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TESTIMONY OF
DAVID J. BAKER
PRESIDENT AND CEO
HUMANA MILITARY HEALTHCARE SERVICES

BEFORE THE
SUBCOMMITTEE ON TOTAL FORCE
HOUSE ARMED SERVICES COMMITTEE
UNITED STATES HOUSE OF REPRESENTATIVES

REGARDING
DEFENSE HEALTH PROGRAMS

 March 18, 2004
 

Thank you Chairman McHugh.  On behalf of Humana Military Healthcare Services, I am pleased to be here today to update you on our current efforts in providing access to cost effective, high quality health care to the military community.  As our Country wages its war on terrorism, our thoughts and prayers are with our troops and their families, and we are extremely grateful for their sacrifices in our behalf. 

As President & CEO of Humana Military Healthcare Services, and as a retired military officer, I know that delivering health service to military beneficiaries is a complex undertaking in both the direct care and purchased care settings.  Regardless of the environment in which care is rendered, Congressional support is essential.  So today, I want to begin my statement by thanking the Committee for its ongoing support of the Defense Health Program.  Your actions have created a health care system that is second to none, and they are very much appreciated by the beneficiaries we jointly serve. 

Humana Military Healthcare Services (HMHS) is a wholly owned subsidiary of Humana Inc., one of the nation's largest health benefit companies.  Our subsidiary was formed in 1993 to focus exclusively on providing integrated health services to military families and retirees through TRICARE.  We have delivered services as a TRICARE contractor since 1996.

Today, HMHS is responsible for two Department of Defense (DoD) managed care support contracts.  Together with our subcontractor partners, we provide access to TRICARE for more than 3 million beneficiaries in the 16 states that comprise the Mid-Atlantic, Southeast, Gulf South, and Heartland regions of the country.  We also oversee the processing of all foreign claims, and we administer enrollment into the Continued Health Care Benefit Program (CHCBP).  With more than 40% of all beneficiaries, we are the largest of the four current TRICARE contractors.

As a life-long beneficiary of the military health system, I can personally attest that today's TRICARE is meeting the medical needs of the military community better than at any time in history.  The program provides access to a broad array of benefits, and it delivers exceptional customer service to active duty members, their families, and retirees of all ages.  In my view, its success is primarily due to the unprecedented collaboration between the Congress, the Department of Defense, the Uniformed Services, the beneficiary advocacy groups and the managed care support contractors.  I am indeed honored to be a contributing partner in making today's TRICARE such a success.

Despite our past achievements, the future will bring great change to TRICARE.  Humana Military Healthcare Services, and the other fine companies represented on this panel, will play an important role in the transformation.  As the contractor selected to oversee the provision of TRICARE to the new South Region, and as the company recently chosen to administer very limited TRICARE services in Puerto Rico, we look forward to meeting the significant challenges ahead.

The coming year also represents a period of extremely high risk for the program.  For example, the shift from twelve regions to three means that beneficiaries residing in nearly two-thirds of the country will change managed care contractors.  Simultaneously, several programs, including retail pharmacy, resource sharing, selected military appointment services, and claim processing for TRICARE-for-Life beneficiaries, are being carved out of the basic TRICARE contracts.  Further, a host of new or revised DoD systems and programs supporting such basic managed care processes as billing and enrollment, eligibility verification, referral management and encounter validation are all scheduled for implementation or modification this year.  And finally, the Department has established standards of performance never before achieved in any known health care system.  The interdependencies -- and the risks -- associated with concurrently implementing all of these changes during 2004 are well known to each of us on the panel.  I would like to share my views with you.

The transition from twelve regions to three will require unprecedented levels of cooperation and collaboration among the managed care support contractors and the Department.  With oversight by TRICARE officials, I am pleased to report that we have established an excellent working relationship with Health Net Federal Services to ensure a seamless transition in both the North and South Regions.  At the same time, Humana's substantial presence in the former Region 6 allows us to enhance the TRICARE provider network in the Southwest, thereby improving access and satisfaction for enrolled and non-enrolled beneficiaries alike.  To illustrate, we have established a goal of contracting with 14,475 network providers in the Southwest by the November 1, 2004 start work date in that area; as of today, we have contracted with nearly 9,350 providers in Texas, Oklahoma, Arkansas and western Louisiana.  This means that we have achieved nearly 65% of our target with more than seven months to go.  

Similarly, we are working with TRICARE Management Activity officials to make certain the hand-offs to the various carve-out contractors go as smoothly as possible.  I believe we will achieve positive results, but I am troubled by apparent delays in some of these initiatives, including the retail pharmacy program, resource sharing, and patient appointing.  Further postponements could compromise delivery of cost effective services to our military customers.

Implementation of new DoD processes, procedures and systems is largely out of our hands as supporting contractors.  Nevertheless, we at Humana Military are working closely with TRICARE officials to monitor progress and to develop contingency plans in case schedules fall behind.  A failure to timely implement any of these changes could also have serious cost and beneficiary service consequences. 

We applaud the higher standards of contractor performance under the new TRICARE contracts, particularly in areas such as network referrals, consultation reporting, and electronic claims submission.  However, we must skillfully approach these unprecedented performance benchmarks very carefully. For example, we must be willing to weigh the requirement for one hundred percent electronic claim submission against the benefits of continued network participation by providers who are unwilling or unable to comply.  Based on my contacts with TRICARE officials, I believe we will achieve an appropriate balance.      

At the same time, our parent company's large presence and history of operations in the Commonwealth of Puerto Rico will enable Humana Military to offer a robust network of hospitals and providers active duty members and their families at the start of our newest TRICARE contract on May 1, 2004.  Despite only 60 days to prepare, we will be ready to implement TRICARE for affected beneficiaries in Puerto Rico.  We are also fully prepared to offer full TRICARE benefits to Puerto Rico's military retiree community, should the Department elect to do so. 

In sum, I view the transformation of today's TRICARE program with significant concern, but also with a sense of optimism.  Working together with the Congress, the Department, the Services, advocacy groups and the other TRICARE contractors, I am hopeful we will achieve a transition that is virtually invisible to our military customers. 

While we are pleased to be a part of the new generation of TRICARE, we do have several items we would like the Congress and the Department to consider.

First and foremost, the Congress must continue to fully fund the Defense Health Program (DHP) to meet both readiness and peacetime health care service needs.  For many reasons, this will be challenging.  For example, as Reserve and National Guard members are called to active duty service for a period of more than 30 days, their family members immediately become eligible for benefits under TRICARE.  And, as private sector employers increase their health care premiums, the TRICARE system becomes more attractive for the dually eligible.  Together with recent expansions of the TRICARE benefit structure, these changes have driven significant cost increases in both the direct care and purchased care sectors.  Over the past several years, the Congress has been extremely diligent in adequately funding the DHP.  It is critical that full funding levels be maintained in the future.

Along with fully funding the DHP, I also believe Congress should refrain from further "fencing" of DHP dollars.  Given today's high operations tempo, the Department needs maximum financial flexibility in responding to changing medical resource requirements.  It is best left to the Department-working with the Services, local military treatment facilities and contractors-to allocate the appropriate resources between the direct and purchased care systems.

Third, I urge full implementation of the expanded program of TRICARE eligibility for Reserve and Guard personnel as authorized by the Congress last year.  Given the sacrifices made by these brave citizens, I believe our nation owes them access to the cost effective, high quality health services available under TRICARE.

Finally, we hope to advance new cutting-edge industry concepts to further improve the TRICARE program.  At Humana Military, we recently expanded our online capabilities to allow TRICARE beneficiaries to check the status of authorizations and referrals, confirm their eligibility, print Prime enrollment verifications, and monitor the status of claims -- all over a secure Internet connection.  In the future, we hope to expand such capabilities in a manner that allows beneficiaries to more actively manage their own health care needs.

In conclusion, Mr. Chairman, let me thank you for the opportunity to be here today.  Humana Military Healthcare Services appreciates the opportunity to serve America's military community.  Notwithstanding the risks, we are confident in our ability to provide outstanding TRICARE service during this period of profound change, and we look forward to our continued association with the Congress and the Department of Defense.

I will be happy to respond to any questions you or other Committee Members may have.