The Defense Department's (DoD) inability to measure how much it spends on health care for the elderly raises doubts about cost data from the ongoing Medicare subvention test, and whether the concept can be shown to save money for Medicare, say congressional auditors.
The findings of a recent General Accounting Office (GAO) report dash hopes that Congress will shorten the three-year subvention test at ten stateside locations and implement a nationwide program as early as next year.
Defense officials agree they have serious cost accounting problems to overcome and that the subvention test should run its course. But they remain confident that the results will convince Congress to adopt Medicare subvention nationwide. About 1.3 million military retirees, dependents, and survivors age 65 and older are barred from using Tricare, the military's triple health-care option. Elderly beneficiaries instead are expected to use Medicare, alternative health insurance, or military hospitals and clinics on a "space available" basis.
In-service care is disappearing for Medicare-eligibles as more staff and resources are committed to enrollees of military managed care, Tricare Prime. The idea behind subvention—having Medicare reimburse the military for part of the cost of caring for the elderly—is to reverse that trend and return more elderly to the military system while lowering Medicare costs. The subvention program is called Tricare Senior Prime.
"In principle," said GAO, "beneficiaries, DoD, and Medicare could all gain." But accurate cost accounting is essential, GAO said. If DoD cannot calculate what it spends on the elderly, and how that amount rises or falls during the test, then the government cannot determine whether subvention saves money for Medicare, as promised.
Addressing the accounting challenge is Richard D. Guerin, director for health program analysis and evaluation at the Tricare Management Activity in Falls Church, Virginia. "I live with the nightmare," Guerin quipped.
Design of the subvention test was worked out two years ago in negotiations among DoD, the Office of Management and Budget (OMB), and the Health Care and Financing Administration (HCFA), which oversees the Medicare Trust Fund. The result was a complex and burdensome set of accounting rules that Defense officials concede are tough to fulfill.
During the test, Medicare only will reimburse the military about 80% of what it pays a civilian Medicare+Choice plan to care for Medicare patients. And no Medicare reimbursements kick in until test sites reach a baseline "level of effort" in caring for the elderly.
"Level of effort just says, `DoD, you've already got some money in your budget for the over-65 population. You've been prepaid, in a sense. So you shouldn't get anything from the Medicare Trust Fund until you use at least that which is in the budget,"' explained Guerin.
"That is so easy to say, and massively difficult to implement or to base a payment scheme on."
Defense officials did come up with a baseline estimate of $172 million spent on elderly care across the 1996. GAO now believes that estimate is too low. If so, Medicare reimbursements could be too high.
Guerin stands by the baseline estimate, but concedes it is not well documented. He hopes it can be verified by an independent accounting firm tasked to review a wide range of subvention accounting issues.
Another complication is how test sites are to track the cost of care for local patient populations, defined as those living within 40 miles of the hospital. HCFA said the cost should include care provided to that population by any other nearby military facility—one more figure hard to calculate. Gordon Adams, who was in the thick of subvention test negotiations while serving as then-associate director for national security at OMB, defends the complex results.
"DoD simply can't just walk in and take funds without being able to show some accurate data on costs," he said. "On balance, I thought we carried it off about right. DoD gets the chance to show how well it can manage; the taxpayer gets reassurance that the end result is not just more health-care funding with inadequate control and verification."
One year of data clearly is not enough to decide whether to implement subvention nationwide, Guerin said. He also conceded that a three-year test could be over before his office has a better cost-accounting system in place.
But even if costs cannot be measured precisely, Guerin said, the test still can provide "an awful lot of information for a congressional committee to deal with. If you have a good idea [of the cost], if patients love it, if it does or doesn't look like DoD can deliver [the care], that's a lot of information."
In trying to nail down whether subvention works, beneficiary satisfaction—even absent flawless cost accounting—could carry the day, said Tricare officials.
"The strategy is to try to win this thing on the dollars," said a Tricare official. "But all other things being equal, heck, let's do what's right" for the elderly.