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The national spotlight is focusing on health care, and military medical services will be no exception. Invariably, controlling costs will mean fewer choices, but we may well be unable to choose otherwise.
Despite the cultural, religious, and philosophical diversity in this nation, almost everyone would agree that nothing is more precious than human life. As a result, many people view access to high-quality health care as a basic right. The prevailing belief is that no one should be denied the best and latest medical treatments and technology, even though the costs of providing that care may be extremely high.
In point of fact, the cost of health care in the United States has risen sharply over the past 25 years. In 1965, national health spending constituted less than 6% of the gross domestic product (GDP), but by 1990, it had expanded to more than 12% of the GDP. That was more than twice what the country spent on national defense, and nearly twice as much as it spent on education. In 1993, health spending exceeded 14% of the GDP, and the Congressional Budget Office has estimated that unless current trends are altered, it will consume 18% of the GDP—or $1.7 trillion—by the year 2000.
According to government economists, health programs also are gobbling up a large portion of government resources and are threatening to crowd out other priorities. On the federal level, health spending is the only category of the budget, with the exception of net interest on the deficit, that is rising as a share of the GDP. In 1970, health expenditures for Medicare and Medicaid accounted for only 5% of total federal outlays. By 1990, they had more than doubled to 12%, and the Congressional Budget Office projects that they will double again—to 25% of the total budget—by the year 2002.
Lowering health costs could allow the government to spend more money on programs that enhance economic performance, such as education, infrastructure, and research and development. Money saved on health costs also could be used to finance tax reductions that may improve the economy’s growth. Finally, lower health costs could help reduce the federal government’s huge budget deficit.
People pay for government health spending directly through taxes. They also pay indirectly through the adverse effects of government deficit, diminished spending on capital formation, and slowed economic growth. In these times of business restructuring and massive layoffs, people pay in a different sense when government health spending preempts other government expenditures such as income maintenance programs—the most notable being unemployment insurance. Similarly, employees pay indirectly for employer-provided health insurance through lost wages and salaries that they might otherwise have received if health coverage were not so costly.
Defense Health Programs
Even before impending national health reforms are enacted, major changes in military health benefits and programs have been taking place at a rapid rate. This is not only a result of inflationary increases in the cost of the care being delivered, but also because the overall Defense budget is being lowered and DoD health care responsibilities are being broadened by major changes in the makeup of the military beneficiary population.
Paradoxically, during the past seven years, the uniformed services population that is eligible for health benefits actually has decreased from 9.3 million to fewer than 8.2 million. Military retirees, however—a group that traditionally requires greater expenditure of funds for health care—now outnumber the 1.7 million active-duty personnel, whose numbers will drop even further, to 1.4 million, by 1999. In the past seven years, military beneficiaries age 65 and older actually have increased, from 600,000 to 1.25 million strong. DoD estimates that its total liability for providing health care to all current and future retirees, as well as eligible dependents, actually will exceed the entire 1994 Defense appropriation by $20 billion.
Seven years ago, the Defense Department responded to long-term, serious problems with both the structure of the “Military Health Benefit” and the actual delivery of health care services to the many beneficiaries. Familiar to most consumers of these services, such problems included:
> High costs, borne both by the government and by many beneficiaries
► Multiple barriers to obtaining services at military treatment facilities
Proceedings / May 1994
* Questionable quality of available health services in some locations
* Uncertain benefits and, periodically, uneven availability of benefits
^ Benefits not shared equally among beneficiaries
* Lack of uniformity of services geographically ^ Multiple administrative hassles
* Complex and confusing paperwork
As a result of dissatisfaction of beneficiaries, health care providers, and Congress, the Department of Defense set >n motion multiple changes and initiatives. Many new programs and services evolved, such as PRlMUS/NavCare clinics; contracting with outside providers for services both within and outside of military treatment facilities; partnership i Programs; quality review programs; Coordinated Care; mental health contracts; Catchment Area Management; family practice panels; TriCare;
Gateway to Care; the CHAMPUS Reform Initiative, now known as Managed Care Support Contracts; and, most recently, the Military Re- { gional Lead Agent program.
, Impact of National Reform
Earlier this year, President Bill Clinton assembled a Health Care Task Force to develop a plan that would guarantee comprehensive health care coverage for all Americans, regardless of their health status, employment, or financial status. At least six of the 500 experts chosen to help develop the plan came from the Department of Defense.
Subsequently, then-Secretary of Defense Les Aspin and Mr. Ira Magaziner, staff director of the Health Care Task Force and Senior Advisor to the President for Policy Development agreed upon conditions governing reform of Defense Department health programs, to make them fit the President’s new national health proposals. The White House acknowledged the Defense Department’s obligations to provide for military medical readiness, while in return, DoD guardedly acknowledged its obligation, as an employer, to offer health benefits to all eligible beneficiaries.
The agreement between the White House and the Secretary of Defense included certain principles. These resulted in specific language placed within the President’s Proposed Health Security Act. In general, the Department of Defense retains authority to meet the readiness needs of the military services. It also will establish Uniformed
Services Health Plans, otherwise referred to as Military Health Plans, and in turn will receive various sources of financing—all within the overall guidelines specified by President Clinton’s proposed national health reform legislation.
The section of the President’s proposed Health Security Act proposals that deals with reform of Defense health benefits states: “The Secretary of Defense may establish one or more Uniformed Services Health Plans ... to provide health care services to members of the uniformed services on active duty . . . and to (other) persons.” It continues, “After enrolling active duty members, opportunities (to enroll) shall be offered to covered beneficiaries in the following order of priority”—which indicates dependents of active duty first, followed by the rest of covered beneficiaries. Enrollment by eligible beneficiaries in a military health plan requires that the military health plan “shall be the exclusive source of health care services available.” What does the proposal mean? All active-duty military members will be enrolled automatically in the Military Health Plan without charge. Overseas, there will be no change to the present military health care system for any authorized beneficiary. Other eligible military beneficiaries within the United States may choose a Uniformed Services (Military) Health Plan, if it is available. Alternatively, they may choose either a civilian managed-care plan (such as a Health Maintenance Organization, or HMO) or a “fee for service” plan, similar to the current CHAMPUS program, chosen by a government-sponsored regional health alliance.
Outside employers of those military beneficiaries who may choose to enter a Uniformed Services Health Plan will be required to pay the employer’s part of the health benefit premium to the military health plan. (Paradoxically, a self-employed retiree may enroll in a military health plan, but may well be obligated to pay the employer’s share of the premium to the plan!)
Beneficiaries offered the Uniformed Services Health Plan, but who decline enrollment, will neither be eligible for nor entitled to any services in facilities of the Uniformed Services, but may, if enrolled in another plan through a regional health alliance created under President Clinton’s Health Security Act, have a right to a DoD pay-
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ment for up to 80% of the health plan premium. These plans, including “fee for service” plans, may result in higher out-of-pocket costs for families than for those enrolled in the Uniformed Services Health Plans.
Those active-duty members and their families who do not have access to a Uniformed Services Health Plan in their area may choose from among one fee-for-service plan or two managed-care plans (HMOs), for which DoD may pay up to 100% of the premium costs if the lower priced HMO is chosen—“less the enrollment fee that would be charged by the Uniformed Services Health Plan.”
Is it for free? Obviously, not quite! Economists tend to believe that one way to reduce overconsumption of health care services is to make the consumer assume a share of the costs. It is felt that entry fees, deductibles, and copayments, which require the patient to pay a portion of the costs at the time of the service, will reduce the incentive to overconsume health services.'
In the new proposed military health plan, E-1 through E-4 family members would be enrolled in the Military Health Services Plan without fee, but enrollment for all other active-duty dependents would cost about $35 per person, with a maximum of $70 per family. If the plan requires visits to a nonmilitary facility, the families of E-ls through E-4s would be required to pay $5 per person, per visit, and all other active-duty family members would pay $10 per person, per visit. For retirees and their families, enrollment fees would be about $50 per person, with a maximum of $100 per family, while a fee of $15 per person will be required for each visit to a nonmilitary facility.
For those receiving treatment or in-patient care at military medical treatment facilities, no additional fee would be required except for subsistence, as required under the present system.
For all families, the medical catastrophic expense cap, now at $7,500 per family, should be the same as for all Americans under national health reform.
Those military health service beneficiaries who are Medicare eligible (both parts A and B) may choose to enroll in a Uniformed Services Health Plan, if available. If so, they will receive all required health services through that plan. In that case, Medicare payments will be made directly to the Uniformed Services Health Plan. Beneficiary cost sharing, a standard part of the Medicare program, will be lower if the beneficiary is enrolled in the Uniformed Services Health Plan. Those persons who do not enroll in a military health plan may use their Medicare benefits as usual, and they also will receive pharmacy benefits, which are not now available under standard Medicare.
Is There an Impact on Medical Readiness?
During the past decade, burgeoning responsibilities have been placed upon uniformed services health care facilities. Heavy patient work loads in military hospitals, budgetary constraints, and efforts to contain CHAMPUS costs by retaining medical services “in-house” have translated into field training deficiencies among health care personnel. Ultimately, military medical personnel during peacetime have had only limited time to participate in readiness training, and often do not attend these training sessions.
In the aftermath of Operation Desert Storm, the Army’s Central Command Surgeon stated, “The . . . overwhelming emphasis on peacetime health care conflicted with the training and readiness of Army clinical personnel to provide the best medical care to large numbers of casualties in the combat zone.” Providing another explanation for inadequate training, a General Accounting Office report noted, “Marine Corps medical officials stated ... it is difficult to get doctors out of hospitals and into the field for training because of a shortage of military doctors, as well as the expense of getting civilian replacements or providing medical care at a nonmilitary facility. . .
CHAMPUS cost containment has been the primary reason why medical treatment facility commanders have heretofore limited the time available for physicians to participate in field and classroom training. CHAMPUS costs are incurred whenever patients are obligated to obtain health care outside military facilities, such as when their physicians are unavailable because of training. In 1989, for example, mobilization-related operational training for all Navy hospital-based personnel was curtailed, not because of the direct costs, but because of the feared impact upon medical care costs within the facilities from which they would be absent.
Little has changed since 1989, and according to a 1993 GAO survey, military hospital commanders are required to manage personnel training “within the practical constraints of providing peacetime health care.” Military medical officials acknowledged to GAO surveyors that the operating budgets of medical facilities (covering personnel, general operating dollars, and equipment) are based upon the number of patients seen and diagnosed for treatment. As a result, the hospitals’ operating budgets can be reduced to the extent that physicians’ participation in readiness training displaces patient work load. It is not surprising, then, that GAO investigators in July 1992 noted that only 25% of active Army physicians had attended the officer advanced course, and only 47% of active physicians had attended the Combat Casualty Course.
Proceedings / May 1994
As increasing pressures are placed upon the medical treatment system to curtail health treatment costs, will these training trends change? Although operational readiness is assured in principle, the impact of these competing obligations remains to be seen.
The Bottom Line
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As the national spotlight focuses on health care, there will be increasing emphasis upon some forms of global budgeting for health expenditures. The military health care system is inescapably part of these same deliberations. The aim will be to place limits on spending by pressuring providers to supply services more cost effectively and efficiently, by restricting investment in new technology, and by rationing the provision of services.
Thunder Below!
★ ★ ★ The USS Barb Revolutionizes ★ ★ ★ Submarine Warfare in World War II
Admiral Eugene B. Fluckey
In response to these initiatives, many ideas have been floated for consideration, with the objective of motivating the users of health services, as well as those who provide them, to be more cost conscious. Hence, the concept of managed care has evolved. Already heavily subscribed to by the military health service system, the concept theoretically provides a mechanism for controlling the care provided by physicians. In addition to negotiated reductions in professional fees charged by physicians, it may require second opinions before surgery, prior authorization before hospital admission, retrospective review of tests and treatments performed by physicians, and other measures. Among the many managed-care options is the HMO, which contracts to provide medical care to enrollees over a given period for a fixed payment. Because the HMO has an incentive to limit costs in order to make the arrangement profitable, there may be greater restrictions, conditions, and limitations on available health services concomitant with the new choices in health care formats provided to military health services beneficiaries.
University of Illinois Press * 1325 South Oak Street * Champaign, IL 61820
Inevitably, the cost of increased security in the new health care environment, both within and outside the military health care system, will be the loss of individual freedoms of choice in health care. Unfortunately, we may well be unable to choose otherwise. Other more creative means of health care financing may evolve in
the future and may well allow for a less painful approach to paying the bill for our growing national medical costs. It is doubtful, however, that military medical health services will find a “safe harbor” to escape from the ongoing raging debate. In addition, an assessment of the potentially critical impact upon operational readiness within the uniformed services cannot be avoided.
'The most comprehensive study of patient behavior was conducted in the late 1970s by the Rand Corporation in Santa Monica, California. Rand researchers found that families with a $2,500 deductible (in today's
Winner of the Samuel Eliot Morison Award for Naval Literature given by the Nava! Order of the United States, New York Commandery
“An action-packed yarn of great adventure on and beneath the seas with special insight into the mind of an aggressive man-of-warsman. . . . Fluckey’s wisdom for the current crop of U.S. submariners is powerful. Everything he did as captain was on the edge: it pushed the envelope, defying training and conventional wisdom.” — Proceedings
prices) spent about 30% less on health care than did families with first dollar coverage, ostensibly without adverse effects upon their health.
Captain Smith is an actively drilling Navy reservist at the Uniformed Services University of the Health Sciences in Bethesda, Maryland, where he holds appointments as Clinical Professor of Surgery and Clinical Professor of Military and Emergency Medicine. He is on the full-time faculty at the Medical College of Georgia in Augusta, Georgia, where he serves as Professor of Surgery (Urology). Admiral Bar- chet was Deputy Surgeon General of the U.S. Navy during 1982 and 1983. He is now a military health consultant and serves as Executive Director of the Northwest Military Retiree Health Benefit Association, based in Seattle.
“Stand aside Tom Clancy and Jack Ryan-here comes Lucky’ Fluckey! Thunder Below! is a book you must read! It is an exciting, nonfiction tale of the almost unbelievable exploits of the most successful American submarine in World War II.” — Shannon D. Cramer, Shipmate Illus. Cloth, $29.95
Autographed copies available: J
Admiral Eugene B. Fluckey g
1016 Sandpiper Lane Annapolis, MD 21403
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Proceedings / May 1994