U.S. GOVERNMENT PRINTING OFFICE

70–437 DTP WASHINGTON : 2001

THE FAILURE OF THE FEHBP DEMONSTRATION

PROJECT: ANOTHER BROKEN PROMISE?

HEARING

BEFORE THE

SUBCOMMITTEE ON THE CIVIL SERVICE

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

APRIL 12, 2000

Serial No. 106–195

Printed for the use of the Committee on Government Reform

(

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(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

BOB BARR, Georgia

DAN MILLER, Florida

ASA HUTCHINSON, Arkansas

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

HELEN CHENOWETH-HAGE, Idaho

DAVID VITTER, Louisiana

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

CHAKA FATTAH, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

HAROLD E. FORD, JR., Tennessee

JANICE D. SCHAKOWSKY, Illinois

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

DAVID A. KASS, Deputy Counsel and Parliamentarian

LISA SMITH ARAFUNE, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON THE CIVIL SERVICE

JOE SCARBOROUGH, Florida, Chairman

ASA HUTCHINSON, Arkansas

CONSTANCE A. MORELLA, Maryland

JOHN L. MICA, Florida

DAN MILLER, Florida

ELIJAH E. CUMMINGS, Maryland

ELEANOR HOLMES NORTON, Washington,

DC

THOMAS H. ALLEN, Maine

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

GARRY EWING, Staff Director

JENNIFER HEMINGWAY, Professional Staff Member

BETHANY JENKINS, Clerk

TANIA SHAND, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on April 12, 2000 .............................................................................. 1

Statement of:

Carrato, Rear Admiral Thomas F., USPHS, director, Military Health

Systems Operations, Tricare Management Activity; and William E.

Flynn III, Director, Retirement and Insurance Programs, Office of Personnel Management ...................................................................................... 49

Norwood, Hon. Charlie, a Representative in Congress from the State

of Georgia; and Hon. Jim Moran, a Representative in Congress from

the Commonwealth of Virginia .................................................................... 6

Partridge, Colonel Chuck, U.S. Army, retired, co-chair, National Military

and Veterans Alliance; Kristen L. Pugh, deputy legislative director,

the Retired Enlisted Association, on behalf of the Military Coalition;

and Hon. Randy ‘‘Duke’’ Cunningham, a Representative in Congress

from the State of California ......................................................................... 23

Letters, statements, etc., submitted for the record by:

Carrato, Rear Admiral Thomas F., USPHS, director, Military Health

Systems Operations, Tricare Management Activity, prepared statement

of ..................................................................................................................... 52

Flynn, William E., III, Director, Retirement and Insurance Programs,

Office of Personnel Management, prepared statement of .......................... 62

Moran, Hon. Jim, a Representative in Congress from the Commonwealth

of Virginia, prepared statement of .............................................................. 11

Morella, Hon. Constance A., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 19

Partridge, Colonel Chuck, U.S. Army, retired, co-chair, National Military

and Veterans Alliance, prepared statement of ........................................... 25

Pugh, Kristen L., deputy legislative director, the Retired Enlisted Association, on behalf of the Military Coalition, prepared statement of ......... 33

Scarborough, Hon. Joe, a Representative in Congress from the State

of Florida, prepared statement of ................................................................ 7

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THE FAILURE OF THE FEHBP DEMONSTRATION PROJECT: ANOTHER BROKEN PROMISE?

WEDNESDAY, APRIL 12, 2000

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON THE CIVIL SERVICE,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 2:14 p.m., in room

2203, Rayburn House Office Building, Hon. Joe Scarborough (chairman of the subcommittee) presiding.

Present: Representatives Scarborough, Miller, Mica, Morella, and

Norton.

Staff present: Garry Ewing, staff director; Jennifer Hemingway,

professional staff member; Bethany Jenkins, clerk; and Tania

Shand, minority professional staff member.

Mr. SCARBOROUGH. I would like to call this meeting of the House

Civil Service Subcommittee to order. Good afternoon. I would like

to welcome all of you here.

Today, the subcommittee is going to scrutinize the administration’s implementation of the demonstration project established in

last year’s Defense authorization bill to allow Medicare-eligible

military retirees and certain others to enroll in the Federal Employees’ Health Benefits Program.

The purpose of this project is to test the FEHBP as an option of

providing military retirees and others quality, affordable health

care.

When I assumed the chairmanship of this subcommittee, I stated

that one of my highest priorities would be to improve the health

care available to families to the men and women who serve or have

served our Nation as part of the armed forces. Military retirees

who are eligible for Medicare are particularly ill-served by the current military health care system. The overwhelming majority of

them are locked out of TRICARE and the dwindling number of

military treatment facilities that are still left where they can go.

They are the only retired Federal employees who are expelled from

their employer’s health benefits program after a lifetime of dedicated service. Members of Congress are not. You can bet your life

on that. Nor are retired civilian employees.

Congress hears almost daily from military retirees and active

duty personnel about their difficulties with this system and with

TRICARE. For this reason, our subcommittee has carefully monVerDate 11-MAY-2000 10:30 Apr 04, 2001 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\70437.TXT HGOVREF1 PsN: HGOVREF1
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itored the implementation of this demonstration project, including

a hearing that we held last year on June 30, 1999.

The previous hearing focused on whether, as implemented, the

demonstration project would fairly test the effectiveness of allowing

the military community to access FEHBP. At the June 30th hearing, Admiral Carrato told this subcommittee that 85 percent of the

eligible beneficiaries in the test sites would enroll. In fact, that was

the Department of Defense’s justification for severely limiting the

total number of eligibles in test sites.

I remember back a year ago, understanding that the admiral was

only doing his job and only bringing the message to us that the

DOD wanted him to bring to us, but I remember a year ago saying

there was no way we would get anywhere close to 85 percent, that

there was no way we would get close to 50 percent, and, in fact,

that we would probably be lucky to get into double digits.

Well, I think other members of this subcommittee agreed with

me and the witnesses at the hearing. They were also very skeptical

of that estimate, and, as it turns out a year later, for very good reason.

The actual numbers are in, and with enrollment at roughly 4

percent of those eligible actually enrolled. This abysmal number is

in stark contrast to the size predicted by both the Congress and the

administration, and it would have even been worse if DOD and

OPM had not extended their enrollment system.

Remember, I remained terribly concerned that the Department of

Defense’s decision to artificially limit the total number of eligible

beneficiaries in the test sites has contributed to the dramatically

depressed enrollment in this demonstration project.

In addition, this subcommittee has been advised of a number of

other deficiencies in the implementation of this demonstration

project. These include unsatisfactory marketing to potential participants and an information center that could not answer the key

questions that enrollees had and poorly planned health fairs.

Consistent with my and this subcommittee’s overall legislative

priorities, I believe we have to keep our ongoing commitment to

promote the health care needs of America’s men and women in uniforms.

The FEHBP demonstration project is a critical component of

Congress’ efforts to improve health care for our military retirees

and their families, and I just hope that the Department of Defense

will use this opportunity to show us that this truly was a good

faith effort on their part to provide military retirees the choice of

the FEHBP as an option to meet retirees’ health care needs.

The questions that I want and that I think we need answered

today are as follows.

Has FEHBP been given a fair test? If not, why?

What should Congress do in light of the results of this year’s

open season?

After all the testimony today, I certainly hope we will come to

a better understanding of how we, as a committee, and we, as a

Congress, can prevent such an abysmal failure over the next 12

months.

[The prepared statement of Hon. Joe Scarborough follows:]

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Mr. SCARBOROUGH. With that, I would like to recognize the gentleman from Florida, former chairman of this subcommittee, John

Mica.

Mr. Mica.

Mr. MICA. Thank you, Mr. Chairman.

I didn’t conceive, in my worst possible dreams, that the administration could screw up a demonstration project for the intent of this

subcommittee, but I think they have managed to accomplish that.

When we first launched this venture to provide FEHBP access to

our dependents, retirees, and other families that didn’t have access.

We knew that there were gaps out in the service areas, and it

doesn’t take a rocket scientist to see that, because of base closures,

because of shut-downs in DOD health care facilities and other

changes in the structure of health care delivery by the Government, that there were people left out across the country in gaps.

We proposed coverage and access to FEHBP on a broad basis. Of

course, we were fought on that, and what we got as a result was

a narrow demonstration project that maybe was destined to fail because it really didn’t address the audience and those in need that

we intended to serve.

I am most disappointed in the way this whole demonstration

project has been handled, most disappointed in the limited scope of

making this available to many who are still in need. It is almost

without a week or without time that I run into military dependents

and others who do not have service or find service through

TRICARE—or, as they term it, ‘‘try to get care,’’ sadly.

We have launched a demonstration project that has not been successful and really didn’t encompass the original intent of our desire

to see that all of our personnel, retired and others, and their dependents, have access to health care on an affordable basis.

So I hope this hearing will help us get back on track. I look forward to working with the subcommittee and the chairman in that

regard.

Thank you.

I yield back.

Mr. SCARBOROUGH. Thank you.

Mr. Miller.

Mr. MILLER. I just wanted to thank you for having the hearing.

I was here last year for the hearing. I am very disappointed and

hope to find out some answers. I appreciate it, and I am just waiting as we are looking forward to hearing the straight talker come

forward.

Mr. SCARBOROUGH. All right. Thank you.

Our first panel—two of which are going to be arriving shortly—

is comprised of Charlie Norwood, Jim Moran, and Randy ‘‘Duke’’

Cunningham, three Congressmen who have, obviously, been very,

very interested in this issue for some time.

Representative Norwood represents Georgia’s 10th District. He

has dedicated much of his time and effort and energy this session

to improving military health care, and, most importantly, introduced H.R. 3573, the Keep our Promises to Military Retirees Act,

with Representative Childs. I am proud to be a cosponsor of that.

Congressman Norwood, we are proud to have you here.

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STATEMENTS OF HON. CHARLIE NORWOOD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA; AND

HON. JIM MORAN, A REPRESENTATIVE IN CONGRESS FROM

THE COMMONWEALTH OF VIRGINIA

Mr. NORWOOD. Thank you very much, Mr. Chairman.

I am proud that you are a cosponsor, as all but one of the members of your subcommittee, and as are 277 Members of Congress

in a very bipartisan way.

I thank you and the members of your subcommittee for the opportunity to testify today, frankly on an issue that is very near and

dear to my heart, the health of our Nation’s veterans, and military

retirees, in particular.

I represent, Mr. Chairman, a District much like yours. It has a

very high concentration of military retirees and a very rich history

of military service. Many of these men and women aren’t just constituents. Many of these men and women I have known for years

and are close friends, and I think I am very in touch with what

is happening with their health care, and, in particular, what is

happening in their health care around Eisenhower Army Hospital.

As a Vietnam veteran, I have seen first-hand the sacrifices that

our men and women in uniform make on a daily basis in order to

keep this country safe and free.

I appreciate the opportunity today to discuss the progress of the

Federal Employees Health Benefits Program demonstration project,

Mr. Chairman, but I have to disclose a bias up front on this issue.

I don’t very much like demonstration projects. It has been my experience that Congress only passes demonstration projects when we

want to appease groups that we would like to help but just simply

don’t have the backbone to do so. The FEHBP demonstration

project epitomizes that lack of backbone.

We all know that the military health care system is in shambles,

and if you are connected to it in any way and don’t know that,

shame on you. TRICARE is the worst HMO in the country. Many

military retirees have little or no access to health care, and senior

retirees are getting kicked out of the system altogether when they

turn 65. So the question is: what do we do?

Well, we pass an extremely limited and poorly planned demonstration project and hope that this problem will just go away.

Mr. Chairman, this problem is not going to just go away. That is

why I have introduced legislation supported by 275 other Members

that would expand the FEHBP option to all military retirees, not

just those in places like Puerto Rico, New Orleans, and Humboldt

County, CA.

Grassroots military retirees from all across this Nation support

this common-sense legislation because it addresses their concerns

in a fair and equitable manner.

I would like to send a message today to our visitors from the Department of Defense. You all know, I hope, that I am as staunch

a defender of the military as there is in this Congress. I will fight

tooth and nail every day to ensure that we have the best-trained,

most well-equipped military in the world. Our men and women in

uniform certainly deserve nothing less, not to mention the security

of this country. But we in Congress need your help in addressing

the vital issue of health care for retirees.

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I hear over and over again the red herring thrown up that expanding the choice of FEHBP to all retirees would somehow hurt

military readiness, but I will tell you what hurts military readiness: the fact that many retirees are reluctant now to encourage

new recruits to enter the military in the first place, because they

feel like they have been shafted by their Nation.

In the military academies, much deference is given to the legacies, the sons and daughters of academy graduates, and the one

reason for that is common sense to realize that those who come

from families with rich and honorable military traditions generally

make very good soldiers, sailors, airmen, and Marines.

But how much do we hurt the military readiness when those

graduates are reluctant to encourage their sons and daughters to

enter the military, as I hear is so often the case these days? How

much is the retention rate being hurt by the fact that those now

in the military see every day that the promises made to their predecessors are broken on a consistent basis?

Again, I will do everything I can to help our Defense Department, but I want to ask their help today. When I look at the egregious mismanagement of a simple demonstration project that contributed greatly to its failure, I can only wonder, Mr. Chairman,

whether or not it was, in fact, deliberate incompetence. To what

end, I can only speculate, but I suspect that some turf war is being

played out at the expense of the health and well-being of the men

and women who sacrificed nearly their entire adult lives for the

freedom and security that we all enjoy today.

We need to end these shenanigans and work together to do what

is right for the military retirees of this Nation.

Mr. Chairman, I want to commend you and your dedication to

this issue. Your passion for veterans’ health care is, frankly, second

to none in Congress. I look forward to working with all of this subcommittee as we continue to address this issue.

Every Congressperson simply needs to ask themselves a simple

question: would you trade your FEHBP health care plan for

TRICARE? And, if we think TRICARE is so great, if it is so adequate for the men and women who serve this Nation, then I suggest we also offer it to ourselves and see if we really think that is

the kind of health care that we need.

Now, I didn’t come up and Ronnie Shows didn’t come up with

this solution. It is important to note this was worked out talking

to the men and women who are retirees. What they need to hear

from us is they need a signal that this country does care about

their services. They need to know that we are going to keep our

word.

Make no mistake about it, we gave them our word. I don’t care

what anybody comes to this table and says, the Federal Government, through its recruitment team in the military, sold this to our

military retirees that, ‘‘If you will just come serve with us as a career, we may get you killed, we will certainly send you all over the

Nation and all over the world and your family life won’t be very

good, we are not going to pay you much, and we will even, if you

live through it, give you a small retirement, and,’’ we said, ‘‘We will

give you very good health care when you retire.’’

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It is time this country stood up and kept its word to what I consider the patriots of America.

I thank you, Mr. Chairman.

Mr. SCARBOROUGH. Thank you, Mr. Norwood.

I appreciate, again, your leadership. You are right, a promise

was made and a promise has been broken, and I think the fact that

the Secretary of Defense is now saying that publicly, that every

member of the Joint Chief’s staff is saying that I think gives us an

opening. We are not fighting. We are certainly not fighting the men

and women that run our military and the Pentagon. I think we

need to get moving.

Thank you for your help on that.

Congressman Moran, thank you.

Mr. MORAN. Thank you, Chairman Scarborough. It is nice to see

you and Mr. Mica and Mr. Miller, and I thank you for your abiding

interest in this issue.

Good testimony, Charlie.

Mr. NORWOOD. Thank you.

Mr. MORAN. Boy, that was compelling.

As you know from previous appearances before this committee,

I have worked with many of you to establish the Federal Employees Health Benefits Plan as a demonstration program for military

retirees over the age of 65. I would rather it not be a demonstration program, unless it is a universal demonstration program. We

ought to just do it. But we are trying to at least get our foot in the

door with a demonstration project.

The measure received overwhelming response—292 cosponsors. If

that isn’t overwhelming response, I don’t know what is. It certainly

illustrated the commitment of the Members of Congress to provide

for the health care needs of our military retirees.

With approximately 1.4 million Medicare-eligible military retirees in the country, we cannot ignore the health care needs of this

population. It is irresponsible, from a public policy standpoint, but

also from a moral standpoint.

I don’t need to remind any of you—and Mr. Norwood said it far

more eloquently than I can—of the sacrifices that military retirees

have made to their country. They saved our country. This is the

base. We have climbed on their shoulders. They gave us democracy

and free enterprise.

But, as they face escalating costs and challenges in getting

health care coverage, we shouldn’t turn our backs on them, and

that is exactly what we are doing.

In the past year, there has been a groundswell of support in all

of our Congressional Districts for improving health care coverage

for the military retirees. The Military Coalition of Service Retirement Organizations has done a terrific job. All of the organizations

have done a terrific job in terms of developing grassroots support.

I am supportive of wider efforts to strengthen health care coverage for all military retirees, but we also need to achieve that balance between maximizing the best health care benefit for retirees

that we can while balancing the financial costs that are incurred

by covering a very fast-growing population of retirees.

There is no question that the number of people are increasing

dramatically, so we have got to make sure that when we make a

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commitment we can follow through on the commitment, that we

are going to have the money available.

Because the FEHBP plan has such a proven record of success

among civilian employees and retirees, it is a logical choice to extend it as an option to military retirees. Many of us have large

number of constituents who are military retirees, and we are familiar with the enormous difficulties that those retirees are experiencing in accessing affordable health care, especially when they need

it the most.

In the past few Congresses, a number of us have sponsored legislation to grant Medicare-eligible military retirees the option of participating in FEHBP, and that was what H.R. 205 did. Once they

became eligible for Medicare, they were being denied access to the

military health care system and shut out of military medical treatment facilities because they were placed last on the priority list for

receiving care, so we created a system where military retirees, once

they reach the point in life where they need health care the most

are given the least from their former employer. It is the only large

organization in the country, maybe in the world, that does not provide health insurance upon retirement if they had it while they

were employed.

So our legislation ensures that retirees, whether they have

served their Nation in the armed forces or as a civilian employee,

they are treated with the same dignity and have an equal opportunity to have participated in the FEHBP.

As many of you know, we have an extraordinary rate of satisfaction with FEHBP. DOD cannot be the only organization that kicks

its people out of its health insurance program once they need it the

most. They don’t do it with civilian employees, and so they

shouldn’t do it with military employees, enlisted employees.

Let me skip some of this stuff. I have got too much down here.

What we are trying to do is to ensure that we have an option,

in addition to Medicare subvention, it doesn’t subvent Medicare

subvention. These are complementary approaches, but I don’t think

Medicare subvention, alone, is going to address the need. The majority of Medicare-eligible military retirees don’t live within

catchment areas surrounding a medical treatment facility. I don’t

bill Medicare subvention, alone, will make available more resources

to ensure that all who need care can be accommodated.

FEHBP is nationwide and can ensure this, and DOD can also

benefit from this legislation because it has the ability to bill thirdparty insurers for the direct care it provides to cover the retirees

in military medical treatment facilities.

In order to achieve a worthwhile demonstration program, OPM

and DOD have to ensure that enrollment is at least 66,000 beneficiaries. I thought that was too much. But when we hear it is only

1,800 people, employees, that is a laugh. It is comical to think that

they would think that that is an adequate demonstration. The

main reason is that no one in their right mind is going to leave

their insurance program, enroll in FEHBP, if they can’t be sure

that after 2 years they are not going to get cutoff. That doesn’t

make sense. Military retirees are not crazy. They understand. They

are responsible. They can read. And they certainly are not going to

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leave their family without health insurance if a demonstration program sunsets, so we need to address that.

The limited scope of the demonstration project, even if it gets up

to 3,000 enrollees, is not adequate. It doesn’t give us a fair demonstration. We can’t use the results. OPM and DOD have to improve their marketing and educational efforts to achieve a full participation rate authorized by law; 66,000 was minimal. At least get

it up to 66,000.

We have sent a letter to DOD, which I am going to include for

the record, to Dr. Bailey, who is the Assistant Secretary for Health

Affairs, detailing our concerns with the implementation of the demonstration. We highlighted the insufficient marketing of the demonstration, including inadequate mailings and educational information provided to eligible retirees, and the reasons why we think

that we had an unacceptably low response rate.

I commend the Department of Defense for adding two additional

test sites to the FEHBP demonstrationsite, but I have got to say

I am disappointed. These two sites, even though one of them is in

Georgia and another is in Iowa, they don’t necessarily represent a

large enough geographic area with a sufficient number of participants. We need larger areas to be tested.

The DOD needs to get out to town hall meetings, needs more effective oversight. They need to be able to cross State lines to reach

their participation rates. They need to do much more. Basically,

they need to get serious about this demonstration program.

Mr. Chairman, our Nation’s leading military service organizations have endorsed this bill. They recognize that allowing the

Medicare-eligible military retirees to join the FEHBP is a fair and

efficient means by which we can live up to our prior promises. I

hope you will agree—and I trust that you will—that this approach

represents part of a solution to a serious health care problem, that

the demonstration project is a critical first step in providing our

Nation’s military retirees with high-quality, reasonably priced

health care.

I appreciate your consideration, and we look forward to working

with the subcommittee, as well as OPM and DOD and the executive branch, to ensure a full and fair test of the FEHBP demonstration, and we will include this letter for the record, because the letter, since it was written with the help of staff, was far more articulate than I can be, and so we will put that in for the record, as

well, Mr. Chairman.

Thank you for your attention, and the members of the panel.

Mr. SCARBOROUGH. And thank you for your very articulate testimony.

[The prepared statement of Hon. Jim Moran follows:]

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Mr. SCARBOROUGH. I think I know the answer to this question,

obviously, from your testimony, but I am going to ask both of you

to just give me briefly your insights on what has gone wrong with

the way DOD and OPM has implemented this program. Of course,

Representative Moran, you started that. Obviously, they were predicting 85 percent, they only came up 81 percent short at 4 percent.

What caused that gap and what can we do to improve it over the

next year?

Mr. MORAN. Obviously, lack of marketing effort, lack of information, and lack of reasonableness. They are not going to join it if

they can’t be confident that it is going to be sustained. They are

not going to put their families in the lurch losing their health insurance.

I am amazed we only have 2,000 to 3,000 enrollees. Charlie,

being a doctor, I think can add additional perspective.

Mr. SCARBOROUGH. Let me ask you briefly, what can this program do to ensure sustainability to somebody coming in—you

talked about it. Obviously, military retirees aren’t crazy, aren’t

dumb. They know that it doesn’t make sense for them to get a new

program when the carpet can be yanked out from underneath them

2 years from now.

Mr. MORAN. DOD will own this program, and understand it

needs to be done. It will get it done. The Defense Department can

get done whatever it wants to get done. I think the issue is whether or not it wants to do this right, adequately, and in a way that

will prove that we were right—that this program works and should

complement the existing level of military health insurance.

Mr. NORWOOD. Mr. Chairman, I think we ought to be of as much

help to DOD as we can, and, in doing so, in this dadgummed demonstration project, and pass 3573. Then you will find that many,

many military retirees will use this as an option because there is

stability to it once you pass that language.

It is of great interest to me that when CBO scored our bill they scored it at $9 billion the first year. Now, that will be on a declining amount, because we are losing 1,000 veterans a day, but they

scored it at $9 billion based on a 50 percent participation. In other

words, 50 percent of the retirees would choose to go into FEHBP

rather than using TRICARE.

Now, my gut tells me that is probably a little high, but somebody

has it wrong when we have a demonstration project with 4 percent

or less joining up, and CBO is, on the other hand, saying at least

50 percent are going to sign up on the FEHBP plan once we codify

it into law and give them the stability they need.

I agree with Congressman Moran. Why in the world would somebody sign up when they don’t know for sure what is going to happen at the end of the project 2 or 3 years later.

What made that even worse, the information system available to

them was just absolutely confusing to people who would call to try

to find out. In other words, they were of no help.

That is why we have got such a mess with the demonstration

project now, Mr. Chairman.

Mr. SCARBOROUGH. What is the fastest, quickest way—and I am

going to lob this off to you first, Mr. Norwood, and then, Mr.

Moran, let you answer it—what is the best way for us to assure

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that we can keep the promise to the men and women in uniform

and their dependents to give them the health care that they deserve?

Mr. NORWOOD. Well, I and the other veterans and retirees across

this country think that the fastest, surest way is to end this demonstration project and go to the floor and pass 3573. Bingo.

Mr. SCARBOROUGH. You see this demonstration project as a detriment to that effort?

Mr. NORWOOD. Well, it is being used by those, whoever they may

be, wherever they may be, who don’t want to keep our promises,

to talk negatively about us going into FEHBP. But I will just tell

you honestly, I would like to know the civilian employees that

would rather go into TRICARE rather than FEHBP.

Mr. SCARBOROUGH. Right.

Mr. NORWOOD. You find me a few.

Mr. SCARBOROUGH. All Members of Congress, as you said.

Mr. NORWOOD. Well, I can guarantee you Members of Congress

won’t want to do that.

Mr. SCARBOROUGH. Right.

Do you know how many men and women who served in World

War II are dying daily?

Mr. NORWOOD. Yes. We are losing 1,000 a day.

Mr. SCARBOROUGH. 1,000 a day. So if we go another year with

the failed demonstration project that only pulls in 4 percent, 5 percent, 10 percent, that means we are going to lose almost half a million by the time we come back next year.

Mr. NORWOOD. And if you will listen, Mr. Chairman, once a week

I go to the floor and talk about one of those families personally that

has, in fact, run into a great deal of problem with their health care

as they go into their latter years and having so many health care

problems. In fact, many of the cases I bring up personally are people who have died simply because they did not get proper health

care.

Mr. SCARBOROUGH. In our field hearing in Florida a week or two

ago, it was the belief of Congressman Cummings, myself, and many

that testified that the Federal Government is just simply doing a

slow roll. It is cheaper to just sit back, with all these people dying,

than to provide them health care in their final years. Do you all

agree with that?

Mr. NORWOOD. Yes. Yes. If you wait long enough, the patient will

die and you don’t have to pay for the care.

Mr. SCARBOROUGH. Congressman Moran.

Mr. MORAN. We are sort of doing that on the notch issue. I hope

we don’t do it on the issue of military retirees.

I agree with Mr. Norwood. H.R. 3573 is a better bill. I would

rather just do it. But I also have to say, you know, we need to pass

this supplemental that included $4 billion for military health care,

that the Senate shouldn’t be messing around with it.

We are not going to have the money in the 2001 budget. It is not

in the budget resolution. We are not going to have that latitude

within the Defense appropriations bill to do it in 2001.

We can’t just pass the legislation. We have got to be prepared to

fund it.

Mr. SCARBOROUGH. Right.

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Mr. MORAN. And it is going to be substantial. We are talking about $9 billion a year. That is why DOD has been reticent to do

it. But I think it is the right thing to do. I think we ought to do

it.

Mr. SCARBOROUGH. Does that price go down over time, again,

with a lot of these veterans getting older and older and passing on?

Mr. NORWOOD. Yes, Mr. Chairman. It will decline.

Mr. SCARBOROUGH. Significantly.

Mr. NORWOOD. That price goes away at some point.

Mr. SCARBOROUGH. So it is not a $9 billion this year and then

going up. It actually will go down.

Mr. NORWOOD. One of the few things I have ever known in Congress that was passed that the cost would go down.

Mr. SCARBOROUGH. Yes.

Mr. MORAN. The only caveat—and I don’t disagree with Mr. Norwood—is that we will still have military retirees coming into the

system every year, and we want to maintain our military force. I

don’t think that it is too much now. It is at a minimal level, as far

as I am concerned. But the cost of medical care also is going to go

up. That is a variable, and we just have to be prepared to meet the

cost as it is incurred.

Mr. SCARBOROUGH. Last question I want to ask you all—and if

you want to comment on that, you can—the last question that I

have for you pertains to the alternative that is coming up in the

Senate that the majority leader supports, and that is Senator—I

think it is Senator Warner’s bill, which is a compromise on yours.

What are the positives or negatives on that bill?

Mr. NORWOOD. Mr. Chairman, I don’t pay a lot of attention to

what they do in the Senate, but my understanding is that it is too

little too late. It is just simply not adequate enough to get to the

problem.

Congressman Moran is right—more people will be coming into

the system. But what we all need to keep in mind is that our bill

addresses retirees differently who were part of the military pre1956 versus those post-1956, and that we do more for those pre1956. In other words, we pay their entire cost, as was promised.

In 1956, Congress basically says, ‘‘OK, we will furnish you your

health care, but it is based on a space-available basis,’’ and on that

basis those that are post-1956 have to pay part of their health care,

just like we do.

I don’t really like that very much. I don’t think that was the

trade, but that is how the bill ended up.

So yes, more will be coming on, but this has a declining cost to

it all the way out.

Mr. SCARBOROUGH. Thank you.

I would like to now recognize the gentlelady from the District of

Columbia, Ms. Norton.

Ms. NORTON. Thank you, Mr. Chairman. I have no questions for

my colleagues here, because I could not agree more with what I

was able to hear of their testimony. I apologize I didn’t hear it all.

I will be far more interested in the response of our third panel with

the OMB and the TRICARE management people, because this is

mystifying to me and it demands an explanation, and I think the

Members have raised just the right questions.

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Thank you.

Mr. SCARBOROUGH. Thank you.

I would like to recognize now the Congresslady from Maryland,

Mrs. Morella.

Mrs. MORELLA. Thank you, Mr. Chairman. I appreciate your having this hearing.

I think it is important for us to recognize whether the demonstration programs we establish do work, and I thank my colleagues for being here to indicate what the intention was and their

feeling of dissatisfaction with what we had.

It appears to me that there was a concern about the fact that the

number was a demonstration program but a limited number fell

far, far under that number, and that education was necessary, further information and marketing, and so, again, I look forward to

hearing why, how, and what we can do in the future.

I thank you for being here.

I ask unanimous consent that an opening statement be put in

that record.

Thank you, Mr. Chairman.

Mr. SCARBOROUGH. Without objection, thank you.

[The prepared statement of Hon. Constance A. Morella follows:]

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Mr. SCARBOROUGH. Congressman Mica.

Mr. MICA. I thank my colleagues. Mr. Moran and I served together. I think he was the ranking member when we initiated some

of this. Our intent at the beginning was to have total coverage. We

got beaten down. They said the sky would fall, that people would

be signing up in droves, that it would be the end of the world and

sliced bread as we knew it. None of that occurred.

It is sad, though, in the meantime that tens of thousands have

been denied care and that our original intent was to provide coverage to that gap.

I can’t totally blame DOD, because others lobbied that the sky

would fall, too, that this would become some type of incredible burden, and organizations ran around behind our back and said it had

to be done on a very narrow basis, and how much harm it would

do. It is sad that they have left these people behind.

Now we need to get this demo behind us, open this up to everyone, to people who need it, fill in the gaps, and meet our commitment to these people that served this country and their dependents.

Thank you, Mr. Chairman.

Mr. SCARBOROUGH. Thank you, Mr. Mica.

Next we will recognize the gentleman from Florida, Mr. Miller.

Mr. MILLER. I appreciate your statements and am very supportive.

Mr. Moran, you have a lot to do on the Federal employee health

plan, and one of the reasons, I guess, the demonstration project

was thought about was that we don’t want to destroy something

like that. Does that concern you? I mean, to jump totally into it,

which I think is a concept—but, you know, to go to a $9 billion addition to Federal employee health benefit, what does it do with that

plan? Do you have concerns about the fact that they have failed

here on a simple demonstration project?

Mr. MORAN. Well, it is an excellent question, Mr. Miller. We do

keep two different pools so that we would not compromise the civilian rates for civilian employees. We don’t think that it is going to

adversely affect the overall insurance rate if you did melt both

pools, but we keep them separate.

Mr. MILLER. For the administrative structures?

Mr. MORAN. That is right. And they are large enough that you

don’t lose economies of scale by doing so. But we do that so that

it—for one thing, we didn’t want any opposition from the civilian

employee ranks, and I don’t think we have it, and there is no reason that we would. It is the same benefit structure, but we will

separate the two pools.

Mr. MILLER. Like my colleagues, I am glad you are here, but we

are really looking forward to the next panels to get some answers,

maybe.

Thank you.

Mr. MORAN. Thanks.

Mr. SCARBOROUGH. Thank you. I thank both of you for coming

today, and certainly also greatly appreciate the fact that you all are

helping Congress and the administration remember a promise that

has been forgotten and has been broken to the men and women

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that have protected our country for so long. Thank you for your

work and your testimony.

Mr. MORAN. Thank you, chairman.

Mr. NORWOOD. Thank you, Mr. Chairman.

Mr. SCARBOROUGH. Next, I would like to call up panel two. They

are Chuck Partridge and Kristen Pugh.

Colonel Partridge currently serves as co-director of the National

Military and Veterans Alliance. He has been the legislative counsel

for the National Association of Uniformed Services since May 1984.

Colonel Partridge’s military career spanned 31 years of enlisted

and commissioned services in the Reserve and active forces. He

served in Vietnam, Germany, and Korea, and in several installations in the United States.

Kristen Pugh currently serves as deputy legislative director of

the Retired Enlisted Association. Today she is going to be testifying

on behalf of the Military Coalition.

Both Colonel Partridge and Ms. Pugh testified at our previous

hearing on the demonstration project. Both have been involved in

the demonstration project from the very start and worked very

hard to create it. I would like to welcome them back for their comments today.

Colonel Partridge.

STATEMENTS OF COLONEL CHUCK PARTRIDGE, U.S. ARMY,

RETIRED, CO-CHAIR, NATIONAL MILITARY AND VETERANS

ALLIANCE; KRISTEN L. PUGH, DEPUTY LEGISLATIVE DIRECTOR, THE RETIRED ENLISTED ASSOCIATION, ON BEHALF OF

THE MILITARY COALITION; AND HON. RANDY ‘‘DUKE’’

CUNNINGHAM, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF CALIFORNIA

Colonel PARTRIDGE. Thank you, Mr. Chairman. It is a pleasure

to be here. And it is also a pleasure to hear the line of questioning

and hear the testimony of the Members of Congress before us.

With base hospital closures, reduction in medical personnel, perennial medical funding shortfalls, the increasing lack of available

health care continues to be a major concern to active and retired

personnel, alike. In fact, the situation will clearly get worse as additional hospitals are converted to clinics and medical personnel

downsizing continues.

Furthermore, each year the Secretary of Defense proposes additional rounds of base closures. Sooner or later, more closures will

occur. This means hospitals will close and additional thousands of

retirees will lose their health care benefit.

Our members remain concerned that the Department of Defense

has no plan that the promised health care benefit will be in place

by a certain date. In fact, military retirees are the only Federal employees that do not have a lifetime benefit. That is why we support

providing FEHBP as an option. This is also why H.R. 3573 in the

House and S. 2003 in the Senate have such strong grassroots support. Those bills would solve the problem.

FEHBP is widely available. There is a variety of plans and options. Its availability is not dependent on troop deployment or base

closures. It is widely accepted by physicians and other providers.

And it is cost effective for DOD, with low administrative costs.

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Military hospitals and associated networks should remain the

primary source of care for military personnel and their families and

beneficiaries who could be guaranteed care. However, the FEHBP

option is badly needed to ensure that everyone who served and was

promised a health care benefit have access to a DOD-sponsored

health care program.

Regarding the demonstration program, specifically, based on information received from our members and the test sites, there are

several reasons for a low participation rate. They include lack of

aggressive marketing by DOD. Initial explanations at the health

fairs did not fully cover the interaction of FEHBP plans with the

Medicare program. This was remedied during a second round of

health fairs, and the fact that the enrollment period was extended,

but by that time a lot of people had made up their minds.

A 3-year limit on the demonstration also deterred enrollees. They

were concerned that the test would fail and not be extended and

they would be faced once again with changing health plans.

Thus, we believe that allowing those who enrolled to remain in

the program, even if FEHBP is not adopted worldwide, would allay

these fears.

One feature of the test which locked FEHBP enrollees out of

military treatment facility was also a deterrent. We believe that

enrollees should no longer have fully paid care in MTF but should

be allowed access with FEHBP being billed for the care, to include

prescription drugs. This would allow MTF commanders to be reimbursed for space-available care, result in more-effective use of

MTFs, and contribute to medical readiness by making these people

available for the graduate medical education programs. Further, it

would allow DOD to recover part of the premium cost.

The geographic limitations of the test also contributed to the lack

of participation. Our recommendation last year and the recommendation this year is that the geographical limits be removed,

and, if you are going to continue a test rather than make it permanent, raise the cap. Set the cap at some level and then enroll people until the cap is hit. That would give you a much better test,

because, as has been stated, the current test proves nothing. It was

flawed, and now we don’t have sufficient data on which to base the

decision.

The requirement to establish a separate risk pool for such a

small population also could result in higher premiums; however, we

would like to state that this was avoided by some carriers who decided to establish the same rate regardless of the risk so that they

could get some feel for what this meant for military retirees.

Mr. Chairman, the National Military Veterans Alliance, the National Association for Uniformed Services, and the Society of Military Widows thank you for holding these hearings and thank you

for letting us testify.

Mr. SCARBOROUGH. Thank you, Colonel Partridge, for all your

hard work and your testimony.

[The prepared statement of Colonel Partridge follows:]

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Mr. SCARBOROUGH. Ms. Pugh, welcome back.

Ms. PUGH. Thank you very much. Good afternoon, Chairman

Scarborough, Mr. Mica, and Mr. Miller.

The Military Coalition appreciates the opportunity to discuss reasons we believe have led to the dismal enrollment numbers in

FEHBP 65 tests. Today, of course, 2,562 beneficiaries, about 4 percent of the 66,000 enrollees authorized by Congress, have enrolled

in this test. This number reflects the extended enrollment period

from December 1999 through March 2000.

To better understand the reasons why retirees, both enlisted and

officers, were and were not enrolling in FEHBP 65, in January the

Military Coalition sent 7,410 health surveys to affiliated eligible association members residing in test sites offering FEHBP 65 only.

For those 2,622 that responded, only 13 percent enrolled, while the

other 87 percent did not enroll.

In one question, those not participating could mark one or more

reasons for non-enrollment, and many entered additional comments

explaining why they chose not to enroll. Some of these conclusions

that were drawn—the Coalition believes the extremely low participation rate is contributed to a variety of reasons, to include lack

of timely delivery of accurate and comprehensive information about

FEHBP 65 to eligible retirees.

The first health fairs sponsored by DOD were not conducted until

the first week of November, a month later from the targeted TMA

marketing plan. The fairs were planned hastily, with little or no

notification for eligible enrollees.

Reading comments from those surveyed, ‘‘The town hall meetings

were very unsatisfactory. No one had answers to questions.’’ ‘‘The

town hall meetings were poorly planned and publicized.’’ I believe

this is the reason for such a poor participation in the program.

Also, the call centers lacked knowledgeable specialists to provide

answers to simple questions and to send adequate educational materials.

Survey comments: ‘‘Requested forms and information to enroll,

but never received information.’’ ‘‘Getting information was very

frustrating. The DOD information center did not appear to ever get

a grasp of what the program was all about.’’

There was fear of venturing into an unknown health care program with the worry they would have to change plans again when

the test authority expired in 2002. The limited, 3-year test deterred

many eligible beneficiaries from enrolling.

Survey comments: ‘‘Just couldn’t risk having to try to get insurance at age 73 should the demonstration fail to be renewed.’’

‘‘FEHBP 65 program may not last.’’ Another quote, ‘‘I plan on enrolling in FEHBP 65 when the program becomes available to all

military retirees on a regular basis, not a test basis.’’

Beneficiaries were concerned about pre-existing medical conditions if the tests terminated and they needed to resume their

Medigap coverage.

There was a lack of understanding by the target population

about FEHBP, including the potential cost savings of their existing

Medicare supplemental insurance if they were to opt for an alternative.

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Beneficiaries were concerned about the benefits provided under

the various FEHBP plans to those enrolled in Medicare part B.

DOD marketing materials failed to adequately highlight that

copays and deductibles are waived for fee-for-service plans for

Medicare eligibles enrolled in part B. Virtually all potential enrollees, 93 percent, are enrolled in Medicare part B.

DOD did not market FEHBP in a timely manner to a population

of members new to the FEHBP plan, unlike Federal civilian retirees.

There was a 10 percent error rate in DOD’s first mail-out, but

to date DOD has made no effort to correct this data base.

Finally, it is in the opinion of the coalition that if DOD wanted

this program they would have marketed appropriately to this population of eligible enrollees.

Marketing material from past and future DOD programs demonstrate their lack of commitment to properly market the FEHBP

65 test.

The TRICARE senior prime test and TRICARE senior supplement were illustrated in glossy and informative marketing materials that are attractive to the customer and user friendly, too. A

post card, a nice brochure, and a nice book—I might want to participate in—in comparison to the inadequate, misleading materials

sent to FEHBP 65.

If I was a retiree and I received this, I would probably throw it

away because I have TRICARE on it, and if you are over 65 you

can’t enroll in TRICARE, and this was a post card that came out

that was due on July 15th that didn’t come out until August 15th.

In conclusion, the coalition recommends a guaranteed enrollment

beyond the test date, an aggressive education and marketing program, mailings to all eligible beneficiaries in each site, and expansion in number of enrollees in the upcoming years for a truly fair

assessment of FEHBP 65.

Thank you.

Mr. SCARBOROUGH. Thank you. We appreciate the testimony.

[The prepared statement of Ms. Pugh follows:]

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Mr. SCARBOROUGH. I wanted to start by asking you all a question. You two have obviously been key leaders in the implementation of this, as far as lobbying for it, encouraging better efforts by

DOD and OPM. Let me ask both of you to separately grade DOD

and OPM on their implementation of the program.

I see you smiling, but what would it be? You have been there

from the beginning?

Ms. PUGH. I will answer first. I guess, on the very beginning, if

we can walk back to the July hearing that we had, there were

great concerns of what OPM’s role was, as well as the Department

of Defense.

The information provided—there was a true disconnect, because

DOD, in the very beginning, did not know. They thought the health

fairs were going to be sponsored by us or the health insurance companies. That is a disconnect. The material that was provided from

them we never reviewed before it was sent out. There was no real

commitment.

The information from OPM is the information that they provide

to all Federal employees, and if you haven’t retired as a Federal

civilian servant you don’t know what those numbers mean. You

don’t know. When you look at a chart, you don’t understand it.

So I feel that DOD did very poor marketing, and OPM put out

what they needed that was provided and required by law.

Mr. SCARBOROUGH. Colonel Partridge.

Colonel PARTRIDGE. I will underline that. Our concern all along

was that the selection of the sites were done on a random basis,

probably for good reason, but that helped in the failure of it. It is

just not a passing grade in terms of laying a program out that we

could get behind early on, get our people informed, and help inform.

Mr. SCARBOROUGH. Throughout the process—and I know you

talked about a disconnect—throughout the process, did you find

DOD and OPM responsive to military retiree groups, concerns that

you had? Let us talk about that dialog. Let us talk about the disconnect, particularly with DOD, who thought that you all were

going to be implementing these health fairs or sponsoring the

health fairs. How responsive were they to your concerns?

Colonel PARTRIDGE. Once we saw where this was going, we went

over and began to express our concern at the staff level, and I

think at that point they began to react, but it was too late.

Much of the material was already out there. People had already

made up their mind by the time we started the second round.

Ms. PUGH. I guess another thing to add, too, is concerning the

fact that we knew where we were in July. We needed to take our

time and start marketing in August, and one post card did not provide any adequate information. We needed to start doing health

fairs then.

Again, when you do a health fair in November and the November

enrollment season starts 10 days later or 5 days later and you

weren’t notified of that health fair, how can you make a decision

in 2 months?

Mr. SCARBOROUGH. Hearing your testimony, it sounds like marketing may have been the biggest effect. Is that a fair assessment

of your testimony? Was poor marketing——

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Ms. PUGH. It is a very fair assessment.

Mr. SCARBOROUGH. That was part of it?

Ms. PUGH. Not only just the marketing aspect, but the education

materials behind the marketing. As I pointed out in my testimony,

people didn’t really understand the protections on the Medigap policy.

Mr. SCARBOROUGH. Yes.

Ms. PUGH. If you are over 65, the last thing you want to be doing

is dropping the current plan that you have to go into a program

where you don’t know if you will be protected.

I guess the caveat is the insurance carries out there, the

Medigap, couldn’t answer that question, nor could the call center.

As an example, one of my members called me and I sent him the

law that he would be protected on the Medigap policy.

Mr. SCARBOROUGH. Yes.

Ms. PUGH. That should have been done at the very beginning.

Mr. SCARBOROUGH. Right.

Colonel Partridge, marketing problems?

Colonel PARTRIDGE. Yes, sir.

Mr. SCARBOROUGH. Do you think that was the main problem?

Colonel PARTRIDGE. Marketing was a major problem, but the policy was also a problem. The short duration, the way it was designed—in other words, if you enrolled the first year, you have 3

years.

Mr. SCARBOROUGH. Right.

Colonel PARTRIDGE. If you wait till the second year, you have 2

years. If you enroll the third year, you have 1 year, and the fact

that they couldn’t continue in the program.

I think the fact that they knew it was a test and they would have

to get out was a major factor.

Mr. SCARBOROUGH. And how do we get around that? I mean,

here we are a year into it. Again, if you look at the number, we

have lost over 300,000 World War II veterans in the past year who

were short-changed, who had their promises broken to them, just

like my grandfather did as a veteran of World War II and the Korean War. He died bitter at the Government because the Government broke the promise.

Are we going to be wasting another 2 years? I mean, even with

the best of marketing, is there any way to make this program work

with only 2 years left?

Colonel PARTRIDGE. No. I would say that the odds are greatly

against us. If we leave the program just as it is, leave the 2-years

as it is, tell people, ‘‘You are going to have to get out of this program at the end,’’ I don’t see how we can fix it at this point.

Mr. SCARBOROUGH. What if DOD tries to improve the program

and we still only have 2 years?

Colonel PARTRIDGE. I think the 2-year limit is a major factor. I

think that will, in itself, be a major deterrent against people signing up.

Mr. SCARBOROUGH. Is there any way around that, or not?

Colonel PARTRIDGE. Of course, what we would like to do is make

it permanent. One way to fix that is, if you enroll in the program,

you are in for the rest of your life, whether we continue the program or not.

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So let us say suppose we had 66,000 people enrolled in it—and

you have got what in the Federal plan, several million? I mean,

what difference? There would be no reasonable cost there. You

could allow that to happen. Let them stay in.

Of course, our view would be let us go ahead and make it permanent, and if you want to control the cost, control the cost by setting

caps of who can enroll in it each year.

Mr. SCARBOROUGH. Ms. Pugh, are we kidding ourselves by thinking that we can now improve marketing a year into the program

and do all these other wonderful things and set up better call centers and set up better health fairs while still not providing a lifetime benefit? Are we kidding ourselves saying that there is any

way to make this work?

Ms. PUGH. I think, on the first note, we have already marketed

to this population, so they are already turned off.

Mr. SCARBOROUGH. Right.

Ms. PUGH. So I don’t know how we capture that population

again, No. 1.

No. 2, with 2 years left, again, the same conclusions are going

to be drawn from retirees—dropping current health care, what they

already know to go into something for 2 years.

I think the only thing—and what Colonel Partridge indicated to,

as well—is expanding it and making it a permanent program, or,

at the very least, grandfather the population now and then in the

future so there is a sense of security that they can go into this program for their life.

Mr. SCARBOROUGH. OK.

Mr. Miller.

Mr. MILLER. That sounds good.

Do you have any feeling about the 4 percent, that 1,600? Do you

have any sense of what their experience is so far?

Ms. PUGH. Yes, I do. I told you I did a survey, and——

Mr. MILLER. That is great you did a survey.

Ms. PUGH. Yes. And we can provide and place in the record the

information that we received. But, going through some of the comments, from even people that enrolled I went through some comments. People still were uncertain when they enrolled in the program. They took a chance, is basically what they said. So that is

one conclusion.

Some of the other observations were reasons why people didn’t

participate is maybe they already had a FEHBP, and that is——

Mr. MILLER. These are the ones that already participate?

Ms. PUGH. Are participating.

Mr. MILLER. So that 4 percent, which I know is not a very large

sample to talk about—I mean, 1,600 people signed up.

Ms. PUGH. Some of the survey responses, people are very content. They are very content from the FEHBP product. Going into

it, they were wary, but now, being in the program, they are very

happy to see that they have a pharmacy benefit and a true wraparound to the Medicare coverage.

A caveat to that is we have got some people who responded to

the survey who already are retired civilian employees, and they indicated in their comments, ‘‘We are so happy to see, for the first

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time, that some of the people that we served alongside get to have

this benefit.’’

Mr. MILLER. When they get to choose, do they have similar

choices that we, as Federal employees, have?

Ms. PUGH. Yes.

Mr. MILLER. The same type of choices?

Ms. PUGH. Yes.

Mr. MILLER. But they don’t pay—you know, we have a different

rate. We choose whichever plan we want, the more we pay.

Ms. PUGH. The rates were adjusted because it is a separate risk

pool.

Mr. MILLER. Right.

Ms. PUGH. Actually, we were surprised. Some of the rates were

a little lower, and that is actuary work done by the insurance carrier. But they do have to pay. I mean, DOD pays the 72 percent

and they have to pay the rest of the percentage.

Mr. MILLER. Better marketing, information, and the guarantee

that they are going to be able to stay in the demonstration—for

those that sign up, they are good for the rest of their lives, as long

as they want to. And then, if we could enlarge the size of the pool—

what about the question of the sites selected. I don’t think Florida

got selected, did we?

Mr. SCARBOROUGH. No, and I am having a hard time figuring out

why.

Mr. MILLER. I think three of us from Florida are on this committee.

Mr. SCARBOROUGH. Well, that is why.

Mr. MILLER. But what impact—I think you said that it was a

random selection process. How much of a problem was the sites to

you?

Colonel PARTRIDGE. My only point there was that perhaps by deliberately picking sites, which might have been politically

unfeasible from the prospect of DOD, but by actually picking sites,

even with a small number we could have gotten a better test than

the random selection, because the way the random selection process worked, it truly was random. I am sure that just by a little

analysis and judgment we might have been able to have done a

better test. I don’t know for sure.

Ms. PUGH. And, just to add to that point, we have always said,

from the very beginning, working with this committee and the staff

on this committee, especially, we should never have had sites, per

se. It should have just been opened up nationally with 300,000 enrollees eligible to participate, because we are seeing 66,000. We

have a little under 2,600 who enrolled.

Mr. MILLER. Do you see problems if we opened it up nationally

to, say, 300,000, rather than target it? I mean, the logic was you

wanted to have certain geographic regions that are fairly compact

to work with, but do you see any problems why that would work

if you just said anyone in the country that wanted to join it could

do it?

Ms. PUGH. From the very beginning, no, I don’t. And actually the

language in the Senate side, S. 2087 that the chairman referred to

earlier, does have a provision to give DOD authority to drop those

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barriers, but it still limits the enrollment to 66,000. We have always said to open it up.

Colonel PARTRIDGE. The good part about doing that nationwide

is that you could start the enrollment and control it by caps and

suppose, after you finish the enrollment period, you have got

50,000 people waiting to get in, then you would know that. The

way we do it now, we don’t know. We don’t really know who wants

it and didn’t get it. It is just not there.

Mr. Cunningham has a bill, H.R. 113, that would have done that.

It would have removed the geographical limits, as would the current bill in the Senate.

Mr. MILLER. Thank you, Mr. Chairman.

Mr. SCARBOROUGH. I thank you, Mr. Miller.

I would like to welcome Congressman Cunningham here.

Why don’t we do this—let me thank you all for coming and,

again, helping us out from the very beginning, and we will dismiss

you now.

I have got a couple other questions that I am going to forward

to you all in writing. If you could return them to me in a couple

weeks, that would be great.

Thanks again.

While we are changing panels, Congressman Cunningham, we

certainly would appreciate your testimony and invite the third

panel up.

Mr. CUNNINGHAM. Thank you, Mr. Chairman. I am going to be

blunt.

Mr. SCARBOROUGH. What a departure, Randy. [Laughter.]

Duke is going to be blunt. Can you believe that? Next you are

going to tell me Mike is going to be blunt.

Mr. CUNNINGHAM. We are going to draw that trail in the sand,

line in the sand, whatever you want to call it.

I know that the previous panels have covered what the problems

are. We have FEHBP for Federal workers, and the bottom line is

we don’t have it for Federal workers in the military that have substandard living, where the children are ripped out of the schools,

the family can’t make investments because they are moved all over

the country, they are asked to go on, in this administration, multiple deployments and ripped away from their families, and in

many cases they don’t come back because they are killed and the

children are left without fathers or mothers in many cases, and

that is just wrong.

Regardless of what it takes, it is time that we, as a Nation, live

up to our word and give our military retirees, veterans, the health

care that has been promised to them.

If you have a civilian worker that gets this and a military that

goes out and fights for this country and makes these sacrifices, it

is just wrong, whatever it takes.

If you want to get it—and I told you I would be frank—you need

to get rid of a White House that has an anti-military bias, and we

plan on doing that. I have talked to both Governor Bush and John

McCain and people on the Senate side, and we are going to make

this happen after November and we are going to push it through

and we are going to support our military and we are going to supVerDate 11-MAY-2000 10:30 Apr 04, 2001 Jkt 000000 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 C:\DOCS\70437.TXT HGOVREF1 PsN: HGOVREF1
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port our veterans. And I am tired of excuses from both Republicans

and Democrats on why we can’t do this and giving in to it.

If you need to take a look, yes, lift the artificial geographical and

numerical demonstration limits. This was a plan that was failed to

doom—and we said it—when the administration limited us in the

scope in which we wanted to do this and they said it would cost

too much.

We need to get this done, and we need to take those limits off

for the same reasons that the testimony was given before and why

it failed.

Not only was it not marketed a couple of months before—and I

don’t fault DOD that much, because I know the problems they have

had with 149 deployments all over the country and looking at what

their budgets are and looking at the limits that they have to take

care of their people.

The subvention bill was my bill. TRICARE is a Band-aid. Where

it is available, then it is not a bad program, but in many cases it

is not. And those are Band-aids, and it is time that we go forward

and move with this damn thing.

We need to lift the prohibitions on the MTFs and FEHBP participants and allow those military facilities to charge FEHBP plans for

retiree services. That hasn’t been done, and we can do that.

You ask, ‘‘Is it legitimate to go out and market a plan with 2

years?’’ And I agree with the previous thing. No, because when you

tell people that they may not even be able to get back into their

original plans if they go on this pilot program, they are scared, and

they are not going to do it. I sure wouldn’t do it.

Until we come up and we extend the timeline and we open this

thing up, it is going to be a waste of time, but the bottom line, Mr.

Chairman, is we need to open this thing up and give the military

Federal retirees the same as civilian.

I can have a secretary, when I was in the military, work side by

side with me, and they are good. She can get FEHBP, I cannot as

a military retiree, and that is wrong.

I yield back, Mr. Chairman.

Mr. SCARBOROUGH. Thank you very much, Congressman

Cunningham.

Thank you, once again, for your hard work and for your testimony before this committee. If you can stick around, I look forward

to you answering some questions.

Rear Admiral Carrato, welcome back. We are happy to have you

here again. We had you in Florida a few weeks ago and had you

here last year and certainly look forward to your testimony.

Same with you, Mr. Flynn. Welcome back.

Rear Admiral Carrato.

STATEMENTS OF REAR ADMIRAL THOMAS F. CARRATO,

USPHS, DIRECTOR, MILITARY HEALTH SYSTEMS OPERATIONS, TRICARE MANAGEMENT ACTIVITY; AND WILLIAM E.

FLYNN III, DIRECTOR, RETIREMENT AND INSURANCE PROGRAMS, OFFICE OF PERSONNEL MANAGEMENT

Admiral CARRATO. Mr. Chairman, Mr. Miller, I appreciate the

opportunity to discuss our progress in implementing the FEHBP

demonstration program.

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The demonstration makes FEHBP enrollment available to certain military health system beneficiaries, principally military retirees who are Medicare eligible and their family members.

The Department of Defense has worked closely with OPM in implementing this program.

Pursuant to the statute, last year we selected eight sites for the

program, told eligible beneficiaries about the program, and conducted an open enrollment season coincident with the usual

FEHBP open season in November and December for health care

enrollment effective January 2000.

Enrollment during the open season was very low. Through December 30, 1999, there were about 1,300 enrollees. This represented less than 2 percent of the total eligible population.

We were very concerned by the low enrollment and wanted to

make sure everyone had gotten the word and understood the opportunity. The Department worked with OPM to develop an additional

mailing for late December to do three things: to emphasize the significance of the opportunity, to clarify the relationship of FEHBP

plans to Medicare coverage, and to provide additional time for

beneficiaries to consider enrolling.

This was in keeping with normal OPM policy to provide additional time for beneficiaries to enroll, even after open season has

technically ended, if they have not had sufficient time to consider

the opportunity.

In addition to the mailing, DOD arranged and conducted 18 town

hall meetings across the eight demonstrationsites during January

2000. I would like to acknowledge the participation of Congresswoman Kay Granger, Congressman Richard Burr, and Congressman Mike Thompson in our town meetings, as well as the help and

participation of several other congressional staff members.

As a result of the additional marketing, over 1,000 more beneficiaries are covered by the demonstration. Nearly half of the

growth of enrollment was in Puerto Rico, where there were 308

persons covered as of December 30 and over 950 as of early April.

Actual enrollment has fallen far short of even the most modest

estimates of participation. The Department shares the committee’s

concern about the level of enrollment.

We take congressional mandates seriously and have spent over

$4 million in establishing the mechanisms to support the program

and market it effectively to eligible beneficiaries. This represents

an investment of over $50 per eligible person, or, looked at another

way, over $1,700 for every enrollee in the demonstration.

GAO is conducting a beneficiary survey to evaluate in detail why

beneficiaries enrolled or not, and we would defer to their findings

in this regard.

We would point out that enrollment response has been the best

in those sites with very limited access to military health care—

Puerto Rico; Greensboro, NC; and the northern California area.

Given that enrollment falls far short of the levels authorized for

the demonstration, the Department believes that it would be appropriate to add two more sites to the demonstration, bringing the

total number of sites to the statutory maximum of ten.

On April 6 we randomly chose two seed counties for the new

sites in the three TRICARE regions still available. The statutory

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authority limits us to one site per TRICARE region, so only regions

3, 11, and the central region were eligible. The counties chosen at

random were Coffee County, GA and Adair County, IA. We are

going to be adding counties to these seed counties to reach 25,000

additional eligibles per site. Enrollment in the new sites will begin

in the fall 2000 open season.

The Department, in cooperation with OPM, has made a concerted, sustained effort to get the word out, to fully inform beneficiaries about this important opportunity, and to give them adequate time and support in their decisionmaking. We are gaining

valuable information about beneficiary preferences and desires, and

we look forward to GAO’s detailed findings on the beneficiary survey.

As the Department conducts these tests—FEHBP, TRICARE

senior, and other approaches for meeting the health care needs of

our senior beneficiaries—we always remember the substantial sacrifices that these people made for their country. We take increased

devotion to our daily tasks from their honorable service, and we

keep in mind their fallen comrades who gave their last full measure of devotion.

Thank you.

Mr. SCARBOROUGH. Thank you, Admiral.

[The prepared statement of Admiral Carrato follows:]

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Mr. SCARBOROUGH. Mr. Flynn.

Mr. FLYNN. Thank you, Mr. Chairman and Mr. Miller and other

members of the subcommittee. We appreciate very much your invitation to appear before you today.

I want to discuss OPM’s perspective on the initial enrollment results under the Federal employees health benefits demonstration

project for Medicare-eligible military retirees and members of their

families.

Enrollment in the demonstration project to date is slightly under

1,700 new members, encompassing a little over 2,500 people. From

a total eligible base of about 66,000, these initial results, as you

have heard this afternoon, are, admittedly, disappointing.

Both OPM and the Department of Defense have invested considerable resources and cooperated closely on every aspect of implementation. We believe our experience has demonstrated that we

can and will do things even better in the second year, and we welcome the opportunity today to discuss that with you.

At the outset, we made two basic decisions in undertaking implementation of this project.

First, we felt it was important to carry out the pilot program so

that, as much as possible, it looked just like the Federal Employees

Health Benefits Program.

Second, we acknowledged that this group would need special information. Unlike Civil Service retirees, these individuals were

largely unfamiliar with the Federal Employees Health Benefits

Program and how it worked.

With these factors in mind, we in the Department of Defense divided up our respective responsibilities to run the project and reflected that in a memorandum of understanding. We developed a

substantial set of materials tailored to the population covered by

the project, and we provided copies of those materials to the subcommittee, and I would be happy to answer any questions you

might have about them.

In addition, both the Department of Defense and our staff

worked with representatives of the military coalition and alliance

groups in sharing information as implementation of the project progressed.

While marketing did go beyond the conventional scope of activities for regular Civil Service retirees, only about 500 persons were

enrolled by the official close of the 1999 open season. Because of

this, as Admiral Carrato has mentioned, we allowed belated open

season enrollments, with coverage and premiums taking effect retroactive to January.

These figures suggest that we should increase even more the

amount of information needed to introduce this program to individuals who are not familiar with it. Persons making this choice clearly want more information not only about the Federal Employees

Health Benefits Program, but also about how it compares with

available alternatives. Similarly, more direct contact with eligible

individuals before the open season seems warranted.

However, lack of familiarity with the Federal Employees Health

Benefits Program is only one of the dynamics in this project. Anecdotal evidence suggests that many eligibles may not perceive our

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program as the preferred option. For example, of over 66,000 people contacted, only about 3,600 requested enrollment materials.

Similarly, as you have heard, enrollment rates in the project

show that areas such as Greensboro, NC; Dallas, TX; and Humboldt County, CA were higher than project sites where military

treatment facilities are located. This suggests that, when access to

military treatment facilities is available, individuals are less likely

to sign up for the Federal Employees Health Benefits Program.

As well, Medicare eligible retirees with zero premium Medicare

plus choice HMO contract coverage might prefer that arrangement.

And, since the project is limited to 3 years, as you have heard

again this afternoon, there is evidence that individuals were reluctant to sign up because of a concern about being uninsured at the

end of the project.

And, as you have heard this afternoon, the law does expressly

entitle beneficiaries to reacquire coverage without preexisting condition limitations when they no longer participate in the project.

Nonetheless, it seems clear that some individuals are concerned

about this.

Your invitation asked us to talk about the difficulties that low

enrollment could create for participants in health plans. As you

know, and in testimony before this subcommittee last year, we anticipated that possibility and consulted with the health plans to develop a risk mitigation strategy to help insulate premiums from the

impact of utilization. In most cases, that seems to have had the desired effect, as you have heard earlier, about the premiums and

their relative position to the regular FEHBP premium.

Certainly, we share your concerns about where we go from here

to improve this project, and I have outlined some actions that seem

warranted. In addition, the GAO survey that has been mentioned

will be useful in understanding the interests of this population and

planning improvements for the future.

Mr. Chairman, that concludes my statement. I would be happy

to answer any questions you or the other Members may have.

Thank you.

Mr. SCARBOROUGH. Thank you. We appreciate your testimony.

[The prepared statement of Mr. Flynn follows:]

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Mr. SCARBOROUGH. Let us talk, Admiral, first of all, about marketing. Again, to recap—and I know you have heard this before,

but we had a discussion last year about the turn-out, and I had

said it was going to be low, you had said that DOD believed it

would be as much as 85 percent, and, quite frankly, I was right,

you were wrong. But I think the one thing that I think you probably couldn’t even foresee last year was just how bad your market- ing was going to be. I mean, you may have spent $4 million on

marketing this thing, or DOD may have, but they sure didn’t spend

any money on marketing materials.

Our last panel showed this to us. Again, the TRICARE materials

are exceptional. I think I could even convince a few dumb Members

of Congress to get into TRICARE after reading this. But you look

at the FEHBP thing. Seriously, I mean, first of all, unmarked. A

lot of them didn’t know where it was coming from. This card is just

absolutely unbelievable. I mean, compare it to this. There is absolutely no comparison. And on this FEHBP material you actually— I mean, this seal, it was done on somebody’s computer, and it

wasn’t even a good computer that it was done on. There is

pixelation here. I don’t want to get in great detail, but I guarantee you you could buy a $500 computer at Office Depot and put something together that looks better than this.

I mean, we understand. This matters. We have got e-mails up

from people that called in and threw it away and looked at it as

junk mail, and I don’t think it is being too cynical to believe that

somebody putting these materials together really didn’t care

whether people read it or not, and if it got thrown away that was

a win for DOD.

How do you explain marketing materials this bad? And please

don’t tell me that you are in charge of printing or anything like

that. Hopefully it is somebody else over at the DOD. But, I mean,

it is awful. I mean, do you agree with me that this stuff is not the

top-quality material that you would prefer come out to promote this

project?

Admiral CARRATO. Let me start by saying I am responsible for

this demonstration program and I put an excellent team in place

to implement this program, in cooperation with OPM. On the DOD

side, there is largely the team that is responsible for other 65 demonstrations, so I can tell you that we made every effort to make

this a successful program.

Mr. SCARBOROUGH. Did you sub out this work?

Admiral CARRATO. Let me just draw a distinction between marketing and education. For TRICARE senior prime, we were actually

involved with educating, marketing, bringing people into a Medicare plus choice plan, the DOD Medicare plus choice plan. The purpose of these activities was to get the word out that there was this

opportunity to enroll in FEHBP, and marketing really is largely a

function of the individual plan, choices, so the individual plans

would have large responsibility for marketing.

What we wanted to do was fully inform our beneficiaries that

this was an option. We wanted to let them know that this program

was in place. We needed to let them know about health fairs and

really wanted them to take full advantage of the literature and the

marketing materials from the plans that participated in FEHBP.

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To directly answer your question, in retrospect we probably

should have paid more attention to those materials, and we certainly will do that next go-round.

Mr. SCARBOROUGH. There are, again, e-mails up here, and I want

to read briefly one or two of them, because, again, the biggest concern is that the DOD sent out materials without letterhead or a

seal indicating its involvement or sponsorship.

According to one eligible member from Camp Pendleton, they

wrote, ‘‘The mailing came in an unmarked envelope. The contents

included an FEHBP general description, with no indication of the

sender, no letterhead or signature block; a frequently asked question sheet about DOD FEHBP; and a list of town hall meetings— again, no indication of the sender. The entire mailing appeared to

be junk mail.’’ Another beneficiary from Dallas, talking about the lack of notification, stated, ‘‘I have read all the mailings, called all the phone

numbers, checked all the Websites to no avail. I attended a town

hall meeting last November and it was a farce.’’ And this is a real

insult—‘‘There was more order in a Washington cocktail party,

with people talking to each other all at once, and no one to whom

you could even ask a question. I left in disgust. I have yet to meet

a single individual who can discuss this program intelligently. I

have no idea who was responsible for ’getting the word out,’ but he

stumbled badly.’’ How do you respond to the inability of an eligible beneficiary to

distinguish this congressionally mandated mailing with what they

called ‘‘junk mail.’’ I think, again, our previous panel said that is

a concern that others have had.

Admiral CARRATO. Yes. Sir, honestly, at last year’s hearing I did

rely on some estimates. Ours were based on GAO and CBO estimating up to 83 percent enrollment in the program, and the great

enthusiasm with which this demonstration authority was received

by certainly the leadership of our coalition and alliance organizations, I did think we would have significant enrollments, and I am

greatly disappointed by the effort.

In terms of the town hall meetings and the health fairs, when

we discovered that the enrollment rates were as low as they turned

out to be, as we looked at the initial results from the open season—

and we had been communicating since January with the coalition

and alliance, requesting their assistance and getting the word out

through their channels—we immediately called a meeting with representatives, including Ms. Pugh and Colonel Partridge, and said,

‘‘Look, how do we get this thing turned around?’’ We met with

Members of Congress. Congressman Burr, as I mentioned before,

was very interested. ‘‘What do we do?’’

We got together with Mr. Flynn’s shop and decided to go out with

some additional materials.

One of the big concerns—and I guess I underestimated this—is

the fact that this is a new program and, dealing with this population, it does take some time to feel comfortable with the decision

you are going to make, particularly when it involves a demonstration.

We asked if we could work together and prepare some additional

material that would clarify the relationship between Medicare and

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FEHBP, and we worked with OPM to do that and worked with the

coalition, able to extend the period. And, working with some Members, we were able to establish a whole new round of town hall

meetings, which we held in January.

So I think we learned a great deal of lessons, which is the purpose of a demo. We reacted, I think, very quickly to try and get additional educational material out to our beneficiaries to make them

know what this program offered.

It offers a very, very rich supplement to their Medicare benefit.

We think it represents an outstanding deal.

Mr. SCARBOROUGH. Congressman Cunningham, let me ask you to

help me out here, because obviously Admiral Carrato is a good

man. He has committed his life to military service. In fact, we are

trying to help him out. I mean, we are trying to help you out. We

are trying to help out the men and women, not only who are military retirees now, but the people that are going to be retired 10

years, 20 years, 30 years from now to make sure we keep the promise that we made to them.

What happened? I mean, where is the disconnect here? I mean,

comment on what you have heard today.

We have certainly heard your testimony, but you are, obviously,

representing San Diego and the District where my late grandfather

lived. I mean, you have seen this from the ground floor. What happened here? Were there some people that just weren’t as interested

in this succeeding as Congress? I guarantee you 99 percent of the

people here believe, or was it just people shooting themselves in

the foot?

Mr. CUNNINGHAM. Mr. Chairman, as I stated, it is not all DOD’s

fault. Sometimes many of us feel like Billy Mitchell when he said

that we need air power, and someone said, ‘‘Well, I will put a ship

out there and we will bomb it,’’ and you know what the result was.

When we testified at the beginning of FEHBP, we told the committees what would be required. When the White House limited us

and told us what the marketing—you know, how they were going

to market it, how they were going to limit it, they weren’t going

to let people go to military facilities that existed, and then the

scare tactics—if you join this pilot program, you may not be insured after the program dies—they are scared. And you may have

an education program going one way, but on the other side you

have got a negative program that is more powerful in fear.

That was not handled well, in my opinion.

Second, the cost analysis that came out to scare people off, you

take a look and it was their own testimony. People with TRICARE,

people with other programs aren’t as likely to go to this if they

have the facility there. But a lot of our retirees are not covered,

and TRICARE is terrible for them.

Yet, they said if 100 percent of these people come into the

FEHBP it is going to break the bank, and that is just not true, so

the analysis was flawed, itself.

If you take a look at Medicare part B, many of those people were

not informed that in other plans that there were copayments and

deductibles, and the fairs—when you have a fair, and a week later

you have to make that decision—you know, I have town hall meetings myself, and I know probably every Member, Republican or

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Democrat, does, too. How many people out of your population do

you have at those town hall meetings? And then, if you don’t have

someone there that is organized, that knows the system, that can

brief the system—and it is called marketing. Are you going to sell

cars? Are you going to sell Chevys? Are you going to sell Toyotas?

If your marketing is flawed and you are working in an uphill way,

anyway, if you had an old car in 1970’s, and American-made car

that was a Toyota without shine, you had a hard time selling that

car.

It is the same thing with FEHBP. If you tell our retirees that

FEHBP will be their plan, like it is for civilians, to help them with

Medicare, I guarantee you they are going to accept it, but if they

have doubts in that they are not going to accept it because they are

scared. That was the flaw, itself, in this.

Mr. SCARBOROUGH. Is there any way around that? Let me ask

you that question on that. Is there any way that we can make this

program succeed by people coming in now knowing that they can

only be in it for 2 years?

Mr. CUNNINGHAM. Yes. We will after November, because we will

open up the plan. Guaranteed.

Mr. SCARBOROUGH. OK. Let me ask you one final question here.

I wanted to talk about Medicare coverage. It wasn’t until after the

initial enrollment period was closed that the DOD included in its

materials information that was still without letterhead or signature block, clear information about Medicare coverage. Mention

was made in the frequently asked questions provided by the Department; however, neither the plan brochure nor the initial mailing was adequate information specified.

Participants were told that Congress—when they called the telephone center, they were referred to the providers, themselves, for

questions pertaining to Medicare.

Mr. CUNNINGHAM. Mr. Chairman, would you yield just for 1 second on that?

Mr. SCARBOROUGH. Sure.

Mr. CUNNINGHAM. I have got to leave, and there is one other

point I wanted to make.

Mr. SCARBOROUGH. Right.

Mr. CUNNINGHAM. If you drive out to Bethesda, look at the big

signs that talk about ‘‘TRICARE is the plan.’’

Mr. SCARBOROUGH. Yes.

Mr. CUNNINGHAM. Go to Balboa and San Diego. You look at the

big signs, the marketing that makes you want to join those programs.

Mr. SCARBOROUGH. Right.

Mr. CUNNINGHAM. There is nothing at our military hospitals or

facilities or anything to help market this plan.

I am sorry. I have got to leave.

Mr. SCARBOROUGH. OK. Thank you.

Mr. CUNNINGHAM. Thank you.

Mr. SCARBOROUGH. Let me ask you, Admiral, why was this important feature not highlighted in the marketing materials, particularly in the plan brochure that was passed out to potential enrollees?

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Admiral CARRATO. I think there are two questions in there. The

first was clarification of the relationship to Medicare.

We originally used some material that OPM had prepared, standard material for Federal annuitants, and we quickly discovered

that that did not satisfy the requirement for someone who had not

been familiar with FEHBP, so we worked together to get a concise

statement out that explained the relationship of this program to

Medicare, so that is the answer to the first question. We learned,

we reacted, got the message out.

The second issue is really sort of a fine technical point, and that

has to do with Medigap coverage, and in the early 1990’s the Government decided that Medigap Medicare supplemental plans needed to be regulated, and after that regulation was implemented—I

think it was about 1991—there were 10 approved Medigap coverages. The provision in the statute allows you to return to that

coverage with no preexisting penalties.

The issue and the reason some individuals were told to talk to

their coverer, their insurer, was that some of this population actually had purchased supplemental plans pre-dating the early 1990

change in statute, so we didn’t want to provide misleading information, and that is why we recommended that the enrollee contact

their insurer to get the complete answer on it.

Mr. SCARBOROUGH. Let me ask you, because I am going to have

to run to some votes here—and I hope both of you don’t mind, I

am going to have some written questions provided to you, and if

you could answer in the next couple of weeks that would be great.

Let me ask you the same question—and if I could get a brief response—do you think it is possible for this program to succeed in

the next 2 years with enrollees knowing that they may only be able

to be in the program for 2 years before being kicked out.

Admiral CARRATO. I will try and be brief.

Mr. SCARBOROUGH. Go ahead.

Admiral CARRATO. I think the answer is what we heard in Pensacola from the representative of TROA. I think one of the most

powerful marketing tools in the military health system is chats at

a club over the back fence, and I think when we have some word

of mouth with people who have enrolled and are satisfied with the

program, I think that might help get the message out and boost enrollments.

I think we will certainly make every effort we can, working together with OPM and our coalition and alliance partners, and we

will do everything we can to make it more successful.

Mr. SCARBOROUGH. Mr. Flynn, do you think you can be more successful? Do you think you will be successful at all, again, with people knowing that they can be kicked out in 2 years?

Mr. FLYNN. Clearly, Mr. Chairman, we have heard that concern.

I have to treat it as a valid concern because of the wide number

of people who said it. I think, nonetheless, we can do better. I do

think, however, that sense of it being a pilot and people thinking

that they won’t have coverage after will have an influence on how

successful we can be.

Mr. SCARBOROUGH. OK. Admiral, last question. The $64,000

question. You said you can do a better job. Are you going to get

your 83 percent next year when we have this hearing?

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Admiral CARRATO. Just to show you I am not a complete idiot,

no comment, sir. [Laughter.]

Mr. SCARBOROUGH. Oh, come on. I am offended, even though I

do have last year’s testimony here where you predicted—in

highlighter—83 percent.

Admiral CARRATO. I predict we will do better, sir.

Mr. SCARBOROUGH. Will we get to 50 percent?

Admiral CARRATO. That is CBO’s prediction in their scoring of

the bill.

Mr. SCARBOROUGH. CBO says 50 percent?

Admiral CARRATO. Yes, sir.

Mr. SCARBOROUGH. OK. And you are confident we are going to

get there?

Admiral CARRATO. We will do better, sir.

Mr. SCARBOROUGH. Well, I hope we do much, much, much better.

I thank both of you for coming on this very, very important subject, and I look forward to discussing it with you again.

We are adjourned.

[Whereupon, at 3:51 p.m., the subcommittee was adjourned.]

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