United States General Accounting Office

GAO Report to the Chairman and Ranking

Minority Member, Subcommittee on

Personnel, Committee on Armed

Services, U.S. Senate

June 1996 DEFENSE HEALTH

CARE

New Managed Care

Plan Progressing, but

Cost and Performance

Issues Remain

G O A

years

1921 - 1996

GAO/HEHS-96-128

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-265681 

June 14, 1996

The Honorable Dan Coats

Chairman

The Honorable Robert C. Byrd

Ranking Minority Member

Subcommittee on Personnel

Committee on Armed Services

United States Senate

The Department of Defense (DOD) is implementing a sweeping reform of

its $15 billion per year health care system. TRICARE, DOD’s new

nationwide managed health care program, will significantly alter health

care delivery for DOD’s 8.3 million beneficiaries. As we testified on March 7,

1996, before the House Committee on National Security’s Subcommittee

on Military Personnel, TRICARE’s implementation is occurring in a rapidly

changing military environment.1

 Post-cold war contingency planning

scenarios, efforts to reduce the overall size of the nation’s military forces,

federal budget-reduction initiatives, and base closures and realignments

have all heightened scrutiny of the size and makeup of DOD’s health care

system. How well DOD implements and operates TRICARE may define and

shape military medicine for years to come.

Because of TRICARE’s complexity, large scale, and impact on

beneficiaries, you requested that we review the program, focusing on

(1) whether DOD’s experiences with early implementation produced the

expected results, (2) how early outcomes may affect costs, and

(3) whether DOD has defined and is capturing data needed to manage and

assess TRICARE’s performance.

To assess DOD’s experiences with early implementation, we visited four

TRICARE regional administrators and eight military medical facilities

within those regions. We also met with TRICARE contractors who provide

health care support to the DOD medical facilities. These officials described

their experiences with the beneficiary education, marketing, and

enrollment phases of TRICARE implementation. They also described their

efforts to identify and disseminate information about the problems they

encountered and the solutions they found in order to facilitate TRICARE

implementation in other regions. To analyze cost implications, we

reviewed studies projecting TRICARE costs and discussed these studies

1

Defense Health Care: TRICARE Progressing, but Some Cost and Performance Issues Remain

(GAO/T-HEHS-96-100, Mar. 7, 1996).

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with Office of the Assistant Secretary of Defense for Health Affairs staff,

their TRICARE cost consultant, and representatives of the Congressional

Budget Office. We discussed management data needs with DOD officials at

the headquarters and regional levels, focusing on those unmet needs that

emerged during early TRICARE implementation.

We did our review between June 1995 and March 1996 in accordance with

generally accepted government auditing standards.

Results in Brief Progress has been made during early implementation of TRICARE, DOD’s

far-reaching effort to bring managed health care to one of the nation’s

largest health care systems. TRICARE is intended to improve access to

care for the military community while maintaining quality and controlling

costs. This initiative involves a unique partnership between the military

and civilian health care communities, including seven multistate managed

care support contracts worth about $17 billion over 5 years.

As DOD intended, large numbers of beneficiaries have enrolled in DOD’s

managed health care program, and many have chosen to receive care from

military providers. Implementation of such substantial changes has not

been problem-free, but both DOD and its contractors have worked hard to

deal with problems as they arise, as well as to disseminate information on

lessons learned from the early stages of TRICARE implementation so that

other areas of the military health care system can more easily overcome

the same obstacles.

Although progress has been made, issues regarding TRICARE’s cost and

performance have emerged during implementation that require DOD’s

attention. Containing costs is critical to TRICARE’s success, but it appears

DOD’s efforts to do so may be hindered. DOD’s ability to save money through

resource-sharing agreements and utilization management, two critical

cost-saving features of TRICARE, is uncertain and may be impeded

because of implementation problems. DOD and contractor staffs do not

fully understand how to effectively use resource-sharing agreements. Also,

there have been delays in the implementation of utilization management.

Although DOD is defining TRICARE performance measures, it is not

collecting key data on either beneficiary access to care or enrollment. The

Congress and DOD will need these data to determine whether DOD is fully

achieving TRICARE’s goals. For example, DOD needs access data to

measure how well it is meeting TRICARE access standards, such as

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timeliness of appointments. Similarly, DOD needs enrollment data to

identify the cost implications of attracting new beneficiaries who were not

using DOD health care and would not now be using the military health

system were it not for TRICARE.

Background DOD’s primary military medical mission is to maintain the health of

1.7 million active duty service personnel2

 and to be prepared to deliver

health care during times of war. Also, as an employer, DOD offers health

care services to 6.6 million non-active duty beneficiaries such as

dependents of active duty personnel and military retirees. The bulk of the

health care is provided at more than 600 military hospitals and clinics

worldwide, which are operated by the Army, Navy, and Air Force. DOD’s

direct health care system is supplemented by a DOD-administered

insurance-like program called the Civilian Health and Medical Program of

the Uniformed Services (CHAMPUS). In fiscal year 1996, DOD expects to

spend about $11.8 billion providing care directly to its beneficiaries and

about $3.6 billion for CHAMPUS.

In response to such challenges as increasing health care costs and uneven

access to care, in the late 1980s DOD initiated, under congressional

authority, a series of demonstration programs to evaluate alternative

health care delivery approaches. In the National Defense Authorization

Act for Fiscal Year 1994 (P.L. 103-160), the Congress directed DOD to

prescribe and implement, to the maximum extent practicable, a

nationwide managed health care benefit program modeled on health

maintenance organization (HMO) plans. The Congress specifically required

that this new program could not incur costs greater than DOD would incur

in the program’s absence and that beneficiaries enrolling in the managed

care program would have reduced out-of-pocket costs. Drawing from its

experience with the demonstration projects, DOD designed TRICARE as its

managed health care program.

TRICARE is designed to give beneficiaries a choice among TRICARE

Prime, which is similar to an HMO; TRICARE Extra, which is similar to a

preferred provider organization; and TRICARE Standard, which is the

current CHAMPUS fee-for-service-type benefit. Beneficiaries who select

TRICARE Prime must enroll to receive care under this option. The

program uses regional managed care support contracts to augment the

capabilities of military hospitals by having contractors perform some

2

Also includes members of the Coast Guard and the Commissioned Corps of the Public Health Service

and the National Oceanic and Atmospheric Administration, who are also eligible for military health

care.

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B-265681 

managed care functions as well as arrange for care in the civilian sector.

There will be seven managed care support contracts covering the 12

TRICARE regions. To coordinate the services and the contractors and

monitor health care delivery, each region is headed by a joint-service

administrative organization called a lead agent. DOD has estimated that the

managed care support contracts will cost about $17 billion over the 5-year

contract period. DOD has awarded four contracts and plans to have all

contracts awarded and the TRICARE program fully implemented by

September 1997. Background on the TRICARE program is in appendix I.

The Northwest Region was the first region to begin enrolling beneficiaries

in March 1995. Three regions, the Golden Gate Region, the Hawaii-Pacific

Region, and Region Nine,3

 began enrolling beneficiaries in October 1995,

followed by the Southwest Region in November 1995. While the contract

has been awarded for the Southeast and Gulf South Regions, they are not

scheduled to begin health care delivery under TRICARE until July 1996.

Figure 1 shows the DOD regions covered by the seven managed care

support contracts. The shaded areas are the regions where TRICARE has

been implemented in various stages as of March 1996.

3

Region Nine covers the Southern California area.

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

TRICARE Implemented

Desert

States

Region

Nine

Golden

Gate

Gulf

South

Southwest

Hawaii-Pacific

Southeast

Mid-Atlantic

Northeast

Heartland

North Central

Northwest

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

DOD has experienced difficulties in awarding its managed care support

contracts. Each of the contracts awarded thus far has been protested. The

protest of the first contract, encompassing the Golden Gate Region,

Hawaii-Pacific Region, and Region Nine, was sustained, and DOD was

required to recompete the contract. The protests for the Northwest

Region’s and Southwest Region’s contracts and the contract including

both the Southeast and Gulf South Regions were denied.

Last year, in response to congressional concerns about DOD’s difficulties

with an early contract award covering California and Hawaii for which GAO4

4

Under the Competition in Contracting Act of 1984 (31 U.S.C. 3551-56 (1988)), GAO is required to

consider bid protests and determine whether a challenged federal solicitation, contract award, or

proposed award complies with applicable statutes and regulations.

Page 5 GAO/HEHS-96-128 TRICARE Implementation Issues
B-265681 

sustained a protest,5 we reviewed problems identified by the bid protest

experience. We reported that while DOD had taken steps to improve future

contract awards, several areas of concern remained. Among our

recommendations—which DOD agreed to adopt—were that DOD consider

the potential effects on competition of such large TRICARE contracts and

weigh alternative award approaches to help ensure competition during the

next procurement round. We also urged that DOD try to simplify the next

round’s solicitation requirements and seek to incorporate best-practice,

managed care techniques in the contracts. We further recommended that

DOD establish general qualification requirements for its board members

who evaluate contractors’ proposals.6

 We plan to follow up on these issues

and begin a study of how well DOD’s contractors are performing under the

current contracts.

Despite Setbacks,

Early Implementation

Is Under Way

Despite unanticipated obstacles, DOD’s early implementation of TRICARE

is progressing in line with DOD expectations. DOD has enrolled large

numbers of beneficiaries in TRICARE Prime, including many of the active

duty dependents DOD particularly wants to enroll. It has also succeeded in

encouraging TRICARE Prime enrollees to select military health care

providers—the source of care that DOD believes is more cost-effective than

civilian-provided care. In addition, DOD is addressing implementation

problems that early on caused confusion for beneficiaries and difficulties

for military health care managers.

Early Enrollment Results As DOD intended through its marketing efforts, many beneficiaries have

enrolled in TRICARE Prime, particularly the target population of active

duty dependents that tends to rely heavily on the DOD health care system.

As of January 31—after almost 12 months of operation in the Northwest

Region and fewer than 4 months in four other regions—more than 400,000

people had enrolled in TRICARE Prime.7

 In the Northwest Region, about

two-thirds of active duty dependents have chosen this option, as shown in

figure 2.

5

Foundation Health Federal Services, Inc; QualMed, Inc., B-254397.4, et al., Dec. 20, 1993, 94-1 CPD ¶ 3.

6

Defense Health Care: Despite TRICARE Procurement Improvements, Problems Remain

(GAO/HEHS-95-142, Aug. 3, 1995).

7

The 400,000 enrollees does not include more than 300,000 active duty military personnel who are

automatically enrolled in TRICARE Prime.

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Figure 2: Northwest Region’s Active

Duty Dependent Enrollment in

TRICARE Prime

35% • Active Duty Dependents Not

Enrolled

65%•

Active Duty Dependents Enrolled

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

Source: DOD data.

Also, in those regions under way, the bulk of beneficiaries choosing

TRICARE Prime have enrolled with military, rather than civilian, health

care providers. This enhances DOD’s goal of fully utilizing its military

medical facilities and providing care in the less expensive military setting.

Figure 3 shows that in the Northwest Region, over two-thirds of the

beneficiaries have chosen to enroll with a military health care provider.

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Figure 3: TRICARE Prime Enrollment

With Health Care Providers in the

Northwest Region

31% • Civilian Health Care Provider

69%•

Military Health Care Provider

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

Source: DOD data.

DOD Is Addressing Early

Implementation Obstacles

During the period from the contract award through the start of health care

delivery, DOD encountered and addressed various start-up problems. A

delay in the TRICARE benefits package and higher than expected early

enrollment together led to initial beneficiary confusion. Also, computer

system problems have hindered DOD’s ability to manage the enrollment

process.

One early setback was the delay in the approval of the TRICARE benefits

package, which details the beneficiaries’ fees and copayments for health

care services. DOD did not approve the benefits package until just 2 months

before the Northwest Region began enrolling beneficiaries. Military

facilities had already begun their marketing and education efforts with the

proposed benefits; however, the approved benefits package changed the

enrollment fees. Because of this, people became confused, and DOD and

the contractor had to explain the changes. This confusion did not occur in

other regions, because the TRICARE benefits package was in place before

marketing and education began.

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Despite the benefits package delay, the Northwest Region had more

people wanting to enroll than it anticipated. Although the contractor had

projected that 28,000 beneficiaries would enroll during the first year,

approximately 58,000 beneficiaries enrolled during the first 4 months. The

contractor responsible for managing the enrollment process was

understaffed and had to hire temporary employees. The temporary

employees were not adequately trained and could not sufficiently address

beneficiaries’ questions about TRICARE, which further confused

beneficiaries. Later, DOD and the Northwest Region shared their

experiences through an extensive lessons-learned effort with other

regions. Thus, the Southwest Region contractor hired temporary

employees and trained them with its regular employees before enrollment

began. Although the Southwest Region also experienced higher enrollment

than anticipated, DOD and the contractor avoided much of the beneficiary

confusion that the Northwest Region experienced.

During the enrollment process, DOD has also encountered problems

stemming from the inability of its medical information system to interact

with the contractors’ systems. Because of their configurations, the systems

cannot communicate, meaning that data cannot be transferred from one

system to another. As a result, according to lead agent officials, DOD does

not have a complete database of all beneficiaries enrolled in TRICARE

Prime, and regional officials must rely on the contractor to provide

enrollment data. However, DOD is addressing the problem by having the

Northwest contractor provide special reports from its system and, in the

Southwest Region, having the contractor put beneficiary enrollment data

in both the DOD and contractor systems. DOD plans to address this problem

by amending the contracts to require contractors’ medical information

systems to exchange information with DOD’s system.

Implementation

Issues May Affect

TRICARE Costs

The degree to which cost savings can be achieved under TRICARE

remains uncertain and depends on DOD’s ability to operate the system as it

is designed to work. Issues have emerged during early implementation that

may hinder DOD’s efforts to contain costs. TRICARE depends on managed

care to achieve maximum efficiency of its military facilities and control

rising health care costs by using techniques such as sharing resources with

the support contractor and managing beneficiaries’ use of health care

services.

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Resource-Sharing Details

Not Well Developed or

Understood

DOD has estimated that resource sharing could save $810 million over 5

years, but DOD and contractor officials responsible for entering into

specific resource-sharing agreements have told us they do not fully

understand the potential cost implications of such agreements. This lack

of understanding continues to impede implementation of resource sharing

under TRICARE, and the effectiveness of the program remains uncertain.

Resource sharing is a feature of the TRICARE contracts that allows the

contractor, through agreements with DOD, to provide personnel,

equipment, and/or supplies to a military facility to improve its capability to

provide care. DOD officials believe that providing health care to military

beneficiaries in military facilities is less expensive than comparable care in

the civilian sector, so maximizing the use of military facilities results in

savings to both DOD and the contractor. For example, the contractor might

provide an anesthesiologist to a military hospital so that more surgeries

could be performed there rather than at a more costly private facility at

DOD expense, thereby reducing overall costs. Similarly, contractor costs

for the service provided are reduced by using the military facility and

supporting resources.

Evaluating the cost-effectiveness of resource-sharing agreements is very

difficult and complex. Each agreement must be analyzed to determine

whether the savings from providing care in the military facility offset

increased facility costs under the agreement, such as the cost of supplies,

staff, or support services that would not have been used if the agreement

had not been established. Also, the extent of resource-sharing savings will

be a factor in future regional contract price adjustments, which further

adds to the complexity of these agreements.

DOD has given regional officials, military facility commanders, and

contractors a financial analysis worksheet to help determine the

cost-effectiveness of the agreements. DOD has also provided some training

sessions in the regions. Despite these efforts, DOD and contractor officials

remain confused about making appropriate decisions regarding the

financial implications of these agreements. According to lead agent

officials, they are uncertain about how individual agreements may affect

future contract price adjustments. Because of this, some regions have

been slow to enter into agreements, and the anticipated savings may not

be achieved.

DOD officials told us that they recognize this deficiency and plan to address

it. They said that DOD is currently developing a formal training program for

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resource sharing and that they also plan to provide military treatment

facility commanders with a new computer-based analytical tool to enable

them to determine the potential effects of resource-sharing agreements.

There is, however, a more direct, less confusing means to accomplish

contractor support of direct care in military facilities. Using a different

program called task order resource support, military facility commanders

can contract separately with the managed care support contractor for

particular resources to augment their direct care capabilities. DOD officials

told us that, in the past, very little resource support has taken place

because hospital commanders did not have the level of control over

CHAMPUS funds they needed to enter into these agreements. Now, however,

DOD has proposed an alternative financing mechanism for the managed

care support contracts. If adopted, this financing method would give

facility commanders more control of CHAMPUS funds along with their direct

care funds and, therefore, more flexibility to enter into resource support

agreements. With this flexibility, DOD managers would be able to directly

buy the services they need to avoid sending some patients out of their

hospitals for needed care. This may have the effect of reducing the need to

negotiate the more complex resource-sharing agreements while still

making the most of contractor support of military facility capabilities.

DOD’s alternative financing approach is still being developed, however, so

its eventual impact on contractor support of military direct care

capabilities is still unclear.

Implementation of

Utilization Management

Delayed

DOD estimated that utilization management in its facilities could save over

$480 million nationwide over 5 years. However, DOD and the contractor

were not ready to perform this function at the start of health care delivery

in the Northwest and Southwest Regions as planned. Therefore, the full

extent of TRICARE savings from utilization management may not be

realized.

Utilization management is intended to ensure that beneficiaries receive

necessary and appropriate care in the most cost-effective manner. For

example, utilization management reviews would verify that hospital

admissions are medically necessary before patients check in or that

lengths of hospital stays are not excessive. Utilization management also

includes case management, which involves assigning health care providers

to manage care for patients with high-cost, chronic conditions (such as

diabetes or asthma) to try to avoid costly and disruptive crises that lead to

emergency room visits or unscheduled hospital admissions.

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Utilization management can be done internally by the military facilities, or

the contract can be written so that the contractor is required to perform

this function. In the Southwest Region, where the contractor is

responsible for utilization management, regional officials have expressed

dissatisfaction with the contractor’s performance of utilization

management activities and have withheld partial contract payments until

the contractor’s performance improves. Because the contractor has hired

additional utilization management staff, both DOD and the contractor

believe the situation will be resolved soon. The Northwest Region’s

utilization management program, which is handled by the military, was not

implemented for over 5 months, but it is now under way.

DOD Is Identifying

Performance

Measures but Is Not

Collecting Certain

Needed Data

Because of TRICARE’s newness, size, and complexity, appropriate and

effective information management has become increasingly important.

During early TRICARE implementation, DOD did not define performance

measures to evaluate how well it is meeting its goals, but DOD is now

defining such measures at the national and regional levels. However, some

data needed to evaluate the program are not being captured.

DOD Is Defining

Performance Measures

Before TRICARE’s implementation, DOD had not defined performance

measures needed to monitor and evaluate all major aspects of health care

delivery at both the regional and national levels. During implementation,

the regional officials quickly recognized the importance of having such

measures for evaluating achievement of regional and national TRICARE

goals, and for providing a good information base for management

decisions. Thus, the regions have begun creating their own sets of

measures to assess the efficiency and effectiveness of the delivery of

health care services in the region. These measures will be used in an

ongoing evaluation of customer services, including patient satisfaction,

and clinical services, including inpatient and outpatient care, disease

prevention and health screening, disease management, enrollee health,

and population health management.

DOD is separately developing a set of performance measures to be used at

the headquarters level to monitor various aspects of health care delivery

across the regions, such as TRICARE Prime enrollment and preventable

admissions. DOD officials said the identification of performance measures

will be a continuing effort for all health care stakeholders as DOD’s needs

change throughout TRICARE implementation. However, the

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appropriateness and effectiveness of these performance measures remain

to be seen.

Beneficiary Access Data

Not Being Captured

Currently, neither DOD nor the contractors are tracking access data to

ensure that they are meeting DOD’s standards for access to primary care

services.8

 However, these data are needed to enable the Congress and DOD

to measure TRICARE’s performance against this key system goal.

Access to care relates to a patient’s ability to get the appropriate level of

health care in a timely manner. Timely access to military health care has

long been a major source of beneficiary dissatisfaction. To improve

performance in this area, DOD established primary care access standards in

their 1994 TRICARE Policy Guidelines. These standards apply to both

military and civilian providers and address areas such as wait times for

appointments and the availability of emergency services. The following are

DOD’s current access standards for maximum appointment wait times:

• 4 weeks for a well visit, which is nonurgent care for health maintenance

and prevention;

• 1 week for a routine visit, which is nonurgent care requiring a health care

provider; and

• 1 day for acute illness care, which is urgent care requiring a health care

provider.

DOD collects some access data through an annual beneficiary satisfaction

survey. The DOD survey contains 25 questions that look at how easily

beneficiaries entered the health care system and whether they received the

care they believed was necessary. Types of questions include where care

was received, types of preventive services received, the number of calls

made for an appointment, usual length of time between scheduling the

appointment and seeing a provider, usual length of wait in the provider’s

office, approximate travel time from residence to provider’s office, and

beneficiaries’ general level of satisfaction with access to care.

Although important, these survey data are based on beneficiaries’

perceptions generalized over a 12-month period and do not measure DOD’s

actual performance against its newly established standards. DOD could

collect the access data needed to measure its performance at the time

beneficiaries schedule their primary care appointments. According to lead

8

Primary care is the entry point to the military health care system that includes a variety of basic

services and may lead to referrals for specialty care.

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agent and Health Affairs officials, they are currently not doing so because

DOD’s patient appointment and scheduling system, as configured, does not

capture this information. DOD officials told us that the needed access data

could likely be gathered by modifying the DOD appointment and scheduling

system to capture precise waiting time information while still

complementing these empirical data with the annual survey data.

DOD Is Not Defining and

Measuring How Many

Former Nonusers Have

Enrolled

DOD also is not collecting the enrollment data needed to identify eligible

beneficiaries who enroll in TRICARE but have not previously been users

of the military health care system. Identifying beneficiaries attracted to

military care by the TRICARE program is crucial to DOD’s ability to contain

health care costs because, as the Congressional Budget Office estimates,

this population accounts for about 25 percent of DOD’s 8.3 million

beneficiaries. Each of these current nonusers who chooses TRICARE

Prime adds to the overall cost of military health care.

Although DOD believes that the impact of such enrollment will be lessened

because of the annual enrollment fee and through targeted marketing to

current system users, DOD officials told us that TRICARE Prime’s generous

benefits9

 will entice some nonusers to enroll, and that data on such

enrollment are needed. However, DOD has not yet developed a definition

that will enable it to identify these enrollees. DOD officials at both the

national and regional levels told us that defining the various types of

former nonusers, though necessary, is difficult because beneficiaries rely

on the military health care system in varying degrees. For example, some

beneficiaries have other health insurance but continue to use the military

pharmacies. Also, some beneficiaries may begin to use military health care

for reasons other than the TRICARE reforms, such as the loss of other

health insurance.

Once DOD has a working definition of this population of former nonusers, it

can seek to ensure that appropriate data are being captured to identify

these beneficiaries. DOD officials told us that the collection of such data

should be done through a set of questions consistently administered to

enrollees across the regions. By gathering this information, DOD could

better evaluate the impact of this enrollment on TRICARE’s costs.

Ultimately, DOD needs these data to reassess TRICARE’s cost-sharing

9

The Joint Chiefs of Staff endorsed this benefits package as the best option for the beneficiaries.

Because all estimates related to the savings of any HMO option contain a degree of uncertainty, they

recommended that the fee structure be reviewed in the future. They urged that this review be based

upon data rather than conjecture.

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structure as it works to contain overall health care costs while maintaining

fees for beneficiaries that are neither too high nor too low.

Conclusions Despite initial beneficiary confusion caused by marketing and education

problems, as well as problems with computer systems’ compatibility, early

implementation of TRICARE is progressing consistent with congressional

and DOD goals. However, the success of DOD’s current efforts to address the

implementation of resource-sharing agreements and utilization

management is critical to containing health care costs. DOD also needs to

gather certain enrollment and performance data so that it and the

Congress can assess TRICARE’s success in the future.

Recommendations We recommend that the Secretary of Defense direct the Assistant

Secretary of Defense for Health Affairs to

• collect data on the timeliness of appointments in order to measure

TRICARE’s performance in improving beneficiary access against DOD’s

standards and

• assess the impact of new beneficiaries who would not be using military

health care if not for TRICARE, by defining these new users, identifying

them, and estimating the cost implications of their use of military health

care.

Agency Comments

and Our Evaluation

In a letter dated May 15, 1996, commenting on a draft of this report, the

Director of TRICARE Operations Policy wrote that DOD fully agreed with

the report and with both of our recommendations. Regarding our

recommendation concerning DOD’s need to collect data on the timeliness

of appointments, the Director said that DOD already identifies the time

between when an appointment is made and the actual appointment.

However, in order to gather access data more precisely and completely,

DOD plans to make computer system modifications during fiscal year 1997.

The Director also wrote that DOD strongly believes that access data should

continue to be collected through surveys of beneficiaries. As stated in the

report, we agree that both types of access-to-care information are

important. We believe that DOD’s plans for collecting access data, if

implemented properly, should be sufficient to measure TRICARE’s

success against DOD’s standards.

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Regarding our recommendation that DOD assess the cost implications of

TRICARE enrollment by beneficiaries who would not otherwise be using

military health care, the Director commented that DOD has taken several

steps to minimize such enrollments, including designing TRICARE’s

cost-sharing structure and targeting marketing to current military medical

system users. While we agree that cost sharing and enrollment targeting

will deter some from enrolling in TRICARE, the program is still attractive

to beneficiaries who would not otherwise be using military health care.

The Director also said that DOD is enhancing a computer information

system that will allow it to track the extent that enrollees have other

health insurance, which, in concert with the beneficiary survey data,

should help DOD assess the impact of beneficiaries who would not be using

military health care if not for TRICARE.

DOD officials also suggested several technical changes to the report that we

incorporated as appropriate.

We are sending copies of this report to the Secretary of Defense and will

make copies available to others upon request.

Please contact me at (202) 512-7111 or Dan Brier, Assistant Director, at

(202) 512-6803 if you or your staff have any questions concerning this

report. Other major contributors are Allan Richardson,

Evaluator-in-Charge, Bonnie Anderson, Sylvia Jones, and David Lewis.

Stephen P. Backhus

Associate Director, Health Care

 Delivery and Quality Issues

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Appendix I 

Background on TRICARE

TRICARE is intended to ensure a high-quality, consistent health care

benefit, preserve choice of health care providers for beneficiaries, improve

access to care, and contain health care costs. TRICARE features a

triple-option benefit. The first option, TRICARE Standard, mirrors the

current fee-for-service CHAMPUS program. The second option is TRICARE

Extra, a preferred provider option through which beneficiaries receive a

5-percent discount on the Standard option when they choose among a

specified network of providers. The third option, TRICARE Prime,

represents the greatest change to defense health care delivery. TRICARE

Prime is an HMO alternative and is the only option that requires

beneficiaries to enroll.

To implement and administer the TRICARE program, DOD has reorganized

the military health care system into 12 new, joint-service regions. DOD

created the position of lead agent for each region to coordinate among the

three services and the contractor and to monitor the delivery of health

care. The lead agent is a designated military medical facility commander

supported by a joint-service staff. Table I.1 presents information on the 12

TRICARE regions, including the designated lead agents, the states

included in the regional boundaries, and the number of military medical

facilities in each region.

Page 18 GAO/HEHS-96-128 TRICARE Implementation Issues
Appendix I 

Background on TRICARE

Table I.1: Profile of the 12 TRICARE Regions

Region Lead agent States in region

Military medical

facilitiesa

1—Northeast National Capital

(Bethesda, Walter Reed, and

Malcolm Grow Medical Centers)

Connecticut, Delaware, District of

Columbia, Maine, Maryland,

Massachusetts, New Hampshire, New

Jersey, New York, Pennsylvania, Rhode

Island, Vermont, and Northern Virginia 10

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

3—Southeast Eisenhower Army

Medical Center

Georgia, South Carolina, and parts of

Florida 12

4—Gulf South Keesler Air Force

Medical Center

Alabama, Mississippi, Tennessee, and

parts of Louisiana and Florida

9

5—Heartland Wright-Patterson Air Force

Medical Center

Illinois, Indiana, Kentucky, Michigan, Ohio,

West Virginia, and Wisconsin 5

6—Southwest Wilford Hall Air Force Medical

Center

Arkansas, Oklahoma, and parts of

Louisiana and Texas 13

7—Desert States William Beaumont Army Medical

Center

Arizona, Nevada, New Mexico, and parts

of Texas 8

8—North Central Evans Army Community Hospital Colorado, Iowa, Kansas, Minnesota,

Missouri, Montana, Nebraska, North

Dakota, South Dakota, Utah, Wyoming,

and parts of Idaho 13

9—Region Nine San Diego Naval Hospital Southern California 6

10—Golden Gate David Grant Air Force Medical

Center

Northern California

3

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

12—Hawaii-Pacific Tripler Army Medical Center Hawaii 1

Total 91

aThese numbers represent military medical centers and community hospitals. Military outpatient

clinics and facilities scheduled for closure are not included.

TRICARE uses contracted civilian health care providers to supplement the

care provided by the defense health care system on a regional basis—a

significant feature maintained from earlier demonstration programs. The

managed care support contractors’ responsibilities include developing

networks of civilian providers, locating providers for beneficiaries,

performing utilization management functions, processing claims, and

providing beneficiary support functions. Seven contracts will be awarded

to civilian health care companies covering the 12 TRICARE health care

regions. Table I.2 describes the status of contract awards and start dates

for health care delivery.

Page 19 GAO/HEHS-96-128 TRICARE Implementation Issues
Appendix I 

Background on TRICARE

Table I.2: TRICARE Implementation

Status

Regions Lead agents Contract status

Health care

delivery start

date

Northwest Madigan Awarded to Foundation

Health Federal Services,

Inc., September 1994,

for $475 million

March 1995

Region Nine,

Golden Gate, and

Hawaii-Pacific

San Diego,

David Grant,

Tripler

Awarded to Foundation

Health Federal Services,

Inc., September 1995,

for $2.5 billion

October 1995a

Southwest Wilford Hall Awarded to Foundation

Health Federal Services,

Inc., April 1995, for

$1.8 billion

November 1995

Southeast and

Gulf South

Eisenhower,

Keesler

Awarded to Humana

Military Healthcare

Services, November

1995, for $3.8 billion

July 1996

Desert States and

North Central

William Beaumont,

Evans

Award date scheduled

for third quarter 1996

February 1997

Northeast National Capital Award date scheduled

for first quarter 1997

September 1997

Mid-Atlantic and

Heartland

Portsmouth,

Wright-Patterson

Award date scheduled

for first quarter 1997

September 1997

aFoundation will not begin delivering care until April 1996 as a result of bid protest decisions. In

the interim, all care will be delivered by Aetna, the previous managed care support contractor for

the demonstration project in the California-Hawaii regions.

Between the contract award date and the health care delivery start date is

a 6- to 8-month transition period for both DOD and the contractor. During

this time, the contractor performs tasks such as the establishment of

provider networks and beneficiary support functions. Both the contractor

and DOD begin some early marketing and education of beneficiaries and

providers. Enrollment of all eligible non-active duty beneficiaries begins

either during the transition phase or at the start of health care delivery.

(101478) Page 20 GAO/HEHS-96-128 TRICARE Implementation Issues
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