Defense Health Care

In response to escalating health care costs, Congress has urged the Defense Department (DOD) to gradually lower reimbursement rates paid to civilian physicians under the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) for medical care provided to members of the armed forces. As DOD has implemented its payment revisions, however, some physicians have complained that the CHAMPUS maximum allowable charge (CMAC) is too low--particularly for obstetric and pediatric rates. Under DOD's new managed care program--TRICARE--these CMAC rates represent DOD's maximum physician reimbursement level. Under TRICARE, civilian doctors provide supplemental care at military treatment facilities. This report examines (1) whether DOD's methodology for setting CMAC rates complied with statutory requirements and how current CMAC rates compare with Medicare rates for similar services, (2) the basis for physicians' concerns about CMAC rates and how these concerns affect their willingness to treat military beneficiaries, (3) the basis for other concerns that physicians have about TRICARE that could also affect their willingness to treat military beneficiaries, and (4) how balance billing limits are being enforced.

GAO noted that: (1) the methodology used by DOD to transition CMAC rates to the Medicare level of payment complies with statutory requirements and generally conforms with accepted actuarial practice; (2) these adjustments will result in DOD saving about three-quarters of a billion dollars in fiscal year 1998 in health care expenditures; (3) as of the most recent available CMAC rate adjustment in March 1997, 80 percent of CMAC rates nationwide were at the same level as Medicare, with about 20 percent higher and less than 1 percent below the Medicare level of payment; (4) the CMAC rates at the four locations GAO selected were generally consistent with Medicare rates; (5) while physicians' initial concerns about low obstetric and pediatric rates have been addressed by DOD, current physician complaints about reimbursement levels are focused on the discounted CMAC rates paid to network physicians under DOD's TRICARE program; (6) because most CMAC rates are now equivalent to Medicare rates, the discounted CMAC rates that TRICARE network physicians agree to accept are typically below the Medicare level of payment; (7) some physicians told GAO that they considered the discounts unacceptable, and they would not join the TRICARE network but would continue to treat military beneficiaries as nonnetwork physicians; (8) the discount rates physicians were willing to accept in the four locations were largely dependent on local health care market factors such as the degree of health maintenance organization penetration and the dependence of local physicians on the military beneficiary population; (9) physicians GAO met with also expressed concerns about administrative hassles, which contributed to their frustration with the TRICARE program; (10) in many cases, physicians said that while they would be willing to accept discounted CMAC rates, the administrative impediments provided significant disincentives to joining the TRICARE network; (11) DOD and managed care support contractors (MCSC) officials acknowledged these complaints and are making efforts to address them and alleviate physicians' concerns; (12) DOD and MCSC officials told GAO that they were aware of only a very small number of balance billing infractions--all of which had been easily resolved; (13) while the MCSCs attempt to educate beneficiaries about balance billing limits, the explanation of benefits statement does not include information on the balance billing limits; and (14) Medicare, which has the same balance billing limit, sends notice of balance billing limitations on the statements it provides to beneficiaries and physicians.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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