The DOD Medicare Subvention Demonstration combines a national health care delivery system operated by DOD with a health insurance system— Medicare—operated by HCFA within the Department of Health and Human Services (HHS). The demonstration includes six sites in different regions of the country. The DOD health care system covers a service population that includes 1.6 million active-duty military personnel, 2.2 million dependents of active- duty personnel, and 4.4 million military retirees and their dependents, including the 1.3 million who are 65 and older. DOD delivers health care through its system of almost 500 MTFs worldwide. These facilities include 15 medical centers that offer extensive specialty care and provide graduate medical education (GME), such as residency training. In addition, DOD operates 76 smaller community hospitals with less extensive service options and 374 clinics offering outpatient services only. Pharmacy services are available at most MTFs and are free-of-charge. The direct care provided at MTFs is supplemented with care provided by a network of contracted civilian providers through DOD’s TRICARE program. TRICARE offers beneficiaries three options for health care delivery, including an HMO option called TRICARE Prime. There are 12 TRICARE regions within the U.S., each headed by a lead agent, who is usually the commander of the largest medical center in the region. Each region also has a managed care support contractor who manages the private provider network and performs various beneficiary assistance and management support services. The Office of the Lead Agent (OLA) oversees the TRICARE management support contractor for the region and coordinates TRICARE activities. Priority for military medical care is given to active-duty personnel and their dependents and retirees under 65 who are enrolled in TRICARE Prime, thus enabling them to receive comprehensive health care coverage. TRICARE Prime coverage ends when a retiree reaches 65. Older retirees are eligible to receive medical care at an MTF, but only when space is available. Some MTFs have considerable space available after high-priority beneficiaries have been served, and others have very little space. Medicare is a federally financed health insurance program for the elderly, some disabled people, and people with end-stage kidney disease. Medicare covers 39 million beneficiaries and spends about $212 billion a year. Its benefits include hospital, physician, and other services, such as home health care and limited skilled nursing facility care. Medicare Part A covers inpatient hospital care, skilled nursing facility care, and hospice care; Medicare Part B covers physician and other outpatient services for beneficiaries who choose to pay a monthly premium. Traditional Medicare reimburses private providers on a fee-for-service basis and allows Medicare beneficiaries to choose their own providers without restriction. Beneficiaries who receive care are responsible for part of the charges. Medicare beneficiaries can also join a Medicare HMO, and Medicare+Choice provisions that took effect in January 1999 permit them to choose other private health plans as well. Currently, 17 percent of these beneficiaries use Medicare managed care. Most Medicare managed care plans have only modest beneficiary cost-sharing and some offer extra benefits, such as eyeglasses and prescription drugs. Military retirees are eligible for Medicare on the same basis as anyone else. HCFA administers Medicare and regulates participating providers and health plans. Both headquarters and regional office HCFA staff have oversight responsibilities regarding Medicare+Choice organizations. Headquarters staff handle legal and financial matters, while the regions are responsible for operational matters. HCFA’s oversight of Medicare+Choice plans begins with the certification process. To receive certification and begin health care delivery, an organization must complete the following tasks, among others: submit a comprehensive application to HCFA and respond to HCFA’s requests for clarification and additional information; develop an organizational structure, bylaws, and policies and procedures, which are subject to approval by HCFA; conduct training for all staff and providers, including making provisions for training of new staff as they come onboard; prepare for and participate in a HCFA site visit, during which a team of HCFA personnel examine policies and procedures to determine if the site has the potential to deliver health care according to HCFA regulations; upon HCFA approval, begin marketing activities to inform beneficiaries enroll beneficiaries and provide for coordination of their health care, by assigning each to a primary care manager or by other means; and begin delivery of health care. HCFA requires a variety of performance information from the plans once they are in operation and conducts both technical assistance and monitoring visits. To test a program granting Medicare-eligible military beneficiaries guaranteed access to health care provided through DOD but paid for by Medicare, Congress established the Medicare Subvention Demonstration Project. This demonstration authorized DOD to establish HCFA-certified Medicare plans and provide care to Medicare-eligible military beneficiaries at six sites for a 3-year period—January 1, 1998, to December 31, 2000. The DOD Medicare demonstration program is known as Senior Prime. The goal of this demonstration is to provide a cost-effective alternative for accessible and quality health care while not increasing the federal cost for Medicare or DOD. HHS is to reimburse DOD from the Medicare Trust Funds for Medicare-covered health care services provided to Medicare- eligible military beneficiaries at an MTF or through contracts. However, to receive payment, DOD must at least match DOD’s baseline cost for serving this dual-eligible population in the recent past. To be eligible for Senior Prime, dual-eligibles must be enrolled in both Medicare Part A and Part B, reside in one of the six geographic areas covered by the demonstration, and have used an MTF before July 1, 1997, or become Medicare-eligible after that date. Beneficiaries enrolled in the program will not have to pay a premium during this demonstration, but must pay any applicable cost-sharing amounts and must agree to receive all of their health care exclusively through Senior Prime. They will be subject to all of the Medicare+Choice requirements. Enrollees must have a primary care manager within the MTF. The benefit package for Senior Prime is the full Medicare benefits package supplemented by other benefits that DOD provides for its TRICARE Prime enrollees, such as prescription drugs. Senior Prime enrollees are to be given priority for treatment at MTFs over other dual-eligibles who are not enrolled in Senior Prime. Each of the six demonstration sites is located in a different DOD TRICARE health care region. The lead agent of the region is the chief executive officer (CEO) of the Senior Prime plan located in that region. Table 1 lists the demonstration sites, their locations, and their Senior Prime enrollment capacities. (Note that sites may have more than one MTF and more than one geographic service area.) For more specific information about each site, consult appendixes I through VI at the end of this report. The MTFs in the demonstration sites vary in size and types of services offered. The medical centers (Madigan, Brooke, Wilford Hall, San Diego, and Keesler) offer a wide range of inpatient services and specialty care, as well as primary care. These centers also have GME training programs. The Sheppard, Reynolds, Evans, and Air Force Academy MTFs are smaller community hospitals with more limited capabilities. Much of the specialty care at these hospitals is contracted out to the civilian network. One site, Dover, is a clinic, offering only outpatient services at the MTF and thus requiring all inpatient and specialty care to be purchased from the civilian network. The six demonstration sites serve Senior Prime populations within the 40- mile radius, or catchment area, around each facility. All sites had served seniors to some extent before the demonstration. At the medical centers, seniors had been a substantial part of the workload to support GME in both primary and specialty care. Centers with GME in internal medicine had formed panels of seniors who regularly received primary care at the MTF. At most of the smaller sites, and in specialty areas in which a particular medical center did not have a GME program, care for seniors was more limited and likely to be episodic. Some demonstration sites are located in areas such as the Seattle-Tacoma area, San Diego, and San Antonio where seniors can choose among a number of private Medicare HMOs. Other sites are located in areas where there are no other Medicare HMOs, such as Mississippi and rural Delaware. We began the evaluation of Senior Prime implementation with a review of the BBA and DOD and HCFA documents relating to the demonstration as well as interviews with headquarters staff from both agencies. We then visited each of the six sites 8 to 12 weeks after the start of program operation at that location. At the sites, we conducted group interviews with administrators and staff, including the lead agent, medical director, health delivery staff, financial managers, and contractor officials as well as beneficiaries and representatives of retiree groups. We collected interview and documentary data on site features pertinent to this demonstration; processes used to set up the program and enroll and serve beneficiaries; issues that arose and how they were addressed; initial results, such as enrollees’ use of health care and Senior Prime’s impact on other patient populations and on MTF operations generally; and lessons learned. Follow-up teleconferences were conducted with the sites toward the end of the study period when the sites had from 4 to 8 months’ experience with program operation. We analyzed documentary and interview data to identify crosscutting and site-specific issues as well as effective problemsolving strategies. The six sites we studied can support operational findings about the demonstration as a whole. However, the study has several limitations. Although they illustrate a variety of conditions, the six demonstration sites—four of which are major medical centers—are not representative of the universe of DOD health care facilities.