Defense Health Program: Reporting of Funding Adjustments Would Assist
Congressional Oversight (Letter Report, 04/29/99, GAO/HEHS-99-79).
Pursuant to a congressional request, GAO reviewed the apparent
discrepancies between the Department of Defense's (DOD) budget
allocations and the actual obligations for direct and purchased care,
focusing on: (1) the extent to which the Defense Health Program (DHP)
obligations have differed from DOD's budget allocations; (2) the reasons
for any such differences; and (3) whether congressional oversight of DHP
funding changes could be enhanced if DOD provided notification or budget
execution data.
GAO noted that: (1) between fiscal years 1994 and 1998, Congress
appropriated $48.9 billion for DHP operations and maintenance (O&M)
expenses; (2) during that period, DHP obligations at the subactivity
level, particularly for direct and purchased care, differed in
significant ways from DOD's budget allocations; (3) in total, about $4.8
billion was obligated differently--as either increases to or decreases
from the budget allocations DOD had developed for the 7 DHP
subactivities; (4) these funding changes occurred because of internal
DOD policy choices and other major program changes; (5) according to
DOD, its strategy was to fully fund purchased care activities within
available funding levels; (6) this strategy left less to budget for
direct care and other DHP subactivities; (7) TRICARE Management Activity
officials also told GAO that because the DHP has both direct and
purchased care components, whereby many beneficiaries can access either
system to obtain health care, it is difficult to reliably estimate
annual demand and costs for each component; (8) between 1994 and 1996,
purchased care obligations were $1.9 billion less than allocated because
of faulty physician payment rate and actuarial assumptions; (9) between
1994 and 1998, direct patient care obligations amounted to $1 billion
more than DOD had allocated--during a period of base closures and
military treatment facility downsizing--largely because DOD understated
estimated direct care requirements; (10) also, between 1996 and 1998,
DOD overestimated TRICARE managed care support (MCS) contract costs,
believing that contract award prices would be higher and implementation
would begin sooner than what occurred; (11) thus, most of the
unobligated MCS contract funds were used to defray higher than
anticipated Civilian Health and Medical Program of the Uniformed
Services obligations; (12) the movement of DHP funds from one
subactivity to another does not require prior congressional notification
or approval; (13) as a result, these sizable funding changes have
generally occurred without congressional awareness; (14) now that the
MCS contracts are implemented nationwide, DOD officials expect future
DHP obligations to track more closely with budget allocations; and (15)
current law and regulations will continue to allow DOD the latitude to
move funds between subactivities with little or not congressional
oversight.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-99-79
TITLE: Defense Health Program: Reporting of Funding Adjustments
Would Assist Congressional Oversight
DATE: 04/29/99
SUBJECT: Budget administration
Defense budgets
Managed health care
Health care programs
Health care cost control
Employee medical benefits
Congressional oversight
Military personnel
Health services administration
Reprogramming of appropriated funds
IDENTIFIER: Civilian Health and Medical Program of the Uniformed
Services
DOD TRICARE Program
Defense Health Program
CHAMPUS
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. This text was extracted from a PDF file. **
** Delineations within the text indicating chapter titles, **
** headings, and bullets have not been preserved, and in some **
** cases heading text has been incorrectly merged into **
** body text in the adjacent column. Graphic images have **
** not been reproduced, but figure captions are included. **
** Tables are included, but column deliniations have not been **
** preserved. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** **
** **
** with the message 'info' in the body. **
******************************************************************
DEFENSE HEALTH PROGRAM: Reporting of Funding Adjustments Would
Assist Congressional Oversight GAO/HEHS-99-79 United States
General Accounting Office
GAO Report to the Chairman, Subcommittee on Defense, Committee on
Appropriations, House of Representatives
April 1999 DEFENSE HEALTH PROGRAM Reporting of Funding Adjustments
Would Assist Congressional Oversight
GAO/HEHS-99-79
GAO/HEHS-99-79
GAO United States General Accounting Office
Washington, D. C. 20548 Health, Education, and Human Services
Division
B-281106 April 29, 1999 The Honorable Jerry Lewis Chairman,
Subcommittee on Defense Committee on Appropriations House of
Representatives
Dear Mr. Chairman: As one of the largest health care providers in
the nation, the Department of Defense (DOD) has experienced many
of the same challenges as the private sector health care industry
including rising costs, problems with access to care, and lack of
a uniform benefit. Between fiscal years 1994 and 1998, the
Congress appropriated $48.9 billion for DOD's Defense Health
Program (DHP) to provide medical and dental services to active
duty personnel and their families and retired military personnel.
These funds were appropriated for DHP operations and maintenance
(O& M) expenses. 1 They were primarily used to deliver patient
care in DOD's direct care system of service- operated military
treatment facilities (MTF) or to purchase care through the
Civilian Health and Medical Program of the Uniformed Services
(CHAMPUS) and seven TRICARE managed care support (MCS) contracts.
2
Each year, the Congress appropriates funds for DHP O& M expenses
after reviewing and making adjustments to DOD's budget request.
DOD's request estimates dollar requirements for the entire DHP and
shows how proposed spending would be allocated among seven major
health care subactivities (for example, direct care, purchased
care, training) and the 34 specific program elements. After the
Congress appropriates overall DHP funding, DOD allocates its
appropriation among the seven DHP subactivities and the 34 program
elements. These budget allocations generally align with the budget
request estimates, and DOD reports the allocated amounts back to
1 In addition to the DHP O& M appropriation, the Congress
appropriates funds to cover other military health system costs.
For example, in fiscal year 1999, the Congress appropriated a
total of about $15.9 billion for the military health system. This
included $9.9 billion for DHP O& M; $5.3 billion for military
personnel; $401 million for DHP procurement; $228 million for
military construction; and $19.4 million for research and
development.
2 DOD administered CHAMPUS as an insurance- like program to pay
for a portion of the care military families and retirees under age
65 received from private sector providers. Under its TRICARE
managed care reform effort, DOD phased out CHAMPUS between 1995
and 1998 and now purchases private health care and administrative
services nationwide from major health care companies under its MCS
contracts.
GAO/HEHS-99-79 Defense Health Program Page 1
B-281106
the Congress with the next fiscal year's budget request. Actual
obligations, 3 however, are separately reported two years later to
the Congress with that subsequent fiscal year's budget request.
The previous subcommittee chairman raised concerns about apparent
discrepancies between DOD's budget allocations and the actual
obligations for direct and purchased care. The chairman asked that
we determine (1) the extent to which DHP obligations have differed
from DOD's budget allocations, particularly for MCS contracts; (2)
the reasons for any such differences; and (3) whether
congressional oversight of DHP funding changes could be enhanced
if DOD provided notification or budget execution data. In doing
our work, we interviewed and obtained documentation from budget
officials of the Office of the Secretary of Defense (Comptroller);
the Office of the Assistant Secretary of Defense (Health Affairs);
the TRICARE Management Activity (TMA); and the Army, Navy, and Air
Force Surgeons General. Because MCS contracts became a DHP program
element in fiscal year 1994, we analyzed fiscal years 1994 through
1998 budget data. DOD provided the data on DHP O& M requests,
budget allocations, and obligations between 1994 and 1998 by
subactivity and program element. 4 We reviewed these data for
internal consistency, where possible, but did not independently
review source data to validate its accuracy. We performed our work
between August 1998 and March 1999 in conformance with generally
accepted government auditing standards.
Results in Brief Between fiscal years 1994 and 1998, the Congress
appropriated $48.9 billion for DHP O& M expenses. During that
period, DHP obligations at
the subactivity level, particularly for direct and purchased care,
differed in significant ways from DOD's budget allocations. In
total, about $4.8 billion was obligated differently as either
increases to or decreases from the budget allocations DOD had
developed for the seven DHP subactivities. Between 1994 and 1998
for example, DOD decreased its purchased care obligations by about
$2 billion and adjusted direct patient care and information
technology obligations by $1.4 billion. DOD also moved varying
amounts into and out of such other subactivities as MTF base
operations, medical education, and management activities.
3 Amounts of orders placed, contracts awarded, services received,
and similar transactions during a given period that will require
payments during the same or future period. 4 In compiling the 1994
through 1998 data, DOD used the program element structure for the
fiscal year 2000 DHP budget request and made adjustments for prior
years to ensure accurate comparisons.
GAO/HEHS-99-79 Defense Health Program Page 2
B-281106
These funding changes occurred because of internal DOD policy
choices and other major program changes. According to DOD, its
strategy was to fully fund purchased care activities within
available funding levels. This strategy left less to budget for
direct care and other DHP subactivities. TMA officials also told
us that because the DHP has both direct and purchased care
components, whereby many beneficiaries can access either system to
obtain health care, it is difficult to reliably estimate annual
demand and costs for each component. Between 1994 and 1996,
purchased care obligations were $1.9 billion less than allocated
because of faulty physician payment rate and actuarial
assumptions. Between 1994 and 1998, direct patient care
obligations amounted to $1 billion more than DOD had allocated
during a period of base closures and MTF downsizing largely
because DOD understated estimated direct care requirements. Also,
between 1996 and 1998, DOD overestimated MCS contract costs,
believing that contract award prices would be higher and
implementation would begin sooner than what occurred. Thus, most
of the unobligated MCS contract funds were used to defray higher
than anticipated CHAMPUS obligations.
The movement of DHP funds from one subactivity to another does not
require prior congressional notification or approval. 5 As a
result, these sizeable funding changes have generally occurred
without congressional awareness. Now that the MCS contracts are
implemented nationwide, DOD officials expect future DHP
obligations to track more closely with budget allocations.
However, they also expect some level of changes to continue during
budget execution, given the uncertainties in estimating the annual
costs of the direct care and purchased care system components.
Meanwhile, current law and regulations will continue to allow DOD
the latitude to move funds between subactivities with little or no
congressional oversight. Thus, congressional oversight could be
enhanced if the Congress chooses to require DOD to (1) notify the
congressional defense committees of its intent to shift funds
among subactivities whenever the shifted amount exceeds a certain
threshold amount and/ or (2) provide quarterly budget execution
data.
Background on the DHP O& M Budget
The DHP budget estimates submitted to the Congress consist of all
the O& M and procurement resources needed to support DOD's
consolidated medical
5 As defined in DOD financial management regulation 7000.14- R
(Vol. 3, Ch. 6), these actions are not considered reprogramming,
which requires notification or prior approval of the Congress.
GAO/HEHS-99-79 Defense Health Program Page 3
B-281106
activities. 6 According to DOD, the budget estimates are based on
the continued refinement and application of a managed care
strategy and methodology used to produce DOD's health care
services for eligible beneficiaries. Operating under the Assistant
Secretary of Defense (Health Affairs), TMA is responsible for
formulating the DHP budget request and for managing DOD's CHAMPUS
and MCS contracts. The Surgeons General of the Army, Navy, and Air
Force are responsible for the budget execution of decentralized
medical activities such as direct MTF patient care.
The DHP O& M budget request consists of a single budget activity
administration and servicewide activities. 7 Each year, DOD
provides detailed DHP budget information to the Congress in
justification materials that show amounts requested for each of
the 7 subactivities that encompass 34 program elements (see table
1). 8
6 This report addresses O& M resources, or about 96 percent of
DOD's fiscal year 1999 DHP budget request. The remaining 4 percent
of the DHP budget request ($ 401 million in fiscal year 1999)
funds procurement of capital equipment in support of MTF and
health care operations.
7 In addition to the DHP O& M budget request that covers health
care expenses, DOD submits O& M budget requests to finance other
portions of DOD's readiness and quality- of- life priorities. O& M
appropriations fund a diverse range of programs and activities
that include salaries and benefits for most civilian DOD
employees, depot maintenance activities, fuel purchases, flying
hours, environmental restoration, base operations, and consumable
supplies. Moreover, each service and DOD agency spends O& M funds.
8 In general, non- DHP O& M budget requests are presented as four
broad budget activities: operating forces, mobilization, training
and recruiting, and administration and servicewide activities.
These requests usually break down each budget activity into
activity groups, which in turn are broken into subactivity groups,
and finally into program elements. In contrast, the DHP O& M
budget consists of a single budget activity administration and
servicewide activities. For comparison of the budget line items,
the DHP subactivities and program elements correspond to the non-
DHP O& M activity groups and subactivities line items.
GAO/HEHS-99-79 Defense Health Program Page 4
B-281106
Table 1: Defense Health Program Operations and Maintenance
Subactivities and Program Elements Subactivity Pays for Program
element
In- house care (direct care) Medical and dental care for patients
in MTFs Defense medical centers, hospitals, and medical clinics
CONUS;
defense medical centers, hospitals, and medical clinics OCONUS;
dental care activities CONUS; and dental care activities OCONUS
Private sector care (purchased care) Medical and dental care for
patients in
private sector settings Managed care support contracts, CHAMPUS,
and care in nondefense facilities Consolidated health support
Supporting DOD's worldwide delivery of
patient care Other health activities, military public/
occupational health, other unique military medical activities,
aeromedical evacuation activities, Armed Forces Institute of
Pathology, examining activities, and veterinary activities
Information management Automated information systems to support
military medical readiness and health care administration
Central information management Management activities Headquarters
administration of direct care
and private sector medical activities Management headquarters and
TRICARE Management Activity Education and training Achieving and
maintaining general and
specialized medical skills and abilities of military and civilian
professionals
Armed Forces Health Professions Scholarship Program, Uniformed
Services University of the Health Sciences, and other education
and training
Base operations/ communications Operating and maintaining DOD-
owned
medical and dental facilities Minor construction CONUS; minor
construction OCONUS; maintenance and repair CONUS; maintenance and
repair OCONUS; real property services CONUS; real property
services OCONUS; base operations CONUS; base operations OCONUS;
base communication CONUS; base communication OCONUS; environmental
conservation; environmental compliance; pollution prevention; and
visual information activities
Note: CONUS means continental United States; OCONUS means outside
the continental United States.
Source: Department of Defense Comptroller.
While the Congress appropriates DHP O& M funds as a single lump
sum, its budget decision is based on the DHP budget request
presented at the subactivity and program element levels. Since
1994, the Congress has generally appropriated more for DHP O& M
expenses than DOD requested (see fig. 1).
GAO/HEHS-99-79 Defense Health Program Page 5
B-281106
Figure 1: Defense Health Program Operations and Maintenance Budget
Status, Fiscal Years 1994 99
0 2
2 2
8 10
12 Dollars in Billions
Requested
1994 9.08 9.33 9.61 9.59 9.86 9.89
9.36 9.94 10.04 10.11
9.65 9.9 Fiscal Year
1995 1998 1996 1997 1999
Appropriated
Source: TMA Office of Resource Management.
Committee reports may specify relatively small amounts of funding
for such items as breast cancer and ovarian cancer research, which
DOD then obligates through the appropriate account in accordance
with congressional direction. 9 Other than the funds specifically
earmarked by the Congress, DOD has the latitude to allocate its
congressional appropriation as needed to meet estimated
subactivity and program element requirements. Between 1994 and
1999, DOD allocated most appropriations to direct care (primarily
MTF patient care) and to purchased care (primarily CHAMPUS and MCS
contracts). Table 2 shows the allocation of DHP appropriations by
subactivity (see tables I. 1 and I. 2 for detailed information on
DHP budget requests, budget allocations, and actual or currently
estimated obligations between fiscal years 1994 and 1999).
9 Between fiscal years 1994 and 1999, of the total $58.7 billion
DHP O& M appropriation, the Congress specified about $929 million
in funding for designated activities.
GAO/HEHS-99-79 Defense Health Program Page 6
B-281106
Table 2: DOD's Allocation of Defense Health Program Operations and
Maintenance Appropriations by Subactivity, Fiscal Years 1994- 99
Dollars in billions
Subactivity 1994 1995 1996 1997 1998 1999
Direct care $2.93 $3.06 $3.45 $3.46 $3.35 $3.15
Purchased care 4.38 4.51 4.27 3.94 4.05 4.07
Consolidated health support
0.68 0.66 0.71 0.83 0.98 0.88 Information management 0.22 0.21
0.22 0.31 0.22 0.30
Management activities 0.13 0.12 0.10 0.09 0.15 0.17
Education and training
0.25 0.26 0.22 0.29 0.32 0.31 Base operations 0.74 0.77 0.91 1.01
1.03 1.02
Total a $9.33 $9.59 $9.89 $9.94 $10.11 $9.90
a Totals may not add because of rounding. Source: TMA Office of
Resource Management.
Significant Differences Between Budget Allocations and Obligations
The Congress appropriated $48.9 billion for DHP O& M expenses
between fiscal years 1994 and 1998. During budget execution, DOD
obligated about $4.8 billion differently as either increases or
decreases from its budget allocations for the various
subactivities (see table 3). Obligations differed particularly for
the direct care and purchased care subactivities. However, the
magnitude of the funding adjustments has diminished in recent
years, dropping to about $283 million in fiscal year 1998 from a
peak of almost $1.5 billion in fiscal year 1995. Because the
Congress makes a lump- sum appropriation, under DOD regulations
and informal arrangements with the Congress, these adjustments did
not require congressional notification or approval.
GAO/HEHS-99-79 Defense Health Program Page 7
B-281106
Table 3: Funding Adjustments Made at the Subactivity Level During
Budget Execution, Fiscal Years 1994- 98
Dollars in thousands
Subactivity 1994 1995 1996 1997 1998 Magnitude of
increase and decrease
Direct care $519,842 $356,469 $ 40,875 $ 106,997 $ 2,691
$1,026,874 Purchased care 606,680 727,119 546,764 66,069 84,093
2,030,725 Consolidated health support 7,403 157,296 148,368 69,111
78,332 460,510 Information management 23,393 45,458 220,467
101,271 5,739 396,328 Management activities 29,691 2,938 44,715
68,118 33,628 179,090 Education and training 23,696 16,927 59,147
4,527 13,458 117,755 Base operations 127,004 187,738 95,617 69,235
64,904 544,498 Subtotal, increase 677,642 763,888 568,314 210,991
52,825 2,273,660 Subtotal, decrease 660,067 730,057 587,639
274,337 230,020 2,482,120 Magnitude of adjustment 1,337,709
1,493,945 1,155,953 485,328 282,845 4,755,780
Appropriation $9,326,635 $9,591,331 $9,886,961 $9,937,908
$10,108,007 $48,850,842
Note: This table details funding adjustments at the subactivity
level during budget execution. See table I. 3 for information
presented for each fiscal year on other DHP adjustments such as
supplemental appropriations, rescissions, and reprogramming, as
well as the amount of unobligated funds left over at the end of
the fiscal year.
Source: TMA Office of Resource Management data.
The largest funding adjustments occurred in the direct care and
purchased care subactivities. Between 1994 and 1998, DOD allocated
$21.2 billion from the final DHP appropriation for purchased care
but obligated only $19.1 billion, allowing DOD to reallocate $2.0
billion into such areas as direct patient care, information
management, and base operations. For example, between 1994 and
1995, DOD increased obligations for direct care at MTFs by $876.3
million above the allocation. Between 1994 and 1996, DOD obligated
about $289.5 million more than it had allocated for the
information management subactivity. Also, funding for the base
operations subactivity which includes such items as repairs and
maintenance on MTF facilities received an increase of $479.6
million over the budget allocation between 1994 and 1997. (Table
I. 4 details the funding increases and decreases for each
subactivity and program element between fiscal years 1994 and
1998.)
In each year between 1994 and 1998, DOD's budget allocation for
purchased care which provided funds for CHAMPUS, the now-
terminated CHAMPUS
GAO/HEHS-99-79 Defense Health Program Page 8
B-281106
Reform Initiative contracts, 10 and MCS contracts exceeded
obligations, as shown in figure 2.
Figure 2: Comparison of CHAMPUS and MCS Contract Budget
Allocations and Actual Obligations, Fiscal Years 1994- 98
0 1
2 3
4 Dollars in Billions
Allocated
1994 Fiscal Year
3.32 3.33 3.77
3.28 3.86
1995 1996 3.41 3.58 3.49 3.49
1997 1998
Obligated
3.86
Source: TMA Office of Resource Management.
At the program element level, the largest adjustments within the
purchased care subactivity occurred between 1994 and 1996, when
DOD obligated $1.4 billion less than the budget allocation for the
CHAMPUS program element (see table I. 4 and fig. 3). In contrast,
MCS contract budget allocations more closely matched obligations
through 1996, when DOD implemented two of the then four awarded
MCS contracts on time. In 1997 and 1998, however, when
implementation of the last three contracts was delayed, MCS budget
allocations exceeded obligations by $990 million. Because of the
delays in starting up these contracts, most of the
10 Between 1994 and 1996, most MCS contract obligations were used
for two CHAMPUS Reform Initiative managed care contracts in
Louisiana, California, and Hawaii. Budget obligations for these
two contracts were $820.4 million (1994), $826.2 million (1995),
and $838.2 million (1996).
GAO/HEHS-99-79 Defense Health Program Page 9
B-281106
unobligated MCS contract funds were used to defray higher than
anticipated CHAMPUS program obligations.
GAO/HEHS-99-79 Defense Health Program Page 10
B-281106
Figure 3: Purchased Care Subactivity Funding Adjustments in
CHAMPUS and MCS Contract Program Elements, Fiscal Years 1994- 98
-600 -400
-200 0
200 400
600
CHAMPUS
1994 1995 1996 1997 1998 -476.2 -486.3
-387.8 446.7
371.6 -69.8 -47.8
-103.5 -520.6 -469.0 Dollars in Millions
Fiscal Year
MCS
Source: TMA Office of Resource Management data.
GAO/HEHS-99-79 Defense Health Program Page 11
B-281106
DHP Obligations Differed From Budget Allocations for Several
Reasons
According to DOD officials, between 1994 and 1998, DOD- wide
budget pressures and major program changes such as downsizing and
the rollout of TRICARE managed care reforms made it difficult to
estimate and allocate resources between direct care and purchased
care budgets. They emphasized that while they are directly
responsible for appropriation amounts at the lump- sum level, they
have flexibility to manage the health care delivery system.
Therefore, in executing the DHP appropriation funds for patient
care, such funds may flow from direct care to purchased care and
vice versa. They believe this flexibility is critical to
efficiently managing the military health care delivery system. 11
DOD officials cited several interrelated reasons why DHP
obligations differed from DOD's budget allocations between fiscal
years 1994 and 1998. These reasons also suggest why shortfalls in
recent DHP budget requests have prompted congressional concerns
about the process DOD uses to estimate and allocate the DHP
budget.
Decision to Fully Fund Purchased Care Left Less for Other
Subactivities
TMA, Health Affairs, and service budget officials made various
internal budget policy choices that included a DHP budget strategy
to fully fund purchased care activities within available funding
levels. This strategy, coupled with general budget pressures, left
less money with which to budget direct care and other DHP
subactivity requirements (such as information management and base
operations). To keep within the DOD- wide spending caps, the
officials intentionally understated requirements for direct care
and other subactivities in the DHP budget requests submitted to
the Congress. This pattern of policy choices, which led budget
officials to underestimate direct care budget requirements, is
underscored by the congressional testimonies by the Assistant
Secretary of Defense (Health Affairs) and the service Surgeons
General all of whom identified shortfalls in the past 3 years of
DHP budget requests, 1997 through 1999. 12 The shortfalls that is,
the difference between the Assistant Secretary's and the Surgeons
General's views of their needs and the President's budget
submission have raised congressional concerns over DHP budget
requests and prompted both DOD and the Congress to
11 DOD officials commented that most of the adjustments moved
between purchased care and direct care subactivities both of which
pay for the delivery of health care to beneficiaries and that
increased funding for information management also supported the
implementation of managed care in the direct care system.
12 For example, in testimony before appropriations committees on
the fiscal year 1997 budget request, the Assistant Secretary of
Defense (Health Affairs) and the service Surgeons General provided
specific details of how a $475 million shortfall would severely
reduce care and medical services to military families and
retirees. One Surgeon General testified that the shortfall would
force him to cut services equivalent to closing two large
hospitals for an entire year.
GAO/HEHS-99-79 Defense Health Program Page 12
B-281106
offset the shortfalls in various ways (see table 4). In addition,
TMA and service officials told us they have relied on DHP's
flexibility during budget execution to fund direct patient care
with funds available and not needed for CHAMPUS and MCS contracts.
Table 4: Offsets to Shortfalls in Defense Health Program
Operations and Maintenance Budget Requests, Fiscal Years 1997- 99
Offset by
Dollars in millions
Fiscal year Budget request DOD
action Appropriation increase Supplemental
appropriation
1997 $9,358.3 None $475.0 None 1998 10,040.6 $274.0
(amended budget request)
None $1.9 a 1999 9,653.4 104.6 b
(reprogramming) None 204.1 b a P. L. 105- 174.
b P. L. 105- 277. In addition to the almost $309 million in
offsets from the supplemental appropriation and DOD reprogramming,
DOD plans to take other actions in fiscal year 1999 to address the
additional fiscal pressures. Planned actions include making cost-
saving efficiencies within the direct care system, support
activities, headquarters management, and MCS and information
technology contracts.
Timing of the Budget Process Presents Challenges
TMA officials told us that forecasting health care costs for
budgeting purposes is inherently challenging because the budget
year starts about 18 months after DOD starts preparing DHP budget
estimates and 8 months after the President submits the DHP budget
request to the Congress. They commented that many conditions
change, affecting their direct and purchased care estimates over
these protracted periods. In our view, however, these comments do
not explain the often large differences that have occurred between
budget allocations which are established after the congressional
appropriation is actually received and obligations, which follow
almost immediately thereafter. DOD has the flexibility to allocate
most of its congressional appropriations as needed among the
various DHP subactivities. Despite this flexibility and even
taking into account the minor impacts of other adjustments to
DHP's allocated budget amounts such as supplemental appropriations
or reprogrammings, 13 DHP
13 Table I. 3 identifies other adjustments following congressional
approval of funds for DHP O& M expenses enacted through the annual
appropriations act. Compared with the almost $4.8 billion in
funding increases and decreases during budget execution, the
impacts were minor from other adjustments: a net decrease of
$139.4 million from foreign currency fluctuations, supplemental
appropriations, program cancellations, rescissions,
reprogrammings, transfers, and withholds; and $57.7 million in
unobligated funds between 1994 and 1998.
GAO/HEHS-99-79 Defense Health Program Page 13
B-281106
obligations still varied significantly from the budget allocations
reported to the Congress, calling into question DOD's methods for
estimating DHP budget requirements.
Number of Nonenrolled Beneficiaries Causes Budget Uncertainty
TMA and Health Affairs budget officials told us that the DHP
beneficiary population is largely undefined, leading to budget
uncertainty. According to these officials, DOD has little control
over where beneficiaries go to get their health care because MTFs
and MCS contractors do not enroll most beneficiaries. TMA
officials stated that, in formulating the DHP budget request,
separate cost estimates for MTFs and MCS contracts are based on
the best available information at the time. Although service
officials told us they had developed higher direct care budget
estimates which TMA nonetheless chose to underfund in the final
DHP budget requests one official told us that the nonenrolled
beneficiary population is a major impediment to submitting
realistic DHP budget requests. Moreover, DOD's capitation method
(allocating MTF budgets on the basis of the number of estimated
users of the military health system) has not kept pace with MTF
cost increases for space- available care to nonenrolled
beneficiaries for medical services and outpatient prescription
drugs. 14
Others have noted similar concerns about the lack of a clearly
defined beneficiary population and the effect on DHP budgeting
uncertainties. For example, in a 1995 report, 15 the Congressional
Budget Office (CBO) raised concerns that, even with TRICARE
Prime's lower cost- sharing features providing incentives, not
enough beneficiaries would enroll, and DOD would continue to have
difficulties planning and budgeting. For DOD to effectively
predict costs and efficiently manage the system, CBO concluded
that DOD would need a universal beneficiary enrollment system to
clearly identify the population for whom health care is to be
provided. CBO concluded that even under TRICARE, beneficiaries can
move in and out of the system as they please, relying on it for
all, some, or none of their care. DOD would have to continue its
reliance on surveys to estimate how many beneficiaries use direct
care and purchased care and to what extent DOD is
14 DOD has designed a new funding system enrollment- based
capitation which is intended to motivate and reward MTF commanders
for maximizing their enrolled population. Under this approach, DOD
funds MTFs on the basis of the number of beneficiaries enrolled in
Prime at the MTF. Under enrollment- based capitation, MTFs will
continue to receive funding for the care they provide to
nonenrollees, but at a lower rate than for those enrolled.
15 CBO Papers: Restructuring Military Medical Care (July 1995).
GAO/HEHS-99-79 Defense Health Program Page 14
B-281106
their primary or secondary source of coverage. In previous
reports, 16 we also raised concerns about the budgetary
uncertainties caused by less- than- optimal enrollment. Moreover,
at the end of fiscal year 1998, we estimate that less than half of
the 8.2 million DOD- eligible beneficiaries were enrolled. Thus,
DOD's budgeting uncertainties stem, in large measure, from its
lack of a universal enrollment requirement.
Base Closures Did Not Yield Expected Savings
Higher than expected MTF costs in fiscal years 1994 and 1995 were
given as another reason that DHP obligations differed from budget
allocations, according to TMA, Health Affairs, and service
officials. The budget savings projected to result from base
closures (and reflected in their requests) were not achieved.
Therefore, although the number of MTFs decreased by 9.5 percent
between 1994 and 1998, DOD wound up obligating $726 million more
for direct care than the amount allocated (see fig. 4). One
service official told us that despite MTF downsizing, the number
of beneficiaries going to MTFs has not dropped, thus sustaining a
high level of demand for MTF health care. But MTF inpatient and
outpatient workload data reported to the Congress in DOD's annual
justification materials indicate that MTF inpatient and outpatient
workload declined by a respective 54.5 percent and 26 percent
between 1994 and 1998. However, DOD and TMA officials cautioned us
that the MTF workload data are not accurate. Yet, a May 1998 DOD
Inspector General audit report (on the extent to which managed
care utilization management savings met Health Affairs'
expectations as reflected in its DHP budgets 17 found a
significant reduction in inpatient and outpatient workload at 15
large MTFs from fiscal year 1994 through 1996, but no
corresponding decrease in operating costs. DOD's Inspector General
attributed the cause to MTFs generally increasing their military
medical staffing and infrastructure costs (real property
maintenance, minor construction, and housekeeping). And, according
to the Inspector General, it is especially difficult to reduce
operating costs when workload is reducing without decreasing
military medical staffing.
16 For more information on DOD enrollment and capitation features,
see Defense Health Care: Issues and Challenges Confronting
Military Medicine (GAO/HEHS-95-104, Mar. 22, 1995) and Defense
Health Care: Operational Difficulties and System Uncertainties
Pose Continuing Challenges for TRICARE (GAO/T-HEHS-98-100, Feb.
26, 1998).
17 DOD, Office of the Inspector General, Joint Audit Report:
Military Health System Utilization Management Program at Medical
Centers, Report No. 98- 136 (May 22, 1998).
GAO/HEHS-99-79 Defense Health Program Page 15
B-281106
Figure 4: Direct Care Budget Status, Fiscal Years 1994- 98
0 3.2
3.0 2.8 2.6
0.2 3.4
3.8 3.6 4.0 Dollars in Billions
Requested 1994 1996 1997 1998 1995
Fiscal Year Allocated Obligated 2.92
3.45 3.24
3.42 3.1 2.93
3.45 3.46 3.35
3.06 3.45
3.41 3.35 3.35 3.41
Source: TMA Office of Resource Management.
Lower Purchased Care Obligations Were Not Anticipated
TMA, Health Affairs, and service officials also told us that
several interrelated factors had made purchased care obligations
significantly lower than the allocated amounts between 1994 and
1998. First, they did not fully account for savings from rate
changes in the CHAMPUS maximum allowable charge (CMAC) for
physician payments. 18 DOD officials told us that during this
period, CHAMPUS budget requests and allocations did not account
for $408 million to $656 million in estimated 3- year CMAC savings
between 1994 and 1996. For fiscal years 1997 to 1998, DOD has
estimated that CMAC saved $1.5 billion in CHAMPUS and TRICARE
contract costs. Given that DHP purchased care budget requests and
allocations track more closely with obligations in 1997 and 1998,
it appears TMA better accounted for CMAC savings. Second, DOD
officials cited a factor related to their
18 Beginning in 1991, the Congress directed DOD to gradually lower
reimbursement rates paid to civilian physicians under CHAMPUS.
Physician payments had been based on charges that were 50 percent
higher on average than those paid for identical treatment under
the Medicare program. For more information, see Defense Health
Care: Reimbursement Rates Appropriately Set; Other Problems
Concern Physicians (GAO/HEHS-98-80, Feb. 26, 1998).
GAO/HEHS-99-79 Defense Health Program Page 16
B-281106
budget strategy of conservatively estimating purchased care costs.
After an earlier history of CHAMPUS budget shortfalls, DOD changed
its budget strategy from not fully funding CHAMPUS to ensuring
CHAMPUS was fully funded. 19 However, they noted that an actuarial
model for projecting CHAMPUS costs, which was used to formulate
the budget requests for fiscal years 1994 through 1996, greatly
overestimated CHAMPUS requirements.
Concerns About Antideficiency Act Violations Drove Decisions
Finally, with the CHAMPUS phase- out and the switch to MCS
contracts, TMA and Health Affairs officials cited the need to
fully fund these contracts in their budget request. According to
these officials, their MCS budgeting strategy was essentially
driven by the concern that if there were not enough funds
allocated for the MCS contracts, an Antideficiency Act violation
could occur. We do not see, however, how requesting the amount of
funds DOD anticipates the contracts will actually cost could
trigger an Antideficiency Act violation. Budget requests, even
where they fail to fully fund an activity, do not cause such
violations.
One of the ways an Antideficiency Act violation could occur is if
DOD continued to pay additional amounts under the contract and
overobligated or overexpended the appropriation or fund account
related to the contract. 20 In such a case, the proper response
would be to reprogram funds and/ or seek additional appropriations
in advance of any such potential deficiency. In other words,
should funds allocated for the MCS contracts appear to be
inadequate, DOD would find itself in essentially the same position
as any agency that anticipates running short of funds. Only if DOD
officials continued to make additional payments under the contract
knowing that appropriations for them were not available would
there be an Antideficiency Act violation.
Looking ahead, DOD officials pointed out that the amount of funds
shifted between DHP subactivities had fallen in 1997 and 1998, and
they anticipated that volatility within the purchased care
subactivity would also decrease now that all seven MCS contracts
have been implemented. Officials also stated that TMA has
established new resource management controls. A quarterly
workgroup process, for example, refines CHAMPUS and MCS
19 Between 1985 and 1991, unanticipated growth in the CHAMPUS
program was the main factor behind $2.8 billion budget shortfalls,
much of which had to be financed through reprogramming and
supplemental appropriations. For more information, see DOD Health
Care: Funding Shortfalls in CHAMPUS, Fiscal Years 1985- 91
(GAO/HRD-90-99BR, Mar. 19, 1990).
20 Antideficiency Act violations can also occur when entering into
a contract or making an obligation in advance of an appropriation
unless authorized by law; or overobligating or overexpending an
apportionment or reapportionment of amounts permitted by DOD's
administrative control of funds regulations.
GAO/HEHS-99-79 Defense Health Program Page 17
B-281106
contract requirements and identifies associated DHP- wide
adjustments that can be used to formulate future budget estimates.
They stated that these procedures represent significant
improvements in their ability to precisely project direct care and
purchased care requirements. They acknowledged, however, that the
next round of MCS contracts will be awarded and administered
differently than the first round and that their integrated care
system, with its largely nonenrolled beneficiary population, is
inherently difficult to budget for. Thus, funding changes during
budget execution are nearly inevitable.
Notification or Budget Execution Data Would Enhance Oversight of
DHP Funding Changes
The movement of DHP funds between subactivities does not require
prior congressional notification or approval. While the Congress
must be notified in many cases when DOD transfers or reprograms
appropriated funds, these reporting rules do not apply to the
movement of funds among DHP subactivities. As a result, sizeable
funding changes have occurred without specific notification.
Refinements to the reporting process would put the Congress in a
better position to be aware of funding changes.
Reprogramming Actions Have Varying Degrees of Congressional
Oversight
Under procedures agreed upon between congressional committees and
DOD, funds can be obligated for purposes other than originally
proposed through transfers and reprogrammings. Reprogramming
shifts funds from one program to another within the same budget
account, while a transfer shifts funds from one account to
another. According to the Congressional Research Service, DOD uses
the term reprogramming for both kinds of transactions. 21 DOD
budgetary regulations, 22 reflecting instructions from the
appropriations committees, distinguish among three types of
reprogramming actions:
1. Actions requiring congressional notification and approval,
including (a) all transfers between accounts, (b) any change to a
program that is a matter of special interest to the Congress, and
(c) increases to congressionally approved procurement quantities;
2. Actions requiring only notification of the Congress, including
reprogramming that exceeds certain threshold amounts; and
21 In annual appropriations bills, the Congress grants DOD
authority to transfer up to specified amounts between accounts. In
recent years, DOD has been given general transfer authority of $2
billion per year, and additional amounts have been made available
for transfer for specific purposes. See M. Tyszkiewicz and S.
Daggett, CRS Report for Congress: A Defense Budget Primer
(Washington, D. C.: Congressional Research Service, 1998).
22 DOD Financial Management Regulation 7000.14- R (Vol. 3, Ch. 6).
GAO/HEHS-99-79 Defense Health Program Page 18
B-281106
3. Actions not requiring any congressional notification, including
reprogramming below certain threshold amounts and actions that
reclassify amounts and actions within an appropriation without
changing the purpose for which the funds were appropriated.
For example, DOD is required to notify the Congress if it shifts
funds from the DHP O& M to the DHP procurement component. But the
notification requirements do not apply when funds move from one
DHP subactivity to another (such as from purchased care to direct
care) or between DHP program elements (such as from MCS contracts
to CHAMPUS, both within the purchased care subactivity) because
such movements are within the same budget activity (administration
and servicewide activities). Thus, the movements do not represent
a change in the purpose for which the funds were appropriated and
fit under the third type of reprogramming procedures.
Congress Has Required DOD to Report Budget Execution Data
To help increase the visibility of DOD funding changes, the
reports accompanying recent defense appropriations acts have
directed DOD to provide congressional defense committees with
quarterly budget execution data on certain other O& M accounts. 23
For example, in fiscal year 1999, DOD is directed to provide data
for each budget activity, activity group, and subactivity not
later than 45 days past the close of each quarter. These reports
are to include the budget request and actual obligations and the
DOD distribution of unallocated congressional adjustments to the
budget request, as well as various details on reprogramming
actions. This type of timely information supports congressional
oversight of DOD O& M budget execution and shows the extent to
which DOD is obligating O& M funds for purposes other than the
Congress had been made aware of. 24
Under current procedures, DHP obligations are reported at the
subactivity and program element levels in the prior- year column
when DOD submits its
23 The fiscal years 1998 and 1999 conference reports require DOD
to provide the congressional defense committees such data for each
of the active, defensewide, reserve, and national guard O& M
accounts. 24 Quarterly reporting of budget execution data may
satisfy the congressional committees' need to know more about such
shifting. However, in an earlier report (Year- End Spending:
Reforms Underway But Better Reporting and Oversight Needed
(GAO/AIMD-98-185, July 31, 1998), we found that budget execution
data reported separately to the Office of Management and Budget
and to the Department of the Treasury were inconsistent with
actual obligations data reported by agencies in formulating the
President's budget request. Also, in recent testimony (DOD
Financial Management: More Reliable Information Key to Assuring
Accountability and Managing Defense Operations More Efficiently
(GAO/ T- AIMD/ NSIAD- 99- 145, Apr. 14, 1999)), we noted that
DOD's systems and controls over its use of budgetary resources
were ineffective. DOD's budgetary resources control weaknesses may
leave DOD unaware of the actual amount of all funds available for
obligation and expenditures in each appropriation account.
GAO/HEHS-99-79 Defense Health Program Page 19
B-281106
budget request justification material to the Congress. However,
such information is not reported in a manner that allows easy
comparison with the prior year's budget allocations, and thus does
not facilitate oversight of funding changes that took place during
budget execution. Reprogramming notification regulations do not
apply when funds shift from one DHP subactivity to another, and
congressional committees have not directed DOD to report DHP O& M
budget execution data in the same manner as other O& M accounts.
The information needed to support congressional notification or
quarterly budget execution reports is now readily available
because DOD officials have instituted their own internal reviews
to better track DHP budget execution. For example, DOD now
requires internal quarterly budget execution reports from the
services to document the shift of funds between subactivities.
Therefore, we discussed with DOD officials potential reporting
changes that would facilitate congressional oversight of DHP
funding adjustments during budget execution. DOD officials told us
that subjecting the lump- sum DHP appropriation to the
reprogramming procedures that require prior approval from the
Congress would eliminate flexibility, making it very difficult to
manage the finances of the integrated MTF and MCS contract health
care system. However, in our view, subjecting the DHP
appropriation to reprogramming procedures for notification, but
not prior approval, to the Congress whenever funds above a certain
threshold shift from one DHP subactivity to another would not
diminish DOD's flexibility. DOD officials agreed that
congressional oversight would be enhanced by quarterly budget
execution reports on DHP obligations by subactivity and program
element. Depending on where the threshold was set and the extent
to which special interest DHP subactivities were designated for
reporting, notification could involve fewer reports than a
quarterly reporting process for DHP subactivities and program
elements. Thus, in our view, notification may well offer a less
burdensome means of facilitating congressional oversight of DHP
funding changes during budget execution.
Conclusions DOD officials expect future DHP obligations to track
more closely with budget requests and allocations, while
acknowledging that some
movement of funds is inevitable given the lack of a universally
enrolled beneficiary population for direct and purchased care.
Although DOD is not required to adhere to its own budget requests
or reported budget allocations when it obligates funds, in our
view, a repeated failure to do so without providing sufficient
justification could cause the Congress to
GAO/HEHS-99-79 Defense Health Program Page 20
B-281106
question the validity of DHP budget requests. The Congress,
however, will not be made aware of improvements or continuing
funding adjustments unless DOD begins to either notify or report
to congressional committees on how it obligates DHP
appropriations.
In our view, and DOD agrees, additional information on how
obligations differ from budget requests and allocations would
improve oversight by the Congress and DOD. Since TMA officials
already require quarterly budget execution reports to improve
their internal budget oversight and budget decisionmaking, DOD
would not be burdened by notifying or reporting similar
information to the Congress. Such notification or reporting could
provide the Congress with a basis for scrutinizing DHP budget
request justifications and determining whether additional program
controls such as a universal requirement that all beneficiaries
enroll in direct care or purchased care components are needed.
Matter for Congressional Consideration
The Congress may wish to consider requiring DOD, consistent with
current notification standards and procedures, to notify the
congressional defense committees of its intent to shift funds
among subactivities (such as direct care, purchased care, and base
operations). Such notification, while not requiring congressional
approval of the funding shift itself, could be initiated whenever
the amount of the funding shift exceeded a certain threshold to be
determined by the Congress. The notification would specify where
funds are being deducted and where they are being added, and the
justification for such reallocation. Also, or alternatively, the
Congress may wish to consider requiring DOD to provide
congressional defense committees with quarterly budget execution
data on DHP O& M accounts. These data could be provided in the
same manner and under the same time frames as DOD currently
provides data for non- DHP O& M accounts.
Agency Comments and Our Evaluation
In its comments on a draft of the report, DOD concurred with the
report and its focus of making the DHP funding more visible to the
Congress. DOD further agreed that providing additional budget
execution data to the Congress, on a regular basis, would be a
valuable step toward keeping congressional members informed about
the military health care system's financial status. Finally, DOD
agreed to modify its current process for internally reporting DHP
obligations to report DHP O& M budget execution data to the
Congress in the same manner as the non- DHP O& M accounts.
GAO/HEHS-99-79 Defense Health Program Page 21
B-281106
However, DOD did not support requiring it to notify congressional
defense committees of its intent to shift funds among DHP
subactivities. DOD stated that such notification could potentially
limit its ability to obligate DHP funds and affect beneficiaries'
timely access to health care. We disagree. As we point out, such
notification would not require prior approval of the funding shift
itself, but would be initiated whenever the funding shift exceeded
a certain amount to be determined by the Congress. These and other
details of the notification procedure could be worked out between
congressional committees and DOD to further ensure that DOD's
ability to obligate funds for the timely delivery of health care
services was not impaired. Further, as the report points out,
notification could involve fewer reports than a quarterly
reporting process for DHP subactivities. Thus, in our view,
notification may well offer a less burdensome means of
facilitating congressional oversight of DHP funding changes during
budget execution.
DOD also suggested several technical changes to the draft, which
we have incorporated where appropriate. DOD's comments are
presented in their entirety in appendix II.
As agreed with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days from its date. At that time, we will send copies to
Senator Wayne Allard, Senator Robert C. Byrd, Senator Max Cleland,
Senator Daniel K. Inouye, Senator Carl Levin, Senator Ted Stevens,
Senator John Warner, Representative Neil Abercrombie,
Representative Steve Buyer, Representative John P. Murtha,
Representative David Obey, Representative Ike Skelton,
Representative Floyd Spence, and Representative C. W. Bill Young
in their capacities as chairman or ranking minority member of
Senate and House committees and subcommittees. We will also send
copies at that time to the Honorable William S. Cohen, Secretary
of Defense; the Honorable William J. Lynn, III, Under Secretary of
Defense (Comptroller); the Honorable Sue Bailey, Assistant
Secretary of Defense (Health Affairs); and the Honorable Jacob J.
Lew, Director, Office of Management and Budget. Copies will be
made available to others upon request.
GAO/HEHS-99-79 Defense Health Program Page 22
B-281106
If you or your staff have any questions concerning this report,
please contact Stephen P. Backhus, Director, Veterans' Affairs and
Military Health Care Issues, on (202) 512- 7101 or Daniel Brier,
Assistant Director, on (202) 512- 6803. Other contributors to this
report include Carolyn Kirby (Evaluator- in- Charge), Jon Chasson,
Craig Winslow, and Mary Reich.
Sincerely yours, Richard L. Hembra Assistant Comptroller General
GAO/HEHS-99-79 Defense Health Program Page 23
Contents Letter 1 Appendix I Detailed Defense Health Program
Budget Tables
26 Other Adjustments to DHP Total Obligational Authority 34
Appendix II Comments From the Department of Defense
37 Tables Table 1: Defense Health Program Operations and
Maintenance
Subactivities and Program Elements 5
Table 2: DOD's Allocation of Defense Health Program Operations and
Maintenance Appropriations by Subactivity, Fiscal Years 1994- 99
7 Table 3: Funding Adjustments Made at the Subactivity Level
During Budget Execution, Fiscal Years 1994- 98 8
Table 4: Offsets to Shortfalls in Defense Health Program
Operations and Maintenance Budget Requests, Fiscal Years 1997- 99
13 Table I. 1: Defense Health Program Budget Requests, Budget
Allocations, and Actual Obligations, Fiscal Years 1994- 96 26
Table I. 2: Defense Health Program Budget Requests, Budget
Allocations, and Actual Obligations, Fiscal Years 1997- 99
30 Table I. 3: Other Adjustments to Defense Health Program
Budgets,
Fiscal Years 1994- 98 34
Table I. 4: Funding Increases and Decreases by Subactivity and
Program Element, Fiscal Years 1994- 98
35 Figures Figure 1: Defense Health Program Operations and
Maintenance
Budget Status, Fiscal Years 1994 99 6
Figure 2: Comparison of CHAMPUS and MCS Contract Budget
Allocations and Actual Obligations, Fiscal Years 1994- 98
9
GAO/HEHS-99-79 Defense Health Program Page 24
Contents
Figure 3: Purchased Care Subactivity Funding Adjustments in
CHAMPUS and MCS Contract Program Elements, Fiscal Years 1994- 98
11 Figure 4: Direct Care Budget Status, Fiscal Years 1994- 98 16
Abbreviations
CBO Congressional Budget Office CHAMPUS Civilian Health and
Medical Program of the Uniformed
Services CMAC CHAMPUS Maximum Allowable Charge CONUS continental
United States DHP Defense Health Program DOD Department of Defense
MCS managed care support MTF military treatment facility O& M
operations and maintenance OCONUS outside the continental United
States TMA TRICARE Management Activity
GAO/HEHS-99-79 Defense Health Program Page 25
Appendix I Detailed Defense Health Program Budget Tables
Table I. 1: Defense Health Program Budget Requests, Budget
Allocations, and Actual Obligations, Fiscal Years 1994- 96 1994
1995 1996
Dollars in thousands
Subactivity/ program element Budget
request Budget allocation Actual
obligation Budget request Budget
allocation Actual obligation Budget
request Budget allocation Actual
obligation
Direct care Medical centers, hospitals, and clinics CONUS
$2,583,114 $2,592,596 $3,062,708 $2,706,329 $2,658,394 $2,988,546
$3,035,259 $3,026,670 $2,954,594 Medical centers, hospitals, and
clinics OCONUS
222,816 223,634 235,131 233,444 233,444 265,572 232,605 238,125
288,577 Dental care activities CONUS
98,612 98,612 129,105 132,718 131,718 126,533 134,787 134,787
131,391 Dental care activities OCONUS
18,783 18,783 26,523 26,213 33,213 32,587 52,034 53,414 37,559
Subtotal $2,923,325 $2,933,625 $3,453,467 $3,098,704 $3,056,769
$3,413,238 $3,454,685 $3,452,996 $3,412,121 Purchased care CHAMPUS
3,000,669 3,000,669 2,524,500 2,885,100 2,885,100 2,398,800
2,414,000 2,414,000 2,026,225 Managed care support contracts
863,400 863,400 793,600 980,100 980,100 932,300 1,356,100
1,356,100 1,252,621 Care in nondefense facilities
461,613 513,937 453,226 613,087 643,087 450,068 496,997 496,997
441,487 Subtotal $4,325,682 $4,378,006 $3,771,326 $4,478,287
$4,508,287 $3,781,168 $4,267,097 $4,267,097 $3,720,333
Consolidated health support Examining activities health care
24,294 24,294 22,941 23,456 23,014 24,176 23,089 23,089 26,485
Other health activities 209,726 244,295 252,927 242,279 241,542
345,152 255,894 271,394 348,352
Military public/ occupational health
145,274 169,220 187,507 167,823 163,223 169,444 191,139 191,139
186,230 Veterinary services 8,782 10,229 9,898 10,145 9,859 12,692
9,850 9,850 14,135
Military unique requirements 95,378 111,099 94,782 110,182 108,975
147,373 96,379 99,779 163,352
(continued)
GAO/HEHS-99-79 Defense Health Program Page 26
Appendix I Detailed Defense Health Program Budget Tables
1994 1995 1996
Dollars in thousands
Subactivity/ program element Budget
request Budget allocation Actual
obligation Budget request Budget
allocation Actual obligation Budget
request Budget allocation Actual
obligation
Aeromedical evacuation system
72,115 84,001 83,801 83,308 83,142 80,227 82,688 82,688 78,309
Armed Forces Institute of Pathology
28,377 33,054 31,739 32,781 32,352 40,339 32,484 32,484 41,928
Subtotal $583,946 $676,192 $683,595 $669,974 $662,107 $819,403
$691,523 $710,423 $858,791 Information management Central
information management
206,659 224,247 247,640 221,692 211,545 257,003 226,332 224,102
444,569 Management activities Management headquarters 24,943
28,479 25,457 26,225 25,539 36,481 25,937 25,937 54,144
TRICARE Support Office a 102,472 102,472 75,803 94,000 94,000
80,120 70,000 69,603 86,111
Subtotal $127,415 $130,951 $101,260 $120,225 $119,539 $116,601
$95,937 $95,540 $140,255 Education and training Armed Forces
Health Professions Scholarship Program
70,197 70,197 73,479 80,014 79,504 71,513 85,671 85,671 74,081
Uniformed Services University of Health Sciences
39,891 45,756 57,067 40,847 50,457 60,791 43,700 50,552 60,145
Education and training health care
92,350 130,255 91,966 130,655 130,655 145,239 86,575 86,575
147,719 Subtotal $202,438 $246,208 $222,512 $251,516 $260,616
$277,543 $215,946 $222,798 $281,945 Base operations/
communications Environmental conservation 86 86 20 72 72 10 72 72
524
Pollution prevention 76 76 35 64 64 29 64 64 132
Environmental compliance 22,316 22,316 26,287 18,739 18,612 27,167
16,931 16,931 27,864
Minor construction CONUS
14,969 14,969 50,216 20,024 20,024 69,123 32,583 32,583 52,642
(continued)
GAO/HEHS-99-79 Defense Health Program Page 27
Appendix I Detailed Defense Health Program Budget Tables
1994 1995 1996
Dollars in thousands
Subactivity/ program element Budget
request Budget allocation Actual
obligation Budget request Budget
allocation Actual obligation Budget
request Budget allocation Actual
obligation
Minor construction OCONUS
2,042 2,042 7,883 2,731 2,731 13,282 4,287 4,287 7,183 Maintenance
and repair CONUS
227,491 227,491 235,430 186,462 190,076 260,349 286,864 286,864
302,666 Maintenance and repair OCONUS
31,022 31,022 36,156 25,427 25,920 50,663 30,346 30,346 75,970
Real property services CONUS
154,426 165,452 191,668 200,910 199,105 184,964 209,080 209,080
183,312 Real property services OCONUS
16,854 18,057 20,918 21,007 20,819 16,269 21,493 21,493 19,286
Visual information activities
10,321 10,321 9,974 12,316 12,148 7,796 11,819 11,819 8,599 Base
communicationCONUS 29,881 29,881 36,993 30,741 30,711 39,225
36,853 36,853 40,976
Base communicationOCONUS 4,075 4,075 3,682 4,192 4,188 4,006 3,607
3,607 4,496
Base operations CONUS
176,864 189,494 219,518 226,559 224,522 254,612 235,771 235,771
260,513 Base operations OCONUS
20,650 22,124 25,630 23,689 23,476 32,711 24,235 24,235 25,459
Subtotal $711,073 $737,406 $864,410 $772,933 $772,468 $960,206
$914,005 $914,005 $1,009,622
Total $9,080,538 $9,326,635 $9,344,210 $9,613,331 $9,591,331
$9,625,162 $9,865,525 $9,886,961 $9,867,636
a The TRICARE Support Office program element incorporated only
Office of CHAMPUS costs in these years.
Source: TMA Office of Resource Management.
GAO/HEHS-99-79 Defense Health Program Page 28
Appendix I Detailed Defense Health Program Budget Tables
GAO/HEHS-99-79 Defense Health Program Page 29
Appendix I Detailed Defense Health Program Budget Tables
Table I. 2: Defense Health Program Budget Requests, Budget
Allocations, and Actual Obligations, Fiscal Years 1997- 99 1997
Dollars in thousands
Subactivity/ program element Budget request Budget allocation
Actual obligation
Direct care Medical centers, hospitals, and clinics CONUS
$2,771,958 $2,973,647 $2,856,273 Medical centers, hospitals and
clinics OCONUS 271,479 282,330 301,359
Dental care activities CONUS 140,927 153,630 152,002
Dental care activities OCONUS 57,949 45,836 38,812
Subtotal $3,242,313 $3,455,443 $3,348,446 Purchased care CHAMPUS
1,048,700 1,048,770 1,495,502 Managed care support contracts
2,439,900 2,439,900 1,919,292
Care in nondefense facilities 447,561 456,103 463,910
Subtotal $3,936,161 $3,944,773 $3,878,704 Consolidated health
support Examining activities health care 28,924 28,924 29,013
Other health activities 325,927 325,927 337,704 Military public/
occupational health 144,047 163,233 198,116
Veterinary services 11,713 11,713 13,625 Military- unique
requirements 97,215 182,932 197,564
Aeromedical evacuation system 81,711 74,861 75,737
Armed Forces Institute of Pathology 37,982 37,982 42,924
Subtotal $727,519 $825,572 $894,683 Information management Central
information management 190,077 314,410 213,139
Management activities Management headquarters 25,637 35,930 32,050
TRICARE Management Activity b 0 0 46,682
TRICARE Support Office c 54,141 54,141 79,457
GAO/HEHS-99-79 Defense Health Program Page 30
Appendix I Detailed Defense Health Program Budget Tables
1998 1999 Budget request Budget allocation Actual obligation
Budget request Budget allocation Current estimate a
$2,936,809 $2,871,009 $2,856,720 $2,475,717 $2,666,113 $3,140,421
279,003 279,003 279,070 289,293 289,293 282,464 158,027 158,027
174,511 155,704 155,704 150,428 45,723 45,723 40,770 41,130 41,130
38,681 $3,419,562 $3,353,762 $3,351,071 $2,961,844 $3,152,240
$3,611,994
735,120 735,120 1,106,710 573,700 573,700 593,700 2,848,888
2,848,888 2,379,869 3,010,200 3,010,200 2,819,800
470,703 470,703 484,039 486,495 486,495 500,614 $4,054,711
$4,054,711 $3,970,618 $4,070,395 $4,070,395 $3,914,114
29,101 29,101 29,463 30,857 30,857 30,813 379,642 379,642 310,400
372,864 372,864 271,887 171,058 171,058 191,822 170,271 170,271
202,027
12,524 12,524 15,245 13,276 13,276 14,475 154,952 272,177 229,694
160,889 178,239 213,773
79,721 79,721 82,232 79,611 79,611 79,758 38,724 38,724 45,759
39,476 39,476 45,600 $865,722 $982,947 $904,615 $867,244 $884,594
$858,333 222,329 219,329 225,068 274,371 297,871 256,568
91,271 91,271 35,646 36,228 36,228 33,992 0 0 143,807 128,784
128,784 144,087
54,554 54,554 0 0 0 0 (continued)
GAO/HEHS-99-79 Defense Health Program Page 31
Appendix I Detailed Defense Health Program Budget Tables
1997
Dollars in thousands
Subactivity/ program element Budget request Budget allocation
Actual obligation
Subtotal $79,778 $90,071 $158,189 Education and training Armed
Forces Health Professions Scholarship Program
83,995 80,842 75,389 Uniformed Services University of Health
Sciences
52,000 70,450 74,463 Education and training health care 123,236
142,501 148,468
Subtotal $259,231 $293,793 $298,320 Base operations/
communications Environmental conservation 74 2,400 904
Pollution prevention 66 500 1,262 Environmental compliance 23,106
23,653 20,216 Minor construction CONUS 33,281 33,384 51,331
Minor construction OCONUS 6,339 8,727 7,223
Maintenance and repair CONUS 245,903 285,545 349,450
Maintenance and repair OCONUS 46,839 60,240 75,308
Real property services CONUS 184,626 214,058 198,010
Real property services OCONUS 16,054 24,858 20,050
Visual information activities 9,605 8,174 8,363 Base communication
CONUS 42,047 43,219 43,723
Base communication OCONUS 4,159 4,820 4,166
Base operations CONUS 276,888 277,111 276,450 Base operations
OCONUS 34,222 27,157 26,625
Subtotal $923,209 $1,013,846 $1,083,081
Total $9,358,288 $9,937,908 $9,874,562
GAO/HEHS-99-79 Defense Health Program Page 32
Appendix I Detailed Defense Health Program Budget Tables
1998 1999 Budget request Budget allocation Actual obligation
Budget request Budget allocation Current estimate a
$145,825 $145,825 $179,453 $165,012 $165,012 $178,079 85,623
85,623 83,327 84,959 84,959 78,854 51,314 70,314 74,270 55,760
64,560 73,630 163,549 163,549 175,347 157,561 157,561 154,223
$300,486 $319,486 $332,944 $298,280 $307,080 $306,707
1,900 1,900 504 3,124 3,124 3,650 500 500 1,994 417 417 483 30,276
30,276 23,180 18,443 18,443 19,570 31,468 31,468 42,288 33,573
33,573 29,761
8,865 8,865 2,206 8,469 8,469 8,447 280,721 280,721 283,005
272,117 272,117 149,743 63,692 63,692 58,071 48,082 50,202 67,737
221,782 221,782 203,354 232,773 232,773 217,961 25,453 25,453
20,566 31,304 31,304 23,477
8,234 8,234 7,703 8,314 8,314 7,584 43,750 43,750 38,822 41,719
41,719 44,223
5,214 5,214 4,397 5,018 5,018 4,215 287,370 287,370 252,443
287,529 289,529 268,854 22,722 22,722 28,510 25,407 25,407 26,563
$1,031,947 $1,031,947 $967,043 $1,016,289 $1,020,409 $872,268
$10,040,582 $10,108,007 $9,930,812 $9,653,435 $9,897,601
$9,998,063
GAO/HEHS-99-79 Defense Health Program Page 33
Appendix I Detailed Defense Health Program Budget Tables
a Data source for fiscal year 1999 current estimate is the Defense
Health Program Justification of Estimates for Fiscal Years 2000
and 2001, Vol. I (Feb. 1999). The total $9,998,063,000 current
estimate includes an anticipated $104,561,000 reprogramming from
the Air Force O& M account to the DHP O& M account.
b DOD established the TRICARE Management Activity program element
in fiscal year 1998. The new organization now includes several
former management headquarters offices and the TRICARE Support
Office. TRICARE Management Activity costs shown in fiscal year
1997 reflect estimates as if the program element existed for that
period.
c The TRICARE Support Office program element incorporated only
Office of CHAMPUS costs in fiscal years 1997 and 1998.
Source: TMA Office of Resource Management.
Other Adjustments to DHP Total Obligational Authority
Following congressional approval of funds for Defense Health
Program (DHP) operations and maintenance (O& M) expenses enacted
through the annual appropriations act, various other actions by
DOD or the Congress result in further adjustments. These
adjustments can increase or decrease the total obligational
authority available to DOD for DHP O& M expenses. Table I. 3
details the other adjustments.
Table I. 3: Other Adjustments to Defense Health Program Budgets,
Fiscal Years 1994- 98
Dollars in millions
Adjustment 1994 1995 1996 1997 1998 Net adjustment, 1994- 98
Foreign currency fluctuations 0 0 0 0 $ 13.0 $ 13.0 Supplemental
appropriations 0 $13.2 0 $21.0 1.9 36.1 Program cancellations 0 0
0 9.3 0 9.3 Rescissions 0 0 $ 15.2 21.0 0 36.2 Reprogrammings
$20.9 26.6 29.7 36.4 144.2 103.4 Transfers 0 0 0.2 3.2 2.0 5.0
Withholds 0 0 8.0 0 0.5 8.5 Subtotal $20. 9 $39.8 $6.7 $ 49.0 $
157.8 139.4
Total obligational authority $9,347.6 $9,630.9 $9,893.6 $9,762.1
$9,950.2 48,584.4 Unobligated balance at end of fiscal year $3.4
$5.8 $26.0 $3.2 $19.4 $57.7
Note: Totals may not add because of rounding. Source: TMA Office
of Resource Management.
GAO/HEHS-99-79 Defense Health Program Page 34
Appendix I Detailed Defense Health Program Budget Tables
Table I. 4: Funding Increases and Decreases by Subactivity and
Program Element, Fiscal Years 1994- 98
Dollars in thousands
Subactivity/ program element 1994 1995 1996 1997 1998
Direct care Defense medical centers, station hospitals, and
medical clinics CONUS
$470,112 $330,152 $ 72,076 $ 117,374 $ 14,289 Defense medical
centers, station hospitals, and medical clinics OCONUS
11,497 32,128 50,452 19,029 67 Dental care activities CONUS 30,493
5,185 3,396 1,628 16,484 Dental care activities OCONUS 7,740 626
15,855 7,024 4,953 Subtotal $519,842 $356,469 $ 40,875 $ 106,997 $
2,691 Purchased care CHAMPUS 476,169 486,300 387,775 446,732
371,590 Managed care support contracts 69,800 47,800 103,479
520,608 469,019 Care in nondefense facilities 60,711 193,019
55,510 7,807 13,336 Subtotal $ 606,680 727,119 $ 546,764 $ 66,069
$ 84,093 Consolidated health support Examining activities health
care 1,353 1,162 3,396 89 362 Other health activities 8,632
103,610 76,958 11,777 69,242 Military public/ occupational health
18,287 6,221 4,909 34,883 20,764 Veterinary services 331 2,833
4,285 1,912 2,721 Military- unique requirements 16,317 38,398
63,573 14,632 42,483 Aeromedical evacuation system 200 2,915 4,379
876 2,511 Armed Forces Institute of Pathology 1,315 7,987 9,444
4,942 7,035 Subtotal $7,403 $157,296 $148,368 $69,111 $ 78,332
Information management Central information management 23,393
45,458 220,467 101,271 5,739 Management activities Management
headquarters 3,022 10,942 28,207 3,880 55,625 TRICARE Management
Activity 0 0 0 46,682 143,807 TRICARE Support Office 26,669 13,880
16,508 25,316 54,554 Subtotal $ 29,691 $ 2,938 $44,715 $68,118
$33,628 Education and training Armed Forces Health Professions
Scholarship Program 3,282 7,991 11,590 5,453 2,296
Uniformed Services University of Health Sciences 11,311 10,334
9,593 4,013 3,956
Education and training health care 38,289 14,584 61,144 5,967
11,798 (continued)
GAO/HEHS-99-79 Defense Health Program Page 35
Appendix I Detailed Defense Health Program Budget Tables
Dollars in thousands
Subactivity/ program element 1994 1995 1996 1997 1998
Subtotal $ 23,696 $16,927 $59,147 $4,527 $13,458 Base operations/
communications Environmental conservation 66 62 452 1,496 1,396
Pollution prevention 41 35 68 762 1,494 Environmental compliance
3,971 8,555 10,933 3,437 7,096 Minor construction CONUS 35,247
49,099 20,059 17,947 10,820 Minor construction OCONUS 5,841 10,551
2,896 1,504 6,659 Maintenance and repair CONUS 7,939 70,273 15,802
63,905 2,284 Maintenance and repair OCONUS 5,134 24,743 45,624
15,068 5,621 Real property services CONUS 26,216 14,141 25,768
16,048 18,428 Real property services OCONUS 2,861 4,550 2,207
4,808 4,887 Visual information activities 347 4,352 3,220 189 531
Base communication CONUS 7,112 8,514 4,123 504 4,928 Base
communication OCONUS 393 182 889 654 817 Base operations CONUS
30,024 30,090 24,742 661 34,927 Base operations OCONUS 3,506 9,235
1,224 532 5,788 Subtotal $127,004 $187,738 $95,617 $69,235 $
64,904
Source: TMA Office of Resource Management data.
GAO/HEHS-99-79 Defense Health Program Page 36
Appendix II Comments From the Department of Defense
GAO/HEHS-99-79 Defense Health Program Page 37
Appendix II Comments From the Department of Defense
Now on p. 2. Now on p. 3.
Now figs. 1, 2, and 4. Now in table 3.
Now on p. 13. Now on p. 14. Now on p. 14.
GAO/HEHS-99-79 Defense Health Program Page 38
Appendix II Comments From the Department of Defense
Now on p. 14. Now on p. 17.
(101620) GAO/HEHS-99-79 Defense Health Program Page 39
Ordering Information The first copy of each GAO report and
testimony is free. Additional copies are $2 each. Orders should be
sent to the following address, accompanied by a check or money
order made out to the Superintendent of Documents, when necessary.
VISA and MasterCard credit cards are accepted, also. Orders for
100 or more copies to be mailed to a single address are discounted
25 percent.
Orders by mail: U. S. General Accounting Office P. O. Box 37050
Washington, DC 20013
or visit: Room 1100 700 4th St. NW (corner of 4th and G Sts. NW)
U. S. General Accounting Office Washington, DC
Orders may also be placed by calling (202) 512- 6000 or by using
fax number (202) 512- 6061, or TDD (202) 512- 2537.
Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512- 6000 using a
touchtone phone. A recorded menu will provide information on how
to obtain these lists.
For information on how to access GAO reports on the INTERNET, send
an e- mail message with "info" in the body to:
info@ www. gao. gov or visit GAO's World Wide Web Home Page at:
http:// www. gao. gov
PRINTED ON RECYCLED PAPER
United States General Accounting Office Washington, D. C. 20548-
0001
Official Business Penalty for Private Use $300
Address Correction Requested Bulk Rate
Postage & Fees Paid GAO Permit No. G100
*** End of document. ***