuity
slightly so there are a number of ways you could do this. The
basic idea, though, is to essentially make a deal with the
retirees to help them out with their costs.
We don't have enough information to figure out today
exactly what an option would look like, how many retirees
would, in fact, be interested in it, and whether the department
would really save all that much money. The reason for being
worried about the cost savings is that if you have a benefit
like this, it's also going to be used by the retirees who
currently are using their employer health plan, and not using
TRICARE at all. So, you have some people who are using TRICARE
instead of their plan and you're going to make money on them,
but then you're going to lose money on the people who are going
to do the opposite.
So the question is, where do you come out in the end? There
seems to be enough potential here, especially if the
projections about growing reliance on TRICARE are correct, that
it would be worth some effort, I think, to figure out whether
this would work.
There are some other changes that could be made in
benefits, one that has been brought up many times in the past
is charging a clinic fee for use of military clinics. Visits to
military clinics are currently free. Retirees pay $12 per visit
if they're in Prime and use a civilian provider. The idea would
be just to take that $12 fee and also implement it in the
military facilities, at least for the retirees. As it turns
out, some of my colleagues that ran into this study fairly
recently that looked at the civilian HMO that implemented a
similar fee, and indeed there's a decrease in utilization, but
the cost savings were actually relatively modest.
Whether that would really be an important change I don't
know. The area where there is more promise is in the cost
sharing for pharmaceutical drugs. TRICARE charges $3 for a
generic drug, and $9 for a brand name drug. If the beneficiary
goes to the retail pharmacy network, a typical employer health
plan charges more like $10 for the generic drug and $20 for the
brand name drug. Others of my colleagues, as it happens, have
looked at what happens when you increase pharmaceutical co-pays
by about that order of magnitude, and they found that
pharmaceutical costs are reduced by one third, which is a very
substantial savings.
Much of the decreased utilization, but not all of it, is
for drugs that have very close substitutes over the counter,
such as antihistamines, and pain relievers. So this may be a
promising option. I would point out that if that change is
made, and not implemented for military pharmacies, what's going
to happen is, a lot of people who have been going to the retail
pharmacies will try to go to the military pharmacies, and you
will save less.
Senator Graham. Could you finish your statement in about 3
minutes, do you think?
Ms. Hosek. I can. Then you would save more. I would just
like to make some very brief comments about the organizational
changes. We've heard a lot about possible management
initiatives that could be cost savings. Right now the military
system is operated through four chains of command. We did a
study a few years ago where we looked at the civilian sector
and tried to draw lessons for the military system. What we
found is that the military system lacks the clear lines of
authority and accountability that all leading civilian health
care organizations have. So we drew a number of specific
conclusions about how the system might be reorganized so that
it would hopefully be better able to manage TRICARE. We paid a
little attention to readiness, but not a lot, in that study.
There is consideration now of establishing a joint medical
command, and we took a look at that. That may be a good idea,
but unless other changes are also made, it is unlikely that a
joint medical command will be sufficient for the purpose, and
that's all I have.
[The prepared statement of Ms. Hosek follows:]
Prepared Statement by Susan Hosek \1\
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\1\ The opinions and conclusions expressed in this testimony are
the author's alone and should not be interpreted as representing those
of RAND or any of the sponsors of its research. This product is part of
the RAND Corporation testimony series. RAND testimonies record
testimony presented by RAND associates to Federal, state, or local
legislative committees; government-appointed commissions and panels;
and private review and oversight bodies. The RAND Corporation is a
nonprofit research organization providing objective analysis and
effective solutions that address the challenges facing the public and
private sectors around the world. RAND's publications do not
necessarily reflect the opinions of its research clients and sponsors.
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Chairman Graham and distinguished members of the subcommittee,
thank you for inviting me to testify today on present and future costs
of defense health care. It is an honor and pleasure to be here.
My testimony will briefly discuss cost trends in Defense health
care and then focus on two areas in which the Department of Defense
(DOD) might consider making changes: (1) TRICARE benefit design and (2)
organizational structure of the Military Health System (MHS).
DEFENSE HEALTH CARE COST TRENDS
Through TRICARE, DOD provides a comprehensive health benefit to
Active-Duty personnel and their dependents. With the addition of
TRICARE for Life (TFL), this is now a lifetime benefit for those who
make the military a career. A continuous benefit is now being offered
to reservists who have been called to Active Duty since September 11,
2001. The health benefit grew out of a policy of granting dependents
and retirees eligibility for care in military treatment facilities
(MTFs) when they had space available after caring for Active-Duty
members. With the establishment of an employer-based health system in
the U.S., a defined health benefit replaced space-available access for
under-65 beneficiaries and CHAMPUS was established to finance any care
military providers couldn't handle. TRICARE modernized the delivery of
the benefit by integrating management of MTF care and CHAMPUS-financed
civilian care by adding an HMO option (Prime) and a PPO option (Extra)
to the Standard fee-for-service option, partnering with civilian
health-care companies, and improving access to care. Today, TRICARE
compares favorably with civilian health plans on many measures, and
military members clearly consider it to be an important element of
their compensation package and a visible marker of the support and
appreciation for their service to the Nation.
Like all public and private payers, DOD has experienced
unrelenting, significant growth in the costs of its health benefit.
DOD's inflation-adjusted per capita health-care costs increased just
under 4 percent per year from 1988 to 2003 (excluding costs for TFL).
This is approximately the same real rate of increase experienced in the
civilian sector during the same 15-year period. Moreover, this has been
the long-term rate of increase in health costs for the past 5
decades.\2\ So DOD's health system is simply on the same path as the
U.S. health care system overall.
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\2\ Growth in Medical Spending by the Department of Defense,
Congressional Budget Office, 2003; Cutler, D.M., M. McClellan, et al.,
``What Has Increased Medical-Care Spending Brought?,'' American
Economic Review, Vol. 88, No. 2, Pg. 132-136, 1998.
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Can anything be done to curb cost growth in the future? Civilian
employers have resorted to benefit cuts to control costs, shifting some
costs to their employees and hoping that higher cost sharing will
induce lower spending. Economic research has consistently shown that
increases in health costs are offset by lower wages in the civilian
labor market.
In contrast to the private sector, DOD has expanded its benefits in
recent years, eliminating almost all cost sharing for Active-Duty
personnel and their family members if they are enrolled in Prime and
adding TRICARE for Life to supplement Medicare coverage for
beneficiaries over age 65. As I describe below, TRICARE today is a more
attractive option than employer health plans for most of the
beneficiaries who are eligible for both DOD and civilian employers'
health plans. Most of these beneficiaries are military retirees who
have a second career (and their spouses), but some Active-Duty spouses
are also eligible for civilian-employer health benefits. If current
trends continue, DOD risks becoming the primary insurer for all of its
beneficiaries, picking up an even higher share of costs that would
otherwise be covered by employer health plans. When costs merely shift
from employers to DOD, the cost to DOD increases but there is little
change in the value of the benefit to servicemembers.
Health services researchers agree that the long-run trend toward
higher health care costs largely reflects advances in medical
technology, but there is little evidence on the health payoff from
these advances. A recent RAND study found that approximately half of
the health care delivered in the U.S. is inappropriate.\3\ Medicare and
other major payers are exploring new mechanisms for targeting health
care dollars on a more appropriate mix of services. DOD's current
organizational structure, with its parallel management structures in
the Office of the Secretary of Defense and the Services, is not ideal
for undertaking this kind of complex health management initiative.
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\3\ McGlynn, E.A., S.M. Asch, et al., ``The Quality of Health Care
Delivered to Adults in the United States,'' New England Journal of
Medicine, Vol. 348, No. 26, Pg. 2635-2645, 2003. The study evaluated
the quality of care for a random sample of adults living in 12
metropolitan areas. It measured performance on 439 indicators of
quality of care for 30 acute and chronic conditions as well as
preventive care. Overall, participants received 54.9 percent (95
percent confidence interval, 54.3 to 55.5) of recommended care.
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DESIGN OF THE TRICARE BENEFIT
Overall, TRICARE benefits compare favorably with benefits in
private-sector plans. Cost sharing is about the same for downtown
office visits and MTF care is free; TRICARE premiums and TRICARE
pharmaceutical cost sharing are lower. For beneficiaries who are
eligible for employer benefits, the big difference is in the premium
contribution required for TRICARE versus their employer's plan.
Differences in beneficiary cost sharing for covered services are
smaller and the services covered are fairly similar.
The average annual premium contribution for family coverage in
employer plans was $2,661 in 2004, and there was little difference
between HMO and non-HMO plans. TRICARE requires no premium
contribution, except for retirees who elect to enroll in Prime, the HMO
option.\4\ Family coverage cost them only $460 in 2004--the amount
established when TRICARE was implemented almost a decade ago. This
difference in premium cost will continue to grow over time unless
TRICARE premiums are increased.
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\4\ The new TRICARE Reserve Select program requires a premium
contribution of $2,796.
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Undoubtedly as a result of this ``premium gap,'' relatively few
TRICARE beneficiaries employed in the private sector are covered by
employer health plans. Currently, DOD surveys do not support estimates
of how many beneficiaries are foregoing employer insurance for which
they are eligible. But we can infer that this behavior is probably
widespread by looking at military retirees who are under age 65 and
working full-time. In 2002, 72 percent of these retirees worked for
employers providing health insurance. Among those with access to an
employer health plan, 35 percent paid to enroll in TRICARE Prime and 62
percent sought care through some TRICARE option.
Focusing on families, when a military beneficiary gives up employer
insurance and uses TRICARE, the employer saves about $7,200 a year and
the employee saves over $2,000. DOD assumes both costs. So much of the
DOD benefit accrues to the employer instead of the retiree. Eliminating
or reducing the TRICARE premium gap for under-65 retirees and
dependents would induce more retirees to participate in their employer
plans, but it would represent a significant benefit cut and lead to the
possibility that some military retirees without access to employer
benefits would become uninsured.
A more promising approach is to offer a new benefit that retirees
can choose in lieu of TRICARE and use to cover premiums and out-of-
pocket costs in employer plans. This new benefit might take the form of
a Health Savings Account. Making a simplistic calculation, DOD can
cover the $2,000 premium contribution and make $7,000 on the exchange.
But some retirees who forego TRICARE now will take advantage of this
new benefit, offsetting at least some of the cost savings from prior
TRICARE users. There are other benefits that could be offered to induce
beneficiaries to enroll in and rely on their employer plans. More
information is needed to determine whether any of these approaches
would realize significant savings, how retirees would react to the
idea, and how to design the most cost-effective approach for both DOD
and retirees. The potential of this general approach is such that an
investment in information and analysis is warranted.
As I indicated earlier, out-of-pocket costs for getting care from
civilian providers are similar in TRICARE and other employer plans. For
example, the typical HMO plan charges a $15 visit fee whereas TRICARE
Prime has no fee for active-duty dependents and a $12 fee for retirees
and their dependents. Most non-HMO employer plans also rely on a visit
fee--typically $20 for a provider under contract to the plan--which is
likely to be just below what the 15-20 percent cost sharing costs
beneficiaries in Extra.\5\ But TRICARE only charges for care delivered
by civilian providers; MTF care is free of charge. Introducing a
copayment for MTF visits has been suggested before and while it would
reduce outpatient utilization, overall cost savings are likely to be
modest.
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\5\ Information on employer plans comes from Employer Health
Benefits: 2004 Annual Survey, Kaiser Family Foundation and Health
Research and Educational Trust, 2004.
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However, employer plans typically charge twice what TRICARE does
for prescription drugs. TRICARE charges $3 for a generic drug and $9
for a brand-name drug, whereas employer plans typically charge $10 and
$20, respectively. Also, as with other services, many military
beneficiaries have access to free prescriptions in the MTFs. A recent
RAND study showed that people are highly responsive to the price they
pay for prescriptions.\6\ Updating prescription copayments to employer-
plan levels would likely lead to noticeable cost savings in TRICARE,
provided that the copayments applied to prescriptions filled by the
MTFs, not just civilian pharmacies.
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\6\ Increasing the price from $5 to $14 for a generic drug and from
$10 to $20 for a brand-name drug reduced spending by 33 percent. The
largest decreases were for drugs that have close over-the-counter
substitutes; higher prices caused smaller reductions in the use of
drugs that don't have substitutes and are important in controlling
chronic illness. Joyce, G.F., J.J. Escarce, et al., ``Employer Drug
Benefit Plans and Spending on Prescription Drugs,'' JAMA, Vol. 288, No.
14, Pg. 1733-1739, 2002, Goldman, D.P., G.F. Joyce, et al., ``Pharmacy
Benefits and the Use of Drugs by the Chronically Ill,'' JAMA, Vol. 291,
No. 19, Pg. 2344-2350, 2004.
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To summarize, the TRICARE benefit is more attractive than the
benefit offered by most civilian employers and, as a result, many
retirees appear to be relying on TRICARE instead of their employer's
plans. Rather than reduce TRICARE benefits to private-sector levels, it
may be possible to induce retirees to take full advantage of any
employer benefits for which they are eligible by offering to offset
their higher out-of-pocket costs. This would ensure that DOD's spending
on health care benefited its beneficiaries, rather than their
employers. Some modest changes in cost sharing for care may also be
worth considering.
ORGANIZATION OF THE MILITARY HEALTH SYSTEM
The second area where changes could impact trends in costs is the
organization of the Military Health System. My comments on organization
are based on a 2001 RAND report on creating a joint medical command and
organization of the military health system more generally.\7\ This
study drew on organizational models from the civilian sector and within
the DOD to develop and assess organizational alternatives. Although we
paid careful attention to the evidence on effective organizational
approaches, we also considered how the coordination required between
operational medical support and providing TRICARE services might be
accomplished under the alternatives we identified.
---------------------------------------------------------------------------
\7\ Hosek, S.D. and G. Cecchine, Reorganizing the Military Health
System: Should There Be a Joint Command?, RAND Corporation, MR-1350-
OSD, 2001.
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Consistent with basic principles of organizational design, civilian
health care organizations consolidate authority and responsibility in
single market managers, who report through a regional chain of command
to corporate management. Since experience has shown that there can be a
conflict of interest, management of the health plan is separated from
management of the providers when they are not separately owned.\8\
Accountability is maintained through the strategic planning and
evaluation processes, which set specific financial and non-financial
goals. Management information systems are tailored to support planning
and evaluation, and strong incentives are established and aligned with
goals.
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\8\ In the Military Health System, TRICARE is the health plan and
the MTFs are providers.
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TRICARE management has taken steps that reflect these standard
private-sector practices. However, we concluded that a single chain of
command for TRICARE management, separate from the MTF command
structure, would create the clear lines of authority and accountability
that characterize the private sector. Arguably, the same principles
might apply in operational medicine as well, but our study did not
investigate the management challenges associated with the readiness
mission. We did consider how readiness considerations might alter our
conclusions about organizational effectiveness for the benefits mission
(TRICARE).
We identified four alternative organizational structures that
consolidate authority over some or all of the system. The first
alternative would consolidate TRICARE authority within the current
structure by modifying resource management and accountability. The
resources used to deliver care to TRICARE beneficiaries would flow
through TMA to a group of local market managers, who would reimburse
the Services for MTF care and the contractors for civilian care. TMA
and its local market managers would be accountable for overall TRICARE
outcomes and the Services would be accountable for the care they
provide. The other three alternative structures establish a joint
medical command, but they differ in how they structure the command. One
establishes a joint command over the organizational structure I just
described. Another maintains three Service component commands, each
responsible for medical readiness activities within its Service and for
managing all health care provided for its defined population. TMA would
be largely disbanded under this scheme. A third joint command
alternative organizes two joint chains of command, one for readiness
and the other for TRICARE. The MTFs would be managed through the
TRICARE chain. All of these organizational schemes, including the
current one, require development of an efficient mechanism for shifting
personnel and other resources between readiness and TRICARE.
We could not be certain which of these alternatives would out-
perform the others. But we could conclude that any of the alternative
organizations we identified, which would consolidate authority over
TRICARE resources and establish clear accountability for outcomes,
should out-perform the current organization, which lacks these
characteristics. We further concluded that establishing a joint medical
command over the current structure, without making these other
organizational changes, likely would not be as effective. In short, we
concurred with at least a dozen other major studies of military health
care organization, conducted over six decades, that more consolidated
management would be advantageous but we also recommended a package of
changes that would reflect best organizational practices.
CONCLUSION
Outside TRICARE for Life, the long-term trend in Defense health
costs reflects the trend in health costs in the U.S. and many other
countries. In light of the persistence of this trend over many decades,
it can be expected to continue into the future. But there are potential
opportunities to shift the cost line downwards. Asking beneficiaries to
pay when they get care would lead to decreased utilization and costs,
but high cost sharing would also represent a benefit cut--a difficult
action to contemplate now. Adding new benefit options that would offer
beneficiaries the option of using employer health plans without
incurring substantially higher premium costs could result in gains for
both beneficiaries and DOD. As the U.S. health system continues to
search for ways to curb costs and/or improve health outcomes, DOD
should reconsider its health care organization so that it can readily
adapt new approaches and create some itself.
Thank you for the opportunity to contribute to the debate regarding
Defense health care costs. I am happy to answer questions from the
subcommittee.
Senator Graham. Thank you all, that was very informative.
To pick your brain quickly, the bottom line is our co-cost
sharing aspects of TRICARE have virtually been flat. We have a
unique problem in the sense that there's a promise being made
to retirees about health care. It seems to me that we're going
to have to look at re-designing that promise in the future, and
without looking at that, this is just going to continue to get
out of hand.
Do all of you agree from what we've heard today that the
efforts for best practices, that they're implementing as far as
administration, you get paid more if you return phone calls, if
you do things expeditiously, that there could be additional
savings if we went to the best practices, in terms of actually
delivering health care?
Dr. Blumenthal. I certainly think you could get more value
for your dollar and I think you could probably save some
administrative expenses, so you would have a more satisfied
clientele in the military health system. The implementation of
a best practice is certainly much to be sought in the clinical
side, and there are some areas where we have pretty clear
knowledge of what to do and we can do it a lot better, so I
think we could make some progress. It's not 100 percent sure
you'll save money by doing things right, a lot of people hope
and expect that, they ought to do them right, just because it's
the right thing to do, but I don't think you could necessarily
be assured that you will fight your way out of this cost
problem by paying for performance.
Dr. Galvin. I concur with that. I think in the first
generation that we thought about this it was just best
practices. I think we now recognize that sometimes doing it
right saves money and sometimes it doesn't, but we recognize
that doing it right and being the most efficient at it always
saves money, versus the other. So all of our paid for
performance is around not only including best practice, or
doing the right thing, but that you have to be the one who's
doing it the most efficiently. I think you have to integrate
efficiency into the quality and then you do save money.
Ms. Hosek. I would like to just issue a caution here. The
military system has two different pieces. It has the in-house
system and it has the contracted care, and I think it is quite
a challenge to figure out how to get both of those lines up and
marching in the right direction. The TRICARE contracts can
certainly put in pay for performance kinds of measures, but you
also have to pay attention to what's going on in the direct
care system as well, and make sure that the two are well-
coordinated.
Senator Graham. Health Savings Accounts (HSAs) have been
mentioned several times. What is the panel's general consensus
about a HSA component?
Dr. Blumenthal. Let me talk about this from the standpoint
of the chronically ill population which, as I indicated,
accounts for a lot of the escalating costs and a lot of the
absolute costs. Think about somebody who has high blood
pressure and heart problems. They spend a lot of money every
year on health care and they're going to blow through whatever
their $1,000, $1,500, $2,000 HSA is every year. So, it doesn't
make any sense for them to purchase it. I think it is a good
buy for a relatively healthy population, but I don't think it's
a solution to the problems that face our chronically ill
population.
Dr. Galvin. We disagree on that one. Let me be clear, first
of all, I'm not speaking on behalf of GE, we negotiate our
benefits through collective bargaining, we do not have HSAs and
if we ever were to get them we would do it through bargaining,
so I just want to be clear.
Personal opinion, though? I think HSAs have a lot of
promise, I think they have some issues when it comes to the
chronically ill, and I have already seen some developments in
the market that these kinds of plans are going to mature and
get better and better as the market works on them. I think
HSAs, with the amount of information we have on quality and
efficiency today, are not going to be nearly as good as HSAs
with the kind of information that people can make the choices
that Senator Coburn was talking about with real data. So, I
think we need to do those at the same time.
Ms. Hosek. With the HSA, the military has an opportunity to
possibly look at some options there that would operate a bit
differently, perhaps, then some of the plans that are out there
and elsewhere, rather than leaving the big gap between the HSA
and the catastrophic insurance that Dr. Blumenthal is concerned
about. It may be possible to integrate an HSA option with other
aspects of the military compensation system, so that you,
again, use the carrot approach to induce people to save money
on their health care costs, rather than using the approach of
taking it out of their pocket if they don't.
One way, for example, is to fully fund the HSA, but then
allow them to roll the money over, at least on some partial
basis, to other uses, and that would provide the incentive to
save money without putting people at risk for large out-of-
pocket expenditures. There are a lot of things you may be able
to do. It's a very flexible approach, potentially, so there may
be ways to adopt it.
Senator Graham. Senator Nelson?
Senator Ben Nelson. Thank you, Mr. Chairman. I'm intrigued
by many of the comments that would show a common trend. Ms.
Hosek said that approximately half of the health care is
inappropriate, is that accurate?
Ms. Hosek. I think I was referring to exactly the same
study Dr. Galvin was.
Senator Ben Nelson. Dr. Galvin noted 30 percent of
unnecessary procedures, and Dr. Blumenthal, you referenced the
fact that there were huge differences in the cost of health
care, depending upon what region you may find yourself in. If
we were to close the gap in each and every one of those
situations, how would we do it? I'll start with you, Dr.
Blumenthal. How would we go about closing the gap, reducing the
differential, the unnecessary procedures, and inappropriate
care?
Dr. Blumenthal. Well, let me put the arithmetic aside,
because I think that 30 percent inefficiency in our system is
due to administrative cost, and now 30 percent is due to
inappropriate care.
Senator Ben Nelson. That would be appropriate to come back
and identify that as well.
Dr. Blumenthal. We could get down to zero for our health
care budget pretty soon, which would be a great buy. But, I
think that we've struggled with exactly this question for
decades. This is the critical question in health care for the
military and for the entire industrialized world. How do you
decide what makes sense to pay for and what doesn't? How do you
not infringe on the patient/physician relationship, and not
alienate the patient and alienate the physician? The history of
managed care is a history of infringing on the freedom of
choice.
Senator Ben Nelson. Well, even in western Nebraska we found
it important to have people manage to find care, because of the
availability of it, and the accessibility as well.
Dr. Blumenthal. So, I think you have to put incentives in
place at multiple levels. I'm not against patient cost-sharing.
I think that makes some sense. I suspect the military has gone
too far in taking the patient out of the equation. I think you
have to have physicians and health care providers also have, as
they say, some skin in the game, and pay them in some way that
is consistent with the appropriateness. Stated differently, the
quality of the care that they provide. I think the health
insurer has to play a role, and the employer has to play a
role, in this case you're talking about TRICARE in terms of
creating the systems that provide the information the doctors
need and the patients need to make correct choices. I think
those are the areas in which we're working right now, but I
would be misleading you if I contended that we knew exactly
what would work, because we are struggling at every level to
make this happen.
Dr. Galvin. I agree, it is a complex question, and there is
no clear answer, but I think it is true on its face that
without transparency, without people--even their own doctors
and hospitals--knowing how well they're doing, it's impossible
to think that we get better. When I was in practice, and it's
still true today for most physicians, we didn't know how many
diabetics were in their practice. When a drug gets recalled we
didn't know who's on it and who isn't on it. I have a back
problem now, and I wanted to go seek care, and I'm pretty
sophisticated about this stuff, but I couldn't figure out where
I should go for this. I think transparency and public release
of understandable information is a threshold issue. I think
unless we cross that one, we can't even get close to it. Then
it gets more complicated. I don't think transparency is
complicated, I think that is a necessary condition.
I think it is incentives and rewards. At GE we think pretty
concretely ``you get what you pay for'' and if you're going to
pay the same to do a fantastic job and the same to not do a
very good job, it's hard to imagine that we can get on the road
to getting the best practices we want. I agree with Dr.
Blumenthal, they're not the answer, but I think they're
important steps on the path.
Ms. Hosek. I'm an economist and so I do believe in
incentives, and I don't believe in regulation, which means that
I think the pay-for-performance is a promising approach. It's
not going to be easy to figure out how to do that, especially
across the board for all the different kinds of care that are
provided, and furthermore to keep it up to date, so that you're
not paying for yesterday's performance, but you're paying for
the right performance, based on current information. But, I
think that is probably the promising way to go, and there are
ways, I believe, of implementing a comparable system within a
system like the military health care.
Again, coming back to the direct care system, when you
don't reimburse providers for providing care, you pay them a
salary, but still, there are ways of rewarding those providers,
and acknowledging their performance when they do well. So I
don't see any reason--in fact, I know that at RAND, because we
do a lot of health care research and we do a lot of military
research--we've been intrigued for years by the opportunity to
take advantage of the military health system to figure out how
to do some of these things.
Senator Ben Nelson. Well, as it relates to the economics of
the military health care system versus private and outside non-
military, is there any differential there related to medical
liability costs?
Ms. Hosek. Yes, I think there actually is. Obviously the
government is liable, but the liability is much less. Actually,
military beneficiaries don't sue at anything like the rates
that other people do. So, Dr. Winkenwerder, I'm sure, knows
much more about that than I do. There are other restrictions,
particularly in state law that don't apply to the military and
licensing laws and that kind of thing. When I first came to
RAND, I worked on physician assistants. The military was trying
to figure out how to do it with active physicians, so they
turned to physicians assistants and they were among the very
leaders in the country in developing training programs and
using those people in their clinics. So they've shown they can
do this kind of thing.
Senator Ben Nelson. Dr. Winkenwerder should be very much
relieved that his problem will be lesser for him than it will
be to solve the rest of the health care problems without
medical liability issues as well.
Thank you, Mr. Chairman.
Senator Graham. Thank you all, thank you to the panel. At
this moment, I would like to ask that testimony from the
Reserve Officers' Association be placed in the record.
[The prepared statement of the Reserve Officers'
Association follows:]
Prepared Statement by the Reserve Officers Association
The Reserve Officers Association of the United States (ROA) is a
professional association of commissioned officers of our Nation's seven
Uniformed Services. ROA was founded in 1922 during the difficult years
following the end of World War I. The founders of the ROA believed
America was vulnerable to return to its pre-war unpreparedness. When
chartered by Congress in 1950, the act established the objective of ROA
to: ``. . . support and promote the development and execution of a
military policy for the United States that will provide adequate
national security.'' The mission of ROA is to advocate strong Reserve
components and national security, and to support Reserve officers in
their military and civilian lives.
The Association's 75,000 members include Reserve and Guard
soldiers, sailors, marines, airmen, and coastguardsmen who frequently
serve on Active-Duty, voluntarily or involuntarily, to meet critical
needs of the uniformed services. ROA's membership also includes the
U.S. Public Health Service and the National Oceanic Atmospheric
Administration. ROA is represented in each State with 55 departments
plus departments in Latin America, the District of Columbia, Europe,
the Far East, and Puerto Rico. Each department has several chapters
throughout the State and is further divided into regional chapters. ROA
has more than 550 chapters worldwide.
DISCLOSURE OF FEDERAL GRANTS OR CONTRACTS
The Reserve Officers Association is a private, member-supported,
congressionally chartered organization. Neither ROA nor its staff
receive, or have received grants, sub-grants, contracts, or
subcontracts from the Federal Government for the past three fiscal
years. ROA has accepted Federal money solely for Reserve recruiting
advertisement in its monthly magazine. All other activities and
services of the Association are accomplished free of any direct Federal
funding.
Staff Contacts:
Executive Director:
Maj. Gen. Robert ``Bob'' A. McIntosh, USAFR (Ret.)202-646-7701,
Legislative Director, Spouse and Family:
Ms. Susan Lukas, 202-646-7710
USNR, USMCR, USCGR, Health Care/MWR:
Capt. Marshall A. Hanson, USNR (Ret.), 202-646-7713
Army Affairs, Veterans:
Maj. Gen. David R. Bockel, USAR (Ret.), 202-646-7717
Air Force Affairs, Retirees:
LT Col. James E. Starr, USAFR (Ret.), 202-646-7719
INTRODUCTION
In answering the call-up, some 475,000 Reserves have been mobilized
cumulatively since the issuance President Bush's issued Executive Order
13223 on September 14, 2001, which authorized the activation of up to 1
million military reservists for the global war on terrorism.
Pre- and post-mobilization health care is being spotlighted with
each wave of deployment. ROA thanks the Personnel Subcommittee for the
chance to present testimony on behalf of the 1.2 million ready
reservists most affected by medical readiness. Further we would like to
thank each member of this committee for working with Department of
Defense (DOD) and the associations to improve TRICARE coverage not only
in quality but also in continuity; making pre- and post-mobilization
coverage permanent, and also introducing TRICARE Reserve Select for
most of those who have served in the global war on terrorism.
We commend the support that your committee has provided to the
young men and women who are deployed overseas, and stationed at home.
We also believe that comprehensive care of the dependents of these
young warriors allow the members of our armed services to better
concentrate on their jobs. Most important is your recognition that a
continuity of health care needs to extend into the Reserve Centers and
Guard Armories to better complete this coverage.
Health care readiness remains the number one problem when
mobilizing reservists. Most Reserve component members shoulder the cost
of their personal medical readiness. Because of the high cost of
medical care, many Guard and Reserve members do not carry health care
coverage. The Government's own studies show that between 20-25 percent
of guardsmen and reservists are uninsured.
With a growing percentage of Reserve component members being
recalled to multiple deployments, a continuum of health care is
becoming as important as pre- and post-deployment coverage.
Health Care
The global war on terrorism is being described as multi-
generational by the leadership in the Pentagon. It will be a protracted
engagement, which overwhelms the resources of the active Services. To
compliment the Active-Duty Forces, the Guard and Reserve have accepted
the task of warrior on numerous fronts. Over 55 percent of our Guard
and Reserve Forces have already been called to do battle.
The Reserve Officers Association believes that a continuity of
health care for these young warriors and their families will allow the
members of our armed services to better concentrate on their jobs, as
the spouse who is left behind will better understand this benefit if it
is unbroken. The side benefits will be a higher level of medical
readiness, retention of Reserve component members, and an incentive for
Active component members to transition in to the Reserve component at
their end of contract.
Continuity of Medical Coverage
As this conflict is expected to be long term, and Reserve component
members are expected to be mobilized multiple times, the importance of
continuity of health care becomes increasingly important and should be
emphasized, as it will impact Reserve component members and their
families. If soldiers or marines are worrying about their families
while in the battlefield, the costs to the U.S. military will be more
than just health care coverage.
Pressures caused by higher health care costs have harmed recruiting
and retention.
When leaving Active-Duty, the loss of benefits causes many prior
servicemembers to concentrate on their civilian career to recover those
benefits. While cash bonuses may be in the short-term enticement to
join the Guard or Reserve, cash alone doesn't provide a family security
in an environment of frequent call-up.
Guard and Reserve members are on call 24 hours a day, and are
expected to meet the same physical, dental, and medical standards as
their Active-Duty counterparts. Reservists are expected to pay for
their own health club and medical coverage while in civilian status,
where wages are growing slower than inflation. ROA believes the
military standards to maintain physical readiness is a shared
responsibility of both the DOD and the military member.
Health insurance coverage varies widely for members of the Guard
and Reserve. Some have coverage through private employers, others
through the Federal Government, and still others have no coverage.
The stress on maintaining a private-sector job and membership in
the Guard and Reserves can be overwhelming. Add to this a job market
where no longer are there ``jobs for life,'' management is flexible and
ever changing, employees are expected to change along with the company
and its operating environment, and companies are not stable entities
with mergers, acquisitions, and attrition resulting from increased
global competition.
It's estimated that the average worker changes jobs 10 times and
careers 3 times in a working lifetime. These changes in jobs occur
every 2 to 3 years before age 30 and every 4 to 7 years thereafter. In
between, gaps can occur in health coverage.
Job seekers are very receptive to relocating for the right position
or benefits. Surveys show that 50 to 60 percent of job applicants are
willing to move. This number increases to as high as 94 percent for
younger, entry level job seekers.
Relocating to a new job disrupts Guard or Reserve continuity. Most
will transfer into the Individual Ready Reserve (IRR) until their new
life settles down, many never to emerge again.
The number of people willing to relocate drops to only 19 percent
when there are family ties to the community. If the Guard and Reserve
can create this sense of community it should encourage retention. A
continuity of health care would help.
A continuity of health care can help build the sense of community
between a Guard and Reserve member and the Reserves by providing
stability. Roller coaster changes in family health care when a spouse
changes Reserve status can be a traumatic and even confusing for family
members. Enabling drilling members and their families to sign up for
TRICARE would not only provide stability but also reassurance for the
reservist when deployed.
Continuity Options
ROA recommends authorizing access to TRICARE on a cost-share
basis, or premium cost-share for civilian health plans upon
activation.
Option 1: Expanded TRICARE Access
Drilling Guard and Reserve servicemembers would pay an annual cost-
share premium for TRICARE coverage for either themselves or their
families. With activation of 30 or more days, and the government would
assume all of the cost as it would for Active-Duty members. Once the
de-mobilization process was complete, the drilling Guard and Reserve
could return to a cost-share basis.
The TRICARE access option is consistent with the DOD's ``seamless,
integrated total force policy,'' as it would open TRICARE to G-R
families and eliminates a ``structural barrier'' inhibiting true
integration of the total force.
ROA believe families would better support a career in the Reserve
component, if health care were provided as a benefit. Spouses would
make reservists think twice before quitting the Guard or Reserve and
losing this benefit.
Costs: a recent Government Accountability Office (GAO) report (GAO-
02-829, Defense Health Care, September 2002, hereafter, GAO Report)
estimated that DOD's cost would be $7 billion over 5 years if
reservists paid a premium similar to that paid by Active-Duty retirees
under age 65 (TRICARE Prime).
Option Two: Payment of Premiums for Employer or Personal Health
Insurance
Guard and Reserve family members are eligible for TRICARE if the
members' orders to Active-Duty are for more than 30 days; but some
families would prefer to preserve the continuity of their own health
insurance. Being dropped from private sector coverage as a consequence
of extended activation adversely affects family morale and military
readiness and discourages some from reenlisting. Many Guard and Reserve
families live in locations where it is difficult or impossible to find
providers who will accept new TRICARE patients.
During both activation and during TAMP, DOD could contribute a
premium payment that is not to exceed its TRICARE contribution.
Payments could be made through direct deposit to employers or
employers' heath care insurers. The Guard and Reserve members' families
would be able to continue with the employer health insurance without
disruption, and the administering by DOD would be simply to cut a
check. Congress has directed GAO to explore this option.
Health care is a key benefit. ROA surveyed the Fortune 500
employers, and found that if any benefit was provided it was health
care continuation first. This shows how important it is. If our
patriotic employers recognize this, so should DOD.
TRICARE Reserve Select (TRS)
Time and study has allowed ROA to recognize Congress' wisdom behind
their creation of TRICARE Reserve Select. In creating a new form of
TRICARE, they have also created a health care engine which can drive a
continuity of health care.
The beauty of this new model is that the premium based Standard
TRICARE can be modified. It provides a basic health care for a standard
cost. Different beneficiaries can now be included with TRS offered at
different cost share premium packages.
ROA recommends Congress explores cost-share coverage for:
A. Unemployed
B. Uninsured
C. Drilling reservists
D. Allowing gray-area reservists buy-in.
Concerns with TRS
1. Uniformed Service Employment and Reemployment Rights Act
(USERRA)
If the member elects coverage under TRS then they may lose their
USERRA protections.
USERRA allows Guard and Reserve members immediate re-enrollment in
the employer's health benefit plan upon re-employment following Active-
Duty longer than 30 days, irrespective of whether the employee
reservist elected to continue coverage during activation. Further it
doesn't permit the employer to apply any plan exclusions or
restrictions that would otherwise be inapplicable if not for the
employee's entry into Active service.
Should a Guard and Reserve member elect to continue TRS, or the
180-day post-mobilization (TAMP) coverage after requesting
reemployment, these USERRA protections are lifted. Except for that
immediate day of re-employment, a Guard and Reserve member may be
required to wait a specified period, on until the next open enrollment
in order to continue the employer's health care coverage.
2. Servicemembers Civil Relief Act (SCRA)
SCRA (Section 704) also provides Guard and Reserve members with
protection of reinstatement of health care insurance without exclusion.
The insurance must have been in effect before such service commenced
and terminated during the period of military service. An application
under this section must be filed not later than 120 days after the date
of the termination of or release from military service. Both TAMP and
TRS exceed this 120 day period.
3. Pre-existing Conditions: The Health Insurance Portability and
Accountability Act of 1996 (HIPAA)
``The length of time coverage can be denied for a preexisting
condition under HIPAA is limited to no longer than 12 months (18 months
if you are a late enrollee).
This time can be reduced or eliminated if you were covered by
previous health insurance (which qualifies under HIPAA as creditable
coverage) and if there was not a break in coverage between the plans of
63 days or more.''
Should a member takes TRS, and the employer later requires a
waiting period to transition back into the employers health care plan,
a break of 63 days or longer would jeopardize pre-existing conditions.
(See USERRA)
ROA recommends changes to USERRA and SCRA to grant
eligibility to employer and private insurance following TRS
coverage.
Continuum of Service
Several issues have emerged that should be watched.
Length of orders: The Reserve components are notorious at producing
types of orders or by adjusting an order's number of days to reduce
cost. For example, a set of 179 day orders would limit a Guard and
Reserve member to just one year because TRS is earned in 90 day
segments.
ROA Recommends prorating this benefit to allow partial years
to be earned.
Any break in Select Reserve status invalidates the health care, but
maintains the obligation. Should a Reserve component fail to implement
the Service Agreement in a timely manner, the TRS could be forfeited.
Many Select Reserve billet assignments are scheduled around a fiscal
year.
The Service Agreement as an Obligation
The TRS Service agreement should be viewed as a legal contract
between the Guard and Reserve member and his or her Reserve component.
Both sides are obligated to fulfill this contract, but there is some
question as to when these obligations become binding.
If a Guard and Reserve member chooses to cancel their TRICARE
Reserve Select coverage, it does not eliminate their remaining
obligation to serve for the duration of that contract. Similarly, if a
Reserve component member is removed from a Selected Reserve billet, the
government could be legally challenged. Uncertain is when these
obligations begin.
The Guard and Reserve member is by law required to apply for TRS
before he or she is demobilized. The Final Service agreement must be
signed 30 days before the end of TAMP. DOD has taken the position that
Select Reserve obligation is binding from the first application.In
contract law, a contract arises when an offer to make a contract is
accepted. When the Guard and Reserve member's application is completed
at the demobilization site, it is just an extended offer. This website
even includes a disclaimer that a Select Reserve billet assignment is
not necessarily available.
The definition of a contract includes a promise to do something in
exchange for money or goods, or a promise to do something in exchange
for a promise to do something. Until the Reserve components can promise
something in return for the offer of duty obligation, no contract
exists. These promises becoming binding only when both parties sign the
service agreement.
Additionally, no contract is binding if it is signed under duress.
Demobilization is a very stressful period, where Guard and Reserve
members are not focusing on details, but are looking at getting home.
The early application as required by law can't be viewed as a binding
obligation.
ROA recommends that the law be changed so that the Service
Agreement is signed by both parties 120 days after
demobilization rather than at demobilization.
Retention Tool or Benefit?
It has been suggested that this new TRICARE for reservists will
encourage retention and longevity. Knowing that it takes a tour of duty
to qualify, reservists should be eager to serve once ever 6 years. This
provides the predictability and periodicity that DOD feels is needed by
both reservists and their civilian employers.
An opposing view is that rather than retaining reservists, the new
benefit will cause them to leave the Reserves. Both new health and
education benefits are based on the ability to deploy. A year on, 4\1/
2\ year off rotation will place stress on both family and civilian
employment. To keep needed benefits, a reservist will either have to
focus on his/her civilian or Reserve career path. Pressures may
preclude doing both.
Retention Concern
As a Retention tool, not everyone is included. The Army, the Marine
Corps, and the Navy have mobilized reservists out of the Individual
Ready Reserve. Under current law, unless these Reserve component
members are given an opportunity to join the Selected Reserve, they are
not eligible to purchase TRS.
All Services offer drilling for points without pay. These members
are in the IRR. The Navy has Voluntary Training Units. The Air Force
and Army have non-paid Individual Mobilization Augmentees (IMA). The
Army also has a group within the IRR body that has agreed to
mobilization during their first 2 years.
ROA feels that IRR members should be eligible for TRS. They could
qualify if they sign an agreement of continued service and complete a
satisfactory year of training and satisfy physical standards. A
satisfactory year could be defined either by points or by training
requirements, as defined by each Reserve Chief.
ROA recommends at a minimum the laws language be changed from
``Selected reservists'' to ``Drilling reservists''.
When Congress created TRS, ROA views it also created an earned
benefit. By going to war, you should be eligible for health care
benefits without obligation. One group, recalled reservists who are in
Gray area retirement, will never qualify for TRS, as normally they are
not eligible by policy or law to return to a drill status. TRICARE
Reserve Select should be likened to a GI Bill entitlement rather than a
retention tool.
Cost Limitations
ROA recognizes the fact that there are cost prohibitions with DOD
subsidizing a blanket TRICARE health plan for reservists.
ROA encourages Congress to explore options to expand payment
sources should the new premium based TRICARE Standard program
be expanded to a wider Reserve population.
As suggested this past year by the Senate, drilling reservists
could be given an opportunity for an employer or other benefactor to
buy-in to TRICARE at 72 percent of premium cost, rather than being paid
by DOD.
Additionally, gray-area reservists should be permitted a chance to
buy-in to the same plan, paying full premium costs. Further, funding
needs to be explored on how to help the unemployed and uninsured
reservist.
With innovative approaches Congress can provide reservists with
continuous health care to optimize medical readiness and insure
recruiting and retention.
Reserve Officer Association feels that it is inappropriate
that drilling guardsmen and reservists are the only part-time
Federal employee not entitled to a health care plan. ROA
supports a continuum of health care from joining the Reserves
up to retirement.
The hearing is adjourned.
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Saxby Chambliss
HEALTH CARE FUNDING
1. Senator Chambliss. Dr. Chu and Dr. Winkenwerder, there is some
concern that funding for medical care for our military personnel and
their families, whether Active, Reserve, or retired, is increasingly
competing for funding against other Department of Defense (DOD)
programs. Some have questioned whether providing health care to our
retired servicemembers has any positive effect on recruiting and
retention. Others have argued convincingly that having a first-class
health plan for retirees is a crucial selling point for recruiting and
retaining soldiers. Senator Warner has been recently quoted as saying
that ``There's no sense in buying modern weapons, unless you have
healthy, intelligent people who can operate them and are willing to
stay there.''
There is much anecdotal evidence that health care benefits are
highly valued by military personnel from new recruits to career
personnel. What would be valuable to know is whether any studies have
been undertaken to quantify to what extent there is a link between
health care benefits and recruiting and retention. Has the DOD
conducted any surveys of military personnel to determine to what extent
health care benefits, for both those serving and after retirement,
motivate servicemembers to join the military in the first place and
reenlist for more service, and then stay until retirement and if so
what effect do health care benefits have on recruitment and
retention?1.
Dr. Chu and Dr. Winkenwerder. If a servicemember is provided a non-
cash or in-kind benefit like health care, clearly the individual will
be better off than before. This makes the military more attractive to
potential recruits and induces some members to stay longer than they
otherwise would. However, the issue is not whether some members will
stay longer or others will join that would not have otherwise, the
issue is what value do members place on these benefits? In other words,
is the provision of health care beyond that necessary for readiness
purposes an efficient way of accomplishing an increase in retention and
recruitment? Although there are no studies that directly relate
recruiting and retention to the provision of health care benefits,
there are a number of theoretical and practicalreasons to believe that
the value of health care benefits to the servicemember, especially
those benefits provided to retired members, is less than the cost of
providing the service. The basis for this statement is that the benefit
is ``in-kind'' and deferred, that is, provided at some time in the
future.
By in-kind benefits we mean specific goods and services, like
health care, that are provided to military members rather than cash
compensation. While cash compensation offers complete flexibility in
purchase decisions, in-kind benefits are tied to a specific good and,
consequently, are of little or no value to the member if he or she does
not use that service. Also, in-kind benefits are generally not tailored
to the preferences of an individual servicemember and thus it is likely
that family health care will not be valued or valued at a substantial
discount by single members, by members that do not use health care
services, and by members whose spouses have health care insurance from
the spouse's employer. Because the service is not valued by some
members, there is a wedge between the cost to the government of
providing this service and the value that at least some of these
members place on the service. Given the choice of ``x amount of
dollars'' in health care or ``x amount of dollars'' in basic pay, many
members would opt for the cash since the value to them of health care
is less than the cash alternative; the larger the wedge the greater,
the inefficiency. (See Deborah Clay-Mendez, Cash and In-Kind
Compensation policies for a Volunteer Force: The U.S. Experience, June
2004.)
The present value to the servicemember of compensation that is
received at some future date must be discounted by the member's rate of
time preference. In other words, the value to a member of future
benefits is the amount of money that the member will accept today in
place of a dollar's worth of benefits to be delivered in the future.
There is considerable evidence that servicemembers have a discount rate
that is significantly higher than the value the government places on
future benefits. According to Warner and Pleeter (American Economic
Review, March 2001), the discount rate for an average enlisted member
is in the range of 17 to 35 percent. If the discount rate were 17
percent, a promise of $1,000 20 years in the future would only be worth
$47 to the member today. If the discount rate were 35 percent, that
same $1,000 would be worth $2.47 to the member. If the cost of
providing future health care as reflected in the accrual rate for
TRICARE for Life is about $6,500 per Active-Duty member and the
discount rate is 17 percent, a 20-year old member who would start
receiving these benefits at age 65, would value this benefit at $5.50.
Benefits today are thus preferred to benefits in the future.
In the August 2004, Status of Forces Survey, the Defense Manpower
Data Center asked respondents how much more in retired pay the member
would accept in lieu of TRICARE for Life. The average response for
officers and enlisted was $3,804 per year only about 60 percent of the
value of the service to be received. This is an example of a situation
where the value of benefits received is considerably less than the cost
of providing the benefit, in which case recruitment and retention would
not be as high as the cash equivalent value of the benefit.
LICENSED PROFESSIONAL COUNSELORS
2. Senator Chambliss. Dr. Chu and Dr. Winkenwerder, currently,
TRICARE requires that physicians refer clients to and supervise mental
health counselors who provide mental health services to its
beneficiaries. This requirement is in contrast to TRICARE's policy of
providing direct access to clinical social workers and marriage and
family therapists. Mental health counselors, also called Licensed
Professional Counselors (LPC), are professionals with masters or
doctoral degrees in counseling or a related discipline who provide
services along a continuum of care from diagnosis and treatment of
mental illness to educational and preventative services to long-term
care. Clinical training and licensing requirements for mental health
counselors are comparable to the training of other master's level
TRICARE providers including clinical social workers and marriage and
family therapists. The DOD recently received the results of a pilot
study that examined whether LPCs should be granted the same treatment
that other health providers enjoy. What were the results of this study?
Dr. Chu and Dr. Winkenwerder. The National Defense Authorization
Act for Fiscal Year 2001 directed the Department of Defense to conduct
a demonstration project under TRICARE that would allow beneficiaries to
access licensed mental health counselors without the requirement for
either physician referral or clinical supervision. The demonstration
began 1 January 2003 and ended 31 December 2003. The demonstration
consisted of a control arm and an experimental arm (access to licensed
mental health counselors). The evaluation of the demonstration was
focused on a comparison of utilization of services, cost of care, and
outcomes. Upon completion of the demonstration, the TRICARE requirement
for physician referral was reinstated.
The RAND report ``Expanding Access to Mental Health Counselors--
Evaluation of the TRICARE Demonstration'' showed that with removal of
the referral and supervision requirements patients were less likely to
see a psychiatrist, and less likely to receive a psychotropic
medication to treat their mental illness. There was also an increased
frequency of inpatient hospitalization for mental illness in the
demonstration area compared to the control area. Therefore, DOD is
concerned that increased hospitalization may suggest poorer outpatient
control of symptoms, resulting in higher, possibly preventable rates of
admission. Access to Licensed Mental Health Counselors (LMHCs)
practicing independently is more likely to result in substitution of
type of provider, rather than increased access to mental health
services. Without the requirement for physician referral and
supervision, there is significant risk that patients will unwittingly
incur out-of-pocket costs for non-medical counseling services that are
not covered by TRICARE.
Additionally, Medicare and the Department of Veterans' Affairs (VA)
require physician supervision of mental health counselors. DOD is
unaware of other health insurance plans that authorize independent
practice. A major concern is the lack of national or uniform standards
of accreditation relating to educational requirements for obtaining a
degree, a lack of agreement in the profession on recognition of a
national certification body or exam, and the differences in
requirements among the states to obtain a license. We assure quality of
care through rigorous requirements for academic and professional
credentials, relevant experience and licensure and periodic
recertification. For psychiatrists, psychologists, social workers,
clinical nurse specialists, and marriage and family counselors, these
standards are derived from well-established bodies of accreditation.
LMHCs have a wide range of standards, licensure, and certification
requirements which makes it difficult to endorse independent practice
that will result in comparable high quality mental health care across
our system. Given differences among States in curricula, accreditation,
and supervised post-graduate practice, the Department has ongoing
concerns about the TRICARE program's ability to maintain a uniformly
high quality of care across geographic areas.
3. Senator Chambliss. Dr. Chu and Dr. Winkenwerder, what are the
DOD's plans to change TRICARE policy in order to provide more
streamlined access to mental health care providers particularly when
the requirement for mental health care services is expected to increase
as a result of combat operations in Iraq and Afghanistan?
Dr. Chu and Dr. Winkenwerder. Both in our military treatment
facilities as well as in our TRICARE network, our beneficiaries have
direct access to mental health services. This means they can go
directly to see a mental health provider who does need a referral from
a physician to be an authorized provider for up to eight sessions;
without the need for a referral from their primary care manager.
We have initiated several changes to improve this basic benefit.
Pre-clinical care is now also offered through our DOD-wide work-life
program called Military One Source. The One Source program offers up to
six free, confidential counseling sessions per person and includes
marriage and family counseling, personal problem solving, and everyday
life events counseling, which are not TRICARE benefits. If a
diagnosable health concern arises that exceeds the scope of the One
Source program, the counselor will personally facilitate a referral to
a military health system health care provider to ensure continuity of
care. While not a health care program, the One Source system increases
access to care by offering an easy method for entry, decreases
potential misinformation and the perceived stigma that can be
associated with mental health care, and increases information and
education about mental health care and its benefits.
Special programs facilitate access for servicemembers who have
served in operational or combat deployments. First, Pre-deployment
Health Assessments provide an opportunity for each servicemember to
identify any mental health concerns before deployment. Immediately upon
return, our servicemembers receive a Post-Deployment Health Assessment
which allows them to identify mental health symptoms or to request a
visit with a health care or mental health care provider or family
counselor, even if they do not currently have symptoms. In addition,
servicemembers receive a medical threat debriefing and benefits
briefing which assists them in identifying potential health concerns
that may emerge in the future and where to seek care if those concerns
present. Once they return to their home station, they participate in a
deployment support and education program, which includes a family
reunion and reintegration component to assist in facilitating access to
health care for family members.
Our newest point on the deployment cycle continuum of care is the
Post-Deployment Health Re-Assessment (PDHRA) program. This program is
scheduled to begin implementation in June of this year. It will provide
a repeat assessment of returning servicemembers at the 3 to 6 month
period after their return from an operational deployment along with
education and outreach for deployment health concerns, with a specific
focus on mental health issues. This global health assessment will also
include a mental health assessment and will again provide increased
access to mental health care based on reported health concerns or at
the request of the individual even if they have no current symptoms or
concerns.
In the coming year, DOD will be implementing an annual Periodic
Health Assessment (PHA) that will address both physical and mental
health conditions for every servicemember, not just those who deploy.
This process will assist in identifying mental health concerns and
conditions that may be associated with the potentially high stress
levels of those who serve in garrison. The PHA will also be available
to retirees and to family members.
Over the past 2 years, DOD has implemented several clinical
practice guidelines that assist our health care providers in delivering
state of the art care for mental health issues. They include the Post-
Deployment Health Evaluation and Management Clinical Practice
guideline, which is mandated for implementation in all military
treatment facilities. Guidelines especially relevant to mental health
include major depression, acute stress and post-traumatic stress,
substance use disorder, and medically unexplained or ill-defined
conditions.
Several initiatives are designed to bring mental health care to the
forces rather than waiting for conditions to present in a traditional
clinical setting. The Operational Stress Control and Readiness (OSCAR)
program in the Marine Corps has embedded mental health providers into
line units to provide ready access to preventive stress management
resources. The Air Force Behavioral Health Optimization Program embeds
behavioral health providers into primary care settings, increasing easy
access to care and reducing the potential stigma of seeking care
through a traditional mental health clinic.
Finally, for those individuals diagnosed with Post-Traumatic Stress
Disorder (PTSD) as a result of combat who are not effectively treated
through other clinic settings, we have established a specialized care
program. While located at Walter Reed Army Medical Center, the program
services the entire military community. It provides intensive
rehabilitative care for chronic ill-defined conditions and PTSD through
a 3-weekday hospital program.
TRICARE RESERVE SELECT
4. Senator Chambliss. Dr. Chu and Dr. Winkenwerder, TRICARE Reserve
Select (TRS) provides our Reserve component personnel with an excellent
health insurance option at a relatively lost cost. For each 90 day
period of consecutive service, Reserve component personnel receive a
whole year of TRS coverage. So if a reservist is mobilized for 2 years,
he would earn a health care benefit that will last for 8 years as long
as he remains in the Selected Reserve. However, if that reservist is
mobilized again, say 4 years into his 8th year benefit for a period of
180 days, he would not earn another 2 years of eligibility because his
``new'' benefit would run concurrently with his ``old'' benefit. This
situation could occur because the law states that the benefit will
start the day after the 180-day demobilization coverage ends. As it
stands, the language of the law does not seem to encourage volunteerism
in our Reserve Forces. What are your thoughts on changing this
provision in TRS so that the benefits would run consecutively rather
than concurrently?
Dr. Chu and Dr. Winkenwerder. DOD is implementing the TRICARE
Reserve Select program in accordance with the statutory requirements.
As noted, a period of accrued TRS eligibility will continue to run even
if the TRS coverage is in suspense because the reservist is in another
period of Active-Duty service. The member may qualify for another
period of TRS benefits based on the additional Active-Duty service, but
this would not extend the period of coverage earned in the prior
activation. If Congress were to revise the statutory requirements so
that earned periods of eligibility run consecutively, this would extend
the time period of eligibility for reservists activated more than once.
In order to take advantage of the extended time period, reservists
would need to commit to continued service in the Selected Reserve.
[Whereupon, at 3:24 p.m., the subcommittee adjourned.]