Medicare Subvention Demonstration:

DOD Data Limitations May Require Adjustments and Raise Broader Concerns

HEHS-99-39: Published: May 28, 1999. Publicly Released: May 28, 1999.

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Pursuant to a legislative requirement, GAO provided information on the Medicare Subvention Demonstration Program, focusing on the sufficiency of the Department of Defense's (DOD) data systems for: (1) determining DOD's historical level of effort (LOE) and Medicare payments; and (2) managing the demonstration and assessing its cost effects.

GAO noted that: (1) portions of DOD's baseline costs may be understated, which could lead to Medicare overpayments if not adjusted; (2) this results from data inaccuracies in areas of DOD's medical cost accounting system such as pay and prescription drugs; (3) these findings show that the DOD cost system problems GAO and others have reported on over the years persist and continue to affect the DOD health care activities that rely on these systems; (4) at the root of the problem is the long-standing lack of DOD and services' oversight as well as a lack of incentives to ensure the data's accuracy, timeliness, and completeness; (5) DOD officials told GAO that DOD is committed to making whatever adjustments are needed to ensure Medicare does not overpay DOD; (6) data problems also make the subvention demonstration more difficult to manage at both the national and local levels; (7) for example, DOD managers do not have sufficiently accurate or timely data to know whether Medicare capitated payments will cover DOD's costs to provide the full range of health care to beneficiaries or to determine whether it is more cost-effective to deliver care in DOD facilities or purchase it from network providers; (8) timely and accurate tracking of cost and utilization data is critical to these decisions, as is the case in other managed care organizations; (9) acting on the problems GAO identified, DOD officials developed a management improvement plan to begin addressing baseline and systematic data weaknesses, and the Health Care Financing Administration (HCFA) plans to hire a contractor to review DOD's data and methodology; (10) in their reviews, these agencies may need to reestimate the baseline using more reliable data or consider alternate ways to determine the baseline; (11) because DOD uses its cost accounting systems for many other health care management purposes beyond the demonstration's needs, such as resource allocation and make versus buy decisions, GAO believes DOD needs to dedicate sufficient management attention and effort to ensure data reliability and accuracy; and (12) DOD established a health care data quality task force to begin addressing the broader system causes of the data problems that GAO and others have continued to identify.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Acting on the problems GAO identified, in October 1998, DOD developed and began implementing a data management improvement plan. DOD agreed that it would continue working with HCFA to improve the measurement of the level of effort and systemic data deficiencies cited in the GAO report. Also in response, HCFA hired a contractor to review DOD's data and methodology. For the time being, HCFA and DOD have agreed to keep the 1997 baseline, but the HCFA contract should identify the threshold's weaknesses and identify needed improvements. Also, both parties now agree on a payment reconciliation approach that will be made shortly.

    Recommendation: The Secretary of Defense should direct the Assistant Secretary of Defense (Health Affairs), in collaboration with HCFA, to identify the baseline's weaknesses and resulting errors in LOE and determine a more reliable baseline. This effort should consider the merits of using a more recent base year for the demonstration and weigh alternatives to the baseline method. Furthermore, to reduce funding uncertainties for site managers, the Assistant Secretary should state definitively how final Medicare payments will be allocated among the demonstration sites, and working with HCFA, explain the method and criteria for risk-adjusting sites' Medicare payments.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: The Medicare Subvention Demonstration concluded in December 2001. The Congress authorized a different military retiree health care program in the Fiscal Year 2001 National Defense Authorization Act. Thus, the need for DOD to take appropriate action on this recommendation was mitigated by the Subvention Demonstration's pending termination. However, GAO's recommendation was aimed more broadly at spurring DOD to correct data quality problems that jeopardize overall management of military health care. Although DOD took steps to address the issues identified in our report--for example, by establishing a high-level data quality task force and implementing a Data Quality Management Control Program--unreliable and poor quality cost and workload data for military treatment facilities remained a problem as of 2002. In an audit report in August of that year, the DODIG noted that, without corrective action, the quality of financial and workload data used in important management decisions would not improve and that DOD's Annual Statement of Assurance would continue to report military health service data quality management controls as a material weakness.

    Recommendation: The Secretary of Defense should direct the Assistant Secretary of Defense (Health Affairs) to improve cost and workload data quality. This is especially important because DOD also uses these data in managing its general health care operations. The effort should identify specific actions needed by the Assistant Secretary and the services to correct cost and workload data collection and reporting problems. It should also ensure, by maintaining all source data and documents, that the Medical Expense Performance Reporting System can be audited. This effort may require actions by and coordination with other DOD Assistant Secretaries, and the Secretary should direct their participation.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: Acting on the problems GAO identified, HCFA hired a contractor to review DOD's data and methodology. For the time being, HCFA and DOD have agreed to keep the 1997 baseline, but the HCFA contract should identify the threshold's weaknesses and identify needed improvements. Also in response, DOD developed and began implementing a data management improvement plan in October 1998. DOD agreed that it would continue working with HCFA to improve the measurement of the level of effort and systemic data deficiencies cited in the GAO report. Finally, both parties now agree on a payment reconciliation approach that will be made shortly.

    Recommendation: The Administrator, HCFA, should, in collaboration with DOD, identify the baseline's weaknesses and, as appropriate, determine a more reliable baseline. HCFA efforts should include providing DOD specific guidance on baseline cost components and assessing baseline source data and methodologies for reliability and compliance with HCFA guidance and regulations. Also, working with DOD, the Administrator should promptly specify the method and criteria for risk-adjusting the Medicare payments.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

 

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