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entitled 'Defense Health Care: Status of Fiscal Year 2004 Requirements 
for Reservists' Benefits and Monitoring Beneficiaries' Access to Care' 
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March 17, 2004:

The Honorable John W. Warner:

Chairman:

The Honorable Carl Levin:

Ranking Minority Member:

Committee on Armed Services:

United States Senate:

The Honorable Duncan Hunter:

Chairman:

The Honorable Ike Skelton:

Ranking Minority Member:

Committee on Armed Services:

House of Representatives:

Subject: Defense Health Care: Status of Fiscal Year 2004 Requirements 
for Reservists' Benefits and Monitoring Beneficiaries' Access to Care:

Since September 2001, about 360,000 reservists have been called to 
active duty to support the war on terrorism, conflicts in Afghanistan 
and Iraq, and other operations. Some reservists have been on active 
duty for a year or more, and the pace of reserve operations is expected 
to remain high for the foreseeable future. When mobilized for active 
duty under federal authorities, reservists are eligible to receive 
health care benefits through DOD's military health care system, 
TRICARE. When reservists are ordered to active duty for more than 30 
days, their families are also eligible for health benefits.

DOD supplements its military health care facilities with civilian 
health care providers through its triple-option TRICARE program. DOD's 
beneficiaries may enroll in TRICARE's Prime option and go to a network 
provider to receive care; without enrolling, they can see a network 
provider through the preferred provider option, Extra; or they may 
elect to use Standard, the fee-for-service option.[Footnote 1] Some 
beneficiaries have raised concerns about difficulties in finding 
civilian providers--particularly Standard, non-network providers--who 
will accept TRICARE beneficiaries as patients.

The National Defense Authorization Act (NDAA) for Fiscal Year 2004, 
enacted on November 24, 2003, required the Department of Defense (DOD) 
to make changes in its delivery and monitoring of health benefits. In 
addition, the law directed us to review and report on aspects of these 
requirements.[Footnote 2] As agreed with the committees of 
jurisdiction, we are providing the status of DOD's progress in 
implementing five requirements--three related to health benefits for 
reservists and two related to monitoring beneficiaries' access to care 
under TRICARE Standard.

To obtain information about DOD's progress in implementing these 
requirements, we reviewed relevant documentation from DOD and 
applicable laws. We also interviewed the DOD officials responsible for 
implementing them. Our work was conducted in March 2004 in accordance 
with generally accepted government auditing standards.

In summary, DOD is in various stages of implementing the three 
requirements related to health care coverage for reservists. DOD has 
implemented the requirement extending the time reservists and their 
families can use TRICARE and is in the process of implementing the 
other two requirements. DOD has not implemented the two requirements 
directed at enhanced monitoring of beneficiaries' access to care under 
TRICARE Standard. We will report further on these requirements as DOD 
makes progress.

Background:

The NDAA 2004 required DOD to temporarily extend the period of TRICARE 
coverage for reservists and their families and provided the option for 
some reservists to buy into the TRICARE program. Specifically, the NDAA 
2004 provisions required DOD to:

* extend the Transitional Assistance Medical Program (TAMP) to allow 
recently demobilized reservists and their families to retain TRICARE 
benefits up to 180 days;[Footnote 3]

* make reservists and their families eligible for TRICARE benefits as 
soon as they receive a delayed-effective-date order for activation or 
90 days before activation--whichever is later; and:

* allow certain reserve members, who are not mobilized, and their 
families who do not have any other health care benefits to enroll in 
TRICARE by paying 28 percent of program costs.[Footnote 4]

DOD decided that the TAMP benefit and the provision of benefits upon 
activation would be retroactive to November 6, 2003. The provision 
allowing qualified reservists and their families to enroll in TRICARE 
requires DOD to issue regulations to administer the program. Congress 
limited expenditures for these three provisions to a combined total of 
$400 million for fiscal year 2004. All of the provisions are temporary, 
expiring December 31, 2004.

In addition, the NDAA 2004 required DOD to enhance its monitoring of 
beneficiaries' access to care for TRICARE Standard including:

* designating an official to ensure the adequacy of provider 
participation in the Standard option in each of TRICARE's market 
areas;[Footnote 5] and:

* conducting surveys in 20 market areas every fiscal year until all 
markets have been surveyed to determine how many providers are 
accepting new patients under TRICARE Standard.

Status of Implementation of NDAA 2004 Requirements:

DOD is in varying stages of implementing the provisions for reservists' 
health care under NDAA 2004. First, in order to extend the TAMP benefit 
period to 180 days as required by law, DOD modified its Defense 
Enrollment Eligibility Reporting System (DEERS), the database that 
maintains information about TRICARE eligibility. This modification, 
which also included changes that allowed DOD to track expenditures for 
the benefit, was completed in January 2004. According to DOD, 
reservists who separated prior to that period will be retroactively 
reimbursed for their own or family members' medical expenses that were 
incurred on or after November 6, 2003.

Second, DOD has not completed all of the changes that will allow it to 
make reservists and their families eligible for TRICARE benefits as 
soon as they receive delayed-effective-date orders for activation or 90 
days before activation--whichever is later. This benefit could not be 
immediately implemented because it also required DEERS modifications to 
record eligibility and track benefit expenditures. In addition, 
according to DOD officials, it required other complicated changes, 
including changes to TRICARE's contracts that are used to deliver 
health care through civilian providers. Further, each of the seven 
components that constitute the reserves had to change the process for 
ordering reservists to active duty, ensuring that DEERS receives 
mobilized reservists' eligibility information.[Footnote 6] According 
to a DOD official, the department expects to implement this benefit 
this month, and reservists with qualifying orders issued on or after 
November 6, 2003 will receive retroactive payments for these benefits.

Third, DOD has not completed drafting the regulations to implement the 
provisions allowing certain reservists and their families who do not 
have other health insurance to enroll in TRICARE by paying 28 percent 
of program costs. According to a DOD official, regulations that involve 
new populations and new benefits generally take 12 to 18 months to 
develop. Further, according to DOD officials, this benefit must have a 
reliable cost estimate before regulations are finalized, and to date, 
estimates from the Office of Management and Budget (OMB) and the 
Congressional Budget Office (CBO) differ widely. According to DOD, 
CBO's estimated costs for this provision were about $70 million for 
fiscal year 2004 while OMB estimated that these costs would be $1 
billion. Further, DOD officials anticipate that TAMP and the expanded 
period of eligibility for benefits could cost up to the $400 million 
allocated to cover the three provisions and little would subsequently 
be available to fund the enrollment benefit.

Furthermore, DOD has not implemented the requirements in NDAA 2004 
regarding monitoring of the TRICARE Standard benefit. First, DOD has 
not designated the official responsible for ensuring adequate 
participation of Standard providers. According to a DOD official, it is 
likely that this responsibility will be assigned to the Assistant 
Secretary of Defense for Health Affairs, who will delegate the 
responsibility to the three TRICARE Regional Directors. These Directors 
will oversee the new TRICARE support contracts, which are scheduled to 
begin implementation in June 2004.

Finally, according to a DOD official, the department has not received 
the approval from OMB required by the Paperwork Reduction Act to 
conduct its initial market survey.[Footnote 7] DOD has requested 
emergency approval from OMB. Based on an anticipated approval in April 
2004, the first surveys are expected to be sent out May 31, 2004. DOD 
officials are uncertain when the analysis of the first set of surveys 
will be complete. Meanwhile, DOD has a Standard Directory feature on 
its Web page to help beneficiaries identify potential providers. The 
Web page explains that managed care support contractors will also help 
beneficiaries locate Standard providers.

We will continue to monitor and report on DOD's progress in 
implementing these requirements.

Agency Comments:

DOD officials reviewed a draft of this report and provided technical 
comments, which we incorporated where appropriate.

We are sending copies of this report to the Secretary of Defense and 
other interested parties. We will provide copies of this report to 
others upon request. In addition, the report is available at no charge 
on the GAO Web site at http://www.gao.gov. If you or your staffs have 
any questions, please contact me at (202) 512-7119 or Bonnie W. 
Anderson at (404) 679-1900. Lois Shoemaker and Allan Richardson made 
key contributions to this report.

Signed by: 

Marcia Crosse:

Director, Health Care--Public Health and Military Health Care Issues:

(290364):

FOOTNOTES

[1] All beneficiaries may receive care at military treatment facilities 
(MTF) as space and capabilities are available. TRICARE Prime enrollees 
have priority for care in MTFs.

[2] See Pub. L. No. 180-136, tit. VII, subtit. A, 117 Stat. 1392, 1524 
(2003).

[3] Under TAMP, DOD provides a transitional period of benefits that 
allows reservists and their families to retain TRICARE benefits for a 
period following demobilization. The NDAA for Fiscal Year 2002 
previously extended the transition period from 30 days to 60 or 120 
days depending on the members' accrued total active federal military 
service. Pub. L. No. 107-107,  736, 115 Stat. 1012, 1172 (2001) 
(codified at 10 U.S.C. 1145(a)(3) (2000)).

[4] This enrollment would allow them to receive TRICARE benefits for 
any period that the member is an eligible unemployment compensation 
recipient or is not eligible for health care benefits under an 
employer-sponsored health benefit plan.

[5] DOD has identified 182 TRICARE market areas across the United 
States where there are large numbers of beneficiaries. The market areas 
were identified as part of DOD's awarding of new TRICARE support 
contracts that are scheduled to be implemented in June 2004.

[6] The armed forces reserve components consist of the Air Force 
Reserve, the Air National Guard, the Army Reserve, the Army National 
Guard, the Navy Reserve, the Marine Corps Reserve, and the Coast Guard 
Reserve.

[7] 44 U.S.C. 3501 et seq. (2000).