Military

Military Health System

 Overview Statement

By

 The Honorable J. Jarrett Clinton, MD, MPH,

Acting Assistant Secretary of Defense for Health Affairs 

                          July 18, 2001

Mr. Chairman, distinguished Members of the Subcommittee, I am pleased to have this opportunity to appear before you to provide a review of the Military Health System, in particular, our budget request for FY 2002. 

             Healthcare is a quality of life issue for our service men and women and their families; it is a recruiting and retention tool; and it is the means by which we retain a fit and healthy force.  The Military Health System (MHS) consists of 78 hospitals and more than 500 clinics worldwide serving an eligible population of 8.3 million.  In addition, we have seven TRICARE  Contracts that supplement our military medical facilities with a network of civilian healthcare providers.  We emphasize the prevention of illness.  We identify hazardous exposures, and record immunizations and health encounters in a computerized fashion for patient safety and any needed patient care events.  We deliver the healthcare benefit as defined by the Congress and ensure high quality healthcare to all eligible beneficiaries.  The Military Health System relies on fully trained and militarily prepared healthcare personnel.  The support for deployed forces is inextricably linked to the operation of hospitals and clinics.  A robust healthcare delivery system is the strategic lynchpin to a healthy force and medical preparedness for contingencies.

             The passage of the generous new health benefit by Congress last year provides additional challenges in our efforts to ensure quality healthcare for our deserving beneficiaries.  Our great success to date in implementing this broad array of new entitlements reflects the support and work of our DoD leadership, the Surgeons General, the beneficiary associations and your staffs.  The outreach to our beneficiaries has been comprehensive, and I greatly appreciate the assistance you and your staffs have provided to ensure successful implementation.

 Military Health System Funding

            Healthcare costs in this country continue to rise and the military health system is not immune from these escalating costs.  This is the first time in recent years that the President’s budget request identifies a realistic estimate of our military healthcare costs.  The budget increases funds for the direct care system to sustain military treatment facilities (MTFs).  It increases funds for pharmacy operations by 15 percent, reflecting our own recent experience, as well as what is anticipated in the private sector in the coming year.  It provides for a 12 percent increase over the FY 2001 budget for the managed care support contracts, which is again consistent with the overall cost increases in the private sector.  Sufficient funds are also provided to implement the FY 2001 NDAA requirements, including TRICARE For Life.

 The President’s budget for the DHP consists of the following amounts ($ millions):

Operation and Maintenance (O&M):                                               $17,566

Procurement:                                                                           $     268

Research, Development, Testing & Evaluation (RDT&E):            $       65

     Total                                                                                  $17,899

Funding by Budget Activity Group (O&M)

Direct Care                                                                            $4,502,139

Private Sector Care                                                                $10,130,687

Consolidate Health Support                                               

$ 748,518

Information Management                                                    

$ 602,824

Management Activities                                                        $  248,965

Education and Training                                                          

  $  309,193

Base Operations/Communications                                      

$ 1,023,424

   Total O&M                                                                         $17,565,750

 An additional $5.7 billion for MILPERS and $0.225 billion for Military Construction supports the MHS.  The total unified MHS budget is $23.8 billion in FY 2002.

 The President’s budget request also reflects requested legislation directing the Department to implement prospective payments for some health services not currently paid on a prospective basis.  The general provision would expedite reform of TRICARE payment methods and allow the Department to expedite adopting prospective payment rates for some civilian institutional services (e.g. skilled nursing facilities (SNF) and hospital outpatient services) and for non-institutional providers (e.g. ambulance services).  We do not expect this change in reimbursement method to create barriers for access to SNFs or to cost-shift payment liability to the beneficiary by balance billing.  We do expect it to save $315 million in FY 2002.

            In our FY 2002 budget request you will see an Administration proposal to eliminate the duplication in funding and services that exists between DoD and the Department of Veterans Affairs (VA).  Reportedly, there are about 700,000 dual eligible retirees, who currently can use both DoD and VA systems.  At present, both agencies must prepare to care for them, without knowing how many will actually use the DoD or VA systems.  As a result, the allocation of federal government resources is not accomplished as efficiently as possible, and beneficiaries may not receive the most coordinated healthcare.  This proposal would require military retirees to select either DoD or VA as their source of care.  The Administration believes this proposal will enable DoD and VA to budget and plan more appropriately for their beneficiaries.  It will also provide beneficiaries greater continuity of care.

 Military Health System Challenges

We face many challenges with the DHP.  These can be summarized into four major areas: 

1.     Creating a stable business environment for the direct care system by ensuring that it is funded properly, and recapturing workload through optimization initiatives;

2.     Developing a new generation of simplified managed care support contracts, which have greater financial predictability, create more competition, and reduce administrative costs. 

3.     Strengthening our ties to other federal healthcare systems, including the VA and Centers for Medicare and Medicaid Services to optimize the utilization of all federal healthcare resources.

4.     Implementing the new TRICARE benefits for those age 65 and over and establishing the accrual fund mechanisms for FY 2003.

 Optimization Initiatives.  Within the MHS, our commitment to performance and efficiency continue as we implement strategies of population health and system optimization.  The key objectives of the MHS Optimization Plan, developed in close cooperation with the Surgeons General, include:

·       Supporting the tenets of population health which involve enrolling and assessing our beneficiary populations, forecasting demand, employing demand management strategies, managing capacities, employing best business practices, condition management strategies, community outreach, and outcomes analyses.

·       Recapturing market share by managing demand for services and optimizing the use of our military medical facilities.

·       Assigning each enrollee a primary care manager by name and standardizing the enrollment capacity of our facilities.

·       Creating a more integrated healthcare system to enhance the health of our patient populations.

·       Employing enhanced Information Technology tools – which provide adequate privacy and security protections -- to support population health, integration, education, and best-business practice strategies.

 Our newly established MHS Executive Review will provide a quarterly assessment of each TRICARE region’s performance, including care obtained from both military medical facilities and network providers.  Measures monitored will include costs, workload, enrollment, beneficiary satisfaction and outcomes.

 One example of our efforts to optimize our facilities and deliver healthcare more efficiently is the pilot program initiated in TRICARE Region 11, the States of Washington and Oregon, in October 2000.  This program evaluates the role of a strengthened, full-time Lead Agent to support regional management of the MHS.  The Region 11 Lead Agent serves as the regional advocate, develops innovative practices to best use regional resources, manages the overall cost of regional healthcare, implements population health initiatives, and evaluates regional performance.  We believe that this pilot program improves management of the regional healthcare system and better integrates the direct and purchased care systems.

 Managed Care Support Contracts.  We have had considerable review and consultation on the methodology for structuring the next generation of contracts.  We plan to develop a contract model that is both more predictable and less difficult to work with, one that incorporates best business practices.  We have recently begun the process of designing this new contract model..

 Ties to Other Federal Healthcare Systems.  As the MHS meets its mission responsibilities, we are undertaking efforts to make our military hospitals and clinics more efficient in their delivery of health care.  This goal led to our cooperative arrangements with other federal agencies, particularly the Department of Veterans Affairs (VA).  We have developed these agreements under the auspices of the DVA-DoD Executive Council.  We recently chartered four new working groups to increase our  partnership  in the areas of financial management, benefits coordination, geriatrics, and joint facility utilization and resource sharing.  We also look forward to participating in the President’s Task Force to Improve Health Care Delivery to Veterans, recently announced by the President on Memorial Day.  Among other things, the Task Force will identify areas where greater coordination between VA and DoD will improve healthcare quality and access for veterans and military retirees.  We will actively support the Task Force as it undertakes this important review over the next two years.

             Delivery of the Healthcare Benefit.  I met with you in March to discuss the TRICARE For Life and Pharmacy program implementations of the National Defense Authorization Act for fiscal year 2001 (NDAA).  I would like to offer a brief update to my prior testimony.

             On April 1, 2001, we implemented a number of the congressionally mandated new benefits.  Medal of Honor recipients and their families became TRICARE beneficiaries to the same extent as other retirees, we extended the active duty survivor benefits to eligible families for both medical and dental coverage, we eliminated cost sharing for active duty family members enrolled in TRICARE Prime, and we successfully introduced a pharmacy benefit for our Medicare-eligible beneficiaries.  On August 1, 2001, we will waive TRICARE Standard cost-shares and deductibles for families of active duty service members residing in remote locations.  We continue to develop the programs for several other benefit enhancements -- school physicals, travel reimbursement, and the catastrophic cap reduction, and will implement them soon.

I would like to take just a moment to describe the successful implementation of the pharmacy program for our senior beneficiaries.  We implemented this benefit just about five months after enactment of the law.  Although the start-up of TRICARE Senior Pharmacy (TSRx) went smoothly, many issues had to be resolved and the new program had to be explained to a large number of beneficiaries in a very short time.  We achieved this tremendous effort through the cooperation of our military and civilian staff, our contractors, the beneficiary associations, our beneficiaries, and with great support from the Congress.  During the first few months of the program, approximately 1.5 million prescriptions have been processed, totaling about $80 million in healthcare costs (excluding start-up and ongoing administrative costs).  We anticipate that healthcare costs will increase as more beneficiaries drop other health insurance with pharmacy coverage and come to rely on us for their pharmacy needs, particularly after TRICARE For Life begins on October 1.

Expanding TRICARE to Medicare Eligibles.  Congress established October 1, 2001, as the date on which our age 65 and over beneficiary population will become eligible for TRICARE benefits.  On that date TRICARE will become a secondary payer to Medicare for care received outside military medical facilities.  The law requires that all Medicare-eligible beneficiaries be enrolled in Medicare Part B to receive the new TRICARE benefits.  DoD has worked with the Centers for Medicare and Medicaid Services (CMS, formerly HCFA) in establishing the mechanisms to conduct data exchanges that will assist in determining those of our beneficiaries who have purchased Medicare Part B, thus verifying eligibility to participate in the program.

Under the new law, Medicare-eligible retirees can continue to use military medical facilities for their care.  For several reasons, Medicare-eligible beneficiaries will not fit into the current structure of the triple option benefit when they attain TRICARE eligibility.  In order to provide beneficiaries an alternative option for using TRICARE providers without the need to lock in to a HMO-like program, we issued a policy authorizing the establishment of TRICARE Plus, an MTF primary care enrollment program.

Under TRICARE Plus, all beneficiaries who use MTFs but who are not enrolled in TRICARE Prime will be offered the opportunity to enroll for MTF primary care, to the extent capacity exists.  There is no lock-in and no enrollment fee.  This will facilitate primary care appointments when needed.  MTF capacity will limit the number of persons accommodated at each MTF to assure that their primary care needs and TRICARE access standards are met.  For care from civilian providers, TRICARE Standard or TRICARE Extra rules will apply.  If the enrollee is Medicare-eligible, for services payable by Medicare, Medicare rules will apply, with TRICARE as second payer.

              Accrual Fund.  The Medicare-eligible Retiree Health Care Fund will begin operation in fiscal year 2003.  At present, we have discussions under way with the Office of Management and Budget (OMB), and within the Department to define the parameters for establishing and implementing the fund.  OMB has established the Fund at the Department of Treasury and placed it in the OMB budget database.  The Board of Actuaries meets on July 17 to determine the major assumptions and methodologies for calculating the liability.  Within the Department we are developing the procedures to implement the fund.  Shortly we will forward a report to the Congress on the concept of operation for how the fund will work, as well as the periodicity and amounts for the accrual fund.

            Now, let me turn to just a few of the other initiatives underway in military healthcare, including prevention, quality and patient safety programs, case management and a measure of the TRICARE program’s improvements.

 Prevention

Force health protection guides the Department’s efforts to sustain and preserve the health of the force during deployments and at home station.  With the ongoing operations in the Balkans and Southwest Asia, the Department and Services continue to focus on improved medical record keeping, disease and non-battle injury surveillance, pre- and post-deployment health assessments, environmental surveillance and combat/operational stress and suicide prevention and treatment.  Service members receive briefings and training on how to remain healthy and safe while performing their missions under potentially hazardous environmental, chemical, and biological warfare conditions.

 The Millennium Cohort Study, a cross-sectional sample of 100,000 U.S. military personnel who will be followed prospectively, is an integral part of the Department’s strategy to preclude Gulf War Illnesses-type experiences in future deployments and to maintain troop morale, confidence, and effectiveness.  In addition, DoD works with the Department of Veterans Affairs and national and international experts to develop an evidence-based post-deployment health clinical evaluation program focused in the primary care setting.  Evidenced-based clinical practice guidelines are being developed in conjunction with electronic self reporting tools to assist healthcare providers in screening, evaluating, and treating service members with health concerns post-deployment.  Integral to the success of these major health initiatives has been the establishment of DoD Research and Clinical Centers for Deployment Health, which identify trends in the health of deployed service members and target areas for improvement.

Quality and Patient Safety

The Military Health System places a high priority on quality and patient safety and has undertaken several steps to ensure that our military medical facilities continue to deliver the highest quality care to our beneficiaries.  Under our National Quality Management Program, the MHS monitors clinical performance in military medical facilities and compares that performance to the civilian sector.  Results reveal that DoD performance is comparable to care received in the commercial sector across a range of clinical conditions.  Current studies look toward measuring consistent improvement by relating them to the utilization of DoD/DVA adopted evidence-based clinical pathways and the evolution of disease and case management programs.  DoD has major initiatives designed to measure and improve quality in all of the traditional areas of assessment including risk management (patient safety), clinical quality performance (enterprise performance against industry standards), beneficiary satisfaction and fiscal prudence (value purchasing and provision of health care).  New initiatives under development include national standards for identification of Centers of Excellence, expansion of the centralized credentials monitoring system to include a broader array of healthcare providers including technical support staff, efforts to better assess quality and utilization in our civilian provider networks, and a centralized patient safety center to track sentinel events and their root causes.

 These many improvements in our quality-monitoring program reflect the thinking of the congressionally directed DoD Healthcare Quality Initiatives Review Panel.  This panel, composed of nine members appointed by the Secretary of Defense, convened in September 1999 under the auspices of the Federal Advisory Committee Act.  Their purpose was to evaluate the quality monitoring in place within the MHS and to recommend steps to further improve.  We are pleased that the Panel found no major problems with the quality of patient care delivered throughout the MHS.  Nevertheless, the Panel made 44 specific and four general recommendations.  I plan to convene a workgroup including the military services to carefully consider these recommendations.  We have forwarded the Panel’s report to the Congress.

Ensuring patient safety is a high priority of the MHS.  New initiatives underway include the establishment of a Patient Safety Center at the Armed Forces Institute of Pathology (AFIP).  This center will receive, consolidate, and analyze reports from all military medical facilities of errors in patient care.  The aggregated information will then be provided back to all military facilities as guiding information for patient safety.   We have five military medical facilities participating in the pilot program with AFIP to refine training materials and procedures before expanding the program system-wide.  With the Agency for Healthcare Research and Quality and DVA, we jointly lead an effort on behalf of the Quality Interagency Coordination Task Force to develop and implement mechanisms for avoiding medical errors in high hazard areas such as Intensive Care Units and Emergency Rooms.  We have fifteen military medical facilities, the Bureau of Medicine and Surgery, and the Army Medical Command participating with us in this endeavor.  Another initiative is the MedTeams program that encourages all members of a medical team, regardless of rank or experience to work together to prevent errors in the delivery of care.  This program now includes work in emergency medicine and will be expanded to other specialty areas in the future.  Also involved in this program will be establishment of centers of excellence to train and guide medical team personnel.  Finally, we have modeled our patient safety program after that of the DVA and we continue to work closely with them in developing and implementing our system.

The Department leverages advances in technology to contribute to the delivery of quality care and patient safety and has focused on development of four systems.  First, the Composite Health Care System II (CHCS II), also referred to as the military computer-based patient record, will enable providers to diagnose with the assistance of practice guidelines, to order screening preventive health services and to prescribe medications.  Results of tests will be returned to the ordering physician with appropriate alerts through the same electronic system.  Second, the Pharmacy Data Transaction Service provides a central data repository for prescriptions filled throughout the Military Health System.  This new pharmacy data system enables interactive clinical screening of a complete patient profile for drug interactions and duplicate therapies and presents the information to the prescribing physician at the time of ordering.

             The Department’s efforts to capture and analyze health and readiness information about service members, especially during deployments, are expanding.  The third system, the Theater Medical Information Program coupled with CHCS II will form the longitudinal view of health information that captures all health encounters and exposures for every service member.  Our collaboration with the DVA on information systems will allow these computer-based patient records to be available to the DVA should separated or retired members of the military choose to use the DVA for their health care.  Given the mobility of our military population, systems that can reach across geographical boundaries are essential to help achieve patient safety and attain the very highest quality care.  That same reaching capability also is essential to the delivery of medical logistics services.  The Defense Medical Logistics Standard Support (DMLSS) program provides electronic commerce and web-based technology to speed the delivery of pharmaceuticals and medical/surgical items to military medical facilities and deployed forces worldwide.

 Recognizing the tremendous potential of the Internet to our highly mobile population, we are using the net to improve healthcare to our beneficiaries.  We developed a prototype E-Health portal called TRICARE Online that represents a single point of entry to the MHS for all beneficiaries, providers, and managers.  A major benefit of a single MHS portal is its ability to address security and privacy issues on an enterprise level.  TRICARE Online is being developed with special attention to federal and DoD privacy and security policies, HIPAA requirements, and American Disability Act guidelines for accessible web sites.  With this single point of entry, beneficiaries would be able to easily navigate our healthcare system and develop personal medical homepages with information about TRICARE services and benefits uniquely tailored to them.  Marketing and information initiatives can be appropriately targeted to the patient and the TRICARE program will appear more portable to all.  The prototype will enable TRICARE Prime patients to make appointments with their Primary Care Manager over the Internet in real-time, and will provide them with access to millions of pages of high-quality health content material.  Prototype testing begins this year at four military medical facilities.

 Individual Case Management Program

            For the Individual Case Management Program for Persons with Extraordinary Conditions we have developed the short-term concepts of this program and prepared a proposed rule, which is under review by OMB.  We continue to address the details of clinical requirements, quality management, priorities for program access, information management and technology requirements, and beneficiary education.  With the new benefits Congress has required for our senior beneficiaries, we are reviewing how best to provide a high quality and equitable benefit. 

 Improving TRICARE

            We have also worked to improve TRICARE for all our beneficiaries:

·       Our beneficiary satisfaction rates continue to rise;

·       We have greatly improved our claims processing record;

·       We have added Beneficiary Counseling and Assistance Officers and Debt Collection Assistance Officers to help our beneficiaries with problems and overdue medical bills, as well as to understand the causes of the events;

·       We continue to focus on population health in all our communities while optimizing our military medical facilities

·       We have again opened discussions with the Department of Veterans Affairs in an effort to pursue sharing opportunities;

·       We have continued our initiatives for attaining excellent quality and better patient safety in the delivery of healthcare.

             In closing Mr. Chairman and Distinguished Members of the Subcommittee, we are working aggressively to fulfill the many and varied missions of the Military Health System.  As our work continues, we will look to Congress for your continued assistance throughout the coming year.

             We thank you, Mr. Chairman and the entire subcommittee, for your consistent support of the Military Health System.