[House Report 104-837]
[From the U.S. Government Publishing Office]
104th Congress Rept. 104-837
HOUSE OF REPRESENTATIVES
2d Session Part 1
_______________________________________________________________________
UNIFORMED SERVICES MEDICARE SUBVENTION DEMONSTRATION PROJECT ACT
__________
R E P O R T
OF THE
COMMITTEE ON NATIONAL SECURITY
HOUSE OF REPRESENTATIVES
ON
H.R. 3142
[Including cost estimate of the Congressional Budget Office]
September 25, 1996.--Ordered to be printed
HOUSE COMMITTEE ON NATIONAL SECURITY
One Hundred Fourth Congress
FLOYD D. SPENCE, South Carolina,
Chairman
RONALD V. DELLUMS, California BOB STUMP, Arizona
G.V. (SONNY) MONTGOMERY, Mississippi DUNCAN HUNTER, California
PATRICIA SCHROEDER, Colorado JOHN R. KASICH, Ohio
IKE SKELTON, Missouri HERBERT H. BATEMAN, Virginia
NORMAN SISISKY, Virginia JAMES V. HANSEN, Utah
JOHN M. SPRATT, Jr., South Carolina CURT WELDON, Pennsylvania
SOLOMON P. ORTIZ, Texas ROBERT K. DORNAN, California
OWEN PICKETT, Virginia JOEL HEFLEY, Colorado
LANE EVANS, Illinois JIM SAXTON, New Jersey
JOHN TANNER, Tennessee RANDY ``DUKE'' CUNNINGHAM,
GLEN BROWDER, Alabama California
GENE TAYLOR, Mississippi STEVE BUYER, Indiana
NEIL ABERCROMBIE, Hawaii PETER G. TORKILDSEN, Massachusetts
CHET EDWARDS, Texas TILLIE K. FOWLER, Florida
FRANK TEJEDA, Texas JOHN M. McHUGH, New York
MARTIN T. MEEHAN, Massachusetts JAMES TALENT, Missouri
ROBERT A. UNDERWOOD, Guam TERRY EVERETT, Alabama
JANE HARMAN, California ROSCOE G. BARTLETT, Maryland
PAUL McHALE, Pennsylvania HOWARD ``BUCK'' McKEON, California
PETE GEREN, Texas RON LEWIS, Kentucky
PETE PETERSON, Florida J.C. WATTS, Jr., Oklahoma
WILLIAM J. JEFFERSON, Louisiana MAC THORNBERRY, Texas
ROSA L. DeLAURO, Connecticut JOHN N. HOSTETTLER, Indiana
MIKE WARD, Kentucky SAXBY CHAMBLISS, Georgia
PATRICK J. KENNEDY, Rhode Island VAN HILLEARY, Tennessee
JOE SCARBOROUGH, Florida
WALTER B. JONES, Jr., North
Carolina
JAMES B. LONGLEY, Jr., Maine
TODD TIAHRT, Kansas
RICHARD `DOC' HASTINGS, Washington
Andrew K. Ellis, Staff Director
C O N T E N T S
----------
Page
Purpose and Background........................................... 3
Legislative History.............................................. 4
Committee Position............................................... 5
Fiscal Data...................................................... 5
Congressional Budget Office Estimate........................... 5
Congressional Budget Office Cost Estimate...................... 6
Committee Cost Estimate........................................ 9
Inflation-Impact Statement..................................... 11
Oversight Findings............................................... 11
Statement of Federal Mandates.................................... 12
Rollcall Votes................................................... 12
104th Congress Rept. 104-837
HOUSE OF REPRESENTATIVES
2d Session Part 1
_______________________________________________________________________
UNIFORMED SERVICES MEDICARE SUBVENTION DEMONSTRATION PROJECT ACT
_______
September 25, 1996.--Ordered to be printed
_______________________________________________________________________
Mr. Spence, from the Committee on National Security, submitted the
following
R E P O R T
[To accompany H.R. 3142]
[Including cost estimate of the Congressional Budget Office]
The Committee on National Security, to whom was referred the
bill (H.R. 3142) to establish a demonstration project to
provide that the Department of Defense may receive Medicare
reimbursement for health care services provided to certain
Medicare-eligible covered military beneficiaries, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Uniformed Services Medicare Subvention
Demonstration Project Act''.
SEC. 2. DEFINITIONS.
For purposes of this Act:
(1) Medicare-eligible covered military beneficiary.--The term
``medicare-eligible covered military beneficiary'' means a
beneficiary under chapter 55 of title 10, United States Code,
who--
(A) is entitled to hospital insurance benefits under
part A of title XVIII of the Social Security Act (42
U.S.C. 1395c et seq.); and
(B) is enrolled in the supplementary medical
insurance program under part B of such title (42 U.S.C.
1395j et seq.).
(2) TRICARE program.--The term ``TRICARE program'' means the
managed health care program that is established by the
Secretary of Defense under the authority of chapter 55 of title
10, United States Code, principally section 1097 of such title,
and includes the competitive selection of contractors to
financially underwrite the delivery of health care services
under the Civilian Health and Medical Program of the Uniformed
Services.
(3) Military treatment facility.--The term ``military
treatment facility'' means a facility of the uniformed services
used for the provision of medical or dental care.
(4) Secretaries.--The term ``Secretaries'' means the
Secretary of Defense and the Secretary of Health and Human
Services acting jointly.
SEC. 3. ESTABLISHMENT OF DEMONSTRATION PROJECT.
(a) Establishment Required.--The Secretary of Defense and the
Secretary of Health and Human Services shall jointly establish a
demonstration project to provide the Department of Defense with
reimbursement, in accordance with section 4, from the medicare program
under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.)
for health care services provided to medicare-eligible covered military
beneficiaries who participate in the demonstration project and receive
the health care services through the managed care option of the TRICARE
program.
(b) Geographic Regions.--The Secretaries shall conduct the
demonstration project in two or more geographic regions in which the
TRICARE program has been implemented.
(c) Duration.--The Secretaries shall conduct the demonstration
project during the three-year period beginning on January 1, 1997.
(d) Expansion of Demonstration Project.--The Secretaries shall
include in the demonstration project a provision for expanding the
demonstration project to incorporate health care services provided to
medicare-eligible covered military beneficiaries under the fee-for-
service options of the TRICARE program if, in the report required by
section 713 of the National Defense Authorization Act for Fiscal Year
1997, the Secretaries determine that such expansion of the
demonstration project is feasible and advisable.
(e) Reporting Requirements.--Not later than 15 months after the
establishment of the demonstration project, and then not later than 90
days after the end of the demonstration project, the Secretaries shall
submit to Congress a report containing the following:
(1) The number of medicare-eligible covered military
beneficiaries opting to participate in the demonstration
project established under this section instead of receiving
health benefits through another health insurance plan
(including through the medicare program).
(2) An analysis of whether, and in what manner, easier access
to the military treatment system affects the number of
medicare-eligible covered military beneficiaries receiving
health benefits under the medicare program.
(3) A list of the health insurance plans and programs that
were the primary payers for medicare-eligible covered military
beneficiaries during the year prior to their participation in
the demonstration project and the distribution of their
previous enrollment in such plans and programs.
(4) An identification of cost-shifting (if any) among medical
care programs as a result of the demonstration project and a
description of the nature of any such cost-shifting.
(5) An analysis of how the demonstration project affects the
overall accessibility of the military treatment system and the
amount of space available for point-of-service care and a
description of the unintended effects (if any) upon the normal
treatment priority system.
(6) A description of the difficulties (if any) experienced by
the Department of Defense in managing the demonstration
project.
(7) A description of the effects of the demonstration project
on military treatment facility readiness and training and the
probable effects of the project on overall Department of
Defense medical readiness and training.
(8) A description of the effects that the demonstration
project, if permanent, would be expected to have on the overall
budget of the military health care system and the budgets of
individual military treatment facilities.
(9) An analysis of whether the demonstration project affects
the cost to the Department of Defense of prescription drugs or
the accessibility, availability, and cost of such drugs to
program beneficiaries.
SEC. 4. REIMBURSEMENT AMOUNTS.
(a) Payment to Department of Defense.--The Secretary of Health and
Human Services shall make monthly payments to the Department of Defense
from the Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund (allocated by the Secretary
of Health and Human Services between each Trust Fund based on the
relative weight that benefits from each Trust Fund contribute to the
required payment) in an amount equal to \1/12\ of the amount determined
under subsection (b) for each medicare-eligible covered military
beneficiary enrolled during the year in the managed care option of the
TRICARE program in the geographic region in which the demonstration
project is conducted, but only if such beneficiary's enrollment is in
excess of the minimum enrollment number determined under subsection
(c)(1) for the geographic region.
(b) Amount Determined.--The amount determined under subsection (a) is
an amount equal to 93 percent of the average adjusted per capita cost
determined under section 1876(a)(4) of the Social Security Act (42
U.S.C. 1395mm(a)(4)) for the year.
(c) Establishment of Minimum and Maximum Enrollment Levels.--
(1) Minimum.--Based on the best available data, the
Secretaries shall establish a minimum enrollment number of
medicare-eligible covered military beneficiaries who are
required to enroll in the managed care option of the TRICARE
program during a year in each geographic region in which the
demonstration project is conducted before the Department of
Defense may receive payment under subsection (a).
(2) Maximum.--The Secretaries shall establish a maximum
number of medicare-eligible covered military beneficiaries for
which payment may be made by the Secretary of Health and Human
Services under subsection (a).
(3) Determination of baseline costs.--Before the
establishment of the demonstration project, the Secretaries
shall establish the minimum and maximum enrollment numbers so
that--
(A) the expenditures by the Department of Defense for
such number of medicare-eligible covered military
beneficiaries is equivalent to the projected
expenditures that would have been made by the
Department for such beneficiaries if the demonstration
project had not been established; and
(B) the cost to the medicare program under the
demonstration project does not exceed the cost that the
medicare program would otherwise incur with respect to
the medicare-eligible covered military beneficiaries
participating in the demonstration project in the
absence of the project.
(d) TRICARE Program Enrollment Fee Waiver.--The Secretary of Defense
shall waive the enrollment fee applicable to any medicare-eligible
covered military beneficiary enrolled in the managed care option of the
TRICARE program for whom reimbursement in the amount determined under
subsection (b) is received under subsection (a).
(e) Review by Comptroller General.--Not later than December 31 each
year in which the demonstration project is conducted, the Comptroller
General shall determine and submit to the Secretaries and Congress a
report on the extent, if any, to which the costs of the Secretary of
Defense under the TRICARE program and the costs of the Secretary of
Health and Human Services under the medicare program have increased as
a result of the project.
(f) Demonstration Project Adjustments Following Review.--Based on the
review prepared under subsection (e), the Secretaries shall modify the
demonstration project at the end of each year to correct for any
discrepancy between cost targets and actual spending under the
demonstration project. From funds available to the Secretary of Defense
for the defense health care program, the Secretary of Defense shall
reimburse the Secretary of Health and Human Services for any excess
costs incurred by the medicare program in violation of subsection
(c)(3)(B).
purpose and background
H.R. 3142 would establish a demonstration program to
provide Medicare subvention or reimbursement to the Department
of Defense (DOD) for health care services provided to certain
Medicare-eligible military beneficiaries. The goal of the
demonstration program would be to improve access to needed
health care services for these military beneficiaries, while
determining whether subvention can be accomplished in a manner
that does not increase costs to the federal government or the
Medicare Trust Fund.
Presently, there are about 1.2 million Medicare-eligible
military beneficiaries. Although these beneficiaries are
eligible to use military medical facilities on a space-
available basis, they are not eligible to enroll in, or
participate in, the DOD's TRICARE managed health care program.
With bases being closed and realigned throughout the country,
access to military medical facilities is becoming increasing
difficult for these beneficiaries. Exacerbating the situation
is the fact that the TRICARE program is designed to maximize
use of military medical facilities by TRICARE program
enrollees.
The Department of Defense estimates that about 25 percent
of military Medicare-eligible beneficiaries currently rely on
military facilities for the majority of their health care
needs. Supporting this population, which is projected to grow
29 percent by the year 2001, costs DOD about $1.4 billion a
year. Continuing to meet the medical needs of this growing
military beneficiary population is an extremely difficult
challenge, particularly in today's budget-constrained
environment.
The committee believes that Medicare reimbursement to DOD
for care provided to Medicare-eligible beneficiaries can
produce savings to both DOD and the Department of Health and
Human Services because military hospital care is generally less
expensive than health care services purchased in the private
sector. Conducting a Medicare subvention demonstration program
is a viable means of determining whether subvention will in
fact save the federal government money, as well as whether
implementing subvention on a large-scale, national level is
feasible.
H.R. 3142 would establish a subvention demonstration
program to be conducted in two TRICARE regions over a three-
year period. Under the program, Medicare-eligible retirees who
chose to participate in the demonstration would be required to
enroll in the TRICARE HMO option--TRICARE Prime--and would
receive all their medical care through the military health
services system. As TRICARE enrollees, program participants
would have a higher priority for receiving medical care in
military facilities than non-enrollees and would be guaranteed
access to treatment within a specific amount of time.
To ensure the demonstration is, at a minimum, cost-neutral
to the Medicare Trust Fund, DOD would continue to provide the
same amount of care to Medicare-eligible military beneficiaries
as it now does. Once that level of effort has been met,
Medicare would begin to reimburse DOD for additional care
provided to Medicare-eligible beneficiaries, at a rate lower
than that at which it reimburses civilian Medicare providers
and health maintenance organizations. H.R. 3142, as amended by
the committee, also would provide for an annual General
Accounting Office review of the program to determine whether
there have been any cost overruns.
To ensure that the demonstration is valid and yields
sufficient data for determining the viability of full-scale
implementation of subvention, the committee intends that the
demonstration be conducted throughout the two TRICARE
demonstration regions--not just at a few specific sites within
the two regions as has been proposed by the Administration--and
include the Department's civilian health care providers
operating within the demonstration region.
legislative history
H.R. 3142, the ``Uniformed Services Medicare Subvention
Demonstration Project Act,'' was introduced on March 21, 1996.
It was referred to the Committee on Ways and Means, and in
addition to the Committees on Commerce and National Security.
The origins of the legislation can be traced back to the
National Defense Authorization Act for Fiscal Year 1993 (Public
Law 102-484) which directed the Secretaries of Defense, Health
and Human Services and Transportation to examine the option of
Medicare reimbursement to the Department of Defense for medical
care provided to military Medicare-eligible retirees.
H.R. 580, introduced on January 19, 1995, sought to amend
title XVIII of the Social Security Act and title 10, United
States Code, to allow the Secretary of Health and Human
Services to reimburse the Military Health Services System for
care provided to Medicare-eligible military retirees and their
spouses in that system. The National Defense Authorization Act
for Fiscal Year 1996 (section 718 of Public Law 104-106)
expressed the sense of Congress that the President's budget for
fiscal year 1997 should provide for reimbursement by the Health
Care Financing Administration to the Department of Defense for
health care provided to Medicare-covered beneficiaries. The
President's budget request for fiscal year 1997 did not include
Medicare reimbursement to DOD.
On March 7, 1996, the Subcommittee on Military Personnel
conducted a hearing on alternatives for military retiree health
care, including Medicare reimbursement to the Department of
Defense. On September 11, 1996, the Subcommittee on Military
Personnel held a hearing to specifically address the issue of
Medicare subvention and H.R. 3142.
On September 12, 1996, the Committee on National Security
met to consider H.R. 3142. The committee agreed to an amendment
in the nature of a substitute. The bill, as amended, was
ordered reported favorably to the House by a unanimous voice
vote.
committee position
On September 12, 1996, the Committee on National Security,
a quorum being present, approved H.R. 3142, as amended, by a
unanimous voice vote.
fiscal data
Pursuant to clause 7 of rule XIII of the Rules of the House
of Representatives, the committee attempted to ascertain annual
outlays resulting from the bill during fiscal year 1997 and the
four following fiscal years. The results of such efforts are
reflected in the cost estimate prepared by the Director of the
Congressional Budget Office under section 403 of the
Congressional Budget Act of 1974, which is included in this
report pursuant to clause 2(l)(3)(C) of House rule XI.
congressional budget office estimate
In compliance with clause 2(l)(3)(C) of rule XI of the
Rules of the House of Representatives, the cost estimate
prepared by the Congressional Budget Office and submitted
pursuant to section 403(a) of the Congressional Budget Act of
1974 is as follows:
September 17, 1996.
Hon. Floyd Spence,
Chairman, Committee on National Security,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate of H.R. 3142, the Uniformed
Services Medicare Subvention Demonstration Project Act, as
ordered reported by the House Committee on National Security on
September 12, 1996.
The bill will affect direct spending and thus would be
subject to pay-as-you-go procedures under section 252 of the
Balanced Budget and Emergency Deficit Control Act of 1985.
If you wish further details on this estimate, we will be
pleased to provide them.
Sincerely,
June E. O'Neill, Director.
Enclosure.
congressional budget office cost estimate
1. Bill number: H.R. 3142.
2. Bill title: Uniformed Services Medicare Subvention
Demonstration Project Act.
3. Bill status: As ordered reported by the House Committee
on National Security on September 12, 1996.
4. Bill purpose: The bill would create a demonstration
project to allow Medicare to reimburse the Department of
Defense (DoD) for health care that Medicare beneficiaries
receive in military treatment facilities through the managed
care option of the TRICARE program.
5. Estimated cost to the Federal Government: The table
below summarizes the budgetary effects of the bill. It shows
the effects of the bill on direct spending and authorizations
of appropriations.
[By fiscal years, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002
----------------------------------------------------------------------------------------------------------------
DIRECT SPENDING
Spending Under Current Law:
Estimated budget authority............ 198,191 217,200 238,144 259,683 281,215 304,913 330,923
Estimated outlays..................... 196,051 215,516 236,419 257,411 279,466 303,179 328,522
Proposed Changes:
Estimated budget authority............ 0 150 200 200 50 0 0
Estimated outlays..................... 0 150 200 200 50 0 0
Spending Under the Bill:
Estimated budget authority............ 198,191 217,350 238,344 259,883 281,265 304,913 330,923
Estimated outlays..................... 196,051 215,666 236,619 257,611 257,516 303,179 328,522
SPENDING SUBJECT TO APPROPRIATIONS ACTION
Spending Under Current Law:
Estimated auth. level \1\ \2\......... 15,117 15,117 15,117 15,117 15,117 15,117 15,117
Estimated outlays..................... 15,166 15,196 15,092 15,080 15,084 15,084 15,084
Proposed Changes:
Estimated auth. level \3\............. 0 -150 -200 -200 -50 0 0
Estimated outlays..................... 0 -100 -200 -200 -100 0 0
Spending Under the Bill:
Estimated auth. level \1\ \2\......... 15,117 14,967 14,917 14,917 15,067 15,117 15,117
Estimated outlays..................... 15,166 15,096 14,892 14,880 14,984 15,084 15,084
----------------------------------------------------------------------------------------------------------------
\1\ The 1996 figure is the amount already appropriated.
\2\ Amounts for fiscal year 1997 through 2002 are authorizations subject to appropriations action and assume
that appropriations under current law remain at the 1996 level. If they are adjusted for inflation the base
amounts would increase by about $450 million a year, but the proposed changes would remain as shown in the
table.
\3\ These estimates exclude the costs to administer and evaluate the demonstration program.
6. Basis of estimate: The bill would require that the
demonstration occur in two or more geographic regions over a
three-year period beginning on January 1, 1997. The estimate
assumes that the project is limited to three of the Department
of Defense's administrative regions--fewer than the bill would
allow, but more than anticipated in a recent memorandum of
agreement (MOA) between DoD and the Health Care Financing
Administration (HCFA). The MOA defines a demonstration at
several specific sites, but CBO assumes that under legislation
that would give broader authority the MOA would be revised.
Under the bill, Medicare would reimburse DoD for
expenditures above a base level of effort, which would be
determined by DoD and HCFA in order that the demonstration
project not raise overall Medicare costs. (The MOA contains a
similar objective but would attempt to achieve it in a
different way.)
Direct spending
Even though the bill aims at no change in Medicare's or
DoD's costs, CBO believes Medicare costs would rise by about
$200 million a year. This increase would stem from information
and administrative problems in determining what each agency
would have spent under current law.
The stipulation that the project be budget neutral for both
DoD and Medicare would be extremely difficult to implement.
Although one could argue that the measurement problems could go
either way, there are at least three reasons to believe that
Medicare's costs would rise under the subvention demonstration
program.
First, knowing how many Medicare beneficiaries will seek
care directly from DoD is difficult enough in the short term,
and that uncertainty only grows over time as populations change
and the availability of discretionary funding for DoD's health
care programs varies. DoD does not have complete information
about the extent to which its beneficiaries currently receive
additional care from other sources, such as Medicare. Thus,
establishing a baseline level is subject to considerable
uncertainty about the numbers of beneficiaries, the extent of
their receipt of care from non-DoD sources, and their response
to being included in the TRICARE enrollment system. Despite the
current lack of an enrollment system, data from DoD indicate
that it provides all health care to the equivalent of 68,000 or
about 30 percent of the 220,000 Medicare-eligible retirees or
dependents living in the three regions. Probably many more
people receive at least some care from DoD, but the number
averages out to being the equivalent of all care for 68,000
people. If healthy retirees are undercounted in the baseline
level, they would become the financial responsibility of HCFA
under the bill, even though they now get most of their care
from DoD.
Second, DoD and HCFA face different incentives and access
to information. As a result, DoD would have an advantage in the
negotiations with HCFA over the baseline level of care that
would work against budget neutrality. The demonstration would
tend to attract beneficiaries who had previously used a
military treatment facility. DoD would therefore have
information on potential participants' medical people to the
demonstration. Moreover, DoD has a greater incentive to shift
its costs to Medicare than HSCA has to prevent shifting.
Because annual discretionary appropriations currently limit
DoD's health care funding, the department would have to
eliminate personnel or otherwise reduce its program in the face
of losses from an inaccurate baseline level (alternatively, it
could expand its programs if it can shift costs to Medicare).
However, HCFA pays Medicare costs from a permanent and
indefinite appropriation that is very large and would not
readily reveal a loss stemming from a demonstration program
such as this one. Even after the fact, it would not be easy for
the General Accounting Office or any other auditing agency to
determine the financial outcome of the demonstration because
it, too, would have to rely on estimates and assumptions about
events and behavior that would have otherwise occurred under
current law.
Third, because Medicare's current method of paying risk
plans does not adequately adjust for differences in health
status among beneficiaries, Medicare's costs would rise if
relatively healthy beneficiaries who would otherwise receive
care in the private sector on a fee-for-service (FFS) basis
choose to receive it in DoD's managed care (MC) program. (The
demonstration program would pay slightly less for participants
who would otherwise be enrolled in a managed care plan under
Medicare.) The sector in which participants would otherwise be
enrolled has important implications for the bill's potential
costs: Maximum enrollment in the demonstration project would
depend on an estimate of whether the participants would
otherwise be enrolled in FFS or MC. If the estimate was that a
large number of MC enrollees would participate, the maximum
enrollment permitted under the bill would be high. If
participants actually would have been FFS enrollees, however,
the demonstration would incur costs for a large number of
participants.
On balance, CBO estimates that DoD could shift 50 percent
of its costs under the demonstration to Medicare because of
measurement problems and institutional features. First, a 20
percent to 30 percent error could easily occur in measuring
current efforts, and uncertainty about the future could add
another 20 percent to 30 percent at least. Second, the
differing incentives and access to information would lead to
errors that compound rather than offset.
This estimate also assumes that the demonstration project
would take place in three of DoD's administrative regions--
Region 6 (Texas), Region 11 (Washington/Oregon), and Region 12
(Hawaii/Pacific). Those regions contain approximately 220,000
retired military personnel and their dependents who are
entitled to Medicare insurance coverage in addition to being
eligible to receive care in DoD medical facilities. The
estimate assumes that 30 percent of the eligible population in
those regions would ultimately enroll in DoD's managed care
program to continue to receive their care from DoD. Finally,
Medicare is assumed to reimburse DoD at a rate of $5,425 per
capita in 1997, a rate that would rise to about $6,775 in 2000.
Spending subject to appropriations action
In terms of its relationship with DoD, HCFA would pay more
to DoD than it now pays to the private sector, and DoD would be
free to spend the extra reimbursement on things other than
medical care for the beneficiaries eligible for Medicare.
The increase in mandatory spending would allow
discretionary authorizations to decline by the same amount
because DoD would be able to spend the receipts from Medicare.
The same factors that would lead to higher Medicare costs would
obscure whether or in what amounts this demonstration project
was providing net additional resources to DoD. Whether
discretionary savings would actually occur would depend on
annual appropriation action.
On the other hand, discretionary costs would rise to cover
HCFA's and DoD's administrative costs to manage and evaluate
the demonstration project. These costs would probably amount to
a few million dollars.
7. Pay-as-you-go considerations: The balanced Budget and
Emergency Deficit Control Act of 1985 sets up pay-as-you-go
procedures for legislation affecting direct spending or
receipts through 1998. The bill would have the following pay-
as-you-go impact:
[By fiscal years, in millions of dollars]
------------------------------------------------------------------------
1996 1997 1998
------------------------------------------------------------------------
Change in outlays...................... 0 150 200
Change in receipts..................... (\1\) (\1\) (\1\)
------------------------------------------------------------------------
\1\ Not applicable.
8. Estimated cost to State, local, and tribal governments:
The bill contains no intergovernmental mandates as defined by
the Unfunded Mandates Reform Act of 1995 (Public Law 104-4) and
would have no significant impacts on the budgets of state,
local, or tribal governments.
9. Estimated impact on the private sector: This bill would
impose no new federal private-sector mandates as defined in
Public Law 104-4.
10. Previous CBO estimate: None.
11. Estimate prepared by: Federal Cost Estimate: Michael A.
Miller; Impact on State, Local and Tribal Governments: Pepper
Santalucia; Impact on Private Sector: Neil Singer.
12. Estimate approved by: Paul N. Van de Water, Assistant
Director for Budget Analysis.
committee cost estimate
With respect to clause 7(a) of rule XIII of the Rules of
the House of Representatives, the committee disagrees with the
Congressional Budget Office (CBO) cost estimate of H.R. 3142,
particularly as it pertains to the validity of certain
assumptions underlying this estimate.
The CBO cost estimate asserts limited confidence in the
ability of the Department of Defense (DOD) and the Health Care
Financing Administration (HCFA) to arrive at an accurate
baseline level of beneficiary enrollment because of a paucity
of good enrollment data. CBO also contends that, to the extent
that such data exists, DOD has better data than HCFA and would
use this advantage to negotiate an enrollment baseline and
reimbursement arrangement which would shift health care costs
to the Medicare program. DOD would then be free to use any
savings for other purposes.
CBO has based its scoring upon these assumptions despite
provisions in H.R. 3142 which specifically prohibit such cost
shifting actions and which limit HCFA's potential liability for
Medicare eligible beneficiaries to current law levels. CBO also
dismisses, without analytical justification, HCFA's ability to
act as an informed participant in the negotiations with DOD and
to establish the appropriate level of reimbursement. The CBO
assumes a level of concerted bureaucratic malfeasance that is
unsupported by any empirical data and that runs counter to the
experience of this committee.
CBO also asserts that relatively healthy retirees who
currently receive care on a fee-for-service basis under
Medicare would move in great numbers to a DOD managed care
system. CBO claims this migration of relatively healthy, low
cost, beneficiaries would result in higher direct spending
because HCFA would reimburse DOD on a per-capita basis that
would exceed the current per-capita cost of care for this
group. CBO provides no justification for this assumption.
Indeed, the ability to choose health care providers is one of
the key features of Medicare that most beneficiaries want to
see preserved under any reform proposal. CBO offers no
compelling analysis to support the proposition that military
retirees receiving care on a fee-for-service basis would behave
differently than other people and migrate in large numbers to a
managed care system. This specific concern is addressed in the
evaluation design contained in the memorandum of agreement
(MOA) between DOD and HCFA--the Administration's specific plan
for implementing the demonstration required by this bill.
Furthermore, both the bill and the implementing plan would
require any eligible beneficiaries who participate in the
demonstration to receive all their medical care through the
Department's TRICARE managed health care program. This
requirement could actually produce savings to the federal
government by limiting the current practice of ``double
dipping''--military beneficiaries who use both their Medicare
benefits and the military health services system depending on
which option is more convenient or less costly. This practice
frequently results in the federal government paying twice for
health services provided to these individuals. The requirement
for demonstration participants to use only one of these two
health care system would serve to prevent this prevent this
practice and save the federal government money. The CBO
estimate wholly failed to address such potential savings.
Finally, CBO's scoring of H.R. 3142 assumes a demonstration
conducted in three TRICARE regions. While the bill does allow
for the demonstration to be conducted in two or more regions,
it does not require that it be conducted in more than two
TRICARE regions. Additionally, the Administration's specific
plan for implementing this bill--the MOA between DOD and HCFA--
would require the demonstration to be limited to only two
TRICARE regions. Thus, the CBO estimate likely significantly
overstates the actual cost of the demonstration program.
H.R. 3142 would not affect any retiree who is not currently
entitled to receive benefits under the Medicare program. The
bill would do nothing to increase or decrease the potential
liability of the Medicare program. CBO's scoring of the bill
reflects an unrealistic, worst case scenario. Under the current
system, DOD is essentially buying down the Medicare program's
liabilities by using defense discretionary funds to provide
health care benefits to Medicare eligible military retirees.
CBO's argument that this bill will lead to an increase in
entitlement spending is therefore misleading since the legal
entitlement, and attendant liability on the part of the
government, already exists.
The budgetary implications of H.R. 3142 should be
considered in light of the following example: when a military
hospital is closed, the secondary effect of eligible military
retirees who received care at that facility migrating to the
Medicare program is not considered as a direct spending
argument against closing the hospital. Similarly, HCFA's duty
to provide health care for all Medicare eligible retirees
should not be considered reduced simply because DOD has
annually spent a portion of its limited discretionary funds to
provide adequate health care for military retirees.
The committee believes that the bill may result in some
small increases in discretionary costs to DOD associated with
management of the demonstration project. However, the bill
contains specific safeguards to prevent any of the increases in
direct spending assumed in the CBO estimate. As a result, the
committee does not agree with the principal assumptions which
form the basis of the CBO cost estimate and therefore does not
believe that the estimate is an accurate forecast of the actual
costs to the government of this legislation.
INFLATION IMPACT STATEMENT
Pursuant to clause 2(l)(4) of rule XI of the Rules of the
House of Representatives, the committee concludes that the bill
would have no significant inflationary impact.
OVERSIGHT FINDINGS
With respect to clause 2(l)(3)(A) of rule XI of the Rules
of the House of Representatives, this legislation results from
hearings and other oversight activities conducted by the
committee pursuant to clause 2(b)(1) of rule X.
With respect to clause 2(l)(3)(B) of rule XI of the Rules
of the House of Representatives and section 308(a)(1) of the
Congressional Budget Act of 1974, this legislation does not
include any new spending or credit authority, nor does it
provide for any increase or decrease in tax revenues or
expenditures. The fiscal features of this legislation are
addressed in the estimate prepared by the Director of the
Congressional Budget Office under section 403 of the
Congressional Budget Act of 1974.
With respect to clause 2(l)(3)(D) of rule XI of the Rules
of the House of Representatives, the committee has not received
a report from the Committee on Government Reform and Oversight
pertaining to the subject matter of H.R. 3142.
STATEMENT OF FEDERAL MANDATES
Pursuant to section 423 of Public Law 104-4, this
legislation contains no federal mandates with respect to state,
local, and tribal governments, nor with respect to the private
sector. Similarly, the bill would provide no unfunded federal
intergovernmental mandates.
ROLLCALL VOTES
With respect to clause 2(l)(2)(B) of rule XI of the Rules
of the House of Representatives, no roll call votes were taken
with respect to the committee's consideration of H.R. 3142.
The committee ordered H.R. 3142 reported to the House with
a favorable recommendation by a unanimous voice vote, a quorum
being present.