Dental care is a key component of the health care services provided by the military to active duty servicemembers, and a key benefit provided to those who are eligible to enroll for health care coverage through TRICARE. DHA’s TRICARE Dental Care Office administers and oversees the TRICARE dental care programs. The ADDP supplements the dental services available to active duty servicemembers through DTFs with the goal of maintaining readiness for deployment. Active duty servicemembers are required to have a dental examination annually, during which their dental readiness is assessed. Dental readiness is a prerequisite for deployment and must be maintained among servicemembers who have been deployed. Active duty servicemembers may obtain necessary dental care at no cost to them at a DTF or through the ADDP. The majority of active duty servicemembers’ dental care is provided in DTFs, which are staffed with general dentists and, in some cases, dental specialists. If a necessary service cannot be provided in a timely way through an accessible DTF, the servicemember may obtain dental care from a private dentist through the ADDP. To facilitate reasonable access to care, the ADDP includes a network of dental care providers throughout the United States and its territories. ADDP is not an insurance program, and active duty servicemembers do not pay premiums for their dental care, do not share in the costs of the care, and do not face any annual or lifetime maximums on the cost of that care. Prior to establishing the ADDP, DOD paid the full cost of necessary dental care provided to active duty servicemembers who were referred to private dentists, and the prices for such privately provided dental services were uncontrolled. By negotiating standard prices for dental services with a private insurance carrier, the ADDP was intended to contain the costs of providing necessary care to active duty servicemembers. The TDP is a dental insurance program that is available to dependents of active duty servicemembers, and to members of the National Guard and Reserve and their dependents.sharing premiums, certain procedure fees, and costs above annual and lifetime maximums. Enrollees’ share of premiums varies with the status of the enrollee. For example, DOD pays: Enrollees are responsible for cost- 100 percent of the premiums of survivors of active duty servicemembers who died while on active duty and to eligible dependents of certain Reserve members; Up to 60 percent of the premiums of the dependents of active duty service members and of certain Reserve members; and 0 percent of the premiums of certain Reserve members who are not on active duty and their dependents. The TRDP is a dental insurance program that is available to retired uniformed service members and their dependents. DOD does not contribute to paying the costs of this program. Enrollees are responsible for the full premium, any cost-sharing fees, and costs above the annual and lifetime maximums. For information about the contracts for these programs, see table 1. The acquisition process for DHA’s dental services contracts includes three main phases, each of which are governed by federal and department-level requirements. The phases include (1) acquisition planning, (2) RFP, and (3) award. (See fig. 1.) Acquisition Planning. Federal regulations require agencies to perform acquisition planning activities for all contracts to ensure that the government meets its needs in the most effective, economical, and timely manner possible. In the acquisition planning phase, DHA officials are to develop a strategy and plan to define and fulfill contract requirements in a timely manner and at a reasonable cost. Federal regulations also require that acquisition planning include market research, which can involve the development and use of requests for information (RFI). An internal working group consisting of a dental program manager, contracting officer, contracting officer’s representatives, and a requirements specialist review information gathered during the acquisition planning process to determine contract requirements, according to DHA officials. RFP. In the RFP phase, DHA officials issue the RFP and receive proposals. Award. In the award phase, DHA officials are responsible for evaluating the proposals and awarding the contract to the offeror presenting the best value to the government based on a combination of technical, cost, and performance-based factors. After the contract is awarded, the contracting officer’s representative is responsible for the day-to-day monitoring of contractor activities to ensure that the services are delivered in accordance with the contract’s performance standards. Each dental service contract includes quality assurance standards for provider access, claims processing, and customer service (telephone coverage and correspondence timeliness) against which the contractor’s performance is assessed. Contractors are required to meet these standards. Although DHA officials use a variety of methods to monitor contractors’ performance, the primary method of monitoring performance is through monthly reports submitted by each contractor to DHA. To develop requirements for each of its current dental services contracts, DHA officials analyzed market research, data from contractors’ past performance, legislation, independent cost estimates, and other information. DHA officials used this information to align the contracts’ requirements with contract goals to deliver high quality dental services in a cost effective manner, and to facilitate access to care. Market Research. As part of its development of contract requirements, DHA officials gathered information through market research and analyzed it to determine the capabilities within the dental services market to satisfy the agency’s needs. DHA’s market research included soliciting information from current and potential dental services contractors. To do this, DHA officials issued RFIs and draft RFPs for comment. These documents included questions related to potential benefit changes—such as how the offeror would implement a specific benefit—and potential data requirements—such as how the offeror would submit required data to DHA. In addition to RFIs and draft RFPs, DHA’s market research activities included one-on-one meetings with dental services contractors. DHA officials used information from these market research activities to revise contract requirements. For example, according to DHA officials, feedback from contractors indicated that DOD’s contract requirements related to information security were costing dental contractors (and DOD) a substantial amount of money. Partly as a result of contractors’ feedback, DHA determined that it would be more economical for contractors to comply with the information security standards used in the commercial sector, according to these officials. In all three new contracts, DHA officials therefore required contractors to comply with commercial information security requirements instead of those developed by DOD. DHA officials also used market research to determine the technical feasibility of potential contract requirements. For example, after encountering delays in treatment preauthorization decisions due to poor quality radiographs (commonly known as x-rays), the RFI that DHA issued for the ADDP contract included questions to determine the feasibility of the electronic submission of radiographs. According to DHA officials, dental technology has progressed to allow for easy electronic submission of this data, resulting in better radiograph quality. Partly as a result of information collected through the RFI, DHA officials incorporated a requirement into the new ADDP contract for the contractor to submit radiographs electronically when requesting pretreatment authorization from DHA. This requirement was intended to increase the quality of the diagnostic information and thus DHA’s efficiency in making preauthorization decisions. Performance Monitoring. DHA officials analyzed information about contractors’ past performance, including contractors’ monthly reports and claims payment data, to assess and revise contract requirements for future contractors. DHA uses a variety of methods to monitor performance, primarily relying on their review of monthly reports submitted by each contractor to DHA, which reflect how well the contractor is performing against the performance standards. They use this information to assess and revise requirements for each future dental services contract. For example, according to DHA officials, before issuing the RFP for the current TRDP contract, DHA officials’ review of the then current TRDP contractor’s performance against the existing contract’s network access standard indicated that the contractor consistently exceeded the standard. As a result, DHA raised the network access standard in the new TRDP contract from 90 to 99 percent, thus requiring that 99 percent of enrollees living within the United States, District of Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands have access to a network general dentist within a specified distance of their primary residence. DHA officials also used other performance monitoring information, such as claims payment data submitted by contractors, when developing contract requirements. For example, DHA officials’ review of the ADDP contractor’s claims payment data confirmed reports they received from DTFs that some servicemembers were being treated twice (and DHA paid more than they would have otherwise) for the same dental problem because they were treated by general dentists, not dental specialists, and the initial treatment was not successful, according to DHA officials. Partly as a result of their review of this information, DHA officials incorporated a new requirement in the new ADDP contract that requires that 90 percent of all DTF-referred endodontic procedures (such as root canals) or oral surgeries be completed by an endodontist or oral surgeon, respectively. Legal requirements. DHA officials reviewed laws relevant to each dental services contract to identify changes required by statute. DHA officials used the information to determine whether any changes to the benefit or eligibility structures of the contracts would be required. For example, DHA added a survivor benefit to the TDP contract as a result of a legislative change. In addition, the Transition Assistance Management Program, which provides 180 days of premium-free transitional health care benefits after regular TRICARE benefits end, was added to the ADDP contract as a result of a legislative change. Independent Cost Estimates. DHA officials reviewed independent cost estimates for new benefit requirements they were considering to assess cost efficiency. Specifically, prior to incorporating new benefit requirements into the TRDP and TDP contracts, DHA obtained and reviewed cost estimates from a private consulting firm to determine the impact of these benefits on enrollees’ monthly premiums. For example, DHA requested cost estimates for increasing the TDP contract’s maximum lifetime orthodontic benefit requirement from $1,500 to $1,750 and from $1,500 to $2,000. The estimates indicated that monthly premiums would increase 65 cents and $1.30, respectively. Based in part on the cost estimate, DHA increased the benefit requirement in the final TDP contract so that the contractor must provide coverage for benefits up to $1,750. According to DHA officials, they do not incorporate benefits if doing so would result in large increases in monthly premiums. Other Sources of Information. Other sources of information DHA officials reviewed prior to determining whether to add, change, or eliminate requirements from their dental service contracts included Lessons learned from previous procurements for other health services. We previously reported that DHA incorporated lessons learned into the RFP for the dental services contracts as a result of challenges to DHA’s contract award decisions for certain managed care support contracts. Specifically, in drafting the RFP for the TDP contract, officials more clearly defined how DHA officials planned to assess the evaluation factors when awarding the contract. Current dental services contract requirements. DHA officials told us that they review current contract requirements and solicit feedback on them from stakeholders, including officials from various branches of the military and organizations representing beneficiaries, before each new solicitation. For example, DHA officials conducted a forum with military services officials through which they identified potential new requirements for the ADDP contract, including a referral tracking system that would indicate authorized care that was not completed and thereby allow military commanders ready access to information about servicemembers’ dental readiness. As a result of this and other information they reviewed, the new ADDP contract required the contractor to develop a referral tracking system and train DHA staff on its use. Dental best practices and changes in the professional practice of dentistry. DHA officials review industry best practices and changes in the practice of dentistry to determine new contract requirements. For example, when developing new benefits for the current TDP contract, DHA officials researched common dental insurance benefits and best practices and solicited feedback from the American Dental Association’s Council on Government Affairs. In addition, DHA officials told us that they used their knowledge of changes in the field of dentistry, including dentistry’s increased use of digital technology, to help them identify the electronic submission of radiographs as a potential solution to the previously discussed problem of poor radiograph quality. DHA uses separate contracts for different beneficiary groups, in part, because the programs that serve them are funded differently. For example, the TRDP contract is separate from the ADDP and the TDP contracts because the government does not contribute any funds for the TRDP, but does contribute funds for the ADDP and TDP. Other factors that contributed to DHA’s decision to use separate contracts for its different beneficiary groups included differences between programs, such as differences in their purposes, covered dental services, and network access standards. To provide assurance that government funds are not expended for the TRDP, the administrative costs associated with the TRDP must be kept separate from the administrative costs associated with government- funded programs. DHA officials told us that they discussed this issue with potential contractors, who said that they would have to operate the programs separately. DHA officials determined that there would be minimal cost savings or efficiencies from combining contracts under these circumstances. Because the TRDP is not directly supported by DOD funds, DHA is exploring the possibility of shifting the option for military retirees to purchase dental insurance, which is currently provided through the TRDP, to the Federal Employee Dental and Vision Insurance Program (FEDVIP), which is administered by the Office of Personnel Management (OPM).Unlike the TRDP, the FEDVIP allows enrollees to select from among several plan options. DHA and OPM are in the preliminary process of determining the viability of this plan. DHA officials said that this option has both advantages and disadvantages. The primary advantages would include: lowering the workload of staff within the TRICARE Dental Care Office, thereby allowing them to devote more of their time to administering and overseeing the remaining two programs; and allowing retirees greater flexibility to choose among insurance plans that differ in their premiums and coverage options. The primary disadvantages of shifting the option to purchase dental insurance to the FEDVIP would include: the loss, for retirees, of the increased ease in use that results from similarities that have been built into the various TRICARE programs, such as similarities across programs in educational materials; potentially higher premiums if the enrollee selects a plan with more extensive dental benefits; and potential resistance to the change among military retirees. DHA officials told us that it is too soon to determine whether it would be possible to shift the TRDP to the FEDVIP. If it is found to be a viable option, legislative action would be necessary for OPM to open the FEDVIP to military retirees and for DOD to terminate the TRDP. Among other factors, differences in how the ADDP and TDP programs are funded also influenced DHA’s decision to use separate contracts for these programs. For example, DOD pays all costs for necessary care provided to active duty servicemembers through the ADDP upon receipt of invoices for individually priced services. In contrast, the TDP is an insurance program: DOD and TDP beneficiaries share in the costs of premiums, which are paid to the contractor; and the contractor is at risk for payment to providers. Thus, unlike the ADDP contractor, the TDP contractor bears the risk of loss if total costs through the program are greater than predicted. (If total costs are lower than predicted, the contractor would earn a larger profit than expected.) DHA officials told us that they consulted with potential contractors to identify advantages and disadvantages of merging the ADDP and TDP contracts and they concluded that the disadvantages of combining these two contracts, which are largely due to the differences in funding, outweighed the potential advantages. The potential advantages of combining the contracts that DHA officials and contractors identified included: enhanced continuity of care when individuals switch from reserve to fewer instances in which two contractors would need to work together to reconcile payments when an error has been made about whether someone is on active or reserve duty because a single contractor would be responsible for both programs; greater leverage in fee negotiations because the pool of potential enrollees would be larger; and slight gains in the efficiency of contract administration, particularly for monitoring contractors’ performance, thereby allowing TRICARE Dental Care Office staff more time to devote to their other responsibilities. The potential disadvantages of combining the contracts that DHA officials and contractors identified included: a reduction in competition if carriers do not want to participate in one or the other program, do not want to manage two different programs simultaneously under the same contract, or do not want to undertake a contract of the resultant size; greater difficulty in selecting the best contractor to award the contract, as one offer may be a better match for the ADDP requirements and another offer a better match for the TDP requirements; the potential for confusion among beneficiaries, dentists, and contractor staff because of differences between the programs (such as different benefits and payment requirements); and the potential for a compromise on quality if the contractor is not able to meet the requirements of both programs simultaneously and well. In the past, there was an interval during which a single contractor held both the ADDP and TDP contracts, and DHA officials told us that there were problems with this arrangement, including obstacles to care; operational challenges; and confusion among beneficiaries, the contractor, and the military DTFs. They said that these problems negatively affected both the delivery of dental care and the reputation of the military health system. Having just awarded the ADDP contract, DHA officials stated that they are not exploring options for combining these contracts. They noted that the government would have to either terminate the ADDP contract early or sole-source the TDP contract to extend it until the ADDP contract expires. They also stated that having to re-solicit a contract would be inefficient. We requested comments on a draft of this product from DOD. In its written comments, reproduced in appendix I, DOD concurred with the findings of the report and stated that the review provided a critical examination of DOD’s contracting initiatives supporting the ADDP, TDP, and TRDP. DOD also provided a technical comment, which was incorporated. We are sending copies of this report to appropriate congressional committees, the Secretary of Defense, the Assistant Secretary of Defense (Health Affairs), and other interested parties. The report also will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or dsouzav@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the contact named above, key contributors to this report were Kristi Peterson, Assistant Director; Kristen Joan Anderson; Jacquelyn Hamilton; Jennel Lockley; and Drew Long.

Summary: DOD offers comprehensive health care coverage to millions of beneficiaries through TRICARE, a system of health care that DOD purchases from private insurers to supplement the health care that DOD provides through its military and dental treatment facilities (DTF). Purchased dental services are provided through separate programs for different groups of beneficiaries: (1) the ADDP provides dental care to active duty servicemembers who do not have ready access to a DTF; (2) the TDP provides dental insurance to eligible dependents of active duty servicemembers, and to National Guard and Reserve members and their dependents; and (3) the TRDP provides dental insurance to retired uniformed service members and their dependents. DHA is responsible for awarding, administering, and overseeing contracts with private insurers for these programs. Senate Report 112-173, which accompanied the Senate Committee on Armed Services' version of the National Defense Authorization Act for fiscal year 2013, mandated that GAO review DOD's private sector care contracts, including its contracts for dental services. GAO examined (1) how DHA developed the requirements for its current dental services contracts and (2) the reasons for DHA's use of separate contracts for different beneficiary groups. GAO reviewed relevant laws, regulations, and DOD contracts and acquisition planning documents. GAO also interviewed DHA officials and other stakeholders. GAO made no recommendations. To develop requirements for its current dental services contracts, officials from the Department of Defense's (DOD) Defense Health Agency (DHA) analyzed market research, data from contractors' past performance, legislation, independent cost estimates, and other information. DHA officials used this information to align the contracts' requirements with contract goals to deliver high quality dental services in a cost effective manner and to facilitate access to care. Market research: DHA officials gathered information through market research and analyzed it to determine the capabilities within the dental services market to satisfy the agency's needs. Performance monitoring: DHA officials analyzed information about contractors' past performance, including claims payment data, to assess and revise contract requirements. Legal requirements: DHA officials reviewed laws relevant to each dental services contract to identify changes required by statute. Independent cost estimates: DHA officials reviewed cost estimates for new benefit requirements they were considering for the TRICARE Retiree Dental Program (TRDP) and TRICARE Dental Program (TDP) contracts to assess cost efficiency. Other sources of information: DHA officials reviewed lessons learned from previous procurements, current dental services contract requirements, and dental best practices and changes in the professional practice of dentistry. DHA uses separate contracts for different beneficiary groups in part because the programs that serve them are funded differently. The TRDP contract is separate from the TRICARE Active Duty Dental Program (ADDP) and the TDP contracts because the government does not contribute any funds for the TRDP, but does contribute funds for the ADDP and TDP. To provide assurance that government funds are not expended for the TRDP, contractors said they would have to operate the programs separately. As a result, DHA officials determined that there would be minimal cost savings from combining contracts. Differences in how the ADDP and TDP programs are funded also influenced DHA's decision to use separate contracts for these programs. DOD pays all costs for necessary care provided to active duty servicemembers through the ADDP. In contrast, the TDP is an insurance program: DOD and TDP beneficiaries share in the costs of premiums, which are paid to the contractor; the contractor is at risk for payment to providers. DHA officials concluded that the disadvantages of combining these two contracts outweighed the potential advantages. Other factors that contributed to DHA's decision to use separate contracts for different beneficiary groups included differences in program purposes, dental services, and network access standards. In comments on a draft of this report, DOD agreed with its findings and provided a technical comment, which was incorporated.