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The participation agreements between the Department of Defense (DoD) and the Uniformed Services Treatment Facilities (USTFs) outline the features of the managed care plans offered to eligible military beneficiaries by the USTFs. This Congressional Budget Office (CBO) memorandum has been prepared to comply with the provisions of the National Defense Authorization Act for Fiscal Year 1994 requiring CBO and the General Accounting Office to evaluate those agreements. The memorandum summarizes CBO's findings, which focus on two specific issues: the cost-effectiveness of the USTF managed care programs compared with other components of the military health care delivery system and the impact of the agreements on DoD's budget and expenditures.

Ellen Breslin Davidson and Sheila Roquitte of CBO's National Security Division and Lisa Siegel of CBO's Budget Analysis Division prepared the memorandum under the direction of Neil M. Singer, R. William Thomas, and Michael A. Miller, The authors gratefully acknowledge the assistance of Harriet Komisar of CBO's Health and Human Resources Division. Special thanks go to Lieutenant Colonel Henry L. Smith at the Office of the Assistant Secretary of Defense (Health Affairs) for providing information and data on the USTF managed care programs. The authors also wish to thank Lane Pierrot for her assistance.

Leah Mazade edited the manuscript, and Christian Spoor provided editorial assistance. Cynthia Cleveland and Judith Cromwell prepared the memorandum for publication.

Questions about the analysis may be addressed to Ellen Breslin Davidson.
 
 

SUMMARY AND INTRODUCTION

BACKGROUND: THE UNIFORMED SERVICES TREATMENT FACILITIES

THE PARTICIPATION AGREEMENTS

• Voluntary Enrollment
• Reimbursement Through Capitation Rates
• Congressional Reporting Requirement

ARE THE USTFs COST-EFFECTIVE?

• Comparing the Costs of the USTF Programs with Those of the MHSS
• Comparing the Costs of the USTF Programs with Those of Civilian HMOs

IMPACT ON BUDGETS AND EXPENDITURES

• How DoD Is Affected
• How the Federal Government Is Affected

SUMMARY AND INTRODUCTION

The National Defense Authorization Act for Fiscal Year 1994 required the Congressional Budget Office (CBO) and the General Accounting Office to evaluate the participation agreements between the Uniformed Services Treatment Facilities (USTFs) and the Department of Defense (DoD). CBO conducted part of that evaluation by addressing two specific questions posed by the authorization act:

• Are the USTF managed care programs that the agreements address more or less cost-effective as a provider of care to military beneficiaries than the Military Health Services System (MHSS)?
  
  
• What is the impact of the USTF managed care programs on DoD's budget and expenditures for health care?

Because of limitations in the available data and differences between the benefit packages and cost-sharing requirements of the USTF managed care programs and the MHSS, CBO cannot answer either of those questions definitively. Moreover, the USTF managed care programs have been operating only since October 1,1993--perhaps long enough to be considered "up and running" but not long enough to generate the data necessary to examine differences in the effectiveness of the two systems of care.

CBO has, however, examined the differences in DoD's cost for providing care in the USTF managed care programs and in the MHSS for a uniform population of beneficiaries. The results of that analysis suggest that the cost to DoD is higher for the USTFs compared with the MHSS in areas where beneficiaries have poor access to care at Military Treatment Facilities. Conversely, the cost to DoD is lower for the USTFs compared with the MHSS in areas where beneficiaries have better access to care at Military Treatment Facilities. Yet the significant differences in health care coverage offered to eligible military beneficiaries through the MHSS and the USTF programs--compounded by certain inefficiencies in the delivery and financing of care through the MHSS--may make the MHSS by itself a questionable standard against which to measure the costs of the USTF programs. To provide a fuller assessment, CBO compared the cost to DoD of providing care in the USTF programs and in civilian health maintenance organizations (HMOs). That comparison also suggests that the cost to DoD is higher for the USTFs compared with civilian HMOs.

Because DoD does not know exactly how many eligible military beneficiaries use its health care system, CBO could not determine the precise impact of the USTF managed care programs on the department's budget Still, one impact that CBO could estimate was the cost to DoD of providing care to military beneficiaries who are eligible for Medicare. CBO estimates that cost to be eight times greater with the USTF managed care programs than without them. In addition, the budget for the USTF programs is likely to grow at a much faster rate than other parts of DoD's health care system. Faster growth could lead to inequitable patterns of spending in the USTF programs compared with the rest of the MHSS.

Finally, CBO's analysis underscores the financial risk to the federal government from the relatively large number of Medicare beneficiaries enrolled in the USTF managed care program. Although the programs specifically require enrollees to refrain from using their Medicare benefits for the duration of enrollment, currently no system is in place to identify those beneficiaries who use both the USTF programs and Medicare. As a result, the federal government may be making double payments.

This document is available in its entirety in PDF.