Defense Health Care

In response to a congressional request, GAO examined 10 Uniformed Services Treatment Facilities' (USTF) medical care costs for beneficiaries to determine the: (1) reasonableness and validity of private contractors' studies of cost comparisons between USTF, the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), and private hospitals in the same geographic area; (2) Seattle, Washington, USTF costs as compared to private care providers in the same geographical area; and (3) reasons for substantially increased federal reimbursements from 1984 to 1985 to the Port Arthur and Houston, Texas, USTF.

GAO found that: (1) the three studies' methodologies and findings were reasonable; (2) the studies showed that USTF generally provided health care services in a cost-effective manner; (3) the Texas USTF charges were lower than CHAMPUS charges, lower than or comparable to Medicare, and lower than hospitals in the same region; (4) the two Texas USTF received increased reimbursements due to an increase in new patients, added inpatient beds, and expanded out-patient services; and (5) there was insufficient data to compare the Seattle USTF costs to those of other area hospitals. GAO also found that: (1) in 1987, Congress authorized a $115 million program cap and directed the Department of Defense (DOD) to negotiate a fixed-price contract with each USTF, similar to Seattle's, to replace the fee-for-service reimbursement agreements; (2) DOD reduced the 1987 Seattle USTF contract by $10 million, with provisions that it not exceed a 10-percent increase over the prior year's contract for 1988 and beyond; and (3) the new payment system should not affect the study results, since the system applies only to inpatient services, and certain USTF inpatient services are excluded from the new payment system.