Defense Health Care: Offering Federal Employees' Health Benefits Program
to DOD Beneficiaries (Letter Report, 03/23/98, GAO/HEHS-98-68).
Pursuant to a congressional request, GAO reviewed nine bills introduced
in the 105th Congress to authorize the Federal Employees Health Benefits
Program (FEHBP) for military beneficiaries, focusing on: (1) issues that
cut across the various bills, such as potential effects on beneficiary
costs, eligibility, and the military health system (MHS) generally; and
(2) the bills' key features, highlighting their similarities and
differences.
GAO noted that: (1) GAO's analysis of the nine bills show that their
different features could affect the numbers of beneficiaries who would
be attracted to participate in the FEHBP, total government and
beneficiary costs, and MHS operations; (2) FEHBP coverage would likely
vary in attractiveness, depending on beneficiaries' current health care
costs and military care eligibility and access and their other health
care coverage; (3) the various bills' premium-setting and cost-sharing
features would affect not only whether beneficiaries' chose to
participate but also the Department of Defense's (DOD) potential added
costs; (4) most proposals would set military enrollees' premiums
separately from the federal FEHBP group's to shield the federal group's
premiums should the military group have higher care usage and costs and
thus a higher total premium; (5) whether military FEHBP enrollees should
be allowed concurrent use of the MHS is both a cost issue and a military
readiness issue; (6) allowing concurrent use of FEHBP and DOD care would
create a system of overlapping coverage for younger beneficiaries who
already have priority access to DOD-funded care through military
facilities and civilian providers; (7) but those aged 65 and older, who
have lower priority access to military health care, FEHBP would be far
less duplicative; (8) prohibiting concurrent DOD and FEHBP care use
might enable DOD to more appropriately size its system, facilitate
downsizing of unneeded capacity, and thus have savings for use in
helping to fund FEHBP enrollment; (9) the size and patient mix of the
DOD medical system, however, are also affected by readiness needs; (10)
DOD officials have stated that retaining sufficient numbers and an
appropriate mix of patients in the DOD system is critical to recruiting,
retaining, and training military physicians and support staff for
wartime readiness; (11) yet some experts believe that military
facilities' current patient mix is not sufficient to ensure physicians'
wartime readiness; (12) to better assess a FEHBP option's attractiveness
and potential effects on government costs and the MHS's operation, some
bills would authorize a test of the program in a few areas of the
country; and (13) such sites would include areas with military medical
facilities and those far from such facilities and areas where a variety
of FEHBP plans and such other health care options as Medicare health
maintenance organization's are alternatively available.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-98-68
TITLE: Defense Health Care: Offering Federal Employees' Health
Benefits Program to DOD Beneficiaries
DATE: 03/23/98
SUBJECT: Health care programs
Military personnel
Health care services
Proposed legislation
Military facilities
Health care costs
Insurance premiums
Retired military personnel
Employee medical benefits
Comparative analysis
IDENTIFIER: DOD TRICARE Program
Federal Employees Health Benefits Program
Medicare Program
DOD Uniformed Services Treatment Facilities Program
DOD TRICARE Prime Program
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Cover
================================================================ COVER
Report to the Chairman, Committee on Government Reform and Oversight,
House of Representatives
March 1998
DEFENSE HEALTH CARE - OFFERING
FEDERAL EMPLOYEES HEALTH BENEFITS
PROGRAM TO DOD BENEFICIARIES
GAO/HEHS-98-68
Analysis of FEHBP Bills
(101610)
Abbreviations
=============================================================== ABBREV
CBO - Congressional Budget Office
DOD - Department of Defense
FEHBP - Federal Employees Health Benefits Program
HMO - health maintenance organization
OPM - Office of Personnel Management
MHS - military health system
MTF - medical treatment facility
PPO - preferred provider organization
USTF - Uniformed Services Treatment Facilities
Letter
=============================================================== LETTER
B-278895
March 23, 1998
The Honorable Dan Burton
Chairman
Committee on Government Reform and Oversight
House of Representatives
Dear Mr. Chairman:
The military health care system has changed significantly during the
past decade. Along with substantial active duty force and
infrastructure reductions, medical personnel strength has decreased
by 15 percent, and one-third of all military hospitals have been
closed. Further, the 1980s doubling of military health costs and
increasing beneficiary concerns about care access in military
hospitals led the Department of Defense (DOD) to establish its
nationwide managed care program, called TRICARE. But further
facility downsizing and access priority changes under TRICARE have
continued to fuel beneficiary concern, especially among persons
living far from military facilities and senior retirees who are
ineligible for TRICARE and have the lowest priority for military
facility care. And TRICARE's cost effectiveness, not yet proven, has
increasingly come into question.
We have reported and testified frequently on TRICARE's
implementation, including TRICARE contracting and resource sharing
program problems and retirees' health benefit shortfalls and the pros
and cons of proposed alternatives (see list of related GAO products
at the end of this report).\1
We have recently reported on providers' participation in TRICARE and
their concerns about existing payment mechanisms as well as TRICARE's
beneficiary feedback systems.
In response to many concerns about TRICARE, members of the Congress,
beneficiary groups, and others have proposed such measures as
authorizing Medicare payments to expand TRICARE eligibility for
senior retirees and extending to certain beneficiaries coverage under
the Federal Employees Health Benefits Program (FEHBP), a health
insurance program that offers a wide array of health plans to federal
employees. At your request, we reviewed nine bills introduced in the
105th Congress to authorize FEHBP for military beneficiaries. Six of
the bills would authorize immediate nationwide access to FEHBP for
either all Medicare-eligible military beneficiaries (H.R. 76, H.R.
1456, H.R. 2128, and S. 224) or Medicare-eligible military
beneficiaries and certain other nonactive duty beneficiaries (H.R.
1356 and H.R. 1631). Three other bills (H.R. 1766, H.R. 2100, and
S. 1334) propose testing the approach to better determine government
costs and beneficiary interest before deciding whether to implement
the option nationwide.
Specifically, you asked us to (1) review issues that cut across the
various bills, such as potential effects on beneficiary costs,
eligibility, and the military health system (MHS) generally, and (2)
profile and comment on the bills' key features, highlighting their
similarities and differences (see app. I). In doing our work, we
interviewed representatives of DOD; the Office of Personnel
Management (OPM), FEHBP's administrator; and military beneficiary
organizations. We also worked closely with Congressional Budget
Office (CBO) staff on our estimates of the bills' effects on
beneficiaries and the MHS, as well as on their estimates of certain
bills' overall costs and related enrollment figures, which CBO has
reported on separately. We conducted our work from October 1997
through January 1998 in accordance with generally accepted government
auditing standards.
--------------------
\1 Resource sharing is a TRICARE cost-saving feature in which the
TRICARE managed care support contractor supplements a military
hospital's or clinic's capacity by providing civilian personnel,
equipment, or supplies.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Our analysis of the nine bills shows that their different features
could affect the numbers of beneficiaries who would be attracted to
participate in FEHBP, total government and beneficiary costs, and MHS
operations. The bills vary, for example, with respect to which
military beneficiaries would be eligible, how premiums would be
calculated, to what extent they would be shared between DOD and
enrollees, whether MHS participation would be concurrently allowed,
and whether the approach should be tested prior to nationwide
implementation. Tables 1 and 2 profile the bills' key features.
Table 1
Legislation Introduced in the 105th
Congress to Extend FEHBP Coverage to
Military Beneficiaries
Bill Concurrent Separate
number and FEHBP and DOD risk
sponsor Summary Eligibility Cost sharing use pool?\a
========== ---------------- ---------------- --------------- -------------- --------
H.R. 76, Authorizes FEHBP DOD determines Enrollees pay FEHBP users Yes
Rep. Moran for all which Medicare- same amount as may continue
Medicare- eligible federal to use MHS.
eligibles. beneficiaries enrollees. DOD FEHBP
may enroll (1.3 pays remainder cancellation
million are up to total is
Medicare- premium. irrevocable.
eligible). OPM
may limit
enrollment if
needed for
management
purposes.
H.R. Authorizes All Enrollees pay Not addressed. Yes
1356, FEHBP beneficiaries same amount as
Rep. Watts for Medicare- without access federal
eligibles and under TRICARE enrollees. DOD
those who are equal to highest pays remainder
not able to FEHBP option up to total
reach or are not (eligibles premium.
guaranteed unknown); those
access to ineligible for
TRICARE. Adds TRICARE because
TRICARE of locality or
improvement limits
provisions. (eligibles
unknown) and
Medicare-
eligibles (1.3
million).
H.R. Authorizes FEHBP Medicare- Enrollees pay FEHBP users Yes
1456, for all eligible same amount as may continue
Rep. Medicare- beneficiaries federal to use MHS,
Thornberry eligibles. (1.3 million). enrollees. DOD DOD can
Approves pays remainder collect third-
Medicare up to total party payments
subvention,\b premium. from FEHBP
pays part B plans.\e FEHBP
penalties,\c cancellation
approves Medigap is
enrollment irrevocable.
period.\d
H.R. Authorizes FEHBP All qualified Total premium Enrollees in Not
1631, for active duty dependents, amount is the FEHBP may not addresse
Rep. Mica dependents, retirees, same as for use MHS. FEHBP d.
retirees and survivors, and federal choice is for
their former spouses enrollees. DOD 3 years. If
dependents, and (total eligible, determines its FEHBP is
survivors. 6.3 million). contribution elected, DOD
Enrollment amount. coverage
limits: 100,000 cannot be
in year 1; restored until
200,000 in year 3-year period
2; 400,000 in passes.
year 3.
H.R. Authorizes FEHBP Medicare- Enrollees pay Enrollees in Yes
2128, for Medicare- eligible same amount as FEHBP may not
Rep. eligibles. beneficiaries federal use MHS. FEHBP
Stearns only (1.3 enrollees. DOD cancellation
million). OPM pays remainder is
may limit up to total irrevocable.
enrollment if premium.
needed for
management
purposes.
S. 224, Authorizes FEHBP Medicare- Enrollees pay Enrollees in Yes
Sen. for Medicare- eligible same amount as FEHBP may not
Warner eligibles. beneficiaries federal use MHS. FEHBP
(1.3 million). enrollees. DOD cancellation
OPM may limit pays remainder is
enrollment if up to total irrevocable.
needed for premium.
management
purposes.
-----------------------------------------------------------------------------------------
\a Creating separate risk pools means that OPM would calculate the
military group's premiums separately from the federal group's to
prevent the military group's risk characteristics such as age,
gender, and care use from altering the federal group's premiums.
\b Medicare subvention would allow Medicare to reimburse DOD for care
provided to Medicare-eligible beneficiaries in military facilities.
\c If an eligible beneficiary does not enroll in Medicare part B (a
voluntary program that covers outpatient care, laboratory tests, and
medical equipment) when first eligible, a 10-percent surcharge per
year is assigned to the premium if the beneficiary chooses to enroll
later.
\d This provision would allow military beneficiaries who did not
enroll in a medigap supplementary insurance plan at age 65 to enroll
in such a plan without consideration of age or medical condition in
the setting of the plan's premium.
\e DOD can collect from health insurance plans, known as third-party
payers, the health care costs incurred on behalf of insured military
dependents and military retirees to the extent that the insurer would
pay if the services were provided at a civilian hospital.
Table 2
Legislation Introduced in the 105th
Congress to Authorize a Demonstration of
Extending FEHBP Coverage to Military
Beneficiaries
Bill Concurrent Separate
number and Eligibility and FEHBP and DOD risk
sponsor Summary enrollment Cost sharing use pool?\a
========== ---------------- ---------------- --------------- -------------- --------
H.R. Authorizes FEHBP Medicare- DOD Concurrent use Yes
1766, demonstration eligible contribution not addressed.
Rep. Moran for Medicare- beneficiaries; may not be more FEHBP
eligibles. must keep than that paid cancellation
Medicare part B. for a federal is
Limited to two employee. irrevocable.
sites: Enrollee
(1) catchment contribution
area with up to not addressed.
25,000 eligibles
and (2)
noncatchment
area with up to
25,000
eligibles.
S. 1334, Authorizes FEHBP Medicare- DOD Concurrent use Yes
Sen. Bond demonstration eligible contribution not addressed.
for Medicare- beneficiaries; may not be more FEHBP
eligibles. must keep than that paid cancellation
Medicare part B. for a federal is
Limited to two employee. irrevocable.
sites: Enrollee
(1) catchment contribution
area with up to not addressed.
25,000 eligibles
and (2)
noncatchment
area with up to
25,000
eligibles.
H.R. Authorizes FEHBP Active duty Not addressed. Not addressed. Not
2100, demonstration dependents and addresse
Rep. for Medicare- retirees who d.
Stearns eligibles and live outside a
those unable to TRICARE Prime
enroll in enrollment area
TRICARE. and Medicare-
eligible
beneficiaries
who live in the
demonstration
region (total
eligibles
unknown).
-----------------------------------------------------------------------------------------
\a Creating separate risk pools means that OPM would calculate the
military group's premiums separately from the federal group's to
prevent the military group's risk characteristics such as age,
gender, and care use from affecting the federal group's premiums.
FEHBP coverage would likely vary in attractiveness, depending on
beneficiaries' current health care costs and military care
eligibility and access and their other health care coverage, if any.
For example, Medicare-eligible beneficiaries--ineligible for TRICARE
and with the lowest priority for military facility care access--would
likely find an FEHBP option advantageous. In contrast, active duty
families and retirees younger than 65, eligible for TRICARE, would
find FEHBP plans' annual premiums to be higher than the annual fee
for TRICARE's Prime health maintenance organization (HMO) option and
thus potentially less attractive.\2 Adding a benefit such as FEHBP is
likely to result in the enrollement in FEHBP of some beneficiaries
who are not now using any DOD health care source. Increased DOD
costs would occur unless military medical facilities were downsized
or closed to free up funding for DOD's share of the FEHBP premiums.
This may be possible, in light of recent studies that have indicated
that the system is now larger than required for wartime needs.\3
The various bills' premium-setting and cost-sharing features would
affect not only whether beneficiaries' chose to participate but also
DOD's potential added costs. Most proposals would set military
enrollees' premiums separately from the federal FEHBP group's to
shield the federal group's premiums should the military group have
higher care usage and costs and thus a higher total premium.\4 In
some bills, the military FEHBP enrollees' premium amount would be the
same as civilian enrollees' and DOD would pay the remainder.\5 Should
the total military premium be higher than the civilian premium, the
government would bear a higher portion for military than for civilian
enrollees. Bills requiring that DOD's premium share not exceed that
paid for a civilian enrollee would put any additional cost burden on
military enrollees.\6 One bill would allow DOD to determine its
premium share and thereby potentially provide greater subsidies to
enlisted families than to officers or greater subsidies to active
duty families than to retirees and their families.\7
Whether military FEHBP enrollees should be allowed concurrent use of
the MHS is both a cost issue and a military readiness issue.
Allowing concurrent use of FEHBP and DOD care would create a system
of overlapping coverage for younger beneficiaries who already have
priority access to DOD-funded care through military facilities and
civilian providers. But for those aged 65 and older, who have lower
priority access to military health care, FEHBP would be far less
duplicative. Prohibiting concurrent DOD and FEHBP care use might
enable DOD to more appropriately size its system, facilitate
downsizing of unneeded capacity, and thus have savings for use in
helping fund FEHBP enrollment.
The size and patient mix of the DOD medical system, however, are also
affected by readiness needs. DOD officials have stated that
retaining sufficient numbers and an appropriate mix of patients in
the DOD system is critical to recruiting, retaining, and training
military physicians and support staff for wartime readiness. Yet
some experts believe that military facilities' current patient mix is
not sufficient to ensure physicians' wartime readiness.\8 Thus,
retaining enough patients for such purposes in its facilities would
be a central issue for DOD should FEHBP be offered. Shortly, we will
be reporting on DOD's efforts to provide trauma care training for its
physicians in civilian facilities.
Finally, to better assess an FEHBP option's attractiveness and
potential effects on government costs and the MHS's operation, some
bills would authorize a test of the program in a few areas of the
country. Such sites would include areas with military medical
facilities and those far from such facilities and areas where a
variety of FEHBP plans and such other health care options as Medicare
HMOs are alternatively available. However, military facility sites'
variability, beneficiaries' current care alternatives, the local
health care markets, and other factors would greatly complicate the
task of choosing sites representative of the overall MHS. To limit
the test's cost, a maximum number of enrollees, or funding limit,
could be set, as is done in H.R. 1766 and S. 1334, by limiting the
test to a total of 50,000 enrollees, or 25,000 at each of two sites.
--------------------
\2 TRICARE also offers preferred provider organization and
fee-for-service options. Active duty families pay no annual fee for
these options, but retirees and their families must pay an annual fee
to enroll in Prime. That fee, $230 for an individual enrollee or
$460 for a family, is approximately half the cost of most FEHBP
plans. For example, in 1998, the Blue Cross and Blue Shield national
plan costs $1,471 per family, and across the country the Kaiser
Permanente plan averages about $1,400.
\3 DOD, Office of Program Analysis and Evaluation, "The Economics of
Sizing the Military Medical Establishment," Executive Report of the
Comprehensive Study of the Military Medical Care System, Washington,
D.C., Apr. 1994.
\4 OPM officials told us they believe the military premiums would
likely not be significantly different from the civilian FEHBP pool,
despite past studies showing higher health care use by military
beneficiaries.
\5 H.R. 76, H.R. 1356, H.R. 1456, H.R. 2128, and S. 224
\6 H.R. 1766 and S. 1334.
\7 H.R. 1631.
\8 Congressional Budget Office, "Restructuring Military Medical
Care," Washington, D.C., July 1995.
BACKGROUND
------------------------------------------------------------ Letter :2
THE MILITARY HEALTH SYSTEM
---------------------------------------------------------- Letter :2.1
The MHS has a dual mission--providing medical services and support to
the armed forces in peacetime and war and caring for the families of
active duty personnel, military retirees and their dependents, and
survivors. In carrying out its mission, the MHS offers health care
coverage to about 8.2 million people, more than half of whom are
retirees and their dependents and survivors, at a cost of $15.6
billion in fiscal year 1997. Health care for eligible beneficiaries
is provided through military medical treatment facilities (MTF),
called the direct care system, and through an insurance-like benefit
that covers much of the cost of civilian care. DOD also uses the
direct care system to recruit and train military physicians and
support personnel needed to meet its wartime mission and such related
peacekeeping roles as the Somalia, Haiti, and Bosnia deployments.
All DOD beneficiaries are eligible for military facility care at
little or no cost if space and resources are available. Active duty
personnel are given first-priority access to military facilities,
followed by their family members and then retirees and their
families. However, such space-available care varies from
comprehensive inpatient and outpatient care at medical centers and
larger hospitals to only outpatient services at very small
facilities. Moreover, as we testified in 1997, recent downsizing and
facility closings and changes in the access priorities under TRICARE
have resulted in reductions in space-available care across the MHS.\9
The TRICARE program was introduced in 1993 in response to soaring
1980s and early 1990s cost increases and increasing beneficiary
complaints about military facility care access. Its goals were to
improve beneficiary access and quality while containing MHS costs.
TRICARE encompasses both military facility care and civilian care and
offers beneficiaries three options: Prime, an HMO; Extra, a
preferred provider network; and Standard, a fee-for-service benefit.
All three TRICARE options, like FEHBP, provide comprehensive
coverage, including inpatient and outpatient care, mental health, and
prescription drugs but not dental care.\10 And like many FEHBP plans,
TRICARE also limits catastrophic out-of-pocket costs from expensive
medical conditions.\11
To participate in TRICARE Prime, beneficiaries must enroll in the
program, choose a primary care physician, and limit their care to the
Prime network of civilian and DOD providers. Active duty dependents
pay no fee to enroll in TRICARE Prime, but eligible retirees and
their dependents pay $230 for a single enrollee or $460 for a family
per year--less than half of most FEHBP plan premiums. Prime
enrollees receive priority-care access in military facilities and pay
only nominal copayments if civilian care is needed. Under TRICARE,
DOD changed the access priorities by ranking all Prime enrollees
first in priority after active duty members but before all other
beneficiaries, regardless of beneficiary class. In the regions where
TRICARE has been implemented, approximately 2 million, or 46 percent,
of eligible beneficiaries have enrolled in Prime.
Eligible beneficiaries pay no enrollment fee to participate in
TRICARE Standard or Extra. TRICARE Standard is available nationwide
and beneficiaries can choose any authorized TRICARE provider. Like
most FEHBP fee-for-service plans, beneficiaries must first meet an
annual deductible, after which DOD shares the cost of care with the
beneficiary. Active duty dependent beneficiaries generally pay 20
percent of the allowed charge, and retirees pay 25 percent. Under
TRICARE Extra, beneficiaries can choose providers from the TRICARE
civilian network and have their copayments reduced by 5 percent. See
appendix II for a comparison of beneficiary costs under TRICARE's
three options and selected FEHBP plans.
TRICARE 's implementation over the past 4 years has met with a
variety of problems. We have reported, for example, that DOD has
struggled with awarding and managing its multibillion dollar
contracts with private health plans to supplement military facility
care and provide administrative services and that it has failed to
achieve expected savings under one part of the TRICARE program.\12
Also, beneficiaries have complained that TRICARE Prime is not
available in many areas that are far from military medical
facilities. Further, provider complaints have arisen about
discounted payment rates, delayed payments to beneficiaries and
providers, and the reluctance of physicians to care for beneficiaries
under TRICARE Standard.\13 We plan to report on these matters during
the next few months.
DOD has begun addressing such concerns by attempting to simplify its
contracting process, for example, and making the Prime benefit
available in more areas of the country. DOD estimates that Prime
will be available within the next year to 90 percent of active duty
beneficiaries and the majority of TRICARE-eligible retirees as well.
Questions nonetheless remain about the MHS's optimal size and about
the combination of military facility and private contractor support
that might provide the cost- and quality-optimal system. Further,
while TRICARE's overall cost-effectiveness and ability to improve
care access and quality remain unproven, a formal congressionally
mandated TRICARE evaluation is just beginning.\14
Only active duty family members and retirees under age 65 are
eligible for TRICARE. Because Medicare-eligible retirees aged 65 and
older are ineligible for TRICARE, they can obtain military facility
care only if space is available after TRICARE enrollees and other
active duty members and their dependents receive their care. We have
reported that the older retiree population is increasing more rapidly
than other beneficiary groups and, as TRICARE enrollment increases,
military facility space-available care will continue to decline such
that many senior retirees may find it unavailable to them in the
future.\15
In addition to care provided by DOD through TRICARE or the direct
care system, military beneficiaries may have private health care
insurance through current or former employers, coverage under the
Medicare program or the Veterans' health care program, eligibility
for FEHBP through employment with the federal government, or coverage
supplementing TRICARE or Medicare purchased privately. According to
a recent DOD beneficiary survey, nearly half of military retirees
have private insurance, and one-third have purchased private
supplemental insurance coverage. Also, about 5 percent of military
retirees, approximately 80,000 people, are active federal employees
and are eligible for FEHBP.\16
--------------------
\9 Defense Health Care: Limits to Older Retirees' Access to Care and
Proposals for Change (GAO/T-HEHS-97-84, Feb. 27, 1997).
\10 DOD beneficiaries can purchase dental coverage separately under
the TRICARE Active Duty Family Member Dental Plan or the Retiree
Dental Plan.
\11 The catastrophic limits are $1,000 for active duty families under
all TRICARE options and for retirees are $3,000 under Prime and
$7,500 under Standard and Extra (see app. II).
\12 All seven TRICARE contract awards were protested and the protests
were sustained for three--the most recent sustained protests occurred
in February 1998. DOD and the awardees have requested
reconsideration of these protests. Defense Health Care: Despite
TRICARE Procurement Improvements, Problems Remain (GAO/HEHS-95-142,
Aug. 3, 1995); Defense Health Care: New Managed Care Plan
Progressing, but Cost and Performance Issues Remain (GAO/HEHS-96-128,
June 14, 1996); Defense Health Care: Actions Under Way to Address
Many TRICARE Contract Change Order Problems (GAO/HEHS-97-141, July
14, 1997), Defense Health care: TRICARE Resource Sharing Program
Failing to Achieve Expected Savings (GAO/HEHS-97-130, Aug. 22,
1997).
\13 According to DOD, private providers accept the allowable charge
on 86 percent of all TRICARE Standard claims.
\14 This evaluation was mandated by the National Defense
Authorization Act for fiscal year 1996, section 717, and is being
conducted for DOD under contract with the Institute for Defense
Analyses and the Center for Naval Analyses.
\15 Military Retirees' Health Care: Costs and Other Implications of
Options to Enhance Older Retirees' Benefits (GAO/HEHS-97-134, June
20, 1997).
\16 OPM officials told us they do not have information on how many
federal retirees are also military retirees or how many federal
employees have spouses who are military members or retirees and thus
dually eligible for both DOD care and FEHBP.
THE FEDERAL EMPLOYEES HEALTH
BENEFITS PROGRAM
---------------------------------------------------------- Letter :2.2
FEHBP is available to federal employees, retirees, annuitants, and
their dependents. In 1997, approximately 9 million beneficiaries
participated in 374 FEHBP plans nationwide at a cost of approximately
$16.3 billion--$12.1 billion paid by the government and $4.2 billion
by enrollees. In comparison, DOD provided care to about 6.3 million
beneficiaries in fiscal year 1997 at a total cost of approximately
$15.6 billion, which also includes its costs for medical readiness
and training, military deployments, veterinary services, and
occupational health. See appendix III for a historical comparison of
DOD and FEHBP beneficiary numbers and program costs.
The federal share of the FEHBP premium is about 72 percent, not to
exceed 75 percent of any plan's premium.\17 The types of FEHBP
plans--HMOs, managed fee-for-service plans, and plans offering a
point of service product--are similar to TRICARE's three options.
And although not all plans are available in all localities, each type
is. FEHBP enrollees, depending on where they live, can choose from
between 10 and 30 plans, including such fee-for-service plans as Blue
Cross and Blue Shield and such health maintenance organizations as
Kaiser Permanente. More than 85 percent of federal employees
participate in FEHBP. To differing degrees, all FEHBP plans cover
inpatient and outpatient care, prescription drugs, and mental health
services, and many cover some dental care expenses. They also have
limits on catastrophic out-of-pocket costs in the case of expensive
health care problems. For Medicare-eligible beneficiaries, many
FEHBP plans operate as a "wraparound" policy to Medicare, giving
retirees comprehensive coverage with no or small copayments and
deductibles.
--------------------
\17 In 1998, according to OPM, the government will pay up to $1,715
annually for each self-only enrollment and $3,699 for each family
enrollment.
CROSSCUTTING FEHBP BILL ISSUES
------------------------------------------------------------ Letter :3
Along with the bills' individual price-tags, several other key issues
cut across them to extend FEHBP coverage to military beneficiaries.
The issues include (1) who would be eligible and, among those, how
many might be attracted to FEHBP and might choose to enroll; (2) how
premiums would be set and what the cost-sharing arrangement would be;
(3) whether FEHBP enrollees would be prohibited from also using
military health care; and (4) whether the FEHBP option should be
tested before deciding on nationwide implementation.
DEFINING ELIGIBILITY AND
PROJECTING ENROLLMENT
---------------------------------------------------------- Letter :3.1
Each FEHBP option's first consideration, tempered by overall cost
considerations, is who would receive the benefit. Many of the bills
would provide eligibility only for Medicare-eligible beneficiaries
aged 65 and older--approximately 1.3 million retirees, dependents,
and survivors.\18 The Military Coalition, an alliance of beneficiary
associations including The Retired Officers' Association and the
National Military Family Association, favors this approach as
responding to the immediate needs of persons with declining direct
care system access and as a way to reduce the option's price tag.\19
Other bills would extend FEHBP eligibility beyond Medicare-eligibles
to certain other military beneficiaries.\20 The maximum number of
eligible beneficiaries under the bills studied would range from an
estimated 50,000, under the most limited demonstration bills, to
almost 3 million, under the bill with the broadest eligibility
definition.\21
Projecting FEHBP enrollment under the various options requires making
assumptions about beneficiaries' behavior, including their coverage
choices, cost consciousness, and risk aversion. Many
TRICARE-eligible beneficiaries have care alternatives that they may
find more attractive than FEHBP. For those who are most concerned
with cost and are eligible for TRICARE Prime, Prime would likely be
more attractive, because most FEHBP plans would cost more than
TRICARE Prime's enrollment fee. For example, FEHBP's lowest-cost HMO
is Foundation Health, available in South Florida, at $279 per year
for a single enrollee and $787 per year for a family. This compares
with Prime, which has no annual fee for active duty singles or
families and a fee of $230 for single retirees or $460 for retiree
families. And Prime's guarantee of priority access to free care in
military facilities may be more attractive to many who live near
facilities than FEHBP's plan choices. Alternatively, a beneficiary
could participate in TRICARE Standard or Extra for no annual fee and
make use of available free care and prescriptions at a nearby
military facility. In contrast, FEHBP's lowest-cost nationwide
fee-for-service plan, Mail Handlers Standard, costs $1,030 for family
coverage, and the lowest-cost point-of-service plan, United
HealthCare Puerto Rico, is $1,019 per year. These plans, like
TRICARE Standard and Extra, may require beneficiaries to meet an
annual deductible and may charge copayments typically ranging from 20
to 30 percent of care costs.
Also, persons with private insurance coverage may find their costs
lower than those under FEHBP--many large employers pay a greater plan
premium share than the government's 72 percent of FEHBP premiums.
However, the benefits covered under some private plans may not be as
generous as FEHBP, and some studies have indicated a decline in
employer coverage of retiree health benefits.\22 Finally, for
beneficiaries generally dissatisfied with their access to care or
choices under TRICARE or private plans, FEHBP's wide array of choices
would likely be more attractive.
FEHBP would likely be more attractive and beneficial to
Medicare-eligible beneficiaries, who also may have alternative health
care choices but find them less comprehensive and more costly than
FEHBP. FEHBP's advantages for senior beneficiaries include
prescription drug coverage and catastrophic limits on out-of-pocket
costs: Medicare covers neither. And on the basis of FEHBP's current
federal employee cost-sharing provisions, senior retirees could pay
lower premiums for more coverage than they would under private
Medigap policies that they purchase to supplement Medicare's
coverage. For example, in 1997 an enrollee's share of the premium
for the five largest plans in FEHBP with comprehensive coverage,
including prescriptions and some dental coverage, ranged from about
$370 to $1,750, compared with Medigap plans, which have premiums
ranging from $750 to almost $3,000 but offer no dental benefits and
limit prescription coverage to 50 percent of drug costs, after
payment of a $250 deductible. Medigap plans also have maximum
benefit limits on prescriptions ranging from $1,250 to $3,000.
Further, for retirees with both Medicare part A (hospital) and part B
(physician and laboratory services and outpatient care) coverage,
most FEHBP fee-for-service plans operate as a "wraparound" policy to
Medicare, providing comprehensive coverage and waiving most
copayments and deductibles.\23 For those who have Medicare part A but
who have not purchased part B, FEHBP plans generally do not waive the
copayments and deductibles but provide the same coverage as for
non-Medicare enrollees.
Alternatively, many Medicare-eligible beneficiaries can now join an
HMO or other health care plan under the expanded Medicare+Choice
program. Approximately 50 percent of Medicare-eligible military
retirees live in a county in which 10 percent or more Medicare
beneficiaries are enrolled in Medicare HMOs, indicating that they
have access to at least one Medicare HMO. Many such plans offer
coverage comparable to FEHBP HMOs, including prescription drugs,
vision care, and even dental care at low or zero premiums.\24 A
significant unknown is the extent to which these plans' growing
availability might affect beneficiaries' decisions to enroll in
FEHBP. Further, those who already have health care insurance paid in
full or in part by their current employer--about 17 percent of older
retirees--might not elect FEHBP if it cost more than their current
coverage. Also, some number of senior retirees will have guaranteed
access to DOD health care by enrolling in the recently authorized
Medicare subvention demonstration.\25
Finally, those with high risk tolerance, in good health, and living
near large military facilities may forgo FEHBP and continue taking
their chances in gaining access to free space-available care.
--------------------
\18 H.R. 76, H.R. 1456, H.R. 1766, H.R. 2128, S. 224, and S.
1334.
\19 Some organizations represented by the Military Coalition also
support other bills. For example, the National Military Family
Association also supports offering FEHBP to all active duty family
members and retirees and their families.
\20 H.R. 1356, H.R. 1631, and H.R. 2100.
\21 H.R. 1766 and S. 1334 are the most limited; H.R. 1631 has the
broadest eligibility definition.
\22 See Retiree Health Insurance: Erosion in Employer-Based Health
Benefits for Early Retirees (GAO/HEHS-97-150, July 11, 1997).
\23 The beneficiary is responsible for the Medicare part B
premium--about $526 per year in 1998.
\24 The beneficiary is responsible for the Medicare part B premium.
\25 Balanced Budget Act of 1997, P.L. 105-33, section 4015.
BILL COST-SHARING AND
PREMIUM PROVISIONS
---------------------------------------------------------- Letter :3.2
Premium-setting and cost-sharing provisions also differ under the
bills and would likely affect beneficiaries' decisions about
participating in FEHBP. OPM, which administers FEHBP, would set the
premiums for plans that participate in the military FEHBP option
separately from the federal groups' premiums. According to OPM, if a
sizable group were added to FEHBP, it would be appropriate to keep
those enrollees separate from the federal participants, called a risk
pool. A separate risk pool--required under all but two of the bills
(H.R. 1631 and H.R. 2100)--would protect federal participants from
large changes in premiums because of a military population that may
have different health care usage and cost patterns.
Most of the bills stipulate separate risk pools until a cost and
health care use pattern similar to that of civilian FEHBP enrollees
has been established and until merging with the federal civilian pool
can be safely done. Thus, military beneficiaries' premiums could be
different from those under the federal civilian program. OPM
officials told us that they could not prospectively estimate military
enrollees' potential premiums without a final plan and detailed data
on military beneficiaries' historical health care use patterns.
However, because not all military beneficiaries get their care from
DOD, this historical use data may not be available. Despite past
studies showing higher health care use by military beneficiaries than
the civilian population, OPM believes that the initial military
premiums would not be markedly different from the federal pool and
that future use by military FEHBP enrollees, because of the premium
and copayment effects on usage patterns, would approximate that of
the federal pool.
The bills' provisions for sharing premium costs between DOD and
enrollees also differ. Under some bills, the enrollee premium amount
for military beneficiaries would be the same as for federal civilians
enrolled in the same FEHBP plans, with DOD contributing the
remainder, up to the total premium.\26 Under this arrangement,
DOD's--and thus the government's--share of the premium could be
greater than the 72 percent the government now pays on average toward
civilian FEHBP premiums and more in total dollars if, under separate
risk pools, the military premiums are higher than civilian premiums.
Other bills could move the cost burden to beneficiaries by limiting
DOD's share to what is now paid on civilian FEHBP enrollees'
behalf.\27 Thus, should the military program's premiums be higher
than in the federal civilian plan, beneficiaries would likely pay
more than civilian enrollees. Another bill's premium-sharing
arrangement would have the total premium set at civilian FEHBP levels
and allow DOD to determine its premium share.\28 Under this
arrangement, DOD could set different shares for different beneficiary
groups such as families of enlisted personnel and officers or active
duty families and retirees and their families.
--------------------
\26 H.R. 76, H.R. 1356, H.R. 1456, H.R. 2128, and S. 224.
\27 H.R. 1766 and S. 1334.
\28 H.R. 1631
POTENTIAL CONCURRENT USE OF
FEHBP AND MILITARY HEALTH
CARE
---------------------------------------------------------- Letter :3.3
Another key issue is whether military FEHBP participants would also
be allowed to continue using military facilities on a space-available
basis or enroll in TRICARE or both.\29 In commenting on past
proposals similar to the bills, OPM has stated that military
enrollees should be clearly committed to FEHBP and that it should be
their exclusive vehicle for health care coverage. Also, OPM
officials told us that military beneficiaries who enroll in FEHBP
should, if they disenroll, be prevented from reenrolling in FEHBP.
Disenrollment is allowed under each of the bills, and most bills
propose that FEHBP cancellation be irrevocable. Nonetheless, all but
three would allow concurrent DOD and FEHBP care use.\30
Current law allows eligible military beneficiaries access to
space-available military facility care and TRICARE civilian care,
regardless of other insurance coverage. Also, military retirees who
are now active or retired federal employees and are FEHBP enrollees
have both benefits--although neither OPM nor DOD has analyzed how
much they use either care source. Such dual use and the lack of a
total enrolled population have exacerbated the MHS's recurring
problems with respect to estimating and budgeting for care use and
containing costs. DOD estimates that about two-thirds of eligible
beneficiaries who are not active duty members rely on the DOD system,
although the numbers of those who partially use the system along with
other benefits is likely much larger.
Should concurrent DOD and FEHBP use be allowed, the government would
in effect be providing affected beneficiaries with coverage that is
duplicative and unnecessarily costly. If beneficiaries were required
to elect either FEHBP or DOD care, such benefit redundancy and
associated costs could be guarded against. Precedent for such a
requirement already exists in DOD's Uniformed Services Treatment
Facilities (USTF) managed care program, under which enrollees agree
to receive all their care from that program and forgo DOD care and
Medicare.\31
Allowing concurrent FEHBP and DOD care use also has DOD sizing and
readiness implications.\32 Should many current DOD care users switch
to FEHBP, prohibiting concurrent use would allow DOD to downsize or
close additional military facilities to help fund FEHBP costs. As it
is, DOD's $15.6 billion annual MHS appropriation is not sufficient to
fund care for all DOD-eligible beneficiaries; it will fund only those
now using the system. Therefore, should FEHBP attract beneficiaries
not now using DOD, then system downsizing may not be feasible and the
added costs could be significant.
Should concurrent use be allowed, however, some revenue could be
generated by DOD's collecting third-party payments from FEHBP plans.
FEHBP plans are now permitted to reimburse MTFs that provide care to
dually eligible beneficiaries. In such cases, the FEHBP plan is the
primary insurer. In contrast, when a Medicare-eligible beneficiary
is also enrolled in FEHBP, Medicare is usually the primary payer and
the FEHBP plan is the secondary payer. Because MTFs are currently
prohibited by law from billing Medicare (except under the Medicare
subvention demonstration), revenue from Medicare-eligibles enrolled
in FEHBP plans would be less than that from younger beneficiaries.
Also, DOD facilities are usually not part of FEHBP HMOs' provider
networks and thus would likely receive reimbursement only for
providing emergency care to DOD eligibles enrolled in those plans.
Moreover, should large numbers of DOD beneficiaries enroll in FEHBP
and reduce their DOD care use without consequent direct care
downsizing, DOD might need to seek out FEHBP enrollees who are also
DOD beneficiaries in order to maintain facility use levels and might
need to continue to aggressively seek FEHBP plan reimbursement to
help offset its overall costs.
--------------------
\29 Because TRICARE Prime has no enrollment fee for active duty
dependents, those who are attracted to FEHBP for its choice of plans
and coverage but who still want priority for virtually free care in
military facilities might pay for a very low cost FEHBP plan and also
enroll in TRICARE.
\30 H.R. 1631, H.R. 2128, and S. 224 would prohibit concurrent use
of DOD and FEHBP.
\31 See Defense Health Care: Medicare Costs and Other Issues May
Affect Uniformed Services Treatment Facilities' Future
(GAO/HEHS-96-124, May 17, 1996).
\32 In June 1997, we reported that the MHS's current size and
structure relative to its wartime mission are being evaluated and
that further downsizing in line with reduced wartime needs is
predicted. The training needs of DOD physicians and the "medical
readiness" tenet that military facilities have a mix of patients of
all ages to keep physicians ready for wartime may be difficult to
meet if large numbers of beneficiaries receive care outside MHS. See
GAO/HEHS-97-134, June 20, 1997.
BENEFIT EQUITY
---------------------------------------------------------- Letter :3.4
In creating the TRICARE Prime benefit, members of the Congress and
DOD sought reduced out-of-pocket costs for all beneficiaries,
including an enrollment fee of zero for active duty members and their
families and low fees for retirees and their dependents. The
resulting TRICARE Prime fees are two-tiered. Active duty members and
their families pay no annual fees or deductibles, while retirees
annually pay $230 per individual or $460 per family.
Most of the bills we reviewed would structure the FEHBP option such
that military enrollees would pay the same dollar amount as similarly
situated federal enrollees--that is, no payment differential would be
made based on grade or position.\33 Currently, civilian enrollees in
FEHBP plans pay the same amount per plan regardless of their grade or
position. Other bills would authorize DOD to determine the premium
share that it would pay, thus enabling it, should it choose, to
structure premiums so that they account for enrollees' beneficiary
category, such as is done in TRICARE.\34
The premium amounts charged to military beneficiaries would likely
have significant effects on how many chose to enroll in FEHBP.
Moreover, beneficiary groups have expressed concern that FEHBP plans
may be less affordable for enlisted members than for officers.\35
Nonetheless, such groups believe that many beneficiaries would be
willing to pay the added FEHBP costs for its choice and care
availability.
--------------------
\33 H.R. 76, H.R. 1356, H.R. 1456, H.R. 2128, and S. 224.
\34 H.R. 1631, H.R. 1766, and S. 1334.
\35 Approximately 84 percent of active duty members are enlisted, and
70 percent of retirees are former enlisted members.
TESTING AN FEHBP OPTION
---------------------------------------------------------- Letter :3.5
Some of the bills authorize a demonstration program before deciding
on full implementation.\36 In our view, this would be prudent,
particularly with respect to determining the extent of beneficiaries'
interest in the program and, thus, providing a better basis for
estimating program costs. But enough carefully chosen sites will be
needed so that the results might be generally representative of a
program implemented nationwide. Health care use and choices tend to
be relatively local and, thus, a test with too few localities and
types of health care options could have results that would not be
replicated across the country. However, limiting enrollment and
sites would allow the test to be appropriately isolated, would allow
its results to be compared with control sites, and would otherwise
allow it to be properly studied.
The demonstration's evaluation would be critical to determining
whether to authorize more widespread use of the program. Such an
evaluation, however, would need to have open access to all
enrollment, use, and cost records of DOD, OPM, and the participating
FEHBP plans.
--------------------
\36 H.R. 1766, H.R. 2100, and S. 1334.
AGENCY COMMENTS
------------------------------------------------------------ Letter :4
Officials from DOD and OPM provided oral comments on a draft of this
report. DOD and OPM generally agreed with our representation of the
facts and related issues. They provided technical comments that we
have incorporated where appropriate.
---------------------------------------------------------- Letter :4.1
Major contributors to this report were Catherine O'Hara,
Evaluator-in-Charge, and Mary Reich, Office of the General Counsel.
If you have any questions or would like to discuss the matters
further, please call me at (202) 512-7101 or Dan Brier, Assistant
Director, at (202) 512-6803.
Sincerely yours,
Stephen P. Backhus
Director, Veterans' Affairs
and Military Health Care Issues
THE BILLS IN THE 105TH CONGRESS
=========================================================== Appendix I
We reviewed nine bills introduced in the 105th Congress that would
authorize enrollment in FEHBP plans for selected military beneficiary
groups. In this appendix, we provide our detailed analysis of each
bill, including eligibility and premium-sharing provisions, whether
concurrent use of DOD health care is allowed, and the implications
for MHS operations and beneficiary costs.
BILLS AUTHORIZING NATIONWIDE
IMPLEMENTATION
--------------------------------------------------------- Appendix I:1
H.R. 76: REP. JAMES P.
MORAN
------------------------------------------------------- Appendix I:1.1
This bill allows nationwide FEHBP participation by certain
Medicare-eligible military beneficiaries. There are approximately
1.3 million such beneficiaries; however, the bill allows OPM to limit
enrollment if it deems this necessary for managing the program. The
bill also allows enrollees to continue receiving services from
military medical facilities, DOD's civilian TRICARE network, and
TRICARE Standard providers--while permitting DOD to bill FEHBP plans
for care from any such sources. Military enrollees would be a
separate risk pool with separately calculated premiums.
Beneficiaries would pay the same dollar amount toward plan premiums
as similarly situated federal employees, and DOD would pay the amount
remaining in the total premium after the enrollees' contribution. A
beneficiary's decision to disenroll from FEHBP would mean that he or
she could not return to FEHBP. With disenrollees barred from
reenrolling, the system's stability would be maintained. Finally,
the bill requires an extensive evaluation to measure participation,
out-of-pocket costs, and overall government costs, as well as an
analysis of the program's effects on the military health care
system's cost and access and use rates.
While military beneficiary groups in the Military Coalition
extensively support the enactment of legislation authorizing
nationwide FEHBP participation immediately, they believe that the
approach's high potential cost would likely doom any bill's passage.
Thus, they have chosen to support Representative Moran's more limited
demonstration legislation, H.R. 1766, to gather evidence that the
program is cost-effective.
H.R. 1356: REP. J. C.
WATTS, JR.
------------------------------------------------------- Appendix I:1.2
This bill approves nationwide FEHBP participation for
Medicare-eligible military beneficiaries, other beneficiaries who
cannot enroll in TRICARE because of capacity or geographic limits,
and those who are not guaranteed care access under TRICARE Standard
comparable to the FEHBP plan with the most generous benefit, such as
the Blue Cross and Blue Shield high-option plan. Premium-setting and
sharing provisions are the same as for H.R. 76. Also, the bill
contains reporting requirements identical to those in H.R. 76. In
addition, the bill mandates that TRICARE Standard benefits be
comparable to the highest benefits offered under FEHBP and that
provider reimbursement rates be the same as the highest FEHBP plan.
Provisions requiring that TRICARE Standard benefits and
reimbursements be equal to those of the highest FEHBP plan's level
would be difficult and costly to implement. While the benefit
package offered under a plan such as FEHBP's Blue Cross and Blue
Shield high option may be more generous than TRICARE in terms of
covered services and copayments, the option's total premium cost--at
$7,250 annually for a family (enrollee pays $3,551, government pays
$3,699)--is one of FEHBP's highest. And participation in TRICARE
Standard and Extra requires no premiums. Thus, improving the TRICARE
Standard benefit without a comparable increase in beneficiary
contributions would be likely to increase DOD's total cost.
Further, requiring that provider reimbursements be equal to the
highest option under FEHBP would entail determining actual provider
reimbursements under FEHBP. This would be extremely difficult
because of the wide range of reimbursement methods across plans,
because plans guard this information as proprietary, and because OPM
does not maintain records on this type of information. Further, if
current rates are bringing about desired care access and quality
outcomes, then increasing them to coincide with the highest FEHBP
rates becomes cost-ineffective.
Eligibility under this bill's provisions would also be likely to
extend to few active duty dependents or younger retirees, because the
required benefit change would mean that no TRICARE-eligible
beneficiary would have a benefit level less than Blue Cross and Blue
Shield high option. Further, where TRICARE Prime is available,
according to DOD, no eligible beneficiary has been refused
enrollment. Also, TRICARE Prime availability is expanding and is now
available in 90 percent of the zip codes in many regions, and new
contracts require coverage wherever active duty members live. Thus,
only Medicare-eligible beneficiaries would be likely to be eligible
for FEHBP under the bill's terms.
Beneficiary associations affiliated with the Veterans' Alliance, such
as the National Association of the Uniformed Services, favor
Representative Watts's bill because it would restore the TRICARE
Standard benefit level to that in the legislation authorizing the
civilian health insurance benefit for military beneficiaries--the
Dependents' Medical Care Act of 1956. Further, they support
immediate enactment and nationwide FEHBP implementation instead of an
initial demonstration because many senior beneficiaries would benefit
immediately rather than in a phased-in way through a demonstration.
H.R. 1456: REP. WILLIAM
M. THORNBERRY
------------------------------------------------------- Appendix I:1.3
This bill authorizes nationwide FEHBP participation for about 1.3
million Medicare-eligible military retirees, dependents, and
survivors at the same contribution amount as federal employees and
retirees. There would be a separate risk pool, and DOD would pay the
difference between enrollees' contributions and the total premiums.
FEHBP enrollees would continue to be eligible for military
facilities' space-available care, and DOD would be permitted to bill
FEHBP plans for care that its facilities provided to those enrollees.
Also, the bill authorizes Medicare reimbursement for
Medicare-eligible beneficiaries cared for in the military medical
care system--known as Medicare subvention. Further, the bill
requires DOD to pay the late-enrollment penalties for beneficiaries
who fail to enroll in Medicare part B, the Medicare portion covering
physicians' visits, outpatient care, laboratory tests, and home
medical equipment. This bill requires that DOD and OPM conduct an
annual study of the FEHBP provisions and that improvements be made to
the TRICARE program similar to those under H.R. 1356. If those
changes are not made, the bill requires that beneficiaries other than
Medicare-eligibles be allowed to participate in FEHBP as well.
The 1997 Balanced Budget Act authorized a 3-year demonstration of
Medicare subvention at six sites beginning in 1998. The passage of
H.R. 1456, therefore, would likely supersede the demonstration
before its viability and cost-effectiveness data could be studied.
We are now evaluating this demonstration and are required to provide
annual reports to the Congress during its 3-year duration. Our June
1997 report on alternatives for military retirees' health care
analyzed the Medicare subvention approach to providing senior
retirees' care at military facilities and compared that approach with
the FEHBP option, among others.\37
Enrollment in Medicare part B is voluntary. However, if
beneficiaries do not enroll at age 65, when they are first eligible,
they must pay a penalty should they later do so. That penalty is
substantial, calculated at 10 percent of the monthly premium for each
year past the first year of eligibility. Thus, a 65-year-old
beneficiary who does not enroll and chooses to do so at age 70 faces
a monthly premium 50-percent higher than the normal premium.
According to a recent DOD survey, approximately 10 percent of
military retirees aged 65 and older do not have Medicare part B.
FEHBP participation does not require that Medicare-eligible
beneficiaries be enrolled in part B, and neither does this bill.
However, because each fee-for-service FEHBP plan waives its hospital
and medical deductibles and copayment for members enrolled in part A
and part B, if beneficiaries do have part B and choose such a plan as
Blue Cross and Blue Shield, they would have nearly 100-percent
coverage. Because part B is not required but adds to the benefit for
enrollees, having DOD pay the part B penalties would seem to be an
unnecessary expense for DOD.
--------------------
\37 GAO/HEHS-97-134, June 20, 1997.
H.R. 1631: REP. JOHN L.
MICA
------------------------------------------------------- Appendix I:1.4
This bill authorizes FEHBP participation for all active duty
dependents, retirees and their dependents, and survivors. It also
extends the FEHBP option to certain former spouses of military
members and retirees and to persons eligible for continued DOD health
care system coverage. We estimate that about 6.5 million
beneficiaries would be eligible for participation. The bill,
however, temporarily limits the total number of program participants
to 100,000 the first year, 200,000 the second year, and 400,000 the
third year, with participants to be selected randomly from all those
who are eligible and seeking to enroll.
The FEHBP enrollees are ineligible for military facility care or
TRICARE and must stay in FEHBP for a minimum of 3 years. However,
the bill does permit DOD to contract with plans to provide certain
services to military beneficiaries enrolled in FEHBP plans. If FEHBP
coverage is dropped, beneficiaries could not reenroll in FEHBP until
the 3-year period passes. Further, eligibility for DOD care cannot
be restored until the 3-year period passes. Thus, beneficiaries who
disenrolled from FEHBP before the end of the 3-year enrollment term
would be without DOD or FEHBP health care coverage until the end of
that period. The total FEHBP premium charges are the same as in the
civilian federal program. Beneficiaries' premium charges are based
on the contribution made by DOD. The bill does not require DOD to
contribute a particular amount toward the FEHBP plan but allows the
Secretary of Defense to determine the amount of DOD's contribution.
Comparatively, this bill offers the least restrictive eligibility,
and it would be phased in over 3 years. The phase-in period would
allow for testing and needed program refinements before full
implementation. Further, requiring beneficiaries to elect either the
military care system or FEHBP would help stabilize both programs'
beneficiary population and aid in forecasting costs and care use.
H.R. 2128: REP. CLIFFORD
STEARNS
------------------------------------------------------- Appendix I:1.5
This bill authorizes FEHBP participation for the 1.3 million
Medicare-eligible DOD beneficiaries and prohibits concurrent
eligibility for military facility care, but FEHBP disenrollment is
irrevocable. Beneficiaries' FEHBP premium share is the same amount
as for similarly situated federal employees, and a separate military
enrollee risk pool would be established. DOD would contribute the
remaining amount up to the total premium. Like all the bills but
H.R. 1631 and H.R. 2100, it requires DOD and OPM to extensively
study the program each year of its operation. Representative Stearns
has also introduced a bill, H.R. 2100, that authorizes an FEHBP
demonstration.
S. 224: SEN. JOHN W.
WARNER
------------------------------------------------------- Appendix I:1.6
This bill authorizes FEHBP participation by Medicare-eligible
beneficiaries in lieu of DOD facility care. The bill allows OPM to
limit enrollment if necessary for management purposes. Enrollees'
FEHBP premiums are the same amount as for similarly situated federal
employees, and a separate military enrollee risk pool would be
established. DOD would contribute the remaining amount up to the
total premium. Beneficiaries who disenrolled from FEHBP and returned
to the DOD system would not be permitted to reenroll in FEHBP.
Annual DOD and OPM reports, similar to those of H.R. 2128, would
also be required.
BILLS AUTHORIZING FEHBP
DEMONSTRATION PROJECT
--------------------------------------------------------- Appendix I:2
H.R. 1766: REP. JAMES P.
MORAN AND S. 1334: SEN.
KIT BOND
------------------------------------------------------- Appendix I:2.1
These two bills are identical and authorize a 2- to 3-year
demonstration program for Medicare-eligible beneficiaries at two
sites. The bills set forth that the sites should be (1) an area that
includes one or more military medical facilities and contains fewer
than 25,000 eligible beneficiaries and (2) an area that does not
include any military medical facility but contains fewer than 25,000
who are eligible. Enrollees do not need Medicare part B coverage,
but the bills require that enrollees with such coverage retain it
throughout the demonstration. A separate risk pool would be
established, and DOD's premium share could not exceed that paid for a
civilian FEHBP enrollee in the same plan. Therefore, if their total
premiums were higher, military enrollees might pay more for FEHBP
plans than civilians. Those who disenrolled from FEHBP could not
reenroll during the demonstration. These bills also require annual
DOD and OPM studies to address participation rates, beneficiary and
government costs, and a cost comparison with other care alternatives.
Limiting enrollment under these demonstration bills limits the
government's cost and provides some evidence of military
beneficiaries' interest in the program. But using only two test
sites might limit the usefulness for predicting the effects of
nationwide implementation. Because Medicare and FEHBP choices vary
widely in different areas of the country and because military
facilities also differ markedly, it would be difficult to select
sites from among those meeting the bills' proposed criteria where
results would be representative of the country as a whole. Only the
San Diego Naval Hospital, California, and MacDill Air Force Base,
Florida, catchment areas and six noncatchment areas--northern and
southern California, eastern Florida, eastern Texas, and the states
of Georgia and Pennsylvania--have more than 25,000 Medicare-eligible
beneficiaries. Thus, all other areas in the continental United
States would be possible test sites.
H.R. 2100: REP. CLIFFORD
STEARNS
------------------------------------------------------- Appendix I:2.2
This bill authorizes a 2-year FEHBP test in at least one DOD health
care region for all Medicare-eligible beneficiaries in the test area
and active duty dependents and retirees under age 65 who live in the
test region but outside the TRICARE Prime option's availability
range. The bill does not address cost-sharing requirements, whether
concurrent eligibility for military facility care would be allowed,
or whether separate risk pools would be established. Unlike the
other bills, demonstration participants could also use medical
savings accounts. Participants are allowed up to a 25-percent tax
credit for payments made annually to their medical savings accounts.
The bill requires DOD, in consultation with the Treasury Department,
to prepare a demonstration implementation plan within 6 months of
enactment.
Testing the program in one or more DOD health care regions might
provide a better basis for determining participation rates and
program costs than would the more limited H.R. 1766 and S. 1334
tests, but it might not be possible to choose regions that typify all
DOD's regions. Which regions are selected would also determine how
many younger beneficiaries would be eligible for the demonstration,
because TRICARE Prime availability still varies markedly from region
to region. In regions that saw early implementation of TRICARE,
offering the Prime benefit was generally not required outside
military facility catchment areas.
COMPARISON OF TRICARE COVERAGE AND
COSTS
========================================================== Appendix II
Table II.1
Comparison of TRICARE Prime Coverage and
Costs to Selected FEHBP HMO Plans
TRICARE Prime FEHBP
------------------------------- ------------------------------------
Officer
and
Junior senior Kaiser
enlisted enlisted Foundatio Foundatio Prudential
active active Retirees n Health n HMO, HealthCare HMO
duty duty and HMO, Californi (Mid-
families families family Florida a Atlantic)
--------- --------- --------- --------- --------- --------- --------------
Annual $0/$0 $0/$0 $230/ $279/ $465/ $671/
fee or $460 $787 $1,111 $1,552
premium
(single/
family)
Catastrop $1,000 $1,000 $3,000 Limited $1,500 $3,308 self;
hic limit to stated self $8,593 family
on out- copayment $3,000
of- s family
pocket
costs
Outpatien $6 $12 $12 $3 $5 $5 primary;
t visits $10 specialty
Emergency $10 $30 $30 $25 $25 $50 copayment
room copayment copayment and charges
visits and and not covered
charges charges
not not
covered covered
Mental $12 $25 $25 $20 $10/ 20% visit 1-
health 40-visit individua 5; 35% visit
visits limit l or $5/ 6-30; 50%
group visit 31+
therapy;
40-visit
limit
Ambulator $25 $25 $25 $0 $5 $0
y surgery
Prescript $5 (30- $5 (30- $9 (30- $5 generic
ions day day day $5 $5 drugs;
(free in supply supply supply $10 brand name
military retail); retail); retail); drugs
facilitie $4 (90- $4 (90- $8 (90-
s to all day day day
beneficia supply, supply, supply,
ries) mail- mail- mail-
order) order) order)
Inpatient $11 ($25 $11 ($25 $11 ($25 $0 $0 $0
per diem, minimum) minimum) minimum)
general
--------------------------------------------------------------------------------
Table II.2
Comparison of TRICARE Extra and Standard
Coverage and Costs to FEHBP's Blue Cross
and Blue Shield Standard Option Plan
TRICARE FEHBP
---------------------------------------------- ----------------
Officer and Blue Cross and
Junior senior Blue Shield
enlisted enlisted Standard Option
active duty active duty Retirees and Plan (Non-PPO/
families families family PPO)
-------------- -------------- -------------- -------------- ----------------
Annual $0 $0 $0 Non-PPO and
enrollment fee PPO:
or premium $604 single,
$1,471 family
Deductible $50 single; $150 single; $150 single; Non-PPO and
$100 family $300 family $300 family PPO:
$200 single,
$400 family
Catastrophic $1,000 family $1,000 family $7,500 family Non-PPO: $3,750
limit single or
family.
PPO: $2,000
Outpatient Standard: 20% Standard: 20% Standard: 25% Non-PPO: 25%.
care of allowable of allowable of allowable PPO: $10 per
charge. charge. charge. visit
Extra: 15% of Extra: 15% of Extra: 20% of
negotiated fee negotiated fee negotiated fee
Prescription Standard Standard Standard Non-PPO and PPO:
drugs retail (30- retail (30- retail (30- 20% after $50
(free in day supply): day supply): day supply): single or $100
military pay 20% after pay 20% after pay 25% after family annual
facilities to paying paying paying deductible at
all deductible. deductible. deductible. preferred
beneficiaries) Extra network Extra network Extra network pharmacies.
retail (30- retail (30- retail (30- Mail order: $12
day supply): day supply): day supply): for 90-day
15% cost share 15% cost share 20% cost share supply, no
after paying after paying after paying deductible
deductible. deductible. deductible.
Mail order Mail order Mail order
(90-day (90-day (90-day
supply): $4 supply): $4 supply): $8
Inpatient care Greater of $25 Greater of $25 Standard: Non-PPO: 25% of
or $9.90 per or $9.90 per lesser of professional
day, Standard day, Standard $360/day or fees, 0%
or Extra or Extra 25% of billed copayment after
charges plus $250/admission
25% of deductible.
professional PPO: 5% of
fees. Extra: professional
lesser of fees, no
$250/day or copayment or
25% of billed deductible
charges plus
20% of
professional
fees
--------------------------------------------------------------------------------
HISTORICAL COMPARISON OF THE
DEFENSE HEALTH PROGRAM AND FEHBP
========================================================= Appendix III
DOD AND FEHBP POPULATIONS HAVE
DECLINED RECENTLY
------------------------------------------------------- Appendix III:1
From a high in 1992, both DOD and FEHBP have experienced recent
declines in beneficiary numbers (see fig. III.1). Not all persons
eligible for DOD care actually use it, because they live too far from
military facilities, have other sources of health insurance and
health care, or face resource limits in gaining access to military
facilities. DOD has estimated that about 75 percent of eligible
beneficiaries use the DOD system. More than 85 percent of federal
employees participate in FEHBP.
Figure III.1: DOD and FEHBP
Beneficiaries, Fiscal Years
1984-98
(See figure in printed
edition.)
Notes: Data for 1997 and 1998 are estimates. DOD-eligibles include
active duty personnel, their dependents, and retirees and their
dependents and survivors. Not all those eligible for care from DOD
use it, because they live too far from a DOD facility, have other
sources of health insurance and care, or face limited access because
of a lack of DOD resources. The term "DOD users" represents a DOD
estimate of the number of eligible beneficiaries who rely on DOD for
their care. FEHBP enrollees represent the federal employees and
retirees who are enrolled in an FEHBP plan and their dependents.
DEFENSE HEALTH AND FEHBP COSTS
HAVE MORE THAN DOUBLED SINCE
1984
------------------------------------------------------- Appendix III:2
Like the private health care industry, both DOD and FEHBP have
experienced increases in their costs since 1984 (see fig. III.2).
In the past 5 years, however, DOD's costs have increased almost 4
percent, while FEHBP's have grown by almost 14 percent.
Figure III.2: DOD Health and
FEHBP Costs, Fiscal Years
1984-98
(See figure in printed
edition.)
Notes: Data for 1997 and 1998 are estimates. DOD's costs are
indicated by its health budget, which includes all DOD medical
activities, including readiness, veterinary, training, occupational
health, construction, procurement, and peacetime health care services
to beneficiaries. Recent DOD budget studies have found that
approximately 22 percent of DOD's health care budget pays for
activities uniquely related to wartime and is not used for providing
peacetime health care. The budget shown has not subtracted out those
unique military costs. FEHBP's costs are in the sum of premiums paid
by the government and enrollees plus the administrative costs
incurred by OPM. It does not include the costs to federal agencies
of administering FEHBP nor does it include beneficiary out-of-pocket
costs after premium payments.
DOD AND FEHBP PER CAPITA COSTS
ARE ALSO MORE THAN DOUBLE THOSE
OF 1984
------------------------------------------------------- Appendix III:3
On a per person basis, DOD and FEHBP have both experienced increases
of more than 100 percent since 1984 (see fig. III.3). In the past 5
years, DOD's cost per user has risen by about 10 percent, while
FEHBP's has grown almost 16 percent.
Figure III.3: DOD Health and
FEHBP per Capita Costs, Fiscal
Years 1984-98
(See figure in printed
edition.)
Notes: Data for 1997 and 1998 are estimates. The per capita costs
for DOD have not subtracted out the unique military costs that are
not comparable to FEHBP's costs. Therefore, the per capita costs for
DOD may be overstated. Further, DOD beneficiaries pay very low or no
premiums for DOD care, thus raising the cost to DOD of providing the
peacetime benefit.
RELATED GAO PRODUCTS
Defense Health Care: Reimbursement Rates Appropriately Set; Other
Problems Concern Physicians (GAO/HEHS-98-80, Feb. 26, 1998).
Defense Health Care: DOD Could Improve Its Beneficiary Feedback
Approaches (GAO/HEHS-98-51, Feb. 6, 1998).
Defense Health Care: TRICARE Resource Sharing Program Failing to
Achieve Expected Savings (GAO/HEHS-97-130, Aug. 22, 1997).
Defense Health Care: Actions Under Way to Address Many TRICARE
Contract Change Order Problems (GAO/HEHS-97-141, July 14, 1997).
Military Retirees' Health Care: Costs and Other Implications of
Options to Enhance Older Retirees' Benefits (GAO/HEHS-97-134, June
20, 1997).
Defense Health Care: Limits to Older Retirees' Access to Care and
Proposals for Change (GAO/T-HEHS-97-84, Feb. 27, 1997).
Defense Health Care: New Managed Care Plan Progressing, but Cost and
Performance Issues Remain (GAO/HEHS-96-128, June 14, 1996).
Defense Health Care: Medicare Costs and Other Issues May Affect
Uniformed Services Treatment Facilities' Future (GAO/HEHS-96-124, May
17, 1996).
Defense Health Care: Effects of Mandated Cost Sharing on Uniformed
Services Treatment Facilities Likely to Be Minor (GAO/HEHS-96-141,
May 13, 1996).
Defense Health Care: TRICARE Progressing, but Some Cost and
Performance Issues Remain (GAO/T-HEHS-96-100, Mar. 7, 1996).
Defense Health Care: Despite TRICARE Procurement Improvements,
Problems Remain (GAO/HEHS-95-142, Aug. 3, 1995).
Defense Health Care: DOD's Managed Care Program Continues to Face
Challenges (GAO/T-HEHS-95-117, Mar. 28, 1995).
Defense Health Care: Issues and Challenges Confronting Military
Medicine (GAO/HEHS-95-104, Mar. 22, 1995).
*** End of document. ***