United States General Accounting Office

GAO Report to Congressional Committees

January 2000 MEDICARE

SUBVENTION

DEMONSTRATION

Enrollment in DOD Pilot

Reflects Retiree

Experiences and Local

Markets

GAO/HEHS-00-35

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-283483 

January 31, 2000

Congressional Committees

Military retirees aged 65 and over can get health care at military medical

facilities only when space is available and therefore cannot rely on them

for comprehensive, continuous care, which is usually important to this age

group. Many of these retirees want to use their Medicare benefits at

military facilities, but federal law does not allow Medicare to pay the

Department of Defense (DOD). DOD has expressed interest in delivering

such care to these older retirees if Medicare law changed so that Medicare

could reimburse DOD.

In light of these concerns, the Balanced Budget Act of 1997 authorized a

3-year, six-site demonstration project, called Medicare subvention, which

allows Medicare-eligible military retirees to enroll in new DOD-run health

maintenance organizations (HMO). Medicare can pay DOD for the health

care provided to retirees enrolled in the demonstration project, subject to

certain conditions. The demonstration’s stated goal is to implement an

alternative for delivering accessible and quality care to these

“dual-eligible” retirees1

 without increasing the cost to Medicare or DOD.

Although retirees had expressed interest in a Medicare subvention

program, the number who would in fact join such a program was

unknown. Before the demonstration, many military retirees aged 65 or

older had joined a Medicare managed care plan, such as Kaiser or

Humana. Others had relied on traditional fee-for-service Medicare or

supplemented it with private insurance that pays for Medicare deductibles

and other out-of-pocket expenses. How would retirees eligible for the

demonstration weigh the advantages of a new program against those of

their familiar health care and insurance arrangements?

The demonstration, in which DOD set up HMOs for retirees aged 65 and over,

began in September 1998 at the first site and is now operational at all sites.

The Balanced Budget Act directed us to evaluate the demonstration by

studying a broad range of issues.2

 As part of the evaluation, this report to

1

Throughout this report, we use the term “retirees” to refer to military retirees and their dependents

and survivors aged 65 and over. Most of these older retirees are dual-eligibles—that is, they qualify for

both Medicare and military health benefits.

2

We reported on the demonstration’s early phases in Medicare Subvention Demonstration: DOD Data

Limitations May Require Adjustments and Raise Broader Concerns (GAO/HEHS-99-39, May 28,

1999) and Medicare Subvention Demonstration: DOD Start-up Overcame Obstacles, Yields Lessons,

and Raises Issues (GAO/GGD/HEHS-99-161, Sept. 28, 1999).

Page 1 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

your committees examines enrollment in DOD’s pilot HMOs for seniors.3

Specifically, we discuss (1) how successful the demonstration has been in

enrolling eligible beneficiaries, (2) what influenced retirees to join DOD’s

pilot HMOs, and (3) what factors accounted for differences in enrollment

rates across demonstration sites.

To address these issues, we analyzed data from our survey of nearly 20,000

Medicare-eligible military retirees in the demonstration areas,

supplemented with Health Care Financing Administration (HCFA) and DOD

administrative data. (See app. I for a description of survey methods and

app. II for a description of our statistical model of enrollment in Senior

Prime.) In addition, we used DOD-generated reports about enrollment in

and disenrollment from the subvention demonstration project. We

performed our work according to generally accepted government auditing

standards between June 1998 and November 1999.

Results in Brief In the first year of DOD’s Medicare subvention demonstration, over

one-fifth of Medicare-eligible military retirees in the demonstration areas

enrolled in TRICARE Senior Prime, DOD’s HMO pilot for seniors, although

enrollment rates differed markedly—from 10 to 38 percent of those

eligible—across the six demonstration sites. Two sites reached their

enrollment targets and started putting applicants on a waiting list;

consequently, the number of enrollees understates interest in the program

at these two sites. The demonstration allows retirees who turn age 65 after

the demonstration’s start to “age-in”—enroll in Senior Prime regardless of

the site’s enrollment limit—if they were enrolled until turning 65 in DOD’s

managed care plan for younger DOD beneficiaries. Slightly more retirees

are aging-in than DOD had expected. At the two sites where the number of

enrollees has already reached the target level, a large number of age-ins

may strain clinics’ capacity. Disenrollment rates—often used as a measure

of dissatisfaction with health plans—are running at almost 5 percent per

year demonstrationwide, relatively low compared with many other

Medicare managed care organizations.

A retiree’s recent use of the military health care system was a strong

predictor of enrollment in Senior Prime—the greater the reliance on

military health care in the previous year, the greater the likelihood of

enrolling. Among those retirees who had obtained all their health care

from military facilities, over 60 percent joined Senior Prime. Most retirees,

however, had not used military care in the previous year—apart from

3

Addressees are listed at the end of this letter.

Page 2 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

getting prescriptions filled—and few of these nonusers enrolled. Several

related factors also influenced retirees’ decisions:

• Satisfaction with previous health care. Not surprisingly, users of military

health care who were very satisfied with it were the most likely to enroll,

whereas retirees satisfied with civilian care were unlikely to choose Senior

Prime.

• Knowledge of Senior Prime. Although DOD undertook marketing efforts,

over 40 percent of retirees reported that they knew nothing about Senior

Prime. Aside from some unusual cases, retirees who did not know about

Senior Prime did not join—suggesting the importance of marketing efforts.

• Convenience. Retirees living close to military health care facilities were

more likely to join Senior Prime.

Any potential expansion of DOD subvention would probably also tend to

attract retirees with these characteristics, although they are a minority of

all military retirees.

Differences in site enrollment rates partly reflected the sites’ different

histories of serving retirees. Sites that had provided high levels of care to

many older retirees had an advantage, since users who depended on

military health care were more likely to choose Senior Prime. In addition,

features of the local market and the site helped to shape individual

enrollment decisions:

• Managed care presence. At sites where enrollment in Medicare managed

care was relatively low, enrollment in Senior Prime tended to be

comparatively high. Conversely, where enrollment in Medicare managed

care plans was high, enrollment in Senior Prime tended to be low. If an

expanded subvention program reflected the demonstration’s experience,

enrollment in a Senior Prime-type program could be expected to be higher

where competition from other Medicare managed care plans was limited,

but lower where such plans were widespread.

• Site targets. Sites with very low targets—relative to the number of eligible

retirees—tended to enroll smaller proportions of retirees. Enrollment

rates were higher at sites with very ambitious targets; this was true even if

sites did not meet their targets.

Page 3 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Background

Military Retiree Health

Care

Currently, about 1.3 million retired military personnel, dependents, and

survivors aged 65 and older reside in the United States, and this number is

expected to increase to over 1.5 million by 2004. Military retirees under

age 65 are eligible for comprehensive coverage through various health

plans sponsored by DOD’s TRICARE program. When they turn 65 and

become eligible for Medicare, however, retirees lose their right to

participate in DOD’s health care plans. These older retirees remain eligible

for free inpatient and outpatient care at military health care facilities, but

only when space and resources are available. The downsizing of the

military medical system, the growth in the number of retirees, and the

introduction of managed care into military medicine have all contributed

to a decline in “space-available” care. As its name suggests, this care is

not expected to be available on a regular and continuous basis, which

older retirees often consider important. Although some retirees aged 65

and over rely heavily on military facilities for their health care, most do

not, and at least half do not use military health care facilities at all. In

addition to using DOD resources, retirees may receive care paid for by

Medicare and other public or private insurance for which they are eligible.

They may also get some care from Department of Veterans Affairs

facilities.4

Medicare Most military retirees aged 65 and over are eligible for Medicare, a

federally financed health insurance program that covers health care

expenses of the elderly, some people with disabilities, and people with

end-stage kidney disease. HCFA, within the Department of Health and

Human Services, administers Medicare. Under traditional Medicare,

beneficiaries choose their own providers, and Medicare reimburses those

providers on a fee-for-service basis. Beneficiaries who receive care

through traditional Medicare are responsible for paying a share of the

costs for most services. Most beneficiaries have supplementary coverage

that reimburses them for many of the costs that Medicare requires them to

pay. Major sources of this coverage include employer-sponsored health

insurance; “Medigap” policies, sold by private insurers to individuals, and

Medicaid, a state/federal program that provides health care to low-income

people.

4

Department of Veterans Affairs facilities are available to retirees, but not to their dependents or

survivors.

Page 4 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Beneficiaries may use an alternative to traditional Medicare, the

Medicare+Choice option. Medicare+Choice allows beneficiaries to enroll

in private managed care plans5

 and other types of health plans. Managed

care plans provide all traditional Medicare benefits and typically offer

additional benefits, such as prescription drug coverage. Members of these

plans generally pay less out-of-pocket than they would under traditional

Medicare. (For most beneficiaries, belonging to a Medicare+Choice plan

makes a Medigap policy unnecessary.) When choosing a plan,

beneficiaries must weigh these benefits against other features of managed

care. For example, beneficiaries enrolled in Medicare managed care plans

are “locked out” of Medicare coverage for providers not in their plan.

These beneficiaries also usually must obtain approval from their primary

care doctor before they can see a specialist.

Although in recent years Medicare managed care enrollment has increased

markedly nationwide, enrollment varies by region, and not all beneficiaries

live in areas where plans are available. As of October 1999, about 18

percent of Medicare beneficiaries were enrolled in Medicare+Choice, most

in capitated managed care plans.6

 In the last 4 years, managed care

enrollment has doubled, from 3 million in 1995 to over 6 million in 1999.

Enrollment is concentrated in the West, Northeast, and Florida. In some

counties, over 40 percent of beneficiaries are members of managed care

plans; in others, even though plans are available, fewer than 1 percent of

beneficiaries have chosen to enroll. Although most Medicare beneficiaries

live in areas where they are able to join a Medicare managed care plan,

about 30 percent of beneficiaries live in counties where no plan is

available.

TRICARE Senior Prime The Medicare subvention demonstration permits DOD to create HMOs that

participate in the Medicare+Choice program and enroll military retirees

eligible for Medicare. Under the demonstration, enrolled beneficiaries may

use their Medicare benefit in TRICARE Senior Prime, the group of new,

DOD-run HMOs operated exclusively in the demonstration’s test sites. To be

eligible for Senior Prime, a retiree must

5

In this report, “managed care plan” refers to a capitated managed care plan—an HMO that contracts

with Medicare and receives a fixed monthly payment for each Medicare beneficiary it serves,

regardless of the actual costs incurred in providing the care to the beneficiary.

6

About 90 percent of Medicare+Choice beneficiaries were enrolled in capitated managed care plans.

The remaining beneficiaries were enrolled in plans that Medicare reimburses for costs they incur when

providing care.

Page 5 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

• be enrolled in Medicare part A and part B;7

• reside in one of the six geographic areas covered by the demonstration;

• be a “dual-eligible”—eligible for both Medicare and military health care

benefits;

• have used a military treatment facility (MTF) before July 1, 1997, or turned

age 65 on or after July 1, 1997;8

 and

• agree to use Medicare-covered and MTF services only through Senior

Prime.

Senior Prime builds on TRICARE Prime—DOD’s HMO program for active

duty personnel, family members, and retirees under age 65. Currently,

Senior Prime does not require its enrollees to pay a premium. In addition

to services typically covered under TRICARE Prime, such as hospital and

physician services, Senior Prime provides home health and other

Medicare-required services. Similar to TRICARE Prime, Senior Prime

enrollees are assigned a Primary Care Manager; only physicians or other

providers, such as nurse practitioners, who deliver services at military

facilities may be Primary Care Managers for Senior Prime enrollees. Other

services may, at Senior Prime’s option, be provided at a military facility or

by a civilian network provider, but beneficiary copayments differ

depending on where the service is delivered. For example, inpatient

hospitalization is free at military facilities but requires a copayment at

civilian hospitals.9

 Senior Prime gives its members priority for treatment at

military facilities over other dual-eligibles. Like enrollees in private

Medicare managed care plans, Senior Prime enrollees are locked out of

Medicare coverage for services provided outside the plan. Enrollees who

use civilian providers without authorization are responsible for the full

charge.

Senior Prime is operated under a Memorandum of Agreement (MOA)

between HCFA and DOD. Each site must meet most conditions of

participation required of private Medicare+Choice plans, such as

beneficiary protection and quality assurance. However, the MOA waived

certain requirements regarding fiscal soundness, physician licensure, and

the maximum travel time to primary care doctors.

7

Medicare part A covers inpatient hospital, skilled nursing facility, and hospice care. Medicare part B

covers physician and other outpatient services, for which beneficiaries who elect part B pay a monthly

premium.

8

MTFs include hospitals (both medical centers and community hospitals) and clinics.

9

In planning for the demonstration, DOD anticipated that most services would be provided at MTFs.

Page 6 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Sites differ in the number of dual-eligible retirees in their area and their

enrollment targets (see table 1) as well as by geographic region, size of

MTF, and managed care penetration in the local Medicare market.

Table 1: Senior Prime Sites and

Selected Features

Site

Start of service

delivery

Eligible

retirees (as of

6/30/98)

Target

enrollment

Total

enrollment (as

of 11/1/99)

Madigan (Wash.) 9/1/98 18,655 3,300 3,987

San Antonio

San Antonio

area (Tex.) 10/1/98 33,426 10,000 11,265

Texoma area

(Tex./Okla.) 12/1/98 6,871 2,700 2,116

San Diego (Calif.) 11/1/98 33,580 4,000 3,805

Keesler (Miss.) 12/1/98 7,177 3,100 3,036

Colorado Springs

(Colo.) 1/1/99 13,432 3,200 3,430

Dover (Del.) 1/1/99 3,894 1,500 835

Total 117,035a 27,800 28,474

Note: Total enrollment may exceed target (planned) enrollment because total enrollment includes

both regular enrollees and enrollees who aged-in to Senior Prime (that is, reached age 65 after

the start of service delivery and subsequently joined Senior Prime), whereas the target enrollment

number excludes age-ins. However, DOD assumed that age-ins would be about 10 percent of

target enrollment. Although the demonstration treats the San Antonio and Texoma areas as one

site, for the purpose of analysis we treat these areas, which are roughly 300 miles apart, as

separate sites.

aAt the time of our survey (Nov. 1998–May 1999), we estimated the number of retirees in the

demonstration areas at 107,414. (See app. I for details.)

Source: DOD, TRICARE Senior Prime Plan Operations Report (Washington, D.C.: DOD, Nov. 1,

1999). The number of eligible retirees (by site and total) is drawn from DOD’s Defense Enrollment

Eligibility Reporting System (DEERS) for the third quarter of fiscal year 1998.

Because sites’ ability to support the demonstration was a factor in site

selection, the demonstration sites are not representative of all military

health care service areas. In addition, military health care resources are

greater in demonstration areas than in other areas served by military

hospitals. In demonstration areas, about 80 percent of retirees live near a

military medical center—a teaching hospital with multiple specialty

clinics—whereas in other areas served by military hospitals, only

30 percent of retirees live near a medical center.

Page 7 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Over One-Fifth of

Eligible Retirees Have

Enrolled in Senior

Prime, Although Rates

Differ Widely Across

Sites

After its first 10 months of operation,10 DOD’s pilot Medicare managed care

plan had attracted over one-fifth of all military retirees who were eligible

at the start of the demonstration—roughly 25,000 enrollees. However,

enrollment rates by site have varied widely. Anticipating strong interest in

Senior Prime, sites set enrollment targets that also were to serve as limits

that guarded against overextending site resources. Some sites set higher

targets for enrollment than others, relative to the number of eligible

retirees. Two large sites that reached their targets have substantial waiting

lists, a sign that demand for Senior Prime exceeds enrollment in those

areas. Retirees who turn 65 after the initial enrollment period and who

were previously in TRICARE Prime are guaranteed acceptance in Senior

Prime, regardless of whether a site has reached its target for regular

enrollees.11 To date, almost 3,300 of these age-ins have enrolled, somewhat

more than DOD expected. Once in Senior Prime, almost all retirees have

remained; the percentage of those disenrolling has been modest.

Demonstrationwide

Enrollment Rate Masks

Sizeable Differences

Among Sites

About 22 percent of retirees in the demonstration areas who were

Medicare-eligible when the demonstration began have enrolled in Senior

Prime, but sites differ considerably in their enrollment rates.12 As figure 1

shows, Senior Prime enrollment rates as a proportion of eligibles vary

nearly fourfold across sites—from 10 percent of eligible military retirees at

San Diego to 38 percent at Keesler.

10Sites started to deliver health care on different dates. We use the first 10 months of data for every site

so that the site enrollment numbers are comparable. Through October 1999, regular enrollment in the

demonstration had reached 90 percent of target enrollment demonstrationwide.

11A “regular enrollee” was aged 65 or older when the site began delivering care.

12The enrollment rate is the number of regular enrollees as a percentage of the number of eligible

retirees in the third quarter of fiscal year 1998; the number of eligibles is from DOD’s DEERS database.

See also app. I.

Page 8 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Figure 1: Enrollment as a Share of

Medicare-Eligible Military Retirees, by

Site

0

5

10

15

20

25

30

35

40

45

50

San Antonio Keesler

Area

Texoma

Area

Colorado

Springs

San Diego Madigan Dover

10

18

20

23

Percentage of Retirees

26

30

38

Note: Data are based on 10 months of operations at each site. Enrollment refers to regular

enrollees only. The number of Medicare-eligible military retirees in the demonstration areas for the

third quarter of fiscal year 1998 is from DOD’s DEERS database.

Source: Iowa Foundation for Medical Care, TRICARE Senior Prime—Enrollment Processed

Report, monthly reports, June 1999 through October 1999 (Washington, D.C.: DOD, 1999).

Sites Differ in

Ambitiousness of

Enrollment Targets as Well

as Success in Meeting

Targets

Although sites set their own enrollment targets, they differ in how closely

regular enrollment has approached their targets. Two of the largest sites,

Madigan and San Antonio, are at or very close to their targets.13 Other

sites’ enrollment levels range from 95 percent of the target at Colorado

Springs to 52 percent at Dover. (See fig. 2.)

13At sites that have reached their targets, actual enrollment may differ from the target, from month to

month, because of deaths and disenrollments.

Page 9 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Figure 2: Enrollment as a Percentage

of Target, by Site

0

10

20

30

40

50

60

70

80

90

100

San Antonio Madigan

Area

Colorado 

Springs

Texoma San Diego Keesler

Area

Dover

52

70

82

87

Percentage of Target

95

99 100

Note: Data are based on 10 months of operations at each site. Enrollment refers to regular

enrollees only.

Source: TRICARE Senior Prime—Enrollment Processed Report, monthly reports, June 1999

through October 1999.

In setting targets, all sites considered their capacity, especially in primary

care clinics, but the process involved considerable judgment; sites also

differed in their use of other criteria. Sites had varying views of how

attractive Senior Prime would be to their retirees, and this affected the

targets they set. Some sites also factored in their experience, including

limited experience in providing ongoing care to selected groups of retirees

aged 65 and over, and several sites considered the number of Senior Prime

enrollees they would need to break even financially. In addition to

establishing a target for regular enrollment, all sites allowed for age-ins,

estimating that they would equal 10 percent of the regular enrollment

target.14

14GAO/GGD/HEHS-99-161, Sept. 28, 1999, p. 14.

Page 10 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

In view of their differing criteria and judgments, it is not surprising that

some sites set higher enrollment targets than others. Sites that succeeded

in meeting their targets did not necessarily enroll high proportions of their

eligible retirees.

Enrollment Understates

Demand at Sites That Have

Reached Their Enrollment

Targets

Applications at two sites, Madigan and San Antonio, have exceeded

enrollment targets, so actual enrollment understates interest in the

demonstration for these sites. Each site created a waiting list and allows

applicants from its waiting list to enroll as regular enrollees leave Senior

Prime. After 10 months of Senior Prime operations, the waiting lists have

grown to a combined total of almost 1,900 applicants. The number of

regular enrollees plus the number of applicants on the waiting list exceeds

target enrollment at Madigan by more than 20 percent, and in the San

Antonio area by 12 percent.

However, the number of applicants on the waiting list may not give a

complete picture of the additional demand for Senior Prime. In particular,

the waiting list can understate additional demand because its length may

discourage some retirees from submitting applications.15

Volume of Age-Ins May

Strain Capacity at Some

Sites

A large number of age-ins may stretch resources and cause delays in

seeing a physician at sites where the number of enrollees has already

reached the site’s target. (Sites can limit the number of regular enrollees

but cannot limit the number of retirees who age-in.) For the first year of

care delivered under Senior Prime, we currently project that the average

age-in rate will be 12 percent of target enrollment—somewhat higher than

the 10-percent rate DOD had been planning on.16 Anecdotal evidence from

several sites suggests that some retirees are enrolling in TRICARE Prime

just before turning age 65 in order to qualify for Senior Prime.

However, age-in rates vary by site. At Madigan, in the first 12 months

age-ins equaled 16 percent of target enrollment, while in the San Antonio

area they reached 12 percent; age-ins at both sites have been higher than

expected. At San Diego, for the same period, the age-in rate was 8 percent.

15Although DOD limits the number of applications on the waiting lists at each site, this limit has not yet

been reached at any site.

16In our analysis of enrollment rates, we compared sites using the first 10 months of care. In analyzing

the rate of aging-in, this section focuses on 12 months because the DOD projection, to which we

compare the sites’ age-in rates, is on an annual basis.

Page 11 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Exceeding capacity could create problems, but sites have several options

for easing the potential strain on capacity. A site could reduce the amount

of space-available care that it gives retirees aged 65 and over who are not

enrolled in Senior Prime. Also, the MTF could refer TRICARE Prime and

Senior Prime enrollees to civilian network providers more often; however,

this would be costly for DOD. If capacity problems were not overcome,

there would be a risk of reduced access to care and increased difficulty in

meeting DOD’s access standards.17

Relatively Few Enrollees

Overall Have Chosen to

Leave Senior Prime

Early experience with Senior Prime showed that relatively few enrollees

have chosen to leave the plan. Over the first 9 months of plan operation,

the average disenrollment rate was 4.6 percent.18 In Medicare managed

care plans generally, early disenrollment rates are usually higher than

longer-term rates, and that is true in Senior Prime. Early

disenrollments—those that occur within 3 months of start-up—may signal

either that beneficiaries did not understand the plan when they signed up

or that they were dissatisfied with their early experience in it. In Senior

Prime, disenrollment during the first 3 months of operations averaged

7.8 percent, falling over the subsequent 6 months to 3.5 percent. Senior

Prime’s disenrollment rates compare favorably with those found in private

Medicare managed care plans, which in several large markets range from

less than 5 percent to more than 40 percent.

Retirees who sign up for a plan may also cancel their application before

their effective enrollment date. Over the first 9 months of plan operations,

the overall cancellation rate was 3.4 percent. More than 80 percent of

cancellations occurred in the first 3 months.

17See Defense Health Care: Appointment Timeliness Goals Not Met; Measurement Tools Need

Improvement (GAO/HEHS-99-168, Sept. 30, 1999).

18Rates have been annualized. The disenrollment rate is total voluntary disenrollments divided by

average monthly enrollment. See Medicare: Many HMOs Experience High Rates of Beneficiary

Disenrollment (GAO/HEHS-98-142, Apr. 30, 1998), p. 14.

Page 12 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Satisfied Users Who

Depended on Military

Health Care Typically

Enrolled, While

Retirees Lacking

Knowledge of Senior

Prime Generally Did

Not

Retirees’ recent experience with military health care strongly influenced

their decision to enroll in Senior Prime. Retirees who had depended

primarily on military facilities for their recent health care were much more

likely to join Senior Prime than those who had received little or no care

from military facilities. Not surprisingly, retirees who were satisfied with

military health care were more likely to join than those who were not.

Convenience was also a factor, with those who lived close to an MTF more

likely to enroll. Retirees who had more information about Senior Prime

also were more likely to enroll. A significant share of retirees reported

knowing nothing about it; surprisingly, a few of these enrolled, although

most did not.

The following discusses the four factors our analysis identified as

particularly important in retirees’ decisions to enroll in Senior Prime.19

Previous reliance on military health care facilities. Retirees were much

more likely to join Senior Prime if they had relied on the military health

system for most or all of their health care during the previous year.20 As

figure 3 shows, over 60 percent of retirees who had received all of their

recent health care at military facilities enrolled in Senior Prime, whereas

only 6 percent of retirees who had received no military care in the

previous year enrolled. In part, this reflected the design of the program: To

be eligible for Senior Prime, retirees must have used military care since

becoming Medicare-eligible—depending on a retiree’s age, this could have

been many years earlier.21 However, we found that the extent to which a

retiree recently had used military care affected whether the retiree

enrolled in Senior Prime. Most retirees residing in the demonstration

areas—almost 60 percent—had not received any military care in the

19Our discussion of the factors leading retirees to enroll is based on the statistical model presented in

app. II. By using the model, we were able to examine the impact of particular characteristics on

enrollment while taking account of (or “controlling for”) a large number of factors. Because the

model analyzed data from our survey of retirees at the subvention sites and there were only a few

age-ins at the time we drew our sample, our discussion is largely limited to regular enrollees. We have

removed from the analysis just under 5 percent of retirees who were not enrolled in both Medicare

part A and part B and were therefore not eligible for Senior Prime. We examine retirees’ actual

behavior—whether they enrolled—rather than whether they “tried to” or “planned to” enroll.

20Retirees were asked how much of their health care—excluding pharmacy services—during the past

year had been at military health care facilities. (In a separate question, retirees were asked if they had

their prescriptions filled at military pharmacies, civilian pharmacies, or other places.) Senior Prime

enrollees were asked to report on the 12 months before their Senior Prime coverage became effective.

21This requirement did not apply to retirees who had been Medicare-eligible only since July 1, 1997.

Previous military facility use was not verified during the enrollment process; applicants merely

answered affirmatively a question about using military facilities. Retirees were not required to be

recent users of military care, and some retirees had been eligible for Medicare for over 20 years, giving

them a large window in which they could have received military services in order to be eligible.

Page 13 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

previous year, and far fewer—less than one-sixth—had depended entirely

on military facilities for their care (see fig. 4). As a result, the Senior Prime

population is very different from the demonstration population as a whole.

Before the demonstration, 47 percent of enrollees had relied entirely on

military care, while only 16 percent of all retirees in the demonstration

areas had done so. By contrast, 17 percent of enrollees had not used

military care at all in the recent past, compared with 58 percent of all

retirees.

Figure 3: Greater Reliance on Military

Facilities for Recent Health Care

Predicted Enrollment in Senior Prime

0

10

20

30

40

50

60

70

80

None Some Most All

6

22

46

62

Percentage That Enrolled

Recent Health Care Received at Military Facilities

Source: GAO subvention survey and HCFA administrative data.

Page 14 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Figure 4: Enrollees Differed From

Eligible Retiree Population in Previous

Reliance on Military Health Care

All

Most

Some

None

Enrollees All Eligible Retirees

17%

18%

18%

47%

16%

8%

18%

58%

Recent Health Care Received

at Military Facilities

Source: GAO subvention survey and HCFA administrative data.

Satisfaction with previous health care. Satisfaction with their previous

health care was also linked to whether retirees chose Senior Prime. As

table 2 shows, retirees who were very satisfied with military health care

were much more likely to join Senior Prime than those who were less

satisfied.

Table 2: Satisfaction With Previous

Military Care Predicted Enrollment Overall satisfaction with military care Percentage who enrolled

Very satisfied 62

Moderately satisfied 42

Less satisfied 22

Note: Data are based on all retirees who reported receiving at least some of their care (excluding

prescriptions) during the past 12 months at military facilities.

Source: GAO subvention survey and HCFA administrative data.

Page 15 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Retirees’ own accounts of why they enrolled or did not enroll in Senior

Prime underline the importance of their previous sources of health care.

When asked why they enrolled in the program, enrollees most often cited

the quality of care at military facilities and a preference for MTF care—both

reflecting enrollees’ previous positive experiences with military facilities.

Conversely, when asked why they did not enroll in Senior Prime,

nonenrollees most often cited satisfaction with their current coverage.

Retirees who relied exclusively on civilian physicians and were satisfied

with their care were much less likely to enroll, suggesting a reluctance to

disrupt their health care arrangements. This is consistent with Senior

Prime marketing materials and briefings: Retirees were told that if they

had a civilian physician and wanted to continue receiving care from that

physician, Senior Prime might not be the right choice.22

Convenience of military health care. The convenience of military care was

also a factor in retirees’ enrollment decisions. Those who lived closer to a

military facility—measured in either miles or reported travel time—were

more likely to enroll (see table 3). This is supported by enrollees’ own

accounts of why they enrolled: About 76 percent of those who gave

reasons for joining Senior Prime mentioned the convenience of military

facilities, and about 14 percent cited this convenience as their main

reason.

Table 3: Travel Time to Nearest MTF

Predicted Enrollment Travel time Percentage who enrolled

Less than 15 minutes 31

15 to less than 30 minutes 23

30 minutes to an hour 14

More than an hour 11

Source: GAO subvention survey and HCFA administrative data.

Knowledge of Senior Prime. Despite DOD’s marketing and informational

efforts, over 40 percent of retirees reported that before receiving our

survey they knew nothing about Senior Prime. About 28 percent of retirees

who did not enroll reported that not having enough information about

22We previously reported that during our visits to subvention sites, Senior Prime staff and retirees

commented that the temporary nature of the demonstration made retirees reluctant to enroll in Senior

Prime (see GAO/GGD/HEHS-99-161, Sept. 28, 1999, p. 12). In our survey, retirees were asked why they

did not try to enroll and were given 12 possible reasons to choose from. Although the program’s

temporary status was not among these reasons, all respondents had the opportunity to write in

additional reasons for not enrolling, and about 2 percent of nonenrollees mentioned the temporary

nature of the program.

Page 16 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Senior Prime was one reason for not enrolling, and a similar number cited

not understanding the program; many cited both reasons. Overall, the less

retirees knew about Senior Prime, the less likely they were to enroll. Over

60 percent of retirees who said they knew a great deal about Senior Prime

enrolled, whereas only 2 percent of retirees who reported knowing

nothing about it enrolled.

It is surprising that some retirees who claimed to have no knowledge of

Senior Prime could have enrolled. Although our data are not definitive on

this point, there are at least two possible explanations: A spouse or other

family member could have handled most of the enrollment paperwork,

with the result that the retiree did not readily recall it; or the retiree could

have known about Senior Prime when enrolling but forgotten about it

when answering our questionnaire several months later.23

It is hard to identify precisely the impact of information on enrollment,

since those who enrolled may have actively sought more information. Both

enrollees and nonenrollees who knew about Senior Prime reported

learning about it from similar information sources. They mentioned five

main sources of information: written information from sites, presentations

or briefings about Senior Prime, written information from an organization

that represents military retirees or their families, newspapers, and

conversations with friends and neighbors. Enrollees, however, were more

likely than nonenrollees to have read information provided by the sites or

to have attended a presentation or briefing, perhaps reflecting their own

prior interest. (See fig. 5.)

23We found that retirees’ level of knowledge about Senior Prime did not vary materially with time.

Comparing those who answered our survey earlier with those who answered later, there was little

difference in knowledge about Senior Prime.

Page 17 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Figure 5: Enrollees Were More Likely

Than Nonenrollees to Have Learned

About Senior Prime From Sites’

Marketing Efforts

0

20

40

60

80

100

Briefing or Presentation Written Material From TRICARE

84

24

64

39

Percentage

Information Source

Enrollees

Nonenrollees

Note: Data are based on retirees who knew about Senior Prime and reported how they learned

about the program.

Source: GAO subvention survey and HCFA administrative data.

In principle, knowing about Senior Prime could be linked to previous use

of military facilities (and the resulting exposure to on-base publicity), but

the evidence on the extent to which each factor—recent use of military

care and knowledge about Senior Prime—contributed independently to

enrollment is striking. As table 4 shows, at each level of military health

care use, the less retirees knew about the demonstration program, the less

likely they were to join. Similarly, at each level of knowledge, the less

retirees had used military care recently, the less likely they were to enroll.

Page 18 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Table 4: Knowledge of Senior Prime

and Previous Use of Military Care

Independently Affected Enrollment Knowledge of Senior Prime

Numbers in percent

Amount of recent care

received at military facilities A great deal Something A little Nothing

All 88 75 53 17

Most 75 58 27 11

Some 52 32 15 2

None 30 15 6 1

Note: The numbers are the percentages of retirees in each group who enrolled in Senior Prime.

Source: GAO subvention survey and HCFA administrative data.

Differences in

Medicare Markets and

MTF Factors Affected

Sites’ Enrollment

Rates

Sites had very different enrollment rates. A site’s previous record in

serving retirees and its effectiveness in informing beneficiaries about

Senior Prime affected the proportion of its retirees who enrolled. In

addition, some evidence suggests that a site’s Medicare market and other

local factors influenced enrollment. Retirees living in areas with a greater

Medicare managed care presence were less likely to choose Senior Prime

than were retirees in areas where managed care plans had lower market

shares. Finally, although sites with ambitious enrollment targets tended to

be less successful in meeting them, these sites tended to enroll higher

proportions of retirees than sites with less ambitious targets, other things

being equal.24

Sites’ Enrollment Rates

Reflect Previous

Experience in Serving

Retirees and Success in

Marketing Senior Prime

To demonstrate the effect of sites’ varying histories and actions on

enrollment rates, we analyzed two sites that, despite their apparent

similarities, enrolled very different proportions of their eligible

populations. Both San Diego and the San Antonio area have large military

medical centers and are located in areas with substantial numbers of

military retirees (each site’s area includes around 33,000 retirees). The two

sites’ combined population represents over half of all retirees eligible for

the demonstration, and the sites’ enrollees compose about half of the

demonstration’s enrollees. However, San Antonio enrolled almost

30 percent of its eligible retirees, while San Diego enrolled only 8 percent.25

Compared with San Diego, San Antonio had more retirees who had

received much of their recent care at military facilities, were satisfied with

24This section, like the previous one, is based on the statistical model that identifies each factor’s

influence on enrollment while controlling for the effects of other factors (see app. II).

25These estimates are based on GAO survey data that reflect enrollment at an earlier point in time than

the data in fig. 1, which reflect enrollment 10 months after the start of service delivery.

Page 19 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

military care, and knew about Senior Prime—all characteristics linked to

joining Senior Prime. (See fig. 6.) If San Diego’s population had mirrored

San Antonio’s in these three respects alone, the number of applicants

would have at least doubled and San Diego would have met its target and

would have had to establish a waiting list.

Figure 6: San Antonio and San Diego

Retiree Populations Differed

0

10

20

30

40

50

60

70

80

Satisfied Users of Military Health Care Knew About Senior Prime

32

14

67

36

Percentage of Retirees

San Antonio Area

San Diego

Note: “Satisfied users of military health care” refers to retirees who received most or all of their

recent care at military facilities and were satisfied with military care.

Source: GAO subvention survey.

Site Enrollment Linked to

Availability and Appeal of

Civilian Alternatives and to

Site Enrollment Targets

Sites’ success in enrolling retirees in Senior Prime was influenced by the

strength of the Medicare managed care presence in the area. Where

Medicare managed care was strongest—San Diego—the Senior Prime

enrollment rate was lowest. By contrast, enrollment rates tended to be

Page 20 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

higher in areas where, before Senior Prime, Medicare managed care was

virtually nonexistent (Keesler and the Texoma area).26

The strength of Medicare managed care in any area (measured by the

percentage of Medicare beneficiaries who enroll) reflects the extent to

which Medicare managed care plans are available and are able to attract

Medicare beneficiaries by their reputations, benefit packages, and low

out-of-pocket costs. High managed care penetration often brings increased

competition for members, which can lead plans to offer more generous

benefit packages. The more attractive these are, the more likely retirees

would be to choose such a plan rather than join Senior Prime.

Additionally, those retirees who were most favorably disposed toward

managed care had already had the opportunity to choose it in areas where

managed care was well established.

By contrast, in areas with less managed care, retirees may have chosen

Senior Prime because their health care options were more limited.

Compared with retirees at sites with a substantial managed care presence,

retirees at sites lacking managed care were more likely to say that they did

not want to enroll in Senior Prime because they did not want to join a

managed care organization or an HMO. Nonetheless, while Senior Prime’s

HMO status may have deterred some retirees in the weaker managed care

areas from enrolling, on balance the lack of competition from managed

care alternatives boosted enrollment.

One other market factor was significant—the availability of nonfederal

primary care physicians, measured as the number of physicians in an area

relative to its population. In areas with fewer physicians, retirees were

somewhat more likely to join Senior Prime, which assigns them a primary

care manager and assures them of access to care.

In addition to local market factors, the enrollment target set by each site

tended to influence the site’s actual enrollment rate. Sites with more

ambitious targets (relative to the number of eligible beneficiaries) typically

enrolled a larger proportion of retirees than less ambitious sites (see table

5). For example, Madigan—a site with one of the lower targets—had

reached its target by the time of our survey and had closed enrollment

(except for age-ins), resulting in a lower rate of enrollment than it might

have had with a higher target.

26Medicare managed care strength—the percentage of Medicare beneficiaries enrolled in managed care

plans—was measured at the county level before the start of Senior Prime at each site. At the Colorado

Springs and Dover sites, managed care plan pullouts occurred around the time the programs started.

Page 21 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

Table 5: Higher Enrollment Targets

Linked to Higher Actual Enrollment

Rates

Site target relative to retiree population in area Percentage who enrolled

High 36

Medium 26

Low 12

Source: GAO subvention survey and HCFA and DOD administrative data.

Concluding

Observations

Early experience indicates that Medicare-eligible military retirees residing

in the demonstration areas are interested in using military facilities for

their health care, although the amount of interest varies widely across

sites. Our analysis of the demonstration and the sites’ records in enrolling

retirees suggest using considerable caution in generalizing this experience

to other possible subvention sites. As we have discussed, subvention

demonstration sites were not selected to mirror the full range of military

health facilities and the diversity of civilian health care environments.

Instead, they were largely sites that DOD thought could run a successful

program. In the demonstration areas, a disproportionate number of

retirees live near medical centers, which offer a broad range of services

and are well-positioned to provide the full continuum of Medicare

services. In nondemonstration areas, far fewer retirees live near military

medical centers. Moreover, whether retirees considered a site’s Senior

Prime program to be attractive depended partly on local market factors.

Although the demonstration was not designed to measure the impact of

local variation, we found evidence that such diverse characteristics as

Medicare managed care penetration, the availability of nonfederal

physicians, and the targets set by the sites affected enrollment. In terms of

these characteristics, demonstration sites and other areas differ. Finally,

both military health care and Medicare are dynamic programs. Retirees

must assess Senior Prime’s attractiveness in relation to the military and

civilian alternatives. To the extent that these alternatives change, the

attractiveness of Senior Prime will change, creating a further impediment

to generalizing the demonstration’s enrollment rates beyond its current

boundaries.

Agency Comments

and Our Evaluation

DOD and HCFA reviewed a draft of this report and concurred with our

findings. HCFA noted that the draft did not discuss how Senior Prime’s

demonstration status affected beneficiaries’ decisions to enroll. We have

added a discussion of retirees’ and Senior Prime staffs’ comments on this

point, as well as evidence from our survey. Both agencies also suggested

Page 22 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

several technical changes to the report, which we incorporated where

appropriate. DOD and HCFA comments are presented in appendixes III and

IV, respectively.

We are sending copies of this report to the Honorable William S. Cohen,

Secretary of Defense; and the Honorable Nancy-Ann Min DeParle,

Administrator of HCFA. We will make copies available to others upon

request.

If you or your staffs have questions about this report, please contact me at

(202) 512-7114. Other GAO contacts and staff acknowledgments are listed in

appendix V.

William J. Scanlon

Director, Health Financing and

 Public Health Issues

Page 23 GAO/HEHS-00-35 DOD/Medicare Subvention
B-283483 

List of Addressees

The Honorable John W. Warner

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable William V. Roth, Jr.

Chairman

The Honorable Daniel Patrick Moynihan

Ranking Minority Member

Committee on Finance

United States Senate

The Honorable Floyd D. Spence

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

House of Representatives

The Honorable Tom Bliley

Chairman

The Honorable John D. Dingell

Ranking Minority Member

Committee on Commerce

House of Representatives

The Honorable Bill Archer

Chairman

The Honorable Charles B. Rangel

Ranking Minority Member

Committee on Ways and Means

House of Representatives

Page 24 GAO/HEHS-00-35 DOD/Medicare Subvention
Page 25 GAO/HEHS-00-35 DOD/Medicare Subvention
Contents

Letter 1

Appendix I 

Health Care Survey of

Subvention

Demonstration

Beneficiaries

28

Questionnaire Design 28

Sample Design 29

Response Rates 31

Appendix II 

A Model of Factors

Affecting Enrollment

in TRICARE Senior

Prime

33

Approach 33

Statistical Model and Results 34

Adequacy of Model 39

Limitations 41

Appendix III 

Comments From the

Department of

Defense

42

Appendix IV 

Comments From the

Health Care Financing

Administration

43

Appendix V 

GAO Contacts and

Staff

Acknowledgments

44

Tables Table 1: Senior Prime Sites and Selected Features 7

Table 2: Satisfaction With Previous Military Care Predicted

Enrollment

15

Table 3: Travel Time to Nearest MTF Predicted Enrollment 16

Page 26 GAO/HEHS-00-35 DOD/Medicare Subvention
Contents

Table 4: Knowledge of Senior Prime and Previous Use of Military

Care Independently Affected Enrollment

19

Table 5: Higher Enrollment Targets Linked to Higher Actual

Enrollment Rates

22

Table I.1: Major Survey Sections and Topics Covered 29

Table I.2: Survey Responses and Nonresponses 31

Table I.3: Population, Sample, Response Rate, and Weight, by

Stratum

32

Table II.1: Potential Influences on Enrollment in TRICARE Senior

Prime

33

Table II.2: Contribution to the Model’s Explanatory Power by

Each Block of Variables

36

Table II.3: Estimated Effects of Selected Factors on Enrollment

in Senior Prime

36

Table II.4: Actual Enrollment Rate Compared With Predicted

Rate, by Site

39

Figures Figure 1: Enrollment as a Share of Medicare-Eligible Military

Retirees, by Site

9

Figure 2: Enrollment as a Percentage of Target, by Site 10

Figure 3: Greater Reliance on Military Facilities for Recent Health

Care Predicted Enrollment in Senior Prime

14

Figure 4: Enrollees Differed From Eligible Retiree Population in

Previous Reliance on Military Health Care

15

Figure 5: Enrollees Were More Likely Than Nonenrollees to Have

Learned About Senior Prime From Sites’ Marketing Efforts

18

Figure 6: San Antonio and San Diego Retiree Populations

Differed

20

Figure II.1: Actual Enrollment Rate Compared With Predicted

Rate, by Site

40

Abbreviations

ADL activity of daily living

CAHPS Consumer Assessment of Health Plans Study

DEERS Defense Enrollment Eligibility Reporting System

DOD Department of Defense

HCFA Health Care Financing Administration

HMO health maintenance organization

M+C Medicare+Choice

MOA Memorandum of Agreement

MTF military treatment facility

Page 27 GAO/HEHS-00-35 DOD/Medicare Subvention
Appendix I 

Health Care Survey of Subvention

Demonstration Beneficiaries

The primary data source for this report is our health care survey of

beneficiaries eligible for the DOD/Medicare subvention demonstration. This

mail survey, which was conducted between November 1998 and

June 1999, sampled enrollees and nonenrollees at each of the seven sites.27

The bulk of data collection was done 2 to 4 months after health care

delivery started, with the exact dates varying by site.

The survey had two major objectives:

• to compare Senior Prime enrollees with nonenrollees, identifying factors

associated with enrollees’ decision to join the program; and

• to serve as the baseline for determining the impact of the demonstration

on Senior Prime enrollees’ and nonenrollees’ health care use, access to

services, quality of care, and out-of-pocket costs.

In order to meet the second objective, the survey was designed as a

two-wave panel, in which the same individuals would be surveyed

twice—at the beginning and at the end of the demonstration—thereby

permitting us to examine change over time.

Questionnaire Design In constructing the questionnaire, we developed questions pertaining to

retirees’ previous source of care, access to care, satisfaction with care,

knowledge of Senior Prime, and reasons for enrolling or not enrolling, and

other topics related to our study objectives. To ensure that the

questionnaire was as comprehensive as possible and that our questions

reflected existing practice, we reviewed literature on access to care and

compiled questions from five existing instruments: the Health Care Survey

of DOD Beneficiaries (1997), the Medicare Current Beneficiary Survey

(1996), the CAHPS (Consumer Assessment of Health Plans Study) Medicare

Managed Care Questionnaire (1997), the National Access to Care Survey

(1994),28 and the Access to Care in Medicare Managed Care Survey

(1996).29 In addition, we selected the SF-12, a set of questions developed

by the New England Medical Center Health Institute to capture health

status. After a series of pretests with groups of retirees, the final

questionnaire included the topic areas shown in table I.1.

27Although the Balanced Budget Act of 1997 specifies six test sites, for the purpose of analysis, we

treat the San Antonio area and the Texoma area, which are about 300 miles apart, as separate sites.

28Jointly sponsored by the Robert Wood Johnson Foundation and the National Center for Health

Statistics, and fielded as a supplement to the 1993 National Health Interview Survey.

29Conducted by Mathematica Policy Research, Inc., for the Physician Payment Review Commission.

Page 28 GAO/HEHS-00-35 DOD/Medicare Subvention
Appendix I 

Health Care Survey of Subvention

Demonstration Beneficiaries

Table I.1: Major Survey Sections and

Topics Covered Section Topics covered

Health Care in the Past Year Health care use; waiting times for appointments; waiting

times in office; amount of care received at military

facilities; ability to obtain care, reasons why not, and any

consequences; global satisfaction; out-of-pocket

expenses

Satisfaction With Care Primary care doctor (military, civilian, or other; one doctor

or group of doctors), satisfaction with primary care

doctor, specialists (military, civilian, or other), satisfaction

with specialists, satisfaction with military health care

Health Attitudes and

Preventive Health Care

Attitudes (worrying about health, avoiding doctors),

smoking history and behavior, advice on smoking

cessation and weight loss, chronic conditions and last

check-up for selected conditions, last eye exam, recent

mammogram, Pap smear

Health and Activities of Daily

Living (ADL)

SF-12 items, current health compared with 1 year ago,

needing help with ADLs

Health Insurance Coverage Current coverage: Medicare part B, Medigap, HMO, other

private insurance, Federal Employees Health Benefits

Program, cost of insurance coverage

Senior Prime Enrolled, tried to enroll, reasons why wanted to enroll or

did not try to enroll; insurance coverage before Senior

Prime; knowledge of Senior Prime and sources of

information; true/false knowledge-testing questions

Demographics and Other

Information

Demographics (such as age, marital status, education,

income), zip code, member of organization that

represents military retirees or their families, nearest

military hospital, travel time to nearest military hospital,

military hospital would most likely use, military sponsor or

dependent, rank at retirement

Many of the questions refer to individuals’ health care experiences during

the past 12 months. We asked Senior Prime enrollees, however, to report

this information for the 12 months before they joined Senior Prime so that

we could gauge their preprogram experience with the military and civilian

health care systems.

Sample Design We defined our population as all Medicare-eligible military retirees living

in the demonstration sites. We treated one site, San Antonio, as two sites

for sampling purposes, because the two parts of the site (San Antonio and

Texoma) are roughly 300 miles apart. Samples of enrollees and

nonenrollees were selected at each site 1 to 2 months after the start of

service, resulting in a demonstrationwide sample with 14 strata—seven

sites and two enrollment states (enrollee and nonenrollee) for each site.

The sample of enrollees was drawn from all those enrolled in the

Page 29 GAO/HEHS-00-35 DOD/Medicare Subvention
Appendix I 

Health Care Survey of Subvention

Demonstration Beneficiaries

demonstration according to HCFA’s Medicare transaction files. The sample

of nonenrollees was drawn from all retirees aged 65 and over in the

Defense Enrollment Eligibility Reporting System (DEERS) who (1) had

Medicare part A coverage, (2) lived within the official demonstration zip

codes, and (3) were not enrolled in the demonstration. The sample size

was dictated by our requirement to compare enrollees and nonenrollees at

each site and over time, taking into account expected attrition as a result

of death, a move to another area, and other types of nonresponse.30 The

total initial sample for all sites was 19,107, drawn from a population of

119,210.

We made two further adjustments to the population size:

• In the course of the survey, we ascertained that 747 people had died

before the date of sampling. These 747 people represented 6,108 people in

the population (using individual sample weights), so we adjusted the

population estimate downward to remove them. (See table I.2.)

• In both the population and the sample, we retained retirees who had only

Medicare part A coverage. However, in this report, all those who did not

have both part A and part B were excluded from the analysis because they

are ineligible for the demonstration.31 These 604 people who were

removed from the sample represented 5,688 people in the population, and

we adjusted the population estimate accordingly. (See table I.2.)

Together, these two adjustments resulted in a demonstration population

size of 107,414.32

30We specified a sample size sufficient to determine a minimum detectable difference of .07, using a

95-percent confidence interval, with a power of 0.8. The finite population correction was applied. In

Dover, the enrollee sample fell short of our desired sample because Dover’s population of enrollees

was quite small and because we tried to minimize the burden on respondents by not sending the

survey to retirees who had received the DOD Beneficiary Survey several months earlier.

31Of those retirees without part B who answered our survey, about half had employer-sponsored

insurance. They were more often officers, had higher income, and were younger than those without

employer-sponsored insurance, and relied less on MTFs for their health care.

32Because our sample was drawn at different times (1 to 2 months after the start of service at each

site), there is no single number to which it can be compared. DOD estimated the population in the

subvention sites at 117,035 in the third quarter of fiscal year 1998, at 102,512 in the fourth quarter, at

97,502 in the first quarter of fiscal year 1999, and at 97,970 in the second quarter. DOD has not yet

explained the reason for the decline.

Page 30 GAO/HEHS-00-35 DOD/Medicare Subvention
Appendix I 

Health Care Survey of Subvention

Demonstration Beneficiaries

Table I.2: Survey Responses and

Nonresponses Response rate: 85.74%

Number of

people

excluded Sample size

Number

excluded

from

population

estimate

Estimated

population

size

Initial sample and population 19,107 119,210

Adjustments to initial sample and population

Died before date of sampling 747 18,360 6,108 113,102

Did not have both part A and

part B 604 17,756 5,688 107,414

Final sample and population

Response 15,224

Nonresponse 2,532

Total 17,756 107,414

Reasons for nonresponse

No information received and

no information available 1,471

Not users of military care 51

Moved/undeliverable address 632

Refused 160

Too sick to respond 101

Died after sampling 83

Others 34

Total nonresponses 2,532

Response Rates Starting with a sample of 19,107 retirees and their dependents, we

obtained usable questionnaires from 15,224 people—an overall response

rate of 86 percent. Response rates were similar across sites, but at all sites,

enrollees responded at higher rates than nonenrollees (see table I.3). Each

stratum was separately weighted to reflect the population, with enrollee

strata generally having smaller weights, reflecting both their higher

response rates and the fact that they were sampled at a higher rate than

were nonenrollee strata.

Page 31 GAO/HEHS-00-35 DOD/Medicare Subvention
Appendix I 

Health Care Survey of Subvention

Demonstration Beneficiaries

Table I.3: Population, Sample,

Response Rate, and Weight, by

Stratum

Stratum

(enrollee/

nonenrollee) Population Sample size

Number of

respondents

Response

rate

(percent)

Sample

weight

Madigan

E 3,185 1,276 1,199 93.97 2.66

N-E 14,727 1,484 1,205 81.20 12.22

San Antonio area

E 8,105 1,452 1,351 93.04 6.00

N-E 22,496 1,514 1,210 79.92 18.59

San Diego

E 2,067 1,150 1,075 93.48 1.92

N-E 27,256 1,520 1,213 79.80 22.47

Keesler

E 2,194 1,169 1,091 93.33 2.01

N-E 4,466 1,317 1,013 76.92 4.41

Texoma area

E 1,539 1,043 973 93.29 1.58

N-E 4,939 1,389 1,085 78.11 4.55

Colorado Springs

E 2,398 1,197 1,116 93.23 2.15

N-E 10,432 1,512 1,225 81.02 8.52

Dover

E 543 442 417 94.34 1.30

N-E 3,067 1,291 1,051 81.41 2.92

All sites

E 20,031 7,729 7,222 93.44 2.77

N-E 87,383 10,027 8,002 79.80 10.92

Total 107,414 17,756 15,224 85.74 7.06

Page 32 GAO/HEHS-00-35 DOD/Medicare Subvention
Appendix II 

A Model of Factors Affecting Enrollment in

TRICARE Senior Prime

This appendix describes the data and methods used to model enrollment

in the DOD Medicare subvention demonstration project. To explain how

factors were identified that influenced military retirees to enroll in Senior

Prime, the appendix summarizes (1) the approach to the analysis of Senior

Prime enrollment, (2) the statistical model and methods used, (3) the

results of estimating the model on data from our survey of retirees, (4) the

adequacy and performance of the model, and (5) the model’s limitations.

Approach The model’s objective is to explain individual retirees’ decisions to enroll

in TRICARE Senior Prime. The results of the model can also be used to

account for differences among the sites in their enrollment rates. To

analyze why some retirees chose to join while others did not, we

considered six categories of individual-level variables and two categories

of market environment and site-specific variables. Table II.1 lists the

categories and variables.

Table II.1: Potential Influences on

Enrollment in TRICARE Senior Prime Category Variables

Individual-level variables

Demographic and other

factors

Age, sex, rank, income, marital status, race, eligibility

status (military sponsor, dependent, and so on), travel

time to nearest military hospital, distance to nearest

military hospital within demonstration area

Prior utilization, health status,

and health conditions

Outpatient visits, hospital admissions, prescriptions,

SF-12 health status score, self-reported health, chronic

conditions, limitations on ADLs

Usual source of care Amount of care received from military treatment facilities

(MTF) and from civilian providers

Health insurance coverage

and health costs

Coverage: Medicare supplemental, Federal Employees

Health Benefits Program, other private plans, HMOs 

Costs: health insurance, health care (out-of-pocket)

Satisfaction with care Satisfaction with primary care physician, satisfaction with

specialist—separately for MTF and civilian provider;

overall satisfaction with military health care

Knowledge of Senior Prime Knowledge of Senior Prime before receiving GAO survey

Market environment and site variables

Medicare market Medicare+Choice (M+C) plan penetration rate, M+C plan

pullouts, M+C capitation rate, Medigap premium

MTF and area characteristics MTF resources for retirees aged 65 and over, site

capacity limit on Senior Prime enrollment, primary care

physicians per 1,000 people

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Common sense as well as previous research suggests that the decision to

enroll is related to each category and the variables it contains. Within each

category, some variables had an expected direction of impact: For

example, being satisfied with primary care at an MTF is expected to spur a

retiree to join Senior Prime. Other variables might make enrollment either

more or less likely. For example, a history of having made many visits to a

civilian outpatient provider could make a retiree more likely to enroll,

since Senior Prime’s outpatient visits are generally cheaper than civilian

care. However, that same history could make enrolling less likely by

strengthening a patient’s ties to a specific civilian provider.

The market environment and site variables reflect factors that might affect

a retiree’s decision to enroll and that vary between demonstration sites.

Specifically, the Medicare market variables represent health insurance

options available to retirees in addition to Senior Prime. For example, the

Medicare+Choice penetration rate represents the extent to which private

Medicare managed care plans are available and are considered by the

area’s Medicare beneficiaries to offer attractive benefit packages. Other

things being equal, a higher penetration rate is expected to dampen

interest in Senior Prime. MTF or site variables represent the resources and

options available to retirees at a specific military health facility. Some site

variables are expected to nudge retirees in a single direction: For example,

the greater a site’s capacity to accommodate retirees in Senior Prime, the

more likely they would be to enroll. Other site variables, however, could

either spur enrollment or discourage it.

Most individual-level variables are binary variables (for example,

“officer” is classified as “yes” or “no” for each retiree). We generally

constructed these variables from the survey responses of

demonstration-area retirees (see app. I), although several individual-level

variables were constructed from administrative and related data. The

market environment and site variables are constructed from aggregate

data; they pertain to a county or zip code and are drawn from Medicare,

industry, and DOD data sources. However, even these market variables

differ within a site to some extent, because retirees are dispersed within a

site across several zip codes or counties.

Statistical Model and

Results

The analysis of how strongly these individual-level and market/site

variables influenced the demonstration-area retirees used logistic

regression—a standard statistical method of modeling an either/or

(binary) variable. In this case, a retiree either enrolls in Senior Prime or

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does not. How likely is a retiree with certain traits—age 72, satisfied with

military health care, and so on—to enroll? Given such information, logistic

regression predicts the probability that a person enrolls.

The coefficient on each variable measures its effect on the dependent

variable. In logistic regression, the dependent variable is related to each

retiree’s probability of enrolling in Senior Prime.33 Explanatory

variables—demographics, satisfaction, knowledge of Senior Prime, and

others listed in table II.1—generally enter the model as separate, additive

terms. The model’s estimates pertain to the entire demonstration

population, not just those retirees in our survey sample. To make the

estimates generalizable, we applied sample weights to all observations.

Blocks of variables differ in their contribution to the model’s explanatory

power. The “knowledge of Senior Prime” block and the “satisfaction

with care” block make the largest (13.99 percent) and second largest

(10.95 percent) contributions to the model’s predictions of who enrolls or

does not enroll. The satisfaction block measures how satisfied the retiree

was with his or her usual source of care—military or civilian. The third

largest contribution to the model’s explanatory power comes from the

market environment and site block (4.6 percent). Other categories’

contributions are less important although still of the same relative size as

the market/site block: usual source of care (2.6 percent) and insurance

coverage and cost (1.6 percent). The contribution of the utilization and

demographic blocks is less than 1 percent each. (See table II.2.)

33To avoid statistical problems with analyzing the probability directly, logistic regression analyzes a

related dependent variable—a function of the probability, P, divided by (1-P). However, the estimated

probability, P, can be calculated from the logistic regression.

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Table II.2: Contribution to the Model’s

Explanatory Power by Each Block of

Variables

Model

explanatory

power (pseudo-R2)

Contribution of

block (percent)

Full model 0.43

Models with one block deleted

Demographic and other factors 0.42 0.87

Prior utilization 0.43 0.37

Usual source of care 0.41 2.62

Health insurance coverage and health costs 0.42 1.64

Satisfaction with care 0.37 10.95

Knowledge of Senior Prime 0.35 13.99

Market environment and site-specific factors 0.40 4.58

Note: A block’s contribution reflects the loss in explanatory power from deleting the block from the

full model. The block’s contribution is calculated by comparing the likelihood ratio of the full

model to the likelihood ratio of that model with the block omitted. For example, if the “usual source

of care” block is omitted from the full model, the model’s explanatory power declines by

2.62 percent. In general, the percentage of the likelihood ratio lost from the full model (Ln) by the

same model with a given block j deleted (Lj) is [(Lj - Ln) / Ln]*100.

Although the set of explanatory variables we considered was sizeable, the

set we selected for our preferred model was smaller. Selection of a

narrower set of variables reflected primarily statistical criteria. Many

plausible variables tested were statistically insignificant, including most

demographic variables; explicit measures of health status; and several

Medicare market variables, such as the number of Medicare+Choice plans

that had pulled out of an area and the Medigap premium in the area.34 The

details of the model estimates are presented in table II.3.

Table II.3: Estimated Effects of

Selected Factors on Enrollment in

Senior Prime Category and description of variables Odds ratio

Estimated

coefficienta Z-statistic

Demographics and other factors

Age at time Senior Prime service began

< 70 years old 1.19 0.17 2.74

Travel time < 30 minutes or distance

< 10 miles to nearest military hospital 1.91 0.65 7.75

Prior utilization

Outpatient visits made during the past 12

months: 0-4 1.26 0.23 3.35

Specialist visits made during the past 12

months: 0-1 1.18 0.16 2.32

(continued)

34Many such variables, taken individually, are correlated with enrolling. However, in the logistic

regression, which controls for other factors, these variables are insignificant.

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Category and description of variables Odds ratio

Estimated

coefficienta Z-statistic

Usual source of care

MTF usage during the past 12 months: all

or most care at MTF 1.52 0.42 5.65

Hospitalized during the past 12 months,

but not in MTF 0.66 –0.41 –4.01

Prescriptions filled during the past 12

months at military pharmacy only 1.35 0.30 3.87

Prescriptions filled during the past 12

months at civilian pharmacy only 0.47 –0.76 –10.94

Health insurance coverage and health costs

Covered by Federal Employees Health

Benefits Program just before Senior

Prime became effective 0.75 –0.29 –2.47

Monthly insurance cost during the past

12 months: > $100 0.71 –0.35 –4.63

Monthly insurance cost during the past

12 months: None 1.40 0.34 4.67

Out-of-pocket money spent for medical

care during the past 12 months > $0 0.72 –0.32 –4.85

Satisfaction with care

Overall satisfaction score with military

health care: from 0 (dissatisfied) to 1

(satisfied) 7.40 2.00 19.42

Primary care at MTF and very

satisfied/satisfied with primary care 1.55 0.44 4.22

Primary care at civilian facility and very

satisfied/satisfied with primary care 0.47 –0.75 –9.79

Specialist care at civilian facility and very

satisfied/satisfied with specialist 0.71 –0.35 –4.15

Knowledge of Senior Prime

No knowledge of Senior Prime 0.08 –2.57 –26.83

Market environment and other site-specific factors

Medicare+Choice market penetration rate 0.64 –0.44 –1.92

Site capacity limit on Senior Prime

enrollees, relative to number of eligibles

(%) > 40 % 1.59 0.47 5.29

Site capacity limit on Senior Prime

enrollees, relative to number of eligibles

(%) < 20% 0.46 –0.77 –10.76

Number of physiciansb per 1,000 people 0.96 –0.04 –6.84

Constant 0.34 –1.08 –6.99

(Table notes on next page)

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aEstimated coefficients have P-values of 0.01 or less, except for “specialist visits in the past 12

months” (P-value = 0.02) and “Medicare+Choice penetration” (P-value = 0.05). P-values are

rounded to nearest hundredth.

bIncludes nonfederal primary care physicians only.

In table II.3, the “odds ratio” column indicates how much more likely (or

unlikely) it is for enrollment to occur if the retiree has a trait, compared

with a similar person who lacks the trait. For example, holding other

factors constant, a retiree who was less than age 70 was 1.19 times more

likely to enroll than someone aged 70 or older. By contrast, a retiree who

had had prescriptions filled only at civilian facilities was less than

half—0.47—as likely to enroll as other retirees. (The odds ratio is derived

from the estimated coefficient35 and conveys the information in the

coefficient in a more intuitive way.) The Z-statistic and its associated

P-value indicate the statistical significance of an estimate.36

The results identify many variables that raised the odds of a retiree’s

enrolling in Senior Prime. Those with an odds ratio greater than one

include age less than 70, living near the MTF (in travel time or distance),

few outpatient or specialist visits in the previous 12 months, substantial

MTF use in the past 12 months, prescriptions filled only at an MTF in the

past 12 months, zero monthly insurance costs, overall satisfaction with

military health care, very satisfied with primary care at the MTF, and a high

site target for (and limit on) Senior Prime enrollment. The remaining

variables in table II.3 reduced the odds of a retiree’s joining Senior Prime.

These variables include the following: hospitalized but not at an MTF,

prescription filled at civilian pharmacy only, covered by a Federal

Employees Health Benefits Program plan before Senior Prime began

service at the retiree’s site, satisfied with primary care at a civilian facility,

and a strong Medicare managed care presence in the area.

35The coefficient indicates each explanatory variable’s estimated effect on the dependent variable,

holding other variables constant.

36The variables listed in table II.3 have estimated coefficients that are significantly different from zero

at conventional levels of significance; all the coefficients’ P-values are less than .10 and all but two

have P-values less than or equal to .01. The standard error for each coefficient was calculated

reflecting the sample design and sample weights. We used the procedures in Stata, Release 5, for

maximum-likelihood logit estimation and robust variance estimates. We reestimated the model using

the logistic procedure in SUDAAN, Release 7.5.3, and confirmed the accuracy of Stata’s variance

estimate around each coefficient. Also, our bootstrap estimates of coefficients and standard

errors—using 100 replications drawn from our sample—support the stability and precision of the

estimates.

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Adequacy of Model The model performs satisfactorily by several yardsticks. First, it has

considerable explanatory power;37 the model produces a 43-percent

improvement over assuming that retirees all have the sample’s mean

probability of enrolling. Second, the direction of estimated effects of

variables on the probability of enrollment generally is what would be

expected. (For example, a retiree who is satisfied with a specialist at a

civilian facility is less likely to enroll.) Third, examination of the model’s

residuals did not reveal a problem with model specification.38, 39 Finally,

the model accounts for variation in site enrollment rates quite well. As

table II.4 and figure II.1 show, for six of the seven sites, the model’s

prediction of enrollment is not significantly different from actual

enrollment; the exception is Dover.40

Table II.4: Actual Enrollment Rate

Compared With Predicted Rate, by Site Numbers are percentage points

Site Actuala Predicted Residual

Colorado Springs 21.7 20.2 1.5

Dover 17.2 21.6 –4.5b

Texoma area 25.7 24.9 0.8

Keesler 35.8 35.8 0

Madigan 17.8 17.2 0.6

San Antonio area 28.9 29.2 –0.3

San Diego 8.2 8.5 –0.4

aActual enrollment at the time of survey.

bStatistically significant at the .05 level.

37A measure of the model’s explanatory power, its “pseudo R2

 , ” is 0.43. That is, the explanatory

variables in the model generate a “likelihood ratio” that is 43 percent lower (in absolute value) than

the likelihood ratio implied by the simplest model—the mean of the dependent variable. (The

likelihood ratio in effect represents the amount of variation in the dependent variable that the model

leaves unexplained.)

38The residuals were ranked by predicted probability of enrollment, and the retirees who responded to

the survey were divided into 100 cohorts—groups of predicted and actual values. A linear regression of

predicted values (by group) on actual values (by group) yielded an adjusted R2 of 0.97—evidence of the

model’s predictive power. See David W. Hosmer and Stanley Lemeshow, Applied Logistic Regression

(New York, N.Y.: Wiley, 1989).

39Additional evidence for the soundness of our model specification is that estimates of another logistic

regression—with a larger set of plausible regressors—are similar to the smaller, preferred model. All

variables in the latter model were statistically significant (at a level of P=.10) in the larger model. Both

models had similar explanatory power. Only a few variables that were significant in the larger model

did not appear in the preferred model, which table II.3 presents.

40Dover differs from other sites in two relevant respects. First, Dover’s MTF is a clinic, while other

sites, which have hospitals or medical centers, have more clinical resources to offer potential

enrollees. Second, Dover retirees seeking space-available care are relatively close to military facilities

in Maryland; Washington, D.C.; and Pennsylvania. Both factors may help account for Dover’s

enrollment being substantially less than predicted.

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Figure II.1: Actual Enrollment Rate

Compared With Predicted Rate, by Site

0 0.25 0.50

0

0.25

0.50

San Diego

Madigan

Dover

Predicted Enrollment Rate

Colorado

Texoma Area

San Antonio Area

Keesler

Actual Enrollment Rate

Most of the individual-level variation in the probability of enrollment is

accounted for by individual-level factors, such as satisfaction with military

care. By contrast, market/site variables—Medicare market and MTF or site

factors—account for a relatively modest amount of enrollment variation

among individuals. This is to be expected. These contextual factors vary

most between sites and vary much less within sites; however, much of the

variation in individual-level factors is within sites.

However, both individual-level and contextual factors are important in

accounting for variations in enrollment among sites. Key individual-level

variables—MTF usage, satisfaction with care, and knowledge of Senior

Prime—varied substantially between sites. This makes sense, since

retirees were responding to different MTFs, which had different resources,

practices, and reputations. Both contextual and individual-level variables

contribute to the accuracy of enrollment predictions by site. When the

contextual variables are omitted from the model, the average residual (in

absolute value) for site enrollment increases by 3.2 percentage points (or

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TRICARE Senior Prime

over threefold). Similarly, when MTF usage, satisfaction with military care,

and knowledge of Senior Prime are dropped from the model, the average

absolute residual for site enrollment increases by 3.8 percentage points (or

over fourfold).

Limitations The design of the demonstration limited our analysis of market/site factors

to some extent. Specifically, the sites selected did not represent the range

and diverse combinations of local market and site variables. Instead, many

potentially important market/site variables—such as Medicare+Choice

penetration rates, Medigap premiums, and sites’ capacity for Senior

Prime—tend to vary together. This makes it difficult to estimate precisely

their separate effects.41 As a result, the estimated model could not make

explicit the role of premiums for Medicare+Choice and Medigap plans or

the roles of Medicare+Choice copayments and Medicare fee-for-service

coinsurance amounts. To some extent, the influence of these factors was

accounted for indirectly, through use of the Medicare+Choice penetration

rate.

Estimates of the effects of explanatory variables in the model may be

understated, to the extent that these variables are measured imperfectly.

For example, the measure of retirees’ knowledge of Senior Prime used in

the model probably overstates the extent to which retirees knew about the

demonstration program. As a result, the estimated effect of that variable

may be understated.

These limitations caused by demonstration design and variable

measurement do not, however, affect our major findings. The model has

substantial explanatory power at the individual level and predicts site

enrollment rates well.

41In addition, our estimates of the effects of Medicare market and site variables differ somewhat,

depending on the specification of these variables.

Page 41 GAO/HEHS-00-35 DOD/Medicare Subvention
Appendix III 

Comments From the Department of Defense

Page 42 GAO/HEHS-00-35 DOD/Medicare Subvention
Appendix IV 

Comments From the Health Care Financing

Administration

Page 43 GAO/HEHS-00-35 DOD/Medicare Subvention
Appendix V 

GAO Contacts and Staff Acknowledgments

GAO Contacts Phyllis Thorburn, (202) 512-7012

Jonathan Ratner, (202) 512-7107

Staff

Acknowledgments

Other GAO staff who made significant contributions to this work include

Robin Burke, Robert DeRoy, Dae Park, Linda Radey, and Martha Wood.

(101878) Page 44 GAO/HEHS-00-35 DOD/Medicare Subvention
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