Defense Health Care:

Effects of Mandated Cost Sharing on Uniformed Services Treatment Facilities Likely to Be Minor

HEHS-96-141: Published: May 13, 1996. Publicly Released: May 13, 1996.

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Pursuant to a legislative requirement, GAO reviewed the potential effects of the Department of Defense's (DOD) new health care benefit and cost-sharing package, which is part of its TRICARE managed health care program, on the Uniformed Services Treatment Facilities (USTF).

GAO found that: (1) the new cost-sharing arrangement might leave USTF at risk for higher costs by causing some healthy members to disenroll, an outcome known as adverse selection; (2) adverse selection probably will not have long-term negative financial effects on USTF, because less than 10 percent of current USTF members are expected to disenroll, and USTF costs would not increase by more than 2 percent; (3) DOD capitation payments will automatically adjust for higher USTF costs caused by changes in enrollment, and USTF may negotiate payment adjustments for the effects of the benefit and cost-sharing revisions; (4) USTF estimated that cost-sharing would cause about 40 percent of their members to disenroll and increase costs by about 11 percent; (5) the USTF estimates are unreliable because of data and methodological weaknesses; (6) the USTF estimates included data for large claims which are unpredictable and dramatically affect cost estimates; (7) the difference in members' out-of-pocket costs between USTF and TRICARE Standard is not expected to be great enough to cause more than an estimated 10-percent USTF disenrollment; and (8) USTF already serve proportionally more retirees and their dependents who are under age 65 than exist in the general DOD population, but cost-sharing may reduce the proportion of younger retirees and their dependents in the USTF population.

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