Military Health Care
Financial Implications
Personnel and Readiness
Agenda
Military Health System 101
Why are we growing?
Efficiency Initiatives
What are we doing?
Beneficiary Cost Shares
Other things we can be doing
Sustainable over time?
Military Health System 101
The Military Health System Has an Interconnected,
Mutually-Supporting, Multi-Pronged Mission
 Be prepared to deploy to support COCOMs – combat casualty care,
humanitarian assistance, disaster relief; and SSTRO – stability,
security, transition and reconstruction operations
 Ensure a healthy, fit, protected force
 Manage/deliver care to build healthy, resilient families & communities
Deploy to
Patient Care,
Sustain Skills to Support
and
Combatant
and Training
Commanders
Manage and
Deliver
Beneficiary Care
Deploy
Medical
Capability
Promote &
Protect
Health of
Force and
Communities
Support Homeland
Defense
Deploy Fit and
Protected Force
The MHS Ensures a Joint En-Route Patient
Evacuation System…from Foxhole to Home
Aerovac
3500nm/7hr 32min
Landstuhl Army
Regional Medical Center
1825nm/
4hr 39min
1415nm/
3hr 37min
VA
Forward
Surgery
Mosul
Wilford Hall Air Force
Medical Center
National Naval
Medical Center
Walter Reed Army
Medical Center
USNS
Comfort
Bagram
Balad
Baghdad
1486nm/
3hr 52min
Medevac
Emergency
Medicine
US Based Medical
Centers and
Research Expertise
Hospitalization
The MHS is a Vast Healthcare Enterprise,
Serving the World’s Best Patients
RESOURCES
• $51 Billion FY2011 Unified
DoD Medical Budget
• 138K military and civilian
personnel
• Expansive Infra- and InfoStructure
9.5 M BENEFICIARIES
• AD and families, RC and
families, retirees and
families, survivors, and
others – worldwide
• 5.0M Prime Enrollees
FY 2011 FACILITIES
• 56 Hospitals
• 363 Ambulatory Clinics
• 275 Dental Clinics
• 288 Veterinary Clinics
• 10 Medical Installations
• USUHS / METC
• 7 Research Laboratories
EVERY WEEK
• 21K Admissions (5K MTF)
• 1.8M Visits (642K MTF)
• 2.1K Births (1K MTF)
• 2.2M Scripts (948K MTF)
• 103K Dental Visits (MTF)
• 3.5M claims processed
ROBUST NETWORK
• TRICARE network of 210K+
private-sector physicians,
nearly all civilian hospitals,
and 55K pharmacies
• VA partnerships
WORLD CLASS DEPLOYED
SYSTEM
• Foxhole to Home –
doctrinally aligned Joint
execution
Our Ultimate Goal
• Readiness
•
•
•
•
Pre- and Post-deployment
Family Health
Behavioral Health
Professional Competency/Currency
• Quality Outcomes
Healthy Service Members, Families, and
Retirees
• A Positive Patient Experience
Patient- and Family-centered Care,
Access, Satisfaction
• Cost
Responsibly Managed
Readiness
Military Health System Components
 Office of the Assistant Secretary of Defense (Health Affairs)
 TRICARE Management Activity
 Military Medical Departments / Services – Units / Personnel
 DHP Funded
 Line and Deployed Medical Units / Personnel
 Chairman of the Joint Chiefs of Staff medical personnel
 Combatant Commanders’ Surgeons staffs
 Education, Training, and Research Assets
 TRICARE Providers (individual providers, hospitals, pharmacies)
 Strategic Partnerships (e.g., interagency, international, and
internal/external stakeholders)
FY2011 Defense Health Program Budget
Operation and Maintenance
(In Billions)
FY2011 Defense Health Program
Budget
(Operation and Maintenance)
Health Care Support
$16.1B
54%
$6.0B
20%
26%
$1.5
$5.3
$0.6
$0.4
$0.0
$7.8
$7.8B
26%
In-House Care
Private Sector Care
In-House Care
In-House Support*
Pharmacy (CONUS/OCONUS)
Health Care/Administrative
Active Duty Dental
Overseas Health Care
Other
Total
*Excludes $4.2B associated with MilPers
Private Sector Care
Health Care Support
Data Source: Defense Health Program FY2011 Budget Submission
Private Sector Care
Pharmacy (CONUS/OCONUS)
Health Care/Administrative
Active Duty Dental
Overseas Health Care
Other
Total
Health Care Support*
Consolidated Health
Information Management/Technology
Management Activities
Education and Training
Base Operations
Total
*Excludes $3.6B associated with MilPers
54%
$2.2
$12.3
$0.1
$0.3
$1.1
$16.0
20%
$2.1
$1.5
$0.3
$0.6
$1.6
$6.1
Defense Health Program Component Overview
FY 2011 Unified Medical Budget (millions)
As of FY 2011 Budget Estimates Submission
DHP Appropriation:
Army
$6,588
$118
$50
$6,757
Navy
$3,195
$69
$38
$3,303
MILPERS* $2,479
MILCON
$479
BRAC
MERHCF O&M Receipts
$566
MERHCF MILPERS Receipts
$133
Total Budget Authority
$10,413
$2,511
$150
$2,801
$165
$306
$119
$6,389
$418
$165
$5,938
O&M
Procurement
RDT&E
Total DHP
Air Force TMA OPNS
$2,297
$1,657
$56
$276
$37
$348
$2,390
$2,280
USUHS
$131
$0
$21
$153
TMA PSC
Total
$16,047
$29,915
$1
$520
$6
$500
$16,053
$30,935
$153
$7,791
$1,030
$410
$8,940
$416
$49,522
Other Sources:
$235
$410
$10
$7,641
$2,936
$23,694
*MILPERS reflects updated rates as of 20 Jan 2010
Manpower
Infrastructure
Army
Army Navy Air Force Total
Inpatie nt Facilitie s
24
19
13
Navy
Air Force
TMA¹
Total
Military End Strength
26,207
27,220
31,519
47
84,946
Civilian FTEs
31,685
13,257
6,953
1,383
53,278
57,892
40,477
38,472
1,430
138,224
45%
67%
82%
56
Me dical Clinics
157
126
80
363
De ntal Clinics
144
38
93
275
Percent Military
Ve te rinary Clinics
288
0
0
288
¹ TMA Military included in Service totals; USUHS Civilians (669) included in TMA total
Total (FY 2010)
Budget Impact
DoD Forecast
$70.00
If DoD Health Budget
grows at recent trend
rates, it will reach
$64B, or 10.4% of
DoD top-line in 2015
$60.00
$50.00
Annual Total
Defense
Health
Expenditures
($B)
If DoD Health
Budget managed to
8% of DoD top-line,
budget would be
$46 in 2015
$40.00
$30.00
$20.00
$10.00
$0.00
FY06
FY07
FY08
FY09
FY10
Maintain Health Budget at 8% of Total DoD Budget
FY11
FY12
FY13
FY14
FY15
Projections are for 10.4% by FY2015
Why Are We Growing?
Evolution of Health Benefits
1940s-1950s
2002
Title 10 Legislated Benefit
Space Required for Active Duty
Space Available for Families and Retirees
TRICARE Plus
TRICARE For Life
TRICARE Prime Remote for AD Family Members
1966
CHAMPUS Legislated Benefit
Civilian Health Care Where MTFs Do Not Exist
Families and Retirees <65
2003
TRICARE Online
TRICARE implements HIPPA Patient Privacy Standard
Elimination of AD Family Member Co-Pays
1993
TRICARE Managed Care Legislation
Automatic enrollment for Active Duty
Space Required for TRICARE Prime Enrollees
Space Available for Non-enrollees
2004
Transitional Assistance Management Program (TAMP) Expansion
Guard/Reserve TRICARE (Early Eligibility, Reserve Family Demo)
Elimination of Non-Availability Statements (NAS)
1995-1998
TRICARE Triple Option Benefits
Prime, Extra and Standard
TRICARE Senior Prime Demonstration
2005
TRICARE Reserve Select
Extended Health Care Option/Home Health Care (ECHO / EHHC)
TRICARE Maternity Care Options
1999-2000
Further Expansion:
Prime Remote for Active Duty
TRICARE provider rates >=Medicare
Beneficiary Counseling & Assistance Coordinators
2006
Extended TRICARE Benefits for Dependents Whose Sponsor Dies on Active
Duty
Limit Deductibles/co-Pays for Nursing Home Residents under the Pharmacy
Program
Enhancement of TRICARE Reserve Select Coverage
2001
Catastrophic Cap Reduced to $3,000
Enhanced TRICARE Retiree Dental Program
TRICARE Senior Pharmacy
Elimination of Prime Co-pays for AD Family Members
Extension of Medical and Dental Benefits to Survivors
School Physicals
Entitlement for Medal of Honor Recipients
TRICARE Prime Travel Entitlement
Chiropractic Care Program
2007
Expansion of TRICARE Reserve Select coverage to All Reservists
Three year Extension of Joint DoD/VA Incentive Program
Planning/Management – Claims Processing Standardization
Expanded Disease Management Programs
Coverage of Forensic Exams for Sexual Assaults
Dental Anesthesia for Pediatric Cases
TRICARE Beneficiary Cost Share Has
Gone Down
For Family of Three
Reason for decrease: Kaiser changes
between High and Standard in 2007
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
TRICARE
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
2008
2007
2006
2009
FEHBP Kaiser HMO*
FEHBP BCBS Standard
Patient Cost Share
Patient % of Total Health Care Costs
2000
2001
TRICARE
17.6%
BCBS
37.5%
39.9%
Kaiser HMO*
29.8%
29.6%
2005
2004
2003
2002
2001
2000
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
$0
Govt/Employer
2002
2003
2004
39.4%
31.5%
39.5%
32.5%
38.1%
32.1%
2005
12.1%
38.0%
32.0%
2006
11.9%
38.9%
31.8%
2007
11.7%
38.0%
36.6%
2008
11.5%
39.5%
38.5%
TRICARE: Assumes all care received in the civilian sector for a family of 3
FEHBPBCBS and Kaiser HMO: Premiums and other out-of-pocket (OOP) levels for a family of 3 from Washington Consumers' Checkbook
Kaiser HMO available data based on Kaiser "High" plan for 2000-2006, and Kaiser "Standard" plan for 2007-2009
2009
40.9%
37.7%
Inpatient Weighted Workload
Inpatient Weighted Workload
400
Health Costs Going Up
(Thousands)
350
Cost Drivers
300
250
200
1. New users – beneficiaries are dropping costly private
health insurance and returning to TRICARE
FY 2004
FY 2006
In-House Care
FY 2007
FY2008
Private Sector Care
(Excludes MERHCF)
Outpatient Weighted Workload
Outpatient Weighted Workload
2. Utilization – existing users are consuming more health
care per capita
45
40
(Millions)
3. Inflation – health care remains above other sectors
FY 2005
35
30
4. New Benefits – added by Congress
25
5. Migration – In-House Care workload is flat to
declining, shifting cost to Private Sector Care
FY 2004
FY 2005
FY 2006
In-House Care
FY 2007
FY 2008
Private Sector Care
(Excludes MERHCF)
Prescriptions Filled
Pharmacy Prescription Count
80
Private Sector Care Demand is
Rapidly Increasing
(Millions)
70
60
50
40
FY 2004
FY 2005
FY 2006
In-House Care
FY 2007
Private Sector Care
(Includes MERHCF)
FY 2008
And…Requirements Continue to Increase
• New requirements have been added to the health
care budget as the result of ongoing actions
Psychological Health
Traumatic Brain Injury
Wounded, Ill, and Injured
Total
$
$
$
$
($M)
FY 2010
472 $
178 $
661 $
1,311 $
FY 2011
479
190
685
1,354
Newest Requirement:
Coverage Until Age 26
• Health Reform Law included provision that health
plans must provide coverage to adult children
(those less than 26 years old)
• Provision not applicable to TRICARE
• Legislation (HR 4923 and S 3201) has been
introduced to extend TRICARE to this population
and authorizes the collection of premiums “not to
exceed the cost of coverage”
• Proposed rules under the Health Care Reform Law will
not allow insurance companies to charge a separate
premium
How Much Will This Cost?
• Unless the legislation changes, the department,
in coordination with OMB will need to decide
what portion of the costs will be charged as
premiums
• Four options have been analyzed:
•
•
•
•
No separate premium
28% premium (same as TRS, FEHBP)
50% premium
100% premium (no cost to the Department)
• Total cost to DoD depends on premium amount
and take rate
Efficiency Initiatives
“What Are We Doing?”
MHS Savings
Initiatives Developed Prior to FY 2011 PB
Outpatient Prospective Payment System (OPPS):
 The 2002 National Defense Authorization Act directs that TRICARE
payment methods for institutional care shall be determined, to the
extent practical, in accordance with the same reimbursement rules
used by Medicare
 Based on these statutory mandates, TRICARE adopted Medicare’s
OPPS reimbursement methodology for certain outpatient procedures
on May 1, 2009
 The estimated savings to be realized within the DHP assume a 4year phase-in of these rates for network hospitals and a 3-year
phase-in for non-network hospitals
Current Estimate of Savings:
FY 2010: $688M
FY 2011: $793M
MHS Savings
Initiatives Developed Prior to FY 2011 PB
Federal Ceiling Pricing (FCP):
 The 2008 National Defense Authorization Act authorized the
procurement of pharmaceuticals under the TRICARE retail
pharmacy program. This will make any prescription filled on or
after January 28, 2008 subject to Federal pricing, which is
significantly lower than regular retail prices.
 FCP will be achieved through refunds from pharmaceutical
manufacturers on a quarterly basis. Refunds in FY 2010 are
projected to be $376M. It is uncertain when retroactive refunds
covering the period of 28 January 2008 through 26 May 2009
(date of the Final Rule) will (may) be received.
Current Estimate of Savings:
FY 2010: $376M
FY 2011: $434M
Other TRICARE Cost Saving Initiatives
Prior to FY2011
•Mail Order Marketing
•
Educating beneficiaries on the convenience and cost savings associated
with having prescriptions filled by mail instead of retail
•Innovation Investment Program
•
Investing seed money in significant projects that will have positive ROIs
•T-3 Contracts
•
Restructured purchase of health care services to reduce administrative
costs
•Direct Care Prospective Payment System
•
Incentivizing the Direct Care System by basing budgets on performance
rather than historical funding
•VA/DoD Sharing
•
Taking advantage of economies of scale with other Federal health service
providers
•BRAC
• Reducing and consolidating unneeded capacity
22
FY2011 Proposed TRICARE
Cost Saving Initiatives
•Acceleration of standardization with Medicare payment policies
• Reducing time from Medicare implementation of payment changes
to TRICARE implementation
•Fraud Waste and Abuse
• Hiring increased personnel for detection and prosecution of
fraudulent health care claims
•Supply Chain Standardization (2011 proposal)
• Improving purchasing within the direct care system through
standardization
•Patient Centered Medical Homes
• Emphasis on prevention, access, and per capita costs
23
Beneficiary Cost Shares
(Other Things We
Can Be Doing)
Health Plan Options
• HMO-type Options
• TRICARE Prime
• TRICARE Prime Remote - For AD and their families in remote
locations
• US Family Health Plan – Former public health hospitals that
provide a Prime-like benefit
• Fee-for-Service Options
• TRICARE Standard and Extra
•
TRICARE Reserve Select – Premium based plan for Select
Reservists
• Medicare Wrap-around Coverage
• TRICARE For Life
Benefit Structure: Based on a Family
Option
Premium
Deductible
Visit
Copay*
Inpatient
Copay*
Catastrophic
Cap
TRICARE Prime
ADFMs
None
None
None
None
$1,000
$460/year
None
$12
$11/day
$3,000
ADFMs
None
$300 E-5+
$100 E-1/4
20%
$15.65/day
$1,000
Retirees
None
$300
25%
$535/day
$3,000
$198/month
$300E-5+
$100 E-1/4
20%
$15.65/day
$1,000
Retirees
TRICARE
Standard
TRICARE
Reserve Select
TRICARE for Life
Medicare
Part B
Second Pay to Medicare
Usually no cost share remaining
$3,000
Pharmacy Benefit Copays
Venue
Generic
Brand Formulary
Non-Formulary
None
None
None
Retail (30 days)
$3
$9
$22
Mail-Order (90 days)
$3
$9
$22
MTF
* No copays when care is received in an MTF
Cost Comparison and Beneficiary Share
Family Coverage
$18,000
Note: Kaiser changes between
High and Standard in 2007
that is reason for decrease
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
Patient Cost Share
2002
2003
2004
39.4%
31.5%
39.5%
32.5%
38.1%
32.1%
Govt/Employer
2005
12.2%
38.0%
32.0%
2006
12.0%
38.9%
31.8%
2007
11.7%
38.0%
36.6%
2008
12.1%
39.5%
38.5%
2009
12.1%
40.9%
37.7%
TRICARE: Assumes all care received in the civilian sector for a family of 3
FEHBPBCBS and Kaiser HMO: Premiums and other out-of-pocket (OOP) levels for a family of 3 from Washington Consumers' Checkbook
Kaiser HMO available data based on Kaiser "High" plan for 2000-2006, and Kaiser "Standard" plan for 2007-2009
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
2009
2007
2006
2008
FEHBP Kaiser HMO*
FEHBP BCBS Standard
TRICARE
Patient % of Total Health Care Costs
2000
2001
TRICARE
17.6%
BCBS
37.5%
39.9%
Kaiser HMO*
29.8%
29.6%
2005
2004
2003
2002
2001
2000
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
$0
Overview: TRICARE Fees
•
Total budget for healthcare in the department exceeds $51B for FY 2011
•
•
•
Includes O&M, military personnel, procurement, R&D, MILCON, and contributions to the
Medicare Eligible Retiree fund to support TRICARE for Life
Projected estimates indicate healthcare will be over 10% of DoD top-line by 2015
Beneficiary fees (PRIME enrollment, co-pays, deductibles have not risen since
mid-1990s)
•
•
Beneficiary cost share now less than half of what they were when TRICARE was initiated
Meanwhile, civilian employee premium shares have increased dramatically
•
•
Example: Federal Employee BC/BS employee premiums increased 249% from $1,380 to $4,812/year
Efforts to rebalance cost shares were proposed in FY 2007, 2008 and 2009 budgets
•
•
•
Increase enrollments fees, deductibles, and pharmacy and care co-pays
Did not impact AD or ADD (other than retail/mail order pharmacy co-pays)
Congressionally directed Task Force on Future of Military Healthcare recommended fee
increases similar to DoD’s position
•
Congressional action stopped savings and froze fees (ended Sep 30 2009)
•
FY 2010 and current FY 2011 Budget assumes no fee change
•
NDAA 2010 did not freeze enrollment or co-pay fees, but clear indication that fee
increases were not supported by Congress
28
Details of Previous Proposals
• Initial Proposal – FY 2007 President’s Budget
• Increase Prime Enrollment fees, Standard deductibles
• Based on rank – Officer, Senior Enlisted, Junior Enlisted
• Institute Standard Enrollment Fee
• Based on rank
• Adjust Pharmacy co-pays
• Incentivize mail order
• Savings: $11B over five years
• FY 2008
• Assumed similar savings to FY2007 budget
• No specifics on increases in fees
• Awaiting Task Force proposal
• FY 2009
• Submitted proposal based on Task Force proposal
• Similar increases, but based on retired pay level - <$20K, $20K-$40K,
>$40K
• Savings: $10B over five years
• FY 2010
• No savings assumed for FY 2010 from increased fees
29
What DoD Can Change Without Congressional Action
(Assuming No Prohibitions)
Program
Beneficiary Cost
Authority
FY2011 Adjustment?
TRICARE Prime
Enrollment
Fees
Retirees: $230/person or $460/family.
Within DoD’s authority.
10 U.S.C. § 1097(e),
NDAA-94, § 731.
32 C.F.R. § 199.18(c), (g).
DoD intends no change in FY2011.
TRICARE Prime
Outpatient
Charges
ADFM: $0;
Retirees: set per visit charge, $12 for most visits, $30 for
emergency room, $25 individual mental health visits.
Fixed dollar charges within DoD’s authority.
10 U.S.C. § 1097(e).
32 C.F.R. § 199.18(d).
DoD intends no change in FY2011.
TRICARE Standard
Inpatient
Copays
AFDM: $20 per diem (min.$25/admission);
Retirees: Lesser of 25% of fixed daily amount (currently $535)
or 25% of TRICARE allowable amount. Fixed daily
amount is based on 25% of average allowable amount.
(Does not apply to TFL or retirees with other health
insurance.)
Annual updates to the fixed daily amount are
required by 10 U.S.C. § 1086(b)(3) for
hospitals paid by DRG-based payment
method (except freeze in effect FY-06
through FY-10).
32 C.F.R. § 199.4(f)(3)(ii).
Yes. Current law requires update for
FY2011. The fixed amount is
updated by the Medicare update
factor (2.1% in FY2010).
Estimated increase for FY2011
would be from $535 to $745.
TRICARE Dental
Program
Premiums vary for ADFM, RC, RCFM, single, family.
ADFM premium = 40% of cost.
RC Sponsor premium = 40% of cost.
RCFM premium = 100% of cost.
10 U.S.C. § 1076a.
32 C.F.R. § 199.13.
Yes, annually on Feb. 1.
TRICARE Retiree
Dental
Program
Premiums vary based on level of coverage, and number of
individuals covered. Premium = 100% of cost.
10 U.S.C. § 1076c.
32 C.F.R. § 199.22
Contractual requirement.
Yes, annually on Oct. 1.
Pharmacy Copays
MTF: $0.
Retail: $3/$9/$22 (30 day supply).
Mail: $3/$9/$22 (90 day supply).
Respective amounts are for Generic/Formulary/Non-Formulary.
Amounts are within DoD’s discretion, subject to
maximum of 20% (ADFM) or 25% (retiree)
of cost.
10 U.S.C. § 1074g.
32 C.F.R. § 199.21(i).
DoD intends no change in FY2011.
TRICARE Reserve
Select
Premiums based on cost, 28% for member. Premiums for
member only (currently $49.62/mo) and member +
family (currently $197.65/mo).
10 U.S.C. § 1076d(d).
32 C.F.R. § 199.24(b).
Yes, annually on Jan. 1.
TRICARE Retired
Reserve
Premiums based on cost, 100% by member. Premiums for
member only and member + family. Premium
amounts to be decided.
Program to begin FY2011.
10 U.S.C. § 1076e(d).
Regulation under development.
Will provide for annual adjustment.
Continued Health
Care
Benefits
Program
(CHCBP)
Premium based on comparable FEHBP plan, plus up to 10%
for administration.
10 U.S.C. 1078a(f)(1).
32 C.F.R. § 199.20(q).
May be adjusted annually. FY20l1 amount
$988/quarter individual;
$2213/quarter family.
What Changes Require
Congressional Action
Regulatory
Legislative
Initiative
Increase Deductibles
For ADD
For Retirees & NADD
Copays for PRIME Enrollees
For ADD (reintroduce)
For Retirees & NADD (increase)
Introduce MTF Copays (except AD)
For Rx
For outpatient visits
For inpatient admission
Amend 10 USC 1079(b)(2)-(3)
Amend 10 USC 1086(b)(1)-(2)
Repeal 10 USC 1097a(e)
Proposed rule change 32 CFR 199.18*
Proposed rule change 32 CFR 199.21
Amend several sections of law**
Amend several sections of law**
Increase Catastrophic Caps
For ADD (index to inflation)
For Retirees & NADD (increase)
Eliminate TRICARE Triple Option
For ADD
For Retirees & NADD
Amend 10 USC 1079(b)(5)
Amend 10 USC 1086(b)(4)
Proposed rule change 32 CFR 199.18
Repeal or amend 10 USC 1097a and
several other sections of law
Sustainable Over Time?
It isn’t!!!!!
Secretary Gates
Saturday, May 8, 2010
• “…the dilemmas we face today in
providing for – and paying for – our
national defense.”
• “Leaving aside the sacred obligation we
have to America’s wounded warriors,
health care costs are eating the Defense
Department alive, rising from $19 billion a
decade ago to roughly $50 billion –
roughly the entire foreign affairs and
assistance budget of the State
Department.”