, -a-- Department of Defense COMPTROLLER GCNERAL OF T?-lE UNITED STATES WRSHINGTON. O.C. 20548 B-133142 Dear Mr. Chairman: Reference is made to your request of October 20, 1969, that we make a comprehensive review of the military Medicare program --now called the Civilian Health and Medi- cal Program of the Uniformed Services. This is the fifth and final report in response to your request, It summarizes the information included in our four earlier reports, and presents our observations on several additional aspects of the program. We have not obtained written comments from the De- partment of Defense on matters discussed in this report, but in conducting the review, we have discussed the sub- stance of our findings with officials responsible for the pro- gram. As arranged with your office, we are providing the De- partment of Defense with copies of this report. We plan to make no further distribution unless copies are specifically requested, and then we shall make distribution only after your agreement has been obtained or public announcement has been made by you concerning the contents of the report. Sincerely yours, Comptroller General of the United States -F The Honorable George H. Mahon CI] Chairman, Committee on Appropriations \I 3~ c House of Representatives ---.---I--- 50TH ANNIVERSARY 1921 m..1971 Contents Page DIGEST I 1 CHAPTER 1 INTRODUCTION 4 History and features of the program 4 How the program is administered 6 Program costs 8 Hospital costs 9 Physician costs 9 Handicap benefits 10 Outpatient drug program 10 i 2 HOSPITALCHARGES,ADMINISTRATIVECOSTSAND OTHERMATTERSRELATEDTO HOSPITALCARE 12 Increased costs 12 Comparison of hospital charges 12 Rising cost of hospital care 13 Extent that hospital costs might be re- duced 14 Reasonableness of administrative costs 15 Adequacy of audits 15 Recommendations or suggestions 16 Matters for consideration by the Com- mittee 16 3 COSTOF PHYSICIANAND PSYCHIATRICCARE 18 Use of the reasonable-charge concept to pay physicians 18 Comparisons of payments to physicians 20 Substantial amounts paid to individual physicians, clinics, and group prac- tice organizations 20 Psychiatrrc care 20 Utilization reviews of medical care furnished 21 Administrative costs and weaknesses in controls 21 Handling outpatient deductible and other insurance provisions 23 Page CUAPTER Need for expanded audit coverage and re: lated evaluation controls 23 Recommendations or suggestions 24 4 PROGRAMFOR PROVIDING BENEFITS TO HANDI- CAPPED PERSONS 26 Cost sharing and limits 26 Increasing costs of the handicap por- tion of CHAMPUS 26 Liberal interpretation of law 27 Administration of handicap benefits 27 Need for authoritative standards for de- termining degree of handicap 27 Better support needed for evaluation of cases 27 Errors and omissions in data used for payment of claims 28 Approval after care has been received or started 28 Written instructions needed to achieve uniform actions 29 Use of medical expertise available at Fitzsimons General Hospital and.longer tours of duty for military personnel 29 Inadequate audit coverage of the handi- cap portion of CIQMPUS 29 Recommendations or suggestions 30 5 ELIGIBILITY OF PARTICIPANTS UNDER CIGMPUS 32 Issue of identification cards 32 Recovery of invalid identification cards 33 Procedures for recovery of identifi- cation cards 34 Notification by the uniformed ser- vices of separatees whose depen- dents are receiving medical care under CHAMPUS 34 Unauthorized use of identification cards to obtain CHAMPUSbenefits 35 Recommendation 36 Page‘ CHAPTER ( 6 MEDICAL CAKE NONAVAILABILITY STATEMENTS 37 Policies among the uniformed services 37 Need to check availability of care at other unifo-rmed services facilities 38 Costs incurred under CHAMPUSdue to shortages in military hospitals 39 7 IMPROVEMENTStiEDED IN CHAMPUSINFORHATION PROGRAM 41 * Responsibility for CHAMPUSinformation 41 Problems in implementing the informa- tion program 42 Results of the information program 43 Conclusions 44 8 POTENTIAL SAVINGS BY PURCHASING MEDICAL EQUIPMENT FROM GOVERNMEW SOURCES 45 Recommendation 46 9 ADDITIONAL MATTERS ON CHAMF'USADMINISTRATION 47 Surveillance by OCHAMPUSover claim proc- essing and paying activities of fiscal agents 47 Submission of claim forms to OCHAMPTJS48 Recommendation 48 Returned or rejected claims 49 Defense Contract Audit Agency audits 50 Audit of OCHAMPUSby the U.S. Army Audit 51 Inspectors General inspections 52 Recent administrative actions by OCHAMFUS 53 10 SCOPE OF REVIEW 54 APPENDIX I Letter dated October 20, 1969, to the Comp- troller General from the Chairman, Commit- tee on Appropriations, House of Representa- tives 57 , AFEEEVIATIONS 4 CHAMPUS Civilian Heal&h and Medical Progrant of the I SJ =/ Uniformed Services GAO General Accounting Office i OCHAMPUSOffice for the Civilian Health and Medical Pro- gram of the Uniformed Services POTENTIAL FOR IMPROVEl'4EPtTS IN THE CIVILIAN HEALTH AND MEDICAL PROG2AYOF THE /' UNIFORMEDSERVICES 71-g ZDepartment of Defense 1 /B-133142 DIGEST _----- WHYTHEREVIEWWASMXDE * The Committee Chairman asked the General Accounting Office (GAO) to * make a comprehensive review of the Civilian Health and Medical.Program of the Uniformed Services. (S ee app. I.) Modifications to the request, agreed to by the Chairman's office, are discussed on pages 10 and 11. Four reports have been issued on the program as the work was completed. They are: --The Civilian Health and Medical Program of the Uniformed Services (interim report), May 19, 1970. --Improved Management Needed in the Program Providing Benefits to Handicapped Dependents of Servicemen, March 16, 1971. --Potential for Reducing Hospital and Administrative Costs Under the Civilian Health and Medical Program of the Uniformed Services, April 16, 1971. --Costs of Physician and Psychiatric Care--Civilian Health and Medi- cal Program of the Uniformed Services, July 1971. Chapters 2 through 4 of this report summarize these earlier reports, and the remaining chapters contain the‘FTnaings of the review of addi- tional aspects of program activities. FINDINGSAND CONCLUSIONS Evaluation of total costs inmrred Annual program costs have increased from $33 million in fiscal year 1957 to over $237 million in fiscal year 1970. About $163 million of this increase has occurred since fiscal year 1966. Estimated 1971 costs will be almost $300 million. (See pp. 8 to 10.) One-half of the cost increase in recent years was attributed by GAO to the additional benefits and the new beneficiaries authorized by the E*lilitary Medical Benefits Amendments of 1966. The remainder was due primarily to the higher cost of medical care and the increased use of the program by beneficiaries. (See pp. 8, 12 to 14, 78 and 79.1 Evaluation of fees Program beneficiaries generally were charged the same for comparab'le care and services as were other hospital patients, and average pay- ments to physicians under the program general'ly were in line with average payments made under other health programs. (See pp. 12 and 20.) EvaZuation of achinistratiue expenses The Office for the Civilian Health and Medical Program of the Uniformed Services had exercised limited manageria'l control; opportunities for cost reductions either had not been identified or had not been acted upon. GAO believes that the potential exists for substantial reduc- tions in administrative costs. (See pp. 15, 21, 27 to 29, and 47 to SO.! EZii~ibiZity of program participants Procedures and controls over the issuance and recovery of identifica- tion cards--which are used to identify e'ligible beneficiaries to those who furnish medical care--were deficient at al7 nine military installa- tions GAO visited. (See pp. 32 to 36.) Adequacy of audits and rev&m made bg Government agencies Audits made by the Department of Health, Education, and klelfare's Audit Agency have been adequate for determining the allocation and allowability of program administrative costs. The scope of the audits and time allowed for performing them in the past have been too limited, however$ for the audits to function as an effective tool for management in several important areas of operations and cost effectiveness. Ef- fective implementation of the Audit Agency's plans for expanded coverage of program activities should result in valuable benefits to the Govern- ment. (See pp- 15, 23, and 29.) Improvements are also needed in reviews of program activities made by Defense organizations. (See pp. 16, 23, 29 and 50 to 53.) 2’ l%J~iTC,~ <:L;T T,sp*7-;XT: There has been SOW improvement in the information program. About 92 percent of over 230 married active duty servicemen i ntervieweci by CA0 :';cre ak;are of th.2 Fr?::-e m in varying degrees. As the infor- mation progudm becomes more effective, it is reasonable to expect that the use of the program and the associated costs will increase. (See pp* 31 t0 44.) ~?onavaiZubiZdty of care at miZitary hospitaZs At the nine military hospitals visited, GAO did not find i-proper issuances of nonavailability statements--authorizations to obtain care from a civilian hospital. (See pp. 37 to 40.) RECOMMENDATIOX5' ORSUGGESTIONS Detailed recommendations which were presented in earlier reports are set forth in chapters 2 through 4. Additiona‘l recommendations for improving the program are shown in chapters 5, 8, and 9. (See PP- 163 24, 25, 30, 31, 36, 46 and 48,) AGENCY ACTIONSANDUNRESOLVED ISSUES Witten comments have not been requested from the Department of Defense on matters contained in this report. In discussions with the Executive Director of the program, however, GAOwas provided with a listing of actions recently taken to imProve program oper- ations. GAO believes that these actions, if properly implemented, will be beneficial. (See pe 53.) &-4TTERS FORCONSIDER4TIOiV BY THECOMMITTEE Reduction in the lengths of hospital stay would have a significant effect on Federal expenditures for hospitai care. Therefore the Committee may wish to consider the need for an analysis of the factors affecting lengths of stay, to identify steps that can be taken to reduce them without sacrificing the qua7ity of medical care. (See p. 16.) CHAPTER 1 -- II INTRODUCTION HISTORY AND FEATURES OF THE PROGRAM '_ The Civilian Health and Medical Program of the Uniformed Services1 (CHAMPUS) provides medical care benefits from ci- vilian sources for dependents of active members, retirees and their dependents, and the dependents of deceased members. The program, formerly called the Dependents' Medical Care ' Program (referred to as Medicare until the larger Social Se- curity Administration program preempted the name), became effective on December 7, 1956. The program was redesignated CHAMPUSon January 1, 1967, to more fully indicate the ex- panded mission resulting from the Military &dical Benefits Amendments of 1966 (Pub, L. 89-614). These amendments in- creased the benefits available under the program and the beneficiaries eligible for the program. Under the original program as authorized by the Depen- dents' Medical Care Act of 1956 (10 U.S.C. 1071) only depen- dent spouses and children of active duty members were eli- gible for benefits. The amendments added retirees and their dependents and the dependents of deceased members. At age 65 these added beneficiaries, who become entitled to medi- cal care under the Social Security Medicare Program, lose their eligibility for CHAMPUSbenefits. Also, benefits are not payable under CHAMPUSto the extent that the costs of medical care are paid by other insurance provided by law or through employment to retired members, their dependents, or dependents of deceased members. The determination of eligibility for CHAMPUSis the responsibility of the uniformed service of which the 1The term "uniformed services“ includes the Army, Navy, Air 1 Force, Marine Corps, the Coast Guard, and the commissioned corps of the U.S. Public Health Service and the National ' Oceanic and Atmospheric Administration (formerly the Envi- ronmental Science Services Administration), 4 sponsor 1 is or was & member, Eligible persons are issued an identification card on which eligibility for CHAMPUSis indicated. 1 Benefits available under the program cover a wide range of health and medical services., Initially these benefits included only physician services furnished on an inpatient basis and hospital care. The amendments added outpatient care, drugs, and, for dependents of active duty personnel, special handicap care, Specifically excluded from the pro- gram were routine physical examinations, routine calz of the newborn, routine eye examinations, and dental care-- D except handicapping conditions and care furnished as a nec- essary part of medical or surgical treatment. Costs of the medical services provided to eligible ben- eficiaries are shared by the Government and the beneficiary. The cost-sharing arrangement which applies to dependents of active duty members is different from that which applies to retirees, their dependents, and the dependents of deceased members. A special cost-sharing arrangement applies to the handicap program, where.the active duty member pays a part of the monthly cost of care based upon his pay grade. These arrangements are described in the earlier reports. Dependents of active duty members residing with their sponsors must obtain a nonavailability statement certifying that, as determined by the local commander, it is not prac- ticable for the required inpatient care to be furnished by facilities of the uniformed services. This statement autho- rizes the dependent to obtain treatment at a civilian facil- ity. All other CHAMPUSbeneficiaries have the freedom to select a uniformed service or a civilian medical facility without being required to obtain the nonavailability state- ment. 1A sponsor is or was an active duty member or a retired mem- ber of the uniformed services from whom a dependent derives eligibility for medical care under CHAMPUS. HOW THE PROGRAMIS ADITINISTERED Responsibility for, administration of the program has been delegated from the Secretary of Defense and the Secre- tary of Health, Education,and Welfare, through channels, to the Executive Director, Office for the Civilian Health and Medical Program of the Uniformed Services (OCHAMPUS>. Ac- tivities of OCHAMPUSinclude (1) development and implemen- tation of a public information program to inform entitled personnel of the available benefits, (2) preparation of a manual explaining policies and procedures for use by pro- viders of services, (3) preparation of suggested changes to the regulations and to a booklet explaining the program, and (4) operation of an information center for providing assis- tance to families with handicapped children. OCHAMPUShas contracted with the Blue Cross and Blue Shield medical agencies, private insurance companies, State medical societies, or combinations of these organizations to process and pay all claims for medical care, except those from Canada and Mexico and some special claims which are processed at OCHAMFUS. The Blue Cross Association and Mu- tual of Omaha Insurance Company have contracted with OCHANPUS for paying hospital claims. Blue Cross pays claims in 33 States, the District of Columbia, and Puerto Rico. Mutual of Omaha pays hospital claims from the remaining 17 States. There are 45 different contractors, or fiscal agents as ' they are commonly called, who process physician, drug, and handicap claims for the 50 States, the District of Columbia, and Puerto Rico. Of these fiscal agents, 22 are also the fiscal agents (carriers) for the Social Security Medicare Program. OCHAMEVScontracts with the fiscal agents are the cost- reimbursement type, under which administrative costs incurred in processing and paying claims are paid by OCHAMPUS. These costs are normally paid at a provisional rate for each claim processed pending a final determination of costs based on audits made by the Department of Health, Education, and Wel- fare's auditors. Effective January 1, 1970, OCHAKPUSbegan converting i from a system of funding fiscal agents in advance for pay- 1 ment of claims to a correspondent bank method. Under the f correspondent ban& method? necessary funds are wired to the' fiscal-agent's bank after the fiscal agent has written the checks to the providers of care. The checks are released by the fiscal agent after the funds arrive at the Lank. This method eliminates the former situation, in which the interest-free funds were held by the fiscal agents. Each of the uniformed services budgets separately for CHAMPUS. The funding program for CHAMPUSis a consolidation of the programs of all the uniformed services prepared by the Office of the Surgeon Ceneral,Department of the Army. . 7 PROGRAMCOSTS Cur report dated F&y 19, 1970, showed the trends in the costs of (Xi.ME'US from its inception through fiscal year 1969 and discussed the annual changes. It showed also that the total costs for benefits provided under CHAMPUSgener- ally had followed the trend of medical care prices in the Consumer Price Index over the years, although the rate of increase for CHAMPUSwas greater during fiscal years 1968 and 1969, Benefit payments made by the Government for fis- cal year 1970 were $237.5 million compared with $218 million1 for fiscal year 1969. Costs were allocated to the period in which care was provided, regardless of when the payment was made. A substantial part of the increase in annual program costs-- from $32.9 million for fiscal year 1957 to $237,5 mil- lion for fiscal year 1970-- occurred because the prugram ex- panded as a result of the 1966 amendments. About $79.8 mil- lion, or 49 percent of the $163.1 million increase from fis- cal year 1966 to fiscal year 1970, was attributable to the additional benefits and the additional beneficiaries autho- rized by the amendments. Other reasons for the increase were the higher cost of medical care and the increased use of the program by beneficiaries. Current estimates made by OCHAMPUSof the costs of pro- gram benefits for fiscal years 1969, 1970, and 1971 will ex- ceed the budgeted costs shown in the President's budget, as follows: Excess over Fiscal Presidential OCHAMPUS Presidential year budget estimates budget 1969 $205,800,003 $229,041,000 $23,241,000 1970 225,700,OOO 270,335,OOO 44,635,OOO 1971 226,900,OOO 294,727,ooo 67,827,OOO 1 The difference from the $197.3 million shown in our May 1970 report is due to fiscal year 1969 claims processed since our previous report. r.mnfit paymmt~'; made by the Government in fiscal year 1970 ',:.pyc distributed as 5321ows: / Number Pro&am of claims casks (percent) (percent) ' Dependents of active duty mem- bers 64 74 Dependents of retirees and de- ceased members 27 20 Retired members 9 6 Hospital costs Hospital costs are the major part of the CXAMPUSex- penditures, the $140.5 million paid for hospital care in fiscal year 1970 being 59 percent of total program costs, CHAMPUShospital costs increased for all types of benefi- ciaries in fiscal year 1969. The number of claims paid for dependents of active duty members decreased slightly in fis- cal year 1970, but the number of claims paid for other types of beneficiaries increased, OCHAMPUSreported that the in- creased use of civilian hospitals was due, in part, to the closing of some military medical facilities which had served a sizable number of retirees, their dependents, or depen- dents of deceased members. The average cost per hospital claim increased from $183 in fiscal year 1966 to $378 in fiscal year 1970, an increase of 107 percent. The average length of hospital stay in- creased from 5.6 days in fiscal year 1966 to 7.2 days in calendar year 1969, The increase was due primarily to the addition in January 1967 of benefits for long-term hospital- ization for emotional disorders and chronic diseases and to the fact that an older age group was under the expanded cov- erage. Physician costs AS shovn in our report dated Hay 19, 1970, physician costs began rising sharply in fiscal year 1967 after being relati7'21y s-table during most_ of the program. Total ph>rsi- cian costs increased from $27.2 million in fiscal year 1966 / to $84.4 million in fiscal year 1970, an increase of 210 percent. For example, as part of' the additionai‘bene- fits authorized by the 1966 amendments, CHAN$?UScosts for outpatient psychiatric treatment were $7.4 r&llion in fiscal year 1970 compared with $1.2 million in fiscal year 1967, j-landicap benefits The handicap portion of CHAMPUSrepresented about 4 per- cent of total CHAMPUScosts in fiscal year 1970. The costs and number of claims increased from $6.7 million and 27,000 in fiscal year 1969 to $8.9 million and 37,000 in fiscal year 1970. The major change was the increase for dental' handicapped cases. Use of the program also increased sub- stantially as more military families became aware of the availability of the benefits, Outpatient drug program The Government paid $2.8 million for 140,000 drug claims in fiscal year 1970 compared with $1.8 million for 117,000 claims in fiscal year 1969. Individual prescrip- tions increased from 580,000 to 844,000. Increased usage was attributed to the increased awareness on the part of beneficiaries of the scope of prescription coverage, Our review was limited to the CHAMPUSportion--in the United States, Puerto Rico, Canada, and Mexico--of the over- all Uniformed Services Health Benefits Program. The over- all program includes medical care benefits in facilities of the uniformed services as well as under CHAMPUS. Care may be obtained, on a space available basis, by retirees at fa- cilities of the Veterans Administration and by dependents of active duty members from Indian or Alaskan native medical facilities. Because of the lack of criteria and data for determin- ing the reasonableness of charges and profits made by hospi- tals and physicians-- as requested by the Committee--agreement was reached with the office of the Chairman to concentrate our efforts on comparing --hospital charges to CHAMPUSwith charges made to other medical programs and to uninsured persons and 10 -.. pyncnts made to plq~~icians under CHAMPUSwith pay- nonts made under other medical programs. It was also agreed that 7Texmuld report on large amount.+ paid tc $-q-"-j4---IX 9 mder CELWTJS during selected periods. The results of this work are summarized fn chapters 2 and 3. ' Four previous reports on CHAMPUShave been issued to the Committee under B-133142 as shown below, Title Date of issue The Civilian Health and Medical Pro- gram of the Uniformed Services %Y 19, 1970 Improved Management Needed in the Program Providing Benefits to Handfcapped Dependents of Ser- vicemen March 16, 1971 Potential for Reducing Hospital and Administrative Costs Under the Civilian Health and Medical Pro- gram of the Uniformed'Services April 16, 1971 Costs of Physician and Psychiatric Care--Civilian Health and Medical Program of the Uniformed Services July 1971 This chapter briefly sunmarizes the detailed report on this subject dated April 16, 1971, previously furnished to the Committee on Appropriations, House of Representatives, INCREASED COSTS Increased hospital charges, along with such other fac- tors as expanded benefits and the addition of new classes of eligible beneficiaries (authorized by the Military Medical Benefits Amendments of 1966), and increased use of the pro- gram have significantly increased costs of the program since its inception in 1956. The major increase occurred in re- cent years when costs for hospital care increased from $46,2 million in 1966 to $134.5 million in 1969, (See ppO 8 to 13 and exhibit A of the detailed report,) COMPARISONOF HOSPITAL CHARGES A comparison of hospital claims paid under CHAMPUSwith amounts paid under several medical insurance programs and a review of hospital billing procedures showed that CHAMPUS beneficiaries generally were charged the same for comparable care and services as were other hospital patients, We found that, although hospital charges had been consistently ap- plied, the total charge per claim for insured patients, in- cluding CHAMPUSbeneficiaries, had exceeded that for unin- 3 sured patients primarily because of a longer average length of hospital stay. (See ppe 14 to 20 of the detailed re- 1 port,) The average length of hospital stay for maternity cases involving care without complications under the program dif- fered widely among hospitals and among geographical areas. Also, the average length of stay for maternity cases under CHAMPUSh-as longer than that for similar cases in military hospitals. Significant savings to the program could be made if, without reducing the quality of care, the lengths of stay for maternity cases could be brought more into line 12 with the shorter lengths of stay experienced at some hospi- tals. But we are not in a position to say whether a shorter length of stay is feasible. (See pp. 15 and 19 to 23 of the detailed report,) Hospitals generally charged less than cost for maternity care but recovered their total costs by charging more than cost for other services@ It appears that hospital charge systems are designed, in general, to recover total operating costs rather than costs for specific servicese As a result of these practices, CHAMPUSpays less than cost for maternity cases9 which constitute about one third of the hospital claims under the program. In contrast, the Federal mployees Health Benefits Program received less advantage from mater- nity cases because9 during the period 1966-69, only 11 per- cent of hospital admissions under that program were for such care. (See ppe 17 to 19 of the detailed report.) Total payments to hospitals under CKAMPUSwere signifi- cantly affected by hospital reimbursement agreements between participating hospitals and the Blue Cross Plans administer- ing the program. These.agreements generally provide that the hospitals-- in consideration of the Plans' making prompt payments and thereby minimizing collection efforts and elim- inating bad debts-- accept less than their normal charges for services rendered to the Plansv subscribers. The.benefits of these agreements were given to the program by 39 of the 52 Blue Cross Plans which process CHAMPUSclaims. In fiscal year 1968 this practice resulted in the program's paying about $2,3 million less than would have been paid without the benefits of these agreements. The 13 remaining Plans reimbursed hospitals for CHAMBUS claims on different bases from those used for their own private subscribers. We estimate that the program could have saved about $850,000 annually had the Plans been able to ex- tend to the program the more favorable reimbursement rates, (See pp* 24 and 25 of the detailed report.) RISINL'G COST OF HOSPITAL CARE The rise in salary expense, which accounts for almost two thirds of hospital operating expenses9 is the major rea- son for the dramatic increase in the cost of hospital care 13 . in recent years. The Nation's community hospitals have ex- perienced an i.xer,~ge payroll increase of 74 perdent during the period 1965-69, mainly because of increased sala-ry ex- penses and increased hospital xork forces which have re- sulted in more hospital employees per patient. Hospital employees have traditionally been underpaid, but, due to * labor and wage legislation and to the effect of unioniza- tion, hospital employees' salaries have increased signifi- cantly in recent years. (See pp. 26 to 31 of the detailed report.) Other factors contributing to rising hospital costs are --new high-cost services now available in community hospitals, and --the increase in the number of services customarily provided. (See pp. 32 to 35 of the detailed report.) EXTENT THAT HOSPITAL COSTS MIGHT BE REDUCED Medical officials believe that reducing unnecessary hospital admissions and shortening the lengths of hospital stay to the minimum number of days needed for good quality care can reduce medical care costs significantly. Attempts currently are being made to control unnecessary hospital admissions and lengths of stay, but current patterns of health insurance provide little incentive to encourage gen- eral acceptance. Studies indicate that the prepaid group practice method for delivery of medical care may be more economical than the more common fee-for-service method. The prepaid group prac- tice method, which aphasizes preventive care, motivates physicians to limit hospital use to the minimum consistent with good care, The fee-for-service method lacks similar incentives to limit hospital use. Other methods being used to control hospital costs are service-sharing agreements, utilization review committees, preadmission testing, employee incentive programs, reim- bursement incentive programss and the planning and coordi- nating of hospital services. Serious problems exist that must be solved if the arttempts to control rising hospital 14 t2ost.s are to have a sigiificant impact, (See ppo 39 to 60 of the detailed report,) Payments by OCHAMPUSto selected fiscal agents for costs incurred in processing hospital claims were, for the most part s allowable under contract provisions. OCHAMPUS, how- ever9 has exercised limited managerial control, and oppor- tunities for cost reductions had not been identified or had not been acted upon by responsible officials, We believe that there is a potential for substantial reductions in ad- ministrative costs. (See pp* 61and62 of the detailed re- . port.) Savings would have been achieved if OCHAHPUShad elim- inated the claims review procedure of the Blue Cross Asso- ciation--a prime contractor-- since the procedure essentially duplicates reviews previously made by Blue Cross Plans--the subcontractors, Investigations should have been made into the wide variances in administrative claim rates paid to the 52 Plans. The rates ranged from $1.25 to $8,64 per claim during 1968. (See pp. 61, to 69 of the detailed report.) We believe that further savings might be possible if OCHAMPUSwere to take advantage of differences in certain geographical areas between administrative costs per claim charged by Blue Cross Plans and those charged by Mutual of Omaha and were to award contracts, on a competitive basis, for paying the claims. (See pp. 66 and 67 of the detailed report.) ADEQUACYOF AUDITS Audits by the Department of Health, Education, and Welfare#s Audit &Agency at selected fiscal agents where we made our review were adequate for determining the allow- ability and allocability of administrative costs, But the scope of the audits and the time spent on them were too limited for the audits to function as an effective tool of max:gement for such matters as the reasonableness of ad- ministrative costs and hospital charges3 the eligibility of beneficiaries, and the efficiency of fiscal agents. (See ppa 70 to 72 of the detailed report.) 15 .. 1 In December 1967 oCW&lPUS created its own review team .-n , to evaluate contractor performances, but it did not visit any hospital fiscal agents until September 1970. (See p0 65 of the detailed report.) RECONMENDATIONSOR SUGGESTIONS We believe that the Executive Director, OCHA.PUS, should consider '--looking into the differences in certain geographical areas between the administrative costs per claim charged by the Blue Cross Plans and those charged by Mutual of Omaha and, where it appears advantageous to do so, changing fiscal agents; --requesting proposals from other commercial insurance firms to act as fiscal agents for the program; --investigating the causes for differences in operat- ing efficiency which appear to exist among fiscal agents and taking necessary action to improve opera- tions of the less efficient agents; --attempting to obtain the more favorable Blue Cross reimbursement formulas for paying hospitals in areas where CHAMPUSis not obtaining them; --discontinuing the duplicate claim review procedure of the Blue Cross Association; --arranging with Department of Health, Education, and Welfare's Audit Agency officials for an expansion of the audit effort and scope of review of CHAMPUS; and --initiating a pilot program to determine the feasibil- ity and economy of paying CHAPPUS claims on a prepaid group practice basis. (See ppe 74 and 75 of the de- tailed report.) MATTERS FOR CONSIDF~TION BY TEE COKFIITTEE Reductions in the lengths of hospital stay would have a significant effect on Federal expenditures for hospital 16 care, Therefore the Committee may wish to consider the need for an analysis of the factors afiecting lengths of stay,, to idcn-lify steps that can be taken to reduce them without sacrificing the quality of medical care* (See pp. 21 to 23, 40 to 44, and 75 of the detailed report.) 17 CHAPTER 3 -COST OF PI-ESICIIZE AND FSYCHIATRIC C2'zB.E The payments to physicians0 including psychiatrists; the surveillance over the cost and quality of services; and the related administrative costs and audits are the subjects of our report issued in July 1971 to the Committee on Ap- propriations, House of Representatives. The subject matter of that report is briefly summarized in this chapter. As of September 30, 1970, physician claims under CHAMPUS were being paid under 48 contracts with Blue Shield and Blue Cross agencies, State medical societies, and private insur- ance companies. These organizations processed and paid $84.4 million in physician fees under CHAMPUSfor fiscal year 1970. (See pp. 7 and 8 of the detailed report.) USE OF TKE REASONABLE-CHAXGECONCEPT TO PAY PHYSICIANS Maximum-fee schedules for paying physician claims were discontinued and the reasonable-charge concept was adopted in 1967 and 1968, Under the reasonable-charge concept, also adopted by the Social Security Medicare program in 1966, a physician receives his customary charge for each service rendered, as long as it is within the prevailing level of charges made for the service by other physicians in the same locality. Physician profiles --histories of each physician's past charges for a specific medical service, which are used to determine each physician's customary charge for that ser- vice--were adopted by the program for determining reasonable charges, The prevailing charge, derived from individual physician profiles, was the charge most frequently and widely used by phipsicians in a locality for a particular medical procedure. We noted that the controls provided by the use of pro- files were somewhat limited, since they enabled physicians, over a period, to influence the amounts they would receive 18 -- - -. ,.. .. _ Our tests and studies by the Departient of the Army show that average amounts paid for selected medical proce- dures have increased as much as 70 percent in some States since the reasonable-charge concept has been adopted. Hea- sons given by fiscal agent officials for the increase in- cluded (1) the use of usual and customary fees encouraged physicians to develop a higher profile, through increased charges in their billings, (2) the trend toward specializa- tion, and (3) the fact that, under fee schedules, some phy- - sicians had charged only what they knew was allowable, al- though their normal charge might have been higher. (See pp. 9 and 17 of the detailed report.) We found that there was little standardization among the fiscal agents in the bases for paying claims against CHAMFIJS. Many did not consider customary charges of physi- cians and paid fees based on schedules of allowa.t:es or rel- ative value scales --a method of determining the amount of a physician's fee for a particular service by using h&reed levels of units of effort and an assigned value per 1lni.t. (See pp. 10 to 13 of the detailed report.) The establishment of physician profiles for paying rea- sonable charges does not appear feasible or economical for many CHAMpirS fiscal agents, because (1) the volume of claims for many medical procedures is insufficient for valid pro- files and (2) the costs for establishing and maintaining profiles are high. (See pp- 14 and 15 of the detailed re- port.) A different procedure for determining fees to be paid to physicians under CWmS may be warranted because of prob- lems or potential problems in implementing the reasonable- charge concept --such as the significant increase in, and the reduced control over, the level of physician fees--and be- cause of the high administrative costs associated with the use of physician pmfiles. (See pp.14 to 18 of the detailed report.) 19 COWP~ISONS OF--PAYMENTS -- TO PHYSICIANS Average payments made for selected procedures under CHAMPUSgenerally were in line with average payments under other health care programs. Comparisons of amounts charged by individual physicians against CHAM3JS with amounts charged against other health care programs for the same medical pro- cedures showed that some physicians charged one program more than they charged another for the same service--possibly because of complications in individual cases. We found,how- ever, no indications of CRAWUS' being charged consistently higher amounts.. (See pp. 19 to 25 of the detailed report.) SUBSTANTIAL AMOUNTSPAID TO INDIVIDUAL PHYSICIANS, CLINICS, AND GROUP PRACTICE ORGANIZATIONS The number of physicians or clinics and group practices receiving more than $20,000 from CHAQWUSin 1969 increased about 72 percent over the previous year. Of these, 13 phy- sicians --eight of whom were psychiatrists--received over $50,000 each. (See pp. 25 and 26 of the detailed report.) PSYCHIATRIC CARE Psychiatric care benefits under CAMPUS generally are more liberal than those under other health programs. Ap- proval is required for more than 90 days of care, but there is no limitation on the dollar value or the number of days of care that may be authorized. Extensive care was being provided to program beneficiaries and several psychiatrists were being paid large amounts under CHAMPUS. There is a need forguidelines for authorizing psychiatric care and a need for some controls over the extent to which this care is furnished. (See pp. 27 to 32 of the detailed report.) The fiscal agents included in our review made no at- tempts to determine whether patients receiving psychiatric care in high-cost facilities could obtain the prescribed care in lower cost facilities, (See p* 33 of the detailed report.) 20 Wt: found that. p:;Ychi.ntr Fc cars had been approved' and proLpid+& in facilities \;hich did not conform to criteria prescrfbed by OC3!&i.WS. (See ppa 33 to 37 of the detailed report.) None of the four fiscal. agents included in our'review had made utilization reviews --evaluations of the quality, quantity, or timeliness of medical services--on a systematic basis, but one of them had recently implemented procedures which should help in performing adequate reviews. Limited guidance for establishing utilization review procedures has been provided by OCHAMPUSto fiscal agents. We believe that effective utilization reviews are necessary. (See pp. 38 to 41 of the detailed report.) ADMINISTRATIVE COSTS AND WEAKNESSES IN CONTROLS Administrative costs of fiscal agents' processing phy- sician claims against CHAMFUS increased from $754,000 in fiscal year 1966 to $5.8 million in fiscal year 1970. Rea- sons for the increased costs include (1) the need for com- puterization of fiscal agent operations to handle the in- creased claims resulting from the expansion of benefits and the increased use of the program, (2) full allocations of costs to CHAMPUSbecause it became a larger part of fiscal agents' business, and (3) the hiring and training of addi- tional personnel by the fiscal agents to cope with the ex- panded program authorized by the Military Medical Benefits Amendments of 1966. (See pp. 42 and 43 of the detailed re- port.) There is a lack of standards for evaluating the perfor- mance of fiscal agents. Widely varying costs for processing CHAMRJS claims and different levels of contract performance have been accepted. During fiscal year 1970 the costs per claim for individual fiscal agents ranged from $2.37 to $9.93, (See ppa 43 to 47 of the detailed report.) I We identified problems in which payments made by the California fiscal agenE for physician claims for obstetrical and psychiatric care resulted from errors in computer 21 I pjwgrGms a-Id 2 leclc CA! management controk. We are per- farming an additional revim to ascertain the extent and signific&nce of ti~sc deficiencies. (SC& pp. 29 and 48 of the detailed report,) f A deductible is applied against claims submitted for outpatient care. Also payments made to physicians on behalf of certain beneficiaries as a result of other insurance must be applied against related claims under CHAMPUS. We noted that CHAMPUSwas incurring additional costs by not limiting the amount physicians receive in these instances to the amount payable through application of the reasonable charge criteria. (See pp. 51 to 57 of the detailed report.) CHAMPUSlegislation requires that all beneficiaries other than dependents of active duty members declare other medical insurance provided by law or through employment, We believe that an opportunity for reduced costs would exist if the same legal and administrative provisions pertaining to other insurance were applied to all beneficiaries. (See pp. 56 and 57 of the detailed report.) The certification of other insurance on the claim form is worded in a manner which provides no means for indicating that the claimant is covered by other insurance which may pay a portion, of the claimed amount. We believe that the certi- fication statement should be revised to elicit a more infor- mative response from the claimant. (See pp. 57 and 58 of the detailed report.) NEED FOR EXF'AJYDED AUDIT COVERAGEAND REL4TED EVALUATION CONTROLS We found that audit work performed by the Department of Health, Education, and Welfare's Audit Agency in reviewing the activities of CHAMPUSfiscal agents had been limited. The time spent by the Audit Agency on the assignments was insufficient to adequately cover fiscal agents' activities. We believe, however, that the expanded coverage planned by the Audit Agency staffs should result in valuable benefits to the Government. (See pp. 59 to 63 of the detailed re- port.) Revlcws of the perEormance of physician fiscal agents made by the Contract Performance Review Branch of OCHAMPUS were limited by the inability to make adequate evaluations 23 of activities in the brief time spent on each review. This restricted their effectiveness and precluded overall evalua- "Lions of fiscal agents' activities, Ge believe that these reviews would be more useful to management if they wore ex- panded in scope and were made in depth, (See ppe 60 and 61 1 of the detailed report.) RECOMMENDATIONSOR SUGGESTIONS We believe that the Executive Director, OCHAPIPUS, should consider --developing a more effective and less costly method for determining the amounts to be paid to physicians (see p, 18 of the detailed report); --issuing guidelines for use in establishing effective controls over psychiatric care, such as more frequent reviews of cases involving extensive outpatient visits, therapy sessions, and hospital stays (see p. 37 of the detailed report); --seeking ways to use available Government facilities for both inpatient and outpatient psychiatric care of dependents and ways to transfer patients to lower cost civilian or Government facilities whenever it appears to be medically feasible (see p. 37 of the detailed report); --establishing and enforcing more definitive criteria for approving psychiatric facilities under CHAMPUS (see p. 37 of the detailed report); --providing guidelines outlining the requirements for acceptable utilization reviews, approving the utili- zation review systems of the fiscal agents, and con- ducting effective surveillance to ensure that these systems are properly implemented (see pa 41 of the detailed report); --establishing perfo-LTilance stanc;=rds to cffectjvely evaluate and compare the operations of fiscal agents and taking prompt action to ixprov‘z zhe operations o fiscal ;i,pZkS xmiever their costs or levels 'of per- formance-are considered to be unacceptable (see pp. 49 and 50 05 thz &tailed report); --applying the reasonable-charge limitation to charges b,il.led to beneficiaries for payment under the de- ductible provisions and limiting payments to physi- cians, when combined with other insurance payments, to the reasonable charge for services rendered (see pp, 54 and 56 of the detailed report); --proposing legislation which would require dependents of active duty members to report other insurance provided by law or through employment (see p. 57 of the detailed report); and --revising the claim form to elicit a more informative response as to whether the beneficiary has other health insurance coverage (see p. 58 of the detailed report). 25 CHARTER4 PROGRAMFOR PROVIDING BENEFITS TO HAYDICAPPED PERSONS This chapter summarizes the salient matters included in the detailed report on this subject dated March 16, 1971, previously furnished to the Committee on Appropriations, House of Representatives. COST SJJARING AND LIMITS The law authorizes care for dependents of active duty personnel who are moderately or severely mentally retarded or seriously physically handicapped but precludes less se- vere cases from benefits under the handicap portion of CHAMPUS l Members of the uniformed services or their depen- dents are required to share in the cost of the benefits and must contribute from $25 to $250 a month according to a graduated scale based upon military grade. Maximum benefits of $350 a month1 for each beneficiary are payable by the Government. (See pp. 5 and 6 of the detailed report.) INCREASING COSTS OF THE HANDICAP PORTION OF CHAJYFWS Costs of the handicap portion of CHAMPUShave in- creased annually since inception on January 1, 1967. By June 30, 1970, over $18 million had been paid in benefits, of which about $5.6 million was for dental claims. About 6,000 physical handicap and mental retardation'cases were approved by OCHAMPUSfrom January 1967 through December 1969. Most of the cases involved.continuing care rather than care on a one-time basis, such as providing hearing aids and wheelchairs. An estimated 30,000 cases for den- tal handicap care have been approved by OCHAMPUS, (See pp. 8 and 9 of the detailed report,) 1 This maximum applies to the first beneficiary in a family. For additional beneficiaries in a family there is no limi- tation to the Government's share. 0 LIBERAL IHTERZFRETATIOXOF LA\.? Since the purpose of the law creating CKAXPUS is to create and maintain high morale throughout the uniformed services, OCXfXXlS of Eicials consider the act to be bencfi- cial legislation and have applied a liberal interpretation in approving care to be paid under the program, These lib- eral approvals of care have increased the costs borne by the Government. (See pp. 10 to 19 of the detailed report.) ADMINISTRATIC'N OF HANDICAP BENEFITS Several decisions of the Executive Director, OCHAMPUS, which we believe to be in the interest of good management, have been disapproved or substantially modified by higher headquarters. Consequently, benefits have been liberalized and the Government has incurred added costs. Also the over- ruling of OCJMMPUSdecisions has inhibited the efforts and attitude of OCHA?HPUS in carrying out its responsibilities. (See pp. 28 to 32 of the detailed report.) NEED FOR AUTHORITATIVE STANDARDS FOR DETERMINING DEGREEOF HANDICAP Specific and authoritative standards were not being used for determining the degree of handicap. We.noted in- consistencies in the determinations and the approval of cases which may be questionable, (See pp. 10 to 19 of the detailed report.) BETTER SUPPORTNEEDED FOR EVALUATION OF CASES In the absence of specific standards for evaluating the degree of the handicap condition, OCHAMPUSrelies upon statements of attending physicians, which in some cases are very brief or incomplete. This has led to poorly supported judgments on whether care will be provided and has resulted in approval of cases under the wrong portion of CWAMPUS. The two alternatives are the program for the handicapped and the basic health and medical program for military dependents generally o (See ppe 20 and 21 of the detailed report.) Placement under the proper portion of CWJPUS is impor- tant because of the different costysharing arrangements between and the Government and because of the servicemen the different benefits a-gailable. The Government's lia- bility may be more or less depending on these factors and on related considerations, (See p* 20 of the detailed re- port.) E-iaORS AND OMISSIONS IN DATA EED FOR PAYmT OF CLAIMS Claims in the program for the handicapped are paid by fiscal agents hired under contract. The basis for payment of the claims is provided by management plans, which are documents setting forth the medical diagnosis of the bene- ficiary; the details of the care authorized, including duration; the estimated total cost of the care and the share of the total to be paid by the serviceman; and other perti- nent data. Our review showed many, errors and omissions in the management plans. For example, in some cases servicemen's pay grades-- which determine the cost-sharing ratio--were incorrect. In other cases information was not properly supported by backup data. Therefore control over the pro- gram for the handicapped was seriously impaired. (See pp* 22 to 24 of the detailed report.) APPROVALAFTER CARE HAS BEEN RECEIVED OR STARTED We found, in 62 of 69 randomly selected cases, that approval had been given after the care had been started or had been received, although policy requires advance ap- proval. An OCHAMPUSofficial said that, in some instances, care had been approved retroactively because beneficiaries had started receiving care before they learned that they were entitled to benefits under the program. He also stated that beneficiaries had applied belatedly for benefits be- cause they were unaware that advance approval was required, Another reason given for retroactive approval was that there were backlogs in processing applications. (See pp. 22 and 23 of the detailed report.) 28 Because of a la& 0f -tirittm guidan.ce to fiscal agents and because of in&equate control over their operations, the agents made eirors in paying claims and used different bases for payment. We found that the agents visited had not determined whether the providers' charges were reason- able. Written instructions are needed to achieve uniform actions by fiscal agents, to minimize confusion, and to en- sure that payments conform with policy. (See pp, 25 to 27 of the detailed report,) USE OF MEDIC& EXPERTISE AVAILABLE AT FITZSIMONS GENERAL HOSPITAL AND LONGER TOURS OF DUTY FOR MILITARY PERSONNEL Administration should improve if OCHAMPUSmakes in- creased use of medical expertise available at the adjacent Fitzsimons General Hospital and if longer tours of duty are authorized for military personnel in OCKAplpUSor if the positions are assigned to civilians. After completion of our fieldwork, recently appointed OCXAMPUSofficials advised us in December 1970 th[at more extensive use of medical expertise at Fitzsimons General Hospital was being made. (See pp. 33 and 34 of the de- tailed report.) INADEQUATE AUDIT COVERAGE OF THE HANDICAP PORTION OF CHAMPUS The most recent audit of OCHAMPUSoperations made by the U.S. Army Audit Agency in 1968 did not cover the handi- cap portion of CHAMPUS. At the four fiscal agents we vis- ited, the Department of Health, Education, and Welfare's Audit Agencyss coverage of the program was limited to re- viewing any claims for handicap care that chanced to be in- cl&cd in s~qle sel.ections of claims representin? the en- tiri! CWWUS Also CCH-T_!iMPUS Contract Performance Review Ij, di-! Ci; pcrso~'~ilel do not specifically consider the handicap poi-tion of the program when visiting fiscal agents. 29 On the basis of our review of the prorrram for the handicapped 5 :ve feel that there is a need for increased audit efforts on the program at both the OCWWUS and the fiscal agent iwel. (See pp. 34 and 35 of the detailed report.) REGOMMEXDATIONS OR SUGGESTIONS The Secretary of Defense, in consultation with the Secretary of Health, Education, and Welfare, where appro- priate, should consider --revising the criteria and standards for approving handicap care to include, wherever possible, stan- dards established by authoritative medical organiza- tions for use as guidelines in approving benefits; --seeing that, in approving benefits under the program, due regard is given to economic considerations; for example, using the least costly of comparable treat- ments; --reevaluating, in the light of medical evidence, De- partment of Defense policy decisions that appear to increase the cost of the program unnecessarily; --reducing turnover in key management positions of OCMQUS, by either establishing Icnger tours of duty for military personnel or assigning civilians to the positions; and --requiring that groups responsible for audits of the program for the handicapped intensify their efforts, (See p, 36 of the detailed report.) The Executive Director, OCFMUS, should consider --establtshing a committee of medical personnel to de- cide the types of cases that should be approved; --establishing a standard for~nat for ;ise by physicia; Cn making, diagnoses, to fa?ti'Litate or encourage the preparation of complete medical statements; --providing detailed, written instructions for use by fiscal agents in processing claims for payment; --requiring that fiscal agents make every effort to determine the reasonableness of c'harges for care provided and requiring inclusion of certification on handicap claims submitted by all sources of care that the charges do not exceed those for all other patients receiving comparable services; and --taking steps to reduce to a minimum retroactive ap- provals of care under the program for the handi- capped. (See pp. 36 and 37 of the detailed report.) 31 CWITTER- 5 ELIGIBILITY _-- --- ------OFm-v- PART1CIPAXT.SUXXR CHJLWUS The primary means used to indicate eligibility for CWUS benefits is an identification card, which includes a photograph of the person to be authorized benefits and j which is issued by the uniformed services at the installa- tion level after eligibility of an individual has been es- tablished. A block on the identification card indicates whether the designated person is entitled to CWWPUS bene- fits. The identification card is also used for other pur- poses, such as denoting eligibility for commissary and post or base exchange privileges and admission to military the- aters. Procedures and controls over the issuance and recovery of identification cards were deficient at all nine military installations we visited, We found that (1) some identifi- cation cards containing erroneous information were being is- sued,(Z) some cards were not being recovered from depen- dents no longer eligible, and (3) Oe"rzAKpUSwas not always being notified of dependents receiving care at the time the sponsor was separated from military service* Thtxs, Govern- ment funds were expended under CWNRJS for medical care pro- vided to ineligibl e recipients and other privileges outside of CI%4KBJScould be extended to unauthorized persons* ISSUE OF IDENTIFICATION CARDS Personnel at military installations were issuing iden- tification cards containing erroneous information regarding eligibility for CGmUS benefits, The rate of error found in our sample test of about 2,200 cards was 2.1 percent. Most of the errors can be attributed to unfamiliarity with regulations governing issuance of the cards and to care- lessness of responsible personnel. Some persons were authorized CHAWUS bzr:efits after they bccaIw ineligi-ble 9 e,g, , in certain i~.;tc:xes after beneficiaries had reached their 21.~'~ cr 65th birthdays, parents or' sponsors had been authorized CiLQX:-‘t’j: Eenef its althcu& not eligible, persons eligible for CHAPPUShad not The TCoSt COl?XiOn type of error encountered was the in- . -r-+-i correct c::p~-,~- cn &.?tc?$-i r;h~v~ on I.4 cards) which ranged from 1 day to over 3 years beyond the correct expiration date. Eight of these cards had l- or Z-day errors, and the remaining 6 ranged from 150 days to 1,170 days beyond the correct expiration date. We found that applications for some dependents' iden- tification cards were incomplete or were not on file with the sponsor's service records; also the applications were not supported by needed backup information. At one Air Force installation, the officer responsible for approving the issuance of identification cards queried the computer to determine whether applicants were eligible dependents. If the computer answered that they were, authorization was given to issue the identification card. This system did not furnish information on whether cards had been issued previ- ously to the dependent and therefore would not prevent the issue of duplicate cards. RECOVERYOF P-P INVALID IDENTIFICATION CARDS A dependent's identification card showing entitlement to CHAPPUS benefits becomes invalid when a sponsor is sepa- rated from the military service prior to the end of his en- listment or when he is officially classified as a deserter. A card also becomes invalid when either a divorced spouse or a spouse of a deceased sponsor remarries,when dependent children pass their 21st birthday, or when dependents or retired members reach their 65th birthday. Regulations are not specific and do not assign respon- sibility for recovering invalid dependent identification cards to any specific function, organization, or person. Consequently the majority of invalid dependent identifica- tion cards are not recovered. Records are not kept of cards recovered, and, since entitlements remain available to a 115ld,r oiY a card until the exJiration date, it is pos- sible for CHAMPUSor other benefits and privileges to be obtcimd by holders of invalid cards. 33 I Air Force; .!Irmy, md Navy regulations do not spccffi- calby ~sign responsibilities for recovering identification CZEdS C. In genecal recc~ery of dependent identification cards seems to rest with the willingness of the sponsor and his dependentsto turn in the cards, Navy regulations state that, when an ineligible card holder refuses to surrender his card, the assistance of the Naval Investigations Service will be requested, But a resident agent of the Naval In- vestigations Service info-rmed us that he acts only when . fraudulent use of the card can be demonstrated, At the installation level procedures for recovery of cards vary considerably,, Records of destruction of identi- fication cards are not required by Air Force and Army regu- lations, Although Navy regulations require such records to be kept, two of the three Navy installations we visited did not do so0 Some of the installations we visited kept rec- ords on cards turned in, but no reconciliation of these cards and the cards issued was made. Some installations were not aware that they were responsible for recovering dependent identification cards, Procedures for recovery of dependent cards at the installations we visited included: --Briefings and instructions to sponsors about to be separated concerning turning in identification cards issued to dependents, --Supplying sponsors with self-addressed, franked en- velopes for returning dependents" cards. --Instructing the sponsor to destroy dependents' cards, NotifLcation --- b2 -----------_-- the uniformed services --J- OL x?.~aratees --- ----.------- w'hose dexndents are receiving . ----------w---w medical ---------------I care under CWUS The Govex~~~-ent~s cost-sharing responsibility under 1 G&AXFUS ter~~imtr,s uhen t-he sponsar separates from the uni- fo-med services or is officially listed as a deserter and when cerL2i.i.n other circi.2xtance.s exist, sponsors bzing separated z.i-a req-ulired to inform their uniformed service wkt-her their dependents are currently receiving care under ? We found that OCl+W.XJS was notifying its fiscal agents timely and efficiently but that the uniformed services were not always notifying OCHAHPUSthat the dependents of sepa- . ratees were receiving medical care under the program. The Army, Navy, and Air Force were requiring separatees to certify whether their dependents were receiving care, but most installations were not reporting the information to ocwus e Those which did were not doing so timely. Rea- sons given by responsible installation officials for not notifying OCHAMPUSincluded a lack of awareness of the re- porting reqtiirements and a Pack of certification forms, Of the. notificatio& received by OCHAMPUSduring July 1970, 78 percent were from Army installations, and, of the 78 percent, 65 percent were from one installation. With a few exceptions the Navy and Air Force and other Amy in- stallations apparently were not notifying OCHAPPUS.at all. Unauthorized use of identification cards to obtain?HAMPUS benefits Unnecessary costs are being incurred under CHAMPUSbe- cause the uniformed services are not recovering dependent identification cards and are not notifying OCHAMPUSof de- pendentsq receiving care at the time their sponsors sepa- rate from the uniformed services. These costs are incurred because the source of care cannot determine whether an identification card contains correct infomation nor whether the holder of the card is an eligible beneficiary, T-k&US care received by holders of Invalid cards could go undztcctle?d ~ 1n ~~;:a:;!!~nia~gthe ciaiix of 346 married individuals who separated early or were listed as deserters, we found that about $4,800 in CHAMPUScosts had been incurred by dependents 35 &Jr C<Z'.TCzftrr ::!E c?a'ic'.5 -;;hcir spor,sors had, been officially separated from the uniformed services or ilad been listed as deserters, Eie~ti~i S~L;LG~~'Shad dependents who received rm- authorized care, The dependents of tvo of thaw inwxred cw2us costs of about $I.,600 and $1,200, respectively. Three of the sponsors were deserters and eight were early separatewe During the first 8 months of 1970, OCIHAKWJS sent to the services, for collection, 57 cases involving payments for unauthorized care,, The payments exceeded $32,000. 'Ex- cept for four cases payments were made on behalf of Ibneli- gible beneficiaries-- such as parents and grandchildren--on the basis of identification cards which should not have been issued and on behalf of dependents of sponsors who had been discharged early or had been officially listed as de- sertersB Because of the potential for incurring substantial costs by the unauthorized use of identification cards, we recomend that the Secretary of Defense direct that regula- tions and procedures of the military services be stsength- ened to ensure, insofar as is practicable, proper issuance and recovery of identification cards. 36 ppn&n~-s cf act ivc r!:::v, Personnel residing with their spo~xsors zire required to have, except for emergencies, non- avsilnbiltty statements :%%cnapplying for civilian hospital- ization in the United States and Puerto Rico. These state- ments are used for only the immediate medical care required and are issued to dependents by uniformed services facili- ties when the required care cannot be provided at a nearby uniformed services medical facility. All other CHAMPUSben- eficiaries have the freedom to select a uniformed services or a civilian medical facility without being required to ob- tain the nonavailability statement. At the nine military hospitals we visited, persons is- suing the statements were aware of hospital conditions and capabilities, Over 1,400 nonavailability statements were issued by the nine hospitals during the 6 months ended June 30, 1970. We did not find improper issuances of non- availability statements; however, we did find that (1) some differences existed in the policies among the services for issuing nonavailability statements, (2) determinations as to whether care could be furnished at nearby facilities had not been made on a routine basis; and (3) shortages of staff and facilities at military hospitals had caused increa-sed use of cwus * There are some differences in policies for issuing non- availability statements among theuniformed services and among individual hospital commanderso Consequently under similar circumstances, dependents tend to receive different treat- ment. More consistency in this area appears to be needed. The CHABPUSjoint regulation provides that, with few exceptions, dependents of active duty members residing with their sponsors be required to obtain inpatient care in uni- formed &r>rviccs facilities when such facilities are within reasonable distances of their residences and are capable of proaidin:; the needed care. Differences noted in the policj-es of the services and among hospital commanders at the instal- lations we visited follow, 37 f --endent's cons idc2.c.d L 2,,,.. lack of confidence in mili- tary hospitals or their personnel a& a sucficient re2so;; to XX-r?nt issuing a nonavailability state- ment. Of t?e statements issued at t'hree Air Force location@ J9 20 percent were issued because of depen- dents' preferences for treatment in civilian rather than military hospitals. --The Air Force was the only branch of service that followed a policy of issuing nonavailability state- ments when a conflict of opinion existed between' civilian and military physicians on the necessity for a particular treatment. Joint regulations is- sued in September 1970, however, made this policy ap- plicable to all uniformed services. --The Navy's "Home Port Rule" results in Navy depen- dents' being considered to be residing with their sponsors if the sponsors' ships have as their home ports the same cities or areas where the dependents reside, even though the ships may be at sea, We have been informed that this often results in hardships to the dependents and lowersthe morale of the sponsors. In contrast, once a soldier or airman is sent oversee his dependents are no longer considered to be resid- ing with him and they do not require nonavailability statements to obtain care in civilian facilities. NEED TO CHECK AVAILABILITY OF CARE AT OTHER UNIFORMXD SERVICES FACILITIES The CHAMPUSjoint regulation provides that, where there are two or more medical facilities of the uniformed service: in a locality and the inpatient care required by a dependen! cannot be furnished at the facility of the service to which he applies, the other facilities of the uniformed services in the area be asked to provide the care. A nonavailabilit: statement is authorized only after it has been determined that the cc?z-c cannot be furnished at any of the other uni- formed services facilities. Military medical facilities in the three areas we vis- ited were not routinely checking the potential for provisic 38 of care at neighboring facilities of other tranrhes of the uniforinzc? sr-rvices S Since this practice could result in an unnecessary use of civilian sources of care, it is essential that the policy rcquirir!g coordination with nearby facili- ties of the unifcrmed services be imp'lemented effectively. COSTS lIGXZX23 -- UNDI$R CFNUS DUE TO SHORTAGESIN NiIilTARY HCSPITALS Shortages of staff and medical facilities at military hospitals have resulted in increased use of CHAMPUS. About 61 percent of all nonavailability statements issued during the 6-month period ended June 30, 1970, by the nine mili- tary installations we visited were issued because staff and facilities were not available when needed for types of care ordinarily available to dependents in the issuing facility. Reasons cited were increased hospital admissions caused by the war in Southeast Asia, the fact that higher priorities had been assigned to more complex operations in operating rooms, and cutbacks of civilian hospital employees ordered by the Department of Defense. At one hospital we visited, the number of nurses in the obstetrics ward had been reduced from 10 to four, and, during an 8-month period in 1970, 556 nonavailability state- ments were issued for obstetrics care. During the same months in 1969, only 16 nonavailability statements were is- sued for obstetrics care by the hospital. The hospital com- mander stated that he had been required to reduce total ci- vilian personnel and that a decrease in obstetrics services had been more appropriate than reductions in services to active duty personnel. Thus the Department of Defense ac- tion has increased the use of civilian hospitals, but the increased costs to CHAMPUSare offset to some degree by related savings in military hospital operating costs. At another military hospital, when operating room time was insufficient, nonavailability statements were issued for all individuals under age 18 requiring tonsillectomies and adenoidectomies. We estimate that this practice in- creased CHAMPUScosts about $139,000 annua.1I.y. In addi- tion, we noted that a U.S. Public Health Service hospital in the same area had not been fully utilized arid had had operating room time available. The military service 39 40 IMPROVEMFNTS __- .___I--- r\lry'f?TlK=n -- IN CHAWUS TNFORMATfON PROGRAM j The prograin to educate beneficiaries about CHAMPUSap- pears to nave shown some recent improvement. About 92 per- cent of the married active duty officers and enlisted men interviewed during our review were aware of CHAMPUSin vary- ing degrees. Earlier Department of Defense studies found a substantially lower ratio of informed personnel. Despite this improvement there are several important areas where greater efforts are needed. These include the need for (1) better coordination within the Department of Defense in implementing the CJ3AMHJSinformation program and (2) better control over the content of informational material. In this area our review was limited to examining ef- forts made by OCHAMPUSin educating CHAMPUSbeneficiaries and to determining the awareness of CHAMPUSbenefits among active duty members of the Army, Navy, and Air Force. RESPONSIBILITY FOR WAMPUS INF'ORMATION The authority and responsibility for the development and implementation of a complete public information program was delegated by the Surgeon General, Department of the Army, to OCHAMPUSin January 1969, OCHAMPUSlater estab- lished a Public Affairs Office, but it was not operational until mid-1970. The OCRAMPUSinformation program includes distributing press releases, maintaining a speakers bureau, and providing supplemental printed material for beneficiaries and for se- lected groups, such as information officers, recruiters, and coordinators at the installation level, Despite the quality and quantity of information disseminated about the program by OCWLJS, the actual education of beneficiaries and dis- tribution of information on CHAMPUSremains largely the re- sponsibility of the individual uniformed services, OCWJPUS ihas no mz211s of obtaining follow-up information concerning how, in 5~ha.t minner, or to W&t extent, the information it furnishes LO tiie services is used, 41 T!lL $l;";7 Ail<! i,gcriry if: in 1963 identified some problems of the information program. These were (1) the late and incomplete distribution of an official pamphiet explaining - the major program changes caused by the 1966 amendments, (2) the uncontrolled issue of supplemental publications, (3) the lack of c 1 arity and the incompleteness of informa- tion in publications, and (4) the lack of formal training for counselors at military installation infoxation centers. The Subcommittee on Supplemental Service Benefits, House Armed Services Committee, reported in December 1969 that there was no clear understanding as to who was respon- sible for the CHAMPUSinformation program. The Subcommit- tee found that OCHAMPUShad the responsibility for develop- ing an information program but that the responsibility for informing beneficiaries was in the hands of the individual services. The Subcommittee recommended that the Department of Defense issue directives clearly setting out the respon- sibility by agency for the various functions associated with the CHAmUS information program and providing authority to one official to make sure that these functions are carried out. In January 1971 the Subcommittee reported that imple- mentation of its earlier recommendation concerning responsi- bility for the information program still had not been achieved. The Subcommittee report pointed out that a clear line of authority had to be provided below the Assistant Secretary level to see that needed information programs were carried out promptly and efficiently. The Subcommittee rec- ommended that the Department of Defense, when submitting its appropriation request, include a request for financing in- formational activities on benefits, such as those available under CHAMPUS. We noted that a recent Army publication substantially hzd mi >-stated a CH:_tPUS p;3 !_i.cy in conden5-,fng i-t for printing WC? that, because OCI!MPUS did not receive an advance copy in sufficient time, the erroneous I'nformation had been pub- lished. We were informed by OCHAMPUSofficials that this vould result in numerous complaints to OCHMPUS, Coordination and cooperation of the uniformed services p;,-ith OCH?AYTTSconcerning the information program is limited and in some cases is nonexisten;. We found that desk pack-- ets prcpnred for recruiter:; of the uniformed services by OC%VPUS had been dcsigncd to provid e the recruiters with informati.on concerning WAYPUS. During our review OCKAMPUS was in the process of mailing 1,200 packets to Army recruit- ers and 900 to Air Force recruiters. The Navy and Marine Corps, however, had not responded to the OCHAMPUSrequest for permission to mail the packets to their recruiters. RESULTS OF THE INFORMATION PROGRAM An Army staff study in 1968 reported that 34 percent of married Army personnel were not aware of the changes in CX.AMPUScaused by the 1966 amendments and that about 45 per- cent, although aware of the changes, were unaware of any de- tails. The Army Audit Agency estimated that 57 percent of the OCHAMPUScomplaints reviewed in 1968 had been caused by lack of understanding of the program. A Department of Defense survey in January 1970 showed that 75 percent of enlisted personnel in the lower enlisted grades (E-5 and below) and 46 percent of those in the higher enlisted grades (E-6 and above) were not well-informed about (3!IAm?us. Our interviews of over 230 married service personnel-- including officers--in the Army, Navy, and Air Force showed that almost 92 percent of those interviewed were aware, in varying degrees, of CHAPPUS or of a medical program which paid for civilian medical care of their dependents. About 51 percent had a fair knowledge of available benefits, and 8 percent had no knowledge of the program. Other servicemen interviewed knew of a medical program for their dependents, but they had no detailed knowledge of available benefits. The overall impression we received from the latter group of servicemen was that they did not care to learn the details of the program. They felt that they knew to whom they could go for assistance or information if the need arose. IJealso noted that, of those servicemen with 12 months Or less service, 89 percent had little or no knowledge of the benefits available to them. These servicemen with 43 . We F;C~C jnf~.,^~.~-\c~that.OCI-MFUS would attempt' to have the uniformed services give a 15m5nute orientation on CEAFETJSto all incorj.nz personnel as part of their mandatory indoctrination. OclHAPPUSforesees no difficulty in getting this revirement implemented by the Army but feels that De- partment of Defense assistance is needed to get the plan ad- equately implemented by the other uniformed services. CONCLUSIONS We believe that there is a need for better coordination within the Department of Defense for promoting CHAMPUSbene- fits, In addition, controls over the content of informa- tional material issued by the uniformed services appear to be necessary, to prevent misstatements of OCKAMPUSpolicies and complaints about the program. In view of the recommendations for improving the infor- mation program made by the Subcommittee on Supplemental Ser- vice Benefits, House Armed Services Committee, we have no reconxxndations at this time. 44 Purchase of medical equipment is authorized under both the basic and handicap portions of CHAFWJS. The purchasers who may be either CHABXJS beneficiaries or providers of care are reimbursed by CHAMPUSfiscal agents. Our review has shown opportunities for savings if this equipment is pur- chased from Government supply sources rather than civilian vendors. Costs recorded by CHAMPUSfor medical equipment in 1969 amounted to nearly $500,000--over $353,000 under the handi- cap portion of CHAMPUSand over $141,000 under the basic portion of the program. In addition, medical equipment was rented under the basic portion at a cost of over $82,000. Some rentals were made through a lease-purchase arrangement which provided that the equipment would revert to the bene- ficiary when rental payments equaled the purchase price. The costs recorded by CHWPUS in 1969 for purchases of med- ical equipment are shown below by category. Type of equipment fzx3AMPuscosts Hearing aids . $206,000 Orthopedic devices 68,000 Prosthetic devices 49,000 Nebulizers 16,000 Other items (note a) 155,000 $494 ,uuu aIncludes wheelchairs, iron lungs, hospital beds, etc. We noted that the types of medical equipment purchased by CZ!/‘?E?ITS beneficiaries were frequently available from Gov- ernment supply sources at prices considerably less than those that' &ivilia vendors ~erc charging. The following table shows the results of our comparisons of a sample of 45 fivct items ri~r~t-1~~4 b by CK~F.PUS beneficiaries from civilian so'.zce?s arld L1le cost Lur comparable items from Government supply so11rc'es . Cost from Cost from civilian Government Equipment vendor supply source Difference Hospitai bed $397 $221 $176 Hearing aid 345 127 218 DO. 350 110 240 Wheelchair 289 173 116 Do. 220 184 36 Certain items of medical equipment are stocked at mili- tary hospitals and at Veterans Administration hospitals, Veterans Administration officials told us that there would be no major problem in supplying medical equipment for CHAMPUSbeneficiaries. They said that the Veterans Adminis- tration procured some items for the Department of Defense because of the lower prices which result from volume pur- chasing. RECOMMENDATION We recommend that the Executive Directcr, OCHAMPUS, ex- amine into the potential savings available if satisfactory arrangements can be made for CHAMPUSbeneficiaries to pur- chase medical equipment from Government sources of supply. 46 ADDfTTON4L MATTERSON CHAMPUSADMINISTRATION _I-__-__~-_--~~~_-_I---_---- Cur earlier reports on the hospital, physician, and handicap portions oLF CflAieUS discussed certain weaknesses in administration of the program. (See chs, 2, 3, and 4.) Other weaknesses in the administration of CHAMPUSare dis- cussed below. These concern (I) the surveillance by OCHAMPUSover claims processing and paying activities of fiscal agents, (2) the high number of claims returned or re- jected by fiscal agents, (3) Defense Contract Audit Agency Audits, (4) the audits'of OCHA+X!?USby the U.S. Army Audit Agency 3 and (5) the Inspector General's inspections of fis- cal agents. SURVEILLANCE BY OCWUS OVER CLAIM PROCESSING AND PAYING ACTIVITIES OF FISCAL AGENTS We found that OCHAMPUScontrols over claim processing and paying activities of fiscal agents were inadequate. Improvements were needed in OCKAMPUSprocedures for process- ing claims data provided by the fiscal agents. OCHAMPUSaudits of claims paid by fiscal agents were sporadic and ineffective. The claims examiners making the audits had received no formal training and had no written guidance to aid them in performing the audits, Only limited supervisory reviews of work done by claims examiners had been made. The audits consisted primarily of scanning computer listings to identify questionable claims either (1) prior to a visit to a fiscal agent by an OCHA?pUS Contract Perfor- mance Review Team or (2) when examiners had time to review the listings. Few claims are examined. Fiscal agents were notified of the claims questioned by the claims examiners; but, although they were supposed to notify OCHAMHCJS of the disposition of clainls which had been questionad, n:any of the agents had not done so. The claims examiners had not taken any follow- up action on the questioned claims aftcr July 1969, and potential adjustn,, ants in the suspense files were doted as far back as March 1967. g-1 ijghju * 9“tJl;\i3ENT #Q//qp$/-F 47 OCFL4WUSh;7s no con+rol over adjustments lnitiatcd by fiscal agents, 'i&se adjustments appear in listings sub- mitt:-d b:; fiscal ngents without explanations, Ordinarily the adjustmwts arc due to erroneous payments made to the source of care, Submission of claim forms to OCWUS Physician fiscal agents sent over a million claim forms to OCHAMPUSin fiscal year 1970, OCHAMPUSutilized the doc- uments in verifying error checks made on a sample basis, in making special studies, and in identifying potential third- party liability cases. Except for potential third-party liability cases, the claims forms were disposed of after about 3 months, Few of the documents were actually used by ocmus D In September 1969 OCHAMPUSdecided that hospital fiscal agents should submit only those claims involving potential third-party liability but failed to notify one of the two hospital fiscal agents to stop submitting all claims, In view of the OCHAMPUSprocedure that requires computer list- ings with data on paid claims to be submitted by the fiscal agents, we suggested in July 1970 that OCHAMPUSpreselect claims on a statistical basis for review and audit and that fiscal agents not be required to submit all paid claims forms. In November 1970 OCHAMPUSimplemented our suggestion that not all claims forms be submitted by the fiscal agents, As a result OCHAMTJSestimated a savings of $150,000 a year-- $125,000 in reduced salaries of fiscal agent employees han- dling and shipping the claims and $25,000 in reduced post- age. The fiscal agents are now required to submit only a preselected sample of paid claims forms and those claims in- volving potential third-party liability. Recommendation IYe recommend that the Exccutivc Directnr, NXAPPUS, de- velop and irny2kment Zo ~Pow-up procedures on claims ques- tioned by OCHAMPUSand require that fiscal arents inform ~~CI-'ML'~TSof the disposition of such claims. We recommend also that manuals and other fotis of written guidance be m?de av~il.able to assist claims examiners *!I-1c%aims audit 5v and verification. =s . 1.- p:. i iw i a-rg,:e nui~~hr c~i clrt i 111seii.Iler (1) ret-urned to the source of care or to the beneficiary for correction, ravi- . SiOilj C1 ,z:i tioi-iii;l I Ll>;CI . ‘l.ULi~ll vi 2) 1 ej ecied for pdyille!lt ( for such reasons as incl.igibility has been a major problem !liild:E'iI:;; efficient op zTatio1-1 of CWMYJS, During fiscal year 1970 physician fiscal agents rejected or returned more than 480,000 claims-- over 28 percent of the claims processed for payment. Hospital fiscal agents rejected or returned approximately 24 percent of the claims. These percentages have remained relatively constant since fiscal year 1968. The rate for returned claims has been much higher than that for rejected claims-- during fiscal years 1968 through 1970, returned claims represented an average of more than 20 percent of claims processed for payment. This increases administrative costs of claims processing, causes backlogs of unprocessed claims, and creates dissatisfaction with CHAMWS, as evidenced by complaints concerning delayed pay- ments. OCHAMPUSbecame aware of this problem about October 1967 when physician fiscal agents began submitting claims activity reports. The matter was subsequently brought to the attention of OCHA?YPUSby special study and audit groups in January and June 1969. No effective corrective action, however, has yet been developed. Our review at OCHAMPUSand fiscal agent locations has shown that the high rate of claims returned or rejected has been attributed to (1) inadequate education of beneficiaries about CHAMPUS, (2) complex claim forms, (3) carelessness in preparing the claim forms, and (4) the return of forms by fiscal agents prior to searching their files for needed data. As pointed out in chapter 7, efforts are now being made to improve the program to educate beneficiaries about cgpipli;s . This could have a beneficial effect on the prepa- early in 196%- to recommend changes to the claim forms, l-.:i&;Z:c G’c:t-Gi C‘;: inr:iuciing coilg:iessio;iLL cc-5:k”cj:i;::;, committees 3rd 2l.ldi-t ory2ni73tions? had recommended simplified claim f OEllS &S 2 ihC2L.i;; SE :zchcing L'Ctiirl>S and rcj ections. This committw 2nd one nutsi.ri_c group made recommendations for revising the claim forms, but the recommendations were based on limited information obtained from fiscaL agents and a small sample of forms completed by about 20 persons. The committee was abolished, and another committee is to be established to study revising the claim forms and to study a new system for identifying beneficiaries. OCHAJYPUS has proposed a revised claims activity report, which requires a more detailed breakdown of the reasons for returning or rejecting claims, to be made by fiscal agents. We believe that this could provide the information necessary for making sound decisions on revisions to the claim forms. An embossed identification card has been proposed for use for beneficiary identification and for use as a means of reducing the number of claims being returned because of in- correct data. The same types of problems currently being experienced regarding eligibility determinations (see ch, 5) would continue with embossed cards. Nevertheless, such cards would eliminate many errors by correctly inserting key data on the claim form directly from the embossed card. This would greatly reduce the number of claims returned be- cause of omission or errors in such data, but such advantage might be offset by the increased costs for the cards and re- lated equipment. In 1970 OCHAJGVSmade a study of fiscal agents for 19 States that had high claim return rates, The study group found that fiscal agents in two States did not research their files prior to returning claim forms for correction or addi- tional information. OCHAMPUSdirected these fiscal agents to resea-rch their files prior to DEFENSE _-_____ CONTRACT AUDIT AGENCY AUDITS -- ------___-__I____- Initially responsibility for auditing CJJAMPUSa.nti its fiscal agents rcstcd with the U.S. Army Audit Agency, The responsibility for auditing Fiscal agents \;a~ trarlsfezred in July 1965 by the U.S. Army Audit Agency to the Defense Con- .tract Audit Agency. 50 j ,? . .,I- #.,- 1 O&-y f + k-7 i.,:- fr.l;.':" c(-Jr;p ~-act Audit Agency ..-, sly, _ .- . '.).<>, - ,(>r'G- 7;i i --, : ! : ,, . ..&i -~ 3 'I Tf- .Y -.-' '--_I-1 -. '1.s 4 t., Yi-~-~-t-';xt~r~Lof i!crilth, Education, rirlu ,r,siiz-iL ;;I,.- ..-ALL--,J __-. r,:p:'.'f+vr-it of !k+th, Education, and Welfare's kIdit AfieY~ry--. Gtli ch t:mkc-s similar audits of s*ra;c Lz +i--z :-i‘.r.,> -::iy-:> -, r' I‘q? :: llnc:z:T the Social Security' Medicare Program--k:ould ccrfom! the contrnct audits on a rei~h1i~:;zl::I.e FasF s o Undh- thi. s agreement the Defense agency retainEd the ova-d.1 responsibility for the audits and the Department of Health, Education, and Welfare's Audit Agency agreed to perform the audits in accordance with the Defense agency's audit standards and regulations. We met with officials of the Defense Contract Audit Agency and were informed that, during the transition period when the Department of Health, Education, and Welfare's Au- dit Agency was beginning its audits of CHAMPUScontracts, the audit agencies had coordinated to deal with a few prob- lems which arose and that, until June 1970, the Defense agency had reviewed copies of audit reports prepared by the Department of Health, Education, and Welfare's Audit Agency. The Defense agency discontinued its review of these audit reports because of the lack of significant problems. These officials also informed us that they did not manage or di- rect the performance of the audits of CHMIPUS contracts., The last audit of OCHAMPUS, made in 1968 by the U.S. Army Audit Agency, although limited in scope, was adequate in the areas of activity which it reviewed. The audit con- centrated on the problem of conformance with Army Regula- tions rather than on overall management effectiveness. The stated primary purpose of the audit was an evalua- tion of the effectiveness and efficiency with which OCHAMPUS utilized its resources to accomplish its mission of admin- istering CFIANPUSand reimbursing fiscal agents and individ- uals for the cost of medical care. The audit included a compxhensive review of zutoxtic data processing activi- t I. ses 9 Cl i"e:Jj ia;? Of t;71: proced:: 7~s for identi Fy ing and proc- essirl? pc:tcnti;:l third-party Iiability cases, an evaluation of -2; *, J-j-.'.r... i.,.C>~,i- ‘I n.3tj 031 o.? j n.?o~.-:::.kicn on CTT,QlP'USto benzfi- ciarrcs 2 an analysis of complaint mail, and a review of bud- get isi; and financial management activities, 51 The: rct;iir L ~i;~jc-L;:~~<, thai improvt7.c-rlts Tiere needed in th-_‘ (1.) dCT'?'9p-~?*::?~ ) C!i stari bil I 'j iill; arid control 5E infcrma- tion 51-t the prn~~c"l-;,~~ (2) &sign of cla?n forms and instmc- ticns ior preyarat.i.o~l, dilil (2) ih~ iAxt'flZ<S of detxxining thz dcsirzliliq- of purchasing: rather than lea?ing: auto-' matic data processing q-kpmnt. Areas not revieved in depth were contract administration, including compliance by fiscal agents with contract requirements; overall manage- ment of CHANPUS; staffing of OCHAMPUS; and activities re- lated to approval of handicap and long-term hospitalization cases. We believe that the U.S. Army Audit .,gency should include examination of such areas of OCHAWUS activities in its future audits. Examination of such areas is essential for evaluation of the effectiveness and efficiency of OCMPUS. The Inspector General, Office of the Surgeon General, Department of the Army, performed contract compliance in- spections of the activities of the fiscal agents approxi- mately every 2 years. He also made periodic inspections of the activities of OCHBWUS. In addition, the Inspector General, Department of the Army, made an inspection of OCHMPUS in 1968 as part of his inspection of the Office of the Surgeon General. The policy statement issued by the Inspector General, Office of the Surgeon General, for guidance of inspectors engaged in procurement inspections stated that: "Inspectors General, in their inspection of CUJlPUS contractors, will strive to provide as- sistance to Jt-fcJcOCHA?YPUSip*** in the over-all impravement of operations and in the solution of problems," 52 Uiz thCZ LaSiS Of tlLJ lLinidLcdspent on these in- t-n2 spections p O'UZ-revi.c:*? of Inforxztion conteined in the re- ports, the general absence of significant recommendations, and a lark of identification 02 significant problem areas, it appeared that inspections made by the Inspector General, Office of the Surgeon General, had been of limited value to management for improving CTMPUS. RECENT ADMINISTRATIVE ACTIONS By OCWUS In December I.970 the Executive Director, 0CHAVl@US,pro- vided us with a listing of actions recently taken to improve CHAHHJS operations. For example, workshops have been ini- tiated for training contractor employees who process claims, and the scope and frequency of contract performance reviews have been increased. A request for additional health care professionals to make inspections of health care facilities has been sent to the Surgeon General, Department of the Army. We believe that many of these actions, together with actions on the recommendations made in this report, if properly implemented, should improve the operation of CHAMPUS0 53 Our examination of CWNTJS included a review of the authorizing legislation a~ld its background. We reviewed applicauie policies, procedures, and practices used in the administration of CHAMPUS. We conferred with appro- priate officials responsible for the administration and op- eration of the program, as well as officials of professional medical organizations. Our review was performed at OCI-lAHJ?US,near Denver, Colo- rado and at the offices of selected CHAPPUS fiscal agents. Additional work was performed at various hospitals, hospital and medical associations, areawide planning commissions, military installations, and regional offices of the Depart- ment of Health, Education, and Welfare's Audit Agency, Our work was directed primarily to (1) determining whether amounts paid under CHAMPUSto hospitals and physi- cians for selected medical and surgical procedures were in line with those amounts paid under Federal and private in- surance plans, (2) evaluating the bases for payment of both hospital and physician charges, (3) determining the extent of fiscal agent surveillance of the costs and quality of services provided to beneficiaries, (4) examining into the reasonableness of expenses of the fiscal agents in adminis- tering the program0 (5) examining into the controls used for establishing the eligibility of program participants, and (6) evaluating the adequacy of audits and reviews of CHAPPUSmade by responsible Goveinment agencies. 54 APPENDIXES 55 Honorable Elmer B. Staats Comptroller General of the United States U. S. General Accounting Office Washington, D. C. rO548 Dear Mr. Staats: In the last several years the coat to operate the military Medicare program has increased substantially. The program was first instituted in fiscal year 1957 at a cost of about $2!,5OO,OOO. For fiscal years 1966, 1957 and 1968 expenses were about $75,616,000, $105~676,000 and $162,374,000, respectively. The preliminary report of obligations for fiscal year Zf.9h9shows @77,366,000, and the budget estimate for 1970 is in excess of $200 million. While testjmony before the Committee indicates that there has been an annual increase in the number of beneficiaries and an increase in the cost of benefits received, it appears that cost increases are greater than might be exxected and not in proportion to benefits derived. The Committee is interested in knowing whether the fees being paid participating physicians, hospitals, or others for services rendered are in line with those which would be customarily charged to non-subscribers of medical-hospitalization programs. Tdewould also like to know whether any substantial profits have been realized by anyone servicing the program. Wewould appreciate the General Accounting Office msklng a comprehcnsiue review of the nilitar-y Xndicare prczr3.m end i-rtp3rting to the Com!tittee on its findings as soon as possible. If you so 1, An e~~lu3tiGn e OA the reasonableness of total cost incu-red by fiscal years. 2. Tne reasonableness of fees charged and profits realized by participz$tin, 0 individuals, medical facilities or ot’ner organizations. 3. The reasonableness of expenses incurred in the administration of the program. 4. A determination of the eligibility of participants. 5. The adequacy of audits made by responsible Govcrment agencies of the administration and operation of the program and benefit payments made under the prograz!.
Potential for Improvements in the Civilian Health and Medical Program of the Uniformed Services
Published by the Government Accountability Office on 1971-07-19.
Below is a raw (and likely hideous) rendition of the original report. (PDF)