Information on Use of Medicare Reimbursement Method to Determine Hospital Payments under the Civilian Health and Medical Program of the Uniformed Services

Savings could be realized if the Department of Defense (DOD) used the Medicare reimbursement method in paying hospital bills under its Civilian Health and Medical Program of the Uniformed Services (CHAMPUS).

An analysis of the effect of using the Medicare hospital reimbursement method for CHAMPUS for a random sample of 25 of 100 hospitals with relative large volumes of CHAMPUS business showed that: (1) CHAMPUS costs in fiscal year 1975 would have been about $1.4 million (11.2%) less than the billed charges of $12.8 million; and (2) the projected difference in CHAMPUS costs for the 100 hospitals would have been between about $2.2 million and $3.9 million less than the billed charges of $31 million. A major objection by hospitals and some related associations to using the Medicare method for CHAMPUS payments was that the increased administrative burden would not be justified by the small number of CHAMPUS patients at most hospitals. However, this concern might be alleviated by applying the method only to hospitals with large volumes of program business. Several alternate reimbursement systems are currently being studied by the Department of Health, Education, and Welfare.