Defense Health Care: New Managed Care Plan Progressing, but Cost and
Performance Issues Remain (Letter Report, 06/14/96, GAO/HEHS-96-128).

Pursuant to a congressional request, GAO reviewed the Department of
Defense's (DOD) implementation of its TRICARE managed health care
program, focusing on: (1) whether early implementation produced the
expected results; (2) how early outcomes may affect costs; and (3)
whether DOD is capturing data needed to manage and assess TRICARE
performance.

GAO found that: (1) early implementation of TRICARE has resulted in
large numbers of beneficiaries enrolling in TRICARE Prime, which DOD
believes is cost-effective; (2) DOD has encountered many start-up
problems, such as a delay in the TRICARE benefits package, higher than
expected early enrollment, and computer systems' incompatibility; (3)
DOD and TRICARE contractors have diligently addressed their start-up
problems and have disseminated lessons learned from those problems; (4)
DOD efforts to contain TRICARE costs may be hindered by uncertainties
regarding resource-sharing arrangements and utilization management
problems; (5) DOD is exploring the use of task order resource support as
an alternative to resource sharing arrangements and giving hospital
commanders more control over dependent-care funds to give military
hospitals more flexibility in obtaining support services from TRICARE
contractors; (6) DOD delayed implementing utilization management because
it was not ready to perform this function in the Northwest and Southwest
regions as planned; and (7) although DOD is defining TRICARE performance
measures, it is not collecting key data on beneficiaries' access to care
or the enrollment of former nonusers who are eligible to use the
military health care system.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-96-128
     TITLE:  Defense Health Care: New Managed Care Plan Progressing, but 
             Cost and Performance Issues Remain
      DATE:  06/14/96
   SUBJECT:  Military personnel
             Military dependents
             Retired military personnel
             Health care programs
             Health care cost control
             Managed health care
             Health services administration
             Data collection operations
IDENTIFIER:  DOD TRICARE Prime Program
             Civilian Health and Medical Program of the Uniformed 
             Services
             CHAMPUS
             DOD TRICARE Program
             
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Cover
================================================================ COVER


Report to the Chairman and Ranking Minority Member, Subcommittee on
Personnel, Committee on Armed Services, U.S.  Senate

June 1996

DEFENSE HEALTH CARE - NEW MANAGED
CARE PLAN PROGRESSING, BUT COST
AND PERFORMANCE ISSUES REMAIN

GAO/HEHS-96-128

TRICARE Implementation Issues

(101478)


Abbreviations
=============================================================== ABBREV

  CHAMPUS - Civilian Health and Medical Program of the Uniformed
     Services
  DOD - Department of Defense
  HMO - health maintenance organization

Letter
=============================================================== LETTER


B-265681

June 14, 1996

The Honorable Dan Coats
Chairman
The Honorable Robert C.  Byrd
Ranking Minority Member
Subcommittee on Personnel
Committee on Armed Services
United States Senate

The Department of Defense (DOD) is implementing a sweeping reform of
its $15 billion per year health care system.  TRICARE, DOD's new
nationwide managed health care program, will significantly alter
health care delivery for DOD's 8.3 million beneficiaries.  As we
testified on March 7, 1996, before the House Committee on National
Security's Subcommittee on Military Personnel, TRICARE's
implementation is occurring in a rapidly changing military
environment.\1 Post-cold war contingency planning scenarios, efforts
to reduce the overall size of the nation's military forces, federal
budget-reduction initiatives, and base closures and realignments have
all heightened scrutiny of the size and makeup of DOD's health care
system.  How well DOD implements and operates TRICARE may define and
shape military medicine for years to come. 

Because of TRICARE's complexity, large scale, and impact on
beneficiaries, you requested that we review the program, focusing on
(1) whether DOD's experiences with early implementation produced the
expected results, (2) how early outcomes may affect costs, and (3)
whether DOD has defined and is capturing data needed to manage and
assess TRICARE's performance. 

To assess DOD's experiences with early implementation, we visited
four TRICARE regional administrators and eight military medical
facilities within those regions.  We also met with TRICARE
contractors who provide health care support to the DOD medical
facilities.  These officials described their experiences with the
beneficiary education, marketing, and enrollment phases of TRICARE
implementation.  They also described their efforts to identify and
disseminate information about the problems they encountered and the
solutions they found in order to facilitate TRICARE implementation in
other regions.  To analyze cost implications, we reviewed studies
projecting TRICARE costs and discussed these studies with Office of
the Assistant Secretary of Defense for Health Affairs staff, their
TRICARE cost consultant, and representatives of the Congressional
Budget Office.  We discussed management data needs with DOD officials
at the headquarters and regional levels, focusing on those unmet
needs that emerged during early TRICARE implementation. 

We did our review between June 1995 and March 1996 in accordance with
generally accepted government auditing standards. 


--------------------
\1 Defense Health Care:  TRICARE Progressing, but Some Cost and
Performance Issues Remain (GAO/T-HEHS-96-100, Mar.  7, 1996). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Progress has been made during early implementation of TRICARE, DOD's
far-reaching effort to bring managed health care to one of the
nation's largest health care systems.  TRICARE is intended to improve
access to care for the military community while maintaining quality
and controlling costs.  This initiative involves a unique partnership
between the military and civilian health care communities, including
seven multistate managed care support contracts worth about $17
billion over 5 years. 

As DOD intended, large numbers of beneficiaries have enrolled in
DOD's managed health care program, and many have chosen to receive
care from military providers.  Implementation of such substantial
changes has not been problem-free, but both DOD and its contractors
have worked hard to deal with problems as they arise, as well as to
disseminate information on lessons learned from the early stages of
TRICARE implementation so that other areas of the military health
care system can more easily overcome the same obstacles. 

Although progress has been made, issues regarding TRICARE's cost and
performance have emerged during implementation that require DOD's
attention.  Containing costs is critical to TRICARE's success, but it
appears DOD's efforts to do so may be hindered.  DOD's ability to
save money through resource-sharing agreements and utilization
management, two critical cost-saving features of TRICARE, is
uncertain and may be impeded because of implementation problems.  DOD
and contractor staffs do not fully understand how to effectively use
resource-sharing agreements.  Also, there have been delays in the
implementation of utilization management. 

Although DOD is defining TRICARE performance measures, it is not
collecting key data on either beneficiary access to care or
enrollment.  The Congress and DOD will need these data to determine
whether DOD is fully achieving TRICARE's goals.  For example, DOD
needs access data to measure how well it is meeting TRICARE access
standards, such as timeliness of appointments.  Similarly, DOD needs
enrollment data to identify the cost implications of attracting new
beneficiaries who were not using DOD health care and would not now be
using the military health system were it not for TRICARE. 


   BACKGROUND
------------------------------------------------------------ Letter :2

DOD's primary military medical mission is to maintain the health of
1.7 million active duty service personnel\2 and to be prepared to
deliver health care during times of war.  Also, as an employer, DOD
offers health care services to 6.6 million non-active duty
beneficiaries such as dependents of active duty personnel and
military retirees.  The bulk of the health care is provided at more
than 600 military hospitals and clinics worldwide, which are operated
by the Army, Navy, and Air Force.  DOD's direct health care system is
supplemented by a DOD-administered insurance-like program called the
Civilian Health and Medical Program of the Uniformed Services
(CHAMPUS).  In fiscal year 1996, DOD expects to spend about $11.8
billion providing care directly to its beneficiaries and about $3.6
billion for CHAMPUS. 

In response to such challenges as increasing health care costs and
uneven access to care, in the late 1980s DOD initiated, under
congressional authority, a series of demonstration programs to
evaluate alternative health care delivery approaches.  In the
National Defense Authorization Act for Fiscal Year 1994 (P.L. 
103-160), the Congress directed DOD to prescribe and implement, to
the maximum extent practicable, a nationwide managed health care
benefit program modeled on health maintenance organization (HMO)
plans.  The Congress specifically required that this new program
could not incur costs greater than DOD would incur in the program's
absence and that beneficiaries enrolling in the managed care program
would have reduced out-of-pocket costs.  Drawing from its experience
with the demonstration projects, DOD designed TRICARE as its managed
health care program. 

TRICARE is designed to give beneficiaries a choice among TRICARE
Prime, which is similar to an HMO; TRICARE Extra, which is similar to
a preferred provider organization; and TRICARE Standard, which is the
current CHAMPUS fee-for-service-type benefit.  Beneficiaries who
select TRICARE Prime must enroll to receive care under this option. 
The program uses regional managed care support contracts to augment
the capabilities of military hospitals by having contractors perform
some managed care functions as well as arrange for care in the
civilian sector.  There will be seven managed care support contracts
covering the 12 TRICARE regions.  To coordinate the services and the
contractors and monitor health care delivery, each region is headed
by a joint-service administrative organization called a lead agent. 
DOD has estimated that the managed care support contracts will cost
about $17 billion over the 5-year contract period.  DOD has awarded
four contracts and plans to have all contracts awarded and the
TRICARE program fully implemented by September 1997.  Background on
the TRICARE program is in appendix I. 

The Northwest Region was the first region to begin enrolling
beneficiaries in March 1995.  Three regions, the Golden Gate Region,
the Hawaii-Pacific Region, and Region Nine,\3 began enrolling
beneficiaries in October 1995, followed by the Southwest Region in
November 1995.  While the contract has been awarded for the Southeast
and Gulf South Regions, they are not scheduled to begin health care
delivery under TRICARE until July 1996.  Figure 1 shows the DOD
regions covered by the seven managed care support contracts.  The
shaded areas are the regions where TRICARE has been implemented in
various stages as of March 1996. 

   Figure 1:  DOD Regions Served
   by the Seven Managed Care
   Support Contracts

   (See figure in printed
   edition.)

Note:  Managed care support for Alaska will be addressed separately
from these regions. 

DOD has experienced difficulties in awarding its managed care support
contracts.  Each of the contracts awarded thus far has been
protested.  The protest of the first contract, encompassing the
Golden Gate Region, Hawaii-Pacific Region, and Region Nine, was
sustained, and DOD was required to recompete the contract.  The
protests for the Northwest Region's and Southwest Region's contracts
and the contract including both the Southeast and Gulf South Regions
were denied. 

Last year, in response to congressional concerns about DOD's
difficulties with an early contract award covering California and
Hawaii for which GAO\4 sustained a protest,\5 we reviewed problems
identified by the bid protest experience.  We reported that while DOD
had taken steps to improve future contract awards, several areas of
concern remained.  Among our recommendations--which DOD agreed to
adopt--were that DOD consider the potential effects on competition of
such large TRICARE contracts and weigh alternative award approaches
to help ensure competition during the next procurement round.  We
also urged that DOD try to simplify the next round's solicitation
requirements and seek to incorporate best-practice, managed care
techniques in the contracts.  We further recommended that DOD
establish general qualification requirements for its board members
who evaluate contractors' proposals.\6 We plan to follow up on these
issues and begin a study of how well DOD's contractors are performing
under the current contracts. 


--------------------
\2 Also includes members of the Coast Guard and the Commissioned
Corps of the Public Health Service and the National Oceanic and
Atmospheric Administration, who are also eligible for military health
care. 

\3 Region Nine covers the Southern California area. 

\4 Under the Competition in Contracting Act of 1984 (31 U.S.C. 
3551-56 (1988)), GAO is required to consider bid protests and
determine whether a challenged federal solicitation, contract award,
or proposed award complies with applicable statutes and regulations. 

\5 Foundation Health Federal Services, Inc; QualMed, Inc.,
B-254397.4, et al., Dec.  20, 1993, 94-1 CPD ï¿½ 3. 

\6 Defense Health Care:  Despite TRICARE Procurement Improvements,
Problems Remain (GAO/HEHS-95-142, Aug.  3, 1995). 


   DESPITE SETBACKS, EARLY
   IMPLEMENTATION IS UNDER WAY
------------------------------------------------------------ Letter :3

Despite unanticipated obstacles, DOD's early implementation of
TRICARE is progressing in line with DOD expectations.  DOD has
enrolled large numbers of beneficiaries in TRICARE Prime, including
many of the active duty dependents DOD particularly wants to enroll. 
It has also succeeded in encouraging TRICARE Prime enrollees to
select military health care providers--the source of care that DOD
believes is more cost-effective than civilian-provided care.  In
addition, DOD is addressing implementation problems that early on
caused confusion for beneficiaries and difficulties for military
health care managers. 


      EARLY ENROLLMENT RESULTS
---------------------------------------------------------- Letter :3.1

As DOD intended through its marketing efforts, many beneficiaries
have enrolled in TRICARE Prime, particularly the target population of
active duty dependents that tends to rely heavily on the DOD health
care system.  As of January 31--after almost 12 months of operation
in the Northwest Region and fewer than 4 months in four other
regions--more than 400,000 people had enrolled in TRICARE Prime.\7 In
the Northwest Region, about two-thirds of active duty dependents have
chosen this option, as shown in figure 2. 

   Figure 2:  Northwest Region's
   Active Duty Dependent
   Enrollment in TRICARE PRIME

   (See figure in printed
   edition.)

Note:  Enrollment data are as of January 31, 1996. 

Source:  DOD data. 

Also, in those regions under way, the bulk of beneficiaries choosing
TRICARE Prime have enrolled with military, rather than civilian,
health care providers.  This enhances DOD's goal of fully utilizing
its military medical facilities and providing care in the less
expensive military setting.  Figure 3 shows that in the Northwest
Region, over two-thirds of the beneficiaries have chosen to enroll
with a military health care provider. 

   Figure 3:  TRICARE Prime
   Enrollment With Health Care
   Providers in the Northwest
   Region

   (See figure in printed
   edition.)

Note:  Enrollment data are as of January 31, 1996. 

Source:  DOD data. 


--------------------
\7 The 400,000 enrollees does not include more than 300,000 active
duty military personnel who are automatically enrolled in TRICARE
Prime. 


      DOD IS ADDRESSING EARLY
      IMPLEMENTATION OBSTACLES
---------------------------------------------------------- Letter :3.2

During the period from the contract award through the start of health
care delivery, DOD encountered and addressed various start-up
problems.  A delay in the TRICARE benefits package and higher than
expected early enrollment together led to initial beneficiary
confusion.  Also, computer system problems have hindered DOD's
ability to manage the enrollment process. 

One early setback was the delay in the approval of the TRICARE
benefits package, which details the beneficiaries' fees and
copayments for health care services.  DOD did not approve the
benefits package until just 2 months before the Northwest Region
began enrolling beneficiaries.  Military facilities had already begun
their marketing and education efforts with the proposed benefits;
however, the approved benefits package changed the enrollment fees. 
Because of this, people became confused, and DOD and the contractor
had to explain the changes.  This confusion did not occur in other
regions, because the TRICARE benefits package was in place before
marketing and education began. 

Despite the benefits package delay, the Northwest Region had more
people wanting to enroll than it anticipated.  Although the
contractor had projected that 28,000 beneficiaries would enroll
during the first year, approximately 58,000 beneficiaries enrolled
during the first 4 months.  The contractor responsible for managing
the enrollment process was understaffed and had to hire temporary
employees.  The temporary employees were not adequately trained and
could not sufficiently address beneficiaries' questions about
TRICARE, which further confused beneficiaries.  Later, DOD and the
Northwest Region shared their experiences through an extensive
lessons-learned effort with other regions.  Thus, the Southwest
Region contractor hired temporary employees and trained them with its
regular employees before enrollment began.  Although the Southwest
Region also experienced higher enrollment than anticipated, DOD and
the contractor avoided much of the beneficiary confusion that the
Northwest Region experienced. 

During the enrollment process, DOD has also encountered problems
stemming from the inability of its medical information system to
interact with the contractors' systems.  Because of their
configurations, the systems cannot communicate, meaning that data
cannot be transferred from one system to another.  As a result,
according to lead agent officials, DOD does not have a complete
database of all beneficiaries enrolled in TRICARE Prime, and regional
officials must rely on the contractor to provide enrollment data. 
However, DOD is addressing the problem by having the Northwest
contractor provide special reports from its system and, in the
Southwest Region, having the contractor put beneficiary enrollment
data in both the DOD and contractor systems.  DOD plans to address
this problem by amending the contracts to require contractors'
medical information systems to exchange information with DOD's
system. 


   IMPLEMENTATION ISSUES MAY
   AFFECT TRICARE COSTS
------------------------------------------------------------ Letter :4

The degree to which cost savings can be achieved under TRICARE
remains uncertain and depends on DOD's ability to operate the system
as it is designed to work.  Issues have emerged during early
implementation that may hinder DOD's efforts to contain costs. 
TRICARE depends on managed care to achieve maximum efficiency of its
military facilities and control rising health care costs by using
techniques such as sharing resources with the support contractor and
managing beneficiaries' use of health care services. 


      RESOURCE-SHARING DETAILS NOT
      WELL DEVELOPED OR UNDERSTOOD
---------------------------------------------------------- Letter :4.1

DOD has estimated that resource sharing could save $810 million over
5 years, but DOD and contractor officials responsible for entering
into specific resource-sharing agreements have told us they do not
fully understand the potential cost implications of such agreements. 
This lack of understanding continues to impede implementation of
resource sharing under TRICARE, and the effectiveness of the program
remains uncertain. 

Resource sharing is a feature of the TRICARE contracts that allows
the contractor, through agreements with DOD, to provide personnel,
equipment, and/or supplies to a military facility to improve its
capability to provide care.  DOD officials believe that providing
health care to military beneficiaries in military facilities is less
expensive than comparable care in the civilian sector, so maximizing
the use of military facilities results in savings to both DOD and the
contractor.  For example, the contractor might provide an
anesthesiologist to a military hospital so that more surgeries could
be performed there rather than at a more costly private facility at
DOD expense, thereby reducing overall costs.  Similarly, contractor
costs for the service provided are reduced by using the military
facility and supporting resources. 

Evaluating the cost-effectiveness of resource-sharing agreements is
very difficult and complex.  Each agreement must be analyzed to
determine whether the savings from providing care in the military
facility offset increased facility costs under the agreement, such as
the cost of supplies, staff, or support services that would not have
been used if the agreement had not been established.  Also, the
extent of resource-sharing savings will be a factor in future
regional contract price adjustments, which further adds to the
complexity of these agreements. 

DOD has given regional officials, military facility commanders, and
contractors a financial analysis worksheet to help determine the
cost-effectiveness of the agreements.  DOD has also provided some
training sessions in the regions.  Despite these efforts, DOD and
contractor officials remain confused about making appropriate
decisions regarding the financial implications of these agreements. 
According to lead agent officials, they are uncertain about how
individual agreements may affect future contract price adjustments. 
Because of this, some regions have been slow to enter into
agreements, and the anticipated savings may not be achieved. 

DOD officials told us that they recognize this deficiency and plan to
address it.  They said that DOD is currently developing a formal
training program for resource sharing and that they also plan to
provide military treatment facility commanders with a new
computer-based analytical tool to enable them to determine the
potential effects of resource-sharing agreements. 

There is, however, a more direct, less confusing means to accomplish
contractor support of direct care in military facilities.  Using a
different program called task order resource support, military
facility commanders can contract separately with the managed care
support contractor for particular resources to augment their direct
care capabilities.  DOD officials told us that, in the past, very
little resource support has taken place because hospital commanders
did not have the level of control over CHAMPUS funds they needed to
enter into these agreements.  Now, however, DOD has proposed an
alternative financing mechanism for the managed care support
contracts.  If adopted, this financing method would give facility
commanders more control of CHAMPUS funds along with their direct care
funds and, therefore, more flexibility to enter into resource support
agreements.  With this flexibility, DOD managers would be able to
directly buy the services they need to avoid sending some patients
out of their hospitals for needed care.  This may have the effect of
reducing the need to negotiate the more complex resource-sharing
agreements while still making the most of contractor support of
military facility capabilities.  DOD's alternative financing approach
is still being developed, however, so its eventual impact on
contractor support of military direct care capabilities is still
unclear. 


      IMPLEMENTATION OF
      UTILIZATION MANAGEMENT
      DELAYED
---------------------------------------------------------- Letter :4.2

DOD estimated that utilization management in its facilities could
save over $480 million nationwide over 5 years.  However, DOD and the
contractor were not ready to perform this function at the start of
health care delivery in the Northwest and Southwest Regions as
planned.  Therefore, the full extent of TRICARE savings from
utilization management may not be realized. 

Utilization management is intended to ensure that beneficiaries
receive necessary and appropriate care in the most cost-effective
manner.  For example, utilization management reviews would verify
that hospital admissions are medically necessary before patients
check in or that lengths of hospital stays are not excessive. 
Utilization management also includes case management, which involves
assigning health care providers to manage care for patients with
high-cost, chronic conditions (such as diabetes or asthma) to try to
avoid costly and disruptive crises that lead to emergency room visits
or unscheduled hospital admissions. 

Utilization management can be done internally by the military
facilities, or the contract can be written so that the contractor is
required to perform this function.  In the Southwest Region, where
the contractor is responsible for utilization management, regional
officials have expressed dissatisfaction with the contractor's
performance of utilization management activities and have withheld
partial contract payments until the contractor's performance
improves.  Because the contractor has hired additional utilization
management staff, both DOD and the contractor believe the situation
will be resolved soon.  The Northwest Region's utilization management
program, which is handled by the military, was not implemented for
over 5 months, but it is now under way. 


   DOD IS IDENTIFYING PERFORMANCE
   MEASURES BUT IS NOT COLLECTING
   CERTAIN NEEDED DATA
------------------------------------------------------------ Letter :5

Because of TRICARE's newness, size, and complexity, appropriate and
effective information management has become increasingly important. 
During early TRICARE implementation, DOD did not define performance
measures to evaluate how well it is meeting its goals, but DOD is now
defining such measures at the national and regional levels.  However,
some data needed to evaluate the program are not being captured. 


      DOD IS DEFINING PERFORMANCE
      MEASURES
---------------------------------------------------------- Letter :5.1

Before TRICARE's implementation, DOD had not defined performance
measures needed to monitor and evaluate all major aspects of health
care delivery at both the regional and national levels.  During
implementation, the regional officials quickly recognized the
importance of having such measures for evaluating achievement of
regional and national TRICARE goals, and for providing a good
information base for management decisions.  Thus, the regions have
begun creating their own sets of measures to assess the efficiency
and effectiveness of the delivery of health care services in the
region.  These measures will be used in an ongoing evaluation of
customer services, including patient satisfaction, and clinical
services, including inpatient and outpatient care, disease prevention
and health screening, disease management, enrollee health, and
population health management. 

DOD is separately developing a set of performance measures to be used
at the headquarters level to monitor various aspects of health care
delivery across the regions, such as TRICARE Prime enrollment and
preventable admissions.  DOD officials said the identification of
performance measures will be a continuing effort for all health care
stakeholders as DOD's needs change throughout TRICARE implementation. 
However, the appropriateness and effectiveness of these performance
measures remain to be seen. 


      BENEFICIARY ACCESS DATA NOT
      BEING CAPTURED
---------------------------------------------------------- Letter :5.2

Currently, neither DOD nor the contractors are tracking access data
to ensure that they are meeting DOD's standards for access to primary
care services.\8 However, these data are needed to enable the
Congress and DOD to measure TRICARE's performance against this key
system goal. 

Access to care relates to a patient's ability to get the appropriate
level of health care in a timely manner.  Timely access to military
health care has long been a major source of beneficiary
dissatisfaction.  To improve performance in this area, DOD
established primary care access standards in their 1994 TRICARE
Policy Guidelines.  These standards apply to both military and
civilian providers and address areas such as wait times for
appointments and the availability of emergency services.  The
following are DOD's current access standards for maximum appointment
wait times: 

  -- 4 weeks for a well visit, which is nonurgent care for health
     maintenance and prevention;

  -- 1 week for a routine visit, which is nonurgent care requiring a
     health care provider; and

  -- 1 day for acute illness care, which is urgent care requiring a
     health care provider. 

DOD collects some access data through an annual beneficiary
satisfaction survey.  The DOD survey contains 25 questions that look
at how easily beneficiaries entered the health care system and
whether they received the care they believed was necessary.  Types of
questions include where care was received, types of preventive
services received, the number of calls made for an appointment, usual
length of time between scheduling the appointment and seeing a
provider, usual length of wait in the provider's office, approximate
travel time from residence to provider's office, and beneficiaries'
general level of satisfaction with access to care. 

Although important, these survey data are based on beneficiaries'
perceptions generalized over a 12-month period and do not measure
DOD's actual performance against its newly established standards. 
DOD could collect the access data needed to measure its performance
at the time beneficiaries schedule their primary care appointments. 
According to lead agent and Health Affairs officials, they are
currently not doing so because DOD's patient appointment and
scheduling system, as configured, does not capture this information. 
DOD officials told us that the needed access data could likely be
gathered by modifying the DOD appointment and scheduling system to
capture precise waiting time information while still complementing
these empirical data with the annual survey data. 


--------------------
\8 Primary care is the entry point to the military health care system
that includes a variety of basic services and may lead to referrals
for specialty care. 


      DOD IS NOT DEFINING AND
      MEASURING HOW MANY FORMER
      NONUSERS HAVE ENROLLED
---------------------------------------------------------- Letter :5.3

DOD also is not collecting the enrollment data needed to identify
eligible beneficiaries who enroll in TRICARE but have not previously
been users of the military health care system.  Identifying
beneficiaries attracted to military care by the TRICARE program is
crucial to DOD's ability to contain health care costs because, as the
Congressional Budget Office estimates, this population accounts for
about 25 percent of DOD's 8.3 million beneficiaries.  Each of these
current nonusers who chooses TRICARE Prime adds to the overall cost
of military health care. 

Although DOD believes that the impact of such enrollment will be
lessened because of the annual enrollment fee and through targeted
marketing to current system users, DOD officials told us that TRICARE
Prime's generous benefits\9 will entice some nonusers to enroll, and
that data on such enrollment are needed.  However, DOD has not yet
developed a definition that will enable it to identify these
enrollees.  DOD officials at both the national and regional levels
told us that defining the various types of former nonusers, though
necessary, is difficult because beneficiaries rely on the military
health care system in varying degrees.  For example, some
beneficiaries have other health insurance but continue to use the
military pharmacies.  Also, some beneficiaries may begin to use
military health care for reasons other than the TRICARE reforms, such
as the loss of other health insurance. 

Once DOD has a working definition of this population of former
nonusers, it can seek to ensure that appropriate data are being
captured to identify these beneficiaries.  DOD officials told us that
the collection of such data should be done through a set of questions
consistently administered to enrollees across the regions.  By
gathering this information, DOD could better evaluate the impact of
this enrollment on TRICARE's costs.  Ultimately, DOD needs these data
to reassess TRICARE's cost-sharing structure as it works to contain
overall health care costs while maintaining fees for beneficiaries
that are neither too high nor too low. 


--------------------
\9 The Joint Chiefs of Staff endorsed this benefits package as the
best option for the beneficiaries.  Because all estimates related to
the savings of any HMO option contain a degree of uncertainty, they
recommended that the fee structure be reviewed in the future.  They
urged that this review be based upon data rather than conjecture. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Despite initial beneficiary confusion caused by marketing and
education problems, as well as problems with computer systems'
compatibility, early implementation of TRICARE is progressing
consistent with congressional and DOD goals.  However, the success of
DOD's current efforts to address the implementation of
resource-sharing agreements and utilization management is critical to
containing health care costs.  DOD also needs to gather certain
enrollment and performance data so that it and the Congress can
assess TRICARE's success in the future. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

We recommend that the Secretary of Defense direct the Assistant
Secretary of Defense for Health Affairs to

  -- collect data on the timeliness of appointments in order to
     measure TRICARE's performance in improving beneficiary access
     against DOD's standards and

  -- assess the impact of new beneficiaries who would not be using
     military health care if not for TRICARE, by defining these new
     users, identifying them, and estimating the cost implications of
     their use of military health care. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

In a letter dated May 15, 1996, commenting on a draft of this report,
the Director of TRICARE Operations Policy wrote that DOD fully agreed
with the report and with both of our recommendations.  Regarding our
recommendation concerning DOD's need to collect data on the
timeliness of appointments, the Director said that DOD already
identifies the time between when an appointment is made and the
actual appointment.  However, in order to gather access data more
precisely and completely, DOD plans to make computer system
modifications during fiscal year 1997.  The Director also wrote that
DOD strongly believes that access data should continue to be
collected through surveys of beneficiaries.  As stated in the report,
we agree that both types of access-to-care information are important. 
We believe that DOD's plans for collecting access data, if
implemented properly, should be sufficient to measure TRICARE's
success against DOD's standards. 

Regarding our recommendation that DOD assess the cost implications of
TRICARE enrollment by beneficiaries who would not otherwise be using
military health care, the Director commented that DOD has taken
several steps to minimize such enrollments, including designing
TRICARE's cost-sharing structure and targeting marketing to current
military medical system users.  While we agree that cost sharing and
enrollment targeting will deter some from enrolling in TRICARE, the
program is still attractive to beneficiaries who would not otherwise
be using military health care.  The Director also said that DOD is
enhancing a computer information system that will allow it to track
the extent that enrollees have other health insurance, which, in
concert with the beneficiary survey data, should help DOD assess the
impact of beneficiaries who would not be using military health care
if not for TRICARE. 

DOD officials also suggested several technical changes to the report
that we incorporated as appropriate. 


---------------------------------------------------------- Letter :8.1

We are sending copies of this report to the Secretary of Defense and
will make copies available to others upon request. 

Please contact me at (202) 512-7111 or Dan Brier, Assistant Director,
at (202) 512-6803 if you or your staff have any questions concerning
this report.  Other major contributors are Allan Richardson,
Evaluator-in-Charge, Bonnie Anderson, Sylvia Jones, and David Lewis. 

Stephen P.  Backhus
Associate Director, Health Care
 Delivery and Quality Issues


BACKGROUND ON TRICARE
=========================================================== Appendix I

TRICARE is intended to ensure a high-quality, consistent health care
benefit, preserve choice of health care providers for beneficiaries,
improve access to care, and contain health care costs.  TRICARE
features a triple-option benefit.  The first option, TRICARE
Standard, mirrors the current fee-for-service CHAMPUS program.  The
second option is TRICARE Extra, a preferred provider option through
which beneficiaries receive a 5-percent discount on the Standard
option when they choose among a specified network of providers.  The
third option, TRICARE Prime, represents the greatest change to
defense health care delivery.  TRICARE Prime is an HMO alternative
and is the only option that requires beneficiaries to enroll. 

To implement and administer the TRICARE program, DOD has reorganized
the military health care system into 12 new, joint-service regions. 
DOD created the position of lead agent for each region to coordinate
among the three services and the contractor and to monitor the
delivery of health care.  The lead agent is a designated military
medical facility commander supported by a joint-service staff.  Table
I.1 presents information on the 12 TRICARE regions, including the
designated lead agents, the states included in the regional
boundaries, and the number of military medical facilities in each
region. 



                                        Table I.1
                         
                            Profile of the 12 TRICARE Regions

                                                                                 Military
                                                                                  medical
Region               Lead agent              States in region                facilities\a
-------------------  ----------------------  ----------------------------  --------------
1--Northeast         National Capital        Connecticut, Delaware,                    10
                     (Bethesda, Walter       District of Columbia, Maine,
                     Reed, and Malcolm Grow  Maryland, Massachusetts, New
                     Medical Centers)        Hampshire, New Jersey, New
                                             York, Pennsylvania, Rhode
                                             Island, Vermont, and
                                             Northern Virginia

2--Mid-Atlantic      Portsmouth Naval        North Carolina and Southern                7
                     Hospital                Virginia

3--Southeast         Eisenhower Army         Georgia, South Carolina, and              12
                     Medical Center          parts of Florida

4--Gulf South        Keesler Air Force       Alabama, Mississippi,                      9
                     Medical Center          Tennessee, and parts of
                                             Louisiana and Florida

5--Heartland         Wright-Patterson Air    Illinois, Indiana, Kentucky,               5
                     Force Medical Center    Michigan, Ohio, West
                                             Virginia, and Wisconsin

6--Southwest         Wilford Hall Air Force  Arkansas, Oklahoma, and                   13
                     Medical Center          parts of Louisiana and Texas

7--Desert States     William Beaumont Army   Arizona, Nevada, New Mexico,               8
                     Medical Center          and parts of Texas

8--North Central     Evans Army Community    Colorado, Iowa, Kansas,                   13
                     Hospital                Minnesota, Missouri,
                                             Montana, Nebraska, North
                                             Dakota, South Dakota, Utah,
                                             Wyoming, and parts of Idaho

9--Region Nine       San Diego Naval         Southern California                        6
                     Hospital

10--Golden Gate      David Grant Air Force   Northern California                        3
                     Medical Center

11--Northwest        Madigan Army Medical    Oregon, Washington, and                    4
                     Center                  parts of Idaho

12--Hawaii-Pacific   Tripler Army Medical    Hawaii                                     1
                     Center

=========================================================================================
Total                                                                                  91
-----------------------------------------------------------------------------------------
\a These numbers represent military medical centers and community
hospitals.  Military outpatient clinics and facilities scheduled for
closure are not included. 

TRICARE uses contracted civilian health care providers to supplement
the care provided by the defense health care system on a regional
basis--a significant feature maintained from earlier demonstration
programs.  The managed care support contractors' responsibilities
include developing networks of civilian providers, locating providers
for beneficiaries, performing utilization management functions,
processing claims, and providing beneficiary support functions. 
Seven contracts will be awarded to civilian health care companies
covering the 12 TRICARE health care regions.  Table I.2 describes the
status of contract awards and start dates for health care delivery. 



                         Table I.2
          
               TRICARE Implementation Status

                                              Health care
                                              delivery
Regions       Lead agents   Contract status   start date
------------  ------------  ----------------  ------------
Northwest     Madigan       Awarded to        March 1995
                            Foundation
                            Health Federal
                            Services, Inc.,
                            September 1994,
                            for $475 million

Region Nine,  San Diego,    Awarded to        October
Golden Gate,  David         Foundation        1995\a
and Hawaii-   Grant,        Health Federal
Pacific       Tripler       Services, Inc.,
                            September 1995,
                            for $2.5 billion

Southwest     Wilford Hall  Awarded to        November
                            Foundation        1995
                            Health Federal
                            Services, Inc.,
                            April 1995, for
                            $1.8 billion

Southeast     Eisenhower,   Awarded to        July 1996
and           Keesler       Humana Military
Gulf South                  Healthcare
                            Services,
                            November 1995,
                            for $3.8 billion

Desert        William       Award date        February
States and    Beaumont,     scheduled for     1997
North         Evans         third quarter
Central                     1996

Northeast     National      Award date        September
              Capital       scheduled for     1997
                            first quarter
                            1997

Mid-          Portsmouth,   Award date        September
Atlantic and  Wright-       scheduled for     1997
Heartland     Patterson     first quarter
                            1997
----------------------------------------------------------
\a Foundation will not begin delivering care until April 1996 as a
result of bid protest decisions.  In the interim, all care will be
delivered by Aetna, the previous managed care support contractor for
the demonstration project in the California-Hawaii regions. 

Between the contract award date and the health care delivery start
date is a 6- to 8-month transition period for both DOD and the
contractor.  During this time, the contractor performs tasks such as
the establishment of provider networks and beneficiary support
functions.  Both the contractor and DOD begin some early marketing
and education of beneficiaries and providers.  Enrollment of all
eligible non-active duty beneficiaries begins either during the
transition phase or at the start of health care delivery. 


*** End of document. ***