[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



                         [H.A.S.C. No. 110-131]

                                HEARING

                                   ON

 
                   NATIONAL DEFENSE AUTHORIZATION ACT
                          FOR FISCAL YEAR 2009

                                  AND

              OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS

                               BEFORE THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                MILITARY PERSONNEL SUBCOMMITTEE HEARING

                                   ON

     BUDGET REQUEST ON THE FUTURE OF THE MILITARY HEALTHCARE SYSTEM

                               __________

                              HEARING HELD

                             MARCH 12, 2008

                                     

    


                                     

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                    MILITARY PERSONNEL SUBCOMMITTEE

                 SUSAN A. DAVIS, California, Chairwoman
VIC SNYDER, Arkansas                 JOHN M. McHUGH, New York
LORETTA SANCHEZ, California          JOHN KLINE, Minnesota
NANCY BOYDA, Kansas                  THELMA DRAKE, Virginia
PATRICK J. MURPHY, Pennsylvania      WALTER B. JONES, North Carolina
CAROL SHEA-PORTER, New Hampshire     JOE WILSON, South Carolina
NIKI TSONGAS, Massachusetts
                David Kildee, Professional Staff Member
               Jeanette James, Professional Staff Member
                     Rosellen Kim, Staff Assistant















                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2008

                                                                   Page

Hearing:

Wednesday, March 12, 2008, Fiscal Year 2009 National Defense 
  Authorization Act--Budget Request on the Future of the Military 
  Healthcare System..............................................     1

Appendix:

Wednesday, March 12, 2008........................................    35
                              ----------                              

                       WEDNESDAY, MARCH 12, 2008
FISCAL YEAR 2009 NATIONAL DEFENSE AUTHORIZATION ACT--BUDGET REQUEST ON 
              THE FUTURE OF THE MILITARY HEALTHCARE SYSTEM
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Davis, Hon. Susan A., a Representative from California, 
  Chairwoman, Military Personnel Subcommittee....................     1
McHugh, Hon. John M., a Representative from New York, Ranking 
  Member, Military Personnel Subcommittee........................     3

                               WITNESSES

Casscells, Hon. S. Ward, M.D., Assistant Secretary of Defense for 
  Health Affairs.................................................     3
Goetzel, Dr. Ron Z., Research Professor and Director, Institute 
  for Health and Productivity Studies, Emory University Rollins 
  School of Public Health, Vice President, Consulting and Applied 
  Research, Thomson Healthcare...................................    10
Wilensky, Dr. Gail R., Co-Chairman, Defense Task Force on the 
  Future of Military Healthcare..................................     6

                                APPENDIX

Prepared Statements:

    Casscells, Hon. S. Ward, M.D.................................    43
    Davis, Hon. Susan A..........................................    39
    Goetzel, Dr. Ron Z...........................................    77
    McHugh, Hon. John M..........................................    41
    Wilensky, Dr. Gail R.........................................    69

Documents Submitted for the Record:

    Chart on Proposed Fee Changes based on Task Force on the 
      Future of Military Healthcare Recommendations..............    96
    Memo, UMWA Health & Retirement Funds to Lorraine Lewis, 
      Outline of Mail Order Savings and Explanatory Notes........    89
    Review of Task Force Report, Relative to Pharmacy Mail Order.    91
Witness Responses to Questions Asked During the Hearing:

    Mrs. Boyda...................................................    99
    Mr. McHugh...................................................    99
    Ms. Shea-Porter..............................................   100

Questions Submitted by Members Post Hearing:

    Mr. McHugh...................................................   105


FISCAL YEAR 2009 NATIONAL DEFENSE AUTHORIZATION ACT--BUDGET REQUEST ON 
              THE FUTURE OF THE MILITARY HEALTHCARE SYSTEM

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                           Military Personnel Subcommittee,
                         Washington, DC, Wednesday, March 12, 2008.
    The subcommittee met, pursuant to call, at 9:02 a.m., in 
room 2118, Rayburn House Office Building, Hon. Susan Davis 
(chairwoman of the subcommittee) presiding.

OPENING STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE FROM 
    CALIFORNIA, CHAIRWOMAN, MILITARY PERSONNEL SUBCOMMITTEE

    Mrs. Davis of California. The meeting will come to order. 
Good morning everybody. Thank you all for being here.
    The purpose of today's hearing is to look at the short-and 
long-term challenges facing the Defense Health Program. In 
2007, total health expenditures of approximately $33 billion 
accounted for just under 8 percent of the overall Department of 
Defense (DOD) budget.
    By 2015, the Department projects that total health 
expenditures will rise to over $64 billion accounting for just 
over 11 percent of the total Defense budget. All of this 
assumes a steady, modest and potentially optimistic annual rate 
of inflation in healthcare expenses.
    Without controlling the growth in healthcare costs, both 
the Department of Defense and Congress will face some very 
difficult choices: Do we fully fund healthcare or operations; 
maintain medical readiness or procure all of the new equipment 
the services will require; keep our promises to retirees, or 
resource all of the research and development needed to keep our 
technological edge? Tough questions.
    The Department's 2009 budget submission marks the third 
straight year that the Department has proposed their Sustain 
the Benefit program. In basic terms, Sustain the Benefit 
proposes to raise beneficiaries' co-payments, deductibles and 
enrollment fees to both offset and avoid costs.
    The increase in fees will result in modest sums returned to 
the Department. Beneficiaries will be discouraged from seeking 
care both necessary and unnecessary, again, due to higher co-
payments for visits. And the Department's own budget materials 
clearly state that they intend to realize savings by raising 
the costs of TRICARE so much that family members and retirees 
will seek health insurance coverage outside the DOD system 
because it will be cheaper.
    These steps are likely to reduce costs over the short term. 
People are simply less likely to seek the same amount of care 
that they receive today. However, what are the long-term 
implications of these actions? What will the costs be if 
beneficiaries wait too long to seek care and the underlying 
conditions worsen or become untreatable?
    Now is not the time to exacerbate existing long-term 
problems or create new ones with programs that provide only 
short-term relief. When TRICARE was envisioned in its current 
form back in the 1990's, assumptions were made without clear 
evidence that private sector care was cheaper than the care 
provided in military treatment facilities.
    Risk was taken by dramatically shrinking the size, 
staffing, and number of military treatment facilities to save 
both money and end-strength personnel authorizations, and as a 
result, we now have great difficulty fully supporting our 
combat forces as the medical practitioners that support them 
are pulled from the very military treatment facilities that we 
downsized.
    Some military hospitals and clinics have had to close down 
entire departments for months at a time due to deployed 
providers, and consequently, many beneficiaries who received 
their care in military facilities now must receive their care 
in the civilian sector.
    With most of our beneficiary care, in terms of dollars, now 
provided in the civilian system, we are at the mercy of 
inflationary pressures affecting the Nation's healthcare 
system. Our beneficiary pool is simply not big enough to move 
the market in a positive direction. These are the problems we 
face with a military at war supported by a healthcare system 
designed with just barely enough capacity to function during 
peacetime. Again, we must not repeat such shortsighted 
thinking. So what is the way forward?
    To help us answers these questions today--we have a great 
burden that we have put on you--we have before us today Dr. 
Ward Casscells, the Assistant Secretary of Defense for Health 
Affairs. We also have Dr. Gail Wilensky, co-chair of the 
Defense Task Force on the Future of Military Healthcare.
    And finally, Dr. Ron Goetzel of Emory University's 
Institute for Health and Productivity Studies, who is also a 
Vice President for Consulting and Applied Research with Thomson 
Healthcare. Dr. Goetzel is a leading voice on the issues of 
wellness and prevention having authored or co-authored numerous 
studies on the subject not to mention advising many of our 
Nation's top companies.
    Welcome to you all. We are delighted to have you with us.
    And we will begin with Dr. Casscells.
    [The prepared statement of Mrs. Davis can be found in the 
Appendix on page 39.]
    Dr. Casscells. Thank you Madam Chairwoman, Ranking Member 
McHugh, Dr. Snyder, Semper Fi, Mr. Kline. On behalf of----
    Mrs. Davis of California. I am so sorry, Dr. Casscells----
    Dr. Casscells. Sorry.
    Mrs. Davis of California [continuing]. If I can interrupt 
you. I was so anxious to hear what you had to say, that I 
forgot to turn to my colleague, Mr. McHugh, on my side.
    Mr. McHugh, I am so sorry. You see what happened----

  STATEMENT OF HON. JOHN M. MCHUGH, A REPRESENTATIVE FROM NEW 
     YORK, RANKING MEMBER, MILITARY PERSONNEL SUBCOMMITTEE

    Mr. McHugh. No, it is all right. I am anxious to hear Dr. 
Casscells, as well, and that is probably the more important 
part of it. Thank you, Madam Chair. I will just submit my 
comments for the record in their entirety.
    I want to welcome our guests here this morning.
    Dr. Casscells, you have been very open and quite willing to 
engage us in discussion as to the way forward. We appreciate 
that leadership.
    And Dr. Goetzel, I certainly think that your perspective 
holds some very positive tabs for us as to how we can better 
contain costs than just relying upon burdening further the 
beneficiaries with that.
    And last, but certainly not least, Dr. Wilensky, thank you 
for your great service as co-chair on the Defense Task Force on 
the Future of Military Healthcare. I had--as did the chair--a 
chance to chat with you previously, and your reputation 
precedes you. And certainly, your work on this task force only 
adds to that illustrious reputation, and we are greatly 
enriched by your participation, and we appreciate it.
    That having been said, as the chair noted, the third year 
in a row we are discussing significant increases to the costs 
to the beneficiaries of the TRICARE system. And quite frankly, 
I remain concerned--as I have in the past--that the place we 
start, particularly in time of war, in trying to put the 
healthcare system on a better path is on the backs of the 
beneficiaries.
    I am not sure that is either the most effective or 
certainly the most equitable way to approach it, and in fact, I 
am pretty convinced it is not, but this is a very important 
hearing and a very serious challenge.
    The Department, I think, has very fairly described the 
effects of the increased costs, and the chair, I think, equally 
fairly described the tradeoffs that we are already having to 
make. And as time goes forward, without some kind of action to 
contain these costs or certainly to accommodate them more 
effectively, we are going to have to face more of those 
choices.
    So your input today is going to be very, very important to 
us as we continue to try to find a way to ensure that we 
continue to provide the best possible healthcare for those in 
uniform, their families, and of course, equally important, the 
retirees that have served this Nation so honorably.
    So welcome, and I look forward to your comments.
    And thank you, Madam Chair.
    [The prepared statement of Mr. McHugh can be found in the 
Appendix on page 41.]
    Mrs. Davis of California. Dr. Casscells, please.

STATEMENT OF HON. S. WARD CASSCELLS, M.D., ASSISTANT SECRETARY 
                 OF DEFENSE FOR HEALTH AFFAIRS

    Dr. Casscells. Thank you, Mr. McHugh.
    We appreciate this opportunity to come before you and tell 
you what help we need and where we are in this one-year 
progress report, and I want to say how helpful the members of 
the committee and the staff have been as we have had a 
challenging year.
    I think you know I am not an Master of Business 
Administration (MBA) or a professional manager, and my military 
career is short and recent. So I don't have the great Pentagon 
experience that many do. So I have needed, more than most, the 
advice that we have gotten from the committee members and 
staff, and from the task forces--seven in number--particularly, 
General Corley and Dr. Wilensky and former Secretary Shalala 
and former Senator Dole.
    These task forces have been great beacons for us, and we 
have embraced them, and we have already begun to implement the 
vast majority of those recommendations. There are a few that 
may need some help from this committee.
    We had a challenging year. We have made progress in almost 
every aspect of the things that we talked about when I came 
before you--not in the oversight hearing but in a hearing about 
combat casualty care and combat stress--some 9 or 10 months 
ago. So I won't brag about the progress--just to say that in 
almost all of these areas, we still have work to do--combat 
care; preventive medicine; safety issues in theater--making 
progress. Got more to do; Post-Traumatic Stress Disorder 
(PTSD); concussions or traumatic brain injury (TBI)--a lot of 
progress. We could talk about that at great length, and we have 
more to do. We have got a good clear roadmap on that as well.
    The frustrating disability system: We have a pilot, which 
we are beginning to evaluate. We hope that--as the Government 
Accountability Office (GAO) pointed out two weeks ago--that we 
are on the right track with that and getting a disability 
system that is faster, fairer or at least as fair, but 
certainly simpler and faster. And those returns are just coming 
in. The GAO has reminded us we need more metrics before we roll 
it out. So that is the interim report on that.
    We have had a lot of people working on patient advocacy and 
family support--kind of programs. And the Army and we at Health 
Affairs and the Navy have put a lot of people in place to care 
for injured soldiers and Marines and their families, and we 
have created some mechanisms in parallel to the chain of 
command by which they can get help.
    DOD-Veterans' Administration (VA) relations: night and day 
compared to a year ago; clear roadmap on that. I don't think we 
need help from you on that, but we would be glad to talk about 
that in some detail.
    Information technology: We appeared before you about six 
months ago. Mr. Kline had plenty of advice for us at that time, 
and we have taken that to heart. And I am really pleased to say 
that we are scoring runs in information technology now, and 
this is being recognized increasingly around the country. We 
are really pleased with that, but we have got a ways to go.
    There are a number of issues in the theater, which relate 
to combat care, particularly stress and long deployments. We 
would be willing to talk about these. These are areas of 
ongoing discussion in the Pentagon, and we hope that we can 
make progress on those.
    Humanitarian assistance: You all know that this has been a 
big focus for us, for the Navy, for Admiral Mullen, and we, of 
course, plan to continue this in this vain--African command 
(AFRICOM), pandemic flu, these kinds of services, which we 
consider will be bridges to peace. We don't plan to belabor 
that this morning, but would be glad to answer any questions.
    We hope that our Uniformed Services University will 
increasingly become a global educator, a force for peace, a 
force to bring people together through healthcare, through 
telemedicine, distance learning and the like. And we are making 
a lot of plans in this regard. We would be glad to share them 
with you.
    TRICARE and cost: Let me talk about them since that was the 
main focus of the opening remarks. Very briefly--and Dr. 
Wilensky will talk about it more--we have expanded the benefits 
in this long war on our own and with congressional guidance--
reservists, Guard, family members--increasing benefits and 
increasing duration of benefits, so the number of eligible 
beneficiaries has increased.
    The usage of these services has increased, because they are 
increasingly high quality. TRICARE is the most popular health 
plan. It has the highest satisfaction of any health plan in the 
country. Now, service members increasingly, particularly 
reservists, for example, will drop their private coverage and 
exclusively use TRICARE. It is cheaper, and they like the 
quality. So this, of course, is increasing the costs.
    We have retirees who fortunately are doing well, living a 
long time, liking their TRICARE for Life. We have doctors who 
are coming up with new ways of treating things, so the 
intensity of care continues to ramp up. That is a factor, as 
Dr. Snyder can tell you, in healthcare inflation broadly.
    So there are lots of factors here, and we are hopeful that, 
in a general sense, competition and choices will drive 
innovation; innovation will drive quality; people will compete 
on the basis of quality, satisfaction, and eventually cost.
    But that is sort of a long-term mantra. In the meantime, I 
would say I personally feel it is critical that we begin to 
endorse the findings of this Corley-Wilensky task force. And I 
believe that the veterans I have spoken to, including the 
leaders of the Veterans Service Organizations (VSOs), are 
willing to see a gradual increase in fees, co-pays and 
deductibles as long as it is not more expensive than the 
private sector, because they don't want to rob theater care for 
garrison care or retiree care, so I would endorse that.
    At the same time though, we are moving away from the more 
simplistic and draconian discussions of things like efficiency 
wedges and Military to Civilian (MILCIV) conversions in favor 
of agreed upon metrics between our surgeons, our TRICARE people 
and using pay for performance techniques--and Dr. Goetzel can 
probably talk about those, because he has studied this a lot--
to incentivize prevention and to reward units and reward 
individuals, both clinicians and patients, who are taking good 
care of themselves and taking good care of each other.
    And this sort of pay for prevention is, in the long run, 
the best way to reduce costs, but there are other things we are 
working on too. And I am proud to say that, you know, we 
invited inspectors general to come in, and they have lived with 
us and gone over these plans like hawks. And I am proud about 
the ethical performance of our caregivers and our 
administrators.
    So, you know, we have got a great team. As Dr. Wilensky 
says, ``you got a great bench,'' and it is true, I do. We are 
going to be ready for the transition next winter in January, 
because we do have a good bench, and we get a lot of help from 
you all.
    So with that, let me stop and say, thanks again for this 
opportunity and this year of advice and the coming year of 
advice. We look forward to working with you. Thank you.
    [The prepared statement of Dr. Casscells can be found in 
the Appendix on page 43.]
    Mrs. Davis of California. Dr. Wilensky.

 STATEMENT OF DR. GAIL R. WILENSKY, CO-CHAIRMAN, DEFENSE TASK 
           FORCE ON THE FUTURE OF MILITARY HEALTHCARE

    Dr. Wilensky. Thank you, Madam Chair and distinguished 
members of the committee. I am pleased to have this opportunity 
to appear before you representing the Department of Defense 
Task Force on the Future of Military Healthcare.
    During this past year, I have had the opportunity to work 
with my very able co-chair, General John Corley of the Air 
Force and 12 other members, half from the Department of Defense 
and half from the outside, so to speak.
    During that same time, I had the privilege of serving as a 
commissioner on the Dole-Shalala Commission and thus spent a 
good portion of my last year trying to help focus on how to 
improve healthcare in both the military and the Veterans' 
Administration. I am a health economist by day--Project HOPE 
sometimes wonders if I am still a senior fellow with them--but 
I am here not to represent my own views as a health economist 
but rather to represent the views of our task force.
    What I would like to do is to very briefly review what it 
is that we have recommended in our task force. And while I 
understand and appreciate that much of your concern has been 
with regard to changes in the financing arrangements--and I am 
pleased to discuss that in whatever detail you would like--I 
think it is very important to understand that of the 12 
recommendations--10 and then two follow on recommendations--two 
of them deal with changes in fees, and eight of them deal with 
how to make military healthcare more effective and efficient in 
its delivery. And we think that is a very important signal as 
to how we approached our duties.
    We want to help make the military healthcare system more 
fiscally sustainable. We think that means making it a more 
efficient and effective healthcare system, and in addition, 
making some changes in the fiscal arrangements. But it is not 
only changing in the fiscal arrangements, and we are going to 
do as much as we can to dissuade people from looking at our 
recommendations only in that light. I think it misses what we 
spent a lot of time thinking about, and it will miss the point 
of the changes that we believe need to occur.
    We recognize that you have a difficult task, and that we 
had a difficult task, which is attempting to balance the needs 
for military medical readiness--the most important single 
function of healthcare in the military--recognizing that there 
has been commitments to those in the military and to their 
families for the sacrifices they have made. And we want to make 
sure that there is a healthcare system in the future that will 
be sustainable for them and for their families.
    We also recognize that military healthcare system--as you 
said Madam Chair--operates within a much broader healthcare 
environment. You are big, but you are not that big. There are 
approximately nine million people on the TRICARE system, 
broadly defined. There are 44 million in Medicare, and there 
are 300 million in the country. So, while you are significant, 
it is not easy for military healthcare to influence the 
healthcare system at large, and some of the difficulties that 
military healthcare is facing is broadly reflective of the 
challenges of healthcare in the country today.
    I am going to review quickly these recommendations. And I 
have said, while I am more than happy to discuss the financial 
ones in any detail you wish, I do think it is important to 
consider the other recommendations we are making, because it 
will make, we believe, the military healthcare system more 
efficient and effective.
    The first and the most overarching recommendation has to do 
with developing strategies to better integrate the direct and 
purchased care, particularly at the level where the care is 
actually provided--that means at the local level.
    You mentioned, Madam Chair, that early on there had been a 
decision to blend purchased care in the private sector with 
direct care provided in the Military Treatment Facility (MTF). 
I personally believe that is a great strength of the military 
healthcare system, not so much as to whether one provides more 
efficient or less efficient healthcare, but because it allows 
the military to respond better to surges and demand, to the 
effects of deploying large numbers of people in theater and to 
shifts in geography.
    However, it represents a challenge and that is to integrate 
the purchased care and direct care, and we think that is not 
yet occurring in an optimum way. People who are running these 
systems need to be empowered, and they need to be held 
accountable. Metrics need to be developed so it is clear how 
they are progressing.
    We have several recommendations that focus on implementing 
best practices both in a business and in a clinical sense. We 
don't say this to suggest that there is something fundamentally 
wrong with the military healthcare system. We have found no 
indication that it does not run generally well or with high 
quality. We just think there are several areas where it is not 
necessarily following the best of what exists in the private 
sector, and it could. And those are the sense in which we have 
made recommendations.
    We think there needs to be more collaboration with other 
payors on best practices, both in the private sector and in the 
government--the VA, Department of Health & Human Services 
(HHS), et cetera. There needs to be more of an attempt to have 
cost and quality more transparent. There needs to be a 
strengthening of incentives. Dr. Goetzel, I am sure, will cover 
some of these issues with regard to pay for results and other 
strategies being used in the private sector.
    We would like to see more systematic use of pilots and 
demos with the results being evaluated. Interesting pilots 
aren't helpful if you don't have a clear set of expectations at 
the front and well-developed metrics at the back. We think that 
the Department needs to have an audit of the financial controls 
done by an outside group.
    We would like to see the processes with regard to 
eligibility, second payor, et cetera, examined with changes 
being suggested as needed. We would like to see more in the way 
of wellness and prevention guidelines. It is not that none of 
this is done, but we think that it is not done at the state of 
the art, and it is not done in a uniform way across the 
military.
    We think there are ways that there can be efficiencies in 
the procurement system. We think it is important that the 
acquisition in terms of TRICARE management be elevated in terms 
of the characteristics of the individuals who are running these 
processes making sure that they are certified, and that best 
practices be used in procurement, which is not always 
occurring.
    And also, in this area, we think that there needs to be an 
examination of existing requirements. We heard from contractors 
and from family members that there are some of the areas that 
are stipulated in the contracting language that do not allow 
for the best use of disease management or of other strategies, 
and that they need to be examined to see whether or not more 
flexibility can be provided in the system.
    We would like to see an assessment as to how the changes 
with regard to Reserves, particularly the TRICARE Reserve 
Select program works. We think it is too soon to have such an 
assessment, but we encourage the department to do that over the 
course of the next two or three years and to make any changes 
that are necessary.
    In the two areas where we have suggested changes with 
regard to fees, one has to do with modifying the pharmacy 
benefit to use more cost-effective care. We have suggested 
different types of tiering and co-payments to use so that there 
is more of an incentive to use preferred meds and also the more 
cost-effective points of service.
    And we have also suggested that there be a pilot where the 
pharmacy function itself is integrated into the direct delivery 
of care. There is some debate both within the military and 
outside the military whether you get the best care by 
integrating pharmacy services directly within the provision of 
the rest of healthcare or whether you can get the best cost 
efficiency by keeping it outside, separate and having direct 
contracting. This is an area that we think can best be settled 
by having a serious pilot in one of the three TRICARE areas 
evaluating the results and then using that information going 
forward.
    We have, as you have referenced, suggested that there be a 
revision to the cost sharing that occurs. I think you are aware 
that we have focused on the retiree. We do not suggest 
increasing the fees with regard to active duty or their 
families. We have primarily focused on the under 65 retirees, 
the majority of whom--but not all of whom--are working. And 
that is to phase in over a four-year period--changes in 
enrollment fees and deductibles that go back to the cost 
sharing arrangements that existed when the Congress introduced 
the TRICARE program in the mid 1990's.
    Even more importantly than going back to what that was is 
how you go forward. And that is to continue indexing the 
relationship between what is paid by the beneficiary and what 
is paid by the military, so that this relationship--which is 
approximately 91:9 on the part of the military versus the 
beneficiary--is maintained going forward. Changes need to occur 
in a predictable way--small changes in each year rather than 
attempting to make large changes in any type of a make up 
arrangement.
    Finally, we have two recommendations that go toward 
monitoring in the way going forward. We think that it would be 
better for the beneficiary and better for the military if 
individuals who have multiple choices, particularly employer-
sponsored insurance and TRICARE, would choose one or the other 
of those two systems, whichever they prefer, and bring some of 
the other money with them to have a unified benefit.
    Having individuals use healthcare in multiple settings 
without any communication between those multiple settings is 
very expensive care and very poor care, medically. We have 
suggested that a pilot be demonstrated to see whether or not it 
is possible to have such an arrangement, again, at the choice 
of the beneficiary as to whether it is the TRICARE program that 
is chosen or the employer-sponsored program that is chosen with 
a contribution being made by the other payor.
    And, finally, we were asked to look at command and control 
issues with regard to the military health system. We think it 
is too early to do so given the changes that are being put in 
place. We think it is important that metrics be developed so 
that it is clear what the Department and the Congress is 
expecting from these changes, and that several years hence in 
the future, it will be possible to assess whether or not the 
changes that are already on the books have occurred as 
anticipated.
    Thank you for allowing me to participate. We recognize that 
even if all of our proposals are introduced, it will not 
resolve the future budgetary problems that will be produced by 
healthcare costs that are increasing faster than the Department 
of Defense budget, whatever that will be, and faster than the 
economy as a whole. We understand that that is a problem to be 
addressed by the Congress, broadly speaking. But we think that 
it is still important that changes that can be introduced, be 
introduced, that will allow the healthcare system in the 
military to be as efficient and effective as possible and to be 
in a financially stable position. These conditions do not 
presently exist.
    Thank you.
    [The prepared statement of Dr. Wilensky can be found in the 
Appendix on page 69.]
    Mrs. Davis of California. Thank you, Dr. Wilensky.
    Dr. Goetzel.

    STATEMENT OF DR. RON Z. GOETZEL, RESEARCH PROFESSOR AND 
DIRECTOR, INSTITUTE FOR HEALTH AND PRODUCTIVITY STUDIES, EMORY 
  UNIVERSITY ROLLINS SCHOOL OF PUBLIC HEALTH, VICE PRESIDENT, 
      CONSULTING AND APPLIED RESEARCH, THOMSON HEALTHCARE

    Dr. Goetzel. Yes. Good morning. Thank you, Madam Chairwoman 
and distinguished members of the subcommittee. I would like to 
thank you for inviting me to testify this morning on the 
subject of the health and financial benefits of health 
promotion programs, and I have some prepared statements, but I 
won't read them directly. I will just summarize and synthesize 
some of the main points.
    My background and my work over the last 20 years has been 
in the private sector. So I have not done work with the 
military. My work has involved doing large scale evaluations of 
corporate health promotion, disease demand programs, and the 
companies that I have worked with include Dow Chemical and 
Johnson & Johnson and Motorola, Chevron, IBM--a long list of 
Fortune 500 companies.
    I have also, in the last five or six years, been a 
principle investigator on federally funded health promotion 
programs for Centers for Medicare & Medicaid Services (CMS), 
for Medicare and for the Centers for Disease Control and 
Prevention (CDC) and for the National Institute for 
Occupational Safety and Health (NIOSH). So, my experience 
bridges the gap between the public and private sector, and my 
main emphasis is on looking at--from a research perspective--
the benefits of providing prevention programs to workers, to 
employees--in this case the military being the workers of the 
government.
    First though I want to, very quickly, make a distinction 
between different categories of prevention, because oftentimes 
that is confused. Prevention is primary, secondary and tertiary 
prevention. And primary prevention is essentially focused on 
keeping healthy people healthy. So getting people not to start 
smoking, being physically fit, maintaining a healthy weight, 
eating healthy, managing their stress, managing their blood 
pressures, cholesterol, glucose levels, and essentially 
remaining well, remaining healthy. And that is primary 
prevention, and there is very little being done in that arena 
in general, not just in the military.
    Secondary prevention essentially involves screening 
programs to detect diseases or detect risk factors before they 
get out of hand, before people become patients, and those 
involve screenings for blood pressure, cholesterol, glucose 
levels, but also people who are overweight, people who smoke 
and getting them to manage those risk factors.
    And tertiary prevention is what we typically consider 
disease management--people already have disease. They already 
have cardiovascular disease, diabetes, depression, asthma and 
so forth. And the intent there is to prevent further 
exacerbation of those conditions.
    Now, that can be done medically, but there is also a very 
important behavioral component associated with that. As you can 
imagine, people with diabetes need to manage their weight; they 
need to exercise; they need to eat healthy and get preventive 
screenings on a regular basis.
    Fundamentally, if you think about health promotion, disease 
prevention and the logic flow behind it, it can be boiled down 
to the following points. Many of the diseases and disorders 
from which people suffer are preventable. In fact, if you look 
at the deaths in the United States over past many decades, it 
is really heart disease and cancers that constitute over 50 
percent of all deaths in the United States.
    And if you flip it around and ask what causes heart disease 
and cancer, it is tobacco, overweight, sedentary behavior and 
not eating right. Those are really the main factors 
contributing to the chief deaths in the United States--
preventable deaths in many cases.
    Many modifiable health risk factors have been associated 
with increased healthcare costs and reductions in productivity. 
Now, we have done a series of studies in the private sector 
where we have looked at the relationship between 10 modifiable 
health risk factors and subsequent healthcare expenditures and 
productivity impacts and found a clear relationship, short 
term, between having these risk factors and increased costs and 
reduced productivity.
    There is also strong evidence that you can actually change 
the risk profile of a population. Even though it is very, very 
hard to get people to quit smoking, start exercising, eat 
healthy, manage stress and so forth, there is growing 
evidence--in fact, the CDC's Community Guide Task Force has 
just done a literature review of worksite health promotion 
programs and came to the conclusion that there is strong, 
sufficient, and in many cases strong evidence to support the 
notion that you can actually reduce risks in many of the risk 
factors and also have a positive impact on healthcare 
utilization and worker productivity.
    And then, finally, our research over the past 20 years has 
focused on the notion of return on investment. We have been 
funded by companies and other sources to look at whether these 
programs actually save money above and beyond what they cost.
    And our analyses done in private sector with increasingly 
proved methods overtime have shown that many of these programs 
due actually produce a positive return on investment--medium 
value, somewhere around 3:1, but if you use better methods, 
more rigorous methods, the ratios are closer to 1.5:1 to 2:1. 
And what that means is that for every dollar you invest, you 
get somewhere around $1.50 to $2 back on that investment over a 
two-to four-year period.
    In fact, we just published a study in last month's issue of 
the Journal of Occupational and Environmental Medicine using 
better methods to evaluate the return on investment in a 
worksite program--this is with Highmark, a health plan in 
Pennsylvania--and our conclusions were that that program 
achieved a $1.65 return on investment for every dollar that 
Highmark invested in the program.
    So to summarize, I think there is a growing body of 
evidence that prevention and health promotion in all three 
categories--primary, secondary and tertiary prevention--more so 
though in primary and secondary--can not only improve the 
health and well-being of the population, in your case the 
military, but also have a positive financial impact on 
healthcare utilization, healthcare costs--in our terms, 
productivity, but in your terms, readiness.
    And again, I want to thank you very much for giving me the 
opportunity to testify this morning.
    [The prepared statement of Dr. Goetzel can be found in the 
Appendix on page 77.]
    Mrs. Davis of California. Thank you very much. We 
appreciate your being here.
    Dr. Casscells, let me just start with you. We talked about 
the fact--and you mentioned as well--that in the 1990's we 
began moving beneficiaries out of the military treatment 
facilities and into a TRICARE program.
    I am wondering if you were to build that program today--if 
we were to just try and erase the slate and think of how you 
would do that today, things being different than they are--what 
would you do? How would you build that? Is that the direction 
that you would go? Or is there something quite different, if 
you can think out of the box, if you will, about how we would 
go about doing that?
    Dr. Casscells. Madam Chairwoman, thank you for the 
opportunity. We, in fact, have taken a white sheet of paper--
clean sheet of paper and, with support from Dr. David Chu, the 
Under Secretary for Personnel and Readiness, our TRICARE 
director, Elder Granger, has gathered a number of experts and 
the first meeting to redesign the system is, in fact, coming in 
a few weeks. And we appreciate Mr. Kildee's coming to that and 
giving us his thoughts about it, but the opportunities there 
are to do many of the things that Dr. Wilensky addressed.
    For example, information sharing: We all know that there 
are many mistakes in medicine. There are, you know, maybe close 
to 100,000 preventable deaths. The military is not perfect, and 
while we have people working hard and trying diligently to use 
ATA--a not very responsive health informatics system--we need 
to do better in that, and we need better remote decision 
support in our routine care.
    In the prevention aspects, you know, we are pleased that we 
exceed the civilian sector now in colonoscopy and pneumonia 
vaccine and influenza, but influenza--we had to order people to 
take it. And pneumonia vaccine--the Army is paying people cash 
to take the pneumonia vaccine, because there was resistance to 
it.
    So, we are seeing some flexibility and some innovation. 
This is the kind of thing we call ``pay for prevention,'' which 
we hope to get in a redesigned system. Pay for performance, of 
which pay for prevention would be a part, as we redesign this, 
should have incentives for the commander, for the team, for the 
patient, for the nurse and doctor so that everyone has the same 
goals and everyone has some extra reason to perform besides the 
sense of duty, which drives so much of what, you know, military 
personnel do.
    Mrs. Davis of California. Can I interrupt for a second? Are 
you seeing that it is more in the military treatment facilities 
or something that integrates more with TRICARE? I mean is it, 
because there are things we can't control----
    Dr. Casscells. Yes, ma'am.
    Mrs. Davis of California [continuing]. In that arena.
    Dr. Casscells. Starting with the local issues and backing 
up just the way Dr. Wilensky's saying, we need an integrated 
system where at least there is bi-directional information 
exchanged that is transparent between our purchased care and 
our military treatment facilities, and we know that that has to 
occur locally. Central guidance is awfully important, and a 
nudge from this committee in this direction would have a 
significant impact in accelerating this work.
    Because we in the military tend to be cautious--when we are 
not sure, we become cautious. So this is a hallmark of the way 
we do things, so a nudge would be helpful. But I think I will 
not get into details such as whether we should make people 
choose between the MTFs and purchased care and whether they can 
go back and forth. My hope would be that once the incentives 
are aligned and the metrics are aligned--the outcome measures, 
as Dr. Wilensky mentioned--that, in fact, people could go back 
and forth between private care and military treatment facility 
care with their portable records with a clear sense that they 
are the owner of their care; that they have some responsibility 
for their care; that they have choices in their care.
    This kind of opportunity is possible in this system where 
97 percent of our enlisted have a high school degree or 
equivalent degree now. All of our people are computer literate. 
They have a great sense of responsibility, and so I believe we 
can be in the lead in patient accountability, doctor 
accountability, nurse accountability, alignment of incentives, 
but your guidance on this would accelerate this.
    Mrs. Davis of California. Thank you. I am going to go ahead 
and move on.
    Mr. McHugh? I know we have a number of members here, and I 
want to be sure that they all have a chance to ask some 
questions.
    And Dr. Wilensky? I know I have a number for you and also 
for Dr. Goetzel.
    We will move on and, hopefully, come back and have a few 
rounds. Thank you.
    Mr. McHugh.
    Mr. McHugh. Thank you, Madam Chairman.
    Dr. Casscells? I heard you reference the VSOs. I want to 
make sure I understood what you said. Are you telling this 
panel that the VSOs support the fee increases that are 
contained in the DOD budget proposal?
    Dr. Casscells. Sir, the VSO leaders I have spoken with are 
not in favor of an abrupt increase of fees, co-pays or 
deductibles, cost sharing of any kind that would catch up to 
the past 12 years where they have been flat or that would make 
military care more expensive than the private sector. But all 
the ones I have spoken with have said they recognize that you 
can't go for another 10 years without some increase in fees and 
co-pays and deductibles, because they know at some point this 
will eat into theater care, combat casualty care and force 
readiness.
    So they are in favor of a cost-of-living--what they tell 
me, sir, is they would accept a cost-of-living index, gradual 
increase in co-pays and deductibles----
    Mr. McHugh. If you could get any of that in writing, I 
would love to see it. And I am not questioning. I didn't mean 
it quite the way it sounded. I am not questioning that, but I 
think they are an important part of this equation----
    Dr. Casscells. Sure.
    [The information referred to can be found in the Appendix 
begnning on page 99.]
    Mr. McHugh [continuing]. And you understand that, and I 
think it is important to go forward with a precise 
understanding of what their tolerances are and what they 
believe is correct--not to say they are absolutely correct one 
way or another--but that is an important part of the 
discussion.
    So, to the extent we can have that formalized, that would 
be helpful.
    Dr. Wilensky? As I read your report, and as we had 
discussions, the fee increases for the under 65 retirees does 
not really demonstrably add to the bottom line of the defense 
healthcare system. In other words, it is not the revenues that 
is the factor here, it is the avoidance of utilization. Is that 
correct?
    Dr. Wilensky. There are two purposes: One is if you do not 
start having gradual increases in the enrollment fees and some 
changes in the deductibles, because of the growth in healthcare 
spending, you will gradually approach the point that the 
military pays everything. Period.
    So you have frozen in an absolute dollar sense all of these 
contributions since the program was--I don't mean you the 
Congress----
    Mr. McHugh. I understand.
    Dr. Wilensky [continuing]. But these have been frozen since 
1995 when the program was introduced. Because of the growth in 
healthcare spending, the contribution by the individual will 
approach zero over time if you don't start that clock.
    Mr. McHugh. But the net positive in terms of a budgetary 
perspective is not the income that is received through the 
increased costs, it is the cost avoidance and nonutilization of 
the program. That is the Department's assumption. I am just 
trying to----
    Dr. Wilensky. I want to make very clear, the Department 
does what the Department is doing, and we----
    Mr. McHugh. Do you agree with the Department's assumption?
    Dr. Wilensky. We agree with some of the issues they have 
raised. We have not mimicked their proposals. What we are 
looking at is partly to restructure the benefit. The reason I 
am hesitating is enrollment fees do not affect utilization. Co-
payments affect utilization and deductibles. Only when you get 
within the range of where you are crossing the deductible 
affect utilization.
    Enrollment fees, like premiums paid in the private sector, 
affect the relative shares of who pays the bill. It doesn't 
affect behavior. When you want to affect behavior, you do it by 
affecting co-payments or co-insurance rates or the pharmacy 
tiering that we talked about.
    So we are recommending two different types of changes in 
the financial arena: one is to try to bring back some of the 
original share between the military and the beneficiary as to 
how this benefit should be financed--overwhelmingly by the 
military, but not 100 percent by the military. We are also 
trying to use financial incentives to change behavior.
    Part of that is why we have introduced changes in the 
pharmacy benefit where we are incenting by spreading the 
differential costs between using preferred drugs then other 
drugs and between using the lowest cost place to get them, 
which is mail order and other places to get drugs and also co-
pays.
    So we are both changing the financial arrangements to try 
to put the military health program in a little better financial 
state. Otherwise, what is going to happen is this benefit will 
basically be funded entirely by the military. It is largely 
funded by the military. It will always be largely funded but it 
is going to be 100 percent effectively funded if you don't 
start having the beneficiaries' contribution increase.
    That is not to change behavior. With all due respect to the 
Department, there is nothing they are going to do which is 
going to make TRICARE more expensive than what goes on in the 
private sector. So I know they have used that argument. I don't 
know what they are thinking. I don't agree with it.
    Mr. McHugh. Well, that is--okay.
    Dr. Wilensky. Okay. And I have----
    Mr. McHugh [continuing]. Don't agree with it.
    Dr. Wilensky. I don't agree that it will make TRICARE more 
expensive and, therefore, less attractive than what goes on in 
the private sector. Nothing that I see being talked about 
begins to approach that. I do think you can make the TRICARE 
benefit more financially sustainable, which is what we have 
suggested doing and also incent better behavior in the sense of 
how you would like to see the beneficiaries choose the 
pharmaceuticals or, in general, engage in the use of 
healthcare. That is generally why you have co-insurance and co-
payments.
    Mr. McHugh. I thank the chair for her patience, because 
that was the crux of the question, because that is a 
fundamental assumption of the Department's proposal, and if it 
is valid, it is important to know. If it is, in your opinion, 
not valid, it is important to know, and I appreciate your 
comments.
    Thank you, Madam Chair.
    Mrs. Davis of California. Thank you. Mr. Kline has left.
    Ms. Drake, you are next.
    Mrs. Drake. Thank you, Madam Chairman.
    Well, first of all, thank you all for being here. And I 
just want to get a few things straight in my mind, because I 
think the population we are having this discussion about and 
the people that approach us and are so emotional about this 
issue, are our retirees who aren't able to get in TRICARE for 
Life yet--in that age bracket.
    First of all, everyone agrees that military offers 
wonderful medical care. People I talk to love TRICARE for Life. 
They think that is an excellent program. So just a couple 
questions that I have, because the time I have been in Congress 
we have this discussion year in and year out on this committee 
about the cost and how we deal with the cost.
    So, and I have asked before, what are we telling new 
enlistees? Because I think the real problem here are the people 
in that middle bracket not old enough for TRICARE for Life who 
believe they went into the service with the understanding their 
benefits would be taken care of, and that is why they are such 
a key component. This is really, really emotional for them, 
because they feel like the rules are being changed.
    So, is there a cutoff point where people who came in after 
that were told something different and were told to expect 
these types of fees, deductibles and co-pays, because it is 
really a matter of expectations and what people thought they 
were doing and what they thought they were getting.
    And I know we are treating everybody the same, but my 
question revolves around is there a way to separate them into 
two categories: people who truly had the expectation their 
healthcare would be paid for and newer people coming in who 
don't have that expectation? So that is one question.
    I thought it was great when we went to the reservists being 
able to be in TRICARE, because this idea of going in and out of 
a healthcare system based on whether you are activated or not 
made no sense to me.
    My second question would deal with is what they are paying 
for TRICARE when they are not activated--when this is optional 
for them--is that an appropriate amount, or are we looking at 
that amount--and there again not to make it more than or even 
the same as healthcare in the private sector. And then just the 
last issue that hits me, and it sort of backs up the 
chairwoman's question, is about the military treatment 
facilities. Because I also hear from people that they are very 
offended they have to go into the private sector.
    They would like to be able to be treated at Portsmouth 
Naval Hospital, and they aren't able to do that. So, going back 
to 1995 and looking at what was done then, would it have been 
better to have given people the option of remaining in military 
health treatment facilities or making a choice to go into the 
private sector and paying for that, you know, for that option 
if they want to use a civilian doctor? Because I can't imagine 
that the costs are less by going into the civilian population 
with what our doctors are paying for today in liability costs 
and all the fees that are associated with even being reimbursed 
by TRICARE.
    I mean, as a former realtor, when I walk in any medical 
facility, I say, I cannot believe the square footage and number 
of people just to get reimbursed and so much of that is 
government reimbursement that we don't have an easier way to do 
it.
    So I know that is a lot of questions, but I will stop 
there.
    But Dr. Casscells? I haven't been talking to the people you 
have been talking to who want their premiums raised.
    Dr. Casscells. Congresswoman, thank you. A couple general 
points and then more specifically--first, thanks for the kind 
words about the military treatment facilities. Not everyone 
realizes, as you do, that the inpatient care has generally been 
superb despite the demands of the longest war in our Nation's 
history and the frequent deployment of one's favorite doctor 
overseas, and your appreciation of that--like the patience of 
our service members and their families--is very appreciated.
    There are still areas where we are not able to provide 
adequate care. A small facility may have their only 
psychologist and psychiatrist deployed, and they may have to 
drive, you know, 40 miles to see someone if they are in need of 
counseling. So there are issues about, you know, understaffed, 
skeleton-staffed facilities, which we are struggling with.
    Certainly, you, from your constituents, will hear from a 
different subset than we hear from. We are actively canvassing 
asking for complaints of all kinds. We hear relatively few. We 
post every one on our Web site, and I am out there walking the 
deck, trooping the line every day trying to solicit more, 
because of this tradition in the military where people tend not 
to complain until they just can't take it any longer.
    And you see a different part of the elephant. You are going 
to get the constituent complaints, and that is important, so we 
need to hear them from your staff, and thank you for when you 
have sent those over. We appreciate those. We follow up every 
one. And if you don't hear back from us, let me know right 
away.
    As regards to the cost issue, overall, you know, the 
chairwoman alluded to the 7.8 percent of the DOD budget, which 
is healthcare. This compares favorably to the 17 percent of 
Gross Domestic Product (GDP), which is healthcare in the U.S. 
But we are trying to prevent this from becoming a runaway train 
here, and so, we are trying to be careful with these costs.
    Certainly, the people--to get more specific with your 
question--the guys and gals who served 20 and 25 years ago, 30 
years ago for a much lower salary and far inferior benefits--
many of them, you know, on a draftee basis--certainly feel that 
they got a promise, explicit or implicit, that they would get 
care for life. And many of them will say this promise is not 
being kept. You can refer them to the fine print, and they 
don't appreciate that.
    So if there is a way that we can do more for them in this 
valley between active duty service or Reserve service--as a 
reservist, I know exactly the issue, and before you get TRICARE 
for Life, we would like to hear about that. It is a weak spot 
and some assistance in this area would be appreciated.
    So the answer is yes.
    Mrs. Davis of California. Thank you.
    Dr. Snyder.
    Dr. Snyder. Thank you all for being here.
    Is it Dr. Goetzel?
    Dr. Goetzel. Yes.
    Dr. Snyder. I think you are all here today as primarily 
talking about health promotion, and I appreciate your 
perspective, but I thought you might be a good person to ask--
do you think investing in medical research through military 
medicine, through the Pentagon--is that a good investment of 
taxpayer dollars?
    Dr. Goetzel. I am a proponent of research----
    Dr. Snyder. I am too.
    Dr. Goetzel [continuing]. Because I am a researcher myself, 
and I am a proponent of conducting research in applied 
settings--in real life settings. So I agree with Dr. Wilensky 
when she talks about doing pilots and demonstrations to test 
out some of these ideas in real world settings. So, yes, I 
would be a proponent of doing that kind of research with the 
military----
    Dr. Snyder. Now, I took Dr. Wilensky to be pilots kind of 
in healthcare delivery, not necessarily basic science research, 
although I think we underfund healthcare delivery models too, 
but I agree with her on that.
    I wanted to ask--and this will be your softball question 
for today, and maybe I will start with you Dr. Wilensky.
    We always like to hear from you, because you have such a 
long history of experience and a varied background. But, am I 
wrong--it seems to me that Dr. Casscells' job is really one of 
the toughest ones with regard to healthcare. When you look at 
other things--the Medicare program--right away we all have a 
sense of mind, what is the typical Medicare patient? Well, they 
are generally older. You think about, okay, Medicaid, we have a 
sense most of it is poor children or nursing home people, but 
Dr. Casscells literally has to run a worldwide program dealing 
with all ages. I mean, he has to come here prepared today for 
me to say, ``I have an 87-year-old military retiree that this 
happened to. I have a young couple just enlisted and they have 
a five-year-old child with autism.'' I mean, just this huge 
perspective, and yet, we want the system to be almost perfect 
because we care so much about our military families and 
retirees.
    Am I correct to say--and it is not much of a question, but 
I mean it really is a challenge that we are laying on Dr. 
Casscells here because of the breadth and quality that we 
expect out of the system. Is that a fair statement?
    Dr. Wilensky. It is, and you have used some good examples. 
If you think about the VA, the VA tends to concentrate on 
certain age groups. It has been heavily male in its focus--it 
will be less so in the future, but still--and it has tended to 
be heavily focused with populations that have certain kinds of 
service-connected disabilities and now an aging population at 
that.
    The military, because it is both active duty and retiree, 
does cross the age span. For the over 65--most of the TRICARE 
for Life is primarily driven by what goes on in Medicare. The 
military becomes a wraparound, a very generous wraparound, but 
a wraparound to Medicare. So it is mostly--as I look at it--in 
the under 65 population, but it includes active duty and 
retirees.
    Dr. Snyder. This was----
    Dr. Wilensky. It is one of the reasons why this integration 
is such a good idea, in my mind, between direct care and 
purchased care, because you have so many varied experiences. 
People shift where they live, bases change, et cetera.
    Dr. Snyder. You can't do it without having some kind of 
blend like that. I think this has really brought home to me--I 
was talking some years ago now with a family who had a child 
with some fairly severe psychiatric problems--a fairly major 
diagnosis--and so Dr. Casscells and his folks can set up this 
perfect healthcare system for that family and patient and then 
two years later, they are transferred, or the next year one of 
the parents is mobilized for 18 months, and then you have the 
whole issue of the family dynamic.
    And I think it is a challenge for us sometimes, I think, to 
get a handle on all the specific issues. Maybe a lot of Members 
of Congress--we get a feel for it because we hear from families 
about what happens, but I think it is hard to judge this 
program with how we do other programs because there is not the 
typical military patient.
    I wanted to ask one specific question, Dr. Casscells. What 
is the status of military-to-civilian conversions now in the 
different branches?
    Dr. Casscells. Dr. Snyder, as you know we are trying to get 
everybody over there who hasn't had a chance to serve, and this 
does require to backfill at the military treatment facilities. 
To this end, there has been a multi-year effort to shift some 
positions to be permanent civilian positions, you know, 
radiation therapy for cancer, for example--or to purchase that 
downtown in the private sector.
    Having said that, our surgeons feel that has gone far 
enough--the military-to-civilian conversion of billets. In 
going through the detailed analysis with them, I feel we are 
about at the point where we have done what we should be doing 
in that, and there is not a lot of savings to be got by pushing 
that much harder.
    We are trying to get some of that done this year. We may be 
at about the right balance now, this year.
    Mrs. Davis of California. Ms. Tsongas.
    Ms. Tsongas. Thank you very much.
    Secretary Casscells? I have a question. This committee 
recently traveled to Camp Lejeune, and I had an opportunity to 
visit the Marine Corps Wounded War Battalion along with many 
others and sat with a young Marine who had been hit by an 
improvised explosive device and was going to be medically 
retired from the Marine Corps.
    This young man had been classified 85 percent disabled, and 
he was still suffering from his injury. He was about 20 years 
old. So, my question is, in considering the future of our 
military healthcare system, what long-term strategy is 
beginning to evolve for the care of these young medical 
retirees.
    We can imagine that his needs may go well into his 
adulthood and beyond. The cost could be tremendous, and I think 
particularly in light of the discussion we have been having 
about preventive care--how do we anticipate and plan for and 
prevent sort of worst case scenario around these kinds of 
situations?
    Dr. Casscells. Congresswoman Tsongas, thank you. You know, 
the Marines have borne an extraordinary burden in this war, and 
it is to their everlasting credit that the Marine family has 
embraced them and nurtured them to recovery, and they feel 
like--even as they retire medically--they are Marines for life.
    But esprit de corps doesn't help you get to the lavatory or 
hold a job. So we are watching this very closely, making sure 
that all of our medically retired personnel have had all of the 
vocational rehabilitation opportunities they can have, because 
the most important single thing is to have a job.
    It is better than having an inheritance. It gives you a 
reason to get up in the morning, and it keeps families 
together. It keeps people from drinking, and so this is the 
key. And of course, they get healthcare; their family gets 
healthcare when they are 85 percent disabled, but the main 
thing is to have a mission still.
    And while they are recovering, their mission is to recover, 
and they stay in, and they put the uniform on. They go to 
formation. They have their disciplined routine, and they have 
their standards. And it is when they transition to the civilian 
sector we have a special obligation--I think that is what you 
are alluding to--to follow up on them, and we have new 
procedures in place to do that so that we don't have any lost 
sheep.
    An example on the Army side, which I am, is the people who 
go home as an Army Reservist, even without an injury but with, 
you know, combat stress, and they are not close to a VA, and 
there is no TRICARE provider in their neighborhood or their 
TRICARE runs out, and some of those people are lost sheep.
    There are a lot of them out there. So we are actively 
looking to bring them home and to make sure that they are 
getting the counseling and particularly the job assistance that 
they need so that--as Secretary Gates said, we owe them the 
best facilities, the best care and the help they need to move 
on to the next step in their life if that is what they choose 
to do.
    So we have no higher priority. We can't give great 
inpatient healthcare and then say, you know, send me a 
postcard. You have an obligation to follow up. So we certainly 
intend that, and I know you will hold us to it.
    Ms. Tsongas. I would like to ask Dr. Goetzel the same 
question, because I can imagine that the cost will be great if 
we don't engage and seriously think through how to provide 
preventive care. This young man, for example, had lost his 
sense of balance. He had to walk with a cane. Long term it is 
hard to know. It is hard to know how quickly, if ever, he will 
fully recover, so a job alone may not--obviously, it is very 
important, but as a country, we really don't know yet the long-
term medical costs of this. And I don't know if you have any 
thoughts about how we should be thinking about this for our 
medical retirees as we go forward given how very young they 
are.
    Dr. Goetzel. I agree with Dr. Casscells that the disability 
management and rehabilitation services that are being provided 
are essential and especially in terms of providing purpose and 
mission. And one of the most important things psychologically 
is to give people, soldiers in particular, who have been hurt 
the sense of the duty that they have to fulfill, and that they 
have to continue working, and that they are complete citizens 
and complete contributors to society.
    So the work that is being done in rehabilitation is 
essential. My focus is much more upstream in terms of just 
basic day-to-day health habits that people have even before 
they enter the military. Things that, in the long term, may 
have very detrimental effects on their health and well-being. 
Things like smoking, being sedentary, not eating properly, 
being overweight--doing many things, drinking too much and so 
forth--many things that potentially may harm them whether or 
not they are affected by combat directly.
    And in many ways that is a significant burden. It is kind 
of a silent burden on the military that is not as apparent as 
somebody who is injured in battle.
    Ms. Tsongas. Thank you.
    Mrs. Davis of California. Ms. Boyda.
    Mrs. Boyda. All right. Thank you.
    Thank you so much. This is just the number one issue 
whether it is private healthcare, military healthcare, so I 
have a number of questions, and I am going to try to go 
quickly.
    Just for the record, I would like to just know what the 
satisfaction levels are for TRICARE, and I would like to see a 
comparison among the three regions. I will just ask that for 
the record, please.
    Real quickly, because I have another--when you say we are 
7.8 percent of--we spend on healthcare, what does General 
Motors (GM) spend? Not GM, bad example. What does Motorola 
spend on healthcare? What is their percentage, generally?
    Dr. Goetzel. I am not sure I can translate it directly as a 
percent, because there are many other benefits, but I can give 
you a dollar value for that. Today, the average American 
company is spending roughly $9,000 for every employee in 
healthcare benefits, and----
    Mrs. Boyda [continuing]. Seventeen percent GDP, and that 
just didn't seem like an apples-to-apples. If you have 
something for the record--if you could just get back, I would 
be curious about that. It is not a have to do, just more 
curiosity.
    The real question that I have is very specific, and if I 
have another chance, I would love to come back and talk about 
broader issues, but the issue of mail order pharmacy has been 
something--my background is coming from the pharmaceutical 
industry from a research and development standpoint, and just 
mail order pharmacy is something that has always kind of 
concerned me.
    When I look at your recommendations here, you have got a 
30-day retail supply up against a 90-day mail order supply, and 
I wondered from an economic standpoint, have you evaluated--
people tell me that mail order is cheaper. You know, and I am 
going, wait a minute, you have got apples-to-kumquats or 
apples-to-something else, but why do we think that 90-day mail 
order--you know, we are losing--I represent a rural, rural 
district, and of course, I am coming from we are losing that 
person who is part of our healthcare team.
    What data do you have to suggest that this is cheaper?
    Dr. Wilensky. We can provide or have the task force staff 
give you the information that is available, but in a more 
intuitive, common sense way, the reason it is cheaper is 
because what you need for mail order is basically a big 
warehouse facility with minimal staffing----
    Mrs. Boyda. And minimal interaction with human beings as 
well.
    Dr. Wilensky [continuing]. As opposed to what you need for 
a retail distribution site. This is an issue, and I am going to 
encourage you because you are rural--one of my many other hats 
is that I am a trustee for the United Mine Workers Health and 
Retirement Fund, and they are quite substantial users of mail 
order for maintenance drugs.
    Mail order does not make sense for all drugs, but for 
maintenance drugs where either once you are on you are on for 
life or you are on for three or five years until your 
healthcare professional wants to try to some other combination, 
really are drugs that you need to have on a regularized basis. 
Chronic disease being the issue it is, those are really where 
you have just the savings, but again, the savings come from not 
having the support structure you need----
    Mrs. Boyda. My question is if you had a chronic drug that 
was filled at a retail pharmacy, do you have the data to--how 
much does that cost? Because we have got 30 days--clearly you 
are filling a prescription three times as often. But for 
chronic drugs--obviously, we are talking chronic drugs--do you 
know that it is that much cheaper?
    Dr. Wilensky. The cost, again, is cheaper because of the 
support structure that it takes will have provided what it is. 
We did not try to assess the cost as a task force. We used the 
information that was available elsewhere.
    Mrs. Boyda. Right, and I would suggest that there may be a 
great deal at stake for the person--for the one or two mail 
order facilities that are around. I would very, very, very much 
like to see an analysis of how that actually works. And again, 
we are also talking about, you know--as you well know, if my 
pharmacy from Chanute actually talks to my pharmacy from 
Parsons to get a better price, that is considered anti-trust. 
So we are, in fact, trying to do something about that to say 
that our small community pharmacies can, in fact, come together 
to get better pricing as well.
    So you are kind of doubly at a disadvantage. Your retail 
has to fill every 30 days, and then they clearly don't get a--
the other question that I would have too is when we are looking 
at mail order--and I have seen degradation curves of what 
happens at high temperature in literally 24 and 48 hours. Do we 
take that into consideration?
    Dr. Wilensky. I will, in addition to have the staff, see 
whether I can have the executive director from the UMWA Fund 
provide the information--because again, as I have indicated, 
they are, because of where their retirees are, primarily rural 
and come up with some of the same questions where, for their 
populations, you have the tradeoff between a social visit as 
well as a medical need being filled and the mail order--but 
provide you with the information that they have in terms of why 
they are encouraging on a fixed budget the use of mail order 
where appropriate, which is maintenance.
    Mrs. Boyda. I think we are out of time, but yes. And I 
would also appreciate anything that DOD has regarding that, 
actually that is my bigger concern. Thank you very much.
    Dr. Wilensky. I will ask them.
    [The information referred to can be found in the Appendix 
beginning on page 99.]
    Mrs. Boyda. All right. Thank you.
    Mrs. Davis of California. Thank you. We have an adjournment 
vote coming up. I think we can get in one more question.
    Mr. Jones? If you could ask a question quickly. We have 
about 11 minutes left to go.
    Mr. Jones. Just two or three points. First of all, Dr. 
Casscells, I appreciate you and your associates being here, and 
I couldn't help to remember three or four years ago when Dr. 
Winkenwerder came to my office and said, ``Congressman, we have 
got a balloon that is about to explode. We can't continue this 
process as it is,'' as it relates to the issues we are talking 
about today.
    And I said to him--the somewhat of a line that Mr. McHugh 
was talking on--I told him, I said, ``Let me tell you, I hope 
you have got a great public relations staff, because once the 
word gets out,''--in fact, two years ago, it was Congressman 
Chet Edwards and myself put in the bill, and we had over 300 
people to join us in the House to say, ``No increase in fees.''
    This is a huge problem. Our Nation is in very bad financial 
shape. We all know that. We know you have answered my 
colleagues, and I listened very intently that the problem is 
growing and you have got to somehow deal with it. But I will 
tell you truthfully--Mr. McHugh was so right--you have got to 
reach out to these VSOs.
    They have the contacts that we don't have, even though we 
go in our district and we know our veteran's groups; we meet 
with them; we listen to them, but when you really come down to 
it, if there is going to be any movement one way or the other, 
I am telling you, you have just got to really reach out.
    And, Dr. Wilensky, this issue that Congresswoman Boyda was 
talking about, I hear from pharmacists all the time. I have a 
rural district. I have Camp Lejeune down in my district, Cherry 
Point Marine Air Station, and from time to time, they will call 
me or I might go into the drug store, and they will say, you 
know, ``What in the world is the Federal Government doing? Are 
they trying to put me, the local pharmacist, out of business?''
    I want to work with you. I am not trying to be against you. 
I want to make that clear, but this is going to be a tremendous 
job of convincing those men and women who wore the uniform that 
this is not a Washington, D.C. game. This is reality. And I 
will tell you that I have them say to me all the time, ``How in 
the world--you can do nothing about this, but how in the world 
do you all find the money to send overseas? And yet you can't 
take care of my medical needs.''
    And I really, as this moves forward--and I know we will 
have more hearings, and I thank the ranking member, and I thank 
the chairman, but I really think that this country--the White 
House down to the Congress--better understand when you increase 
foreign aid three or four percent every year, send it overseas, 
and then you tell the retirees you are going to have an 
increase in your fees, it just doesn't wash. It just does not 
wash.
    Now you can't do anything about what this Congress votes 
on, at least I know that part, but I am just saying that this 
is going to be extremely important that you inform that this is 
a critical situation. I don't mind telling you I have spent 
much of my time in my district recently telling people that 
when you have to borrow money from foreign governments to keep 
your doors open as a government, it won't last long.
    And I think that with this issue that those who wore the 
uniform for this country--they want to be patriots just like 
they were when they went overseas for America--but they have 
got to be told the true story. And they don't need to be seeing 
in 2005 where we sent money to Switzerland--you can't do 
anything about it, but how in the world does this country send 
money to countries who have a surplus and we have a debt. It 
doesn't make any sense, but we are in the minority--can't do 
anything about it, but maybe the majority can.
    But again, I really can't add anymore than what my 
colleagues have said more articulate than I have, but I can 
just tell you that we know it is a problem. We know there has 
got to be a fix to the problem, but you better bring in the 
VSOs to sit down with your people before you even come back to 
Congress and say, ``This is where we are. What can you do to 
help us sell the American retiree and the veterans on the fact 
that we don't have the luxury of time to take care of their 
needs,'' and they deserve to be taken care of.
    Thank you for letting me preach for just about three 
minutes. I appreciate it.
    Thank you, Madam Chairman. Thank you.
    Mrs. Davis of California. Thank you, Mr. Jones.
    We are going to go vote and come back. There is only one 
vote, so it shouldn't take too long. I would ask people to 
please come back. We would like you to come back with 
questions. And staff can help out if you need phones or any 
place to go, please. We should be back shortly. Thank you.
    [Recess.]
    Mrs. Davis of California. Thank you, everybody, for being 
back. We will resume.
    Ms. Shea-Porter.
    Ms. Shea-Porter. Thank you very much. I just have two short 
questions here. I know that is what we all say, but it really 
will be short.
    And this one is for Dr. Casscells, please. I want to know 
why Wal-Mart and other companies can offer prescriptions for $4 
co-pay and the proposed co-pay is $15 here, and what are they 
doing that we could do differently?
    Dr. Casscells. Mrs. Shea-Porter, thanks for that. We have 
got to learn more about that. It is as big a surprise to me as 
it is to you. Obviously though they are talking about generics. 
Obviously, they are talking about a program that they are 
rolling out, and they may be able to sustain a loss on that for 
a while.
    I am not sure that they can sustain that. We do, thanks to 
the Congress, have Federal pricing now. And this ought to 
enable us to reduce our pharmacy costs, and in combination with 
incentives for mail order pharmacy, we may be able to compete 
with Wal-Mart.
    Whether we can compete with $4, even on a generic, that is 
a real challenge. I am still not sure----
    Ms. Shea-Porter. Well, do you think we should be asking 
them or at least looking to see if it is a model that we could 
use considering the cost that we incur yearly in prescriptions?
    Dr. Casscells. Yes. I think that is very reasonable. And I 
think the other thing is I hope they will invite us to go over 
there and learn from some of the things they are doing well. 
They obviously have found some efficiencies, and you know, this 
business they have now with ready clinics and minute clinics in 
the Wal-Marts and the Walgreens, this is very popular with 
people.
    So there are things we can learn, and we intend to try to 
learn from them.
    Ms. Shea-Porter. Yes. I would say instead of hoping they 
invite us, I hope that we call up and check, because this is 
difficult, and every dollar that we can save a retiree or 
anybody related to the military, I think we have to make the 
effort.
    The other question I wanted to ask you was, I am aware of a 
case because it is a relative of mine actually who had to leave 
one state to go to another state because she needed some 
surgery, and the hospitals around her were not either accepting 
TRICARE or would not reimburse in full, and so, she was forced 
to travel, not the 40 miles that you talked about earlier for a 
psychologist, but literally hundreds of miles for medical care.
    And I know that you have heard these stories before, and I 
wondered what you were doing to address that, because basically 
what happened was she found a hospital that was a teaching 
hospital, and the taxpayers of another state picked up the 
cost. How much of that cost for our military veterans and their 
families are we shifting onto, you know, other taxpayers?
    Dr. Casscells. Mrs. Shea-Porter, I don't have the answer to 
the last part. We will have to get back to you about that if we 
can. I am sure we can. As regards to this commonly encountered 
problem where there is no care locally--and everyone wants top 
quality care around the corner, naturally, and they want it 
covered as a military health benefit.
    And what I can say is that thanks to the efforts of General 
Granger and the governors who have been very good about urging 
their doctors to take TRICARE, we now have--in most states 
about 90 percent of doctors are willing to take TRICARE or at 
least they are signed up.
    Now, they may not be actively recruiting TRICARE patients. 
They may not be doing cartwheels when a TRICARE patient comes 
in the door, but most of them have enough patriotism, that they 
are willing to surmount the paperwork. TRICARE is a bit onerous 
still. We are working to reduce the paperwork burdens, and 
General Granger has authority, thanks to you all, to go above 
Medicare by 5 or 10 percent if that is what is needed to 
persuade people to sign up for TRICARE.
    So all these have to be done locally, and every one of 
these situations, we follow up. So, ma'am, if you will give me 
the patient's name, we will follow that up today, and we 
usually can get that resolved.
    [The information referred to can be found in the Appendix 
beginning on page 100.]
    Ms. Shea-Porter. Yes. It was resolved, because she was 
willing to travel, and her husband was willing to travel and 
stay with her and people in the next state were willing to take 
care of her, but it was onerous obviously, and a lot of steps 
involved--childcare--everything was too much of a strain, I 
think, to ask for somebody who has cancer.
    So, I do want to thank you for the work that you are all 
doing and for paying such attention to this and for coming 
today, and I think that if we work together and we hear these 
stories and we concentrate on them, we can improve the level of 
care. So thank you.
    Mrs. Davis of California. Thank you, Ms. Shea-Porter. And 
we are going to go back to our rounds. I wanted to go back to 
an issue to clarify, because I think that it has certainly been 
touched on.
    But looking at the structural implications of raising fees: 
Will the additional fees that are generated or the funds that 
are generated by raising fees go back into the military health 
system, or will they go someplace else?
    If the fees have some of the effect of reducing demand--
which I am not sure that that basic assumption necessarily 
holds water--for care in the military treatment facilities and 
driving beneficiaries out of TRICARE toward other insurance, is 
this then going to reduce the funding and the resource 
allocation that is going to our military treatment facilities?
    And if the beneficiaries are as fond of TRICARE as your 
survey suggests, then what makes you think that they would 
leave TRICARE even if the costs increase? If they like it that 
is a calculus that they have to entertain.
    So what happens to this money? And it seems like we are 
going to enter into a spiral here in terms of being able to 
actually do what is appropriate by the military treatment 
facilities.
    Dr. Casscells. Madam Chairwoman, we see eye-to-eye on this. 
I think it is critical that savings that are realized stay in 
the system. More particularly, we need to guarantee that the 
people who achieve these savings on a local level--which is the 
commander, the doctor or nurse practitioner and the patient--
are beneficiaries either in cash or some other recognition of 
what they have done.
    Because, you know, for example, one of the things we 
learned in TRICARE is that when we asked commanders to collect 
the third party payments from patients who had that, no monies 
were collected until it became, you know, clearly believed that 
these would come back to the facility that collected those 
third party payments, and now that is actually working. So it 
is a local issue that needs central support from you.
    As regards the last part of your question, I agree with you 
that we are not going to have people leaving TRICARE for 
civilian care. That should not be a goal. The goal should be 
that people get high quality, cost-effective care that is 
convenient for them, and that they have some sense of choice 
and control because then they are more likely--you know, like 
they say in Texas, no one washes a rent car, you know. You take 
ownership of something where you have a stake in it.
    So if it just stays where it is now, without driving 
patients to private sector, I would be delighted, because we 
have to have a volume of care, particularly in the MTFs, to 
maintain excellence.
    Mrs. Davis of California. Right, to justify those 
facilities as well.
    Dr. Casscells. Yes, ma'am. If a cardiac surgeon does one 
case a week, he or she is not going to be as good. Same with a 
pediatric endocrinologist or whatever, that is why we put 
Walter Reed and Bethesda together--not to save money, but to 
have a critical mass to be excellent.
    Mrs. Davis of California. Dr. Wilensky? Can I ask you too 
then, whether that is consistent with the idea put forth in the 
task force report it said, ``military healthcare benefit must 
be reasonably consistent with broad trends in the U.S. 
healthcare system.'' Is that really our goal to have it 
reasonably consistent? Or is there something else that we are 
trying to achieve in the military healthcare system?
    Dr. Wilensky. Well, it needs to be reasonably consistent in 
the sense that individuals are providing services frequently in 
both settings the military and the private sector. Individuals 
are moving back and forth between the military and the private 
sector, and unless you think there is something fundamentally 
wrong with the trends that are going on in the private sector, 
you would want to have some kind of consistency.
    The attention in the private sector has been in trying to 
focus on clinical outcomes, quality improvements, improving 
patient safety measures, moving to pay for results--all of 
these being driven by the same factors that make our current 
position unsustainable in the broad sense both in terms of 
financial pressures and in terms of the value that we are 
getting. So it is within that kind of context that you want 
them consistent.
    I have already stated quite forcefully that with my 
knowledge of the Medicare benefits, my knowledge of the private 
sector benefits and my knowledge of the military healthcare 
benefits, there is no way that the TRICARE system on average is 
going to look less attractive than what is available in the 
private sector. So I don't think that is really a relevant 
issue. What I do worry about is whether or not it is going to 
be sustainable in the sense of not having major spillover 
affects on the rest of the Department of Defense.
    I have used the term--which I believe is that because of 
the differential growth rates that we see in healthcare versus 
everything else--that the same way the Medicare budget is going 
to become the PacMan of the Federal budget unless we can find a 
way to moderate healthcare spending growth, the health benefit 
is going to become the PacMan of the Department of Defense not 
because of gross inefficiencies going on in Defense relative to 
anywhere else, but because the rate of growth in healthcare 
spending for the Department of Defense is much greater than I 
foresee the growth in any other part of the Defense budget. It 
is just going to put a huge pressure.
    We are trying to help find ways to get as an efficient and 
effective system and a somewhat more sustaining financial 
system, but we can't solve that other broader problem that I 
just laid out, which is signaling; we recognize that it is 
there.
    Mrs. Davis of California. Yes. I appreciate that. I 
certainly appreciate the goals, but I think what we would all 
feel is that it does respond to a higher system in the sense of 
making certain that the care is there for the people who have 
served and perhaps does take a different mindset in some way.
    Dr. Wilensky. And we agree and we recognize and we try to 
be very clear in the report. We recognize the commitment and 
the sacrifice that people have made. The kinds of benefits that 
are being provided--we estimate, that we are talking in the 
90th percentile of the largest employers in the country. So, 
you know, you could say, well, it ought to be better than the 
best that exists anywhere, and if that is what the Congress and 
the American public want to fund, they can have it that way.
    It is already among the very best benefits that we were 
able to find described among the large employers who 
traditionally provide the best benefits, so we think that is 
appropriate. We just didn't think Congress meant to have zero 
or very close to zero beneficiary contributions to the program, 
which is why we made some of the changes, but again----
    Mrs. Davis of California. Can I ask you--just very quickly, 
Dr. Casscells mentioned trying to keep that local so that we 
don't bring the costs down to such an extent that a few years 
even henceforth that we would be in the same position that we 
are in today, essentially--that we brought the cost down, but 
we don't have the system to respond.
    Is that reasonable to bring those costs back locally, 
because then you are not being able to respond to other 
concerns in the DOD budget at all?
    Dr. Wilensky. I do think to bring it back locally makes 
sense. It is why we wanted to see the local commander medically 
empowered--to bring the purchased care and the direct care 
together in a more integrated way. Empower the local commander, 
give the person incentives and hold them accountable for 
showing what they have produced.
    Mrs. Davis of California. Thank you very much. We have 
about eight minutes left--another vote--Motion to Table 
Resolution, and so we should be back, barring another vote, 
immediately thereafter. We should be back in about 15 minutes.
    Mrs. Boyda. [OFF MIKE]
    Mrs. Davis of California. Sure.
    Mrs. Boyda. Thank you. I don't want to sound like a broken 
record but back to the pharmacy. How long do you think it would 
take to get that sort of an analysis done?
    Dr. Wilensky. I spoke to Colonel Bader, who is the 
executive director. We think the information exists, and you 
should have it within the week. I will call the executive 
director of the UMWA Fund and ask her to send the information. 
It is an issue, as you can imagine, as a former Medicare head 
and as a trustee, I have heard raised by the local pharmacy 
community of ``show me.''
    Mrs. Boyda. Right. Let me just add too, in our last 
National Defense Authorization Act (NDAA), we also said that 
retail pharmacies can get the same pricing as the mail order 
too. So, I certainly am hoping that that is going to be taken 
into a scenario that says with the current pricing, but the 
NDAA said retail gets the same benefit.
    Dr. Wilensky. Obviously, none of the analysis will have 
done that because of the timing.
    Mrs. Boyda. Well, I would like to then--that is what I 
would like to look at.
    Dr. Wilensky. Okay, if you are going to ask someone to do 
additional analysis, I can't commit to when that will be.
    Mrs. Boyda. Okay. I would like to ask, for the record, that 
that analysis be done, and I would be interested seeing in the 
short term what the current one is. All right. Thank you very, 
very much. I appreciate it.
    [The information referred to can be found in the Appendix 
beginning on page 96.]
    Mrs. Davis of California. We are going to come back after 
this next vote, but then we certainly are very aware of your 
time restraints, and after that, if there is another vote, we 
won't do this again. But we would like to have a few more 
minutes with you. Thank you.
    [Recess.]
    Mrs. Davis of California. Thank you all for staying with us 
today. We are very sorry for the interruptions. I wanted to go 
back a little bit to some of the recommendations and the ideas 
that you expressed in terms of some pilots that we might look 
at in terms of the integration.
    And I wondered, Dr. Wilensky, especially, could you be a 
little more specific? What would that look like? If we were to 
try and begin to really assess how this better system can work, 
where would you go first? What kind of a community would you go 
to? What would that look like?
    Dr. Wilensky. I will speak off the top of my head, but I 
would be glad to also give it some more thought and get back to 
you with some more specifics. At least three or four different 
areas we have suggested pilots.
    And, we have done this--I was both, as a researcher 
promoting the idea, but also from the experience of running 
Medicare of not wanting to introduce change everywhere until 
you have had a chance to see that it does what it think you 
will do and not raise other problems that you haven't focused 
on. So I think it is wise when you have a program as spread as 
TRICARE in the military direct system, that you try some of 
these so you know what you are doing.
    There are three different areas that come to mind right 
away: one of them has to do with this issue about should you 
integrate the provision of pharmacy care with the direct 
provision of care? I happen to think it is likely that you will 
have a better clinical outcome and better use of resources if 
these are part of the same strategy.
    Now at some level it is easier in the MTF--in the direct 
care system, it is easier to have that be regarded as part of 
an integrated delivery system with the people practicing in the 
facility right there. It is much less obvious how that happens 
in the purchased care part of TRICARE when you have the 
separate contracts as to how you have physicians prescribing in 
the smartest way in terms of the pharmaceuticals and 
therapeutics they are using.
    So what we had suggested is in one of the three TRICARE 
areas, there ought to be a portion--you don't have to do the 
whole contract--where there is an integration so you have much 
more of a real integrated delivery system, the way the Kaisers 
or other delivery systems would operate. That is one kind of 
pilot.
    There is a second pilot that I referenced, And I mentioned 
it, and it is a little more complicated, so I want to try to 
explain it, and it had to do with the layering of insurance or 
the multiple insurance holdings. General Corley and I had heard 
very clearly from the Congress that the Congress had strong 
negative feelings about the notion of pushing people out of 
TRICARE. So we took that into account.
    But we are concerned that in the current world, too often 
people have both employer-sponsored insurance and TRICARE, but 
they don't know about each other or, in some cases, they can 
have all of that and Medicare as well or access to the VA as a 
priority.
    The pilot we are suggesting there is to allow somebody who 
is eligible for multiple insurance plans, particularly 
employer-sponsored and TRICARE, to choose one of those, 
whatever they think gives them the best benefits, and to drag 
some of the other financial contribution over to the plan that 
is chosen.
    So if it is going to TRICARE, it is having the employer pay 
a portion of what they would otherwise pay to TRICARE to have 
an augmented benefit, or--I recommended this being able to go 
either direction--if the person chooses the employer-sponsored 
plan, to be able to take some of the money TRICARE would have 
spent on their behalf and pull it over to paying some of the 
premiums or the co-pays for the employer-sponsored.
    Right now, the world we are in is expensive because people 
don't know what the other is doing. Sometimes you get tests re-
done because people don't know. So that is a different kind of 
pilot. So we had--some of the pilots had to do with doing 
better disease management; doing better preventive health like 
Dr. Goetzel had recommended.
    We were surprised that in a place like the military, there 
isn't more proactive work routinely going on in terms of 
obesity prevention, smoking cessation, other types of 
preventive care--again, not that it is not going on at all, 
just not state-of-the-art some of the work he is recommending.
    Those kinds of pilots you can pick and choose a few areas, 
try to have--the biggest problem you get is self-selection. So 
trying to either have it in a large enough place that you can 
have a sample that you can match to the people that you do or 
you have a treatment facility nearby.
    Mrs. Davis of California. I wondered, Dr. Casscells, do you 
think there is anything inherent within the military system 
that would make it difficult to do that kind of a pilot where, 
in fact, you are sending the military benefits elsewhere?
    Dr. Casscells. Mrs. Davis, it would be doable once we have 
shared metrics, measures of process and measures of outcomes 
including patient satisfaction that we have agreed upon those 
with the services and health affairs, and we are now going to 
be asking the purchased care bidders to abide by that same 
standard and then begin to share this data transparently.
    Now in such a system--and a nudge from your committee would 
help in that regard--pilots like this would be feasible across 
the system. Right now--as Dr. Wilensky says correctly--this 
would only be possible really in the MTFs. But with some 
further standardization of the outcomes and some requirements 
that the data be shared in real time or nearly real time, we 
could certainly do that.
    Mrs. Davis of California. But today, that sharing of data 
continues to be problematic?
    Dr. Casscells. Yes, ma'am.
    Mrs. Davis of California. We would probably need an entire 
hearing just to try and sift that through, so I appreciate 
that.
    Mr. McHugh.
    Mr. McHugh. Thank you, Madam Chair. I want to apologize for 
my late return to this dais. The governor of the state of New 
York was just resigning, and as someone from New York, I 
thought I should listen to his words--not that your words are 
any less important to us today, they are not, and hopefully, in 
a more positive way.
    Dr. Goetzel? You heard Dr. Casscells talk about some of the 
prevention programs that the military has instituted. I would 
tend to agree that certainly within the active component, there 
are strong efforts for smoking cessation programs and 
responsible consumption of alcohol, et cetera, et cetera, et 
cetera--maybe you have a different perspective.
    I am not so sure that we can see the same kind of 
achievement amongst the retired community on a programwide 
basis. Have you had a chance to look at that? And just 
generically, what kind of opportunities do you see we have 
within the military setting to implement some of the programs 
you have spoken about and hopefully contain costs?
    Dr. Goetzel. First, let me address the retiree community. 
There is very strong evidence that it is never too late; that 
you can improve health and lifestyle habits even for the 
elderly population--those 65 and older.
    In fact, I was telling Dr. Wilensky that Medicare is 
starting a 3 1/2-year demonstration right now, actually in the 
next month, to test out private sector programs and services 
that have been effective in the corporate world--trying those 
out with the Medicare beneficiary population--doing a 
demonstration--a very rigorously implemented experiment in 
which people will be randomized into different treatment and 
control conditions to test the notion that you can improve 
health and also at the same time save money and produce a 
positive return on investment.
    And so there is a lot of literature out there to support 
that it is not only a possibility to improve health and well-
being but also to have a very significant cost impact. For 
example, in the Medicare system, approximately 5 percent of 
beneficiaries generate close to 50 percent of the dollars, but 
50 percent of the beneficiaries only generate only 2 percent of 
the dollars.
    So there is a huge opportunity not only to go after people 
who have disease and chronic-disease conditions, which a large 
proportion do, but actually a large segment of the population 
are still fairly well and to keep them well, because it is a 
lot cheaper to keep people well then it is to bring them back 
from illness back to wellness.
    In terms of the kinds of programs that might be put into 
place. There is a lot of science out there that has been 
developed over the past 20 years on better ways to get people 
to change their behavior because it is very, very, very hard to 
get people to change their behaviors, but there is a lot of 
social behavioral psychological theories out there put together 
by Bandura, by Straker, by Kate Lorig, by Prochaska and others 
that have shown that their methods are actually a lot more 
effective than handing someone a brochure saying, you know, 
``Be healthy.'' Those really don't work very well.
    But there are new advances in behavior-change technology 
and theory and application that may not be tried and applied as 
broadly as you might think in the military.
    Mr. McHugh. Would you view the potential--for lack of a 
better phrase--return on investment that you spoke about 
earlier--I guess about $1.50 to $2--would that be your 
expectation within the military health system----
    Dr. Goetzel. I think that is a reasonable expectation. I 
mean there are two sides to a cost-benefit analysis. The 
benefit, of course, is what you save, and the saving is in 
medical, but you also, I think, can save it in disability and 
readiness to monetize those. But the other side is how much you 
spend on the program.
    And you have got to be very efficient and evidence based in 
the spending so that you don't go overboard.
    Mr. McHugh. Dr. Wilensky? Would you like to comment on 
that?
    Dr. Wilensky. We had been having sidebar conversations 
while you were off voting, and I am very pleased at the 
additional work that has been done since, Dr. Goetzel and I 
have had earlier conversations at the CDC, about the ability to 
try to be sure you are comparing relevant populations. And the 
kind of numbers that he has talked about in the timeframe he is 
talking about are at least intuitively credible.
    The area I think the military has a substantial potential 
savings on is not just the retiree, although certainly the 
retiree population, but it is the dependent population because 
of the nature of the military's being able to reach out to the 
active duty--although weight control is a problem even in the 
active duty--although there are a variety of ways in terms of 
promotion to try to pressure people to be responsive.
    So even in the active duty, there may be more that can be 
done in savings in terms of readiness as well as future 
disability expenses, but there is a lot of potential with 
regard to the dependent population that is not being achieved, 
and they are, as you know, the responsibility of the military 
in any case.
    So, I would encourage you to set your sights higher than 
only the retiree population, and especially because of the 
additional work that is been done in the last three to five 
years to work with behavior modification in areas where, if you 
go after obesity and smoking, you hit a huge amount of the 
preventable illness.
    Mr. McHugh. I would imagine just intuitively the dependent 
population families would be a lot easier to get to than many 
of the retirees, because they tend to disburse more widely.
    Dr. Wilensky. Right. Harder than the active duty, but 
definitely easier than the retiree.
    Dr. Goetzel. There is also one more segment--civilian 
workforce--that also is affected by your program, and they have 
not been at all targeted or involved in these kinds of 
prevention programs.
    Mr. McHugh. Just, if I might, Madam Chair, one quick 
question to Dr. Wilensky, and she may not choose to respond, 
but when the question was posed about Wal-Mart--and I would 
note other corporations like Wegmans and Hannaford Markets in 
the northeast have instituted similar generic $4 prescription 
policies--I thought I detected a reaction of some sort on your 
face.
    Dr. Wilensky. You did.
    Mr. McHugh. Would you like to add to that?
    Dr. Wilensky. Yes. I have been told never to play poker. 
[Laughter.]
    Dr. Wilensky. There is something called loss leaders. We 
have no idea whether Wal-Mart is able to provide the generic 
for $4 or not. And, in fact, I have heard it referenced that 
the most important thing for a company like Wal-Mart to do, is 
to get people in the store, and I assume for Wegmans as well.
    So, I would regard--I mean, the answer is, I really don't 
know whether they are able to provide it at $4. I would think 
that the positive publicity that Wal-Mart has received as a 
result of the $4 generic after two or three years of being 
beaten up in every place imaginable and subject to legislation 
in the state of Maryland, et cetera, combined with the loss 
leader notion may be as much an explanation as to the $4 
generic as to their being able to actually have a $4 generic, 
although there probably are some generics that are sufficiently 
low cost that you can at least break even or do a low-margin 
business with a $4 generic.
    So, I wouldn't dismiss it. I would just caution you to 
assume they are actually able to cover their costs. Businesses 
only need to cover their costs on average--plus a return to 
equity--not on every single item.
    Mrs. Davis of California. Thank you, Mr. McHugh, and I 
really appreciate your being here. I wonder if there are just a 
few questions, and we will have a chance to get together again, 
but I continue to be concerned about the physician bench, 
essentially, in the military, and how we will develop that.
    Now that we are where we have said in law, that there can 
no longer be these military-civilian conversions, that means 
there has to be a lot of planning about how that corps is 
developed, and how are we going to get there, I think is--I 
would think, a big concern to the services.
    You have raised the issue that about 90 percent of doctors 
will take TRICARE patients, but I know in the community that I 
serve, physicians are not too eager to do that any longer, and 
so I think there are gaps in that service. As we move forward, 
it would be interesting to see--as we really try to focus on 
how we integrate these systems better--the role that our 
providers are going to play, because we know that in a number 
of specialties today--not just in the military system, but in 
the system as a whole--that is a concern and plays a role in 
how we are able to move forward.
    Did you want to comment just very briefly, Dr. Casscells, 
because I know we need to finish up? I wanted to express those 
concerns.
    Dr. Casscells. Just to say thank you for that guidance and 
for the fact that your staff have been so proactive, and 
Jeanette James and Dave Kildee have consistently seen this not 
as a contest of wills here but as a year-long dialogue. I 
particularly appreciate their coaching. The fact that they 
have, on your behalf--they are not only holding us accountable, 
but they also are helping us innovate.
    And so you asked about a clean sheet approach, how we would 
redesign the system. We are just starting out on that process 
now, and so having the committees active engagement in that is 
very much appreciated.
    Dr. Wilensky. This is also an area where we as a task force 
recognized we were not able to spend time to try to develop 
recommendations. We think it is a very serious issue in terms 
of recruitment and retention of the appropriate number of 
medical personnel, and the best use of Reserve and active duty 
medical personnel going in the future, particularly in the time 
of future military engagement.
    So we most definitely recognize that it was not an issue we 
were able to deal with, but it is a serious one.
    Mrs. Davis of California. Thank you very much.
    And Dr. Goetzel? I know a lot of my colleagues asked 
questions. I didn't have a chance to ask specifically, but the 
areas of prevention, of course, are very critical. And the 
extent to which we can really document those cost savings is 
helpful, because I happen to believe they are there, but 
ordinarily, we don't plan long term as well as we plan on the 
short term, and so it is an ongoing concern.
    Thank you all so much for being here. Appreciate it. We 
look forward to seeing you again.
    Meeting is adjourned.
    [Whereupon, at 12:02 p.m., the subcommittee was adjourned.]
?

      
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                            A P P E N D I X

                             March 12, 2008

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             March 12, 2008

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



    

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


                   DOCUMENTS SUBMITTED FOR THE RECORD

                             March 12, 2008

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



    

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


              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                             March 12, 2008

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

      
              RESPONSE TO QUESTION SUBMITTED BY MR. MCHUGH

    Dr. Casscells. Thank you for your follow-up question regarding 
Veteran Service Organization (VSO) support of TRICARE fee increases. 
You asked for VSO support in writing. Below, I have provided citations 
from the VSO websites in which they concede that TRICARE fee increases 
may be necessary but should not exceed increases in military 
compensation or should be tied to true healthcare costs. As for my 
personal conversations with members of the Coalition and Alliance and 
other VSOs, we do not record minutes for these meetings, as we feel it 
would discourage the free exchange of ideas that make our interactions 
so valuable. Thank you for your follow-up question. The Military Health 
System does understand that knowing the tolerances of fee increases is 
an important part of the discussion.

    ``Percent Fee Increase in Any Year Shouldn't Exceed % Increase in 
Military Compensation.''
    MOAA fee-increase briefing, ``Health Care Cost-Shifting to Military 
Beneficiaries,'' MOAA, accessed August 15, 2008. http://www.moaa.org/
lac/lac_resources/siteobjects/published/
B40B0C69836F0E9D9744C384897CE90C/41BB16DC
1E9E71D48DE23BE6A8B7E2EC/file/TRICAREFeeBrief.pdf

    ``While understanding fee increases may be necessary in the future, 
NMFA believes all decisions regarding fee increases should be put on 
hold until the Congressionally-mandated study is completed to determine 
what efficiencies DOD can implement.''
    Joyce Wessel Raezer, Kathy Moakler, ``NDAA Conference Committee 
Debates Many Provisions,'' NMFA, accessed August 15, 2008, http://
www.nmfa.org/site/PageServer?pagename=ndaa_conference_provisions

    ``Adjustments to the enrollment fee are acceptable if tied to true 
healthcare cost.''
    CAPT Michael P. Smith, ``Statement by CAPT Michael P. Smith, USNR 
(Ret) National President, Reserve Officers Association of the United 
States Before the Task Force on the Future of Military Health Care 
March 7, 2007,'' ROA, accessed August 15, 2008, https: / / 
secure2.convio.net/roa/site/SPageServer?pagename=TaskForce
HealthCareTestimony&JServSessionsIdr011=cj0uzoxbq1.app5a

    ``Prevent DOD plans to significantly increase annual TRICARE Prime 
enrollement fees for military retirees.''
    2007-2008 AFSA Legislative Platform, AFSA, accessed August 15, 
2008, https://www.hqafsa.org/AM/Template.cfm?
Section=Top_Issues&Template=/CM/HTMLDisplay.cfm&ContentID=2610 [See 
page 13.]
                                 ______
                                 
             RESPONSES TO QUESTIONS SUBMITTED BY MRS. BOYDA
    Dr. Goetzel. TRICARE uses several metrics to determine beneficiary 
satisfaction with the services we provide to eligible beneficiaries. 
Our primary method of gathering information is through telephone and 
mail surveys. The information presented to you today represents results 
from three core surveys that depict beneficiary satisfaction with 
medical services from the TRICARE network of civilian providers.
    The Health Care Survey of DOD Beneficiaries (HCSDB) measures the 
healthcare experiences of eligible Military Healthcare System (MHS) 
beneficiaries around the world during the previous 12 months. For 
comparison, 61 percent of civilian health plan users rated their health 
plan eight or higher (on scale of 0-10 (0=worst, 10=best)). Among MHS 
beneficiaries, 60 percent of those enrolled to a civilian primary care 
manager (PCM) in the North Region rated their health plan eight or 
higher. Sixty-five percent of those enrolled to a civilian PCM in the 
South Region rated their health plan eight or higher and 66 percent 
enrolled in the West Region rated their health plan eight or higher.
    The TRICARE Outpatient Satisfaction Survey provides a monthly 
assessment of beneficiary satisfaction with ambulatory care. For 
comparison, 72 percent of civilian health plan users rated their 
healthcare eight or higher (on scale of 0-10 (0=worst, 10=best)). 
Sixty-four percent of MHS beneficiaries enrolled to a civilian PCM in 
the North Region rated their healthcare eight or higher. Sixty-six 
percent of those enrolled in the South Region rated their healthcare 
eight or higher and 65 percent of West Region enrollees rated their 
healthcare eight or higher.
    The TRICARE Inpatient Satisfaction Survey provides an annual 
assessment of beneficiary satisfaction with their inpatient experience. 
For comparison, 60 percent of civilian health plan users rated their 
inpatient care nine or higher (on scale of 0-10 (0=worst, 10=best)). 
Among MHS beneficiaries, 59 percent of those enrolled to a civilian PCM 
in the North Region rated their inpatient care nine or higher. Sixty 
percent of enrollees in the South Region rated their inpatient care 
nine or higher, and 60 percent of West Region enrollees rated their 
satisfaction with a score of nine or higher.[See page 99.]
    Dr. Wilensky. Independent Government Estimate of TRICARE Retail 
Pharmacy (TRRx) Costs to the Government versus TRICARE Mail Order 
Pharmacy (TMOP) Costs to the Government

 
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Prior to implementation of the National Defense Authorization Act for
 Fiscal Year 2008.......................................................
(FY 2008 NDAA) granting DOD authority to access Federal Pricing
 discounts in TRRx......................................................
------------------------------------------------------------------------
                                                     TRRx          TMOP
                                                 (Retail)        (Mail)
------------------------------------------------------------------------
Average cost to the Government for a 90 day       $476.86       $232.47
 supply of brand-name prescription*
 
------------------------------------------------------------------------


 
After implementation of FY 2008 NDAA Government cost estimates..........
------------------------------------------------------------------------
Average cost to the Government for a 90 day       $304.55       $232.47
 supply of brand-name prescription*
 
------------------------------------------------------------------------

    *Includes overhead, dispensing fees, administrative fees, mailing 
(in TMOP), and co-pays

    DISCUSSION: Based on this analysis, it is estimated that passage of 
the FY 2008 NDAA will reduce Government retail prescription costs 
significantly. This analysis also estimates that after initial 
implementation of FY 2008 NDAA, retail prescription Government costs 
will remain approximately 24% higher when compared to TMOP.
    The prices the Department of Defense (DOD) pays in TMOP are based 
on Federal Ceiling Price (FCP), which is the maximum price that 
manufacturers can charge the Big Four (DOD, VA, Public Health, and 
Coast Guard) for brand-name drugs. The non-federal average manufacturer 
price (non-FAMP) is the average price paid to the manufacturer by the 
wholesaler for drugs distributed to non-federal purchasers (such as 
retail pharmacies). FCP equals 76% of the previous fiscal year's non-
FAMP. In retail, after implementation of the FY 2008 NDAA, the refund 
due to the Government from pharmaceutical manufacturers will be based 
on the difference between the non-FAMP and the FCP subtracted from the 
actual retail price paid by the Government. The retail price, before 
the FY 2008 NDAA mandated refund is applied, reflects the additional 
costs associated with the retail distribution model. In addition, the 
DOD Pharmacy and Therapeutics process has obtained prices lower than 
FCP for some drugs dispensed via mail, which accounts for a portion of 
the price differential between the retail and mail points of service. 
[See page 22, and supporting documentation on page 89.]
                                 ______
                                 
           RESPONSE TO QUESTION SUBMITTED BY MS. SHEA-PORTER
    Dr. Casscells. We are not aware of shifting any costs to other 
taxpayers for providing healthcare to military veterans and their 
families. By law, title 42 United States Code (U.S.C.), section 
1395cc(a)(1)(J), acute care hospitals accepting Medicare beneficiaries 
must also accept TRICARE beneficiaries, and we pay for care covered by 
the TRICARE benefit, which covers all medically necessary treatments 
for injuries or illnesses (title 10, U.S.C., section 1079(a)(13)). 
TRICARE is the primary payer for care provided by the States through 
their Medicaid programs.
While we cannot positively rule out the possibility that one or more 
States have other taxpayer-funded programs that would pay for the 
healthcare for patients with a federal health benefit, we are not aware 
of such programs. [See page 25.]
?

      
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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                             March 12, 2008

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

      
                   QUESTIONS SUBMITTED BY MR. MCHUGH

    Mr. McHugh. Assistant Secretary Casscells, your testimony tells us 
that because of the influx of troops with complex war wounds, 
deteriorating medical facilities and deployed care givers, you rewrote 
the MHS mission because the MHS needed a new focus. The new mission is 
to ``sustain a medically ready military force and provide world-class 
health services for those injured and wounded in combat.'' That coupled 
with your stated focus of the MHS on combat care, humanitarian 
assistance and disaster readiness makes me wonder about your commitment 
to your title 10 responsibilities to provide healthcare to all 9.2 
million beneficiaries. Where do retirees fit in your new mission and 
focus particularly in light of your plan to raise TRICARE fees for this 
group?
    Dr. Casscells. Retirees are a key element to the MHS mission. They 
are so for two reasons. First, in delivering care to retirees and their 
families, military providers develop and maintain the skills necessary 
to provide those world-class health services to the injured and wounded 
in combat. Second, they have earned a benefit. After serving a career 
in the military, the nation owes these warriors a first-class health 
benefit. It is incumbent for the MHS to see that they get that benefit. 
Our need to raise TRICARE fees, based on the recommendations of the 
Task Force on the Future of Military Health Care, restores to some 
extent the cost-sharing relationship between the Government and the 
retirees that existed when TRICARE began in 1995. Those benefits will 
still be significantly more generous than the vast majority of 
employer-sponsored health plans and we are committed to ensuring that 
the care delivered continues to be first-rate.
    Mr. McHugh. Assistant Secretary Casscells, the President's budget 
reflects an estimated $1.2 billion cost savings generated by these 
behavior changes in the beneficiary behavior. How much of the estimated 
savings is based on the beneficiaries opting out of TRICARE or using 
healthcare less?
    Dr. Casscells. Of the $1.2 billion estimated cost savings (if the 
fee changes that the task force proposed are adopted), $398 million was 
based on the beneficiaries' behavioral response in choosing what health 
insurance to use. We estimate that, instead of the number of retirees 
who use TRICARE increasing from 2.36 million to 2.41 million with the 
current enrollment fees and deductibles, the new enrollment fees an 
deductibles will result in only 2.32 million retirees using TRICARE. In 
addition, we estimate a savings of $42 million based on lower 
utilization in response to the higher deductibles.
    Mr. McHugh. DOD's proposals to increase TRICARE fees were based in 
part on the principle that beneficiaries would opt out of TRICARE and 
decrease the amount of healthcare they use as a result of having to pay 
more. The estimated $1.2 billion cost savings reflected in the present 
budget includes savings generated by these behavior changes. The task 
force report dies not specifically mention either change in beneficiary 
behavior and you have testified that you do not agree with this 
strategy. With that, do you agree that DOD can save $1.2 billion in the 
fiscal year 2009 by implementing the task force recommendations? How 
much do you think they can save?
    Dr. Casscells. We did not make an estimate of how much TRICARE 
would save based on the task force recommendations. Our objective was 
to reverse the trend of the increasingly small share of the cost borne 
by the beneficiary of the Military Health System (MHS).
    I do not accept the Department's estimates of the number of 
beneficiaries who would drop TRICARE because of the fee increases. As 
long as TRICARE is substantially more generous than other health 
insurance in terms of benefits and cost sharing, retirees will continue 
to rely on TRICARE.
    Better coordination of benefits among retirees who are eligible for 
private health insurance as well as TRICARE may help slow the growth of 
DOD medical costs while providing better care coordination for 
retirees. The task force recommended a study, and then possibly a pilot 
program, aimed at better coordinating insurance practices among those 
retirees who are eligible for private health insurance as well as 
TRICARE. This study and pilot program could reveal a harder number for 
projections.

                                  
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