Defense Health Program:

Reporting of Funding Adjustments Would Assist Congressional Oversight

HEHS-99-79: Published: Apr 29, 1999. Publicly Released: Jun 1, 1999.

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Pursuant to a congressional request, GAO reviewed the apparent discrepancies between the Department of Defense's (DOD) budget allocations and the actual obligations for direct and purchased care, focusing on: (1) the extent to which the Defense Health Program (DHP) obligations have differed from DOD's budget allocations; (2) the reasons for any such differences; and (3) whether congressional oversight of DHP funding changes could be enhanced if DOD provided notification or budget execution data.

GAO noted that: (1) between fiscal years 1994 and 1998, Congress appropriated $48.9 billion for DHP operations and maintenance (O&M) expenses; (2) during that period, DHP obligations at the subactivity level, particularly for direct and purchased care, differed in significant ways from DOD's budget allocations; (3) in total, about $4.8 billion was obligated differently--as either increases to or decreases from the budget allocations DOD had developed for the 7 DHP subactivities; (4) these funding changes occurred because of internal DOD policy choices and other major program changes; (5) according to DOD, its strategy was to fully fund purchased care activities within available funding levels; (6) this strategy left less to budget for direct care and other DHP subactivities; (7) TRICARE Management Activity officials also told GAO that because the DHP has both direct and purchased care components, whereby many beneficiaries can access either system to obtain health care, it is difficult to reliably estimate annual demand and costs for each component; (8) between 1994 and 1996, purchased care obligations were $1.9 billion less than allocated because of faulty physician payment rate and actuarial assumptions; (9) between 1994 and 1998, direct patient care obligations amounted to $1 billion more than DOD had allocated--during a period of base closures and military treatment facility downsizing--largely because DOD understated estimated direct care requirements; (10) also, between 1996 and 1998, DOD overestimated TRICARE managed care support (MCS) contract costs, believing that contract award prices would be higher and implementation would begin sooner than what occurred; (11) thus, most of the unobligated MCS contract funds were used to defray higher than anticipated Civilian Health and Medical Program of the Uniformed Services obligations; (12) the movement of DHP funds from one subactivity to another does not require prior congressional notification or approval; (13) as a result, these sizable funding changes have generally occurred without congressional awareness; (14) now that the MCS contracts are implemented nationwide, DOD officials expect future DHP obligations to track more closely with budget allocations; and (15) current law and regulations will continue to allow DOD the latitude to move funds between subactivities with little or not congressional oversight.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: With the legislative enactment of major expansions in military health care benefits for active duty families and retirees, other, more critical Defense Health Program funding and budgetary issues have emerged. For example, congressional, GAO, and other external and internal DOD investigations continue to scrutinize the adequacy of Defense Health Program financing and budgeting procedures. Although still valid, GAO is closing this recommendation. GAO is unaware of any intention by Congress to implement the recommendation in the foreseeable future.

    Matter: Congress may wish to consider requiring DOD, consistent with current notification standards and procedures, to notify the congressional defense committees of its intent to shift funds among subactivities (such as direct care, purchased care, and base operations). Such notification, while not requiring congressional approval of the funding shift itself, could be initiated whenever the amount of the funding shift exceeded a certain threshold to be determined by Congress. The notification would specify where funds are being deducted and where they are being added, and the justification for such reallocation. Also, or alternatively, Congress may wish to consider requiring DOD to provide congressional defense committees with quarterly budget execution data on DHP O&M accounts. These data could be provided in the same manner and under the same timeframes as DOD provides data for non-DHP O&M accounts.


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