Defense Health Care: Status of Fiscal Year 2004 Requirements for 
Reservists' Benefits and Monitoring Beneficiaries' Access to Care
(17-MAR-04, GAO-04-563R).					 
                                                                 
Since September 2001, about 360,000 reservists have been called  
to active duty to support the war on terrorism, conflicts in	 
Afghanistan and Iraq, and other operations. Some reservists have 
been on active duty for a year or more, and the pace of reserve  
operations is expected to remain high for the foreseeable future.
When mobilized for active duty under federal authorities,	 
reservists are eligible to receive health care benefits through  
DOD's military health care system, TRICARE. When reservists are  
ordered to active duty for more than 30 days, their families are 
also eligible for health benefits. DOD supplements its military  
health care facilities with civilian health care providers	 
through its triple-option TRICARE program. DOD's beneficiaries	 
may enroll in TRICARE's Prime option and go to a network provider
to receive care; without enrolling, they can see a network	 
provider through the preferred provider option, Extra; or they	 
may elect to use Standard, the fee-for-service option. Some	 
beneficiaries have raised concerns about difficulties in finding 
civilian providers--particularly Standard, non-network		 
providers--who will accept TRICARE beneficiaries as patients. The
National Defense Authorization Act (NDAA) for Fiscal Year 2004,  
enacted on November 24, 2003, required the Department of Defense 
(DOD) to make changes in its delivery and monitoring of health	 
benefits. In addition, the law directed us to review and report  
on aspects of these requirements. As agreed with the committees  
of jurisdiction, we are providing the status of DOD's progress in
implementing five requirements--three related to health benefits 
for reservists and two related to monitoring beneficiaries'	 
access to care under TRICARE Standard.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-563R					        
    ACCNO:   A09532						        
  TITLE:     Defense Health Care: Status of Fiscal Year 2004	      
Requirements for Reservists' Benefits and Monitoring		 
Beneficiaries' Access to Care					 
     DATE:   03/17/2004 
  SUBJECT:   Health care programs				 
	     Managed health care				 
	     Military reserve personnel 			 
	     Beneficiaries					 
	     Mobilization					 
	     DOD TRICARE Program				 

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GAO-04-563R

United States General Accounting Office Washington, DC 20548

March 17, 2004

The Honorable John W. Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Duncan Hunter
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives

Subject: Defense Health Care: Status of Fiscal Year 2004 Requirements for
Reservists' Benefits and Monitoring Beneficiaries' Access to Care

Since September 2001, about 360,000 reservists have been called to active
duty to support the war on terrorism, conflicts in Afghanistan and Iraq,
and other operations. Some reservists have been on active duty for a year
or more, and the pace of reserve operations is expected to remain high for
the foreseeable future. When mobilized for active duty under federal
authorities, reservists are eligible to receive health care benefits
through DOD's military health care system, TRICARE. When reservists are
ordered to active duty for more than 30 days, their families are also
eligible for health benefits.

DOD supplements its military health care facilities with civilian health
care providers through its triple-option TRICARE program. DOD's
beneficiaries may enroll in TRICARE's Prime option and go to a network
provider to receive care; without enrolling, they can see a network
provider through the preferred provider option, Extra; or they may elect
to use Standard, the fee-for-service option. 1 Some beneficiaries have
raised concerns about difficulties in finding civilian providers-
particularly Standard, non-network providers-who will accept TRICARE
beneficiaries as patients.

1 All beneficiaries may receive care at military treatment facilities
(MTF) as space and capabilities are available. TRICARE Prime enrollees
have priority for care in MTFs.

The National Defense Authorization Act (NDAA) for Fiscal Year 2004,
enacted on November 24, 2003, required the Department of Defense (DOD) to
make changes in its delivery and monitoring of health benefits. In
addition, the law directed us to review and report on aspects of these
requirements.2 As agreed with the committees of jurisdiction, we are
providing the status of DOD's progress in implementing five
requirements-three related to health benefits for reservists and two
related to monitoring beneficiaries' access to care under TRICARE
Standard.

To obtain information about DOD's progress in implementing these
requirements, we reviewed relevant documentation from DOD and applicable
laws. We also interviewed the DOD officials responsible for implementing
them. Our work was conducted in March 2004 in accordance with generally
accepted government auditing standards.

In summary, DOD is in various stages of implementing the three
requirements related to health care coverage for reservists. DOD has
implemented the requirement extending the time reservists and their
families can use TRICARE and is in the process of implementing the other
two requirements. DOD has not implemented the two requirements directed at
enhanced monitoring of beneficiaries' access to care under TRICARE
Standard. We will report further on these requirements as DOD makes
progress.

Background

The NDAA 2004 required DOD to temporarily extend the period of TRICARE
coverage for reservists and their families and provided the option for
some reservists to buy into the TRICARE program. Specifically, the NDAA
2004 provisions required DOD to

1) 	extend the Transitional Assistance Medical Program (TAMP) to allow
recently demobilized reservists and their families to retain TRICARE
benefits up to 180 days;3

2) 	make reservists and their families eligible for TRICARE benefits as
soon as they receive a delayed-effective-date order for activation or 90
days before activation-whichever is later; and

3) 	allow certain reserve members, who are not mobilized, and their
families who do not have any other health care benefits to enroll in
TRICARE by paying 28 percent of program costs.4

2 See Pub. L. No. 180-136, tit. VII, subtit. A, 117 Stat. 1392, 1524
(2003).
3 Under TAMP, DOD provides a transitional period of benefits that allows
reservists and their families
to retain TRICARE benefits for a period following demobilization. The NDAA
for Fiscal Year 2002
previously extended the transition period from 30 days to 60 or 120 days
depending on the members'
accrued total active federal military service. Pub. L. No. 107-107, S:
736, 115 Stat. 1012, 1172 (2001)
(codified at 10 U.S.C. S:1145(a)(3) (2000)).
4 This enrollment would allow them to receive TRICARE benefits for any
period that the member is an
eligible unemployment compensation recipient or is not eligible for health
care benefits under an
employer-sponsored health benefit plan.

DOD decided that the TAMP benefit and the provision of benefits upon
activation would be retroactive to November 6, 2003. The provision
allowing qualified reservists and their families to enroll in TRICARE
requires DOD to issue regulations to administer the program. Congress
limited expenditures for these three provisions to a combined total of
$400 million for fiscal year 2004. All of the provisions are temporary,
expiring December 31, 2004.

In addition, the NDAA 2004 required DOD to enhance its monitoring of
beneficiaries' access to care for TRICARE Standard including

1) 	designating an official to ensure the adequacy of provider
participation in the Standard option in each of TRICARE's market areas;5
and

2) 	conducting surveys in 20 market areas every fiscal year until all
markets have been surveyed to determine how many providers are accepting
new patients under TRICARE Standard.

Status of Implementation of NDAA 2004 Requirements

DOD is in varying stages of implementing the provisions for reservists'
health care under NDAA 2004. First, in order to extend the TAMP benefit
period to 180 days as required by law, DOD modified its Defense Enrollment
Eligibility Reporting System (DEERS), the database that maintains
information about TRICARE eligibility. This modification, which also
included changes that allowed DOD to track expenditures for the benefit,
was completed in January 2004. According to DOD, reservists who separated
prior to that period will be retroactively reimbursed for their own or
family members' medical expenses that were incurred on or after November
6, 2003.

Second, DOD has not completed all of the changes that will allow it to
make reservists and their families eligible for TRICARE benefits as soon
as they receive delayed-effective-date orders for activation or 90 days
before activation-whichever is later. This benefit could not be
immediately implemented because it also required DEERS modifications to
record eligibility and track benefit expenditures. In addition, according
to DOD officials, it required other complicated changes, including changes
to TRICARE's contracts that are used to deliver health care through
civilian providers. Further, each of the seven components that constitute
the reserves had to change the process for ordering reservists to active
duty, ensuring that DEERS receives mobilized reservists' eligibility
information.6 According to a DOD official, the department expects to
implement this benefit this month, and reservists with qualifying orders
issued on or after November 6, 2003 will receive retroactive payments for
these benefits.

5 DOD has identified 182 TRICARE market areas across the United States
where there are large
numbers of beneficiaries. The market areas were identified as part of
DOD's awarding of new
TRICARE support contracts that are scheduled to be implemented in June
2004.
6 The armed forces reserve components consist of the Air Force Reserve,
the Air National Guard, the
Army Reserve, the Army National Guard, the Navy Reserve, the Marine Corps
Reserve, and the Coast
Guard Reserve.

Third, DOD has not completed drafting the regulations to implement the
provisions allowing certain reservists and their families who do not have
other health insurance to enroll in TRICARE by paying 28 percent of
program costs. According to a DOD official, regulations that involve new
populations and new benefits generally take 12 to 18 months to develop.
Further, according to DOD officials, this benefit must have a reliable
cost estimate before regulations are finalized, and to date, estimates
from the Office of Management and Budget (OMB) and the Congressional
Budget Office (CBO) differ widely. According to DOD, CBO's estimated costs
for this provision were about $70 million for fiscal year 2004 while OMB
estimated that these costs would be $1 billion. Further, DOD officials
anticipate that TAMP and the expanded period of eligibility for benefits
could cost up to the $400 million allocated to cover the three provisions
and little would subsequently be available to fund the enrollment benefit.

Furthermore, DOD has not implemented the requirements in NDAA 2004
regarding monitoring of the TRICARE Standard benefit. First, DOD has not
designated the official responsible for ensuring adequate participation of
Standard providers. According to a DOD official, it is likely that this
responsibility will be assigned to the Assistant Secretary of Defense for
Health Affairs, who will delegate the responsibility to the three TRICARE
Regional Directors. These Directors will oversee the new TRICARE support
contracts, which are scheduled to begin implementation in June 2004.

Finally, according to a DOD official, the department has not received the
approval from OMB required by the Paperwork Reduction Act to conduct its
initial market

7

survey. DOD has requested emergency approval from OMB. Based on an
anticipated approval in April 2004, the first surveys are expected to be
sent out May 31, 2004. DOD officials are uncertain when the analysis of
the first set of surveys will be complete. Meanwhile, DOD has a Standard
Directory feature on its Web page to help beneficiaries identify potential
providers. The Web page explains that managed care support contractors
will also help beneficiaries locate Standard providers.

We will continue to monitor and report on DOD's progress in implementing
these requirements.

Agency Comments

DOD officials reviewed a draft of this report and provided technical
comments, which we incorporated where appropriate.

                       7 44 U.S.C. S:3501 et seq. (2000).

We are sending copies of this report to the Secretary of Defense and other
interested parties. We will provide copies of this report to others upon
request. In addition, the report is available at no charge on the GAO Web
site at http://www.gao.gov. If you or your staffs have any questions,
please contact me at (202) 512-7119 or Bonnie W. Anderson at (404)
679-1900. Lois Shoemaker and Allan Richardson made key contributions to
this report.

Marcia Crosse Director, Health Care--Public Health and Military Health
Care Issues

(290364)

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