Medicare Subvention Demonstration: DOD Start-Up Overcame Obstacles,
Yields Lessons, and Raises Issues (Letter Report, 09/28/1999,
GAO/GGD/HEHS-99-161).
Pursuant to a legislative requirement, GAO provided information on the
Department of Defense's (DOD) implementation of its Medicare Subvention
Demonstration, focusing on: (1) progress in establishing the ground
rules for program operation, receiving Health Care Financing
Administration (HCFA) approval, attracting enrollment, and starting to
deliver health services; (2) the useful practices and operational
difficulties that emerged during program start-up; and (3) issues for
the future.
GAO noted that: (1) the start-up period of the Medicare Subvention
demonstration was successful; (2) despite unanticipated delays, the six
demonstration sites met the requirements for Medicare managed care
plans, enrolled substantial numbers of beneficiaries, and began delivery
of health care services by January 1, 1999; (3) the sites' experience in
dealing with the difficulties that arose along the way has yielded
valuable lessons and has also pinpointed issues that remain to be
resolved; (4) while the successful start-up of the demonstration is
encouraging, it will be some time before the results of its mature
operation can be assessed; (5) establishing the ground rules for the
demonstration took longer and the HCFA approval process was more
demanding than anticipated; (6) as a result, the demonstration will
cover 24 to 28 months of service rather than 3 years; (7) the initial
demand for enrollment overall was not as great as expected, in part
because retirees were wary of a temporary program and feared that they
might be unable to obtain affordable supplementary insurance at the
demonstration's end; (8) enrollment also reflected site-specific
factors, such as prospects for getting space-available care at a
military treatment facility (MTF) without joining Senior Prime, the
breadth of services available at the MTF, and options for care elsewhere
in the community; (9) preparing for the start-up of the demonstration
brought some useful new senior health care and management practices to
the MTFs, but also revealed operational difficulties; (10) the fact that
this demonstration program operates within two bureacracies--DOD and
HCFA caused--some points of strain; (11) being new to Medicare,
demonstration sites had to devote substantial DOD staff and consultant
time learning HCFA requirements; (12) the dual organizational structures
within DOD carry with them the potential for conflict; (13)
additionally, dual DOD and HCFA procedures may result in duplication of
effort; (14) experience in the start-up phase of this demonstration
raises issues for the future of this or other similar demonstrations;
and (15) enrollees will need to know several months in advance of the
end of this demonstration whether service will continue so that they can
plan for their continued health care.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD/HEHS-99-161
TITLE: Medicare Subvention Demonstration: DOD Start-Up Overcame
Obstacles, Yields Lessons, and Raises Issues
DATE: 09/28/1999
SUBJECT: Health insurance
Redundancy
Health insurance cost control
Health care programs
Interagency relations
Veterans benefits
Retired military personnel
IDENTIFIER: DOD Senior Prime Program
DOD TRICARE Program
DOD Medicare Subvention Demonstration Program
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. This text was extracted from a PDF file. **
** Delineations within the text indicating chapter titles, **
** headings, and bullets have not been preserved, and in some **
** cases heading text has been incorrectly merged into **
** body text in the adjacent column. Graphic images have **
** not been reproduced, but figure captions are included. **
** Tables are included, but column deliniations have not been **
** preserved. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** **
** **
** with the message 'info' in the body. **
******************************************************************
United States General Accounting Office GAO
Report to Congressional Committees September 1999 MEDICARE
SUBVENTION DEMONSTRATION DOD Start-up Overcame Obstacles, Yields
Lessons, and Raises Issues GAO/GGD/HEHS-99-161 United States
General Accounting Office
General Government Division Washington, D.C. 20548 B-281299
September 28, 1999 Congressional Committees: This report conveys
our findings on the early implementation of the Department of
Defense (DOD) Medicare Subvention Demonstration. 1 The
demonstration is designed to test whether DOD, by forming Medicare
Health Maintenance Organizations (HMO) at six sites, can provide
accessible and quality health care to military retirees and their
survivors and dependents, while not increasing federal costs for
either Medicare or DOD. 2 Military health care and Medicare share
a sizable service population. There are 1.3 million military
retirees (including their dependents and survivors) who are 65 and
older. Most of them are eligible for Medicare as well as for
military health benefits-dual eligibles-and many of these dual
eligibles are enrolled in traditional fee-for-service Medicare or
a Medicare HMO. Some of these Medicare enrollees obtain Medicare-
covered health services at military treatment facilities (MTF) as
well as from their private physician or HMO. However, legislation
prior to this demonstration prohibited Medicare from reimbursing
DOD, which had paid for these services from appropriated funds.
DOD's 1999 appropriation for military health care was almost $16
billion, of which about $1.2 billion was spent on those 65 and
older. Although retirees 65 and older have historically received
some care at MTFs, prior to this demonstration DOD could not offer
them comprehensive care.3 DOD had a managed care program (TRICARE
Prime), but only for service members on active duty, retirees
under 65, and their respective dependents and survivors. However,
once they reached 65, retirees were no longer eligible for TRICARE
Prime. The demonstration program, called TRICARE Senior Prime,
extends DOD-provided managed care at the six sites to these older
retirees. 1 "Subvention" means a transfer of money from one
federal department to another. 2 For the names of the six sites
and summary information about them, see table 1. More detailed
information about the sites is included in appendixes I through
VI. 3 We will use the term "retirees" in this report when
referring to retirees and their dependents and survivors. Page 1
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 Senior Prime differs from TRICARE Prime in three
important ways. First, Senior Prime covers Medicare benefits, such
as care at a skilled nursing facility, in addition to TRICARE
Prime benefits. Second, Senior Prime serves two masters. It must
comply with Medicare as well as DOD requirements and answer to the
Health Care Financing Administration (HCFA), which administers the
Medicare Program, as well as to Defense health care officials.
Third, Senior Prime involves Medicare subvention payments to DOD,
provided that certain conditions are met. In principle, the
subvention demonstration offers several advantages. It enables
older military retirees to obtain Medicare managed care benefits
within the military health care system, which is an option that
military retiree groups have supported. It also enables DOD to
receive Medicare funds for services to Medicare-eligible retirees,
beyond what DOD was already providing at its own expense. Medicare
might gain from the subvention demonstration if its payments to
DOD are lower than what Medicare would otherwise have paid on
behalf of these beneficiaries. However, key features of the
demonstration are new and there were many questions as to how the
program would work out. Accordingly, the Balanced Budget Act of
1997 (BBA),4 which established this demonstration, directs us to
evaluate the demonstration's results. The BBA poses 15 evaluation
questions covering 3 key areas: feasibility of and difficulties in
program implementation; costs to Medicare and DOD; and effects on
beneficiaries (in terms of access to and quality of care). The
questions also ask about possible side effects-for example,
whether the demonstration affects other users of DOD health care,
military readiness and training, and private providers. We have
already issued an initial report on cost information and related
payment issues.5 Other interim reports on cost, access, and
quality issues will follow this report. The BBA calls for us to
issue a final report several months after the demonstration ends
in December 2000. This report focuses on program implementation
during the start-up phase of the demonstration. Our objectives
were (1) to report on progress in establishing the ground rules
for program operation, receiving HCFA approval, attracting
enrollment, and starting to deliver health services; (2) to
present information on useful practices and operational
difficulties that emerged during program start-up; and (3) drawing
on experience to date, 4 P.L. 105-33. 5 Medicare Subvention
Demonstration: DOD Data Limitations May Require Adjustments and
Raise Broader Concerns (GAO/HEHS-99-39, May 28, 1999). Page 2
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 to identify issues for the future. Side effects, to the
extent that they can be identified at this early stage of program
operation, are included in the discussion. The start-up period of
the Medicare Subvention demonstration was Results in Brief
successful. Despite unanticipated delays, the six demonstration
sites met the requirements for Medicare managed care plans,
enrolled substantial numbers of beneficiaries, and began delivery
of health care services by January 1, 1999. The sites' experience
in dealing with the difficulties that arose along the way has
yielded valuable lessons and has also pinpointed issues that
remain to be resolved. While the successful start-up of the
demonstration is encouraging, it will be some time before the
results of its mature operation can be assessed. Establishing the
ground rules for the demonstration took longer and the HCFA
approval process was more demanding than anticipated. As a result,
the demonstration will cover 24 to 28 months of service rather
than 3 years. The initial demand for enrollment overall was not as
great as expected, in part because retirees were wary of a
temporary program and feared that they might be unable to obtain
affordable supplementary (Medigap) insurance at the
demonstration's end. Enrollment also reflected site-specific
factors, such as prospects for getting space-available care at an
MTF without joining Senior Prime, the breadth of services
available at the MTF, and options for care elsewhere in the
community. Preparing for the start-up of the demonstration brought
some useful new senior health care and management practices to the
MTFs, but also revealed operational difficulties. Such new
practices included enrollee orientations and the early
identification of health care needs that affected patients'
transition into Senior Prime. Some of the operational difficulties
that arose-such as bulges in demand for primary care-were solved
at individual sites. Others were linked to HCFA and DOD central
direction, such as difficult-to-combine data systems or
inconsistent policy guidance. The fact that this demonstration
program operates within two bureaucracies-DOD and HCFA-caused some
points of strain. Being new to Medicare, demonstration sites had
to devote substantial DOD staff and consultant time learning HCFA
requirements. The dual organizational structures within DOD-the
governance structure of the Senior Prime Medicare plan and the
military chain of command-carry with them the potential for
conflict. Additionally, dual DOD and HCFA procedures, although
perhaps necessary, may result in duplication of effort. Page 3
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 Finally, experience in the start-up phase of this
demonstration raises issues for the future of this or other
similar demonstrations. Current enrollees will need to know
several months in advance of the end of this demonstration whether
service will continue so that they can plan for their continued
health care. Questions continue to arise concerning which aspects
of Senior Prime operation DOD will handle centrally for the
program as a whole and which aspects will be left to the sites.
The demonstration also raises questions about arrangements for
seniors' care during periods of deployment of military medical
staff. It is uncertain how program expansion, if enacted at the
end of the demonstration, would take place-for example, how sites
distant from the DOD regional office that directs a Senior Prime
plan might be added. Also, the viability of expanding the program
to isolated sites that offer limited services deserves careful
review. We make recommendations in this report concerning issues
that affect the current demonstration. The DOD Medicare Subvention
Demonstration combines a national health Background
care delivery system operated by DOD with a health insurance
system- Medicare-operated by HCFA within the Department of Health
and Human Services (HHS). The demonstration includes six sites in
different regions of the country. The DOD health care system
covers a service population that includes 1.6 The DOD Health Care
million active-duty military personnel, 2.2 million dependents of
active- System duty personnel, and 4.4 million
military retirees and their dependents, including the 1.3 million
who are 65 and older. DOD delivers health care through its system
of almost 500 MTFs worldwide. These facilities include 15 medical
centers that offer extensive specialty care and provide graduate
medical education (GME), such as residency training. In addition,
DOD operates 76 smaller community hospitals with less extensive
service options and 374 clinics offering outpatient services
only.6 Pharmacy services are available at most MTFs and are free-
of-charge. The direct care provided at MTFs is supplemented with
care provided by a network of contracted civilian providers
through DOD's TRICARE program. TRICARE offers beneficiaries three
options for health care delivery, including an HMO option called
TRICARE Prime. There are 12 TRICARE regions within the U.S., each
headed by a lead agent, who is usually the commander of the
largest medical center in the region. Each region also has a
managed care support contractor who manages the private provider
network and performs various beneficiary assistance and 6
Approximately 10 community hospitals also offer GME. Page 4
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 management support services. The Office of the Lead Agent
(OLA) oversees the TRICARE management support contractor for the
region and coordinates TRICARE activities. Priority for military
medical care is given to active-duty personnel and their
dependents and retirees under 65 who are enrolled in TRICARE
Prime, thus enabling them to receive comprehensive health care
coverage. TRICARE Prime coverage ends when a retiree reaches 65.
Older retirees are eligible to receive medical care at an MTF, but
only when space is available. Some MTFs have considerable space
available after high-priority beneficiaries have been served, and
others have very little space. Medicare is a federally financed
health insurance program for the elderly, Medicare some
disabled people, and people with end-stage kidney disease.
Medicare covers 39 million beneficiaries and spends about $212
billion a year. Its benefits include hospital, physician, and
other services, such as home health care and limited skilled
nursing facility care. Medicare Part A covers inpatient hospital
care, skilled nursing facility care, and hospice care; Medicare
Part B covers physician and other outpatient services for
beneficiaries who choose to pay a monthly premium. Traditional
Medicare reimburses private providers on a fee-for-service basis
and allows Medicare beneficiaries to choose their own providers
without restriction. Beneficiaries who receive care are
responsible for part of the charges. Medicare beneficiaries can
also join a Medicare HMO, and Medicare+Choice provisions that took
effect in January 1999 permit them to choose other private health
plans as well. Currently, 17 percent of these beneficiaries use
Medicare managed care. Most Medicare managed care plans have only
modest beneficiary cost-sharing and some offer extra benefits,
such as eyeglasses and prescription drugs. Military retirees are
eligible for Medicare on the same basis as anyone else. HCFA
administers Medicare and regulates participating providers and
health plans. Both headquarters and regional office HCFA staff
have oversight responsibilities regarding Medicare+Choice
organizations. Headquarters staff handle legal and financial
matters, while the regions are responsible for operational
matters. HCFA's oversight of Medicare+Choice plans begins with the
certification process. To receive certification and begin health
care delivery, an organization must complete the following tasks,
among others: Page 5 GAO/GGD/HEHS-99-161 Medicare
Subvention Demonstration DOD Start-up B-281299 * submit a
comprehensive application to HCFA and respond to HCFA's requests
for clarification and additional information; * develop an
organizational structure, bylaws, and policies and procedures,
which are subject to approval by HCFA; * conduct training for all
staff and providers, including making provisions for training of
new staff as they come onboard; * prepare for and participate in
a HCFA site visit, during which a team of HCFA personnel examine
policies and procedures to determine if the site has the potential
to deliver health care according to HCFA regulations; * upon HCFA
approval, begin marketing activities to inform beneficiaries about
the program; * enroll beneficiaries and provide for coordination
of their health care, by assigning each to a primary care manager
or by other means; and * begin delivery of health care. HCFA
requires a variety of performance information from the plans once
they are in operation and conducts both technical assistance and
monitoring visits. To test a program granting Medicare-eligible
military beneficiaries The Demonstration guaranteed access to
health care provided through DOD but paid for by Medicare,
Congress established the Medicare Subvention Demonstration
Project. This demonstration authorized DOD to establish HCFA-
certified Medicare plans and provide care to Medicare-eligible
military beneficiaries at six sites for a 3-year period-January 1,
1998, to December 31, 2000. The DOD Medicare demonstration program
is known as Senior Prime. The goal of this demonstration is to
provide a cost-effective alternative for accessible and quality
health care while not increasing the federal cost for Medicare or
DOD. HHS is to reimburse DOD from the Medicare Trust Funds for
Medicare-covered health care services provided to Medicare-
eligible military beneficiaries at an MTF or through contracts.
However, to receive payment, DOD must at least match DOD's
baseline cost for serving this dual-eligible population in the
recent past.7 To be eligible for Senior Prime, dual-eligibles must
be enrolled in both Medicare Part A and Part B, reside in one of
the six geographic areas covered by the demonstration, and have
used an MTF before July 1, 1997, or become Medicare-eligible after
that date. Beneficiaries enrolled in the program will not have to
pay a premium during this demonstration, but 7 For more
information on the payment mechanism for the Medicare Subvention
Demonstration, see GAO/HEHS-99-39. Page 6
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 must pay any applicable cost-sharing amounts and must
agree to receive all of their health care exclusively through
Senior Prime. They will be subject to all of the Medicare+Choice
requirements. Enrollees must have a primary care manager within
the MTF. The benefit package for Senior Prime is the full Medicare
benefits package supplemented by other benefits that DOD provides
for its TRICARE Prime enrollees, such as prescription drugs.
Senior Prime enrollees are to be given priority for treatment at
MTFs over other dual-eligibles who are not enrolled in Senior
Prime. Each of the six demonstration sites is located in a
different DOD TRICARE The Sites and Their Health health care
region. The lead agent of the region is the chief executive Care
Environments officer (CEO) of the Senior Prime plan
located in that region. Table 1 lists the demonstration sites,
their locations, and their Senior Prime enrollment capacities.
(Note that sites may have more than one MTF and more than one
geographic service area.) For more specific information about each
site, consult appendixes I through VI at the end of this report.
Page 7 GAO/GGD/HEHS-99-161 Medicare Subvention
Demonstration DOD Start-up B-281299 Table 1: Medicare Subvention
Demonstration Sites Other HMO choices TRICARE
Senior Prime in area at start enrollment
capacity Demonstration site name Facility type
of services For MTF For Site
Colorado Springs Evans Army Community Hospital,
Community hospital Limited
2,000 Fort Carson Air Force Academy Hospital
Community hospital Limited
1,200 Total (Colorado Springs)
3,200 Dover Dover Clinic, Dover Air Force Clinic
None 1,500 1,500
Base, Dover, DE Keesler Keesler Medical Center, Keesler
Medical center None
3,100 3,100 Air Force Base, Biloxi, MS Madigan
Madigan Army Medical Center, Medical center
Plentiful 3,300 3,300
Fort Lewis, Tacoma, WA San Antonio San Antonio Sites: Brooke Army
Medical Center, Medical center
Plentiful 5,000 Fort Sam Houston
Wilford Hall Medical Center, Medical center
Plentiful 5,000 Lackland Air Force
Base Texoma Sites: Sheppard Community Hospital,
Community hospital None
1,300 Sheppard Air Force Base, Wichita Falls, TX Reynolds Army
Community Community hospital None
1,400 Hospital, Fort Sill, Lawton, OK Total (San Antonio)
12,700 San Diego Naval Medical Center, Medical
center Plentiful
4,000 4,000 San Diego, CA Total
N/A N/A
27,800 27,800 Sources: Facility information is from
documents received from each site. Information on HMO choices is
from interviews, the HCFA plan comparison World Wide Web site, and
HCFA quarterly enrollment tables. Enrollment capacity figures are
from DOD TRICARE Senior Prime Plan Operations Report tables. The
MTFs in the demonstration sites vary in size and types of services
offered. The medical centers (Madigan, Brooke, Wilford Hall, San
Diego, and Keesler) offer a wide range of inpatient services and
specialty care, as well as primary care. These centers also have
GME training programs. The Sheppard, Reynolds, Evans, and Air
Force Academy MTFs are smaller community hospitals with more
limited capabilities. Much of the specialty care at these
hospitals is contracted out to the civilian network. One site,
Dover, is a clinic, offering only outpatient services at the MTF
and thus Page 8 GAO/GGD/HEHS-99-161 Medicare
Subvention Demonstration DOD Start-up B-281299 requiring all
inpatient and specialty care to be purchased from the civilian
network. The six demonstration sites serve Senior Prime
populations within the 40- mile radius, or catchment area,8 around
each facility. All sites had served seniors to some extent before
the demonstration. At the medical centers, seniors had been a
substantial part of the workload to support GME in both primary
and specialty care. Centers with GME in internal medicine had
formed panels of seniors who regularly received primary care at
the MTF. At most of the smaller sites, and in specialty areas in
which a particular medical center did not have a GME program, care
for seniors was more limited and likely to be episodic. Some
demonstration sites are located in areas such as the Seattle-
Tacoma area, San Diego, and San Antonio where seniors can choose
among a number of private Medicare HMOs. Other sites are located
in areas where there are no other Medicare HMOs, such as
Mississippi and rural Delaware. We began the evaluation of Senior
Prime implementation with a review of Scope and the BBA and
DOD and HCFA documents relating to the demonstration as
Methodology well as interviews with headquarters staff from
both agencies. We then visited each of the six sites 8 to 12 weeks
after the start of program operation at that location. At the
sites, we conducted group interviews with administrators and
staff, including the lead agent, medical director, health delivery
staff, financial managers, and contractor officials as well as
beneficiaries and representatives of retiree groups. We collected
interview and documentary data on * site features pertinent to
this demonstration; * processes used to set up the program and
enroll and serve beneficiaries; * issues that arose and how they
were addressed; * initial results, such as enrollees' use of
health care and Senior Prime's impact on other patient populations
and on MTF operations generally; and * lessons learned. Follow-up
teleconferences were conducted with the sites toward the end of
the study period when the sites had from 4 to 8 months' experience
with program operation. We analyzed documentary and interview data
to 8 The demonstration service areas are defined by ZIP codes and
differ slightly from the catchment areas. Page 9
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 identify crosscutting and site-specific issues as well as
effective problemsolving strategies. The six sites we studied can
support operational findings about the demonstration as a whole.
However, the study has several limitations. Although they
illustrate a variety of conditions, the six demonstration sites-
four of which are major medical centers-are not representative of
the universe of DOD health care facilities. A site's capacity to
support the demonstration and its evaluation was a factor in site
selection, so our findings will not necessarily apply to sites
that do not meet this capacity threshold. We did not conduct
interviews with network providers or providers outside of the
demonstration plan, nor did we independently verify study data.
These findings pertain to the start-up period but not to mature
operation of the program. It is also too early to measure midterm
or long-term results of the program. We have no comparable
information about approval and early implementation for multisite,
private Medicare+Choice organizations. We conducted our review
from October 1998 through June 1999 in accordance with generally
accepted government auditing standards. We requested comments on a
draft of this report from the Department of Defense, but none were
provided. We also requested comments from the Health Care
Financing Administration, and their written responses are
presented and evaluated in the final section of this report and
reprinted in appendix VII. The process of securing HFCA
certification for demonstration sites to The Application
receive Medicare contracts proved difficult in two respects.
First, the Process Encountered process got off to a late
start, and there was considerable pressure to complete it quickly.
The demonstration could not get started until HHS and
Difficulties, But All DOD had negotiated a Memorandum of
Agreement (MOA) that set forth Sites Earned HCFA the basic
conditions of the demonstration. Several complex issues had to
Approval be resolved along the way. The MOA
spelled out the benefit package, rules for Medicare's payments to
DOD, and the HCFA requirements DOD would have to meet, along with
some exceptions, such as waivers of HCFA regulations concerning
physician licensing and fiscal soundness.9 In general, DOD would
be operating a Medicare+Choice plan following all of the HCFA
requirements. 9 The licensing waiver reflects the fact that each
military physician, although licensed in some state, is not
necessarily licensed in the state where he or she is currently
stationed. Also, as a federal agency, DOD is deemed fiscally
sound. Page 10 GAO/GGD/HEHS-99-161 Medicare
Subvention Demonstration DOD Start-up B-281299 Although the MOA
certified that DOD had the resources and expertise to operate the
demonstration program, the MOA still required that each
demonstration site submit an application to be certified through
the HCFA approval process. (In requiring each site to complete an
application, HCFA was following the same procedure that it would
use with any multisite, private Medicare+Choice organization, such
as Kaiser Permanente.) The six sites were not officially announced
until the MOA was signed on February 13, 1998, by which time 6
weeks of the demonstration period (which started Jan. 1, 1998) had
already passed. DOD immediately directed sites to prepare
application materials and submit them within a few weeks. Site
officials commented that 3 months would have been a more
reasonable length of time. Second, having had no prior experience
with HCFA reviews, DOD initially underestimated the detailed and
Medicare-specific nature of the information required. Given that
the MOA had recognized that existing DOD and TRICARE procedures
meet many of HCFA's requirements, DOD officials had thought that
the applications could be based largely on central- and site-level
documents that were already on hand. The applications initially
submitted consisted largely of such documents, and thus described
procedures and service provider networks that predated Senior
Prime. These applications did not include signed contracts with
network providers of Medicare services as HCFA requires, nor did
they describe the site-level policies and procedures through which
Medicare requirements would be met. From HCFA's viewpoint, these
applications were incomplete and, if not part of a demonstration,
would have been sent back for further development. In view of the
pressure of time and considering that demonstration programs are
often given extra assistance, HCFA officials agreed to proceed
with the application review and scheduling of site visits despite
the deficiencies in the applications. However, these officials
emphasized that signed contracts would have to be available for
inspection during the site visit and that standard review criteria
and procedures would be applied. To further speed the reviews,
HCFA * scheduled site visits sooner than usual after the
application review, * gave the demonstration sites priority over
other applicants and contributed extra central staff to the site
reviews where a particular regional office did not have sufficient
staff available, and * permitted two sites to proceed with
marketing on the basis of verbal approval so as to enable services
to start by selected target dates. Page 11 GAO/GGD/HEHS-99-
161 Medicare Subvention Demonstration DOD Start-up B-281299 DOD,
in turn, provided funding for sites to retain consultants
experienced in Medicare to help the sites prepare for the reviews.
The demonstration sites varied in their initial knowledge of HCFA
requirements and in the amount of work (especially network
development) that remained to be done. Each site team mounted an
all-out effort to prepare for the site visits. The first sites
were visited in June 1998. DOD staff from the earlier sites gave
later sites the benefit of their experience, and the last two site
visits were completed by the end of September 1998. The sites'
efforts were ultimately successful. All of the sites received
certification. However, because of the time required to develop
the MOA and complete the application and review process, the
demonstration will cover 24 to 28 months of service rather than 3
years. The first site certified, Madigan, began service September
1, 1998, and all of the sites had begun delivering services by
January 1, 1999. HCFA reviewers found the site visit presentations
and staff commitment to the program impressive. But two lessons
from the experience stood out in our review. First, the
application process was more demanding and time- consuming-and
required more reworking of existing procedures--than DOD had
envisioned. Officials at nearly every site told us that completing
all of the work required in the short time available was a major
difficulty they faced in implementing the program. Second, HCFA
facilitation of the process was critical. HCFA officials indicated
that under normal circumstances, the process would have taken
considerably longer. Initial enrollment in the demonstration was
lower than DOD officials and Enrollment Levels
other observers expected, and enrollment rates varied considerably
from Reflected Both General site to site. The demand for
enrollment appeared to reflect both the temporary nature of the
demonstration and site-specific factors. and Local Factors At
every demonstration site, we heard either directly from
beneficiaries or The Temporary Nature of from Senior
Prime staff that many retirees were reluctant to enroll in the
Demonstration Affected Senior Prime because of the temporary
nature of the demonstration. Some Enrollment
took a "wait and see approach," wanting some time to observe the
demonstration before committing themselves. Other beneficiaries
were concerned about how they would receive medical care after the
demonstration was over and whether they would be able to
affordably re- enroll in their previous Medigap (supplementary
insurance) plans or other Medicare HMOs when the demonstration
ended. The fact that the temporary nature of this demonstration
reduced enrollment numbers to an unknown degree argues that the
demonstration may not be an accurate Page 12 GAO/GGD/HEHS-
99-161 Medicare Subvention Demonstration DOD Start-up B-281299
indicator of the number of people who would enroll in a permanent
program. The Medigap issue was a major concern to retirees who
were enrolled in fee-for-service Medicare. Medigap policies are
private health insurance policies that require a monthly premium
and cover certain expenses not covered by fee-for-service
Medicare. The BBA provided that participants in demonstration
programs would be guaranteed issuance of a Medigap policy and
protected against price discrimination if they applied for Medigap
insurance after leaving the demonstration. However, implementation
of this "guaranteed issue" provision required action by state
insurance commissioners. The timing of such actions was uncertain
at the beginning of the demonstration. Accordingly, DOD's
marketing materials warned potential enrollees that it may be
difficult for them to obtain Medigap coverage under previous terms
and conditions when they disenrolled from the demonstration.
Beneficiaries told us that a couple pays as much as $190 per month
for Medigap coverage.10 Some beneficiaries did not drop their
Medigap policies when enrolling in Senior Prime because of their
concern that Medigap re-enrollment would be at a higher rate.
However, this problem is being worked out as the demonstration
continues. As of the end of July 1999, guaranteed issue
protections were in place in each state that includes a
demonstration site. Our interviews indicated that there were also
variables at each site that Various Site Factors Also
affected enrollment, such as the Made a Difference * breadth of
services available at the MTF, * amount of space-available care
at the MTF, * health care environment in the area, and *
maturity of the TRICARE program. The demonstration sites varied in
the number of eligible beneficiaries within each catchment area,
the enrollment capacity, and the number enrolled, as shown in
table 2 below. 10 The monthly cost of an individual Medigap policy
in the demonstration states ranges from about $50 for basic
benefits to about $200 per month for the most comprehensive
coverage. Page 13 GAO/GGD/HEHS-99-161
Medicare Subvention Demonstration DOD Start-up B-281299 Table 2:
Medicare Subvention Demonstration Program Enrollment as of June
28, 1999, by site TRICARE Enrolled
beneficiaries Senior Capacity
Number open Start of Prime
as enrolled as
health Eligible enrollment percentage
percentage of Demonstration site care beneficiaries
capacity of eligible Open Age-ina
Total capacity Colorado Springsb 1/1/99
13,689 3,200 23.4% 2,878
243 3,121 89.9% Dover 1/1/99
3,905 1,500 38.4 706
30 736 47.1 Keesler
12/1/98 7,361 3,100 42.1
2,661 186 2,847 85.8 Madigan
9/1/98 21,709 3,300 15.2
3,303 427 3,730 100.0 San
Antonio: San Antonio Sitesc 10/1/98 34,148
10,000 29.3 9,929 827 10,756
99.3 Texoma Sitesd 12/1/98 7,067
2,700 38.2 1,819 114 1,933
67.4 San Diego 11/1/98 35,619
4,000 11.2 3,101 180 3,281
77.5 Total N/A 123,498
27,800 22.5% 24,397 2,007 26,404
87.8% a Age-ins are persons enrolled in TRICARE Prime before their
65th year, and assigned to a primary care manager at an MTF, who
were eligible for and applied to Senior Prime upon turning 65.
Age-ins are guaranteed acceptance, and the number of age-ins does
not count toward capacity. bMTFs include Evans Army Community
Hospital, which had reached 84.55 percent of capacity, and the Air
Force Academy Hospital, at 98.92 percent of capacity. c MTFs
include Brooke Army Medical Center and Wilford Hall Medical
Center, both of which had reached 99 percent of capacity. dMTFs
include Sheppard Community Hospital, which had reached 57 percent
of capacity, and Reynolds Army Community Hospital, at 77 percent
of capacity. Source: DOD's TRICARE Senior Prime Plan Operations
Report, June 28, 1999. Site officials told us that they arrived at
their Senior Prime capacity figure by estimating the workload
capability of physicians in the primary care clinics. Financial
considerations played a role at some sites, as discussed in a
later section of this report. As shown in table 2, the percentage
of the eligible population that a site could accommodate if filled
to capacity varied from 11 percent to 42 percent. The lowest
capacity percentages were at Madigan and San Diego. The highest
were at Keesler, Dover, and the Texoma sites, where Senior Prime
is the only Medicare HMO in the market area. Although most sites
anticipated that there would be a high initial demand for
enrollment, only two MTFs filled up within the first few months-
Madigan reached capacity the 3rd month of operation, and Wilford
Hall Medical Center in San Antonio reached capacity the 4th month.
The Air Force Academy Hospital reached capacity after 6 months,
and Brooke Army Medical Center reached capacity at 8 months. By
the end of June, Keesler and Evans Army Community Hospital were
over 80-percent full, San Diego was over 75-percent full, the
Texoma sites were over 65-percent full, and Dover was just under
50 percent full. Page 14 GAO/GGD/HEHS-99-161 Medicare
Subvention Demonstration DOD Start-up B-281299 One site factor
that apparently affected enrollment was the breadth of services
available at an MTF, where Senior Prime beneficiaries receive care
at no charge. (See apps. I through VI for services available at
each site.) For example, at the large medical centers with many
specialties, most medical services needed by seniors could be
within the MTF. Thus, very little specialty care would need to be
referred to the civilian network, where beneficiaries would be
required to make co-payments for their care. Smaller hospitals,
such as those in Colorado Springs (Air Force Academy and Evans)
and Texoma (Fort Sill and Sheppard), needed to refer seniors to
the civilian network for most specialty care, and the Dover clinic
needed to refer all inpatient care to the network. Co-payments,
ranging from $12 to $40 for outpatient services, could be a
disincentive to enrollment for some retirees. Also influencing
enrollment was the likely availability or shortage of space-
available care at an MTF. We found that some MTFs with GME
programs had substantial space-available care in specialty areas.
For example, the Naval Medical Center in San Diego had ample
space-available care in some specialties (such as cardiology) at
the MTF, and we were told that some seniors felt they could get
the specialty care they needed without joining Senior Prime. Other
sites, such as Madigan, Sheppard, and the Air Force Academy
Hospital, were nearly full before Senior Prime and warned
beneficiaries that there would be little space-available care left
after Senior Prime reached its enrollment capacity. In this case,
retirees realized that if they did not enroll in Senior Prime,
they would probably not be able to receive care at the MTF. The
health care environment for seniors at each site was also a
factor. In some areas, seniors could choose from several Medicare
HMOs as well as fee-for-service Medicare. For example, in San
Diego, private HMOs have a 48-percent market share of eligible
Medicare beneficiaries. This high penetration rate brings with it
much competition for beneficiaries. To attract customers, San
Diego area HMOs offered enhanced benefits, compared to which the
Senior Prime plan was perhaps less attractive. In other
demonstration areas (Keesler, the Texoma sites, and Dover), Senior
Prime was the only Medicare HMO option for most potential
beneficiaries. In these areas, being an HMO was not necessarily an
advantage for Senior Prime: some retirees at these sites expressed
reluctance to enroll because of their discomfort and unfamiliarity
with managed care plans in general. These retirees would be
returning to fee-for-service care if the demonstration were not
continued, and concerns about the future availability of Medigap
insurance added to their reluctance. However, MTF officials told
us that some seniors had difficulty finding fee-for-service care
Page 15 GAO/GGD/HEHS-99-161 Medicare Subvention
Demonstration DOD Start-up B-281299 in these areas (and sometimes
at the MTF) and welcomed the ready access to care that Senior
Prime offered. The maturity of DOD's managed care program, TRICARE
Prime, in an area also apparently affected enrollment in Senior
Prime. In sites where TRICARE Prime had been in operation for 3 or
4 years, such as Madigan, initial problems had been resolved and
seniors could see how the program was working. TRICARE Prime was
new in the area where Dover is located, having begun in June 1998.
This new program brought new and unfamiliar procedures and
encountered some start-up difficulties, and TRICARE Prime
enrollment was low. Thus, Dover staff predicted that Senior Prime
enrollment would be well below capacity, and that most enrollees
would be those who had already been regularly receiving care at
Dover. When TRICARE Prime enrollees at demonstration sites turn
65, those who Aging-in May Stretch are Medicare-
eligible and assigned to a primary care manager in the MTF
Capacity are guaranteed enrollment in
Senior Prime-a process called "aging in." Age-ins do not count
toward capacity levels at demonstration sites. DOD expected age-
ins to come from the already enrolled population and to increase
at a modest rate. However, some sites are finding that eligible
beneficiaries are enrolling in TRICARE Prime in their 64th year,
so that they can join Senior Prime when they turn 65. At sites
where MTFs are nearing their planned enrollment limit, an
increasing number of age-ins might strain current resources. The
delivery of medical services under Senior Prime largely followed
the Preparing for Health managed care framework and
procedures established for TRICARE Prime. Care Delivery Brought
The principal difference was that Senior Prime enrollees now
received the full range of TRICARE Prime care, plus added Medicare
benefits such as Useful New Practices home health care.
But in other respects, preparing for the implementation of the
Senior Prime demonstration brought useful new practices to the
MTFs. (For practices specific to each site, see apps. I through
VI.) Sites adopted several new practices to meet the needs of
their senior Patient Care Enhanced patients. One such
practice was to conduct orientation sessions for new Through
Demonstration enrollees to educate them on the program
and identify their individual Activities
health care needs. Each site conducted some form of orientation
for the enrollees to explain the program benefits, health service
delivery, the role of the primary care manager, and how to
schedule appointments with their health service providers. Many
sites combined this educational orientation with identifying the
health care needs of enrollees through administering a health
assessment survey and/or holding individual health screenings in
one-on-one meetings between enrollees and medical staff. As part
of the Page 16 GAO/GGD/HEHS-99-161 Medicare Subvention
Demonstration DOD Start-up B-281299 intake of enrollees, sites
identified patients who had neglected medical conditions and
arranged for the immediate care they needed. For example, at one
site a patient with a life-threatening heart condition was
identified and scheduled for surgery the following day. Other
useful changes that Senior Prime brought to the MTFs included the
following: * Identifying enrollees' continuing health care needs
before the start of health care delivery, such as patients who
needed durable medical equipment or needed to complete previously
scheduled care outside of the MTF. * Changing or augmenting case
management, already practiced under TRICARE Prime, to meet the
special needs of older patients. (Case managers are assigned to
monitor certain patients' care over time, including patients with
multiple diseases or complex health problems and patients taking
multiple medications.) * Monitoring and assisting older patients
who did not qualify for case management but were likely to have
difficulty following through on their own care, for example,
following up with certain patients to ensure that they scheduled
their needed appointments. Certain HCFA data collection and
reporting requirements prompted or Management Improvements
accelerated management improvements at the demonstration sites.
For From Meeting HCFA example: Requirements *
Acceleration of the MTFs' efforts to improve and refine their
information systems and generate better data while meeting HCFA
reporting requirements. To illustrate, one site trained MTF
providers and staff on how to enter outpatient and inpatient data
accurately and in accordance with HCFA coding guidelines. *
Consolidation and simplification of MTF quality improvement
efforts to respond to HCFA program rules, including developing
quality indicators and monitoring health care process and outcome
metrics. The quality management and utilization management work
plans required by HCFA were seen as a useful tracking device that
could also be applied to TRICARE Prime. Page 17
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 * Improved coordination and collaboration between the
lead agent offices, MTFs, and managed care support contractors. In
San Antonio, this coordination extended across service lines.
Officials at one site commented that reviewing HCFA requirements
had prompted re-examination of traditional practices, and that
preparing for the demonstration had "invigorated" the DOD health
care system in that region. Demonstration site officials see the
comprehensive treatment of older Comprehensive Treatment
patients under Senior Prime as being useful in supporting the
MTFs' of Seniors Seen as training of providers and
readiness missions. According to MTF officials, Supporting GME and
treating relatively healthy patients is not enough to keep doctors
Readiness challenged; however, treating
older patients with complex cases gives doctors the chance to
practice a broader range of clinical skills.11 Before Senior
Prime, MTFs relied on space-available care to provide older
patients, and therefore could not be guaranteed a consistent
population for training residents. Under Senior Prime, MTF
residents provide the full spectrum of care for these patients and
are more likely to have the mix of medical cases they need to
develop their skills. MTF officials said that treating seniors
helps indirectly with the readiness mission. According to MTF
officials, treating the more complex cases indirectly aids
retention and recruitment of doctors. In addition, they indicated
that having an enrolled population provides a firm basis for
planning for such contingencies as the deployment of MTF medical
staff. Sites' experiences during marketing, enrollment, and the
first weeks of Preparing for Service service delivery
revealed several operational difficulties. Some of these Delivery
Also Revealed difficulties were solvable (and solved) at the site
level, but others were linked to central DOD or HCFA direction,
policy, or information systems. Operational Difficulties The first
sites to begin service encountered operational problems as a Some
Difficulties Were result of not identifying patients'
transition needs in advance. Some Solved at the Site Level
incoming enrollees' supplies of durable medical equipment, such as
home oxygen, were disrupted in the transition to Senior Prime.
Other enrollees kept previously scheduled appointments with out-
of-network providers after Senior Prime coverage began, which
required retroactive approval. 11 See Medical Readiness: Efforts
are Underway for DOD Training in Civilian Trauma Centers
(GAO/NSIAD-98-75, Apr. 1, 1998). Page 18
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 Later sites found ways to ensure that vital equipment was
available on the first day of service and to arrange permission
for out-of-network care in advance. For example, one site sent a
letter to new enrollees before the start of service urging those
with transitional needs to call Senior Prime program managers
about them right away. Another obtained this information through
telephone calls to all new enrollees. Madigan's experience also
illustrated the difficulties of starting services for large
numbers of new enrollees on a single start date. Serving 3,000 new
enrollees led to bulges in demand that strained the capacity of
primary care clinics and made it difficult for them to meet access
standards. It was also difficult to process large numbers of
enrollments in the time available, as sites typically received
HCFA's list of approved applicants around the 25th of the month,
for services starting on the 1st day of the following month. Sites
dealt with the first of these difficulties by phasing in
enrollment over 2 or 3 months. This helped spread out enrollment
processing and cut down on bulges in demand, although they still
occurred in some primary care clinics and in certain specialties
such as eye care. (Senior Prime beneficiaries were entitled to a
health evaluation within 90 days and an eye examination during the
course of the demonstration, for which space- available care had
previously been scarce.) However, phased-in enrollment was
disadvantageous for applicants who needed a firm start date. For
example, applicants in Colorado whose former HMOs withdrew from
Medicare December 31, 1998, needed to know in advance whether, if
accepted into Senior Prime, their services would start January 1,
1999. Start dates were phased in on a first-come, first-served
basis, and program officials were unable to tell which applicants
were in the January group until late December, when the list of
approved applicants arrived from HCFA. Sites employed several
strategies to deal with the tight timelines for processing
enrollments, including * preparing enrollment materials for every
applicant in advance and then removing the packets for the few who
were not approved, * immediately sending approved enrollees a
letter of acceptance that also served as a temporary ID until
their full enrollment packet arrived, and * seeking access to a
HCFA data system (the MCCOY system) that would allow site
officials to track approvals as they were made rather than waiting
for a batched report. Page 19 GAO/GGD/HEHS-99-161 Medicare
Subvention Demonstration DOD Start-up B-281299 Other operational
difficulties were linked to central direction, policy, or Other
Difficulties Were information systems. While sites
devised strategies for handling some of Linked to Central
Direction, these difficulties in the short term, longer-term
solutions would require Policy, or Information
central action. Systems Limited Access to Medicare DOD
authorized sites to purchase up to 1,000 hours of consulting time
Expertise from experts on Medicare HMO
application and site visit requirements and procedures to assist
them in preparing for site visits, and all of the sites found this
assistance to be very helpful. (San Antonio, with four MTFs, was
allowed 2,000 hours.) The HCFA Web site on the Internet was also
helpful, and design teams from some sites visited nearby Medicare
HMOs. But DOD barred officials at the demonstration sites from
consulting another important source-HCFA regional office staff.
Instead, they were to direct questions about HCFA requirements to
officials at DOD headquarters, who would refer the questions to
central HCFA headquarters officials as needed. (Apparently, this
restriction was intended to ensure that the information provided
was consistent across sites and to minimize the demands on busy
HCFA regional offices.)12 Some sites ignored the ban and worked
actively with HCFA regional staff. Others honored the ban, but
felt that doing so put them at a considerable disadvantage. Site
officials generally agreed that the ban was an impediment, and
HCFA regional officials shared this view. Unclear or Inconsistent
We found several instances of unclear or inconsistent central
guidance to Guidance sites. Site
officials reported that central program documents described the
Senior Prime benefits package in such general terms that they had
difficulty determining exactly what was covered. For example, the
documents listed diabetic supplies but did not specify which
particular diabetic supplies (such as glucose strips and syringes)
were included. The sites called for clearer central guidance in
the interest of uniformity. Direction was also inconsistent with
respect to allowable marketing activities. One site, San Antonio,
used direct mail as a part of its marketing strategy with HCFA
approval. Other sites asked DOD whether they could use direct
mail, and were told that direct mailing was not permitted. (Staff
at these sites believed this response to be based on HCFA
guidance.) Some sites received DOD approval to arrange for
Medicare consultant assistance 12 The issue of inconsistency
across HCFA regional offices has been discussed in previous GAO
reports and testimonies. See, for example, Medicare Contractors:
Despite Its Efforts, HCFA Cannot Ensure Their Effectiveness or
Integrity (GAO/HEHS-99-115, July 14, 1999). Page 20
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 beyond the site visit, but another site requested such
assistance and was turned down. The clarity of HCFA guidance was
also an issue for the sites. While some HCFA regional offices sent
detailed letters outlining material to be covered in the site
visit, others provided only general guidance or no guidance in
advance. Lacking detailed guidance, DOD staff at two sites had not
prepared contract materials that the HCFA regional staff person
expected to review. During the HCFA approval process, consistency
was an issue as well. At one site, HCFA regional staff asked to
see the entire provider contract, while at other sites the Senior
Prime addendum to the contract was sufficient for review.
Similarly, staff at one HCFA regional office objected to marketing
materials that had been approved centrally for the demonstration
as a whole. DOD site staff we spoke with understood that the
regional offices operate somewhat differently from one another.
Each site ultimately developed a good working relationship with
HCFA regional office staff. Policy Changes in Mid-process
Changes in policy during the start-up process complicated program
planning and management. For example, some sites did not know
until the last minute that they would be included in the
demonstration, and some began their planning with the
understanding that program management would be lodged at the MTF
level only to learn later that the lead agent would be in charge.
Several critical changes in or clarifications of benefits were
made after program operation had begun, which required adjustments
in MTF and managed care support contractor operations. Finally,
sites had to rewrite their Senior Prime policies and procedures to
conform to the BBA-required Medicare+Choice regulations that went
into effect on January 1, 1999. Outdated Marketing Materials
Key changes in eligibility and benefits were made after DOD
marketing materials had already been printed. For example, DOD
greatly increased the number of days of skilled nursing facility
care without a co-payment, and under Medicare+Choice, eligibility
was expanded to include persons who spent up to 12 consecutive
months outside of the service area. However, DOD continued to use
the already printed material, supplemented by lengthy errata
sheets. Sites reported that seniors were confused by information
presented in this fashion, and that outdated provisions continued
to be quoted long after they had been changed. Design Flaw in the
Age-in The program permits eligible retirees and their
dependents who were Process enrolled in
TRICARE Prime and assigned to a primary care manager at a
demonstration MTF to age in to Senior Prime upon reaching 65, even
if Page 21 GAO/GGD/HEHS-99-161 Medicare Subvention
Demonstration DOD Start-up B-281299 Senior Prime enrollment has
reached capacity at a given site. The age-in process calls for
such individuals to be identified 150 days in advance and notified
of this option 120 days in advance of their 65th birthday.
However, this procedure was not in place for each site 150 or even
120 days before the start of service. Sites had to develop their
own procedures for identifying and notifying individuals whose
65th birthdays fell within that period. A further complication was
that HCFA considers a person to have turned 65 on the first day of
his birth month, whereas DOD data systems use the actual date of
birth. Divergence in Data Systems and The Senior Prime
program draws from various DOD, contractor, and Measures
HCFA data systems that must be consistent with one another.
Experience during the start-up period showed that constant
monitoring is needed to ensure alignment between the data in these
different systems, and that even apparently minor differences in
data entry practice can make programwide reporting difficult. For
example: * Senior Prime enrollment data must be entered
separately into a DOD data system, a data system specifically
designed to transmit DOD data to HCFA, and sometimes into a
support contractor data set as well. Multiple entry creates the
potential for error at initial entry and also as information is
updated. Also, the data sets use different conventions. DOD lists
a dependent under the sponsor's (retiree's) Social Security number
with a prefix, whereas HCFA lists each individual under his or her
own Social Security number. Sites found that discrepancies in
information across these various systems did occur, and that
checking for them (as HCFA required) and determining which of two
discrepant entries was correct was extremely labor-intensive. *
Differences in coding practices complicated the task of
aggregating clinical data for Senior Prime from different clinics
or MTFs. For example, in Colorado Springs, the Army hospital used
only the base or generic code for mammograms, while the Air Force
hospital used the base code with extensions to differentiate
various types of mammograms. The DOD data system that generates
management reports reads the generic and extended codes
differently, such that equal numbers of mammograms from the two
sites as recorded in the original data system did not necessarily
produce equal totals in the management reporting system. Funding
arrangements for the demonstration presented site officials with
Unclear Payment many uncertainties during the
start-up period. Medicare payments are due Arrangements Did Not
to DOD under the demonstration only if DOD's cost of caring for
Medicare Affect Early Care eligibles (using the
level of effort calculation) during the period exceeds Page 22
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 the costs incurred to serve this population in the recent
past. Funding arrangements provide for DOD to receive interim
reimbursement monthly when a site's enrollment in Senior Prime
meets a specified threshold. However, the demonstration as a whole
must also meet an annual threshold. Failure to reach this
threshold can result in DOD's returning a portion of the interim
payments.13 Managers at each site could tell, on the basis of
enrollment, whether that site was likely to earn interim payments
for DOD. However, when services started they did not know, because
DOD had not indicated, whether and how interim payments might flow
to participating MTFs. They also did not know whether sites that
received interim payments would be responsible for turning back
these funds if the demonstration as a whole did not meet the
annual threshold. Thus, the only funds the sites could be sure of
were those already provided from DOD appropriations. Site
officials worried that these DOD funds might not be sufficient to
cover the cost of services added under Medicare, such as home
health care. The officials were also concerned that sites might be
asked to bear the cost of very expensive procedures or equipment,
such as liver transplants, if medically necessary for a Senior
Prime beneficiary. Existing MTF budgets were not designed to cover
such extraordinary expenses for the senior population. These
expenses would previously have been borne largely by Medicare.
Although frustrated by the uncertainty in the funding formula,
site officials told us that this uncertainty had relatively little
impact on site operations during the start-up period. Two sites
(San Antonio and Keesler) adjusted their enrollment target upward
on the basis of funding considerations. Funding considerations
also influenced Madigan's decision to begin services for all
enrollees on a single start date, which would help generate
interim payments. However, other sites elected to phase in
enrollment in the interest of avoiding overload, despite the
potential financial disadvantage to DOD. With respect to health
care delivery, officials told us that during this period of
uncertainty, they were putting financial considerations on the
back burner and concentrating on providing care to seniors.
Utilization management procedures were in place to guard against
unnecessary or unnecessarily expensive care. By late spring of
1999, interim payments had been made to DOD and were being used to
pay claims for Senior Prime services received through network
providers. DOD had informed the demonstration sites that the funds
that remained would be released to the various services. However,
it 13 For a more detailed explanation of the payment mechanisms,
see GAO/HEHS-99-39. Page 23 GAO/GGD/HEHS-99-
161 Medicare Subvention Demonstration DOD Start-up B-281299 takes
some time for claims to come in, and DOD was reluctant to release
funds until it was clear that reserves for claims payment were
adequate. Sites expected that some funds would be released to them
shortly, but details and amounts were still not known. Substantial
uncertainty will remain until the first annual reconciliation
takes place.14 This demonstration, involving both DOD and HCFA and
their separate Dual Systems Create requirements,
contains some inherent duplication. Operating in a dual- Points of
Strain systems environment has created some points of
strain for the test sites. DOD officials told us that contrary to
what they first thought, Senior Prime Substantial DOD
is not a DOD program with some extra Medicare benefits, it is a
Investment in Learning Medicare+Choice plan. Staff at each
site had to learn and comply with HCFA Requirements
Medicare rules and regulations to receive certification and
operate the demonstration program. Complicating the learning
process, the subvention demonstration start-up got caught in a
major transition in Medicare. In addition to becoming familiar
with prior regulations, personnel at all sites also had to learn
the new HCFA regulations for Medicare+Choice, which under the BBA
became effective January 1, 1999. Thus, Senior Prime managers at
each site have made a substantial investment in learning. This
substantial investment in learning the HCFA regulations has the
potential for being lost because of DOD's policy of staff
rotation. Under this policy, about one-third of military staff
rotate to a new assignment each year. Already some lead agent
military personnel, recently knowledgeable about Medicare, are
being transferred to locations where there is no test site or
where their new job responsibilities will not require them to use
their Medicare knowledge. Their replacements will have to go
through the same learning process. As a result, some test sites
have considered placing civilian employees in charge of
administering the demonstration so that their investment in having
staff learn HCFA requirements and procedures will not be lost to
transfer. The OLA for Madigan currently has a civilian in charge
of running the day-to-day aspects of the program, and there is a
civilian chief operating officer at the Colorado Springs OLA. To
meet HCFA's accountability requirements, the Senior Prime program
Dual Organization Carries has its own organizational
structure, which differs from the structure for Potential for
Conflict and TRICARE Prime. At each demonstration site, the
lead agent serves as CEO Duplication of the
Senior Prime plan and is accountable to HCFA for the plan's 14 The
first annual reconciliation was expected to take place in late
summer of 1999. The results were not available during our work for
this report. Page 24 GAO/GGD/HEHS-99-161
Medicare Subvention Demonstration DOD Start-up B-281299
performance. However, the lead agent position, established to
oversee the managed care support contractor and foster
communication among MTFs for TRICARE, is not a part of the
military chain of command. MTF commanders report to, and receive
appropriated funds from, the Surgeon General of their respective
service (Army, Navy, or Air Force). The position of lead agent
does not carry direct authority over the commanders of the MTFs in
the region, nor do staff in the OLA have authority over staff with
similar functional responsibilities in the MTFs. Typically, the
commanding officer of the largest MTF in the region is appointed
to serve as lead agent/Senior Prime CEO; as MTF commander, he or
she has direct authority over that MTF's staff. In three of the
demonstration sites (Madigan, San Diego, and Keesler) the lead
agent is the commander of the only MTF offering Senior Prime. In
other sites, the situation is more complex. The lead agent/Senior
Prime CEO for the San Antonio demonstration site commands one of
the four participating MTFs, two of which are within a different
service than his. None of the MTFs participating in the Dover and
Colorado Springs sites were under the lead agent's command. (See
apps. I through VI for details.) Staff in the demonstration sites
recognized the potential for tension in these arrangements. Having
the same person fill three positions (lead agent, Senior Prime
CEO, and MTF commander) could be awkward if the interests of the
three positions do not coincide. Where no formal reporting
relationship between lead agent and MTF staff exists, smooth
operation of Senior Prime depends on cooperation. As of our
review, the sites had worked out command and control issues to
operate the Senior Prime program. Often, program operation rested
on informal lines of authority and cooperation among the
individuals involved. However, staff turnover and expansion of the
program could strain such relationships, bringing the potential
for conflict. Overlap and potential duplication are also an issue
in some aspects of this demonstration program. For example, HCFA
and DOD operate parallel quality assurance systems, both with the
goal of ensuring that beneficiaries receive quality medical care.
Although the activities are similar, each has its own measurement
and reporting requirements. Such requirements may be necessary to
support the purposes of their respective agencies. However,
overlapping requirements do not necessarily improve the quality of
care at the MTFs, and these requirements do add cost and
administrative work for Senior Prime staff. Page 25
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 Appeals and grievance procedures provide a second example
of overlap. HCFA's requirements, which strongly emphasize
patients' rights, are sufficiently different from DOD's
requirements that sites ended up operating two sets of procedures-
one for TRICARE Prime and another for Senior Prime. The two sets
of procedures raised the prospect of unequal treatment for
different groups of patients. Finally, some HCFA requirements do
not apply to the military context. Demonstration sites have to
submit a report of physician incentive payments, even though there
are no such payments in DOD. Additionally, some items need
adaptation for DOD enrollees, such as the Notice of Discharge and
Medicare Appeal Rights, which is given to hospitalized patients
when they are informed of their discharge date. HCFA's model
language for this document states that the patient would be liable
for the cost of hospital care beyond the discharge date. Patients
in DOD hospitals are not liable for such costs, and this
inapplicable language has caused much confusion for beneficiaries.
DOD site officials reported that operating a Medicare HMO required
a Administrative Workload similar administrative workload,
regardless of the size of the enrolled Similar for Larger and
population, both during the application process and as the new
Smaller Populations Medicare+Choice program was being
launched. Firm measures of administrative workload are not yet
available. Most sites told us they had devoted about four full-
time equivalents (FTE) from their lead agent staff (more at San
Antonio, where there are four MTFs, and fewer at Dover, where the
start-up of TRICARE absorbed the attention of lead agent staff).
In addition, many MTF staff hours were also devoted to this
demonstration. Madigan, for example, estimated that about three
FTEs from the MTF were dedicated to Senior Prime. However,
administrative workload was not initially counted as program cost
for the level of effort calculation and was not measured. HCFA and
DOD are now discussing whether administrative cost could be
included in the level of effort. DOD has hired a contractor to
determine the actual administrative costs of this demonstration,
including staff time devoted to the project. Managed care support
contractors are responsible for many aspects of the demonstration,
including network development, enrollment, marketing,
appointments, and claims processing, and the FTEs devoted to these
activities were substantial. Cost information from contractors was
just becoming available when we concluded this study and bears
watching in the future. Page 26 GAO/GGD/HEHS-99-161
Medicare Subvention Demonstration DOD Start-up B-281299 Experience
in the start-up phase raises issues for the later years of this
Experience in the demonstration program, as well as
for any future subvention program. For Start-up Phase Raises
the current program, the issue for beneficiaries is what will
happen to them when the demonstration ends. A second issue, both
for the Issues for the Future demonstration period and for
any future program, concerns uniformity versus local variation in
program benefits and operation. Other issues are concerned with
possible expansion of the program. Finally, military readiness
activities raise issues for Senior Prime. Beneficiaries and site
officials alike expressed concern that enrollees had Planning for
Transition at not been informed what arrangements would be made
for their transition the End of the back to other
forms of Medicare if the demonstration were to end as
Demonstration scheduled. Nor was anything said
initially about when the decision regarding the demonstration's
future would be made. DOD has since stated, in the 1999 Annual
Notice of Change for Senior Prime, that the program must give
enrollees 90 days notice if the program is to be terminated at the
end of the demonstration period (Dec. 31, 2000). Such notice would
give them time to apply to other Medicare plans during the
November 2000 open enrollment period. However, such advance notice
would also mean that Congress would have to make a decision
regarding continuation-at least with respect to the current sites-
before the evaluation of the demonstration had been completed. Our
conversations with beneficiaries after the Notice of Change was
issued indicate that the notice did not fully resolve their
concerns. Questions about access to Medigap insurance remained,
and seniors also wanted information regarding whether they would
be able to get space- available care at MTFs if the demonstration
were terminated. Another major question is whether Senior Prime
will be operated as one Central v. Local Decision DOD program,
as six local programs, or as a combination. Although HCFA central
officials coordinated regional offices' efforts across the
demonstration, HCFA generally treats each site as an independent
HMO, allowing each the latitude given by the Medicare statute to
structure its own product and operations. Thus, HCFA called upon
sites to make operational decisions concerning such matters as
details of the benefits package, patient notification procedures,
and Year 2000 data compliance plans. DOD guidance also permits
variation from site to site on many operational matters, and, as
each new HFCA directive arrived, the question of central versus
local response had to be resolved. In the case of the patient
notification-of-discharge requirement, for example, each site
framed its own initial response. Responses varied widely, in part
because the requirement incorporates assumptions that do not apply
to DOD. Sites Page 27 GAO/GGD/HEHS-99-161 Medicare
Subvention Demonstration DOD Start-up B-281299 inquired whether a
central DOD response to the issue might not be more appropriate-as
it was for the Year 2000 issue, which was handled centrally within
DOD. The central versus local question is likely to come up within
DOD again. The current demonstration raises several questions
regarding how It Is Unclear How Potential expansion of the
program, if enacted at the end of the demonstration, Expansion, If
Enacted, would take place. Specifically, it is unclear how
plans would incorporate Would Take Place MTFs that
are administratively independent of the lead agent and
geographically distant from the lead agent's office. The
demonstration offers only two sites as examples-San Antonio and
Dover. Each of these sites raises questions that have not yet been
addressed. The San Antonio site includes (1) an initial service
area containing the medical center commanded by the lead agent and
an independent medical center in the same city and (2) an
expansion area containing two geographically distant and
independently commanded community hospitals, one of them in
another state. This arrangement represents a possible prototype
for adding additional MTFs to a plan. However, HCFA officials
emphasized that they make decisions about expansion on a site- by-
site basis. Because distance can lead to insufficient oversight,
HCFA approves such arrangements only when there is evidence of
close communication, as there was in San Antonio. HCFA officials
told us that they are generally wary of very large service areas.
Thus, adding more (and more distant) sites to the San Antonio plan
would likely raise questions for HCFA. But adding new plans within
the region, each with the lead agent as CEO, might raise issues as
well. The Dover site consists of a single clinic that is
administratively independent of and about a 2-hour drive from the
OLA in Washington, D.C., and not under the lead agent's command.
Before the demonstration, the Dover MTF had little contact with
the OLA itself. While HCFA approved the Senior Prime plan for
Dover, this is no guarantee that similar arrangements with more
distant MTFs in the region would also be approved. It is unclear
to what extent Senior Prime procedures and organizational
structures developed for each current site could be transferred to
or extended to cover other sites in the region. Sites in the
demonstration found that although materials from other, already-
approved sites were a useful starting point, they generally needed
adaptation to local circumstances. Finally, the regional structure
of the two agencies is a complicating factor. Some DOD regions
overlap with several HCFA Page 28 GAO/GGD/HEHS-99-161
Medicare Subvention Demonstration DOD Start-up B-281299 regional
offices. For example, the DOD Northeast Region, with the lead
agent in Washington, D.C., includes states that fall under HCFA's
Philadelphia, New York, and Boston Regional Offices. As previously
indicated in this report, the six sites in this demonstration
Expectations of Rapid completed the application and
approval process in a little less than 1 year, Expansion May Not
Be but only because of HCFA's willingness to augment
regional office staff Realistic and
expedite the process for the sake of the demonstration. HCFA's
capacity to process applications with current staffing is limited,
and HCFA officials made clear to us that if the program were no
longer a demonstration, applications from DOD would be treated the
same as applications from any other source. Staff capacity limits
at the OLAs may be a factor as well. The experience that DOD
gained through the demonstration would likely ease the task of
preparing applications at new sites, but even so, substantial time
and effort would likely be required. Existing policies and
procedures would likely be helpful, but may need to be adapted to
local circumstances. Even if materials prepared elsewhere were
applicable, staff at new sites would need time to absorb their
content thoroughly. On the basis of what we heard of the visits to
demonstration sites, HCFA reviewers would likely probe site
officials' understanding of the program's operational procedures,
as off-the-shelf procedures that are insufficiently understood may
invite problems in program operation. Finally, Medicare+Choice
requirements concerning the effective date of enrollment could
limit initial enrollment at new DOD sites. Starting with 1999, the
Medicare+Choice regulation provides for an annual election period
in November with enrollments effective January 1 of the following
year. At other times, enrollment is to be effective 1st day of the
month following the application. These provisions appear to
preclude phasing in initial enrollment over several months. As we
have seen, DOD sites found phased enrollment essential for
handling large numbers of new beneficiaries. Without phasing in,
new DOD sites would have to limit initial enrollment or face
overloading their primary care clinics. Judging from experience
thus far, MTFs that offer limited services The Viability of the
Program (community hospitals and especially clinics) and are
located in isolated or at Isolated MTFs That Offer rural areas
would likely have special difficulty building a Senior Prime
Limited Services Merits program. The demonstration
sites with these characteristics operated in a Careful Review
fee-for-service environment in which private physicians (1) were
in relatively short supply and (2) had little incentive to
contract with a Medicare managed care plan. Building and
maintaining a Senior Prime Page 29 GAO/GGD/HEHS-99-161
Medicare Subvention Demonstration DOD Start-up B-281299 network or
providers under such circumstances took extra effort. Building
Senior Prime enrollment offered additional challenges as well. At
most of the community hospitals and clinic we studied, relatively
little space- available care had been available in recent years,
so that the initial customer base among seniors was fairly small.
The Senior Prime networks for these MTFs offered a limited choice
of private specialists, and some seniors chose not to join to stay
with a favorite physician who was not included. The use of network
specialists also involves co-payments, which decrease the
financial advantage of joining the program. Finally, Senior Prime
program management at these sites may consume a disproportionate
share of administrative resources to serve a small percentage of
the patient population. In discussing the interim "fixes" they had
made to compensate for the Procedures and Data
limitations in the data sets essential for program administration,
site Systems That Work at a officials commented that
although workable at a small scale, these labor- Small Scale May
Not Be intensive procedures would not be adequate to handle
a substantially Adequate at Larger Volume larger volume of
enrollees. Finally, military readiness raises important issues for
Senior Prime. Most Readiness Raises Senior importantly, if
medical staff from the MTF were deployed to support a Prime Issues
military action, would each site still have sufficient resources
to meet its commitments for seniors' care?15 This issue arose in
concrete form in Colorado Springs, where both the Air Force
Academy Hospital and Evans Army Community Hospital had medical
staff (including primary care physicians) deployed overseas at the
time of our visit. In the temporary absence of one colleague, each
of the three remaining Air Force primary care physicians in
internal medicine carried a substantial extra number of Senior
Prime beneficiaries. Having just gotten to know one new doctor,
these beneficiaries were not eager to be reassigned to another
when the deployed physician returned. Evans also had some trouble
fitting in all of the requested Senior Prime appointments, in
light of deployment. Losses of staff due to deployment are
particularly important for Senior Prime because DOD requires that
Senior Prime beneficiaries (unlike those in TRICARE Prime) be
assigned to primary care managers within the MTF- they cannot be
assigned to network physicians. MTFs in the demonstration vary in
the extent to which staff are subject to absence for readiness
training or short-term deployment under normal circumstances. All
lead agents are expected to engage in readiness 15 This question
is part of the broader question of how DOD can best balance the
need for wartime medical training with the needs of its peacetime
health care system. See GAO/NSIAD-98-75. Page 30
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
B-281299 planning and provide for backup coverage of deployed
staff. Readiness contingency plans in demonstration sites include
shifting Senior Prime beneficiaries to network specialty care and,
if primary care capacity at the MTF is greatly reduced, shifting
TRICARE Prime beneficiaries to primary care managers in the
network. Site officials might ask DOD to permit Senior Prime
beneficiaries to be shifted to network primary care managers as
well. If the existing network were not able to take on this extra
load, support contractors would seek to expand the network, paying
higher than normal rates if necessary. If physicians who were
willing to take on added patients were available, coverage would
be provided, although perhaps at an added cost. However,
availability may be a problem in areas where private physicians
are in short supply. The effects of a major deployment on the
order of Desert Storm are much harder to predict. For example, San
Diego is the deploying platform for a hospital ship and Keesler
for an Air Transportable Hospital, but under deployment, staff for
these mobile units may be drawn from other locations as well as
the home base. MTFs that contribute staff to back-fill for
deployments at other MTFs do not themselves receive backfill.
However, such a major deployment could potentially lead to gaps in
coverage or inability to maintain access standards, especially in
sites that were operating close to capacity before the deployment.
A demonstration is intended to produce useful evidence of the
feasibility Conclusions or effectiveness of a new approach,
and the start-up period of the Medicare Subvention Demonstration
has done so.16 This demonstration provides evidence that it is
feasible for DOD-designed plans to meet HCFA requirements for
Medicare managed care plans and begin delivering health care to
seniors, building on the TRICARE Prime framework but adapting it
to the needs of this older population. But as demonstration site
officials expressed it, Senior Prime is not a DOD program with
Medicare benefits added on-it is a Medicare+Choice plan
accountable to HCFA. The dual nature of the program affected its
implementation in many ways. Several feasibility issues connected
with the design of the program affected the start-up period and
would likely pertain to any similar demonstration program in the
future. For example: * The lead time needed to develop
interagency agreements and secure HCFA certification before
service delivery was substantial and shortened the period of
service delivery to 24 to 28 months. 16 Evidence concerning cost,
access, and quality of care will be assessed in future reports.
Page 31 GAO/GGD/HEHS-99-161 Medicare
Subvention Demonstration DOD Start-up B-281299 * This shortened
demonstration period apparently discouraged enrollment. * A key
feasibility issue from the enrollees' standpoint-how they will
make the transition to other forms of Medicare at the end of the
demonstration-was not adequately addressed. * It was not feasible
to start services at all sites on the same date. However, phased-
in start dates turned out to be advantageous. The phased dates
spread out the HCFA workload over several months and allowed
difficulties to be discovered (and solved) early, when their
effects were small-scale. The start-up period also offered lessons
regarding coordination within and between DOD and HCFA.
Coordination between staffs of the two agencies at the central
level was clearly necessary. However, coordination at the central
level was not sufficient to enable sites to prepare adequately for
certification (i.e., direct contact between site officials and
HCFA regional office staff was essential as well). As
Medicare+Choice provisions are put into effect, the question of
which matters to handle locally and which might more appropriately
be handled centrally for this demonstration continues to arise.
Finally, experience to date has revealed both useful practices and
certain practical difficulties in operating Medicare+Choice plans
within the DOD framework. Some of the difficulties-such as the
lack of alternative designs for adding sites and bringing large
numbers of beneficiaries into the program at once-do not affect
current operations. However, these difficulties would affect
expansion of the program, if authorized at the close of the
demonstration. Other difficulties affect the demonstration itself.
These difficulties include (1) possible overlaps in procedures,
(2) the lack of clear provisions for beneficiaries' transition to
other forms of health care at the end of the demonstration, (3)
uncertainty regarding which aspects of Senior Prime operation DOD
will handle centrally for the program as a whole and which will be
left to the sites, and (4) insufficient information regarding the
adequacy of arrangements for seniors' care during periods of
deployment of military medical staff. We recommend that the
Secretary of Defense direct the Assistant Recommendations to
Secretary of Defense (Health Affairs) to the Secretary of Defense
* work with HCFA to examine Medicare and DOD procedures,
measurement, and reporting systems with an eye toward seeking Page
32 GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration
DOD Start-up B-281299 waivers (where warranted) and eliminating
duplication to the extent possible; * work with HCFA to determine
conditions for transitioning out of the demonstration into other
coverage (including Medicare options, access to Medigap insurance,
and care at the MTF) and to notify enrollees of these conditions
as soon as possible; * determine (in advance, whenever possible)
which HCFA directives and operational matters will be handled
centrally and will be uniform across the Senior Prime program and
which matters will be handled at the site level; and * review
plans for the provision of health care to seniors during times of
military deployment and either (1) ensure that staffing at
participating MTFs is sufficient to provide seniors with primary
care or (2) provide for primary care to be delivered through some
other means. We recommend that the Administrator of the Health
Care Financing Recommendations to Administration work
with the Assistant Secretary of Defense (Health the Administrator
of Affairs) to (1) examine Medicare and DOD procedures,
measurement, and reporting systems with an eye toward granting
waivers where warranted HCFA and
eliminating duplication as previously discussed, and (2) determine
or clarify the conditions for transitioning out of the
demonstration into other Medicare coverage and notify enrollees of
these conditions as soon as possible. HCFA concurred with our
recommendations and provided information Agency Comments and about
current and planned activities to address them, including
activities Our Evaluation to determine conditions
for Senior Prime beneficiaries' transition to other Medicare
coverage at the end of the demonstration. Our work documented that
military retirees enrolled in the Medicare Subvention
Demonstration need clearer information about their options for
care through the military health system as well as their Medicare
options once the demonstration has ended. This observation points
to the need to identify the options open to Senior Prime enrollees
more broadly and for DOD and HCFA to communicate information about
these options more clearly. For example, Senior Prime
beneficiaries will need to know whether they will be permitted to
complete a course of care at the MTF after returning to other
Medicare coverage at the end of the demonstration and what chance
they will likely have of getting care on a space-available basis.
In addition, Senior Prime enrollees will need an explanation of
the Page 33 GAO/GGD/HEHS-99-161 Medicare Subvention
Demonstration DOD Start-up B-281299 guaranteed issue rights that
apply to Medigap supplemental insurance policies, expressed in
terms they can understand. Those who dropped Medigap coverage
because they had enrolled in Senior Prime may also want
information on Medigap options, availability, and rates. These
examples illustrate the need for the recommendations we are making
in this report. We are sending copies of this report to the
Honorable William S. Cohen, Secretary of Defense, and the
Honorable Nancy-Ann Min DeParle, Administrator of HCFA, and will
make copies available to others upon request. If you have any
questions regarding this report, please contact Ms. Westin or Gail
MacColl at (202) 512-5108, or Mr. Backhus at (202) 512-7111. Other
key contributors to this assignment were Cheryl Brand, Linda
Lootens, and Ruth McKay. Susan S. Westin Associate Director,
Advanced Studies and Evaluation Methodology Stephen P. Backhus
Director, Veterans' Affairs and Military Health Care Issues Page
34 GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration
DOD Start-up B-281299 List of Committees The Honorable John W.
Warner Chairman The Honorable Carl Levin Ranking Minority Member
Committee on Armed Services United States Senate The Honorable
William V. Roth, Jr. Chairman The Honorable Daniel Patrick
Moynihan Ranking Minority Member Committee on Finance United
States Senate The Honorable Floyd D. Spence Chairman The Honorable
Ike Skelton Ranking Minority Member Committee on Armed Service
House of Representatives The Honorable Tom Bliley Chairman The
Honorable John D. Dingell Ranking Minority Member Committee on
Commerce House of Representatives The Honorable Bill Archer
Chairman The Honorable Charles B. Rangel Ranking Minority Member
Committee on Ways and Means House of Representatives Page 35
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
Contents 1 Letter 38 Appendix I The TRICARE Region
and the Demonstration Site 38
Colorado Springs The Senior Health Care Environment
38 Preparing for HCFA Approval
39 (Central Region) Program Features
39 Operational Difficulties and Issues
39 40 Appendix II The TRICARE Region and the
Demonstration Site 40 Dover
(Northeast The Senior Health Care Environment
40 Preparing for HCFA Approval
41 Region) Program Features
41 Operational Difficulties and Issues
41 42 Appendix III The TRICARE Region and the
Demonstration Site 42 Keesler
(GulfSouth The Senior Health Care Environment
42 Preparing for HCFA Approval
42 Region) Program Features
43 Operational Difficulties and Issues
43 44 Appendix IV The TRICARE Region and the
Demonstration Site 44 Madigan
(Northwest The Senior Health Care Environment
44 Preparing for HCFA Approval
44 Region) Program Features
45 Operational Difficulties and Issues
45 46 Appendix V The TRICARE Region and the
Demonstration Site 46 San Antonio
The Senior Health Care Environment
46 Preparing for HCFA Approval
46 (Southwest Region) Program Features
47 Operational Difficulties and Issues
47 48 Appendix VI The TRICARE Region and the
Demonstration Site 48 San Diego
(Southern The Senior Health Care Environment
48 California Region) Page 36 GAO/GGD/HEHS-99-161 Medicare
Subvention Demonstration DOD Start-up Contents Preparing for HCFA
Approval 49
Program Features
49 Operational Difficulties and Issues
49 50 Appendix VII Comments From the Health Care Financing
Administration 52 Related GAO Products Table 1: Medicare
Subvention Demonstration Sites 8 Tables
Table 2: Medicare Subvention Demonstration Program
14 Enrollment as of June 28, 1999, by site Abbreviations BAMC
Brooke Army Medical Center BBA Balanced Budget Act of
1997 CEO chief executive officer DOD
Department of Defense FTE full-time equivalent GME
graduate medical education HCFA Health Care Financing
Administration HHS Department of Health and Human
Services HMHS Humana Military Health Services HMO
health maintenance organization MAMC Madigan Army
Medical Center MOA memorandum of agreement MTF
military treatment facility NMCSD Naval Medical Center of
San Diego OLA Office of the Lead Agent SMHS
Sierra Military Health Services Page 37 GAO/GGD/HEHS-99-161
Medicare Subvention Demonstration DOD Start-up Appendix I Colorado
Springs (Central Region) The Central Region, which combines
Regions 7 and 8, encompasses 16 The TRICARE Region
states and 1 million eligible beneficiaries, of whom about 183,000
are 65 or and the Demonstration older. There is no Medical Center
in the region, and the lead agent does not command a military
treatment facility (MTF). Rather, he is assigned full- Site
time to the Office of the Lead Agent (OLA), in Colorado Springs.
The demonstration site includes 2 Colorado Springs MTFs with
overlapping 40-mile catchment areas: the 140-bed Evans Army
Community Hospital at Fort Carson and the 40-bed U.S. Air Force
Academy Hospital. (The clinic at Peterson Air Force Base is also
included in the demonstration, but only for "age-ins.") These
community hospitals provide primary care, some specialty care, and
ancillary services, relying on the network to fill specialty gaps.
The combined catchment areas include a service population of
134,341, including about 13,500 retirees who are 65 or older. The
two hospitals had collaborated on programs and shared resources
before Senior Prime. Each had lost medical staff, including
primary care staff, to deployment at the time of our visit.
TRICARE began in this region in 1997. The Managed Care Support
Contractor, TriWest Healthcare Alliance, is an organization owned
by 14 local health care entities (including Blue Cross and Blue
Shield plans and university hospitals) that was formed in 1995 to
bid on the TRICARE contract. TriWest's main office is in Phoenix,
AZ, with satellite staffs at various MTF locations. The firm has
no experience in operating Medicare managed care plans, although
many of its providers have Medicare experience. Local retiree
organizations strongly supported the demonstration and this site's
inclusion in it. Thus, site officials were involved well before
site selection was announced. With reductions in staff and the
advent of TRICARE, space available to The Senior Health Care
Medicare eligibles at these hospitals has been very limited since
1997, Environment especially for primary
care. There were four commercial Medicare Health Maintenance
Organizations (HMO) operating in the area, but two of them
discontinued service as of January 1, 1999. The supply of private
physicians is also limited and military retirees who no longer
found space at the MTFs reportedly had difficulty finding private
physicians who would accept new patients. Evidence from Senior
Prime intake screening suggests that some of these retirees simply
went without care. Page 38 GAO/GGD/HEHS-99-161 Medicare
Subvention Demonstration DOD Start-up Appendix I Colorado Springs
(Central Region) This site's primary source of information on
Medicare requirements was a Preparing for HCFA local
independent consultant who had worked with Health Care Financing
Approval Administration's (HCFA) regional
office staff in Denver. She was hired by TriWest as a full-time
employee to assist in preparing for the site visit and continued
to provide assistance through the start-up period. Site staff also
contacted Denver HCFA staff directly and sent them documents to
review before the site visit. Information from other Department of
Defense (DOD) demonstration sites about their experiences was also
useful. However, policy and procedures documents from earlier
sites were of limited use because they were designed for larger
medical centers and reflected earlier Medicare requirements rather
than the later Medicare+Choice rules. * The enrollment target for
the site is 3,200 (1,200 for the Air Force hospital Program
Features and 2,000 for Evans). Initial enrollment was
less than expected, but by the end of June, the Air Force hospital
was at 99-percent capacity and Evans at 85 percent. * Service
delivery was phased in over 3 months to avoid overload. * Retiree
organization representatives were hired to assist with marketing
and orientation meetings to help put attendees at ease. *
Beneficiaries' transition needs, such as ongoing use of oxygen or
other medical equipment and completion of previously scheduled
care outside the MTF, were identified before the start of
services. * The two hospitals' approaches to enrollee orientation
and health screening reflected differences in their staffing for
primary care. Evans included health screenings in the orientation
meetings, which were used to identify patients with immediate
needs for medical care or coordination of care. The Air Force
Academy held briefer orientation meetings, with health assessment
covered in the initial visit to the primary care physician. * To
ensure coverage during the phase-in of Senior Prime, some retirees
Operational applied to a commercial HMO as well,
which led HCFA to reject both Difficulties and Issues
applications. * Deployments of medical staff during the start-up
period created a substantial extra workload for the primary care
managers that remained. Reassigning Senior Prime patients to even-
out workloads once the deployed staff returned posed something of
a problem. * Retirees nearing 65 joined TRICARE Prime in order to
age in to Senior Prime. As enrollment continues, adding these age-
ins may strain capacity. * Differences between the two MTFs in
coding medical procedures on the ambulatory care data form make it
difficult to compile data for the demonstration site as a whole. *
The base year for judging level of effort for funding purposes
precedes TRICARE and reflects conditions very different from the
present. Page 39 GAO/GGD/HEHS-99-161 Medicare Subvention
Demonstration DOD Start-up Appendix II Dover (Northeast Region)
The Northeast Region, Region 1, extends from Maine to Virginia,
The TRICARE Region encompassing 12 states and the
District of Columbia. Its service and the Demonstration population
is 957,000, of whom 194,000 are 65 or older. The region includes
three medical centers and two additional military inpatient
facilities. All Site other MTFs in the
region deliver only outpatient care. The position of lead agent
rotates annually among the commanders of the three medical centers
located in the national capital area-Andrews Air Force Base
Hospital, Bethesda Naval Hospital, and Walter Reed Army Medical
Center. The OLA staff of 33 is located at Walter Reed. Dover is
the smallest Senior Prime MTF, with the most limited services
beyond primary care. It was added to the demonstration to
illustrate outpatient-only services and rural conditions. Staffing
at Dover has declined sharply since 1996, and inpatient service
was discontinued in 1998. MTF facilities are being renovated, and
most patient care is currently in temporary buildings. Sixty
percent of the care delivered to Dover's patients was outside of
the MTF even when Dover offered inpatient services. Located about
a 2-hour drive from Washington, D.C., Dover has a service
population of 26,000, of whom 4,100 are eligible for Senior Prime.
A unique feature of the site is its proximity to the medical
centers of the national capital area. A government van transports
Dover patients to and from these centers several days a week.
Another unique feature of the site is its inclusion in a
demonstration that allows military retirees to join the Federal
Employees Health Benefits Program. TRICARE began in this region in
June 1998, bringing with it practices that were unfamiliar to
beneficiaries in the region, such as a contractor- operated
centralized appointment system. Start-up problems in TRICARE were
being resolved while Senior Prime was being implemented. The
Managed Care Support Contractor is Sierra Military Health Services
(SMHS) whose parent company in Nevada has Medicare HMO experience.
Local military retiree organizations helped publicize Senior
Prime. About 800 seniors, concentrated in a few locations, have
traditionally used The Senior Health Care the Dover MTF. Space-
available care has been shrinking with the advent of Environment
TRICARE Prime. The geographically isolated Delmarva Peninsula,
where Dover is located, has several hospitals but relatively few
private sector physicians in each specialty area. The military
medical centers of the national capital area have been an
important additional source of care for military retirees.
Medicare in the Dover area has been primarily fee-for- service.
There were commercial Medicare HMOs, but they withdrew at the end
of 1998. Their departure may have exacerbated seniors' concerns
about the temporary nature of Senior Prime. Page 40
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
Appendix II Dover (Northeast Region) Although Dover was named as
a possible demonstration site beginning in Preparing for HCFA
August 1997, its participation was uncertain until sites were
announced in Approval February 1988.
Pressed to produce an application quickly, Dover sent in a thin
binder that contained placeholders for sections still to be
developed at the site. Concerted program development started in
June, when staff met in San Diego with staff from other sites and
learned what was really needed. The design teams relied heavily on
the HCFA site visit guide, documents and advice from Madigan and
San Antonio, and consultant assistance. Because the OLA viewed the
consultant as critical for implementing the program, it persuaded
DOD to continue funding the consultant (through the SMHS contract)
beyond the HCFA site visit. HCFA regional office staff in
Philadelphia first saw the Dover plan in early July and notified
the OLA of additional materials that would be needed. Site
officials were not permitted to contact the regional office until
shortly before the site visit, which took place September 28
through 30. To meet a January 1 service start date, marketing had
to start November 1. HCFA gave verbal approval for the marketing
to go forward in advance of the formal plan approval document,
which was issued November 18. * The capacity for the site was set
at 1,500, but open enrollment had reached Program Features
only 706 by the end of June. Enrollment consists largely of
individuals who had traditionally used the MTF and is not likely
to exceed about 800. * With a small staff and TRICARE start-up
duties, the OLA delegated considerable responsibility for Senior
Prime to the MTF level. At the MTF, staffing and administrative
workload for Senior Prime were about the same as at larger sites.
* Flu shots were given at new member orientation sessions. *
Case management for seniors is located at Dover rather than at
SMHS' central site and will be supplemented by MTF nurses. *
Network development has been a struggle and network maintenance
Operational requires ongoing attention. The
few specialists in the area have been Difficulties and Issues
reluctant to undergo credentialing and to adopt referral
procedures for the sake of a small number of Senior Prime
patients. * The new DOD data module used as an enrollment vehicle
in this region has encountered technical problems and has had
difficulty handling age-ins and multiyear enrollment. * Distance
between the MTF and the OLA was an impediment. Materials and
information important to the program were not always sent to both
locations. * Availability of nearby specialty care through the
Senior Prime network might reduce seniors' use of the more-distant
capital area medical centers. Page 41 GAO/GGD/HEHS-99-161
Medicare Subvention Demonstration DOD Start-up Appendix III
Keesler (GulfSouth Region) The GulfSouth Region, Region 4,
encompasses Alabama, Mississippi, parts The TRICARE Region
of Florida and Louisiana, and Tennessee. Its service population of
605,000 and the Demonstration includes 112,748 who are 65 or
older. The region includes 13 military hospitals and clinics
(Departments of the Air Force, Navy, and Army and Site
the U.S. Coast Guard) plus Keesler Air Force Medical Center, whose
commanding officer serves as lead agent. The OLA has a staff of
32, of whom 4 are assigned part-time to Senior Prime. Keesler's
status as a site was uncertain, but a strong presentation to DOD
helped to win its place in the demonstration. Keesler is a
tertiary care teaching facility providing primary care, 44 medical
and surgical specialties, and graduate medical education (GME)
programs in internal medicine and several specialty areas. It
serves a close-knit, local retiree population and attracts space-
available patients from a wide area for specialized services, such
as sleep studies. Vacationers also use Keesler services,
particularly its pharmacy. Humana Military Health Services (HMHS),
the Managed Care Support contractor, is a new subsidiary of Humana
and had no previous experience with Medicare or with government
military contracting. The site's experience with managed care
began with TRICARE Prime in 1996. Volunteers from military retiree
and veterans' groups and the Red Cross helped with marketing
Senior Prime. One retiree organization did a direct mailing of
national material on Senior Prime to 3,500 members. Keesler has
traditionally emphasized primary care and continuity of care. The
Senior Health Care Historically, most of the internal medicine
care at the center has been Environment given
to seniors, and 1,500 seniors were considered "continuity
empaneled" with an internal medicine provider. Space-available
care was provided to support GME. However, space-available care
outside of GME was episodic and has been decreasing in recent
years. Seniors who were not empaneled reported difficulty in
getting appointments. Mississippi had no HMOs for any age group
before TRICARE Prime, and Keesler Senior Prime is the only
Medicare HMO. Managed care is a relatively new concept in the
Keesler area, and providers and beneficiaries are reluctant to
accept it. Keesler's Senior Prime service area includes a few ZIP
codes in Mobile, AL, where Medicare managed care is an option.
Planning teams at Keesler had little understanding of Medicare
Preparing for HCFA requirements when Keesler
prepared its initial application in late February Approval
1998. To meet DOD's March deadline, the OLA took boilerplate
information from San Antonio's application and made changes later.
Page 42 GAO/GGD/HEHS-99-161 Medicare Subvention
Demonstration DOD Start-up Appendix III Keesler (GulfSouth Region)
The Keesler team received useful information from other
demonstration sites, but otherwise lacked access to Medicare
expertise. There were no nearby Medicare HMOs to visit. HMHS
delayed hiring a consultant until the contract modification to
authorize this action was in place. (Once hired, the consultant
was very helpful.) Keesler waited for DOD approval before
contacting the regional HCFA office in Atlanta. Central rather
than regional HCFA staff had reviewed the Health Services Delivery
portion of the application, and when Keesler staff first visited
the regional office on July 31, the HCFA staff had apparently just
received the Memorandum of Agreement and had not yet been briefed
about the demonstration. Because of a misunderstanding of HCFA
requirements, Keesler lacked signed contracts with the network
providers at the time of the HCFA site visit in late August. HCFA
gave verbal approval to start marketing the program even though
the contracts were not complete. Keesler asked DOD to support
additional consultant help in preparing for the first HCFA
monitoring visit, but this request was turned down. * Keesler had
enrolled 2,661 beneficiaries toward its capacity of 3,100 by the
Program Features end of June. About 600 had been in
primary care at the MTF before the demonstration. * The program
includes a board-certified geriatrician who has sensitized staff
to the needs of patients 65 and over, including the need for
louder telephone messages and larger print on signs. * 99 percent
of Senior Prime enrollees chose an Internal Medicine over a
Primary Care (Family Practice) clinic team. Some younger patients
were shifted from Internal Medicine to accommodate the seniors. *
Internal Medicine nurse-managers and other staff called all 2,200
people who were enrolled for December 1 and January 1 start dates
to screen for special needs and make appointments for the
orientation seminars. * Primary care appointments for Senior
Prime were lengthened by 5 minutes to allow providers to complete
administrative work for each encounter. * Keesler had given
previous attention to data quality and data use in program
management, which was helpful for Senior Prime. * Limited access
to Medicare expertise has been a major difficulty. Operational
* Keesler must market the concept of managed care, not simply the
Senior Difficulties and Issues Prime program, to both customers
and providers in the community. Network development has been
difficult. * The administrative demands of Senior Prime have
drawn effort from the health care delivery system for active duty
personnel and their families. * Loss of program knowledge
through administrative staff turnover is a major concern. Page 43
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
Appendix IV Madigan (Northwest Region) The Northwest Region,
Region 11, covers Washington, Oregon, and part of The TRICARE
Region Idaho, and a service population of about
370,250, including about 62,290 and the Demonstration who are 65
and older. There are eight MTFs in this region-one major medical
center, two community hospitals, and five ambulatory clinics. Site
The demonstration site consists of Madigan Army Medical Center
(MAMC), a major medical center, colocated with the OLA at Fort
Lewis in Tacoma, WA. MAMC is a 227-bed tertiary care teaching
hospital that provides the full range of care, including primary,
specialty, and ancillary care, relying on the network to fill gaps
in specialty care. The service area for the demonstration covers
most of the catchment area around MAMC as well as a few areas
outside of the catchment area. There are about 137,791 total
beneficiaries in the catchment area with about 19,323
beneficiaries who are 65 and older. This region was the first to
implement TRICARE in early 1995. The managed care support contract
was awarded to Foundation Health Federal Services, an experienced
TRICARE contractor, which also operates TRICARE in Regions 6, 9,
10, and 12. Foundation's main office is in Rancho Cordova, CA,
with satellite staff at various MTF locations. Foundation has
experience running Medicare managed care plans in its commercial
operation. Since 1994, the Madigan staff had been exploring ways
for the MTF to be reimbursed for care provided to Medicare
patients, and MAMC had been on the list of potential demonstration
sites for the DOD program. MAMC has had a commitment to managed
care and has been providing The Senior Health Care care to seniors
before the demonstration, helping to meet the training Environment
needs of the MTF physicians. Before Senior Prime, the MTF provided
ongoing care to certain seniors who were empanelled to the MTF.
Space- available care at the MTF has declined for all
beneficiaries, but many factors in addition to Senior Prime (e.g.,
resource reductions) have contributed to this decline. Managed
care has long been established in the Pacific Northwest, and
seniors in the Madigan area can choose from four commercial HMOs.
The site staff worked with Medicare consultants, who were hired by
the Preparing for HCFA managed care support
contractor, to prepare for the HCFA site visit and Approval
learn about Medicare requirements. The consultants' most
significant contribution was the mock site visit conducted with
site staff to educate them on HCFA's expectations before the
actual site visit. The site staff worked closely with the HCFA
regional staff in writing the application and preparing for the
site visit, in spite of a lack of authority from DOD Page 44
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
Appendix IV Madigan (Northwest Region) headquarters to contact the
regional staff. Madigan was the first site to implement Senior
Prime, so there were no other DOD examples to follow. * The site
was successful in meeting the enrollment target of 3,300 within 3
Program Features months, but there were some
surprises. Enrollment among formerly empanelled beneficiaries who
had been served by the MTF was lower than expected, and among
"new" beneficiaries was greater than expected. * Service delivery
was not phased in over time. DOD headquarters encouraged taking in
all enrollees at once, and MAMC wanted to begin a large volume of
service so that HCFA interim payments would begin. * In
implementing the demonstration, there was no change in medical
care delivery, other than adding HCFA-required services, such as
skilled nursing facility care. Ninety-five percent of the
specialty care under Senior Prime will be provided at the MTF. *
In marketing the program, the MTF worked with local retiree
groups, such as The Retired Officers' Association and the Fort
Lewis Retiree's Association, for example, using retiree
newsletters to publish program information. * The site conducted
beneficiary orientations to provide information on program
benefits, how to access care, and the role of primary care
managers as well as to obtain information from beneficiaries on
current medications and health care needs. * Deployment of MTF
specialists has caused gaps in providing care, which Operational
may also be an issue for Senior Prime. Difficulties and Issues *
The level of effort provision and uncertainty concerning funding
have not affected health care delivery, but have caused
frustration and concern. Health care delivery and costs are
different than they were in 1996-the base year for level of
effort. * More time was needed for preparing marketing materials,
clarifying the benefit before presenting to enrollees, preparing
enrollee documents once HCFA had provided the approved list of
enrollees, beneficiary orientation, and provider and staff
education. * Enrolling a large number of patients on a single
start date strained primary care capacity and the site's ability
to meet the appointment standards. * Two full-time staff in the
OLA are needed for start-up and continuation of Senior Prime. One
key position is held by a civilian. Page 45 GAO/GGD/HEHS-
99-161 Medicare Subvention Demonstration DOD Start-up Appendix V
San Antonio (Southwest Region) The Southwest Region, Region 6,
consists of 4 states-Texas (except the The TRICARE Region
far western portion), Oklahoma, Arkansas, and most of Louisiana-
and and the Demonstration about 1 million beneficiaries, of whom
about 162,000 are 65 and older. There are 18 MTFs in this region-2
major medical centers, both located in Site
San Antonio, 7 community hospitals, and 9 ambulatory care clinics.
The demonstration site is the most complex, consisting of two
service areas-San Antonio (urban) and Texoma (rural), four MTFs,
two states (Texas and Oklahoma), and two branches of the armed
services-the Army and Air Force. The San Antonio service area MTFs
include Wilford Hall, which is a 350-bed medical center located at
Lackland Air Force Base and Brooke Army Medical Center (BAMC), a
238-bed medical center located at Fort Sam Houston. Both of these
medical centers provide primary care, most specialty care, and
tertiary care. The Texoma service area includes Sheppard Air Force
Base Hospital, which is a 60-bed community hospital located in
Wichita Falls, TX, and Reynolds Army Community Hospital, an 150-
bed community hospital located at Fort Sill in Lawton, OK. Both of
the Texoma hospitals provide primary care and some specialty care,
but rely on the network to fill in specialty care unavailable in
the MTFs. The San Antonio service area has a beneficiary
population of about 192,000, including almost 33,000 retirees 65
and older. The Texoma service area includes a beneficiary
population of about 70,000, of whom 6,643 are 65 and older. The
TRICARE managed care support contract was awarded for this region
in late 1995 to Foundation Health Federal Services, an experienced
TRICARE contractor that was discussed in appendix IV. Foundation
also supports TRICARE in Regions 9, 10, 11, and 12. Enrollees in
the San Antonio area formerly had limited access to space- The
Senior Health Care available care for primary care, but some of
those with complex problems Environment were
seen for GME purposes. In Texoma, the Ft. Sill senior population
had accessed primary care at the MTF as part of its Silver Care
Program. The San Antonio area has many Medicare providers and
seniors have a choice of enrolling in four commercial HMOs. The
Texoma area has more limited availability of civilian physicians
and the Senior Prime demonstration in the Texoma area is the first
Medicare HMO in this rural market. With the coordination required
among four MTFs, the OLA became central Preparing for HCFA
in leading the effort for the site to obtain HCFA approval. Staff
from the Approval four MTFs worked together
with OLA staff to prepare policies and procedures and prepare for
the site visit. Foundation provided the same consultants used by
the Madigan site to teach the San Antonio site about Page 46
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
Appendix V San Antonio (Southwest Region) Medicare. In addition,
OLA staff took the initiative to inform themselves about HCFA
requirements from other sources, such as the HCFA Web page and
commercial Medicare HMOs. * Enrollment capacity was set at 12,700
(5,000 each for BAMC and Wilford Program Features
Hall, 1,300 for Sheppard, and 1,400 for Ft. Sill.) Although
initial enrollment was slower than expected, the San Antonio area
had reached 99-percent capacity and the Texoma area 67 percent by
the end of June 1999. * Service delivery was phased in to avoid
overload. * The MTFs had always served substantial numbers of
patients who were 65 and older as part of Ft. Sill's Silver Care
Program, and largely to support GME at BAMC and Wilford Hall.
Senior Prime changed the scope of seniors' care at BAMC and
Wilford Hall from providing specialty care services to meeting
patients' overall medical needs. * This demonstration site
accounts for almost half of all enrollees across the six
demonstration sites. * HCFA approved the Texoma service area as
an "expansion area." This has the potential to be a model if the
program goes nationwide. * New member orientation and health
screening procedures resulted in innovative changes for the Senior
Prime population, such as telephone calls to all new enrollees at
Sheppard for health care screening and orientation meetings that
also screened enrollees for health care needs at Wilford Hall. *
A phased-in enrollment process, which also allowed enrollees to
designate Operational a preferred MTF and
primary care manager, proved to be a challenge for Difficulties
and Issues data systems not equipped to handle these refinements,
requiring manual corrections. * Continuous shifts in the ground
rules with respect to what benefits were actually being offered to
enrollees required many adjustments as preparations moved forward.
* Combining policies and procedures from the four MTFs and
rewriting them into a single plan that meets HCFA requirements and
worked for all the MTFs was a daunting task managed by the OLA.
This was a new role for the OLA-that of being directly involved
with MTFs rather than primarily focusing on contract oversight.
Page 47 GAO/GGD/HEHS-99-161 Medicare Subvention
Demonstration DOD Start-up Appendix VI San Diego (Southern
California Region) The Southern California Region, Region 9,
encompasses southern The TRICARE Region California
and Yuma, AZ. Its service population totals approximately and the
Demonstration 643,848, of whom 107,197 are 65 or older. The region
includes the Naval Medical Center of San Diego (NMCSD), a 320-bed
tertiary care facility with Site the
largest GME in the Navy, as well as 6 other MTFs not included in
the demonstration. NMCSD's service area contains about 35,000
Medicare eligible beneficiaries in an overall service population
of 257,658. NMCSD covers every area of medical treatment except
burns and transplants. Retired officers in the San Diego area were
among the first to propose subvention, and San Diego volunteered
to be a subvention demonstration site in 1995. It was dropped from
consideration for a time, but reinstated in November 1997. NMCSD
is the only Navy facility in the demonstration. The OLA has a
staff of 48; the 7 OLA staff assigned to Senior Prime include 1
full-time and 6 part-time positions, for a total of 4 full-time
equivalents. The OLA expects to convert one key administrative
position to civilian status. The site's experience with managed
care began with TRICARE in 1995. The support contractor is
Foundation Health Federal Services, whose parent company has
previous Medicare HMO experience. Foundation also supports Madigan
and San Antonio and drew on lessons learned in setting up Senior
Prime at those earlier sites. Local retiree groups supported San
Diego's inclusion in the demonstration, and some 20 retiree
organizations in the area sent out newsletters about the program.
The extensive range of services and space available for seniors'
care have The Senior Health Care led, historically, to high use of
the Naval Hospital by seniors and have Environment
attracted military retirees to this area. About 18,000 seniors are
current users of services. Seniors constitute about half of the
patients seen overall and as high as 80 percent in some
specialties. However, space has been limited in primary care.
About 20 percent of those who joined Senior Prime had been seen
regularly in primary care clinics. The Medicare HMO market is
highly saturated and enrolls about 49 percent of eligible
beneficiaries (military and civilian combined). Some of the
commercial HMOs offer richer benefits than Senior Prime. Many dual
eligibles who used NMCSD were in private HMOs; some had used the
MTF for backup while others used the MTF as primary provider and
the HMO as backup. Local HMOs, aware of potential competition, ran
newspaper advertisements at the start of the demonstration; one
even held a ball for military retirees. Of the 165,000 Medicare
eligibles (both military and civilian), site officials estimated
that only 10,000 do not have Part B. Page 48 GAO/GGD/HEHS-
99-161 Medicare Subvention Demonstration DOD Start-up Appendix VI
San Diego (Southern California Region) San Diego had 6 weeks to
develop its initial application and turned in a Preparing for HCFA
supplemental application 2 months after the first. Materials from
DOD, Approval Madigan, and San Antonio were
useful for the general sections, but San Diego had to develop
site-specific materials from scratch. Foundation brought their
previous HMO experience to developing the application, and their
Arizona Medicare HMO provided a copy of its operating manual. The
San Francisco HCFA regional office has a perspective that reflects
the highly competitive Medicare HMO market in southern California.
By respecting the ban on communication with that office, DOD
regional and MTF officials had no opportunity to learn what HCFA
regional staff considered important. Nor could HCFA regional staff
develop a clear picture of the demonstration program or offer
guidance in advance of their visit. San Diego officials found that
experience at Madigan and San Antonio did not help them anticipate
the HCFA regional office's special concerns and information
requests. Having to respond to newly expressed concerns on the
spot added tension to the visit. * As of the end of June, the
site had enrolled 3,101 beneficiaries toward its Program Features
capacity of 4,000; early enrollment was phased in. * "Welcome
Aboard" orientation sessions for enrollees included the use of a
health assessment form tailored for senior populations. *
Cardiology clinic staff took over some duties of the Internal
Medicine staff early in the demonstration to ensure that each
Senior Prime beneficiary received a first appointment within 90
days of enrolling. * Program officials identify frequent users of
emergency room services and alert their primary care manager so
that any problems in accessing primary care can be remedied or
patients educated on how to obtain care. * Appeals and grievances
requirements have led to new mechanisms, such as a 24-hour 800
number to better serve the Senior Prime expedited 72- hour appeal
process, and a new role for the lead agent serving as central
point of contact for all appeal or grievance actions. * The
regional HCFA office considered DOD's marketing material
Operational insufficiently detailed to allow
retirees in commercial HMOs to compare Difficulties and Issues
their current benefits to Senior Prime. * Developing a table that
HCFA and site officials could agree was a fair presentation proved
challenging. * On the basis of outdated information, some retiree
organizations erroneously informed their members that Senior Prime
did not provide skilled nursing facility care. * The clinical
encounter form had been in use for only a year. Coding issues were
not yet resolved and completion rates at some clinics were low.
Page 49 GAO/GGD/HEHS-99-161 Medicare Subvention
Demonstration DOD Start-up Appendix VII Comments From the Health
Care Financing Administration Page 50 GAO/GGD/HEHS-99-161
Medicare Subvention Demonstration DOD Start-up Appendix VII
Comments From the Health Care Financing Administration Page 51
GAO/GGD/HEHS-99-161 Medicare Subvention Demonstration DOD Start-up
Related GAO Products Medicare Contractors: Despite Its Efforts,
HCFA Cannot Ensure Their Effectiveness or Integrity (GAO/HEHS-99-
115, July 14, 1999). Medicare Subvention: Challenges and
Opportunities Facing a Possible VA Demonstration (GAO/T-HEHS/GGD-
99-159, July 1, 1999). Medicare Subvention Demonstration: DOD Data
Limitations May Require Adjustments and Raise Broader Concerns
(GAO/HEHS-99-39, May 28, 1999). Medicare Subvention Demonstration:
DOD Experience and Lessons for a Possible VA Demonstration (GAO/T-
HEHS/GGD-99-119, May 4, 1999). Medicare+Choice: HCFA Actions Could
Improve Plan Benefit and Appeal Information (GAO/T-HEHS-99-108,
Apr. 13, 1999). Medicare+Choice: New Standards Could Improve
Accuracy and Usefulness of Plan Literature (GAO/HEHS-99-92, Apr.
12, 1999). Medicare Managed Care: Greater Oversight Needed to
Protect Beneficiary Rights (GAO/HEHS-99-68, Apr. 12, 1999).
Medicare: Progress to Date in Implementing Certain Major Balanced
Budget Act Reforms (GAO/T-HEHS-99-87, Mar. 17, 1999). Medicare HMO
Institutional Payments: Improved HCFA Oversight, More Recent Cost
Data Could Reduce Overpayments (GAO/HEHS-98-153, Sept. 9, 1998).
Medical Readiness: Efforts Are Underway for DOD Training in
Civilian Trauma Centers (GAO/NSIAD-98-75, Apr. 1, 1998). Military
Retirees' Health Care: Costs and Other Implications of Options to
Enhance Older Retirees' Benefits (GAO/HEHS-97-134, June 20, 1997).
Page 52 GAO/GGD/HEHS-99-161 Medicare Subvention
Demonstration DOD Start-up Ordering Information The first copy of
each GAO report and testimony is free. Additional copies are $2
each. Orders should be sent to the following address, accompanied
by a check or money order made out to the Superintendent of
Documents, when necessary. VISA and MasterCard credit cards are
accepted, also. Orders for 100 or more copies to be mailed to a
single address are discounted 25 percent. Order by mail: U.S.
General Accounting Office P.O. Box 37050 Washington, DC 20013 or
visit: Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S.
General Accounting Office Washington, DC Orders may also be placed
by calling (202) 512-6000 or by using fax number (202) 512-6061,
or TDD (202) 512-2537. Each day, GAO issues a list of newly
available reports and testimony. To receive facsimile copies of
the daily list or any list from the past 30 days, please call
(202) 512-6000 using a touch- tone phone. A recorded menu will
provide information on how to obtain these lists. For information
on how to access GAO reports on the INTERNET, send e-mail message
with "info" in the body to: info@www.gao.gov or visit GAO's World
Wide Web Home Page at: http://www.gao.gov United States General
Accounting Office Bulk Rate Washington, D.C. 20548-0001
Postage & Fees Paid GAO Permit No. G100 Official Business Penalty
for Private Use $300 Address Correction Requested (966711)
*** End of document. ***