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Testimony:



Before the Subcommittee on Total Force, Committee on Armed Services, 

House of Representatives:



United States General Accounting Office:



GAO:



For Release on Delivery Expected at 1:30 p.m.



Thursday, March 27, 2003:



DEFENSE HEALTH CARE:



Oversight of the Adequacy of TRICARE’s Civilian Provider Network Has 

Weaknesses:



Statement of Marjorie Kanof:



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



GAO-03-592T:



GAO Highlights:



Highlights of GAO-03-592T, a report to a testimony before the 

Subcommittee on Total Force, Committee on Armed Services, House of 

Representatives



Why GAO Did This Study:



During 2002, in testimony to the House Armed Services Committee, 

Subcommittee on Personnel, beneficiary groups described problems with 

access to care from TRICARE’s civilian providers, and providers 

testified about their dissatisfaction with the TRICARE program, 

specifying low reimbursement rates and administrative burdens. 



The Bob Stump National Defense Authorization Act of 2003 required that 

GAO review DOD’s oversight of TRICARE’s network adequacy. In response, 

GAO is (1) describing how DOD oversees the adequacy of the civilian 

provider network, (2) assessing DOD’s oversight of the adequacy of the 

civilian provider network, (3) describing the factors that may 

contribute to potential network inadequacy or instability, and (4) 

describing how the new contracts, expected to be awarded in June 2003, 

might affect network adequacy.



GAO’s analysis focused on TRICARE Prime—the managed care component of 

the TRICARE health care delivery system. This testimony summarizes 

GAO’s findings to date. A full report will be issued later this year.



What GAO Found:



To oversee the adequacy of the civilian network, DOD has established 

standards that are designed to ensure that its network has a 

sufficient number and mix of providers, both primary care and 

specialists, necessary to satisfy TRICARE Prime beneficiaries’ needs. 

In addition, DOD has standards for appointment wait, office wait, and 

travel times that are designed to ensure that TRICARE Prime 

beneficiaries have adequate access to care. DOD has delegated 

oversight of the civilian provider network to lead agents, who are 

responsible for ensuring that these standards have been met.



DOD’s ability to effectively oversee—and thus guarantee the adequacy 

of—the TRICARE civilian provider network is hindered in several ways. 

First, the measurement used to determine if there is a sufficient 

number of providers for the beneficiaries in an area does not account 

for the actual number of beneficiaries who may seek care or the 

availability of providers. In some cases, this may result in an 

underestimation of the number of providers needed in an area. Second, 

incomplete contractor reporting on access to care makes it difficult 

for DOD to assess compliance with this standard. Finally, DOD does not 

systematically collect and analyze beneficiary complaints, which might 

assist in identifying inadequacies in the TRICARE civilian provider 

network.



DOD and its contractors have reported three factors that may 

contribute to potential network inadequacy: geographic location, low 

reimbursement rates, and administrative requirements. However, the 

information the contractors provide to DOD is not sufficient to 

measure the extent to which the TRICARE civilian provider network is 

inadequate. While reimbursement rates and administrative requirements 

may have created dissatisfaction among providers, it is not clear that 

these factors have resulted in insufficient numbers of providers in 

the network.



The new contracts, which are expected to be awarded in June 2003, may 

result in improved network participation by addressing some network 

providers’ concerns about administrative requirements. For example, 

the new contracts may simplify requirements for provider credentialing 

and referrals, two administrative procedures providers have complained 

about. However, according to contractors, the new contracts may also 

create requirements that could discourage provider participation, such 

as the new requirement that 100 percent of network claims submitted by

providers be filed electronically. Currently, only about 25 percent of 

such claims are submitted electronically.



www.gao.gov/cgi-bin/getrpt?GAO-03-592T.

To view the full report, including the scope and methodology, click on 

the link above. For more information, contact Marjorie Kanof at (202) 

512-7114.



[End of section]



Mr. Chairman and Members of the Subcommittee:



I am pleased to be here today to discuss issues related to the 

Department of Defense’s (DOD) healthcare system, TRICARE. TRICARE’s 

primary mission is to provide care for its eligible beneficiaries; 

currently, more than 8.7 million active duty personnel, retirees, and 

dependents are eligible to receive care through TRICARE. These 

beneficiaries receive their care through Military Treatment Facilities 

(MTFs) or through TRICARE’s civilian provider network, which is 

designed to complement the availability of care offered by MTFs. MTFs 

supply most of the health care services TRICARE beneficiaries 

receive.[Footnote 1]



TRICARE faces new challenges in ensuring that its civilian network can 

provide adequate access to care that complements the capabilities of 

MTFs. In 2003, DOD will award new contracts for the delivery of care in 

the civilian network. As a result, the providers who choose to 

participate may change, while those who remain will operate under new 

policies and procedures. During this time, TRICARE is still responsible 

for ensuring that its civilian network provides adequate access to 

care, even if the provider for some beneficiaries’ care is changed.



TRICARE also faces beneficiary and provider dissatisfaction with its 

existing civilian network. During April 2002, testimony before the 

House Armed Services Committee, Subcommittee on Personnel, beneficiary 

groups described problems with access to care from TRICARE’s civilian 

providers. Also, providers testified about their dissatisfaction with 

the TRICARE program, specifying low reimbursement rates and 

administrative burdens.



In response to these concerns, the Bob Stump National Defense 

Authorization Act of 2003 (NDAA 2003) required that we review DOD’s 

oversight of the adequacy of the TRICARE civilian network.[Footnote 2] 

My remarks will summarize the findings of our analysis to date, and we 

will issue a full report later this year. Our analysis, including our 

testimony today, focuses on TRICARE’s civilian provider network. 

Specifically, I will discuss (1) how DOD oversees the adequacy of the 

civilian provider network, (2) an assessment of DOD’s oversight of the 

adequacy of the civilian provider network, (3) the factors that may 

contribute to potential network inadequacy or instability, and (4) how 

the new contracts might affect network adequacy.



To examine how DOD oversees the civilian provider network and interacts 

with the contractors, we interviewed officials at TRICARE Management 

Activity (TMA) in Washington D.C., the office that ensures that DOD 

health policy is implemented, and officials at TMA-West, the office 

that carries out contracting functions, including administering the 

civilian contracts and writing the Requests for Proposals for the 

future contracts. To assess DOD’s oversight of the TRICARE network, we 

reviewed and analyzed extensive information from network adequacy 

reports from each of the contractors. We also interviewed DOD regional 

officials, known as lead agents, and MTF officials from 5 of 11 TRICARE 

regions. In addition, we interviewed officials from each of the four 

managed care support contractors who develop and maintain the network 

of providers to augment the care provided by MTFs. We visited and 

discussed network management and provider complaints with 

representatives of each contractor. We focused our work on TRICARE 

Prime--the managed care component of the TRICARE health care delivery 

system. We conducted our work from June 2002 through March 2003 in 

accordance with generally accepted government auditing standards.



In summary, to oversee the adequacy of the civilian network, DOD has 

established standards that are designed to ensure that its network has 

a sufficient number and mix of providers, both primary care and 

specialists, necessary to satisfy TRICARE Prime beneficiaries’ needs. 

In addition, DOD has standards for appointment wait, office wait, and 

travel times that are designed to ensure that TRICARE Prime 

beneficiaries have adequate access to care. DOD has delegated oversight 

of the civilian provider network to lead agents, who are responsible 

for ensuring that these standards have been met.



DOD’s ability to effectively oversee--and thus guarantee the adequacy 

of--the TRICARE civilian provider network is hindered in several ways. 

First, the measurement used to determine if there is a sufficient 

number of providers for the beneficiaries in an area does not account 

for the actual number of beneficiaries who may seek care or the 

availability of providers. In some cases, this may result in an 

underestimation of the number of providers needed in an area. Second, 

incomplete contractor reporting on access to care makes it difficult 

for DOD to assess compliance with this standard. Finally, DOD does not 

systematically collect and analyze beneficiary complaints, which might 

assist in identifying inadequacies in the TRICARE civilian provider 

network.



DOD and its contractors have reported three factors that may contribute 

to potential network inadequacy: geographic location, low reimbursement 

rates, and administrative requirements. However, the information the 

contractors provide to DOD is not sufficient to measure the extent to 

which the TRICARE civilian provider network is inadequate. While 

reimbursement rates and administrative requirements may have created 

dissatisfaction among providers, it is not clear that these factors 

have resulted in insufficient numbers of providers in the network.



The new contracts, which are expected to be awarded in June 2003, may 

result in improved network participation by addressing some network 

providers’ concerns about administrative requirements. For example, the 

new contracts may simplify requirements for provider credentialing and 

referrals, two administrative procedures providers have complained 

about. However, according to contractors, the new contracts may also 

create requirements that could discourage provider participation, such 

as the new requirement that 100 percent of network claims submitted by 

providers be filed electronically. Currently, only about 25 percent of 

such claims are submitted electronically.



Background:



TRICARE has three options for its eligible beneficiaries:



* TRICARE Prime, a program in which beneficiaries enroll and receive 

care in a managed network similar to a health maintenance organization 

(HMO);



* TRICARE Extra, a program in which beneficiaries receive care from a 

network of preferred providers; and:



* TRICARE Standard, a fee-for-service program that requires no network 

use.



The programs vary according to the amount beneficiaries must contribute 

towards the cost of their care and according to the choices 

beneficiaries have in selecting providers. In TRICARE Prime,[Footnote 

3] the program in which active duty personnel must enroll, the 

beneficiaries must select a primary care manager (PCM)[Footnote 4] who 

either provides care or authorizes referrals to specialists. Most 

beneficiaries who enroll in TRICARE Prime select their primary care 

providers from MTFs, while other enrollees select their PCMs from the 

civilian network. Regardless of their status--military or civilian--

PCMs may refer Prime beneficiaries to providers in either MTFs or 

TRICARE’s civilian provider network.[Footnote 5]



Both TRICARE Extra and TRICARE Standard require co-payments, but 

beneficiaries do not enroll with or have their care managed by PCMs. 

Beneficiaries choosing TRICARE Extra use the same civilian provider 

network available to those in TRICARE Prime, and beneficiaries choosing 

TRICARE Standard are not required to use providers in any network. For 

these beneficiaries, care can be provided at an MTF when space is 

available.



DOD employs four civilian health care companies or managed care support 

contractors (contractors) that are responsible for developing and 

maintaining the civilian provider network that complements the care 

delivered by MTFs. The contractors recruit civilian providers into a 

network of PCMs and specialists who provide care to beneficiaries 

enrolled in TRICARE Prime. This network also serves as the network of 

preferred providers for beneficiaries who use TRICARE Extra. In 2002, 

contractors reported that the civilian network included about 37,000 

PCMs and 134,000 specialists. The contractors are also responsible for 

ensuring adequate access to health care, referring and authorizing 

beneficiaries for health care, educating providers and beneficiaries 

about TRICARE benefits, ensuring providers are credentialed, and 

processing claims. In their network agreements with civilian providers, 

contractors establish reimbursement rates and certain requirements for 

submitting claims. Reimbursement rates cannot be greater than Medicare 

rates unless DOD authorizes a higher rate.



DOD’s four contractors manage the delivery of care to beneficiaries in 

11 TRICARE regions. DOD is currently analyzing proposals to award new 

civilian health care contracts, and when they are awarded in 2003, DOD 

will reorganize the 11 regions into 3--North, South, and West--with a 

single contract for each region. Contractors will be responsible for 

developing a new civilian provider network that will become operational 

in April 2004. Under these new contracts DOD will continue to emphasize 

maximizing the role of MTFs in providing care.



The Office of the Assistant Secretary of Defense for Health Affairs 

(Health Affairs) establishes TRICARE policy and has overall 

responsibility for the program. The TRICARE Management Activity (TMA), 

under Health Affairs, is responsible for awarding and administering the 

TRICARE contracts. DOD has delegated oversight of the provider network 

to the local level through the regional TRICARE lead agent. The lead 

agent for each region coordinates the services provided by MTFs and 

civilian network providers. The lead agents respond to direction from 

Health Affairs, but report directly to their respective Surgeons 

General. In overseeing the network, lead agents have staff assigned to 

MTFs to provide the local interaction with contractor representatives 

and respond to beneficiary complaints as needed and report back to the 

lead agent.



DOD Has Standards for Network Adequacy and Requires Contractors’ 

Compliance:



DOD’s contracts for civilian health care are intended to enhance and 

support MTF capabilities in providing care to millions of TRICARE 

beneficiaries. Contractors are required to establish and maintain the 

network of civilian providers in the following locations: for all 

catchment areas,[Footnote 6] base realignment and closure 

sites,[Footnote 7] in other contract-specified areas, and in 

noncatchment areas where a contractor deems it cost-effective. In the 

remaining areas, a network is not required.



DOD requires that contractors have a sufficient number and mix of 

providers, both primary care and specialists, necessary to satisfy the 

needs of beneficiaries enrolled in the Prime option. Specifically, it 

is the responsibility of the contractors to ensure that the network has 

at least one full-time equivalent PCM for every 2,000 TRICARE Prime 

enrollees and one full-time equivalent provider (both PCMs and 

specialists) for every 1,200 TRICARE Prime enrollees.[Footnote 8]



In addition, DOD has access-to-care standards that are designed to 

ensure that Prime beneficiaries receive timely care. The access 

standards[Footnote 9] require the following:



* appointment wait times shall not exceed 24 hours for urgent care, 1 

week for routine care, or 4 weeks for well-patient and specialty care;



* office wait times shall not exceed 30 minutes for nonemergency care; 

and:



* travel times shall not exceed 30 minutes for routine care and 1 hour 

for specialty care.



DOD does not specify access standards for eligible beneficiaries who do 

not enroll in TRICARE Prime. However, DOD requires that contractors 

provide information and/or assist all beneficiaries--regardless of 

which option they choose--in finding a participating provider in their 

area.



DOD has delegated oversight of the civilian provider network to the 

regional TRICARE lead agents. The lead agents told us they use the 

following tools and information to oversee the network.



* Network Adequacy Reporting--Contractors are required to provide 

reports quarterly to the lead agents. The reports contain information 

on the status of the network--such as the number and type of 

specialists, a list of primary care managers, and data on adherence to 

the access standards. The reports may also contain information on steps 

the contractors have taken to address any network inadequacies.



* Beneficiary Complaints--The complaints come directly from 

beneficiaries and through other sources, such as the contractor or 

MTFs.



In addition to these tools, lead agents periodically monitor contractor 

compliance by reviewing performance related to specific contract 

requirements, including requirements related to network adequacy. Lead 

agents also told us they periodically schedule reviews of special 

issues related to network adequacy, such as conducting telephone 

surveys of providers to determine whether they are accepting TRICARE 

patients. In addition, lead agents stated they meet regularly with MTF 

and contractor representatives to discuss network adequacy and access 

to care.



If the lead agents determine that a network is inadequate, they have 

formal enforcement actions they may use to correct deficiencies. 

However, lead agents told us that few of the actions have been issued. 

They said they prefer to address deficiencies informally rather than 

take formal actions, particularly in areas where they do not believe 

the contractor can correct the deficiency because of local market 

conditions. For example, rather than taking a formal enforcement 

action, one lead agent worked with the contractor to arrange for a 

specialist from one area to travel to another area periodically.



DOD’s Civilian Provider Network Oversight Has Weaknesses:



DOD’s ability to effectively oversee--and thus guarantee the adequacy 

of--the TRICARE civilian provider network is hindered by (1) flaws in 

its required provider-to-beneficiary ratios, (2) incomplete reporting 

on beneficiaries’ access to providers, and (3) the absence of a 

systematic assessment of complaints. Although DOD has required its 

network to meet established ratios of providers to beneficiaries, the 

ratios may underestimate the number of providers needed in an area. 

Similarly, although DOD has certain requirements governing beneficiary 

access to available providers, the information reported to DOD on this 

access is often incomplete--making it difficult to assess compliance 

with the requirements. Finally, when beneficiaries complain about 

availability or access in their network, these complaints can be 

directed to different DOD entities, with no guarantee that the 

complaints will be compiled and analyzed in the aggregate to identify 

possible trends or patterns and correct network problems.



Required Provider-to-Beneficiary Ratios May Not Account for Actual 

Number of Beneficiaries or Availability of Providers:



In some cases, the provider-to-beneficiary ratios underestimate the 

number of providers, particularly specialists, needed in an area. This 

underestimation occurs because in calculating the ratios, the 

contractors do not always include the total number of Prime enrollees 

within the area. Instead, they base their ratio calculations on the 

total number of beneficiaries enrolled with civilian PCMs and do not 

count beneficiaries enrolled with PCMs in MTFs. The ratio is most 

likely to result in an underestimation of the need for providers in 

areas in which the MTF is a clinic or small hospital with a limited 

availability of specialists.



Moreover, in reporting whether their network meets the established 

ratios, different contractors make assumptions about the level of 

participation on the part of civilian network providers. These 

assumptions may or may not be accurate, and the assumptions have a 

significant effect on the number of providers required in the network. 

Contractors generally assume that between 10 to 20 percent of their 

providers’ practices are dedicated to TRICARE Prime beneficiaries. 

Therefore, if a contractor assumes 20 percent of all providers’ 

practices are dedicated to TRICARE Prime rather than 10 percent, the 

contractor will need half as many providers in the network in order to 

meet the prescribed ratio standard.



Information Reported on Access Standards Was Incomplete:



In the network adequacy reports we reviewed, managed care support 

contractors did not always report all the information required by DOD 

to assess compliance with the access standards. Specifically, for the 

network adequacy reports we reviewed from 5 of the 11 TRICARE regions, 

we found that contractors reported less than half of the required 

information on access standards for appointment wait, office wait, and 

travel times. Some contractors reported more information than others, 

but none reported all the required access information. Contractors said 

they had difficulties in capturing and reporting information to 

demonstrate compliance with the access standards. Additionally, two 

contractors collected some access information, but the lead agents 

chose not to use it.



Beneficiary Complaints Are Not Systematically Collected and Evaluated:



Most of the DOD lead agents we interviewed told us that because 

information on access standards is not fully reported, they monitor 

compliance with the access standards by reviewing beneficiary 

complaints. Beneficiaries can complain about access to care either 

orally or in writing to the relevant contractor, their local MTF, or 

the regional lead agent. Because beneficiary complaints are received 

through numerous venues, often handled informally on a case-by-case 

basis, and not centrally evaluated, it is difficult for DOD to assess 

the extent of any systemic access problems. TMA has a central database 

of complaints it has received, but complaints directed to MTFs, lead 

agents, or contractors may not be directed to this database.



While contractor and lead agent officials told us they have received 

few complaints about network problems, this small number of complaints 

could indicate either an overall satisfaction with care or a general 

lack of knowledge about how or to whom to complain. Additionally, a 

small number of complaints, particularly when spread among many 

sources, limits DOD’s ability to identify any specific trends of 

systemic problems related to network adequacy within TRICARE.



DOD and Contractors Report Three Factors That May Contribute to Network 

Inadequacies:



DOD and contractors have reported three factors that may contribute to 

network inadequacy: geographic location, low reimbursement rates, and 

administrative requirements. While reimbursement rates and 

administrative requirements may have created dissatisfaction among 

providers, it is not clear how much these factors have affected network 

adequacy because the information the contractors provide to DOD is not 

sufficient to reliably measure network adequacy.



DOD and contractors have reported regional shortages for certain types 

of specialists in rural areas. For example, they reported shortages for 

endocrinology in the Upper Peninsula of Michigan and dermatology in New 

Mexico. Additionally, in some instances, TRICARE officials and 

contractors have reported difficulties in recruiting providers into the 

TRICARE Prime network because in some areas providers will not join 

managed care programs. For example, contractor network data indicate 

that there have been long-standing provider shortages in TRICARE in 

areas such as eastern New Mexico, where the lead agent stated that the 

providers in that area have repeatedly refused to join any network.



According to contractor officials, TRICARE Prime providers have 

expressed concerns about decreasing reimbursement rates. In addition, 

there have been reported instances in which groups of providers have 

banded together and refused to accept TRICARE patients due to their 

concerns with low reimbursement rates. One contractor identified low 

reimbursement rates as the most frequent cause of provider 

dissatisfaction. In addition to provider complaints, beneficiary 

advocacy groups, such as the Military Officers Association of America 

(MOAA), have cited numerous instances of providers refusing care to 

beneficiaries because of low reimbursement rates.



By statute, DOD cannot generally pay TRICARE providers more than they 

would be paid under the Medicare fee schedule. In certain situations, 

DOD has the authority to pay up to 115 percent of the Medicare fee to 

network providers.[Footnote 10] DOD’s authority is limited to instances 

in which it has determined that access to health care is severely 

impaired within a locality. In 2000, DOD increased reimbursement rates 

in rural Alaska in an attempt to entice more providers to join the 

network, but the new rates did not increase provider 

participation.[Footnote 11] In 2002, DOD increased reimbursement rates 

to 115 percent of the Medicare rate for the rest of Alaska. In 2003, 

DOD increased the rates for selected specialists in Idaho to address 

documented network shortcomings. In 1997, DOD also increased 

reimbursement rates for obstetrical care. These cases represent the 

only instances in which DOD has used its authority to pay above the 

Medicare rate.[Footnote 12] Because Medicare fees declined in 2002, and 

there is a potential for future reductions, some contractors are 

concerned that reimbursement rates may undermine the TRICARE network.



Contractors also report that providers have expressed dissatisfaction 

with some TRICARE administrative requirements, such as credentialing 

and preauthorizations and referrals. For example, many providers have 

complained about TRICARE’s credentialing requirements. In TRICARE, a 

provider must get recredentialed every 2 years, compared to every 3 

years for the private sector. Providers have said that this places 

cumbersome administrative requirements on them.



Another widely reported concern about TRICARE administrative 

requirements relates to preauthorization and referral requirements. 

Civilian PCM providers are required to get preauthorizations from MTFs 

before referring patients for specialized care. While preauthorization 

is a standard managed care practice, providers complain that obtaining 

preauthorization adversely affects the quality of care provided to 

beneficiaries because it takes too much time. In addition, civilian 

PCMs have expressed concern that they cannot refer beneficiaries to the 

specialist of their choice because of MTFs’ “right of first refusal” 

that gives an MTF discretion to care for the beneficiary or refer the 

care to a civilian provider.



Nevertheless, there are not direct data confirming that low 

reimbursement rates or administrative burdens translate into widespread 

network inadequacies. We found that out of the 2,156 providers who left 

one contractor’s network during a 1-year period, 900 providers cited 

reasons for leaving. Only 10 percent of these providers identified low 

reimbursement rates as a factor and only 1 percent cited administrative 

burdens.



New Contracts May Address Some Network Concerns, but May Create Others:



DOD’s new contracts for providing civilian health care, called TNEX, 

may address some network concerns raised by providers and 

beneficiaries, but may create other areas of concern. Because the new 

contracts are not expected to be finalized until June 2003, the 

specific mechanisms DOD and the contractors will use to ensure network 

adequacy are not known. DOD plans to retain the access standards for 

appointment and office wait times, as well as travel-time standards. 

However, instead of using provider-to-beneficiary ratios to measure 

network adequacy, TNEX requires that the network complement the 

clinical services provided by MTFs and promote access, quality, 

beneficiary satisfaction, and best value health care for the 

government.[Footnote 13] However, TNEX does not specify how this will 

be measured.



TNEX may reduce administrative burden related to provider credentialing 

and patient referrals. Currently, TRICARE providers must follow 

TRICARE-specific requirements for credentialing. In contrast, TNEX will 

allow for network providers to be credentialed through a nationally 

recognized accrediting organization. DOD officials stated this approach 

is more in line with industry practices. Patient referral procedures 

will also change under TNEX. Referral requirements will be reduced, but 

the MTFs will still retain the “right of first refusal.”:



On the other hand, TNEX may be creating a new administrative concern 

for contractors and providers by requiring that 100 percent of network 

claims submitted by providers be filed electronically. In fiscal year 

2002, only 25 percent of processed claims were submitted 

electronically.[Footnote 14] Contractors stated that such a requirement 

could discourage providers from joining or staying in their network. 

However, DOD states that electronic filing will cut claims-processing 

costs and save money.



Another concern that has been raised by beneficiary groups extends 

beyond the network and potentially impacts beneficiaries who use 

TRICARE Standard. TNEX will no longer require contractors to provide 

information to all beneficiaries, including Standard beneficiaries, 

about providers participating in their area and to assist them in 

accessing care. Under the existing contracts, contractors are required 

to provide beneficiaries with the name of at least one participating 

provider, offer to contact the provider on behalf of the beneficiary, 

and offer to contact at least three local providers if a participating 

provider is not available locally. In contrast, TNEX does not include 

these requirements. MOAA and other beneficiary groups are concerned 

about this omission because they have received an increasing number of 

complaints from their constituents related to difficulties in finding 

providers who accept TRICARE Standard beneficiaries.



Mr. Chairman, this concludes my prepared statement. I would be happy to 

answer any questions you or other Members of the Subcommittee may have.



Contacts and Acknowledgments:



For more information regarding this testimony, please contact me at 

(202) 512-7101. Kristi Peterson, Allan Richardson, Louise Duhamel, Marc 

Feuerberg, Krister Friday, Gay Hee Lee, and John Oh also made key 

contributions to this statement.



FOOTNOTES



[1] The military health system was funded at about $26.4 billion for 

fiscal year 2003. Approximately 20 percent of this amount, $5.2 

billion, was budgeted for the TRICARE civilian provider network.



[2] Pub. L. No. 107-314, .§712,116 Stat. 2458, 2588 (2002).



[3] Out of more than 8.7 million eligible beneficiaries, nearly half 

are enrolled in TRICARE Prime.



[4] A primary care manager is a provider or team of providers at an MTF 

or a provider in the civilian network to whom a beneficiary is assigned 

for primary care services when he or she enrolls in TRICARE Prime. 

Enrolled beneficiaries agree to initially seek all nonemergency, 

nonmental health care services from these providers.



[5] DOD’s policy is to optimize the use of the MTF. Accordingly, when a 

referral for specialty care is made by a civilian PCM, the MTF retains 

the “right of first refusal” to accommodate the beneficiary within the 

MTF or refer the beneficiary to the civilian provider network for the 

needed medical care.



[6] Catchment areas are geographic areas determined by the Assistant 

Secretary of Defense for Health Affairs that are defined by five-digit 

zip codes, usually within an approximate 40-mile radius of inpatient 

MTFs.



[7] Base realignment and closure (BRAC) sites are military 

installations that have been closed or realigned as the result of 

decisions made by the Commissions on Base Realignment and Closure.



[8] In addition, all four contractors chose to closely follow the 

Graduate Medical Education National Advisory Committee (GMENAC) 

recommendation for determining the specialty mix requirements for their 

network.



[9] 32 C.F.R. §199.17(p)(5)(2002). 



[10] See 32 C.F.R. §199.14(h)(1)(iv)(D),(E)(2002).



[11] U.S. General Accounting Office, Defense Health Care: Across-the-

Board Physician Rate Increase Would Be Costly and Unnecessary, 

GAO-01-620 (Washington, D.C.: May 24, 2002).



[12] Similarly in April 2002, DOD adopted a policy that will authorize 

a 10 percent bonus payment to select TRICARE providers working in 

medically underserved areas as defined by Health Resources and Services 

Administration, consistent with Medicare payment policy. DOD plans to 

implement the bonus payment in July 2003.



[13] DOD defines best value health care as high quality care delivered 

in the most economical manner for the military health system that 

optimizes the MTF system while delivering the highest level of customer 

service.



[14] This percentage does not include pharmacy claims or claims for 

care provided to Medicare-eligible beneficiaries under TRICARE For 

Life.