Defense Health Care:

Reimbursement Rates Appropriately Set; Other Problems Concern Physicians

HEHS-98-80: Published: Feb 26, 1998. Publicly Released: Feb 26, 1998.

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Pursuant to a legislative requirement, GAO examined: (1) whether the Department of Defense's (DOD) methodology for setting the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) maximum allowable charge (CMAC) rates complies with statutory requirements and how current CMAC rates compare with Medicare rates for similar services; (2) the basis for physicians' concerns about CMAC rates and how these concerns affect physicians' willingness to treat military beneficiaries; (3) the basis for other concerns physicians have about TRICARE that could also affect their willingness to treat military beneficiaries; and (4) how balance billing limits are being enforced.

GAO noted that: (1) the methodology used by DOD to transition CMAC rates to the Medicare level of payment complies with statutory requirements and generally conforms with accepted actuarial practice; (2) these adjustments will result in DOD saving about three-quarters of a billion dollars in fiscal year 1998 in health care expenditures; (3) as of the most recent available CMAC rate adjustment in March 1997, 80 percent of CMAC rates nationwide were at the same level as Medicare, with about 20 percent higher and less than 1 percent below the Medicare level of payment; (4) the CMAC rates at the four locations GAO selected were generally consistent with Medicare rates; (5) while physicians' initial concerns about low obstetric and pediatric rates have been addressed by DOD, current physician complaints about reimbursement levels are focused on the discounted CMAC rates paid to network physicians under DOD's TRICARE program; (6) because most CMAC rates are now equivalent to Medicare rates, the discounted CMAC rates that TRICARE network physicians agree to accept are typically below the Medicare level of payment; (7) some physicians told GAO that they considered the discounts unacceptable, and they would not join the TRICARE network but would continue to treat military beneficiaries as nonnetwork physicians; (8) the discount rates physicians were willing to accept in the four locations were largely dependent on local health care market factors such as the degree of health maintenance organization penetration and the dependence of local physicians on the military beneficiary population; (9) physicians GAO met with also expressed concerns about administrative hassles, which contributed to their frustration with the TRICARE program; (10) in many cases, physicians said that while they would be willing to accept discounted CMAC rates, the administrative impediments provided significant disincentives to joining the TRICARE network; (11) DOD and managed care support contractors (MCSC) officials acknowledged these complaints and are making efforts to address them and alleviate physicians' concerns; (12) DOD and MCSC officials told GAO that they were aware of only a very small number of balance billing infractions--all of which had been easily resolved; (13) while the MCSCs attempt to educate beneficiaries about balance billing limits, the explanation of benefits statement does not include information on the balance billing limits; and (14) Medicare, which has the same balance billing limit, sends notice of balance billing limitations on the statements it provides to beneficiaries and physicians.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Actions have been taken by DOD and the Congress which complete the action intended by the recommendation. First, DOD provides CHAMPUS maximum allowable charges on the Internet. With the growth and widespread use of the Internet as a business communications medium, this information source helps eliminate the necessity of distributing paper fee schedules. Second, and more importantly, GAO has worked with congressional staff to draft legislative language to replace the term "CHAMPUS maximum allowable charges" with the more-familiar term "Medicare rates," which, when implemented, will eliminate confusion about reimbursement rates. In the near future, when CMAC rates are equivalent to Medicare rates, there will be no need for a TRICARE fee schedule.

    Recommendation: To improve the administration of the TRICARE program, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs to require MCSCs to provide to physicians written or published locality-specific fee schedules after each yearly CMAC update to help eliminate confusion about CMAC reimbursement rate amounts.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD stated that the requirement for managed care support contractors to provide balance-billing information on nonparticipating claims has been funded. The managed care support contractors will compose their own messages explaining balance billing limits for the explanation of benefit statements, which explain claim adjudication.

    Recommendation: To improve the administration of the TRICARE program, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs to require MCSCs to notify beneficiaries and physicians of balance billing limits on the explanation of benefits statements for all TRICARE Standard claims submitted by nonparticipating physicians.

    Agency Affected: Department of Defense


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