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entitled 'Medicare Subvention Demonstration: Pilot Satisfies 
Enrollees, Raises Cost and Management Issues for DOD Health Care' 
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United States General Accounting Office: 
GAO: 

Report to Congressional Committees: 

February 2002: 

Medicare Subvention Demonstration: 

Pilot Satisfies Enrollees, Raises Cost and Management Issues for DOD 
Health Care: 

GAO-02-284: 

Contents: 

Letter: 

Results in Brief: 

Background: 

Demonstration illustrated Retirees' Interest in Military Health Care,
Had Positive Impact on Enrollees: 

Demonstration Underscored Challenges in Managing Care and Costs Within 
the Military Health System: 

Concluding Observations: 

Agency Comments: 

Appendix I: Methodology for Evaluating the Subvention Demonstration: 

Appendix II: Senior Prime Enrollees' Previous Medicare Managed Care 
Plan Enrollment: 

Appendix III: Comments From the Department of Defense: 

Appendix IV: Comments From the Centers for Medicare and Medicaid 
Services: 

Appendix V: GAO Contacts and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Characteristics of Participating MTFs Varied: 

Table 2: Enrollment at the Subvention Demonstration Sites Varied: 

Table 3: Most Enrollees Cited Military Care as a Reason for Enrolling 
in Senior Prime: 

Table 4: Enrollees Cited Access to Care, Low Cost-Sharing as Positive 
Features of Senior Prime: 

Table 5: Most Nonenrollees Were Satisfied with Their Current Coverage: 

Table 6: The Percentage of Senior Prime Enrollees Who Switched from 
Another Medicare Managed Care Plan Varied by Site: 

Figures: 

Figure 1: As Senior Prime Enrollment Grew, Space-Available Care 
Declined: 

Abbreviations: 

BBA: Balanced Budget Act of 1997: 

CMS: Centers for Medicare and Medicaid Services: 

DEERS: Defense Enrollment Eligibility Reporting System: 

DOD: Department of Defense: 

DSH: disproportionate share hospital: 

GME: graduate medical education: 

HCFA: Health Care Financing Administration: 

LOE: level of effort: 

MTF: military treatment facility: 

NDAA: National Defense Authorization Act for Fiscal Year 2001: 

TMA: TRICARE Management Activity: 

TROA: The Retired Officers Association: 

[End of section] 

United States General Accounting Office: 
Washington, DC 20548: 

February 11, 2002: 

Congressional Committees: 

In recent years, the Congress has sought to improve health care 
benefits for Medicare-eligible military retirees. In the past, these 
retirees[Footnote 1] were not eligible for the Department of Defense's 
(DOD) TRICARE health care program and were able to get care from 
military treatment facilities (MTF) only when space was available. By 
law, DOD was not responsible for providing a full range of services to 
these Medicare-eligible retirees and could not receive payments from 
Medicare for those services that it provided them. The DOD Medicare 
subvention demonstration,[Footnote 2] established by the Balanced 
Budget Act of 1997 (BBA),[Footnote 3] was designed to test an 
alternate way of providing health care coverage to retirees through 
DOD. 

The demonstration allowed retirees to enroll in new DOD-run Medicare 
managed care plans, known as TRICARE Senior Prime, at six sites. The 
Senior Prime plans offered enrollees the full range of Medicare-
covered services as well as additional TRICARE services, with minimal
copayments. At the same time, Senior Prime gave enrollees improved 
access to MTF care. The demonstration authorized DOD to receive 
payment from Medicare if MTFs continued to spend as much on retirees 
as they had in the past. The demonstration, which began in 1998, was 
originally authorized for a 3-year period. 

During the demonstration period, new legislation altered the manner in 
which retirees receive health care coverage through DOD. Under 
provisions of the Floyd D. Spence National Defense Authorization Act 
for Fiscal Year 2001 (NDAA),[Footnote 4] military retirees age 65 and 
older became eligible for TRICARE coverage as of October 1, 2001. The 
NDAA also extended Senior Prime for 1 year, through December 2001, 
with the possibility of extension and expansion. DOD has decided, 
however, not to extend Senior Prime or implement it in other areas. 
Nonetheless, DOD's experience with Senior Prime illustrated issues 
that DOD may face in its future efforts to serve military retirees and 
other beneficiaries. 

The BBA directed us to evaluate the demonstration during its initially 
authorized period.[Footnote 5] The law required us to study a broad 
range of issues, including the demonstration's effects on 
beneficiaries, its costs to DOD and Medicare, and any difficulties 
that DOD encountered in managing the demonstration. As mandated by the 
BBA, we have issued a series of reports on the demonstration to date. 
[Footnote 6] This is our last report on the demonstration. Our 
objectives are to describe (1) the demonstration's appeal to 
beneficiaries, why some joined and others did not, and the reactions 
to the demonstration of those who joined and (2) difficulties DOD 
encountered in managing patient care and costs. 

To address these issues, we drew on our interviews with DOD and Health 
Care Financing Administration (HCFA)[Footnote 7] officials and our 
visits to the demonstration sites both during the start-up phase and 
toward the end of the initial demonstration period. In addition, we 
analyzed data from our mail survey of about 20,000 Medicare-eligible 
military retirees in the demonstration areas. We supplemented the 
survey data with reports and administrative data from DOD and HCFA, 
but did not independently verify their data (See appendix I for a 
discussion of our survey and methods.) 

Several features of the demonstration limit the generalizability of 
our findings. First, the demonstration sites are not representative of 
all MTF service areas. MTF resources are greater in the demonstration 
areas than in most other areas.[Footnote 8] In addition, sites' 
ability to support the demonstration was a factor in site selection. 
Second, the sites in many ways remained in a mode of implementing the 
demonstration; consequently, we were unable to observe Senior Prime in 
a period of routine operation. Third, our findings are particular to 
the context in which Senior Prime took place. As an important 
demonstration project, Senior Prime received a great deal of 
management attention at a limited number of locations; if it had been 
expanded nationwide, results might have differed. Finally, we cannot 
generalize retirees' demand for Senior Prime to their future demand 
for MTF care, in large part because retirees will be able to obtain 
care in the civilian sector with TRICARE covering most of their 
Medicare cost-sharing. 

Our evaluation of costs was confined to 1999, the first full year of 
the demonstration, because more recent data were not available in time 
for our analysis. Findings during this initial period would not 
necessarily apply fully were Senior Prime to continue. 

We performed our work from March 2001 through November 2001 in 
accordance with generally accepted government auditing standards. 

Results in Brief: 

The demonstration showed that retirees were interested in enrolling in 
low-cost military health plans and that DOD was able to satisfy its 
Senior Prime enrollees. By the close of the initial demonstration 
period, about 33,000 retirees—over one-fourth of those eligible—were 
enrolled in Senior Prime and more were on waiting lists. The access to 
military care that Senior Prime provided was particularly attractive 
to enrollees. Over 80 percent reported that they joined Senior Prime 
because they preferred military care. After enrolling, most retirees 
reported that they were able to get the care that they needed with 
minimal out-of-pocket costs. Few enrollees decided to leave Senior 
Prime. While enrollees were generally positive about the program, a 
minority reported difficulties getting care. When asked why they did 
not join Senior Prime, over 60 percent of nonenrollees said that they 
were satisfied with their existing health coverage, and few cited a 
dislike of military care. Before the demonstration, a minority of 
nonenrollees had relied on MTF care; under the demonstration, most of 
these nonenrollees experienced reduced access to military care. About 
40 percent of these retirees who had previously relied on MTFs said 
that they decided not to enroll in part because they expected to 
continue to get MTF care. 

While the demonstration had positive results for enrollees, it also 
highlighted three challenges confronting the military health system in 
managing patient care and costs. First, the demonstration revealed the 
need to manage care more efficiently: although DOD satisfied enrollees 
and gave them good access to care, in doing so it incurred high costs. 

These high costs were largely due to enrollees' heavy use of services, 
which substantially exceeded that of comparable Medicare 
beneficiaries. Although MTFs generally tried to restrain inappropriate 
utilization, some features of the military health system weakened 
their incentives to moderate utilization and costs. For example, MTFs 
could reduce care for nonenrollees when resources were strained. 
Senior Prime's low cost-sharing, although beneficial for enrollees, 
encouraged them to use services and made it more difficult for DOD to 
control utilization. Second, although DOD was able to establish and 
operate the demonstration, its efforts were hindered by limitations in 
its data and data systems. Officials had difficulty producing 
reliable, timely, and complete information on retirees' care. This 
hampered their ability to implement the demonstration's complex 
payment mechanism as well as to monitor enrollees' health care costs 
and utilization. While DOD is taking steps to improve its data, basic 
data problems—such as the inability to segregate costs for seniors—are 
pervasive and persistent. Finally, the demonstration illustrated the 
tension between the military health system's commitment to support 
military operations and promote the health of active-duty personnel 
and its commitment to provide care to civilians—dependents of active-
duty personnel, retirees and their families, and survivors. As Senior 
Prime illustrated, caring for seniors—who require more complex care 
than younger and healthier patient groups—can help prepare medical 
personnel to treat complex medical and surgical cases while deployed. 
However, providing care to civilians can also constrain MTFs' efforts 
to meet their military mission. For example, in selecting staff for 
deployment, MTFs sometimes avoided selecting clinicians with 
substantial civilian care responsibilities so civilian care would not 
be disrupted. Conversely, rotations and deployments can complicate the 
provision of care to civilians and reduce the continuity of their care. 

In commenting on a draft of this report, DOD said that the report 
identified some of the challenges it faced in implementing and 
managing the demonstration, while noting limitations in the report's 
generalizability as well as several issues concerning data systems. 
The Centers for Medicare and Medicaid Services (CMS) said that the 
report was accurate and met its objectives. 

Background: 

Two large health programs—-TRICARE and Medicare-—influenced the design 
and operation of the Medicare subvention demonstration. 

TRICARE: 

The military health system has three missions: (1) maintaining the 
health of active-duty service personnel, (2) medically supporting 
military operations, and (3) providing care to the dependents of 
active-duty personnel, retirees and their families, and survivors. In 
fiscal year 1999, DOD's annual appropriations included about $16 
billion for health care, of which over $1 billion funded the care of 
seniors. 

In the mid-1990s, DOD implemented the TRICARE framework for military 
health care in response to rapidly rising costs and beneficiary 
concerns about access to military care. Its goals were to improve 
beneficiary access and quality while containing costs. TRICARE offers 
health care coverage to approximately 6.6 million active-duty military 
personnel, retirees, dependents, and survivors under age 65. These 
beneficiaries have three main options: TRICARE Prime, a managed care 
option; TRICARE Extra, a preferred provider option; and TRICARE 
Standard, a fee-for-service option. A new option, TRICARE Plus, allows 
beneficiaries to enroll with a primary care provider at participating 
MTFs.[Footnote 9] TRICARE covers inpatient services, outpatient 
services such as physician visits and lab tests, and skilled nursing 
facility and other post-acute care. It also covers prescription drugs, 
which are available at MTFs, through DOD's National Mail Order 
Pharmacy, and at civilian pharmacies.[Footnote 10] TRICARE delivers 
care through over 600 MTFs-—such as medical centers, community 
hospitals, or major clinics that serve military installations—-and a 
network of civilian providers managed by DOD's managed care support 
contractors. Managed care support contractors also assist 
beneficiaries and support regional DOD management by providing 
services such as enrollment and utilization management. 

DOD Health Care for Medicare-Eligible Military Retirees: 

There are about 1.5 million retired military personnel, dependents, 
and survivors age 65 or older residing in the United States. About 
600,000 of these seniors live within 40 miles of an MTF. In the past, 
retirees had access to all MTF and network services through TRICARE 
until they turned age 65 and became eligible for Medicare, at which 
point they could only use military health care on a space-available 
basis—that is, when MTFs had unused capacity after caring for higher 
priority beneficiaries. In the 1990s, downsizing and changes in access 
policies led to reduced space-available care throughout the military 
health system. Moves to contain costs by relying more on military care 
and less on civilian providers under contract to DOD also contributed 
to the decrease in space-available care. As is the case today, MTF 
capacity varied from a full range of services at major medical centers 
to limited outpatient care at small clinics. Some retirees aged 65 or 
older relied heavily on military facilities for their health care, but 
most did not, and about 60 percent did not use military health care 
facilities at all. Retirees could obtain prescriptions from MTFs, but 
not from TRICARE's National Mail Order Pharmacy or network of civilian 
pharmacies. In addition to using these DOD resources, retirees could 
receive care paid for by Medicare and other public or private 
insurance for which they were eligible. 

Significant changes in retiree benefits and military health care 
occurred in 2001 as a result of the NDAA. This legislation gave older 
retirees two major benefits: 

* Pharmacy benefit. Effective April 1, 2001, retirees age 65 and older 
were given access to prescription drugs through TRICARE's National 
Mail Order Pharmacy and at civilian pharmacies.[Footnote 11] 

* TRICARE eligibility. Effective October 1, 2001, retirees age 65 and 
older enrolled in Medicare part B became eligible for TRICARE coverage—
commonly termed TRICARE For Life. As a result, TRICARE is now a 
secondary payer for these retirees' Medicare-covered services—paying 
most of their required cost-sharing. This includes copayments required 
of retirees enrolled in civilian Medicare managed care plans. Retirees 
are eligible to enroll in TRICARE Plus but are not allowed to enroll 
in TRICARE Prime. 

Medicare: 

Medicare is a federally financed health insurance program for persons 
age 65 and older, some people with disabilities, and people with end-
stage kidney disease. Eligible beneficiaries are automatically covered 
by part A, which covers inpatient hospital, skilled nursing facility 
and hospice care, as well as some home health care. They also can pay 
a monthly premium to join part B, which covers physician and 
outpatient services as well as those home health services not covered 
under part A. Traditional Medicare allows beneficiaries to choose any 
provider that accepts Medicare payment and requires beneficiaries to 
pay for part of their care. Most beneficiaries have supplemental 
coverage that reimburses them for many of the costs that Medicare 
requires them to pay. Major sources of this coverage include employer-
sponsored health insurance; "Medigap" policies, sold by private 
insurers to individuals; and Medicaid, a joint federal-state program 
that finances health care for low-income people. 

The alternative to traditional Medicare, Medicare+Choice, offers 
beneficiaries the option of enrolling in managed care or other private 
health plans. All Medicare+Choice plans cover basic Medicare benefits, 
and many also cover additional benefits such as prescription drugs. 
Typically, Medicare+Choice managed care plans have limited cost-
sharing but restrict members' choice of providers and may require an 
additional monthly premium. 

The Medicare Subvention Demonstration: 

Under the Medicare subvention demonstration, DOD established and 
operated six Medicare+Choice managed care plans, called TRICARE Senior 
Prime, at sites selected jointly by DOD and HCFA. Enrollment in Senior 
Prime was open to military retirees enrolled in Medicare part A and 
part B who resided within roughly 40 miles of a participating MTF. 
About 125,000 retirees were eligible for the demonstration. DOD capped 
enrollment at about 28,000 for the demonstration as a whole; each MTF 
had its own enrollment cap. In addition, retirees enrolled in TRICARE 
Prime who had a primary care provider at a demonstration MTF could 
"age in" to Senior Prime upon reaching age 65, even if MTFs' 
enrollment caps had been reached. 

Senior Prime offered enrollees the full range of Medicare-covered 
services as well as additional TRICARE services, notably prescription 
drugs. It also gave them higher priority for care at MTFs than 
retirees who did not join the program. Enrollees paid the Medicare 
part B premium, but no additional premium to DOD.[Footnote 12] Care at 
MTFs was free of charge, but enrollees had to pay any applicable cost-
sharing amounts when MTFs referred them to the civilian network for 
care (for example, $12 for an office visit). All primary care was 
provided at MTFs, but DOD purchased some hospital and specialty care 
from the civilian network. Purchased care was used for services not 
available at MTFs as well as when MTFs did not have sufficient 
capacity in particular specialties. 

Although the demonstration was authorized to begin in January 1998, 
implementation was delayed, and the first site began delivering care 
in September 1998. All sites were operational by January 1999. The six 
demonstration sites are in different regions of the country and 
include 10 MTFs that vary in size and types of services offered (see 
table 1), as well as by managed care penetration in the local Medicare 
market. The five medical centers offer a wide range of inpatient 
services and specialty care as well as primary care. They accounted 
for over 75 percent of all enrollees in the demonstration. The two San 
Antonio medical centers had 38 percent of all enrollees. The four 
community hospitals have more limited capabilities, and the civilian 
network provided much of the specialty care. At Dover, the MTF is a 
clinic that offers only outpatient services, thus requiring all 
inpatient and specialty care to be obtained at another MTF or 
purchased from the civilian network. 

Table 1: Characteristics of Participating MTFs Varied: 

Demonstration site, location of military treatment facility: Colorado 
Springs; Fort Carson, Colorado Springs, Colorado; 
Facility type: Community hospital; 
Eligible retirees[A]: 6,530; 
Total enrollment[B]: 2,371
Percentage of demonstrationwide enrollment: 7%. 

Demonstration site, location of military treatment facility: Colorado 
Springs; U.S. Air Force Academy, Colorado Springs, Colorado; 
Facility type: Community hospital; 
Eligible retirees[A]: 8,458; 
Total enrollment[B]: 1,750; 
Percentage of demonstrationwide enrollment: 5%. 

Demonstration site, location of military treatment facility: Dover; 
Dover Air Force Base, Dover, Delaware; 
Facility type: Clinic; 
Eligible retirees[A]: 3,894[C]; 
Total enrollment[B]: 1,062; 
Percentage of demonstrationwide enrollment: 3%. 

Demonstration site, location of military treatment facility: Keesler; 
Keesler Air Force Base, Biloxi, Mississippi; 
Facility type: Medical center; 
Eligible retirees[A]: 8,309; 
Total enrollment[B]: 3,507; 
Percentage of demonstrationwide enrollment: 11%. 

Demonstration site, location of military treatment facility: Madigan; 
Fort Lewis, Tacoma, Washington; 
Facility type: Medical center; 
Eligible retirees[A]: 21,072; 
Total enrollment[B]: 4,674; 
Percentage of demonstrationwide enrollment: 14%. 

Demonstration site, location of military treatment facility: San 
Antonio; San Antonio Area; Fort Sam Houston, San Antonio, Texas; 
Facility type: Medical center; 
Eligible retirees[A]: 21,354; 
Total enrollment[B]: 5,928; 
Percentage of demonstrationwide enrollment: 18%. 

Demonstration site, location of military treatment facility: San 
Antonio; San Antonio Area; Lackland Air Force Base, San Antonio, Texas; 
Facility type: Medical center; 
Eligible retirees[A]: 15,153; 
Total enrollment[B]: 6,523; 
Percentage of demonstrationwide enrollment: 10%. 

Demonstration site, location of military treatment facility: Texoma 
Area; Sheppard Air Force Base, Wichita Falls, Texas; 
Facility type: Community hospital; 
Eligible retirees[A]: 2,820; 
Total enrollment[B]: 1,074; 
Percentage of demonstrationwide enrollment: 3%. 

Demonstration site, location of military treatment facility: Texoma 
Area; Fort Sill, Lawton, Oklahoma; 
Facility type: Community hospital; 
Eligible retirees[A]: 4,873; 
Total enrollment[B]: 1,467; 
Percentage of demonstrationwide enrollment: 4%. 

Demonstration site, location of military treatment facility: San 
Diego; San Diego, California; 
Facility type: Medical center; 
Eligible retirees[A]: 34,485; 
Total enrollment[B]: 4,751; 
Percentage of demonstrationwide enrollment: 14%. 

Demonstration site, location of military treatment facility: Total; 
Eligible retirees[A]: 126,948; 
Total enrollment[B]: 33,107; 
Percentage of demonstrationwide enrollment: 100%[D]. 

Note: Although the law specifies six test sites, for the purpose of 
analysis we treat the San Antonio area and the Texoma area, which are 
roughly 300 miles apart, as separate sites. 

[A] As of December 31, 2000. 

[B] As of December 31, 2000. Total enrollment includes age-ins. 

[C] As of June 1998. 

[D] Percentages do not add to 100 due to rounding. 

Source: TRICARE Senior Prime Plan Operations Report (Washington, D.C.: 
DOD, Dec. 31, 2000). The number of eligible retirees (by site and 
total) is drawn from DOD's Defense Enrollment Eligibility Reporting 
System (DEERS). 

[End of table] 

The BBA established rules for Medicare to follow in paying DOD for 
Senior Prime care. It authorized Medicare to pay DOD in a way that was 
similar to the way it pays civilian Medicare+Choice plans, with 
several major exceptions: 

* Senior Prime's capitation rate—a fixed monthly payment for each 
enrollee—differed from the Medicare+Choice rate in several ways. The 
Senior Prime rate was set at 95 percent of the rate that Medicare 
would pay civilian Medicare+Choice plans in the demonstration areas, 
consistent with a belief that DOD could provide care at lower cost 
than the private sector. The rate was further adjusted by excluding 
the part of the Medicare+Choice rate that reflects graduate medical 
education (GME) and disproportionate share hospital (DSH) payments, 
[Footnote 13] as well as a percentage of payments made for hospitals' 
capital costs. The GME exclusion took into account the fact that GME 
in the military health system is funded by DOD appropriations, and the 
DSH exclusion recognized that DOD medical facilities do not treat the 
low-income patients for whom DSH payments compensate hospitals. The 
law directed HCFA and DOD to determine the amount of the capital 
adjustment, and the two agencies agreed to exclude two-thirds of the 
capital costs reflected in the Medicare+Choice rate. 

* The Senior Prime capitation rate was to be adjusted if there was 
"compelling" evidence that enrollees were healthier or sicker than 
their Medicare fee-for-service counterparts. The adjustment was 
intended to reflect whether Senior Prime enrollees would be expected 
to be significantly more or less costly than the average Medicare 
beneficiary. HCFA and DOD agreed that if the difference between the 
adjusted and unadjusted payments equaled or exceeded 2.5 percent, then 
that would be compelling evidence that enrollees' health status 
differed from that of their Medicare counterparts. In that case, the 
Medicare payment would reflect the adjustment. 

* The BBA required that, before DOD could receive Medicare payment, 
participating MTFs must spend as much on care for retirees age 65 and 
older as they did prior to the demonstration. This threshold amount-—
termed DOD's baseline level of effort or LOE-—was intended to prevent 
the federal government from paying for the same care twice, through 
both DOD appropriations and Medicare. 

* The total amount that Medicare could pay DOD for the demonstration 
was capped at $50 million in 1998, $60 million in 1999, and $65 
million in 2000.[Footnote 14] 

The demonstration was initially scheduled to end in December 2000. The 
NDAA extended the demonstration for 1 year—through 2001—with the 
possibility of further extension and expansion. However, DOD allowed 
Senior Prime to end on December 31, 2001, because the new TRICARE For 
Life program provides health care coverage to older military retirees. 
DOD has stated that Senior Prime enrollees will have priority for 
enrollment in TRICARE Plus, which began at the former demonstration 
MTFs in January 2002. 

As authorized by the BBA, the demonstration was to include a second 
component—Medicare Partners. Under Medicare Partners, a demonstration 
MTF would be allowed to contract with civilian Medicare+Choice plans 
to provide selected MTF services to military retirees enrolled in the 
civilian plans. According to DOD, lack of interest among local 
Medicare+Choice plans was key to its decision not to implement the 
Medicare Partners program. Plans may have had little incentive to 
participate in Medicare Partners and pay for MTF care because retirees 
already were eligible for such care at DOD's expense—when space was 
available. 

Demonstration Illustrated Retirees' Interest in Military Health Care, 
Had Positive Impact on Enrollees: 

The demonstration showed that DOD health care plans based at MTFs 
could attract many retirees, particularly those who were recent users 
of military care. Retirees said they were attracted to Senior Prime by 
the quality and convenience of MTF care, as well as by the program's 
low cost-sharing. After enrolling, most reported that they were able 
to get the care that they needed at little expense. Most retirees who 
did not enroll in Senior Prime reported that they were satisfied with 
their existing health care coverage. 

Senior Prime Met Enrollees' Expectations for Access to MTFs, Quality 
Health Care, and Low Costs: 

Senior Prime's enrollment showed that there was substantial demand 
among retirees for DOD health care plans based at MTFs, and also that 
demand varied by site. By December 2000, Senior Prime had attracted 
roughly 33,000 enrollees—over one-fourth of all retirees eligible to 
join. (See table 2.) Over 6,500 of these enrollees had aged-in from 
TRICARE Prime after turning age 65.[Footnote 15] The percentage of 
eligible retirees who enrolled varied significantly, from 14 percent 
at San Diego to over 40 percent at Keesler and Lackland Air Force 
Base.[Footnote 16] However, these figures understate retirees' 
interest in Senior Prime: during the demonstration, 6 of the 10 MTFs 
reached their maximum enrollment and had to establish waiting lists. 

Table 2: Enrollment at the Subvention Demonstration Sites Varied: 

Demonstration site, location of military treatment facility: Colorado 
Springs; Fort Carson, Colorado Springs, Colorado; 
Facility type: Community hospital; 
Eligible retirees[A]: 6,530; 
Total enrollment[B]: 2,371
Percentage of eligible retirees enrollment: 36%. 

Demonstration site, location of military treatment facility: Colorado 
Springs; U.S. Air Force Academy, Colorado Springs, Colorado; 
Facility type: Community hospital; 
Eligible retirees[A]: 8,458; 
Total enrollment[B]: 1,750; 
Percentage of eligible retirees enrollment: 21%. 

Demonstration site, location of military treatment facility: Dover; 
Dover Air Force Base, Dover, Delaware; 
Facility type: Clinic; 
Eligible retirees[A]: 3,894[C]; 
Total enrollment[B]: 1,062; 
Percentage of eligible retirees enrollment: 27%. 

Demonstration site, location of military treatment facility: Keesler; 
Keesler Air Force Base, Biloxi, Mississippi; 
Facility type: Medical center; 
Eligible retirees[A]: 8,309; 
Total enrollment[B]: 3,507; 
Percentage of eligible retirees enrollment: 42%. 

Demonstration site, location of military treatment facility: Madigan; 
Fort Lewis, Tacoma, Washington; 
Facility type: Medical center; 
Eligible retirees[A]: 21,072; 
Total enrollment[B]: 4,674; 
Percentage of eligible retirees enrollment: 22%. 

Demonstration site, location of military treatment facility: San 
Antonio; San Antonio Area; Fort Sam Houston, San Antonio, Texas; 
Facility type: Medical center; 
Eligible retirees[A]: 21,354; 
Total enrollment[B]: 5,928; 
Percentage of eligible retirees enrollment: 28%. 

Demonstration site, location of military treatment facility: San 
Antonio; San Antonio Area; Lackland Air Force Base, San Antonio, Texas; 
Facility type: Medical center; 
Eligible retirees[A]: 15,153; 
Total enrollment[B]: 6,523; 
Percentage of eligible retirees enrollment: 43%. 

Demonstration site, location of military treatment facility: Texoma 
Area; Sheppard Air Force Base, Wichita Falls, Texas; 
Facility type: Community hospital; 
Eligible retirees[A]: 2,820; 
Total enrollment[B]: 1,074; 
Percentage of eligible retirees enrollment: 38%. 

Demonstration site, location of military treatment facility: Texoma 
Area; Fort Sill, Lawton, Oklahoma; 
Facility type: Community hospital; 
Eligible retirees[A]: 4,873; 
Total enrollment[B]: 1,467; 
Percentage of eligible retirees enrollment: 30%. 

Demonstration site, location of military treatment facility: San 
Diego; San Diego, California; 
Facility type: Medical center; 
Eligible retirees[A]: 34,485; 
Total enrollment[B]: 4,751; 
Percentage of eligible retirees enrollment: 14%. 

Demonstration site, location of military treatment facility: Total; 
Eligible retirees[A]: 126,948; 
Total enrollment[B]: 33,107; 
Percentage of eligible retirees enrollment: 26%. 
		
[A] As of December 31, 2000. 

[B] As of December 31, 2000. Total enrollment includes age-ins. 

[C] As of June 1998. 

Source: TRICARE Senior Prime Plan Operations Report (Washington, D.C.: 
DOD, Dec. 31, 2000). The number of eligible retirees (by site and 
total) is drawn from DEERS. 

[End of table] 

Senior Prime's strong link to military care was particularly 
attractive to retirees. When asked why they wanted to join Senior 
Prime, enrollees most often cited reasons related to military care, 
such as the quality of care at MTFs, a preference for military care, 
and the convenience of local MTFs. (See table 3.) Most enrollees had 
used MTFs to some extent the year before enrolling in the program, and 
about 60 percent had relied on these facilities for most or all of 
their care. In part, this reflected the design of the program. To be 
eligible for Senior Prime, retirees must have used military care since 
becoming Medicare-eligible.[Footnote 17] However, DOD relied on 
retirees' answers to a question about prior MTF use and did not verify 
their answers. Over half of enrollees believed that by joining Senior 
Prime they would be able to get appointments at MTFs more easily. This 
is not surprising, given that Senior Prime offered retirees the same 
priority access to MTFs as younger retirees enrolled in TRICARE Prime. 
Senior Prime attracted some retirees—about 3,500—who had not recently 
used MTFs; most of these retirees nonetheless cited a preference for 
military care. Retirees who were attracted to Senior Prime varied in 
their health care coverage before the demonstration. About 30 percent 
had had traditional Medicare exclusively. The remainder had had 
supplemental insurance coverage in addition to traditional Medicare or 
were enrolled in a civilian Medicare managed care plan.[Footnote 18] 

Table 3: Most Enrollees Cited Military Care as a Reason for Enrolling 
in Senior Prime: 

Reason: I receive high quality health care at military health care 
facilities; 
Percentage who cited as a reason for enrolling[A]: 82%; 
Percentage who cited as the main reason for enrolling[B]: 36%. 

Reason: I prefer military health care over nonmilitary health care; 
Percentage who cited as a reason for enrolling[A]: 81%; 
Percentage who cited as the main reason for enrolling[B]: 28%. 

Reason: The military health care facility is the most convenient place 
for me to receive care; 
Percentage who cited as a reason for enrolling[A]: 76%; 
Percentage who cited as the main reason for enrolling[B]: 14%. 

Reason: I will be able to get appointments at military health care 
facilities more easily; 
Percentage who cited as a reason for enrolling[A]: 56%; 
Percentage who cited as the main reason for enrolling[B]: 4%. 

Reason: The doctors have a good reputation; 
Percentage who cited as a reason for enrolling[A]: 55%; 
Percentage who cited as the main reason for enrolling[B]: 1%. 

Reason: It will save me money on health care; 
Percentage who cited as a reason for enrolling[A]: 54%; 
Percentage who cited as the main reason for enrolling[B]: 8%. 

Reason: I will have better benefits or coverage; 
Percentage who cited as a reason for enrolling[A]: 52%; 
Percentage who cited as the main reason for enrolling[B]: 3%. 

Notes: Retirees were asked why they wanted to enroll in Senior Prime 
and were given a list of possible reasons as well as an "Other" option 
in which they could write their own answers. Retirees first circled as 
many reasons as applied to them and then indicated which was their 
main reason for enrolling. These data are from our survey of enrollees 
at the start of the demonstration. Retirees who enrolled later in the 
demonstration, including age-ins from TRICARE Prime, gave similar 
reasons for joining the program. Many also indicated that they had 
done so because it was easy to move to Senior Prime from TRICARE Prime 
or because they had liked TRICARE Prime. 

[A] Percentages do not add to 100 because respondents could select 
more than 1 reason. 

[B] Percentages do not add to 100 because only the top 7 reasons are 
listed. 

Source: GAO survey of military retirees. 

[End of table] 

Although less important than the link to military care, other features 
of Senior Prime also appealed to retirees. The program's low cost-
sharing was attractive to retirees; about half of enrollees saw 
joining Senior Prime as a way to save money on health care expenses. 
This was true even though many enrollees had only minimal out-of-
pocket costs before joining the program, due in part to their use of 
free MTF care. In addition, about half of enrollees saw joining Senior 
Prime as a way to obtain improved health care benefits or coverage. 

After enrolling in Senior Prime, retirees reported that they were able 
to get the care that they needed at little expense. When asked what 
they liked about Senior Prime, the majority of enrollees cited access-
related features such as the ability to get all the care that they 
needed and the ability to get appointments when needed. (See table 4.) 
This is not surprising, given that enrollees had more hospital stays 
and outpatient visits than before the demonstration and used 
significantly more services than their Medicare fee-for-service 
counterparts. Enrollees also reported that they received good care at 
their MTFs and that they liked their MTF doctors. Despite their heavy 
use of services, most enrollees also were pleased with the low cost of 
their care. They reported few financial barriers to obtaining care and 
that their spending on health care services was minimal. About two-
thirds of enrollees reported no out-of-pocket costs; their costs were 
low even at smaller sites where network care, which required 
copayments, was more common. 

Table 4: Enrollees Cited Access to Care, Low Cost-Sharing as Positive 
Features of Senior Prime: 

Reason: I get all the care that I need; 
Percentage who cited as something they liked about Senior Prime[A]: 
88%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 22%. 

Reason: I do not have to pay (or pay very much) for care; 
Percentage who cited as something they liked about Senior Prime[A]: 
81%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 7%. 

Reason: I am able to get an appointment when needed; 
Percentage who cited as something they liked about Senior Prime[A]: 
81%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 13%. 

Reason: I do not have to submit bills; 
Percentage who cited as something they liked about Senior Prime[A]: 
81%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 2%. 

Reason: When I go for appointments, I do not wait long; 
Percentage who cited as something they liked about Senior Prime[A]: 
79%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 2%. 

Reason: I like my primary care doctor; 
Percentage who cited as something they liked about Senior Prime[A]: 
77%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 7%. 

Reason: The MTF is convenient to where I live; 
Percentage who cited as something they liked about Senior Prime[A]: 
74%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 3%. 

Reason: I like seeing MTF doctors; 
Percentage who cited as something they liked about Senior Prime[A]: 
73%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 6%. 

Reason: I receive good care at the MTF; 
Percentage who cited as something they liked about Senior Prime[A]: 
71%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 23%. 

Reason: Senior Prime is less expensive than civilian care; 
Percentage who cited as something they liked about Senior Prime[A]: 
69%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 3%. 

Reason: I can get all my care at MTFs; 
Percentage who cited as something they liked about Senior Prime[A]: 
67%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 8%. 

Reason: I like specialists at the MTF; 
Percentage who cited as something they liked about Senior Prime[A]: 
57%. 
Percentage who cited as the main thing they liked about Senior 
Prime[B]: 2%. 

Notes: Toward the end of the demonstration, retirees were asked what 
they liked about Senior Prime and were given a list of possible items 
as well as an "Other" option in which they could write their own 
answers. Retirees first circled as many items as applied to them and 
then indicated which was the main item. 

[A] Percentages do not add to 100 because respondents could select 
more than 1 reason. 

[B] Percentages do not add to 100 due to rounding. 

Source: GAO survey of military retirees. 

[End of table] 

Once enrolled, relatively few retirees decided to leave Senior Prime—
another indication of enrollees' satisfaction with the program. Early 
in the demonstration, the enrollment rates were relatively low 
compared with other Medicare managed care plans.[Footnote 19] 
Disenrollment remained low throughout the demonstration, averaging 
about 2 percent during the last year of the initial demonstration 
period. 

Although retirees generally were positive about Senior Prime, some 
reported difficulties. Over 70 percent of enrollees reported that 
there was nothing about the program that they disliked. Very few 
enrollees reported that they did not like their doctors, that they did 
not get good care at MTFs, or that Senior Prime refused them 
treatment. However, 13 percent of enrollees reported that they did not 
like having to wait too long to get an appointment, 13 percent cited 
not being able to see the same primary care doctor every time, and 8 
percent cited difficulty making appointments. In addition, among those 
few who disenrolled from Senior Prime, the most commonly cited reasons 
for doing so were these same three access-related difficulties as well 
as the inability to use regular Medicare benefits while enrolled in 
the program—that is, the inability to have Medicare pay for services 
not authorized by Senior Prime. 

Most Nonenrollees Were Satisfied with Their Existing Health Coverage: 

Most retirees who did not enroll in Senior Prime reported that they 
were already satisfied with their existing health care coverage, and 
few cited negative attitudes about military care. When asked why they 
did not try to enroll in Senior Prime, over 60 percent of nonenrollees 
cited satisfaction with their current coverage. (See table 5.) About 
one-third said they did not have enough information about Senior Prime 
or did not understand it. Although the sites used many means of 
providing information about Senior Prime to local retirees, many 
retirees surveyed early in the demonstration had not previously heard 
of the program. The lack of information about Senior Prime remained an 
issue later in the demonstration as well; at the end of the 
demonstration, many retirees still reported this as one reason for not 
wanting to enroll. Other major reasons for not enrolling included not 
wanting to join a managed care organization and the belief that Senior 
Prime might not be permanent.[Footnote 20] Few nonenrollees—about 9 
percent—reported that they decided not to join Senior Prime because 
they disliked military care. 

Table 5: Most Nonenrollees Were Satisfied with Their Current Coverage: 

Reason: I am satisfied with my current coverage; 
Percentage who cited as a reason for not enrolling[A]: 62%; 
Percentage who cited as the main reason for not enrolling[B]: 44%. 

Reason: I have not received enough information on Senior Prime; 
Percentage who cited as a reason for not enrolling[A]: 30%; 
Percentage who cited as the main reason for not enrolling[B]: 13%. 

Reason: I do not understand Senior Prime; 
Percentage who cited as a reason for not enrolling[A]: 30%; 
Percentage who cited as the main reason for not enrolling[B]: 11%. 

Reason: I do not want to join a managed care organization; 
Percentage who cited as a reason for not enrolling[A]: 24%; 
Percentage who cited as the main reason for not enrolling[B]: 10%. 

Notes: Retirees were asked why they did not try to enroll in Senior 
Prime and were given a list of possible reasons as well as an "Other" 
option in which they could write their own answers. Retirees first 
circled as many reasons as applied to them and then indicated which 
was their main reason for not enrolling. These data are from our 
survey at the start of the demonstration. Retirees who became eligible 
later in the demonstration cited similar reasons for not enrolling. 

[A] Percentages do not add to 100 because respondents could select 
more than 1 reason. 

[B] Percentages do not add to 100 because only the top 4 reasons are 
listed. 

Source: GAO survey of military retirees. 

[End of table] 

Nonenrollees' access to care was generally unaffected by the
demonstration, but among the minority who had previously relied on 
military care, most experienced reduced access to MTFs.[Footnote 21] 
When asked at the start of the demonstration why they had not joined 
Senior Prime, many of the nonenrollees—almost 40 percent—who were 
later "crowded out" of MTFs had said that they were able to get 
military health care when they needed it. This suggests that they did 
not foresee that space-available care would decline as a result of the 
demonstration. By the end of the demonstration, about 20 percent of 
those who were crowded out had tried to join Senior Prime. However, 
most sites had reached their enrollment caps, and retirees who applied 
after the caps were reached were placed on a waiting list. 

Demonstration Underscored Challenges in Managing Care and Costs Within 
the Military Health System: 

While the demonstration had positive results for enrollees, it also 
highlighted several challenges that confront the military health 
system in managing patient care and costs. The high costs generated by 
enrollees' care revealed the need to deliver care more efficiently. In 
addition, difficulties encountered in obtaining and managing data 
during the demonstration underscored problems that DOD officials 
generally face in monitoring patient care and costs. Finally, the 
demonstration illustrated the tensions between the military health 
system's commitment to care for active-duty personnel and support 
military operations and its commitment to provide care to civilian 
family members and retirees. 

High Senior Prime Costs Are Associated with Weak Incentives for 
Managing Care: 

Senior Prime's experience revealed the need to deliver care more 
efficiently, and differences in sites' utilization suggested that this 
might be possible. Although DOD satisfied its new senior enrollees and 
gave them good access to care, it incurred high costs in doing so. 
[Footnote 22] These high costs were largely due to enrollees' heavy 
use of medical services, which substantially exceeded that of 
comparable Medicare beneficiaries.[Footnote 23] If DOD had delivered 
fewer services, it is possible that enrollees would have been less 
satisfied. However, we found that the number of outpatient visits by 
enrollees affected their satisfaction with care only slightly.
Furthermore, substantial site differences in utilization—with little 
difference in enrollee satisfaction—provide evidence that some sites 
were able to satisfy enrollees with fewer services and, consequently, 
lower costs. This suggests that other sites could have reduced 
utilization somewhat without sacrificing enrollee satisfaction. 

Although sites' costs varied, managers at all sites faced similar 
disincentives to containing utilization and costs. MTFs generally 
tried to restrain inappropriate utilization, but basic features of the 
military health system's financial and management practices weakened 
their incentives to moderate utilization and costs. First, while MTFs 
cannot spend more than their budget, several factors act as safety 
valves for budgetary pressure: 

* The primary factor is space-available care: when resources required 
for enrollees increase, space-available care declines and those who 
are not enrolled are less able to get MTF care. This was observed 
during the demonstration: as Senior Prime enrollment climbed, the 
amount of space-available care provided to nonenrolled seniors 
decreased. (See figure 1.) 

Figure 1: As Senior Prime Enrollment Grew, Space-Available Care 
Declined: 

[Refer to PDF for image: multiple line graph] 

The graph plots the amount of space-available care (dollars in 
thousands) and: Senior Prime enrollment during the time period of 
January 1999 through December 2000. 

Note: Space-available care is expressed as a centered 3-month moving 
average. 

Source: GAO analysis of Databook for TRICARE Senior Prime 
Demonstration Sites (Washington, D.C.: DOD, Aug. 10, 2001). 

[End of table] 

* MTFs can request supplemental funding from their respective 
services. During the demonstration, every MTF requested supplemental 
funding either for Senior Prime specifically or for the MTF generally, 
and all received some added funds. Although MTFs cannot always count 
on receiving such funding, the potential to obtain extra funds reduces 
incentives for moderating utilization. 

* MTFs can try to defer some utilization until the following fiscal 
year—for example, by postponing elective surgery or issuing 
prescriptions on a 60-day rather than a 90-day basis. At the end of 
fiscal year 2000, officials from several sites told us that they were 
considering this approach to staying within their budgets, and at the 
time of our visits at least one had implemented it. 

Second, MTFs have no direct financial incentive to manage care 
purchased from the civilian network. At the local level, MTF providers 
refer patients for services that, depending on MTF resources and 
capacity, may be obtained from network providers. However, MTFs are 
not directly responsible for the costs of network claims; DOD funds 
purchased care centrally, thereby reducing sites' incentive to trim 
unnecessary network utilization.[Footnote 24] An additional factor 
unique to the demonstration was the lack of incentives for the managed 
care support contractors to limit utilization in Senior Prime. Under 
the demonstration, these contractors authorized network services but 
bore no risk for the costs of enrollees' care. Consequently, they had 
no financial incentive to limit use of specialists
and other civilian network providers.[Footnote 25] 

Third, Senior Prime's low cost-sharing, although beneficial for 
enrollees, limited DOD's ability to control utilization and costs. 
Research has shown that patients tend to use more care when their out-
of-pocket expenses are low.[Footnote 26] Therefore, copayments tend to 
encourage patients to curb their use of health care services. In 
Senior Prime, however, there were few financial incentives for 
enrollees to reduce their use of health care services. Enrollees had 
no annual deductible; furthermore, care within MTFs, where most 
services were delivered, was free and copayments for visits to network 
providers were small.[Footnote 27] 

Finally, practice patterns among military physicians may also explain 
part of the high costs and utilization seen in Senior Prime. High 
utilization is not unique to the demonstration: studies have shown 
that the military health system has higher utilization than the 
civilian sector.[Footnote 28] As with civilian physicians, military 
physicians' training, experience, and the practice style of their 
colleagues affect their use of procedures and tests, their readiness 
to hospitalize patients, as well as their recommendations to patients 
about follow-up visits and referrals to specialists.[Footnote 29] 

Limitations in Data and Data Systems Posed Problems for DOD Managers: 

Although DOD was able to establish and operate the demonstration, its 
efforts were hampered by limitations in its data and data systems. 
Throughout the demonstration, officials had difficulty producing 
reliable, timely, and comprehensive information on retirees' care. 
This hampered their ability both to implement the demonstration's 
payment mechanism and to monitor enrollees' health care costs and 
utilization. 

DOD's experience with the demonstration's payment mechanism 
illustrated DOD's problems with data and data systems. At the 
beginning of the demonstration, DOD needed to determine the cost of 
the care that participating MTFs had provided to military retirees 
prior to Senior Prime—an amount referred to as DOD's baseline level of 
effort or LOE. This step was critical in determining how much payment, 
if any, DOD would earn from Medicare. However, DOD's data systems did 
not permit it to isolate the costs of retirees' previous MTF care, and 
DOD had to undertake a substantial effort to estimate its baseline LOE—
an effort made more difficult by deficiencies in the source data on 
MTF costs. The payment mechanism also required DOD to collect 
information on enrollees' inpatient and outpatient diagnoses to 
determine whether enrollees were significantly more or less healthy 
than other Medicare beneficiaries—in which case, Medicare's payment to 
DOD would be adjusted. DOD and HCFA agreed to use a method of 
assessing enrollees' health status that involved both inpatient and 
outpatient data. DOD took over 1 year to assemble the final data and 
later stated that the outpatient data may have omitted certain items 
and may have contained coding errors. Overall, although DOD completed 
the tasks necessary to implement the payment mechanism, its efforts 
consumed considerable time and resources due to data problems. 

DOD's data systems were not well-suited to monitoring health care 
costs and utilization—an impediment to effective management. At the 
local level, data limitations reduced site officials' ability to 
monitor Senior Prime costs. At first, the sites operated with little 
information on the costs of enrollees' care. For care provided at 
MTFs, sites' data systems could not isolate costs specific to Senior 
Prime enrollees. For care provided outside MTFs, claims submitted by 
network providers recorded the costs of civilian care, but there were 
delays between the time services were provided and when complete 
claims data were available. About 1 year into the demonstration, cost 
information available to site officials improved. In the fall of 1999, 
DOD's TRICARE Management Activity (TMA)[Footnote 30] office began 
distributing periodic Senior Prime databooks, which provided 
information on enrollment, utilization, cost, and satisfaction for 
each site.[Footnote 31] Sites found that these databooks were a useful 
resource; for the first time, they were able to compare their sites' 
costs to the Senior Prime capitation rate. However, neither the 
databooks nor the systems on which they were based permitted the sites 
to identify the cases or practices that led to high costs. Moreover, 
the information was not timely—the lag was usually 6 months or more—
and changed over time as problems in underlying data and calculations 
were identified and corrected. For example, the databook reports on 
the costs of enrollees' care changed repeatedly as mistakes were 
uncovered and corrected, reducing confidence in comparisons to the 
Senior Prime capitation rate. 

Data limitations also hindered officials' ability to monitor 
enrollees' use of health care services. Sites had information on 
utilization, but had difficulty integrating data from MTF and network 
providers and encountered data of questionable accuracy. These 
problems undermined the ability of managers and physicians to obtain a 
comprehensive picture of the care provided to individuals or to groups 
of patients. In addition, site officials told us they had some 
difficulties using benchmark utilization rates from civilian managed 
care to help understand the patterns in Senior Prime utilization. They 
were sometimes uncertain about the quality and credibility of the 
underlying data used to generate Senior Prime measures, and often 
found that comparisons between Senior Prime and civilian rates were 
distorted by differences in clinical and coding practices.[Footnote 
32] Comparisons between the sites were also problematic. Some 
officials cited differences in coding practices as a partial 
explanation of site differences in utilization rates. 

While DOD is making efforts to improve its data and data systems, its 
fundamental data problems are pervasive and persistent. Key data-
related difficulties include inaccurate and incomplete data, systems 
that produce usable data only after substantial delays, and the 
inability to segregate costs for particular patient groups, such as 
seniors. In addition, DOD's separate, unconnected systems for 
recording inpatient and outpatient MTF care, and for MTF and network 
care, complicate data collection and analysis. Most important, the 
lack of strong incentives for MTFs to achieve efficiency in delivering 
care reduces officials' demand for improved data and related tools. 
Officials told us about efforts to improve data and data systems, some 
resulting directly from the demonstration. The demonstration's 
requirements for reporting quality and cost information, including the 
need for MTF commanders to certify data submitted to HCFA, led to 
increased scrutiny of data systems by national and local managers. 
Officials at several sites noted that the demonstration had stimulated 
MTF efforts to generate better data, for example, by more accurately 
recording and coding patient visits and diagnoses. In addition, DOD's 
new Data Quality Management Control program, initiated in November 
2000, introduced data quality as a formal management objective and 
made MTF commanders more accountable for their data.[Footnote 33] It 
is too early to tell whether DOD's recent efforts to make MTFs more 
accountable for data quality will have an impact that is systemwide 
and sustained. Although the new data quality program may give MTF 
managers added reason to improve their data, it does not alter their 
incentives for using those data. 

Demonstration Illustrated Tension between Military Mission and 
Civilian Care Responsibilities: 

The demonstration illustrated a central challenge confronting the 
military health system: dealing with the tensions that arise from its 
commitment to support military operations and care for active-duty 
personnel while providing care for their family members and retirees. 
As part of its mission, the military health system is responsible for 
medical support of military deployments, from small humanitarian 
engagements to major military actions. The military health system must 
ensure that clinicians and other medical personnel have the skills 
they need when deployed and must maintain the health of active-duty 
personnel. Like other large employers, DOD also provides health care 
coverage for the families of active-duty personnel and for retirees. 
Unlike most other employers, DOD provides much of its beneficiaries' 
care in its own facilities. Overall, MTFs' experiences during the 
demonstration highlighted ways in which the provision of care to 
civilians, in particular older retirees, can both support and hinder 
the military mission. It also illustrated the ways in which that 
mission complicates the delivery of civilian care. 

Senior Prime demonstrated that providing care to civilian 
beneficiaries can contribute to the mission of providing medical 
support for military operations. According to DOD, during wartime and 
peacetime military operations (such as humanitarian or peacekeeping 
missions), most cases encountered are commonplace medical or surgical 
conditions, not complex illnesses or injuries requiring specialized 
skills. Consequently, clinicians with broad general training and 
experience are able to manage most conditions they are likely to see. 
However, clinicians supporting military operations are likely to 
encounter some complex medical and surgical cases. They therefore need 
experience with patients requiring complex care—rather than young, 
generally healthy adults and children requiring routine care—to ensure 
that they are prepared to provide complex care in the field.[Footnote 
34] Senior Prime illustrated how seniors can contribute to the skills 
needed for deployment. MTF officials reported that enrollees gave 
medical staff experience with conditions that are relevant to both 
wartime and peacetime operations but are not typically seen among 
younger patient groups. Although the underlying causes of illness and 
injury differed from what would occur on the battlefield, seniors' 
needs for complex care, such as vascular and orthopedic surgery and 
intensive care, helped prepare staff to treat complex cases while 
deployed. Treating seniors also prepared staff for humanitarian 
missions, on which they may encounter individuals who are older or who 
have chronic conditions.[Footnote 35] 

However, as Senior Prime also demonstrated, providing civilian care 
can interfere with an MTF's efforts to meet its military medical 
mission. Not all services provided to civilians contribute directly to 
providers' preparedness for deployment. For example, according to 
officials at one MTF, under Senior Prime some specialists were 
providing more routine care to seniors and seeing fewer of the complex 
cases important for training, compared to before the demonstration. In 
addition, MTFs' responsibility for primary care influenced the 
selection of medical staff for deployments. Several MTFs chose to 
deploy specialists or others who were not primary care managers, 
rather than disrupt primary care teams and patients. In this way, 
civilian care posed a constraint for officials in meeting their 
primary mission. Finally, increased demands for care among civilian 
beneficiary groups have the potential to affect the care of active-
duty personnel—the primary population that the military health system 
is intended to serve. Although active-duty personnel receive priority 
for MTF care, the assignment of MTF appointment slots to civilians can 
affect how quickly active-duty personnel get care.[Footnote 36] During 
the demonstration, officials found little evidence that, at its small 
scale, Senior Prime had led to a decline in active-duty personnel's 
access to care or satisfaction with care.[Footnote 37] However, 
several officials either expressed concern that continued growth in 
the program could cause difficulties in the future or noted the strain 
resulting from MTFs' commitment to both active-duty and other patient 
groups. 

Conversely, the demonstration illustrated ways in which the military 
mission complicates civilian care and can increase costs. Medical 
personnel absences due to deployments, readiness training, and 
rotations complicated MTFs' efforts to ensure enrollees' access to and 
continuity of care, although the extent varied by site. During the 
demonstration, MTFs experienced temporary shortages in personnel 
important for seniors' care, including nursing staff and key 
specialists. Officials took steps to mitigate the effect of these 
absences on patient care, and enrollees had good access to care 
overall. However, they were not always able to see the same provider 
and at times were referred to civilian providers.[Footnote 38] 
Personnel absences had implications not only for patient care but also 
for DOD's costs, particularly when care had to be purchased from 
network providers. These costs could be significant if personnel 
absences occurred in large numbers or were extended over a long period. 

Concluding Observations: 

While the demonstration showed that DOD's new MTF-based health plans 
could attract and satisfy military retirees, it also highlighted 
challenges that DOD encountered in doing so. The issues DOD 
encountered in launching and implementing Senior Prime leave open the 
question of whether the program could have been successfully 
implemented on a larger scale. Although DOD has chosen not to continue 
Senior Prime, the demonstration offers lessons about managing the care 
of seniors and other beneficiary groups. 

The challenges revealed by the demonstration relate to DOD's 
management of health care delivery and costs within the broader 
military health system: 

* The high utilization and costs observed during the demonstration 
underscore the importance of designing incentives and management 
practices within DOD that promote efficient care—that is, the delivery 
of appropriate care and improved health outcomes while discouraging 
inappropriate utilization and costs. 

* As the demonstration illustrated, limitations in DOD data and 
information systems, as well as weak incentives for greater 
efficiency, are obstacles to managing military beneficiaries' health 
care use and costs. Data analysis could help managers target clinical 
and financial areas needing improvement. 

* The demonstration highlighted a strategic issue facing the military 
health system: how to reconcile its commitment as an employer to 
provide care to the families of active-duty personnel as well as 
retirees with its responsibility to provide medical support for 
military operations. 

Agency Comments: 

We provided DOD and CMS an opportunity to comment on a draft of this 
report, and both agencies provided written comments. DOD said that the 
report identified some of the challenges it faced in implementing and 
managing the demonstration and that the report appropriately noted 
limitations in the generalizability of its findings. DOD commented 
that one statement—that difficulties in producing information on 
retirees' care hampered its ability to implement the demonstration's 
payment mechanism—was only partially true and somewhat misleading. DOD 
asserted that the Senior Prime databooks were reasonably timely and 
reliable and that, once DOD and CMS had agreed on financial policies, 
the payment mechanism was implemented without significant 
difficulties. In response to our statement that DOD took over 1 year 
to assemble the data needed for risk adjustment, DOD emphasized that 
delays in the risk adjustment process were largely beyond its control. 
Regarding our statement that DOD's data systems were not well-suited 
to monitoring health care costs and utilization, DOD stated that its 
data systems, although not capable of providing all data that might be 
desired, adequately showed that utilization and costs were high. DOD 
further stated that high costs and utilization are more attributable 
to the benefit structure, financial incentives for MTFs, high 
administrative costs, and MTF practice and capacity issues than to 
data system weaknesses. Finally, in response to our statement that 
limitations in DOD data systems are obstacles to managing military 
beneficiaries' health care use and costs, DOD stated that, while it is 
true that MTFs have weak incentives for greater efficiency, the focus 
on information systems as a primary cause of high costs and 
utilization is misleading. DOD said that data analysis targeted 
clinical and financial areas needing improvement early in the 
demonstration, but noted that systematically responding to clinical 
and financial issues across multiple services and MTFs is still a 
problem. 

As noted earlier, the Senior Prime databooks were a useful source for 
site officials in monitoring sites' performance. However, sites did 
not start receiving the databooks until about a year into the 
demonstration, and lags affecting the databooks' information limited 
their usefulness. Moreover, frequent changes in reported costs reduced 
site officials' confidence in the data. Regarding the demonstration's 
payment mechanism, it required DOD to collect information on 
enrollees' inpatient and outpatient diagnoses before the risk 
adjustment process could begin. Assembling the data was DOD's 
responsibility and under its control. We cited the time and effort 
required for DOD to assemble the data as an illustration of its 
broader difficulties with data and data systems. Concerning DOD's data 
and data systems, although they showed that the demonstration was 
generating high costs and utilization, neither the Senior Prime 
databooks nor the systems on which they were based permitted the sites 
to identify cases or practices that led to high costs. Finally, we do 
not cite data system limitations as a primary cause of Senior Prime's 
high costs and utilization. However, as the demonstration showed, 
DOD's data limitations are obstacles to managing patient care and 
costs. 

CMS said that the report was accurate and met its objectives. CMS 
provided technical comments, which we incorporated where appropriate. 
(DOD's and CMS's comments appear in appendixes BI and IV, 
respectively.) 

We are sending copies of this report to the secretaries of defense and 
health and human services and the administrator of the Centers for 
Medicare and Medicaid Services. We will make copies available to 
others upon request. 

If you or your staffs have questions about this report, please contact 
me at (202) 512-7114. Other GAO contacts and staff acknowledgments are 
listed in appendix V. 

Signed by: 

William J. Scanlon: 
Director, Health Care Issues: 

[End of section] 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John Warner: 
Ranking Minority Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Max Baucus: 
Chairman: 
The Honorable Charles E. Grassley: 
Ranking Minority Member: 
Committee on Finance: 
United States Senate: 

The Honorable Bob Stump: 
Chairman: 
The Honorable Ike Skelton: 
Ranking Minority Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable W.J. 'Billy' Tauzin: 
Chairman: 
The Honorable John D. Dingell: 
Ranking Minority Member: 
Committee on Energy and Commerce: 
House of Representatives: 

The Honorable William M. Thomas: 
Chairman: 
The Honorable Charles B. Rangel: 
Ranking Minority Member: 
Committee on Ways and Means: 
House of Representatives: 

[End of section] 

Appendix I: Methodology for Evaluating the Subvention Demonstration: 

In directing us to evaluate the demonstration, the BBA specified that 
we study three broad areas: the demonstration's effects on 
beneficiaries, its costs to DOD and Medicare, and difficulties that 
DOD encountered in managing the demonstration. To address these 
topics, we surveyed retirees living in the demonstration areas, 
visited the demonstration sites, interviewed DOD and HCFA officials, 
and analyzed administrative data and reports from both agencies. 

Survey of Retirees: 

To determine the demonstration's appeal to and effect on military 
retirees, including why they chose to enroll and their satisfaction 
with care, we conducted a two-phase mail survey of about 20,000 
retirees living in the demonstration areas. The survey was sent to 
Senior Prime enrollees and to retirees who were eligible for Senior 
Prime but did not join. We surveyed retirees at the beginning of the 
demonstration to collect information on their health care experiences 
before Senior Prime. Toward the end of the initial demonstration 
period, we resurveyed these retirees to measure changes from their 
earlier reports. In this second phase, we also surveyed those who had 
joined Senior Prime since the first survey and those who had become 
eligible for Senior Prime but had not joined.[Footnote 39] 

Site Visits and Interviews with DOD and HCFA Officials: 

To collect information on the demonstration's implementation and 
operation, we interviewed officials and reviewed documents that we 
obtained during two rounds of visits to the demonstration sites. We 
first visited the sites within 3 months after each had begun 
operations to assess their status during the start-up phase and to 
examine the issues that had emerged in planning and implementing 
Senior Prime. We conducted follow-up visits about 15 months later. 
This allowed us to observe the sites at a more mature stage. We 
examined the demonstration's status, effects on beneficiaries and 
providers, and other key management issues. We also conducted 
additional interviews with DOD and HCFA officials.[Footnote 40] 
	
Retirees’ Health Care Utilization and Costs to DOD: 

To evaluate retirees' health care use and costs under the 
demonstration, we conducted several analyses using administrative data 
from DOD and HCFA. In analyzing utilization, we compared enrollees' 
use of services with that of Medicare fee-for-service beneficiaries in 
the same areas, adjusting for the relative health of the two 
populations.[Footnote 41] To determine the demonstration's impact on 
the cost to DOD of caring for military retirees, we compared average 
monthly costs for Senior Prime enrollees to the Senior Prime 
capitation rates.[Footnote 42] 

[End of section] 

Appendix II: Senior Prime Enrollees' Previous Medicare Managed Care Plan
Enrollment: 

Senior Prime attracted a substantial number of retirees who had been 
enrolled in other Medicare managed care plans just prior to enrolling 
in Senior Prime. Overall, about 10,000 seniors left other plans to 
join Senior Prime—about 40 percent of all seniors who enrolled in the 
program in 1998 and 1999.[Footnote 43] This percentage varied by site, 
in part due to local variation in Medicare managed care plan 
availability. Some sites, such as San Diego and San Antonio, were 
located in areas with significant Medicare managed care presence. 
Other sites, such as Texoma and Keesler, were located in areas where 
retirees generally had few or no other Medicare managed care options. 
Table 6 provides site-level information on Senior Prime enrollees 
drawn from other plans. In most cases, plans lost a small number of 
their members, but one plan lost over 3,400 members—about 4 percent of 
its members who lived in that subvention area. 

Table 6: The Percentage of Senior Prime Enrollees Who Switched from 
Another Medicare Managed Care Plan Varied by Site: 

Demonstration site: Colorado Springs; 
Percentage of Senior Prime enrollees from other plans: 58%. 

Demonstration site: Dover; 
Percentage of Senior Prime enrollees from other plans: 17%. 

Demonstration site: Keesler; 
Percentage of Senior Prime enrollees from other plans: 2%. 

Demonstration site: Madigan; 
Percentage of Senior Prime enrollees from other plans: 38%. 

Demonstration site: San Antonio area; 
Percentage of Senior Prime enrollees from other plans: 51%. 

Demonstration site: Texoma area; 
Percentage of Senior Prime enrollees from other plans: 1%. 

Demonstration site: San Diego; 
Percentage of Senior Prime enrollees from other plans: 40%. 

Note: These data do not include enrollees who joined Senior Prime upon 
turning age 65 and therefore could not have been enrolled in other 
Medicare managed care plans before joining the program. The 
percentages include all retirees who enrolled in Senior Prime during 
1998 or 1999, even if they later disenrolled. 

Source: GAO analysis of data from HCFA's Medicare Enrollment Data Base. 

[End of table] 

[End of section] 

Appendix III: Comments From the Department of Defense: 

The Assistant Secretary Of Defense: 
Health Affairs: 
1200 Defense Pentagon: 
Washington, DC 20301-1200: 

January 30, 2002: 

Mr. William J. Scanlon: 
Director, Health Care Issues: 
U.S. General Accounting Office: 
Washington, DC 20548: 

Dear Mr. Scanlon: 

This is the Department of Defense (DoD) response to the General 
Accounting Office (GAO) Draft Report GA0-02-284, "Medicare Subvention 
Demonstration: Pilot Satisfies Enrollees, Raises Cost and Management 
Issues for DoD Health Care," dated December 19, 2001. 

Overall, DoD finds that the report identifies some of the challenges 
faced with respect to implementing, administering, and managing the 
Medicare Subvention Demonstration. In addition, the GAO appropriately 
identifies the shortcomings in the report with respect to the limited 
generalization of the findings. 

The Department appreciates the opportunity to comment on the draft 
report. We have enclosed comments, which we hope will strengthen the 
GAO final report. 

Please feel free to address any questions to my project officers on 
this matter, Dr. Richard D. Guerin, Director, Health Program Analysis 
and Evaluation (functional) at (703) 681-3623 or Mr. Gunther J. 
Zimmerman (GAO/IG Liaison) at (703) 681-7889. 

Sincerely, 

Signed by: 

William Winkenwerder, Jr., MD: 

Enclosure: As stated: 

GAO Draft Report — Dated December 19, 2001 (GAO 02-284): 

Medicare Subvention Demonstration: Pilot Satisfies Enrollees, Raises 
Cost and Management Issues for DoD Health Care: 

Department Of Defense Comments: 

The draft report contains no recommendations, however, the Department 
would like to offer several comments and observations regarding the 
report. 

Page 4, first paragraph: "Officials had difficulty producing reliable, 
timely, and complete information on retiree's care. This hampered 
their ability to implement the demonstration's complex payment 
mechanism...." 

Comment: This statement is only partially true and somewhat 
misleading. Within the context of claims-based data, the TSP Databooks 
were reasonably timely and generally reliable. The payment mechanism 
was implemented without any significant difficulties once the 
financial policies were agreed upon by DoD and CMS. The only extended 
delay in the financial mechanism occurred due to delays in the risk 
adjustment process controlled by CMS. 

Page 20, last paragraph: "DoD took over one year to assemble the final 
data...." [Now on p. 22] 

Comment: As stated above, delays in the risk adjustment process were 
largely out of the control of DoD. The risk adjustment was conducted 
by Fu Associates under contract to CMS. 

Page 21, first paragraph: "DoD's data systems were not-well suited to 
monitoring health care costs and utilization - an impediment to 
effective management." [Now on p. 23] 

Comment: While DoD's data systems are not capable of providing all 
data that might be desired, they adequately and quite early in the 
demonstration revealed that utilization and costs were high. Problems 
of high cost and utilization are more attributable to the benefit 
structure, financial incentives on the MTFs, high administrative 
costs, and MTF practice and capacity issues than they are to data 
system weaknesses. 

Page 25, last paragraph: "...limitations in DoD data and information 
systems...are obstacles to managing military beneficiaries' health 
care use and costs. Data analysis could help managers target clinical 
and financial areas needing improvement." [Now on p. 28] 

Comment: While it is true that MTFs have weak incentives for greater 
efficiency, the focus on information systems as a primary cause of 
high costs and utilization is misleading. Data analysis did target 
clinical and financial areas needing improvement quite early in the 
demonstration. Systematically responding to clinical and financial 
issues across multiple Services and MTFs is a problem yet to be 
resolved. 

[End of section] 

Appendix IV: Comments From the Centers for Medicare and Medicaid 
Services: 

Department Of Health & Human Services: 
Centers for Medicare & Medicaid Services: 
Administrator: 
Washington, DC 20201: 

Date: January 15, 2002: 

To: William J. Scanlon: 
Director, Health Care Issues: 
General Accounting Office: 

From: [Signed by] Thomas A. Scully: 
Administrator: 
Centers for Medicare & Medicaid Services: 

Subject: General Accounting Office (GAO) Draft Report "Medicare 
Subvention: Pilot Satisfies Enrollees, Raises Cost and Management 
Issues for DOD Health Care," (GAO-02-284): 

We appreciate the opportunity to review and comment on the above-
referenced report. 

The GAO's objectives were to describe the Department of Defense (DOD) 
Medicare subvention demonstration's appeal to beneficiaries and the 
management difficulties DOD encountered in managing patient care and 
costs. We have no comments on the report's conclusions. We find the 
report to be accurate throughout and we believe it fully satisfies the 
objectives. 

We look forward to working with GAO on this and other issues. 

[End of section] 

Appendix V: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Phyllis Thorburn, (202) 512-7012: 
Jonathan Rather, (202) 512-7107: 

Staff Acknowledgments: 

In addition to those named above, Robin Burke, Martha Wood, Jessica
Farb, Maria Kronenburg, Gail MacColl, Dae Park, Lisa Rogers, and Eric 
Wedum contributed to this report. 

[End of section] 

Related GAO Products: 

Medicare Subvention Demonstration: DOD Costs and Medicare
Spending [hyperlink, http://www.gao.gov/products/GAO-02-67], Oct. 31, 
2001. 

Medicare Subvention Demonstration: Greater Access Improved Enrollee 
Satisfaction but Raised DOD Costs [hyperlink, 
http://www.gao.gov/products/GAO-02-68], Oct. 31, 2001. 

Medicare Subvention Demonstration: DOD's Pilot HMO Appealed to 
Seniors, Underscored Management Complexities [hyperlink, 
http://www.gao.gov/products/GAO-01-671], June 14, 2001. 

Defense Health Care: Observations on Proposed Benefit Expansion and 
Overcoming TRICARE Obstacles [hyperlink, 
http://www.gao.gov/products/GAO/T-HEHS/NSIAD-00-129], Mar. 15, 2000. 

Medicare Subvention Demonstration: Enrollment in DOD Pilot Reflects 
Retiree Experiences and Local Markets [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-00-35], Jan. 31, 2000. 

Defense Health Care: Appointment Timeliness Goals Not Met; Measurement 
Tools Need Improvement [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-99-168, Sept. 30, 1999. 

Medicare Subvention Demonstration: DOD Start-up Overcame Obstacles, 
Yields Lessons, and Raises Issues [hyperlink, 
http://www.gao.gov/products/GAO/GGD/HEHS-99-161], Sept. 28, 1999. 

Medicare Subvention: Challenges and Opportunities Facing a Possible VA 
Demonstration [hyperlink, 
http://www.gao.gov/products/GAO/T-HEHS/GGD-99-159], July 1, 1999. 

Medicare Subvention Demonstration: DOD Data Limitations May Require 
Adjustment and Raise Broader Concerns [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-99-39], May 28, 1999. 

Medicare Subvention Demonstration: DOD Experience and Lessons for 
Possible VA Demonstration [hyperlink, 
http://www.gao.gov/products/GAO/T-HEHS/GGD-99-119], May 4, 1999). 

[End of section] 

Footnotes: 

[1] Throughout this report, we use the term "retirees" to refer to 
military retirees and their dependents and survivors aged 65 and over, 
unless otherwise noted. 

[2] "Subvention" means a transfer of money from one federal department 
to another. 

[3] P.L. 105-33, sec. 4015, 111 Stat. 251, 337 (42 USC 1395ggg). 

[4] P.L. 106-398, sec. 712, 114 Stat. 1654, 1654A-176. 

[5] Although the demonstration was extended for 1 year, our evaluation 
is confined to the initial demonstration period, which ended December 
31, 2000. 

[6] A list of related GAO products is included at the end of this 
report. 

[7] On June 14, 2001, the secretary of health and human services 
announced that the name of HCFA had been changed to the Centers for 
Medicare and Medicaid Services. In this report, we refer to HCFA when 
our work and findings apply to the organizational structure and 
operations associated with that name. 

[8] Although most retirees eligible for the demonstration lived near a 
military medical center offering a wide array of specialty care, in 
other areas far fewer live near MTFs that offer similar services. 

[9] TRICARE Plus was implemented on October 1, 2001. It gives 
enrollees access to MTF primary care providers but does not guarantee 
them access to MTF specialty care. TRICARE Plus will not be 
implemented at all MTFs; the availability of TRICARE Plus and the 
number of enrollees will be based on MTF commanders' determination of 
available capacity. 

[10] A small copayment is required for prescriptions filled by mail 
order or at civilian pharmacies but not for prescriptions filled at 
MTFs. 

[11] Beneficiaries who turned age 65 prior to April 1, 2001, 
automatically qualify for this benefit. Those who turned age 65 on or 
after that date must be enrolled in Medicare part B to obtain the 
pharmacy benefit. 

[12] Although DOD could charge enrollees a premium for Senior Prime, 
as any Medicare+Choice organization can, it chose not to do so. 

[13] GME payments cover Medicare's share of teaching hospital expenses 
incurred in training medical interns and residents. DSH payments 
assist hospitals that treat a disproportionate number of uninsured and 
indigent patients. 

[14] See Medicare Subvention Demonstration: DOD Costs and Medicare 
Spending [hyperlink, http://www.gao.gov/products/GAO-02-67], Oct. 31, 
2001, for a description of how Medicare's final payment to DOD is 
determined. 

[15] Most retirees eligible to age-in did so. Although enrollment at 
each MTF was capped, age-ins were not counted against the caps. 
Consequently, after most MTFs had reached or approached their caps, 
the majority of new enrollees were age-ins. 

[16] For a discussion of site variation in enrollment at the beginning 
of the demonstration, see Medicare Subvention Demonstration: 
Enrollment in DOD Pilot Reflects Retiree Experiences and Local Markets 
[hyperlink, http://www.gao.gov/products/GAO/HEHS-00-35], Jan. 31, 2000. 

[17] This requirement did not apply to retirees who had been Medicare-
eligible since July 1, 1997, a little over a year before the program 
began. 

[18] This includes enrollment in a Medicare managed care plan, 
Medicare supplemental insurance, and employer-sponsored insurance. The 
estimate excludes enrollees who aged-in from TRICARE Prime. For 
details on enrollees' prior membership in Medicare managed care plans, 
see appendix II. 

[19] See [hyperlink, http://www.gao.gov/products/GAO/HEHS-00-35]. 

[20] In our first survey we did not include the temporary nature of 
the demonstration as a reason for not enrolling but found that 2 
percent of retirees had written in that reason. In our second survey, 
when we included this as a possible reason, we found that over 25 
percent of nonenrollees indicated it was a reason for not joining 
Senior Prime but only 13 percent said it was their main reason. 

[21] See Medicare Subvention Demonstration: Greater Access Improved 
Enrollee Satisfaction but Raised DOD Costs [hyperlink, 
http://www.gao.gov/products/GAO-02-68], Oct. 31, 2001, for a further 
discussion of nonenrollees' access to care under the demonstration. 

[22] Costs varied by site. At all sites, average costs exceeded the 
local Senior Prime rate by at least 20 percent. 

[23] For further discussion of DOD's costs and enrollees' use of 
services, see Medicare Subvention Demonstration: DOD Costs and 
Medicare Spending [hyperlink, http://www.gao.gov/products/GAO-02-67], 
Oct. 31, 2001. 

[24] However, DOD encourages MTFs to deliver care in-house when 
possible in order to maximize the use of MTFs. 

[25] In TRICARE Prime, the managed care support contractors bear part 
of the risk for beneficiaries' purchased care costs. 

[26] See Physician Payment Review Commission, Annual Report to 
Congress, 1997, Chapter 15, and Sandra Christensen and Judy Shinogle, 
"Effects of Supplemental Coverage on Use of Services by Medicare 
Enrollees," Health Care Financing Review, Fall 1997. 

[27] Low cost-sharing is a feature of TRICARE Prime as well, although 
its terms differ somewhat from Senior Prime's. 

[28] See Susan D. Hosek and others, The Demand for Military Health 
Care: Supporting Research for a Comprehensive Study of the Military 
Health Care System (Santa Monica, Calif.: RAND, MR-407-PA&E, Jan. 
1994), and The Institute for Defense Analysis and Center for Naval 
Analysis Corporation, Evaluation of the TRICARE Program FY 1998 Report 
to Congress (Washington, D.C.: 1998). 

[29] In civilian health care, much of the variation in use of health 
care among states and counties is attributed to the clinical practice 
styles of their physicians. See W.P. Welch and others, "Geographic 
Variation in Expenditures for Physician Services in the United 
States," New England Journal of Medicine, Vol. 328, No. 621 (Mar. 4, 
1993); John E. Wennberg and Alan Gittelsohn, "Small Area Variations in 
Health Care Delivery," Science Vol. 182, No. 4117 (Dec. 1973); and The 
Quality of Medical Care in the United States: A Report on the Medicare 
Program (American Hospital Association, 1999). 

[30] TMA performs TRICARE-wide support functions, such as managing 
information technology and data systems and selecting, directing, and 
paying the managed care support contractors. TMA officials were 
responsible for evaluating and supporting the subvention demonstration. 

[31] The databooks were primarily intended for internal use in 
monitoring and tracking the program. Compiling the databooks was a 
complex task and took a substantial commitment of resources, partly 
because staff had to collect and manipulate data from separate and 
incompatible data systems. Although they were a mechanism for sharing 
information with the sites, according to TMA officials the databooks 
were not intended to be a management tool. Nonetheless, they were the 
only data available to sites that allowed them to compare their costs 
and utilization to those of other sites. 

[32] Some sites reported that, despite extensive adjustments to the 
data, their measures were not entirely comparable to the civilian 
benchmarks. 

[33] This program is an outgrowth of a task force DOD established in 
1998 partly in response to our report on data limitations relevant to 
the demonstration. (See Medicare Subvention Demonstration: DOD Data 
Limitations May Require Adjustments and Raise Broader Concerns 
[hyperlink, http://www.gao.gov/products/GAO/HEHS-99-39], May 28, 
1999.) The task force addressed the military health system's need for 
data quality improvements. 

[34] See "Concept Paper on Enrollment in TRICARE Plus for MTF 
Commanders," TRICARE Management Activity, July 3, 2001. 

[35] During the demonstration, some MTFs continued to care for 
nonenrolled seniors, in addition to enrollees, to help meet their 
training needs. 

[36] See Defense Health Care: Appointment Timeliness Goals Not Met; 
Measurement Tools Need Improvement [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-99-168], Sept. 30, 1999. 

[37] See Medicare Subvention Demonstration: DOD's Pilot HMO Appealed 
to Seniors, Underscored Management Complexities [hyperlink, 
http://www.gao.gov/products/GAO-01-671], June 14, 2001. 

[38] Recent events illustrated an additional way in which DOD's 
military mission complicates civilian care. In times of enhanced 
security at military installations it may be difficult for 
beneficiaries to access MTFs. Following the terrorist attacks on the 
World Trade Center and the Pentagon, there were reports of military 
retirees having difficulty getting care and prescriptions at MTFs in 
the Colorado Springs area, due to restricted access to area 
facilities. More broadly, The Retired Officers Association (TROA) 
notified its members that tightened security at military installations 
might limit some beneficiaries' ability to get new or refill 
prescriptions at military pharmacies or to see their providers for new 
medications. In October 2001, DOD issued guidance for beneficiaries on 
seeking emergency, urgent, and routine care when military 
installations are under heightened security. 

[39] For information on the first survey, see Medicare Subvention 
Demonstration: Enrollment in DOD Pilot Reflects Retiree Experiences 
and Local Markets [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-00-35], Jan. 31, 2000, app. I. 
For information on the follow-up survey, see Medicare Subvention 
Demonstration: Greater Access Improved Enrollee Satisfaction but 
Raised DOD Costs [hyperlink, http://www.gao.gov/products/GAO-02-68], 
Oct. 31, 2001, app. I. 

[40] For information on our methods, see Medicare Subvention 
Demonstration: DOD Start-up Overcame Obstacles, Yields Lessons, and 
Raises Issues [hyperlink, 
http://www.gao.gov/products/GAO/GGD/HEHS-99-161], Sept. 28, 1999, and 
Medicare Subvention Demonstration: DOD's Pilot HMO Appealed to 
Seniors, Underscored Management Complexities [hyperlink, 
http://www.gao.gov/products/GAO-01-671], June 14, 2001. 

[41] For further discussion of our analysis of enrollees' health care 
utilization, see Medicare Subvention Demonstration: Greater Access 
Improved Enrollee Satisfaction but Raised DOD Costs [hyperlink, 
http://www.gao.gov/products/GAO-02-68], Oct. 31, 2001, app. III. 

[42] For further discussion of our analysis of the costs of enrollees' 
care, see Medicare Subvention Demonstration: DOD Costs and Medicare 
Spending [hyperlink, http://www.gao.gov/products/GAO-02-67], Oct. 31, 
2001, app. I. We also analyzed Medicare spending on military retirees 
under the demonstration. See [hyperlink, 
http://www.gao.gov/products/GAO-02-67], app. II. 

[43] This percentage does not consider retirees who joined Senior 
Prime upon turning 65 and therefore could not have been enrolled in 
other plans before joining the program. 

[End of section] 

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