II. ISSUE AND RECOMMENDATION SUMMARIES (CONT'D)

D. HEALTH ISSUES (CONT'D)

OSD 28: THE CIVILIAN HEALTH AND MEDICAL PROGRAM OF
THE UNIFORMED SERVICES (CHAMPUS)

Summary Recommendation

The Department of Defense (DOD) should require modifications to the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) in order to reduce the steadily increasing CHAMPUS claims expenditures and to return patients to the direct care system. Specifically, we recommend that for beneficiaries who reside in catchment areas around military treatment facilities, DOD should discontinue reimbursement via CHAMPUS for inpatient or outpatient treatment at private medical facilities. This would be accomplished by prohibiting the issuance of nonavailability certificates for beneficiaries in the catchment areas. Exceptions should be made, and nonavailability certificates issued, in situations where care is not readily or practically available at military treatment facilities; e.g., emergency care and certain psychiatric care.

Financial Impact

$355.7 million

annually

Potential Savings: To calculate savings,
we have assumed the full elimination of
non-availability certificates in catchment
areas, which represents approximately 55
percent of CHAMPUS expenditures, excluding
emergency care situations, which we have
estimated at 20 percent of CHAMPUS costs.

Background

The Office of the Secretary of Defense (OSD) Task Force reviewed the operations of the overall DOD health care program, both the direct care system and CHAMPUS. The direct care system provides health care principally for active duty personnel. Care is also provided for active duty dependents and retirees and their dependents when space and resources are available at military treatment facilities. CHAMPUS provides reimbursement benefits for dependents of active duty personnel and for retirees and their dependents when health care is obtained from the civilian sector.

The OSD Task Force recognizes the complexities involved in managing the DOD health care system. The military must be ready to provide medical care in time of In peacetime, sufficient staffing and training must take place not only to provide. for everyday needs but also to prepare for the possibility of war.

war.

Beneficiaries who live in catchment areas are expected to get their inpatient care from the proximate military direct care facility. A catchment area is defined as that area within a 40-mile radius of a military treatment facility. However, under certain circumstances, beneficiaries can obtain inpatient care from the private sector and be reimbursed via CHAMPUS.

Reimbursement via CHAMPUS for inpatient care is contingent upon presentation of a nonavailability certificate (NAC), which must be obtained from the military direct care center. Currently, NACS for inpatient care can be issued for any one of the following reasons: if using a civilian facility assures continuity of care of the patient; if the cost of care is reimbursed primarily by other insurance; if the services needed by the patient cannot be provided at the direct care facility; or if the civilian facility and the direct care facility disagree on the type of care to be given, and the beneficiary prefers the civilian care program.

Under CHAMPUS, the beneficiaries are required to pay some portion of inpatient costs. Dependents of active duty personnel pay $6.30 per day or $25 per admission, whichever is greater, for inpatient care at civilian hospitals. Retirees and their dependents are responsible for 25 percent of the charges for civilian hospitalization and 25 percent of the charges for professional services.

Outpatient care can be secured from the private sector without a NAC even if the beneficiary resides in the catchment area. Active duty dependents must pay for 20 percent of the allowable charges above the deductible of $50 per person or $100 per family per fiscal year. Retirees and their dependents pay for 25 percent of the allowable charges above the deductibles (same as above). Outpatient care provided at a direct care facility is free of charge.

Inpatient care was the chief concern of the OSD Task Force since it represents approximately 65 percent of CHAMPUS expenditures. Outpatient care represents approximately 10 percent of expenditures. The remaining 25 percent includes psychotherapy, both inpatient and outpatient, and administrative and other expenditures.

Methodology

In order to determine the scope of the DOD health care system, the procedures used in administering health care, and the provisions for health care reimbursement via CHAMPUS, the OSD Task Force conducted interviews with various OSD personnel. An analysis was made of information obtained from these interviews, as well as information obtained from OSD publications, office memoranda, directives, and General Accounting Office (GAO) and DOD audit reports.

Findings

The estimated FY 1983 budget for CHAMPUS is $1.1 billion. DOD has estimated that approximately 55 percent, or $594 million, will represent expenditures for beneficiaries living within a catchment area. In fact, an additional appropriation of $110 million was requested for FY 1982 to fund the increasing use of the private sector for health care.

In FY 1979-1930, the military granted approximately 224,000 NACS, excluding blanket certificates, which included multiple inpatient treatments. DOD reports that the services do not have a specific coordinated policy on appropriate levels of approval or necessary documentation to support the NACS issued. An effective system for referrals to other direct care centers or other Federal health facilities in overlapping catchment areas is not fully developed.

It appears to the OSD Task Force that the present system for funding CHAMPUS through a DOD appropriation and funding the direct care system through service appropriations adds to these control problems. Budgets for the two systems are developed separately. The direct care systems are budgeted within the services, and CHAMPUS is budgeted by OSD. There is no effective policy coordination between the two systems, and the direct care system has little or no incentive to control the issuance of NACS. This has the effect of pushing prospective patients to CHAMPUS.

Our review indicated that, in general, the direct care system is underutilized and therefore has the capacity to absorb additional patients from CHAMPUS. From 1977 through 1981, inpatient admissions remained relatively unchanged, and average daily patient load decreased approximately 8 percent. However, physician strength in the military has increased by 12 percent and the cost of direct care has increased by 53 percent. As a result, in today's environment, significantly more military physicians are providing inpatient care to approximately the same number of patients, with shorter average stays. Also, outpatient visits have decreased approximately 5 percent.

In addition, only 77 percent of the operating bed capacity of the direct care hospitals in the continental United States is in use on an average day. Hospital administrators in the private sector use 85 percent as an optimal occupancy rate and 70 percent as a minimal rate, a criterion for closure. Using these criteria in the continental U.S. direct care system, which includes 124 hospitals, it can be concluded that only 6.5 percent, or eight hospitals, reach or exceed the optimal 85 percent measurement. A large percentage, 38.7 percent (48 hospitals), fall in the minimal category of 70 percent or less of operating bed capacity.

Normal bed capacity, a measure used to identify the proportion of capacity space currently used, is only 46 percent in the direct care hospitals in the continental United States. The direct care system has a legitimate need to provide for greatly expanded use in wartime. However, when ascertaining the ability of the direct care system to expand to accommodate the return of CHAMPUS patients, this measure indicates that it can virtually double its existing bed capacity and not be in need of new facilities in the same locations.

It appears to us that there are adequate support personnel in the direct care system to handle an increased

patient load. Private sector hosptial administrators measure the adequacy of hospital support personnel according to the number of full-time equivalent personnel per bed, excluding physicians and dentists. The median measure of civilian hospitals in 1981 was approximately 2.5 personnel per bed (Hospital Statistics, 1981 edition). The comparable measure for the military's direct care system was 6.59 personnel per bed.

We recognize that in emergency cases, it may be necessary for beneficiaries to use civilian hospitals, rather than the direct care system. An analysis of extensive claims experience in civilian hospitals in a major urban state shows that about 18 to 20 percent of hospital admissions are for emergency care. We have discounted our potential savings by 20 percent to reflect our recommendation that the cost of true emergency care continue to be reimbursed through CHAMPUS. The true emergency care to which we refer in our recommendation is that care required for situations such as accidents, in which the patient is taken to the nearest appropriately equipped facility.

Conclusions

The OSD Task Force concluded that significant changes in the DOD health care system are required for more effective use of existing medical and support personnel. OSD needs to take more decisive action to match medical resources with health care needs. If the present system is not changed, beneficiaries in catchment areas will continue to seek and obtain care from the private sector regardless of their proximity to direct care facilities. The absence of any attempt at coordinated management of the direct care and CHAMPUS systems has led to inefficient budget expenditures for both and independent policy decisions which are counterproductive in terms of the overall military health care system.

Recommendations

In making our recommendations, we have taken into consideration the impact of the proposals on the consolidated system. Our recommended changes in the CHAMPUS system are aimed at shifting a portion of the current CHAMPUS users into the direct care system. In a separate issue, OSD 29, we recommend the introduction of cost containment measures in CHAMPUS and in the direct care system. The recommendations included herein are aimed primarily at the domestic-based CHAMPUS environment.