Medicare Subvention Demonstration

Most of the 1.3 million military retirees aged 65 and older are eligible for Medicare as well as for military health benefits. Many of these "dual eligibles" are enrolled in traditional fee-for-service Medicare or a Medicare health maintenance organization (HMO). The Defense Department (DOD) has launched a demonstration designed to test whether DOD, by forming Medicare HMOs at six sites, can deliver accessible, quality health care to military retirees while not increasing costs to the government. Some of these Medicare enrollees obtain Medicare-covered health services at military treatment facilities as well as from their private physician or HMO. Medicare had previously been prohibited from reimbursing DOD, which had paid for these services from appropriated funds. In principle, the subvention demonstration offers several advantages. It allows older retirees to obtain Medicare managed care within the military health care system---an option that military retiree groups support. It also enables DOD to receive Medicare funds for services to Medicare-eligible retirees, beyond what DOD was already providing at its own expense. Medicare might gain from the subvention demonstration if its payments to DOD are lower than what Medicare would otherwise have paid on behalf of these beneficiaries. Key features of the demonstration are new, however, and there are many questions about how the program will work out. This report looks at program implementation during the start-up phase. GAO (1) discusses progress in establishing the ground rules for program operation, receiving approval from the Health Care Financing Administration, attracting enrollment, and starting to deliver health care services; (2) presents information on useful practices and operational problems that emerged during program start-up; and (3) draws on experiences so far to identify issues for the future.

GAO noted that: (1) the start-up period of the Medicare Subvention demonstration was successful; (2) despite unanticipated delays, the six demonstration sites met the requirements for Medicare managed care plans, enrolled substantial numbers of beneficiaries, and began delivery of health care services by January 1, 1999; (3) the sites' experience in dealing with the difficulties that arose along the way has yielded valuable lessons and has also pinpointed issues that remain to be resolved; (4) while the successful start-up of the demonstration is encouraging, it will be some time before the results of its mature operation can be assessed; (5) establishing the ground rules for the demonstration took longer and HCFA approval process was more demanding than anticipated; (6) as a result, the demonstration will cover 24 to 28 months of service rather than 3 years; (7) the initial demand for enrollment overall was not as great as expected, in part because retirees were wary of a temporary program and feared that they might be unable to obtain affordable supplementary insurance at the demonstration's end; (8) enrollment also reflected site-specific factors, such as prospects for getting space-available care at a military treatment facility (MTF) without joining Senior Prime, the breadth of services available at the MTF, and options for care elsewhere in the community; (9) preparing for the start-up of the demonstration brought some useful new senior health care and management practices to the MTFs, but also revealed operational difficulties; (10) the fact that this demonstration program operates within two bureacracies--DOD and HCFA--caused some points of strain; (11) being new to Medicare, demonstration sites had to devote substantial DOD staff and consultant time learning HCFA requirements; (12) the dual organizational structures within DOD carry with them the potential for conflict; (13) additionally, dual DOD and HCFA procedures may result in duplication of effort; (14) experience in the start-up phase of this demonstration raises issues for the future of this or other similar demonstrations; and (15) enrollees will need to know several months in advance of the end of this demonstration whether service will continue so that they can plan for their continued health care.

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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