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

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    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
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