Medicare Subvention Demonstration: Greater Access Improved Enrollee Satisfaction but Raised DOD Costs
Released: 2001-10-31T00:00:00

Letter

Background

DOD’s health system, TRICARE, currently offers health care coverage to approximately 6.6 million active duty and retired military personnel under age 65 and their dependents and survivors. An additional 1.5 million retirees aged 65 and over can obtain care when space is available. TRICARE offers three health plans: TRICARE Standard, a fee-for-service plan; TRICARE Extra, a preferred provider plan; and TRICARE Prime, a managed care plan. In addition, TRICARE offers prescription drugs at no cost from MTF pharmacies and, with co-payments, from retail pharmacies and DOD’s National Mail Order Pharmacy.

Retirees have access to all of TRICARE’s health plans and benefits until they turn 65 and become eligible for Medicare. Subsequently, they can only use military health care on a space-available basis, that is, when MTFs have unused capacity after caring for higher priority beneficiaries. However, MTF capacity varies from a full range of services at major medical centers to limited outpatient care at small clinics. Moreover, the amount of space available in the military health system has decreased during the last decade with the end of the Cold War and subsequent downsizing of military bases and MTFs. Recent moves to contain costs by relying more on military care and less on civilian providers under contract to DOD have also contributed to the decrease in space-available care.

Although some retirees age 65 and over rely heavily on military facilities for their health care, most do not, and over 60 percent do not use military health care facilities at all. In addition to using DOD resources, retirees may receive care paid for by Medicare and other public or private insurance for which they are eligible. However, they cannot use their Medicare benefits at MTFs, and Medicare is generally prohibited by law from paying DOD for health care.

Medicare

Medicare is a federally financed health insurance program for persons age 65 and over, some people with disabilities, and people with end-stage kidney disease. Eligible beneficiaries are automatically covered by part A, which covers inpatient hospital, skilled nursing facility, and hospice care, as well as home health care that follows a stay in a hospital or skilled nursing facility. They also can pay a monthly premium to join part B, which covers physician and outpatient services as well as those home health services not covered under part A. Traditional Medicare allows beneficiaries to choose any provider that accepts Medicare payment and requires beneficiaries to pay for part of their care. Most beneficiaries have supplemental coverage that reimburses them for many costs not covered by Medicare. Major sources of this coverage include employer-sponsored health insurance; “Medigap” policies, sold by private insurers to individuals; and Medicaid, a joint federal-state program that finances health care for low-income people.

The alternative to traditional Medicare, Medicare+Choice, offers beneficiaries the option of enrolling in managed care or other private health plans. All Medicare+Choice plans cover basic Medicare benefits, and many also cover additional benefits such as prescription drugs. Typically, these plans have limited cost sharing but restrict members’ choice of providers and may require an additional monthly premium.

The Subvention Demonstration

Under the Medicare subvention demonstration, DOD established and operated Medicare+Choice managed care plans, called TRICARE Senior Prime, at six sites. Enrollment in Senior Prime was open to military retirees enrolled in Medicare part A and part B who resided within the plan’s service area. About 125,000 dual eligibles (military retirees who were also eligible for Medicare) lived in the 40-mile service areas of the six sites—about one-fifth of all dual eligibles nationwide living within an MTF’s service area. DOD capped enrollment at about 28,000 for the demonstration as a whole. Over 26,000 enrolled—about 94 percent of the cap. In addition, retirees enrolled in TRICARE Prime could “age in” to Senior Prime upon reaching age 65, even if the cap had been reached, and about 6,800 did so. Beneficiaries enrolled in the program paid the Medicare part B premium, but no additional premium to DOD. Under Senior Prime, all primary care was provided at MTFs, although DOD purchased some hospital and specialty care from its network of civilian providers. Senior Prime enrollees received the same priority for care at the MTFs as younger retirees enrolled in TRICARE Prime. Care at the MTFs was free of charge for enrollees, but they had to pay any applicable cost-sharing amounts for care in the civilian network (for example, $12 for an office visit).

The demonstration authorized Medicare to pay DOD for Medicare-covered health care services provided to retirees at an MTF or through private providers under contract to DOD. As established in the BBA, capitation rates—fixed monthly payments for each enrollee—for the demonstration were discounted from what Medicare would pay private managed care plans in the same areas. However, to receive payment, DOD had to spend at least as much of its own funds in serving this dual-eligible population as it had in the recent past.

The six demonstration sites are each in a different TRICARE region and include 10 MTFs that vary in size and types of services offered. (See table 1.) The five MTFs that are medical centers offer a wide range of inpatient services and specialty care as well as primary care. They accounted for over 75 percent of all enrollees in the demonstration, and the two San Antonio medical centers had 38 percent of all enrollees. MTFs that are community hospitals are smaller, have more limited capabilities, and could accommodate fewer Senior Prime enrollees. At these smaller facilities, the civilian network provides much of the specialty care. At Dover, the MTF is a clinic that offers only outpatient services, thus requiring all inpatient and specialty care to be obtained at another MTF or purchased from the civilian network.

Senior Prime Enrollees Got More Care While Some Nonenrollees Were Crowded Out of MTFs

Compared with their access to care before the demonstration, many enrollees reported that their access to care overall—their ability to get care when they needed it—had improved. They reported better access to MTFs as well as to doctors. Although at the start of the demonstration enrollees had reported poorer access to care than nonenrollees, by the end of the demonstration about 90 percent of both groups said that they could get care when they needed it. Enrollees’ own views are supported by administrative data: they got more care than they had received from Medicare and DOD combined before the demonstration. However, most nonenrollees who had relied on MTFs before the demonstration were no longer able to rely on military health care.

Enrollees Obtained More Health Care Than Before the Demonstration

Most enrollees reported that their ability to get care when they needed it was not changed by the demonstration, but those who did report a change were more likely to say that their access to care—whether at MTFs or from the civilian network—had improved. (See table 2.)

When asked specifically about their access to MTF care, those who had not used MTFs in the past reported the greatest improvement. (See figure 1.)

About one-third of all enrollees said that their access to physicians had improved, and a significantly smaller fraction said that it had declined. For example, 32 percent of enrollees said that, under the demonstration, their primary care doctor’s office hours were more convenient, while 20 percent said they were less so. Similarly, enrollees said that they did not have to wait too long to get an appointment with a doctor and, once they reached the office, their doctor saw them more promptly. (See table 3.)

For two aspects of access, however, Senior Prime enrollees’ experience was mixed. TRICARE has established standards for the maximum amount of time that should elapse in different situations between making an appointment and seeing a doctor: 1 month for a well-patient visit, 1 day for an urgent care visit, and 1 week for routine visits. According to TRICARE policy, MTFs should meet these standards 90 percent of the time. While Senior Prime met the standards for the time it took to get an appointment and see a doctor for well-patient visits (like a physical), it fell slightly short of the standard for urgent care visits (such as for an acute injury or illness like a broken arm or shortness of breath) and, more markedly, for routine visits (such as for minor injuries or illnesses like a cold or sore throat). (See table 4.)

When asked about their ability to choose their own primary care doctors, enrollees were somewhat more likely to say that it was more difficult than before the demonstration. This is not surprising, in view of the fact that Senior Prime assigned a primary care doctor (or nurse) to each enrollee. However, regarding specialists, enrollees said that their choice of doctors had improved.

Enrollees reported fewer financial barriers to access under Senior Prime. They said that their out-of-pocket spending decreased and was more reasonable than before. By the demonstration’s end, nearly two-thirds said that they had no out-of-pocket costs. Even at the smaller demonstration sites, where care from the civilian network, which required co-payments, was more common, about half of enrollees said they had no out-of-pocket costs.

These enrollee reports of better access under Senior Prime are largely supported by DOD and Medicare administrative data. Enrollees received more services from Senior Prime than they had obtained before the demonstration from MTFs and Medicare combined. Specifically, their use of physicians increased from an average 12 physician visits per year before enrolling in Senior Prime to 16 visits per year after enrollment, and the number of hospital stays per person also increased by 19 percent.

Enrollees’ use of services not only increased under Senior Prime—as did other measures of access to care—but exceeded the average level in the broader community. Enrollees used significantly more care than their Medicare fee-for-service counterparts. These differences cannot be explained by either age or health—enrollees were generally younger and healthier. Adjusted for demographics and health conditions, physician visits were 58 percent more frequent for Senior Prime enrollees than for their Medicare counterparts, and hospital stays were 41 percent more frequent. Nonetheless, enrollees’ hospital stays—adjusted for demographics and health conditions—were about 4 percent shorter.

We found three probable explanations for enrollees’ greater use of hospital and outpatient care: Lower cost-sharing. Research confirms the commonsense view that patients use more care if it is free. Whereas in traditional Medicare the beneficiary must pay part of the cost of care—for example, 20 percent of the cost of an outpatient visit—in Senior Prime all primary care and most specialty care is free.

Lack of strong incentives to limit utilization. Although MTFs generally tried to restrain inappropriate utilization, they did not have strong financial incentives to do so. MTFs cannot spend more than their budget, but space-available care acts as a safety valve: that is, when costs appear likely to exceed funding, space-available care can be reduced while care to Senior Prime enrollees remains unaffected. MTFs also had no direct incentive to limit the use of purchased care, which is funded centrally, and the managed care contractors also lacked an incentive, since they were not at financial risk for Senior Prime.

Practice styles. Military physicians’ training and experience, as well as the practice styles of their colleagues, also affect their readiness to hospitalize patients as well as their recommendations to patients about follow-up visits and referrals to specialists. Studies have shown that the military health system has higher utilization than the private sector. Given that military physicians tend to spend their careers in the military with relatively little exposure to civilian health care’s incentives and practices, it is not surprising that these patterns of high use would persist.

Some Nonenrollees Could No Longer Use MTFs

Although nonenrollees generally were not affected by the demonstration, the minority who had been using space-available MTF care were affected because space-available care declined. This decline is shown in our survey results, and is confirmed by DOD’s estimate of the cost of space-available care, which decreased from $183 million in 1996 to $72 million in 1999, the first full year of the demonstration. However, for most nonenrollees, this decline was not an issue, because they did not use MTFs either before or during the demonstration. Furthermore, of those who depended on MTFs for all or most of their care before the demonstration, most enrolled in Senior Prime, thereby assuring their continued access to care. (See figure 2.)

Since there was less space-available care than in the past, many of those who had previously used MTFs and did not enroll in Senior Prime were “crowded-out.” Crowd-out varied considerably, depending both on the types of services that nonenrollees needed and the types of physicians and space available at MTFs. Nonenrollees who required certain services were crowded out while others at the same MTF continued to receive care. We focus on nonenrollees who experienced a sharp decline in MTF care: those who said they had received most or all of their care at MTFs before the demonstration but got no care or only some care at MTFs during the demonstration.

Of those nonenrollees who had previously depended on MTFs for their care, over 60 percent (about 4,600 people) were crowded out. (See figure 3.)

The small number of nonenrollees—10 percent of the total—that had depended on MTFs for their care before the demonstration limited crowd- out. (See figure 4.) Consequently, only a small proportion of all nonenrollees—about 6 percent—was crowded out. Somewhat surprisingly, a small number of nonenrollees who had not previously used MTFs began obtaining all or most of their care at MTFs.

Although Medicare fee-for-service care increased for those who were crowded out of MTF care, the increase in Medicare outpatient care was not nearly large enough to compensate for the loss of MTF care. (See figure 5.) Retirees who were crowded out had somewhat lower incomes than other nonenrollees and were also less likely to have supplemental insurance, suggesting that some of them may have found it difficult to cover Medicare out-of-pocket costs. By the end of the initial demonstration period, less than half of all nonenrollees said they were able to get care at MTFs when they needed it, a modest decline from before the demonstration.

Improved Enrollee Access Resulted In Higher Patient Satisfaction but Costs for DOD Were High

Enrollees’ improved access to care had both positive and negative consequences. Many enrollees in Senior Prime reported that they were more satisfied with nearly all aspects of their care. Some results were neutral: enrollees’ self-reported health status did not change and health outcomes, such as mortality and preventable hospitalizations, were no better than those achieved by nonenrolled military retirees. However, enrollees’ heavy use of health services resulted in high per-person costs for DOD compared to costs of other Medicare beneficiaries.

Enrollee Satisfaction Improved

Satisfaction with almost all aspects of care increased for enrollees. Moreover, by the end of the demonstration, their satisfaction was generally as high as that of nonenrollees.

Patients’ sense of satisfaction or dissatisfaction with their physicians reflects in part their perceptions of their physicians’ clinical and communication skills. Under Senior Prime, many enrollees reported greater satisfaction with both their primary care physicians and specialists. Specifically, enrollees reported greater satisfaction with their physicians’ competence and ability to communicate—to listen, explain, and answer questions, and to coordinate with other physicians about patients’ care. (See table 5.)

Demonstration Did Not Affect Health Outcomes

Senior Prime did not appear to influence three key measures of health outcomes—the mortality rate, self-reported health status, and preventable hospitalizations.

Mortality rate. Although there were slightly more deaths among nonenrollees, the difference between enrollees and nonenrollees disappears when we adjust for retirees’ age and their health conditions at the start of the demonstration.

Health status. We also found that Senior Prime did not produce any improvement in enrollees’ self-reported health status. We base this on enrollees’ answers to our questions about different aspects of their health, including their ratings of their health in general and of specific areas, such as their ability to climb several flights of stairs. This finding is not surprising, given the relatively short time interval—an average of 19 months—between our two surveys. We also found that, like enrollees, nonenrollees did not experience a significant change in health status.

Preventable hospitalizations. The demonstration did not have a clear effect on preventable hospitalizations—those hospitalizations that experts say can often be avoided by appropriate outpatient care. Among patients who had been hospitalized for any reason, the rate of preventable hospitalizations was slightly higher for Senior Prime enrollees than for their Medicare fee-for-service counterparts. However, when all those with chronic diseases—whether hospitalized or not— were examined, the rate among Senior Prime enrollees was lower.

Access and High Utilization Resulted in High Costs for DOD

A less desirable consequence of enrollees’ access to care was its high cost for DOD. Under Senior Prime, DOD’s costs were significantly higher than Medicare fee-for-service costs for comparable patients and comparable benefits. These higher costs did not result from Senior Prime enrollees being sicker or older than Medicare beneficiaries. Instead, they resulted from heavier use of hospitals and, especially, greater use of doctors and other outpatient services. In other words, the increased ability of Senior Prime enrollees to see physicians and receive care translated directly into high DOD costs for the demonstration.

Concluding Observations

From the perspective of enrollees, Senior Prime was highly successful. Their satisfaction with nearly all aspects of their care increased, and by the end of the demonstration enrollees were in general as satisfied as nonenrollees, who largely used civilian care. However, enrollees’ utilization and the cost of their care to DOD were both higher. Although subvention is not expected to continue, the demonstration raises a larger issue for DOD: can it achieve the same high levels of patient satisfaction that it reached in Senior Prime while bringing its utilization and costs closer to the private sector’s?

Agency Comments

We provided DOD and CMS an opportunity to comment on a draft of this report, and both agencies provided written comments. DOD said that the report was accurate. It noted that the report did not compare Senior Prime enrollees’ utilization rates with those of Medicare+Choice plans and suggested that our comparison with fee-for-service might be misleading, because it did not take account of the richer benefit package offered by Senior Prime. DOD further stated that the utilization data should cover the full 3 years of the demonstration experience and that utilization might be higher during the initial phase of a new plan. Finally, DOD stated that access and satisfaction for TRICARE Prime enrollees were adversely affected by the demonstration. CMS agreed with the report’s findings and suggested that higher quality of care might be an explanation for Senior Prime enrollees’ higher use of services. (DOD and CMS comments appear in appendixes VI and VII.)

In comparing utilization rates with Medicare fee-for-service in the same areas, we chose a comparison group that would be expected to have higher utilization than Senior Prime or any other managed care plan. Fee-for- service beneficiaries can obtain care from any provider without restriction, whereas Medicare+Choice plans typically have some limitations on access. Consequently, the fact that Senior Prime utilization was substantially higher than fee-for-service utilization is striking. As mandated by law, our evaluation covers the initial demonstration period (through December 2000). We therefore did not attempt to obtain information on utilization during 2001 and, in any case, the lag in data reporting would have prevented our doing so. However, during the first 2 full years of the demonstration utilization declined slightly: outpatient visits in 2000 were 2 percent lower than in 1999. As we have reported elsewhere, site officials found little evidence that the demonstration affected TRICARE Prime enrollees’ satisfaction or access to care. Regarding the possible impact of quality of care on use of services, we examined several health outcome indicators and found no evidence of such an effect.

We are sending copies of this report to the Secretary of Defense and the Administrator of the Centers for Medicare and Medicaid Services. We will make copies available to others upon request.

If you or your staffs have questions about this report, please contact me at (202) 512-7114. Other GAO contacts and staff acknowledgments are listed in appendix VIII.

Health Care Survey of Subvention Demonstration Beneficiaries

To address the questions Congress asked about Medicare subvention, we fielded a mail survey of military retirees and their family members who were eligible for the subvention demonstration. The survey had two interlocking components: a panel of enrollees and nonenrollees, who were surveyed both at the beginning and the end of the demonstration, and two cross sections or snapshots of enrollees and nonenrollees—one taken at the beginning of the demonstration and the other at the end.

Panel Study

To assess those questions that involved change over time, we sampled and surveyed by mail enrollees and nonenrollees, stratified by site, at the beginning of the demonstration. These same respondents were resurveyed from September through December 2000, shortly before the demonstration’s initial period ended. Because a prior report describes our initial survey, this appendix focuses on our second survey.

Sample Design

To conduct the second round of data collection, we began with 15,223 respondents from the first round of surveys. To be included in the panel, three criteria had to be met: (1) the person must still be alive, (2) the person must still reside in an official demonstration area, and (3) the person must have maintained the same enrollment status, that is, enrolled or not enrolled. Based on these criteria we mailed 13,332 surveys to our panel sample of enrollees and nonenrollees.

Response Rates

Starting with a sample of 13,332 retirees and their family members, we obtained usable questionnaires from 11,986 people, an overall response rate of 91 percent. (See table 6, which also shows the adjustments to the initial sample and to the estimated population size. See table 7 for the reasons for nonresponse.)

Cross Section Study

To enable comparisons between enrollees and nonenrollees at the end of the demonstration, the second survey was augmented to include persons who had enrolled since the first survey as well as additional nonenrollees. The overall composition of the Senior Prime enrollee population had changed from the time of our first survey. When we drew our second sample in July 2000, 36 percent of all enrollees were new—that is, they had enrolled since our first survey—and over two-fifths of them were age-ins who had turned 65 since the demonstration started. From the time of our first survey to the time of our second survey, only 861 people had disenrolled from Senior Prime. Therefore, we surveyed all voluntary disenrollees. Data from all respondents—those we surveyed for the first time as well as those in the panel—were weighted, to yield a representative sample of the demonstration population at the end of the program.

Sample Design

The sample for the cross section study included the panel sample as well as the augmented populations. We defined our population as all Medicare- eligible military retirees living in the demonstration sites and eligible for Senior Prime. The sample of new enrollees was drawn from all those enrolled in the demonstration according to the Iowa Foundation’s enrollment files. The supplemental sample of nonenrollees was drawn from all retirees age 65 and over in the Defense Enrollment Eligibility Reporting System who (1) had both Medicare part A and part B coverage, (2) lived within the official demonstration zip codes, (3) were not enrolled in Senior Prime, and (4) were not part of our first sample. We stratified our sample of new enrollees and new nonenrollees by site and by whether they aged in. We oversampled each stratum to have a large enough number to conduct analyses of subpopulations. The total sample for all sites was 23,967, drawn from a population of 117,618.

Response Rates

Starting with a sample of 23,967 retirees and their family members, we obtained complete and usable questionnaires from 20,870 people, an overall response rate of 88 percent. (See table 8, which also shows the adjustments to the initial sample and to the estimated population size. See table 9, which shows the reasons for nonresponse.) Response rates varied across sites and subpopulations. Rates ranged from 95.3 percent among aged-in new enrollees to 66.7 percent among disenrollees.

Questionnaire Design

The original questionnaire that was sent to our panel sample was created based on a review of the literature and five existing survey instruments. In addition, we pretested the instrument with several retiree groups. For the second round of data collection, we created four different versions of the questionnaire, based on the original questionnaire. The four versions were nearly the same, with some differences in the sections on Senior Prime and health insurance coverage. (See table 10 for a complete list of all the survey questions used in our analyses.)

For the panel sample, our objective was to collect the same data at two points in time. Therefore, in constructing the questionnaires for the panel enrollees and panel nonenrollees we essentially used the same instrument as the original survey to answer questions about the effect of the demonstration on access to care, quality of care, health care use, and out- of-pocket costs. However, we modified our questions about plan satisfaction and health insurance coverage.

In constructing the questionnaires for the new enrollees, we generally adopted the same questions in the panel enrollee instrument to measure access to care, quality of care, health care use, and out-of-pocket costs. However, we also asked the new enrollees about their health care experiences in the 12 months before they joined Senior Prime. For new nonenrollees, we were able to use the same instrument as we had used for the panel nonenrollees, because their health care experiences were not related to tenure in Senior Prime. Finally, the disenrollee questionnaire, like the other versions, did not change from the original instrument in the measures on access to care, quality of care, health care use, and out-of- pocket costs. However, we added questions on the reasons for disenrollment.

Measures of Access to Care And Satisfaction With Care

Measures of Change in Access and Satisfaction

To detect the effects the demonstration had on both enrollees’ and nonenrollees’ access to care and satisfaction with care, we compared the differences between survey responses at both points in time and among each demonstration site. For most questions, retirees were asked both before the demonstration and at the end of the demonstration how much they agreed or disagreed with each statement. They were given five possible answers: strongly agree, agree, neither agree nor disagree, disagree, and strongly disagree. To calculate change, responses were assigned a numeric value on a five-point scale, with five being the highest and one being the lowest. To properly quantify the response, some scales had to be reversed. Where necessary, questions were rescaled so that “agree” represents a positive answer and “disagree” a negative answer. To obtain a measure of change, the value of the response from the first survey was subtracted from the value of the response from the second survey. A positive value indicates improvement, a negative value indicates decline. The net improvement is calculated as the difference between the proportion of respondents within each sample population who improved and the proportion of those who declined.

Four separate significance tests were performed. (See table 11.) The first test was for net improvement (the difference between improved and declined) among enrollees. The second test was for net improvement among nonenrollees. The third test was for the difference of net improvement between enrollees and nonenrollees. Finally, we tested whether the net improvement for each site is significantly different from the net improvement of the other sites. (See tables 11 and 12.)

Measures of Access and Satisfaction at the End of the Demonstration

In addition to the change of access and quality among enrollees and nonenrollees, we also examined the level of access and quality at the time of the second survey among the cross section sample. (See table 12.)

Three separate significance tests were performed. The first test of significance was between enrollees and nonenrollees who said they strongly agreed with each statement. The second test of significance was between enrollees and nonenrollees who said they either strongly agreed or agreed with each statement. The final test was whether the site percentage differs significantly from the overall percentage.

Models of Utilization

In this appendix, we describe the DOD and Medicare data that we used to analyze utilization. We also summarize the models that we developed to risk adjust acute inpatient care and outpatient care and give results both demonstration wide and by site.

Data

For these analyses, we defined the Senior Prime enrollee population as those who had enrolled as of December 31, 1999. We used DOD data for 1999 as the source of our counts of hospital stays and outpatient visits to both MTF and civilian network providers. We limited our analysis to hospital stays of 1 day or more to eliminate inconsistencies between Medicare and TRICARE in the use of same-day discharges. Our counts of outpatient utilization include (1) visits and ambulatory surgeries in MTF outpatient clinics and (2) visits to network providers— doctors’ offices, ambulatory surgeries, hospital emergency rooms, and hospital outpatient clinics.

To identify our comparison group of fee-for-service beneficiaries in the demonstration areas, we used CMS’ 20-percent Medicare sample, and extracted those beneficiaries residing in the subvention areas. We excluded anyone who had been in a Medicare+Choice plan for any part of the year. To make the comparison fair, we also excluded certain groups not represented or only minimally represented in Senior Prime: persons with end-stage renal disease (ESRD), Medicaid beneficiaries, persons with disabilities (under age 65), and people who lost Medicare part A or part B entitlement for reasons other than death. We derived our counts of Medicare fee-for-service utilization for the sample from Medicare claims files. For those who were in either Senior Prime or fee-for-service for less than a full year, we estimated full-year utilization counts.

We identified a separate comparison group of persons eligible for the demonstration who did not enroll. We collected both Medicare fee-for- service claims and DOD encounter data for the sample of enrollees and nonenrollees who answered both our first and second surveys.

Models of Risk- Adjusted Utilization

In order to compare the utilization of Senior Prime enrollees to Medicare fee-for-service beneficiaries in the demonstration areas, we developed several models of fee-for-service utilization (for hospitalization, length of stay, and outpatient care). We then applied each model to Senior Prime enrollees—taking account of their demographic characteristics and health status—to predict what their utilization would have been in Medicare fee- for-service. The ratio of their predicted utilization to their actual Senior Prime utilization gives a measure of the amount by which Senior Prime utilization exceeded or fell short of fee-for-service utilization for people with the enrollees’ characteristics. Table 13 compares the characteristics of Senior Prime enrollees with Medicare fee-for-service beneficiaries in the demonstration area.

Acute Hospitalization Model

Acute hospitalization is a relatively rare event: only one out of five Medicare beneficiaries (in the counterpart 20-percent fee-for-service sample) is hospitalized during the year, and about half of those who are hospitalized are admitted again during the same year. We therefore used Poisson regression, which is designed to predict the number of occurrences (counts) of a rare event during a fixed time frame, to estimate the number of acute hospitalizations. Positive coefficients are interpreted as reflecting factors that increase the hospitalization rate while negative coefficients indicate a decrease in that rate. The strongest factor affecting the number of hospitalizations is the HCC score, which measures how ill and how costly a person is. Its effect is not linear—both squared and cubed terms enter the model. (See table 14.)

Outpatient Physician Visit Model

Diagnostic groupings are based on the International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM).

Endocrine, nutritional, and metabolic diseases and immunity disorders Diseases of the nervous system and sense organs Diseases of the musculoskeletal system and connective tissue Supplementary classification (V01-V82)

Profile of Sites’ Utilization and Risk Factors

Using the same approach and models, we examined utilization at each site. (See table 16.) Adjusting for risk, both hospital stays and outpatient visits were substantially greater in Senior Prime than in fee-for-service at all sites. However, the differences in length of stay were small, with lengths of stay generally higher in fee-for-service.

Crowd-Out of Nonenrollees

“Crowd-outs” were nonenrollees who had used MTF care before the demonstration but were unable to do so after the demonstration started. In this report, we define crowd-outs as those 4,594 nonenrollees (6 percent of all nonenrollees) who had, according to their survey answers, received all or most of their care at an MTF before the demonstration but received none or only some of their care at an MTF after the demonstration started.

However, as table 17 shows, crowd-out can be defined either more narrowly or more broadly. By the narrowest definition of crowd-out— those nonenrollees who received all of their care at an MTF before the demonstration but none of their care at an MTF after the demonstration started—only 1,498 persons (2 percent of all nonenrollees) were crowded out. However, if we count all those who received less care than before, 12,133 (16 percent of nonenrollees) nonenrollees were crowded out.

Change in Satisfaction With Access to Military Care Among Crowd- Outs

As expected, many of the 4,594 nonenrollees whom we characterized as crowd-outs changed their attitudes toward military care during the demonstration. As shown in table 18, they reported a decline in access to MTF care as well as lower satisfaction with care in MTFs. However, they did not report significant changes in satisfaction on issues not explicitly connected to MTFs.

Trend in Utilization Among Crowd-Outs

DOD’s MTF encounter data and network claims data confirmed the self- reports of crowd-outs. The crowd-outs’ MTF outpatient care dropped dramatically during the demonstration and the increase in fee-for-service (FFS) outpatient visits was not sufficient to offset this decline. However, as shown in table 19, there was no decline in acute hospitalizations.

Health Outcomes Analysis

In this appendix, we describe our methods for analyzing the effects of the subvention demonstration on three indicators of health outcomes— mortality, health status, and preventable hospitalization.

Mortality Analysis

Using our first survey, we calculated the mortality rate from the date of the survey response to January 31, 2001. The source of death information was the Medicare Enrollment Database. We excluded Medicare+Choice members because we could not obtain their diagnoses, which we needed to calculate risk factors.

The unadjusted 2-year mortality rate was 0.06 for Senior Prime enrollees and 0.08 for nonenrollees. Although the difference is significant, it disappears when we adjust for individual risk. The adjusted 2-year mortality rate is 0.06 for both enrollees and nonenrollees. (See table 20.)

We used the Cox proportional hazard model to calculate individuals’ risk- adjusted mortality rate. A hazard ratio greater than 1 indicates a higher risk of death while a hazard ratio less than 1 indicates a lower risk. For example, a hazard rate for males of 1.5 means that males are 50 percent more likely to die than females, holding other factors constant. Similarly, a hazard rate of 0.5 for retirees with HCC scores in the lowest quartile means that they are 50 percent less likely to die than those with HCC scores in the middle two quartiles, holding other factors constant. Enrollment in Senior Prime did not have a significant effect on mortality. (See table 21 for a description of the factors that entered our model and of their estimated effects.)

Health Status Analysis

See Ware, J. E., Kosinski, M., and Keller, S. D., SF-12: How to Score the SF-12 Physical and Mental Health Summary Scales, The Health Institute, New England Medical Center, Second Edition, pp. 12-13.

The change in the score between the two times was also insignificant. We examined both the unadjusted score and the adjusted score, using a linear regression model (see table 23), but neither was significant, and enrollment in Senior Prime was not a significant factor in the model.

Preventable Hospitalizations

We analyzed preventable hospitalizations—hospital stays that can often be avoided by appropriate outpatient care—using several alternate models. Specifically, we estimated the effect of Senior Prime enrollment on the likelihood of having a preventable hospitalization, adjusting for age, sex, and health conditions. Measures of a person’s health conditions included the HCC score, an index of comorbidities, and the number of recent hospitalizations. In addition, we controlled for the number of outpatient clinic and physician visits, since outpatient care is considered a means of preventing hospitalization.

We analyzed data on Senior Prime enrollees and on Medicare fee-for- service beneficiaries who were not military retirees and who lived in the demonstration areas. Within this combined group of enrollees and fee-for- service beneficiaries, we modeled preventable hospitalizations for two populations: (1) those who had been hospitalized in 1999 and (2) those who had at least one chronic disease in 1999—whether they had been hospitalized or not.

Our analysis of the demonstration’s effect on preventable hospitalizations yielded inconsistent results. For the first population (hospitalizations), we found that Senior Prime enrollment was associated with more preventable hospitalizations. By contrast, for the second population (the chronically ill), Senior Prime enrollment was associated with fewer preventable hospitalizations.

Comments From the Department of Defense

Comments From the Centers for Medicare and Medicaid Services

GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments

Other GAO staff who made significant contributions to this work included Jessica Farb, Maria Kronenburg and Dae Park. Robin Burke provided technical advice and Martha Wood provided technical advice and assistance.

Related GAO Products

Medicare Subvention Demonstration: DOD Costs and Medicare Spending (GAO-02-67, Oct. 31, 2001).

Medicare Subvention Demonstration: DOD’s Pilot Appealed to Seniors, Underscored Management Complexities (GAO-01-671, June 14, 2001).

Medicare Subvention Demonstration: Enrollment in DOD Pilot Reflects Retiree Experiences and Local Markets (GAO/HEHS-00-35, Jan. 31, 2000).

Defense Health Care: Appointment Timeliness Goals Not Met; Measurement Tools Need Improvement (GAO/HEHS-99-168, Sept. 30, 1999).

Medicare Subvention Demonstration: DOD Start-up Overcame Obstacles, Yields Lessons, and Raises Issues (GAO/GGD/HEHS-99-161, Sept. 28, 1999).

Medicare Subvention Demonstration: DOD Data Limitations May Require Adjustments and Raise Broader Concerns (GAO/HEHS-99-39, May 28, 1999).

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