Defense Health Care: Disability Programs Need Improvement and	 
Face Challenges (12-OCT-01, GAO-02-73). 			 
								 
The Department of Defense (DOD) health program-TRICARE-provides  
medical care for about 8.3 million active duty service members	 
and retired beneficiaries and their  dependents and survivors. As
supplements to TRICARE, DOD provides benefits for persons with	 
extraordinary disabling physical or mental disorders through its 
Individual Case Management Program for Persons with Extraordinary
Conditions (ICMP-PEC) and for less severely disabled active duty 
dependents through its Program for Persons with Disabilities	 
(PFPWD). Recently, military families and advocacy groups have	 
raised concerns about problems accessing ICMP-PEC benefits. Also,
the DOD Authorization Act for 2001 entitled military retirees age
65 and older and their dependents and survivors to TRICARE	 
benefits for life (TFL) which may have caseload and cost effects 
on ICMP-PEC. As of June 2001, there were 38 ICMP-PEC participants
whose total services for fiscal year 2001 were projected to cost 
about $6 million with annual per-case cost projected to range	 
from about $13,000 to $382,000. Currently ICMP-PEC lacks a	 
clearly enunciated purpose, well-defined eligibility criteria and
benefits, and an efficient application process. In addition,	 
PFPWD is an established program with well defined criteria and	 
benefits that assist thousands of ADFMs with their special health
care service and equipment needs. Also, prior to April 2001,	 
PFPWD provided many services and equipment items at modest	 
cost-shares to ADFMs with severe disabilities that were also	 
available at higher copayments to less seriously disabled ADFMS  
under TRICARE Basics. Data are not available on how many PFPWD	 
participants are affected by the program's $1,000 monthly benefit
limit. A comparison of ICMP-PEC's home care benefit of up to 24  
hours of skilled nursing care per day, seven days per week-and	 
unlimited skilled nursing facility (SNF) coverage with Medicare  
and selected Medicaid programs showed that ICMP-PEC's benefits	 
are more generous.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-73						        
    ACCNO:   A02228						        
    TITLE:   Defense Health Care: Disability Programs Need Improvement
             and Face Challenges                                              
     DATE:   10/12/2001 
  SUBJECT:   Federal Employees Health Benefits			 
	     Program						                                                                 
	     Program for Persons with Disabilities		 
	     Individual Case Management Program for		 
	     Persons with Exraordinary Conditions		                                                                 
	     Managed Care Support Contractor			 

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GAO-02-73
     
Report to Congressional Committees

United States General Accounting Office

GAO

October 2001 DEFENSE HEALTH CARE

Disability Programs Need Improvement and Face Challenges

GAO- 02- 73

Page i GAO- 02- 73 DOD Disability Programs Letter 1

Results in Brief 2 Background 5 Number of Program Participants and Program
Costs Differ

Significantly 10 Programs Differ in Guidance; TRICARE Changes Will Affect

Caseloads 12 Questions Remain About the Adequacy of PFPWD?s Monthly

Maximum 19 ICMP- PEC and PFPWD Benefits Are Better Than or Comparable to

Other Programs and Plans 21 Conclusions 25 Recommendations 26 Agency
Comments and Our Evaluation 27

Appendix I Scope and Methodology 30

Appendix II TRICARE Cost- Shares, Deductibles, and Copayments 32

Appendix III PFPWD Monthly Cost- Share Is Guided by Pay Grade 33

Appendix IV PFPWD Exclusive Benefits and PFPWD Benefits Also Available in
TRICARE Basic 34

Appendix V Comments From the Department of Defense 35

Appendix VI GAO Contacts and Staff Acknowledgments 38 GAO Contacts 38 Staff
Acknowledgments 38 Contents

Page ii GAO- 02- 73 DOD Disability Programs Tables

Table 1: PFPWD Program Costs and Estimated Beneficiary Costs by Fiscal Year
12 Table 2: TRICARE Cost- Shares, Deductibles, and Copayments for

Active Duty Family Members 32 Table 3: TRICARE Cost- Shares, Deductibles,
and Copayments for

Retirees, Their Family Members, and Others 32 Table 4: PFPWD Exclusive
Benefits and PFPWD Benefits Also

Available in TRICARE Basic 34

Figure

Figure 1: Numbers of PFPWD Beneficiaries Grouped by Fiscal Year and Number
of Participants per Family 11

Page iii GAO- 02- 73 DOD Disability Programs Abbreviations

ADFM active duty family member( s) ADL activities of daily living CHAMPUS
Civilian Health and Medical Program for the Uniformed

Services DME durable medical equipment DOD Department of Defense EPSDT Early
and Periodic Screening, Diagnostic and Treatment FEHBP Federal Employees
Health Benefits Program HCBS Home and Community Based Services HHD Home
Health Demonstration HMO health maintenance organization ICMP- PEC
Individual Case Management Program for Persons with

Extraordinary Conditions MCSC Managed Care Support Contractor OPM Office of
Personnel Management PFPWD Program for Persons with Disabilities PTFH
Program for the Handicapped REM Rare and Expensive Case Management Program
SNF skilled nursing facility TFL TRICARE For Life TMA TRICARE Management
Activity

Page 1 GAO- 02- 73 DOD Disability Programs

October 12, 2001 Congressional Committees The Department of Defense (DOD)
health program- TRICARE- provides medical care for about 8.3 million active
duty service members and retired beneficiaries and their respective
dependents and survivors. As supplements to TRICARE, DOD provides benefits
for persons with extraordinary disabling physical or mental disorders
through its Individual Case Management Program for Persons with
Extraordinary Conditions (ICMP- PEC) and for less severely disabled active
duty dependents through its Program for Persons with Disabilities (PFPWD).
Recently, military families and advocacy groups have raised concerns about
problems accessing ICMP- PEC benefits. Also, the DOD Authorization Act for
fiscal year 2001 entitled all 1.4 million military retirees age 65 and older
and their dependents and survivors to TRICARE benefits for life (TFL) 1
effective October 1, 2001, which may have caseload and cost effects on ICMP-
PEC. 2

The 2001 Defense Authorization Act required that we review DOD?s
supplemental disability programs- ICMP- PEC and PFPWD. 3 As agreed with your
offices, our objectives were to determine each program?s number of
participants and benefit costs; whether the programs are generally meeting
their purposes, accessible to their target groups, and adequately
administered; the extent to which PFPWD?s monthly maximum benefit limit may
affect beneficiaries? ability to obtain services; how the programs? selected
benefits generally compare to Medicare, Medicaid, and Federal Employees
Health Benefit Program (FEHBP) plan benefits; and whether and, if so, what
program improvements may be needed.

In doing the work we interviewed and obtained program records from TRICARE
Management Activity (TMA) officials, TRICARE Managed Care Support
Contractors (MCSC) representatives, DOD Regional Lead Agent Medical
Directors and case managers, and military beneficiary advocacy groups. We
reviewed the programs? legislative histories and policies,

1 The Floyd D. Spence National Defense Authorization Act for 2001,
hereinafter cited as the 2001 Defense Authorization Act. 2 P. L. 106- 398,
Section 712.

3 P. L. 106- 398, Section 701( d).

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 73 DOD Disability Programs

ICMP- PEC case files, an ICMP- PEC database installed during our review
aimed at providing needed ICMP- PEC management data, TMA?s proposed ICMP-
PEC rule published in the Federal Register in August 2001, 4 and PFPWD
claims data. We reviewed Medicare, Medicaid, and FEHBP plan documents. Also,
we discussed illustrative ICMP- PEC and PFPWD cases and the general
comparability of program and plan benefits with officials and
representatives from California, Maryland, and Alabama Medicaid programs and
three FEHBP plans. Further methodological details are given in appendix I.
We conducted our work from December 2000 through August 2001 in accordance
with generally accepted government auditing standards.

As of June 2001, there were 38 ICMP- PEC participants whose total services
for fiscal year 2001 were projected to cost about $6 million with annual
per- case costs projected to range from about $13,000 to $382,000. Also, 10
participants from earlier demonstration programs were granted continued care
coverage under ICMP- PEC with projected fiscal year 2001 costs of about $2.5
million. Despite record system and database improvements made during our
work, TMA managers still cannot track ICMP- PEC?s actual case- by- case
costs. Regarding PFPWD, for fiscal year 2000, the most recent year for which
data were available, there were 3,843 participants whose services cost about
$12 million.

Currently ICMP- PEC lacks a clearly enunciated purpose, well- defined
eligibility criteria and benefits, and an efficient application process.
This complicates regional program managers? ability to identify potentially
qualifying cases and makes TMA?s case acceptance/ denial and benefit- level
decisions seem arbitrary. Also the program?s ambiguities obstruct efforts to
inform potential participants of its availability. Some regional program
managers told us that as a result they believe ICMP- PEC?s caseload is lower
than the actual number of eligible patients. Further, some ICMPPEC regional
managers told us that the application process is complex and
administratively burdensome, involving many clinical reviews of a patient?s
condition before final approval or denial. However, given the high average
cost per beneficiary, clearly defined eligibility criteria and an effective
eligibility determination process are critical. Recently enacted

4 The ICMP- PEC proposed rule explains legislative changes made to the
program and makes amendments to clarify specific policies that relate to the
program. Federal Register, Vol. 66, No. 148, August 1, 2001, pp 39699-
39705. Results in Brief

Page 3 GAO- 02- 73 DOD Disability Programs

TRICARE changes, effective October 1, 2001, entitling senior retirees to
lifetime DOD health benefits, potentially including ICMP- PEC benefits,
further underscore the need to address ICMP- PEC?s problems before expected
caseload increases occur. In this respect, TMA?s proposed rule for ICMP- PEC
does not clearly enunciate its purpose nor does it substantially change
eligibility criteria; therefore current problems may persist. And, while the
rule attempts to clarify ICMP- PEC?s services and would extend service
priority to active duty family members (ADFM) before retirees and their
dependents, the rule and its accompanying operating policies and procedures
are not expected to be completed until the end of 2001.

PFPWD is an established program with well defined criteria and benefits that
assist thousands of ADFMs with their special health care service and
equipment needs. Potential participants have clear expectations of whether
they qualify and, according to regional program managers, have ready access
to the program. Further, PFPWD?s application process is relatively
straightforward and, for the most part, is managed and operated at regional
levels. Case managers told us, however, that they need to do a better job
and lack procedures for communicating across regions about PFPWD patients
leaving and entering their jurisdictions. Because patients changing
jurisdictions must reapply for the program in their new location, managers
said they need to better facilitate and help expedite PFPWD patients?
reapplications.

Prior to April 2001, PFPWD provided many services and equipment items at
modest cost- shares to ADFMs with severe disabilities that were also
available at higher copayments to less seriously disabled ADFMs under
TRICARE Basic. 5 The 2001 Defense Authorization Act, however, effective
April 1, 2001, eliminated the copayments for ADFMs under TRICARE Prime 6 but
not under PFPWD. As a result, PFPWD families can now buy many of the
services and equipment they need under TRICARE Prime at

5 In 1995, with TRICARE?s introduction, some PFPWD services and equipment
also became available under TRICARE Basic, although PFPWD patients were
required until 1997 to obtain all services related to their disability from
PFPWD. TRICARE- also referred to as TRICARE Basic- is a triple- option
benefit program designed to give beneficiaries a choice among a health
maintenance organization, a preferred provider organization, and a fee-
forservice benefit.

6 TRICARE Prime, a health maintenance organization benefit, is one of three
benefit options under DOD?s health care program referred to as TRICARE
Basic.

Page 4 GAO- 02- 73 DOD Disability Programs

no cost. And, as some regional case managers have told us, PFPWD caseloads
may decrease and the program may no longer be needed.

Data are not available on how many PFPWD participants are affected by the
program?s $1,000 monthly benefit limit. Regional program managers we spoke
with differed on whether the limit was keeping beneficiaries from obtaining
needed services and thus should be increased. Some officials told us the
limit has not kept pace with medical service and equipment cost increases
because the limit has not changed materially in the last 15 years. However,
other officials told us they are able to schedule services and buy equipment
by spreading costs over several months so that the PFPWD $1,000 monthly
limit is rarely an obstacle. Some participants may use Medicaid to obtain
services above the monthly limit and others may rely completely on Medicaid
due to the $1,000 monthly limit. Other officials told us that the recent
TRICARE Prime copayment changes would cause PFPWD families to meet some of
their needs under TRICARE Basic and thus reduce PFPWD?s caseload costs. This
could obviate the need to raise the limit. The effect of eliminating TRICARE
Prime?s copayments on PFPWD service use and caseloads may need to be
reviewed before attempting to assess the monthly limit?s adequacy.

Comparing ICMP- PEC?s home care benefit- up to 24 hours of skilled nursing
care per day, 7 days per week- and unlimited skilled nursing facility (SNF)
coverage with Medicare and selected Medicaid programs showed that ICMP-
PEC?s benefits are more generous. Medicare?s home health benefit is
intermittent 7 and its SNF coverage is limited to 100 days following at
least a 3- day hospital stay. The selected Medicaid programs we reviewed
cover unlimited SNF care, but in- home services may be limited, especially
for persons over age 21. The FEHBP plans reviewed have limited in- home and
SNF coverage, but each also offers extended coverage for patients with
unusual medical needs who may qualify based on individual case- by- case
assessments. Plan representatives could not elaborate on such coverage,
citing the need for complete case information and examination by a plan
physician. PFPWD services are comparable to Medicare services and also the
reviewed Medicaid services available to those under age 21. 8 Services
available to patients over age 21, however,

7 Skilled nursing care on an intermittent basis means services on fewer than
7 days per week or for fewer than 8 hours per day for periods of 21 days or
fewer. There are no limits on the number of visits or length of coverage,
and no copayments or deductibles apply.

8 About 85 percent of PFPWD patients are under age 21.

Page 5 GAO- 02- 73 DOD Disability Programs

are limited under Alabama?s Medicaid program and somewhat so under
California?s Medicaid program- unlike Maryland?s program and PFPWD which
provide the same services to patients regardless of age. For the plans we
reviewed, FEHBP coverage for care needs, such as hearing aids and wheelchair
maintenance, is less than PFPWD coverage for the same needs.

We are recommending that DOD clarify ICMP- PEC, explain how its legislative
changes are to be implemented, and improve its case- by- case cost- data
tracking. Also, DOD needs to develop procedures to facilitate the transfer
of PFPWD cases from region to region and reassess PFPWD after the effects of
eliminating TRICARE Prime copayments on its costs and caseload are known. In
commenting on a draft of this report, DOD concurred with our
recommendations.

DOD?s health care program- TRICARE- provides health care services to active
duty military members and their dependents and military retirees and their
dependents. Health care for eligible beneficiaries is managed on a regional
basis at military hospitals and clinics supplemented by contracted civilian
services. Five Managed Care Support Contractors (MCSC) administer the
TRICARE health benefit in 11 TRICARE regions in the contiguous United States
through provider networks. TRICARE- also referred to as TRICARE Basic- is a
triple- option benefit program designed to give beneficiaries a choice among
a health maintenance organization (TRICARE Prime), a preferred provider
organization (TRICARE Extra), and a fee- for- service benefit (TRICARE
Standard). 9 Cost sharing varies among the three options from low per-
service costs for active duty families under TRICARE Prime to a percentage
of allowable charges under TRICARE Standard. (See appendix II for a list of
TRICARE cost- shares, deductibles, and copayments.)

In 1999, DOD implemented ICMP- PEC. The program was an outgrowth of DOD?s
Home Health Demonstration (HHD) projects established to test DOD?s ability
to provide home health care in lieu of hospital care to patients with
exceptionally serious, long- term, costly, and incapacitating

9 TRICARE Standard was formerly called the Civilian Health and Medical
Program for the Uniformed Services (CHAMPUS). Background

ICMP- PEC Program

Page 6 GAO- 02- 73 DOD Disability Programs

physical or mental conditions. 10 ICMP- PEC provides qualifying patients
with care and equipment not available under TRICARE Basic by waiving TRICARE
Basic?s restrictions on such services or supplies. 11 The National Defense
Authorization Act for fiscal year 2000 (2000 Defense Authorization Act) 12
eliminated the program?s original 365- day benefit limit and made ICMP- PEC
first payer to Medicaid. 13 The 2001 Defense Authorization Act imposed a
$100 million annual spending cap on ICMPPEC.

ICMP- PEC requires that a qualifying patient be determined to be

?custodial? under TRICARE or require continuing extensive services. A
custodial patient must be disabled mentally or physically for a prolonged
period; require assistance with the activities of daily living (ADL), which
include eating, bathing, dressing, toileting, and transferring; not be under
active medical, surgical, or psychiatric treatment that would reduce the
disability such that the patient could function outside a protective,
monitored, and controlled environment; and require a protected, monitored,
or controlled environment whether in an institution or a home.
Alternatively, a qualifying patient must have high TRICARE service costs in
the year preceding his or her ICMP- PEC eligibility or require clinically
appropriate services or supplies from various providers and be able to be
treated more appropriately and cost effectively at a less intensive level of
care under ICMP- PEC. 14

Patients who qualify for ICMP- PEC predominantly receive skilled nursing
services. Such services can only be furnished by a registered nurse,

10 The first HHD project began in July 1986 for dependents of active duty
service members and members who died in the service. The second HHD project
began in July 1988 and expanded coverage to military retirees and dependents
of retirees. For additional information, see DOD Health Care: Further
Testing and Evaluation of Case- Managed Home Care is Needed (GAO/ HRD- 93-
59, May 21, 1993) and Evaluation of the Champus Home Health Care- Case
Management Program, Office of the Secretary of Defense, June 1992.

11 10 U. S. C. sect.1079( a)( 17). 12 P. L. 106- 65, sect.703( b). 13 Any Medicaid
expenses incurred by ICMP- PEC beneficiaries are fully reimbursable by ICMP-
PEC to the extent such services are available under ICMP- PEC. 14 TMA?s
August 2001 proposed ICMP- PEC rule would eliminate as one of the qualifying
criteria the alternative that a qualifying patient must have high TRICARE
service costs in the year preceding ICMP- PEC eligibility or require
clinically appropriate services or supplies from various providers.

Page 7 GAO- 02- 73 DOD Disability Programs

licensed practical nurse, or licensed vocational nurse and are required to
be performed under a physician?s supervision. Once a patient is deemed
custodial he or she can receive 1 hour per day of skilled nursing care in
the home under TRICARE Basic. Through ICMP- PEC, up to an additional 23
hours per day in the home is available if medically necessary. As an
alternative, skilled nursing care in a facility may be authorized through
ICMP- PEC if medically necessary. ICMP- PEC does not cover assistance with
ADLs. Cases undergo review periodically and, in particular, on a family?s
movement to another region.

MCSC program managers identify potentially eligible cases and, with regional
lead agent concurrence, submit them to the TMA office in Colorado (TMA
West), which until May 2001 had final acceptance or denial authority. The
National Program Director, located at TMA headquarters in Falls Church,
Virginia, has general oversight and program policy and procedure development
responsibilities but had not been directly involved in final case decisions.
In May 2001, however, final case decision responsibilities and functional
program oversight were transferred to TMA headquarters. 15

Also, over the past year TMA has been working to develop a final ICMPPEC
rule to implement legislative changes to ICMP- PEC made in fiscal years 2000
and 2001 and to concurrently amend the TRICARE operations and policy
manuals. Both actions are expected to be completed by the end of 2001. The
proposed rule was entered into the Federal Register on August 1, 2001, and
TMA was accepting public comments until October 1, 2001. Once comments have
been reviewed, the rule, as appropriate, will be amended, its contents
translated into operating policies and procedures in the TRICARE manuals,
and the information made available to regional program managers and lead
agents. Subsequently, contract modifications incorporating the program
changes will need to be drawn up and negotiated with the MCSCs who help
administer ICMP- PEC.

PFPWD provides services and equipment to ADFMs who have moderate or severe
mental retardation or serious physical disabilities. 16 Prior to

15 TMA West?s Contracting Officer remains responsible for providing ICMP-
PEC case files for independent peer review. 16 The program originally did
not have a separate name. It was named the Program for the Handicapped
(PFTH) in 1977 and was renamed the Program for Persons with Disabilities
(PFPWD) in 1997. PFPWD Program

Page 8 GAO- 02- 73 DOD Disability Programs

October 1997, PFPWD patients were required to obtain all services related to
their disability from PFPWD and all other needed care from TRICARE Basic.
Now, PFPWD patients may receive services related to their disability through
TRICARE Basic. Currently, PFPWD requires that before PFPWD benefits are
provided, a determination be made that the patient?s needed care cannot,
with the exception of Medicaid covered care, be met using other public
resources and facilities. Examples of PFPWD qualifying disabilities are
epilepsy, cerebral palsy, multiple sclerosis, muscular dystrophy, and
hearing or vision loss. Services covered include speech and physical
therapy, durable medical equipment (DME), transportation to and from medical
appointments, and hearing aids. Upon the family?s movement to another
TRICARE region, the patient is required to reapply for program services
there.

Beneficiaries are responsible for a cost- share each month they receive a
service. The cost- share amount, ranging from $25 to $250, is based on the
sponsor?s rank (see appendix III). Also, the program has a monthly benefit
cap of $1,000 per family. Beneficiaries are responsible for costs beyond the
limit. In families with more than one PFPWD participant, only the least
expensive participant in a given month is subject to the monthly limit,
while the family?s other participants are not subject to the limit for that
month nor a cost- share requirement.

Recently, significant legislative changes were made to TRICARE Basic. As of
April 1, 2001, copayments under TRICARE Prime were eliminated for active
duty beneficiaries but not under PFPWD. Currently, about 67 percent of PFPWD
claims are for persons enrolled in TRICARE Prime.

Also, Medicare- eligible uniformed services retirees age 65 and over and
their spouses, dependents and survivors are entitled to TRICARE benefits as
of October 1, 2001- referred to as TRICARE For Life (TFL). 17 Eligible
beneficiaries who receive care from Medicare providers will have TRICARE as
their secondary payer. Also, those who qualify for ICMP- PEC will have
access to benefits- such as up to 24 hours per day of skilled nursing care
in the home- that are not covered by Medicare.

17 Section 712( a)( 2)( A) of the 2001 Defense Authorization Act requires
that all Medicareeligible beneficiaries be enrolled in Medicare Part B
(which covers physician, outpatient hospital, laboratory and other services)
to receive the TRICARE benefit. Recent Legislative

Changes

Page 9 GAO- 02- 73 DOD Disability Programs

Medicare, the nation?s largest federal health insurance program, provides
health insurance to people age 65 and over and to those who have endstage
renal disease, (permanent kidney failure requiring regular dialysis or a
transplant) and certain people with disabilities. There is a 24- month
waiting period for Medicare coverage based on disability. Medicare part A
covers inpatient hospital, SNF, certain home health, and hospice care.
Enrollment in part A (Hospital Insurance) is automatic at age 65 for all
workers who paid the hospital insurance payroll tax during their working
years or whose spouse is covered. Beneficiaries generally pay no premium for
part A coverage, but they are liable for required deductibles, coinsurance,
and copayment amounts. Medicare- eligible beneficiaries may elect to
purchase part B (Supplemental Medical Insurance), which covers physician,
outpatient hospital, laboratory, and other services. Beneficiaries must pay
a premium for part B coverage, currently $50 per month, and are also
responsible for part B deductibles, coinsurance, and copayments. Most of
Medicare?s 40 million beneficiaries are enrolled in both part A and part B.

Certain TRICARE beneficiaries are also eligible for Medicaid, a joint
federal- state, means- tested entitlement program that provides medical
assistance to certain individuals and families with low income and
resources. Under broad federal guidelines, each state establishes its own
eligibility standards, benefits package, and program administration. As a
result, there are essentially 56 different Medicaid programs- one for each
state, territory, and the District of Columbia. Nonetheless, under the Early
and Periodic Screening, Diagnostic and Treatment (EPSDT) program, all state
Medicaid programs are required to cover any service or item medically needed
for qualifying persons under the age of 21. Also, Medicaid programs often
cover a variety of supportive services for persons with long- term needs.

Established in 1959, FEHBP is an employer- sponsored program for federal
civilian employees and annuitants and certain of their dependents.
Participation is voluntary. The Office of Personnel Management (OPM) has
overall administrative responsibility for contracting with private health
insurance carriers and plans sponsored by federal employee and postal
organizations. The contracts provide- for fixed, predetermined plan
premiums- benefits that OPM judges affordable and appropriate for the needs
of federal workers and retirees. The FEHBP law does not require plans to
offer a particular benefit package, although OPM requires that they cover
such services as child immunizations, cancer screening, Medicare

Medicaid FEHBP

Page 10 GAO- 02- 73 DOD Disability Programs

prescription drugs, mental health, and organ transplants. Plans are required
to limit enrollees? annual out- of- pocket expenses for deductibles and
coinsurance but can vary with regard to availability of high and low
options, deductibles, coinsurance, and copayment requirements.

As of June 2001, there were a total of 38 participants in ICMP- PEC whose
services for the fiscal year were projected to cost about $6 million. Also,
the care costs of 10 other participants from earlier HHD programs that
preceded ICMP- PEC were transferred to ICMP- PEC. The projected costs for
such services for this fiscal year are $2.5 million. TMA managers lack the
ability to track actual program costs during the year despite their efforts
to improve data collection made during our review. Regarding PFPWD, for
fiscal year 2000 there were 3,843 participants whose services cost about $12
million.

Thirty patients are dependent children, 6 are dependent spouses, and 2 are
retired military members. About 80 percent of the patients are less than age
22 and the rest are between 22 and 64 years of age. 18 Thirty- six are
receiving skilled nursing services in the home and 2 are receiving
occupational and physical therapy. Demographic information was not available
on the 10 patients transferred to the ICMP- PEC from the HHD. However, these
patients were receiving skilled nursing and one of them was also receiving
occupational and physical therapy. Early in our review we observed that
TMA?s ICMP- PEC records were incomplete, contained inconsistent data, and
were not kept current. In July 2001, TMA officials described to us their
recently installed ICMP- PEC data system aimed at addressing such problems.
While significantly improving the automated compilation of needed data,
still lacking is their ability to compile actual case- by- case cost data as
it accrues during the fiscal year. Among other management uses such data are
needed to track progress against ICMPPEC?s spending cap.

For fiscal years 1998, 1999, and 2000 the annual number of PFPWD
participants has ranged from about 3,714 to 3,843 (see figure 1). Most such
participants have been dependents under age 21. Most services provided have
been therapeutic in nature, such as medically supervised speech,

18 Ages were recorded for all but 1 patient. Number of Program

Participants and Program Costs Differ Significantly

ICMP- PEC Participant Data

PFPWD Participants, Services, and Costs

Page 11 GAO- 02- 73 DOD Disability Programs

language, and hearing therapy. Most participating families have one member
in the program, but 2 percent to 3 percent of families have more than one
member in the program.

Figure 1: Numbers of PFPWD Beneficiaries Grouped by Fiscal Year and Number
of Participants per Family

a Fiscal year total. Source: GAO analysis of PFPWD claims data provided by
TMA.

3400 3500

3600 3700

3800 3900

1998 1999 2000 800

600 400 200

0 Beneficiaries

(1 per family) (2 per family) (3 per family) (4 per family)

Fiscal years

PFPWD beneficiaries 3714 a

3472 214

24 4 3807 a

3600 176

27 4 3843 a

3606 210

27

Page 12 GAO- 02- 73 DOD Disability Programs

Since fiscal year 1998, PFPWD total program costs have ranged from about $11
million to $12 million per fiscal year, with DOD paying about 85 percent of
the service and equipment costs and the remaining potentially paid either
out- of- pocket or by Medicaid, other health insurance, or other means (see
table 1).

Table 1: PFPWD Program Costs and Estimated Beneficiary Costs by Fiscal Year
Cost to DOD Estimated

beneficiary cost a Total costs

1998 $9,436,918 $1,906,206 $11,343,124 1999 9,710,398 1,654,673 11,365,071
2000 10,389,500 1, 538,434 11,927,934

a Data may not include beneficiary cost- shares above the $1, 000 monthly
limit. Source: September 2000 TRICARE Statistical Phaseback Report for
fiscal year 1998 and March 2001 TRICARE Statistical Phaseback Report for
fiscal years 1999 and 2000.

ICMP- PEC has operated for about 3 years with frequent changes and without
clear policy guidance, a situation that has lead to confusion about the
program?s purpose, eligibility criteria, and benefits. The program?s lack of
clarity may further exacerbate such problems now that the age- 65- andover
military retiree population has become entitled to participate.

PFPWD, on the other hand, has clearly defined regulations with specific
eligibility and benefit criteria. Qualifying cases can be readily identified
using program guidance. However, in April 2001, copayments were eliminated
under TRICARE Prime, 19 so PFPWD families may opt to obtain many services
and equipment they now receive under PFPWD with a costshare through TRICARE
Prime for free. Thus, PFPWD?s caseloads may decrease.

19 Prescription medication copayments were not eliminated. Programs Differ
in

Guidance; TRICARE Changes Will Affect Caseloads

Page 13 GAO- 02- 73 DOD Disability Programs

Among DOD and MCSC managers we interviewed, the general consensus is that
ICMP- PEC?s overall purpose is unclear and that it lacks clear policy
guidance largely because it has been in a state of change since
implementation. Also generally agreed is that ICMP- PEC lacks clearly
defined eligibility criteria and benefits such that program specifics cannot
be adequately communicated to potential participants. While a patient?s
access to such an expensive benefit needs to be carefully determined, the
ICMP- PEC application process involves several clinical reviews of a
patient?s condition before final approval or denial and may be too complex
and administratively burdensome. Recently enacted TRICARE changes entitling
military retirees aged 65 and over and their dependents and survivors to
lifetime DOD health benefits, including ICMP- PEC benefits, further
underscore the need to address ICMP- PEC?s problems before potential
caseload increases occur. In that regard, DOD is working to complete ICMP-
PEC?s final rule and operating procedures, and efforts have recently begun
to develop legislative proposals to improve ICMPPEC.

Since March 1999, when ICMP- PEC was first implemented, the program has been
legislatively and administratively changed each year- and final regulations
have yet to be promulgated. For example, the 2000 Defense Authorization Act
eliminated the program?s 365- day benefit limit. 20 This converted the
program from one of temporary assistance while qualifying patients
transitioned to other care resources, including Medicaid, to permanent
assistance of potentially unlimited duration. The 2000 Defense Authorization
Act made ICMP- PEC primary payer to Medicaid. This changed the program from
one that relied on Medicaid and other public resources before providing
services into a qualifying beneficiary?s first resort for care. These
changes had the potential for increasing ICMP- PEC?s costs. 21

In an effort to explain the new changes and how the program should operate,
in March and November 1999 and March and April 2000, TMA issued informal
guidance to regional program managers. However, DOD regional and MCSC
officials told us that the successively changing guidance did not adequately
address the program?s lack of clear eligibility

20 P. L. 106- 65, sect.703( b). 21 The 2001 Defense Authorization Act did impose
a $100 million program spending cap. However, current spending is less than
$10 million, so the cap will likely constrain services only if the number of
enrollees expands significantly. ICMP- PEC Purpose and

Operating Rules Need Clarification Before Expected Caseload Hikes Occur

Program Changes and Limited Policy Guidance

Page 14 GAO- 02- 73 DOD Disability Programs

criteria and benefits or issues that the legislative changes had raised,
such as the effects of transforming the program into a long- term benefit.
Eliminating the 365- day benefit limit, for example, potentially opened the
program to unlimited care for those among the over- age- 65 population who
would qualify under TFL. MCSC officials also told us that they viewed the
guidance as nonbinding because it was not the subject of a formal contract
modification. According to regional program managers, the net effect of the
program changes and unclear guidance is general confusion about the
program?s fundamental purpose. In seeking to provide further guidance on how
legislative changes to the program are to be implemented, TMA?s proposed
rule sets forth, among other things, that ICMP- PEC?s purpose is not to
provide long- term care, thus reiterating TMA?s interim guidance. But, under
the proposed rule, ICMP- PEC?s perpatient benefit would remain potentially
unlimited and ICMP- PEC would remain first payer to Medicaid. Thus, the
program would appear to continue to provide a potentially long- term care
benefit contrary to the proposed rule?s statement about ICMP- PEC?s purpose.
As mentioned, however, the proposed rule is subject to change based on
public comment and subsequent translation into operating policies and
procedures.

Regional program managers told us that ICMP- PEC eligibility criteria are
confusing and have not been specified to the level where they can readily
identify patients that qualify for the program. For the most part, ICMPPEC?s
custodial care definition is DOD?s way of screening from TRICARE Basic,
patients with high- cost, prolonged, nonremedial, disabling conditions. The
definition generally requires that a patient must have a severe mental or
physical disability and that the disability must be prolonged. Also, the
patient must require assistance to support the essentials of daily living
and not be under active medical, surgical, or psychiatric treatment that
would reduce the disability such that the patient could function outside a
protective, monitored, and controlled environment. Each case must be
separately and comprehensively reviewed before care- level and duration
decisions can be made. Some program managers told us that because the
criteria are subjective and open to interpretation there is resulting
confusion about which cases may qualify. Coupled with the multistep
application reviews, this confusion may result in an ICMP- PEC caseload that
is lower than the actual numbers of eligible patients.

Regional case managers also cited many instances in which TMA would approve
cases for the program but then deny similar cases with no clear
justification for the decisions. The TMA West officials responsible for
approving and denying cases told us they agreed that the ICMP- PEC ICMP- PEC
Eligibility and

Benefits Are Unclear

Page 15 GAO- 02- 73 DOD Disability Programs

criteria are too vague and need more specificity and that as a result their
decision- making has been impeded.

Regional program managers also told us ICMP- PEC?s benefits have not been
clearly defined or set forth. They told us that, as a result, decisions
about each eligible patient?s services appear arbitrary. Decisions to assign
different hours of skilled nursing care or to approve or deny other in- home
services for apparently similar cases without reference to some commonly
understood benefit criteria confuse regional program managers and
beneficiaries about ICMP- PEC?s case- by- case coverage. For example, a 1-
year- old patient requiring 24- hour ventilator- related care was denied
ICMP- PEC coverage by TMA West because the care was viewed as potentially
temporary (meaning the patient likely would improve) because it would be
needed for an estimated 5 to 10 years. In contrast, a 4- year- old patient
requiring the same services was approved for 16 hours a day by TMA West,
later increased to 24 hours, 2 days a month. The services were approved
despite similar expectations that the patient would no longer need
ventilator care after about 3 years.

Also, regional program officials told us that due to ICMP- PEC?s eligibility
and benefit ambiguities, they are unable to adequately explain its coverage
to potential beneficiaries. Some officials questioned why they would attempt
to inform potential clients about the program if they cannot answer their
clients? most basic questions about it. As a result, they told us, ICMP- PEC
is not well known to potential beneficiaries nor to their service providers.
In this regard, TMA?s proposed rule reiterates ICMPPEC?s custodial
definition and, for the most part, reiterates the interim guidance with
respect to eligibility criteria so that the current problems may persist. On
the other hand, the proposed rule attempts to clarify ICMP- PEC?s services
with examples and more explicit service definitions, which may better equip
regional program managers in understanding ICMP- PEC?s coverage in the
future.

While access to such an expensive benefit as ICMP- PEC needs to be carefully
determined, TMA and regional program managers told us that the current
process is complex and burdensome. The ICMP- PEC application process is
managed centrally by TMA, although some regional program managers told us
they believe the process should be decentralized. Upon receipt of an ICMP-
PEC application package, TMA preliminarily determines whether the case may
be eligible, sends a letter to regional program managers authorizing 60 days
of ICMP- PEC coverage, continues to review the case, and sends it for
external peer review. Regional ICMP- PEC Application Process

Necessary but Burdensome

Page 16 GAO- 02- 73 DOD Disability Programs

program managers told us that 60 days is the minimum period for a TMA case
decision and that many cases take longer.

Along with being administratively burdensome, regional program managers told
us, the process is costly, requiring an estimated 20 to 40 hours at
registered- nurse pay rates to complete the application alone. The estimates
include the need to respond to frequent TMA requests for added case data
such that regional program managers told us they often question TMA?s
ability to make the approval/ denial decisions. While agreeing that the
process is complex, TMA and peer review contractors, however, told us that
many application packages provided by MCSC case managers lack sufficient
clinical information needed for a thorough review.

TMA requests for added data are generally made after the patient?s primary
provider, regional MCSC medical director and case managers, and the lead
agent?s medical director and case managers have diagnosed the patient?s
condition, made their prognoses, and filed the application. After these
reviews, TMA makes its separate review followed by a full, independent
review by a peer- review organization. This review may be and has been,
overturned by TMA upon its final case review. While acknowledging the
importance of an effective eligibility process, some regional MCSC medical
directors and case managers questioned the need for so many reviews,
pointing to their redundancy and questioning their cost effectiveness and
the value added to the process. These officials also told us that if
decision- making were de- centralized in the regions- in much the way PFPWD
operates- the approval process could be markedly shortened and streamlined.
Other regional program officials, however, told us that because of the open-
ended nature of ICMP- PEC?s benefit and high per- case costs, managing
eligibility centrally can improve control.

On October 1, 2001, the newly enacted TFL became effective. TFL entitles the
estimated 1.4 million age- 65- and- over military retirees and their
dependents and survivors to DOD health care including ICMP- PEC. The TMA
officials we interviewed also expect the new entitlement to increase ICMP-
PEC?s caseload and costs, but they told us that the number of ICMPPEC
eligibles and their care costs are difficult to reliably estimate and have
not been determined.

In anticipation of TFL, TMA proposed an ICMP- PEC rule that would extend
service priority to ADFMs before retirees and their dependents and
survivors. Under the proposed rule, should current or projected service
demand exceed available funding- currently capped at $100 million- for the
fiscal year, termination notices would be issued to affected TFL?s Potential
Effects on

ICMP- PEC Are Unknown

Page 17 GAO- 02- 73 DOD Disability Programs

participants. The order of coverage termination would be non- ADFM patients
from last to first authorized and then ADFM patients in the same order. The
proposed rule is not expected to be complete until the end of calendar year
2001 followed by a period within which MCSC contract change orders will need
to be negotiated.

In view of the program?s current policy and definitional problems, however,
DOD may face unforeseen financial risks and operational difficulties should
it delay in addressing ICMP- PEC?s problems. Meanwhile, efforts were
recently begun to develop legislative proposals to restructure ICMP- PEC to
address such problems, but proposal details are not yet available.

Regional program managers generally agreed that PFPWD is meeting its goal of
financially assisting disabled ADFMs with their special health care service
and equipment needs. Also general agreement exists that PFPWD eligibility
and benefit criteria, for the most part, are clear and that the program is
known to users and program administrators. Further, PFPWD?s application
process is relatively straightforward and, except for TMA?s appeals and
general oversight responsibilities, managed and operated at the regional
level. The 2001 Defense Authorization Act eliminated copayments for TRICARE
Prime but not for PFPWD participants, effective April 1, 2001. As a result,
many services and much of the equipment that beneficiaries obtained under
PFPWD with a cost- share can now be obtained under TRICARE Prime at no cost.
Thus, PFPWD?s caseloads may decrease.

PFPWD in various forms has been in operation for about 35 years. The need
for the program sprang from the military?s normal geographic reassignment of
active duty families. Members with disabled children needing special
services and equipment not available through the military health care system
might obtain them through Medicaid but sometimes had difficulty obtaining
them due to Medicaid?s state- by- state residency and other eligibility
requirements. Thus, PFPWD, in its earlier forms, was established to provide
financial assistance for special services and equipment that Medicaid
otherwise would have provided. Today, Medicaid residency requirements,
eligibility factors such as income level, and benefits continue to vary
widely across the states so that PFPWD remains an important option for
active duty members with disabled children.

Regional officials told us that PFPWD administrators, providers, and
beneficiaries are aware of the program and how it operates and fits within
PFPWD Is Accessible but

Changes May Reduce Caseloads

Role Unchanged and Familiar to Users

Page 18 GAO- 02- 73 DOD Disability Programs

TRICARE. They told us this is due to the program?s many years of operations
and efforts to educate potential beneficiaries about PFPWD?s availability,
eligibility criteria, and benefits. On the other hand, regional officials
told us that some qualifying families may choose Medicaid instead of PFPWD
because they believe that participating in PFPWD may cause the active duty
member to be viewed as less deployable, thus limiting promotion potential.
However, regional officials said that other families view participating in
Medicaid as stigmatizing because it is considered a welfare program, and
thus they choose PFPWD.

PFPWD is governed by rules and regulations that were last promulgated in
October 1997 and that set forth the program?s eligibility and benefit
criteria. For example, the guidelines make clear that, except for Medicaid,
public programs, such as those in schools, and other resources must be used
when available before accessing PFPWD. In addition to reducing PFPWD costs,
regional program managers told us this requirement causes their case
managers to remain knowledgeable about the related resources in their
jurisdictions so they can provide timely advice about service availability.
These managers also told us that their case managers are able to identify
qualifying PFPWD patients and access needed services and equipment through
the program. Moreover, regional program managers told us that because PFPWD
is well established, its eligibility criteria and benefits can be
communicated to potential beneficiaries.

PFPWD?s application process is designed to make case determinations quickly
without successive levels of review. Once identified and physicianapproved,
a potential PFPWD case is promptly screened by case managers to determine if
other public resources (with the exception of Medicaid) could be used; if
not, the person is enrolled in the program. The average processing time for
such cases is 2 to 4 weeks. Unless appealed to TMA, eligibility and benefit
decisions are made at the regional level and are not subject to TMA or
independent peer review. Case managers told us that some beneficiaries have
one- time equipment or service needs, such as for a hearing aid, and leave
and reenter the program intermittently. They told us they track such
beneficiaries and can readily close and reopen their cases and not delay
service delivery.

Case managers also told us that when PFPWD patients and their families move
to different TRICARE regions, the receiving MCSC normally requires that the
patient reapply there. While this has caused service delays and
inconvenienced some patients, the receiving jurisdiction may have other
public resources or services available to substitute for PFPWD services that
the patient had been receiving in the previous jurisdiction. In this Defined
Eligibility and Benefits

and Straightforward Application Process

Page 19 GAO- 02- 73 DOD Disability Programs

regard, case managers told us they need to do a better job and formalize
their communications with other region?s MCSC case managers when PFPWD cases
leave and enter their jurisdictions. Currently, there are no procedures
requiring case managers to do so.

A possible consequence of the 2001 National Defense Authorization Act is
that qualified beneficiaries who obtained services and equipment under PFPWD
with cost- shares can now obtain many of them for free under TRICARE Prime.
Effective April 2001, active duty beneficiary copayments are no longer
required under TRICARE Prime but still are under PFPWD. PFPWD?s caseload may
be reduced to only ADFMs needing services that are only obtainable under
PFPWD and not TRICARE Prime such as hearing aids, assistive services such as
interpreters for the deaf, and special education services for disabled
patients (see appendix IV).

To illustrate, if a $6,000 wheelchair were obtained under PFPWD, the
participant would have a cost- share ranging from $25 to $250, depending on
the active duty member?s rank. An E- 5, for example, would pay $25 a month
for the 6 months over which the $6,000 cost could be prorated. 22 Prior to
April 2001, obtaining the same wheelchair under TRICARE Prime would have
cost the family a 15 percent cost- share, or $900. Today, obtaining the
wheelchair under TRICARE Prime would cost the family nothing. Thus, PFPWD
patients who can obtain the services and equipment they need through TRICARE
Prime- about 70 percent of PFPWD?s caseload- will likely do so at no cost.

PFPWD has had a monthly benefit limit that has not changed materially in the
last 15 years. Data are not available, however, on how many PFPWD
participants are affected by the program?s $1,000 monthly benefit limit.
Regional program managers we spoke with had differing views about whether
the limit was keeping beneficiaries from obtaining needed services and thus
should be increased. Some officials told us that the limit was not
reflective of current higher medical service and equipment costs so that
some beneficiaries may be reaching the limit. Other officials told us

22 Because the program has a $1, 000- per- month benefit limit, participants
are allowed to prorate such equipment costs over as many months as the
monthly limit and the program?s prorating formula allows. The PFPWD
prorating formula is used to calculate the longest period of time over which
an item can be prorated. The allowable cost is divided by 1,000 and the
quotient is multiplied by two. For example, a $10,000 wheelchair may be
prorated for a maximum of 20 months. Likely Reduction of Caseloads

With TRICARE Changes Questions Remain About the Adequacy of PFPWD?s Monthly
Maximum

Page 20 GAO- 02- 73 DOD Disability Programs

that the recent copayment changes to TRICARE Prime will reduce PFPWD
caseload costs and may obviate the need to raise the limit. Still other
regional program officials told us that they can schedule services and buy
equipment to spread costs over several months so that the $1,000 monthly
limit is rarely an obstacle.

At issue in weighing the adequacy of PFPWD?s monthly benefit are the
questions- to what extent are participants incurring costs at or in excess
of the monthly limit; to what extent are they using Medicaid and or other
means to obtain services that exceed the limit; and how many otherwise
eligible beneficiaries exclusively use Medicaid to avoid the $1,000 benefit
limit? Data to address such questions are currently unavailable.

When first established in 1967, the program?s monthly benefit limit was
$350. In 1985, the limit was increased to $1,000, where it has remained to
this day. Some regional program officials told us that the limit has not
kept pace with the rising medical goods and services costs. Such costs have
increased by about 130 percent over the same period, which if applied to the
current PFPWD monthly limit would increase it to about $2,300.

Regional program managers told us that the elimination of TRICARE Prime
copayments enables PFPWD participants to obtain many of their needed
services and equipment under TRICARE Prime at no cost to themselves. For
this reason, the managers said that the $1,000 monthly limit may be
sufficient to cover the services and equipment that are now obtainable only
under PFPWD. However, they were unable to provide data to support that
position.

Some regional program managers told us they have worked with the $1,000 cap
for many years and have become experienced in planning and scheduling
services and equipment purchases so that needed care is delivered and the
monthly cap is not exceeded. Because PFPWD equipment costs can be prorated
at $500 per month over the months needed to amortize the costs, the patient
can use up to $500 per month for other services such as therapies. For
example, an $8,000 wheelchair can be prorated over 16 months, leaving $500
per month over that period for other services. A case manager told us that
to ensure that costs were kept within a family?s monthly cap, she could
negotiate lower costs with the local providers, search for alternative
providers, or consider purchasing the services under TRICARE Prime- which if
done before April 1, 2001, would have entailed added beneficiary copayments.
Currently, however, the example wheelchair and other services can likely be
obtained under TRICARE Prime at no cost. As a result, none of the program
managers we

Page 21 GAO- 02- 73 DOD Disability Programs

spoke with could provide examples of PFPWD cases whose services were
interrupted or who otherwise were adversely affected by the monthly limit.
23

Further experience with the effects of eliminating TRICARE Prime?s
copayments on PFPWD costs and caseloads may suggest that the services and
equipment exclusively obtained under PFPWD could as appropriately be
obtained under TRICARE Prime. If so, the need for PFPWD could become the
issue.

Comparing ICMP- PEC?s unlimited home health and SNF benefits with Medicare
and Medicaid showed that ICMP- PEC?s benefits are more generous. 24 Medicare
provides limited home health and SNF benefits. And, while the state Medicaid
programs we compared provide unlimited coverage for under- age- 21 patients,
older patients? benefits have varying limits. The FEHBP plans we reviewed
had home care and SNF benefits that also have more limitations, but patients
with special medical needs may qualify for extended coverage determined
through individual case- bycase assessments. PFPWD services are comparable
to those available under Medicare and to Medicaid services for patients
under age 21 in the states reviewed. 25 Unlike PFPWD and one of the state
Medicaid programs, two state Medicaid programs limit services for patients
over age 21. FEHBP services for the same care needs for all ages were less
available than PFPWD services.

Medicare has an intermittent in- home benefit and posthospital SNF benefit.
Most ICMP- PEC cases need more than the intermittent care Medicare?s home
health benefit provides. ICMP- PEC?s home benefit is up to 24 hours a day of
skilled nursing care, 7 days a week.

23 In families with two or more PFPWD participants, the monthly limit only
applies to the participant whose service or equipment costs for a given
month are lowest among the family?s participating members. The other
members? costs for that month would not be subject to the monthly limit, but
in subsequent months such members may be the lowestcost user and be subject
to the limit. Multiple PFPWD participants from the same family are about 6
percent of the current caseload.

24 ICMP- PEC?s requirement that qualifying beneficiaries? conditions not be
expected to improve may significantly affect the comparable number of
beneficiaries eligible for the program. Moreover, those military
beneficiaries with serious physical or mental disabilities that are expected
to improve may receive in- home or SNF coverage under TRICARE Basic.

25 About 85 percent of PFPWD patients are under age 21. ICMP- PEC and

PFPWD Benefits Are Better Than or Comparable to Other Programs and Plans

Page 22 GAO- 02- 73 DOD Disability Programs

Regarding SNF care, Medicare covers up to 100 days of such care for those
needing daily skilled nursing or rehabilitative care following a hospital
stay of at least 3 days. And, for the first 20 SNF care days, Medicare pays
all the costs, but for the 21st through the 100th day, the patient is
responsible for a daily copayment that currently equals about $99. Even if
ICMP- PEC patients were qualified for Medicare, which is the case under TFL
beginning October 2001, their Medicare coverage would end after 100 days-
while their ICMP- PEC SNF coverage would be unlimited.

Medicaid program benefits vary among states with respect to service type,
duration, and limits, and the family?s income and resources are taken into
account in determining eligibility. Generally, Medicaid programs cover all
necessary services for persons under age 21 and certain federally required
services and state- selected options for persons over age 21. All Medicaid
programs provide children a special entitlement to needed services through
the provision of Early and Periodic Screening, Diagnostic and Treatment
(EPSDT) services. 26 Established in 1967, EPSDT mandates that states cover
any service or item medically needed to ameliorate a child?s condition,
regardless of whether the service or item is otherwise covered under the
state Medicaid program. 27

ICMP- PEC?s in- home skilled nursing benefit appears equal to or better than
the three state Medicaid programs- California, Maryland, and Alabama- with
which we compared it. California?s Medicaid program includes two Home and
Community Based Services (HCBS) waivers 28 that provide in- home skilled
nursing services to medically fragile children and adults who would
otherwise be receiving care in a licensed health care facility. In our view-
and California Medicaid officials generally agreed- these patients were
categorically most like ICMP- PEC patients. Qualifying pediatric patients
may receive from 16 hours to 22 hours and adult patients

26 EPSDT requires that the patient?s total family meet state Medicaid income
and asset requirements. 27 Children With Disabilities: Medicaid Can Offer
Important Benefits and Services (GAO/ T- HEHS- 00- 152, July 12, 2000). The
statutory requirements of EPSDT are in 42 U. S. C.,

Section 1396d( r). 28 One of the waivers, the Nursing Facility waiver,
requires that the family meet state income and asset requirements whereas
the other waiver, the Model waiver, only measures the patient?s income
against the requirements. Generally, Home and Community Based Services
waivers allow states to develop and implement alternatives to placing
Medicaideligible individuals in hospitals, nursing facilities, or
intermediate- care facilities for persons with mental retardation.

Page 23 GAO- 02- 73 DOD Disability Programs

up to 16 hours per day of licensed- nurse care in the home. Patients and
providers can decide to take fewer than the available number of skilled
nursing hours and apply the difference to such supplementary services as
respite care or home health aides.

Since 1985, Maryland has had a Model HCBS waiver that targets medically
fragile individuals including technology- dependent individuals who, before
age 22, would otherwise be hospitalized and are certified as needing a
hospital or nursing- home level of care. Under the waiver all medically
needed services including up to 24 hours of skilled nursing care can be
provided to enable medically fragile children to live and be cared for at
home rather than in a hospital. Model waiver services include private duty
nursing, home health aide assistance, and medical equipment and supplies.
For persons over age 21 who meet the income, asset, and other criteria,
ICMP- PEC patients would likely qualify for Maryland?s Rare and Expensive
Case Management Program (REM). REM patients also receive all the medically
necessary care they need either at home or in a community setting but not in
an SNF. Thus, Maryland?s Medicaid program and ICMP- PEC services are the
same in what they offer in each age group.

The Alabama Medicaid program does not have an HCBS waiver for a population
similar to the ICMP- PEC cases. However, like ICMP- PEC, all medically
necessary in- home skilled nursing services up to 24 hours per day would be
provided through the Private Duty Nursing benefit for individuals under the
age of 21. Unlike ICMP- PEC, however, patients over age 21 needing skilled
nursing services would have to be admitted to a nursing facility for their
care.

According to the three selected FEHBP plans? representatives and the
documents they provided, patients with conditions like those of ICMPPEC
patients may receive in- home or SNF benefits, but such benefits are
limited. For example, one plan reported that for qualified beneficiaries the
plan would cover intermittent home health care and pay 100 percent of the
first 30 visits. Subsequent visits would be covered with the patient?s
paying $20 per visit. Also, a patient would be eligible for 100 days of SNF
care per calendar year. Thus, ICMP- PEC?s benefit is more extensive.

Each of the plans also has an extended benefit or case management option for
caring for patients with unusual medical and condition- related needs. Under
such an option, the plans generally

 determine the most effective way to provide services;

Page 24 GAO- 02- 73 DOD Disability Programs

 may identify medically appropriate alternatives to traditional care and
coordinate other benefits as a less costly alternative;

 conduct an ongoing review of granted alternative benefits;

 may withdraw an alternative at any time and resume regular contract
benefits; and

 offer or withdraw alternative benefits without OPM review under the normal
disputed claims process.

Plan representatives told us that qualifying patients could be referred to
case management for individual assessments of the most appropriate service
venues, supplies; equipment; skill needs, if any; and coverage
authorization. However, without complete case information and examination by
a plan physician, the plan representatives could not elaborate on the extent
nor on the duration of possible coverage referring to the need for case- by-
case assessments.

Most PFPWD- type services, including therapies and equipment, are available
under Medicare. Medicare does not cover hearing aids, however, and for DME,
such as wheelchairs, it requires a 20 percent patient costshare. Under PFPWD
the cost- share would likely be less and the item?s cost could be spread
over a period of months, depending on its cost, to manage the purchase
within PFPWD?s monthly benefit cap.

In general, most states? Medicaid programs offer an array of services needed
by children with special health care needs similar to those covered by
PFPWD. Medicaid services in the three states we reviewed are comparable to
PFPWD?s services for patients under the age of 21. Such services offered at
the states? option can include private duty nursing; case management;
physical, occupational, or speech therapies; and prosthetic devices
including hearing aids and DME. Officials in each state reported that the
PFPWD example cases we provided, all of which involved persons under age 21,
would be provided with virtually all the physical, occupational, and speech
therapies; hearing aids; orthotics; and wheelchairs they now receive.

Services available to patients over age 21, however, are limited under
Alabama?s and California?s Medicaid programs- unlike Maryland?s program and
PFPWD, which provide the same services to patients regardless of age.
California, for example, limits some therapies for older patients, and
Alabama does not provide hearing aids or prosthesis services.

Page 25 GAO- 02- 73 DOD Disability Programs

The types of services available in the example PFPWD cases varied among the
FEHBP plans we consulted. Unlike PFPWD, for example:

 The plans had considerable limitations in their speech, physical, and
occupational therapy coverage. (For example, two plans restricted the number
of therapy visits per year, while another plan only covered therapy lasting
2 months if, during that period, significant improvement was expected. None
of the plans covered long- term therapy.)

 None of the plans covered hearing aids.

 The plans covered standard wheelchairs and replacements due to normal
growth and development but not all plans covered maintenance and repairs.

Changes and challenges are on the horizon for DOD?s supplemental disability
programs. Currently, efforts are under way to revamp ICMP- PEC now that TFL
became effective October 2001, and age- 65- and- older military retirees,
their dependents and survivors are eligible for TRICARE and ICMP- PEC. Also,
PFPWD faces potential reductions in caseload due to the April 2001
elimination of copayments under TRICARE Prime. This is because many of the
medical services and much of the equipment bought under PFPWD with a cost-
share and a $1, 000- per- month benefit limit can now be gotten for free
under TRICARE Prime- which may lead to questions about the need for PFPWD.
Now, about 67 percent of PFPWD claims are from TRICARE Prime enrollees.

Currently, ICMP- PEC lacks a clearly enunciated purpose, well- defined
eligibility criteria and benefits, and an efficient application process
thereby impeding beneficiary access. Lead agent officials and MCSC
representatives believe the program is too confusing to administer
effectively and that it needs restructuring. A related problem is the lack
of readily available case- by- case cost data needed to properly manage the
program and track its spending limit under TFL. Clearly, DOD needs to
clarify ICMP- PEC?s purpose, eligibility criteria, benefits, and operating
rules and disseminate the guidance to regional program managers who told us
they do not sufficiently understand the program nor do they understand how
it should be implemented. The need for such clarification is also made
evident by the program?s major legislative changes since its inception.

However, TMA?s current proposed rule for ICMP- PEC does not clearly
enunciate the program?s purpose nor does it further clarify its eligibility
criteria, so current problems may persist. The rule does attempt to clarify
Conclusions

Page 26 GAO- 02- 73 DOD Disability Programs

ICMP- PEC?s services and would extend service priority to ADFMs in
anticipation of increased service demand now that retirees age 65 and over
and their dependents and survivors are potentially eligible for the program
due to TFL. Yet, the draft rule and its accompanying operating policies and
procedures are not expected to be finalized until the end of 2001, whereupon
contract change orders would need to be negotiated with MCSCs.

While PFPWD is an established program serving thousands of beneficiaries
with clear eligibility criteria and benefits, certain actions would likely
improve PFPWD?s performance, including better communication among program
managers when program participants leave and enter their respective
jurisdictions to arrange for care continuity. Also, once enough is known
about the effects on PFPWD of eliminating TRICARE Prime copayments, PFPWD?s
purpose and structure, including its cost- share and monthly limit may need
to be reassessed and, if appropriate, modified.

To ensure that DOD?s active duty and retired beneficiaries and dependents
with seriously disabling conditions can readily access needed services and
equipment, we recommend that the Secretary of Defense direct the Assistant
Secretary of Defense for Health Affairs to take the following actions aimed
at improving ICMP- PEC:

 clarify ICMP- PEC?s purpose, eligibility criteria, and service coverage
and provide guidance to better equip regional program managers in
administering the program and target groups in understanding it;

 provide guidance on how the legislative changes made to ICMP- PEC since
its inception are to be implemented; and

 make needed improvements to TMA?s ICMP- PEC records to ensure that they
capture the actual case- by- case cost data needed to properly plan and
manage the current program.

Also, we recommend that the Assistant Secretary of Defense for Health
Affairs be directed to take the following actions to improve PFPWD:

 develop procedures for PFPWD program managers to communicate with one
another across regions about active patients leaving and entering their
respective jurisdictions to facilitate and expedite their reapplication for
PFPWD, and Recommendations

Page 27 GAO- 02- 73 DOD Disability Programs

 reassess PFPWD?s purpose and structure, including its cost- share and
monthly benefit limit once the effects of eliminating TRICARE Prime
copayments on PFPWD?s cost and caseload are better known.

In its comments on a draft of this report, DOD concurred with each of our
recommendations and without providing specific details highlighted
improvements planned or already in progress. DOD said, for example, that it
has begun to clarify ICMP- PEC?s legislative changes and eligibility
criteria and to significantly streamline the program?s administrative
processes. Also, DOD said that, as we recommended, it was now devising
methods to provide actual ICMP- PEC patient level cost data.

With respect to facilitating service continuation for PFPWD families who
transfer to other regions, DOD said that it is considering a policy change
that would require a MCSC gaining a PFPWD- eligible beneficiary to honor an
existing PFPWD authorization issued by the losing MCSC. Also, DOD said it
would design policy and operating procedures to implement the change.
Lastly, DOD said that the entire PFPWD program is being reviewed for
potential changes and that this review would be on- going to support future
program changes. DOD also suggested technical report changes which we
incorporated, as appropriate. DOD?s comments are included in appendix V.

We are sending this report to the Secretary of Defense, relevant
congressional committees, and others who are interested. Copies will be made
available to others on request. Agency Comments

and Our Evaluation

Page 28 GAO- 02- 73 DOD Disability Programs

If you or your staff have any questions about this report, please contact me
at (202) 512- 7101. Other contacts and major contributors are included in
appendix VI.

Stephen P. Backhus Director, Health Care- Veterans?

and Military Health Care Issues

Page 29 GAO- 02- 73 DOD Disability Programs

List of Committees The Honorable Carl Levin Chairman The Honorable John
Warner Ranking Minority Member Committee on Armed Services United States
Senate

The Honorable Daniel K. Inouye Chairman The Honorable Ted Stevens Ranking
Minority Member Subcommittee on Defense Committee on Appropriations United
States Senate

The Honorable Bob Stump Chairman The Honorable Ike Skelton Ranking Minority
Member Committee on Armed Services House of Representatives

The Honorable Jerry Lewis Chairman The Honorable John P. Murtha Ranking
Minority Member Subcommittee on Defense Committee on Appropriations House of
Representatives

Appendix I: Scope and Methodology Page 30 GAO- 02- 73 DOD Disability
Programs

As agreed with the cognizant committees? offices, our objectives were to
determine the number of ICMP- PEC and PFPWD participants and benefit costs;
whether the programs are generally meeting their purposes, accessible to
their target groups, and adequately administered; the extent to which
PFPWD?s monthly maximum benefit limit may affect beneficiaries? ability to
obtain services; how the programs? benefits compare to Medicare and selected
Medicaid and FEHBP plan benefits; and what program improvements may be
needed.

We obtained and analyzed program data from TMA to determine the number of
individuals receiving services in the two programs and the costs of those
services. We reviewed available ICMP- PEC case files at TMA to obtain
information on the services being provided, and from TMA, we obtained and
analyzed PFPWD claims data from 1998 through February 2001.

To determine whether the programs are generally meeting their purposes,
accessible to their target groups, and adequately administered, we reviewed
program guidelines and discussed program coordination with TMA officials,
MCSCs, program case managers, and military beneficiary advocacy groups.

We requested data from TMA to determine how PFPWD beneficiaries are affected
by the monthly maximum benefit, how many participants use Medicaid or pay
out of pocket for services above the limit, and the number that use Medicaid
due to the $1,000 monthly cap. However, TMA?s databases do not contain
information on the number of beneficiaries experiencing costs in excess of
the $1,000 monthly maximum limit or PFPWD participant?s use of Medicaid. TMA
program officials told us they were unaware of any database that could be
used to address these issues.

To compare these programs? benefits with Medicare, Medicaid, and FEHBP
plans, we (1) reviewed Medicare and Medicaid program requirements and
eligibility criteria and (2) provided ICMP- PEC and PFPWD actual case
examples without identifiers to selected Medicaid program officials in
California, Maryland, and Alabama and FEHBP plan representatives in
California and Alabama. The state Medicaid programs were chosen to reflect,
respectively, higher, moderate, and lower state Medicaid spending and the
resulting potential mix of available services. In each of the three Medicaid
states, we selected one of the top three health maintenance organizations
(HMO) with the highest number of enrollees. We also chose an FEHBP national
fee- for- service plan that had the highest number of enrollees. We asked
the Medicaid officials and FEHBP plan Appendix I: Scope and Methodology

Appendix I: Scope and Methodology Page 31 GAO- 02- 73 DOD Disability
Programs

representatives to provide a list of services for which the cases would
qualify. The case examples included information on the patient?s age and
services currently received. We also interviewed the state Medicaid
officials and the selected FEHBP plan representatives about the case
examples and services, and we interviewed OPM representatives and obtained
and reviewed FEHBP plans? brochures of covered services.

We also reviewed TMA?s proposed ICMP- PEC rule which was published August 1,
2001, in the Federal Register. We conducted our work from December 2000
through August 2001 in accordance with generally accepted government
auditing standards.

Appendix II: TRICARE Cost- Shares, Deductibles, and Copayments

Page 32 GAO- 02- 73 DOD Disability Programs

Table 2: TRICARE Cost- Shares, Deductibles, and Copayments for Active Duty
Family Members TRICARE Prime TRICARE

Extra TRICARE Standard

Annual deductible None $150 per individual or $300 per family for E- 5 and
above; $50 per individual or $100 per individual or for E- 4 and below

$150 per individual or $300 per family for E- 5 and above; $50 per
individual or $100 per individual or for E- 4 and below Civilian outpatient
visit None 15 percent of negotiated fee 20 percent of allowable charge
Civilian inpatient visit None Greater of $25 or $10.85 per day Greater of
$25 or $10.85 per day Civilian inpatient mental health None $20 per day $20
per day

Note: Copayments under Prime were eliminated for active duty members as of
April 1, 2001. Prescription medication copayments, however, were not
eliminated.

Source: TRICARE Standard Handbook, May 19, 2000.

Table 3: TRICARE Cost- Shares, Deductibles, and Copayments for Retirees,
Their Family Members, and Others TRICARE Prime TRICARE

Extra TRICARE Standard (Champus)

Annual deductible

None $150 per individual or $300 per family $150 per individual or $300 per
family Annual enrollment fee $230 per individual

$460 per family None None Civilian provider copayments: outpatient visit
emergency care mental health visit

$12 $30 $25 ($ 17 for group visit)

20 percent of negotiated fees 25 percent of allowed charges Civilian
inpatient cost- share $11 per day

($ 25 minimum charge per admission)

Lesser of $250 per day or 25 percent of negotiated charges plus 20 percent
of negotiated professional fees

Lesser of $390 per day or 25 percent of billed charges plus 25 percent of
allowed professional fees Civilian inpatient mental health $40 per day 20
percent of institutional and

negotiated professional charges Lesser of $144 per day or 25 percent of
institutional and professional charges

Source: TRICARE Standard Handbook, May 19, 2000.

Appendix II: TRICARE Cost- Shares, Deductibles, and Copayments

Appendix III: PFPWD Monthly Cost- Share Is Guided by Pay Grade

Page 33 GAO- 02- 73 DOD Disability Programs

Pay grade Cost- share amount

E- 1 to E- 5 $25 E- 6 30 E- 7, O- 1 35 E- 8, O- 2 40 E- 9, W- 1, W- 2, O- 3
45 W- 3, W- 4, O- 4 50 W- 5, O- 5 65 O- 6 75 O- 7 100 O- 8 150 O- 9 200 O-
10 250

Note: E= enlisted, W= warrant officer, and O= officer. Source: TRICARE
Standard Handbook, May 19, 2000.

Appendix III: PFPWD Monthly Cost- Share Is Guided by Pay Grade

Appendix IV: PFPWD Exclusive Benefits and PFPWD Benefits Also Available in
TRICARE Basic

Page 34 GAO- 02- 73 DOD Disability Programs

Some services and equipment available through PFPWD are also obtainable
through TRICARE Basic, while other program services and equipment can be
acquired only through PFPWD.

Table 4: PFPWD Exclusive Benefits and PFPWD Benefits Also Available in
TRICARE Basic PFPWD covered services and equipment PFPWD services also

covered in TRICARE Basic

Assistive services such as interpreters and translators for the deaf and
readers for the blind Training to allow use of assistive technology or to
acquire skills that are expected to reduce the disabling effects of a
qualifying condition Durable medical equipment (DME) including wheelchairs
and walkers

Equipment repair for DME; DME coverage includes fitting to accommodate the
disability

Durable equipment, which is defined as a device or apparatus that does not
qualify as DME but which is essential to the efficient arrest or reduction
of functional loss resulting from a qualifying condition. This includes
hearing aids. Equipment repair for durable equipment. This includes fitting
to accommodate the disability. Institutional care for the purpose of
providing the beneficiary with protective custody or training in a
residential environment Orthotic devices as well as orthopedic braces and
appliances

Prostheses including limbs, eyes, certain surgical implants, and some types
of voice enhancement devices

Special education designed to accommodate the disabling effects of the
qualifying condition (when appropriate public facilities are not available)
a Transportation of patient and medical attendant to and from a provider in
order to receive therapies or other authorized PFPWD services Medical or
rehabilitative treatment, including physical therapy, occupational therapy,
and speech therapy

a Special education is provided under TRICARE Basic only in an institutional
setting if not available from a public entity. Source: GAO analysis based on
information provided through (1) PFPWD Final Rule, Federal Register, June
30, 1997, (2) C. F. R. Title 32 (National Defense), Part 199.5, effective
October 28, 1997, (3) TRICARE/ Champus Policy Manual 6010.47- M, Chapters 1,
7,8, June 25, 1999, (4) discussions and correspondence with the PFPWD
program director, March through July 2001, and (5) TRICARE Conference, PFPWD
briefing, Washington, D. C., June 2001.

Appendix IV: PFPWD Exclusive Benefits and PFPWD Benefits Also Available in
TRICARE Basic

Appendix V: Comments From the Department of Defense

Page 35 GAO- 02- 73 DOD Disability Programs

Appendix V: Comments From the Department of Defense

Appendix V: Comments From the Department of Defense

Page 36 GAO- 02- 73 DOD Disability Programs

Appendix V: Comments From the Department of Defense

Page 37 GAO- 02- 73 DOD Disability Programs

Appendix VI: GAO Contacts and Staff Acknowledgments

Page 38 GAO- 02- 73 DOD Disability Programs

Dan Brier (202) 512- 6803 Lesia Mandzia (202) 512- 7188

Other major contributors to this report were Donald Morrison, Janice Raynor,
Mary Reich, and Wayne Turowski. Appendix VI: GAO Contacts and Staff

Acknowledgments GAO Contacts Staff Acknowledgments

(290014)

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