Defense Health Programs:

Savings Available by Using Two Medicare Cost-Containment Techniques

HRD-86-115: Published: Aug 25, 1986. Publicly Released: Aug 25, 1986.

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GAO reviewed the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) to determine whether it could better contain costs for professional services if it adopted two cost-containment techniques used in the Medicare program, including: (1) a fee schedule for outpatient laboratory services; and (2) an economic index for physician services.

GAO analyzed five states' payment records and found that the maximum allowable charges under CHAMPUS were 80 percent of the customary charges, while Medicare allows only 75 percent. If CHAMPUS used: (1) the Medicare fee schedule, it would reduce its laboratory services costs and its intermediaries would not have to maintain allowable-charge data for most laboratory services; and (2) the Medicare economic index for physician services, it would limit increases in allowable charges to those resulting from changes in physician operating costs and general wage changes. However, the impact of these alternative reimbursement techniques on CHAMPUS beneficiary costs will depend on providers' willingness to accept the CHAMPUS allowable charges as payment-in-full. If providers do not accept the CHAMPUS allowable charges, beneficiaries will be responsible for the difference.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Department of Defense (DOD) did not concur with part one of this recommendation. It concurred with part two of this recommendation and stated that it would seek a legislative change to do this. DOD took action after completion of field work, before the report was issued, that would partially accomplish this recommendation.

    Recommendation: The Assistant Secretary of Defense (Health Affairs) should take the necessary action to adopt the Medicare: (1) laboratory fee schedule and associated reimbursement practices as the basis for reimbursing providers for laboratory services under CHAMPUS; and (2) economic index method of limiting increases in allowed charges for physician services.

    Agency Affected: Department of Defense: Office of the Assistant Secretary of Defense (Health Affairs)


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