Potential Expansion of the CHAMPUS Reform Initiative

T-HRD-90-17: Published: Mar 15, 1990. Publicly Released: Mar 15, 1990.

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GAO discussed its examination of the Department of Defense's (DOD) Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) Reform Initiative demonstration project, focusing on DOD: (1) progress in overcoming implementation problems; and (2) plans for expanding the project. GAO noted that the DOD prime contractor's: (1) financial condition had improved since April 1989 because of its divestitures of unprofitable subsidiaries, better concentration and management, and favorable bank loan refinancing; (2) claims processing efforts were meeting contract standards; and (3) use of resource-sharing agreements increased. GAO also noted that: (1) CHAMPUS claims costs were lower than DOD estimated; (2) DOD needed to perform more research to determine the linkage between historical trends and CHAMPUS cost increases; (3) DOD contracted for more detailed analysis of CHAMPUS claims; and (4) through January 1990, DOD had paid the prime contractor about $742 million for the project.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: The FY 1991 DOD authorization act requires DOD to comply with the recommendation.

    Recommendation: DOD should obtain more conclusive evidence that estimates of savings are attributable to the CHAMPUS initiative. This should be done soon to allow sufficient time for testing in the other three states. The current contract expires in January 1993, and both DOD and the initiative's prime contractor must do substantial preparatory work before the delivery of services to additional beneficiaries. Expansion efforts would probably have to begin in early 1991 to adequately test an expanded initiative under the current contract.

    Agency Affected: Department of Defense


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