. United States Gener;al.Accounting Office Briefing Report to the Chairman, ’ .GAO Subcommittee on Defense, Committee on Appropriations, U.S. Senate March 1990 DOD HEALTH CARE Funding Shortfalls in CHAMPUS, Fiscal Years 1985-91 GAO/HRD90-99BR ._.. .” ,. ,.“. “.- 1. unitedstates General Accounting office Washington, D.C. 20648 Human Resources Division B-231236 March 19,199O The Honorable Daniel K. Inouye Chairman, Subcommittee on Defense Committee on Appropriations United States Senate Dear Mr. Chairman: On July 20,1989, you requested that we identify the extent of funding shortfalls in the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)since fiscal year 1986, reasons for the shortfalls, and actions planned by the Department of Defense (DOD) to reduce CHAMPUS costs in fiscal years 1990 and 1991. Information presented in our Janu- ary 24,1990, briefing to your staff is summarized below. Additional information is in appendixes I-IV. The DOD medical care system consists of (1) direct care provided by the Background military services in over 500 military facilities and (2) CHAMPUS. The mil- itary services are required to provide needed medical care to active duty members, either through their facilities or through care purchased from civilian providers. To the extent that space, staff, and necessary resources are available, medical care may also be provided to nonactive duty beneficiaries (dependents of active duty members, retired mem- bers, their dependents, and survivors of deceased members). These ben- eficiaries obtain care under CHAMPUS when it is not available from a military facility or when they do not live near a facility. From foal year 1986 to 1989, the growth in DOD'S CHAMPUS costs has outpaced DOD direct care cost growth. This growth pattern is expected to continue into 1990 and 1991. In foal year 1986, CHAWUS costs totaled over $1.4 billion; in fiscal year 1991, they are projected to be about $2.7 billion-a 9Spercent increase. During the same period, the direct care system costs will rise to about $11.2 billion-a 43-percent increase. In July 1989,’ we reported that the amount and cost of care provided under CHAMPUShad grown, in part, because the amount of care provided at military facilities had declined. Other reasons for CHAMPUScost increases included an overaIl cost increase in providing medical care. an l&f- He&h Cam Workload Reductions at Military Hospitals Have Increased CHAVPL’S Ccsts C-7, July 10, I=). 5221226 increase in the number of beneficiaries, and an increase in the rate at which beneficiaries use CHAMPUS. We reviewed (1) DOD documents detailing CHAMPUS budget estimates and Scopeand appropriations and actual expenditures since fiscal year 1985, (2) policy Methodology decisions affecting budget estimates, and (3) information developed by DOD on its efforts to reduce CILAMPUS costs. Also, we interviewed officials from the Office of the Assistant Secretary of Defense for Health Affairs and the Office of CHAMPUS, Aurora, Colorado. Our work was conducted between July 1989 and January 1990. For the past 5 fiscal years, 1986-89, CHAMPUS has experienced funding Results in Brief shortfalls totaling $1.8 billion. (A shortfall is the difference between the appropriated amount before supplemental appropriations and actual costs.) An additional $441 million funding shortfall is expected in fiscal year 1990. In fiscal year 1991, DOD estimates there will be no shortfall because of steps it is taking to reduce CHAMPUS costs. In every year since 1986, DOD has requested less funds in its budget than it estimated the program was going to cost. These lower estimates have been a major contributor to the yearly CHAMPUS funding shortfalls. In addition, each year the Congress appropriates less funds than DOD requests. Other reasons contributed to the shortfalls in some years, including unexpected start-up costs for the CHAMPUS Reform Initiative2 and congressional direction that DOD fund CWUS care to Coast Guard beneficiaries. These shortfalls have been financed by reprogramming funds from other DOD activities to CHAMPus,supplemental appropriations, and/or carryover of claims to subsequent fiscal years. In an attempt to reduce CHAMPUS costs, DOD has initiated numerous efforts aimed at accommodating more of the CHAMPUS work load in the direct care system. DOD'S estimates of future CHAMPUS costs anticipate substantial savings from these efforts. Should such efforts fail to pro- duce the savings anticipated, DOD may continue to experience substan- tial shortfalls. 2A marmged-are demonstration projectin California and Hawaii whose purpose ISto Improve basic health care services for military beneficiaries while containing CHAMPUS cc&s. Pmge 2 GAO/BBD9092BIt Funding shortfti In t‘HAMPUS B-231236 As requested by your office, we did not obtain written agency comments Agency Views on this briefing report. We did, however, discuss its contents with offi- cials of the Office of the Assistant Secretary of Defense for Health Affairs and incorporated their comments where appropriate. As arranged with your office, we plan to distribute copies of this report to the Senate and House Committees on Armed Services; House Commit- tee on Appropriations; the Director, Office of Management and Budget; the Secretary of Defense; and other interested parties. We also will make copies available to others upon request. If you have questions regarding this report, I can be reached on (202) 27643207. Other major contribu- tors to this report are listed in appendix V. Sincerely yours, David P. Baine Director, Federal Health Care Delivery Issues P8ge 8 Contents Letter Appendix I CHAMPUS Budget Shortfalls Appendix II Reasonsfor CHAMPUS Shortfalls Appendix III Financing the Shortfalls Appendix IV DOD Initiatives to ReduceCHAMPUS costs Appendix V 13 Major Contributors to This Briefing Report Tables Table 1.1: CHAMPUS Shortfalls (Fiscal Years 1986-91) 6 Table III. 1: How CHAMPUS Shortfalls Were Financed 10 (Fiscal Years 1986439) Table IV. 1: Estimated CHAMPUS Savings From Direct Care Initiatives (Fiscal Years 1990-91) Figure I. 1: Comparison of CHAMPUS Costs, President’s Budget Submissions, and Appropriations (Fiscal Years 1986-9 1) Figure II.1: Reasons for Shortfalls (Fiscal Years 1986-91) 9 Figure IV.l: Efforts to Reduce CHAMPUS Costs 12 P8ge 4 ~O/ElUj~99BB Fbding Shortfalls in CHA.MpUS Contents Abbreviations CHAMPUSCivilian Health and Medical Program of the Uniformed Services DOD Department of Defense GAO General Accounting Office P4iP5 GAO/ERDWBBBR Pundtng Shortfdb tn CHAMPUS Ppe - k6kPUS Budget Shortfalls The CHAMPUS funding shortfalls for fiscal years 1986-89 total $1.8 bil- lion, with an added $441 million projected for 1990 (see table 1.1). Table 1.1:CHAMPUS Shortfalls (Fiscal Years 19859 1) Dollars in millions Fiscal year Total shortfall Appropriation 1985 $27.3 $1 336 1986 360.0 1,346 1987 610.7 1.465 1988 529.0 2.027 1989 252.0 2.467 1990 441.4a 2.393 aDOD estimate. bNot applicable. CHAMPUSactual costs for fiscal years 1986-89 exceeded both the Presi- dent’s budget submission and final appropriations, as figure I. 1 shows. Although a shortfall is currently projected for fiscal year 1990, DOD anticipates that savings efforts will significantly reduce the projection by increasing the portion of care provided in the direct care system. For fiscal year 1991, the expected shortfall was eliminated because DOD pol- icy now requires the services to request appropriations equal to the total amount of CHAWUS funding needed, based on its estimated pro- gram requirements. P8ge6 Figure 1.1:Comparison of CHAMPUS Costs, President’s Budget Submissions, and Appropriations (Fiscal Years 198591) 4oW Mm SW0 2soo 2mo uoo 1000 mo Note: CHAMPUS ccwts 8re proj8otad for fiscal years 1990-91.President’s budged suhission 19pro- jected for fiecal year 1991. AppropMons are unav8i~ fiscal year 1991. f* *. q& ..ll & *. 2. .; Pyle 7 Ppe *~i&s for CHAMPUSShortfalls Most of the CHAMPUS shortfalls are attributable to unanticipated and unbudgeted growth in the program (see fig. II. 1). For example, in fiscal years 1985-87, during which shortfalls totaled $998 million, CHAMPUS costs increased about $700 million. In our July 1989 report, we noted that most of the cost increase was the cumulative result of a general decrease in work load at military facilities. For example, at these facili- ties, the CHAMPUS inpatient work load decreased about 11 percent and the outpatient work load, 10 percent over fiscal years 1985-87. In some cases, this program growth resulted in expenditures being car- ried over and funded from the next year’s appropriation. This in turn increased the shortfall in the subsequent year, specifically fiscal years 1985, 1987, and 1989. Other reasons for the shortfalls included the following: . Start-up costs of $100 million and $52 million for the CHAMPUSReform Initiative for fiscal years 1988 and 1989, respectively. l Funding of CHAMPUS benefits for Coast Guard beneficiaries amounting to $23 million for fiscal year 1988 and $50 million for 1989. previously, these benefit-s were included in the Coast Guard budget, but the Con- gress directed DOD to fund these services for these years. l Congressional reduction in the CHAMPUS budget requests each year. Page 8 GAO/I%NMMBBE F’undhg sboxtfah in CTHAMPUS Appendix II Rem01118for CHAMPUS Shortfalla Figure 11.1 GAQ Reasons for Shortfalls (Fiscal Years 198591) aMainly unanticipated and unbudgeted program growth @Decrease in direct care work load *Carryover of unpaid claims GHAMPUS Reform initiative start-up costs Page 9 GAO/EED99.99BR Fundlug Shortfalla in (HAMPUS Ppe *&~cing the Shortfalls Procedures to restrain budget growth, that is cancellation or cutbacks in programs, are not available to CHAMPUS. The costs incurred when such services are delivered must be paid. Thus, other sources of funding must be found if CHAMFTS is unable to pay for care out of its existing appropriation. CHAMPUS budget shortfalls are financed in various ways, DOD told us (see table 111.1).They include l reprogr amming of funds (transfer of appropriated funds from other DOD activities) to cIiAhm.6, l supplemental appropriations, and/or l carryover of unpaid claims into the subsequent fiscal year. Table 111.1:How CHAMPUS Shotialls Wre Financed (Fiscal Years1965-69) Dollars in millions Financing method Bud et Supplemental Carryover to Fiscal year rho rtpall Reprogramming appropriation next year 1965 $27.3 $27 3 -__ 1966 360.0 $loai §2*.i . 1967 610.7 . 425.0 185.7 1966 529.0 529.0 . . 1969 252.0 152.3 . 997 Page 10 ~O/JZRD-BfM9BR F&ding shortfdla In (‘MCCW’C’S Ppe *tiElnitiatives to ReduceCHAMPUSCosts As part of its strategy to reduce CHAMPUS costs, DOD plans to add resources to the military’s direct care system in fiscal years 1990-91 (see fig. IV.1). In this way, the direct care system can provide more medical care to beneficiaries rather than using CHAMPUS. Since the services state that CHAMPUS care is more expensive than care in the direct care system, they expect to avoid $1.40 to $2.00 in CHAMPUS care for each $1 .OO invested in the direct care system. Each of the services is planning initiatives in accordance with DOD’S strategy. The Army initiatives rely heavily on Amy-wide increases in clinical support personnel to assist physician staff. The Navy plans to recapture the CHAMPUS work load by awarding a wide range of health care contracts to retain current functions, such as emergency services and primary care. The Air Force plans to use various contracts and to increase civilian health care staff. Projected CHAMPUSsavings from these initiatives are significant-about $200 million and $313 million in fiscal years 1990 and 1991, respec- tively (see table IV.1). If the initiatives do not achieve these savings, the projected shortfall for fiscal year 1990 will be even more significant and a shortfall may develop in 1991. Tsble IV.l: Estimated CHAMPUS Savings From Direct Care Inltlatives (Fiscal Years Dollars in millions 1990-91) Estimated cpH”z Savings shortfall after Fiscal year Service shortfall inltiatlves saving8 initlatlves 1990 Army $206.6 $21.5 $184 1 Navy 209.8 126.2 63.6 Air Force 226.3 52.6 173.7 Total $641.7 $200.3 $441.4 1991 Army $58.0 $58.0 $0 Navy 201.2 201.2 0 Air Force 54.1 64.1 0 TOtal $313.3 3313.3 30 Page11 Appendix IV DOD Initiatives to lb-&we CHAMPUS Costs Fiaure IV.1 GAQ Efforts to Reduce CHAMPUS Costs --...- - _.--- @Plansto invest additional resources in the direct care system @DODestimates it will avoid $1.40 to $2.00 in CHAMPUS costs per $1 .OOinvested in direct care .FY 1990-91 estimated savings of $200-313 million Page 12 GAO/HiUMWWBR Fbding Shortfallm ln CHAMPUS Appendix V Major Contributors to This Briefing Report Human Resources William A. Hightower, Assignment Manager Division, Jacquelyn T. Clinton, Evaluator-in-Charge Washington, DC. 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DOD Health Care: Funding Shortfalls in CHAMPUS, Fiscal Years 1985-91
Published by the Government Accountability Office on 1990-03-19.
Below is a raw (and likely hideous) rendition of the original report. (PDF)