The Department's medical portion of the President's FY 93 Amended Budget approximates $15.3 billion (5.7 percent). Of this amount, $9.5 billion comprises the newly established Defense Health Program (DHP) appropriation, which funds medical operations and maintenance (including CHAMPUS), at $8.9 billion, procurement at $294 million, and medical research and development at $313 million. Medical military construction funding of $240 million, in a separate appropriation, continues under my direction and control.

In FY 92, $8.1 billion was appropriated to the Defense Agency, Operations and Maintenance account for the medical program. Previously, these funds were part of the Military Departments' O&M accounts. An additional $600 million was retained in the Services and Defense Agencies medical O&M accounts. The FY 93 O&M medical program of $8.9 billion reflects an increase of $171.4 million...less than two percent...over the FY 92 current estimate.

The Defense Health Program (FY 93) provides resources for the health care needs of 8.4 million eligible beneficiaries. Care is both delivered worldwide in 148 hospitals and 554 clinics and purchased from the civilian sector through the CHAMPUS program and the Uniform Services Treatment Facilities (USTFs). The budget is developed based on projected workload, anticipated changes in force structure, and programmed base closures and realignments.

This budget submission reflects a fully funded CHAMPUS program of $3.9 billion, primarily based on the CHAMPUS Actuarial Projection Systems (CAPS) model forecast for the CHAMPUS benefit program, estimates for contracts and demonstration projects, and adjustments for known program changes. The budget includes the newly authorized disabled care benefit and the authorized increase to the dental benefit. Significantly, FY 91 CHAMPUS costs remained within appropriated funds, and we are confident FY92 costs will as well.

In addition to health care delivery, the Defense Health

Program supports the FY 93 requirements of three field activities:

* the Defense Medical Support Activity (DMSA)

* the Office of CHAMPUS (OCHAMPUS)

(USUHS).

the Uniformed Services University of the Health Sciences

The $294 million in the medical procurement account is to fund the purchase of capital equipment for medical treatment facilities as well as other equipment requirements. Examples include initial outfitting of new, expanded or altered health care facilities being constructed under major construction programs; equipment for modernization and replacement of worn-out, obsolete, or uneconomically reparable items; information processing requirements and equipment supporting pollution control, clinical investigation, and occupational and environmental health programs.

The military medical research and development account of $313 million funds the efforts to prevent illness and injury to the fighting forces. These medical research and development efforts are directed at resolving military unique problems that affect all activities of the active duty force from training to mobilization and deployment, through redeployment to home base.

8

These efforts focus on infectious disease, protection against biological and chemical agents, environmental hazards, military systems health hazards and developing combat casualty care treatment regimens and materiel to save life and limb.

Phase-funding of major medical construction initiatives has allowed us to get several much needed large projects started which will help modernize our aging hospital inventory. One caution however, is that based on the increasing portion of the military construction budget being consumed by phase-funded projects, maintaining adequate resources to ensure appropriate maintenance, upgrades and alterations to existing facilities becomes increasingly more difficult.

Funding for medical military personnel, reserve component personnel, combat support medical units and activities, and certain management headquarters are included in the budgets of the military departments and are not part of the consolidated Defense Health Program budget. In addition, regarding medical personnel, the new management authorities do not allow for change in the structure of the chain of command within a military department or within a unified or specified command for those personnel.

DELIVERY OF HEALTH CARE

Last year I reported to you that the environment for coordinated care had been created. This year, it pleases me to report that on January 8th, I transmitted to the Service Secretaries the instructions to begin the Department's three-year phased implementation of our Coordinated Care Program. This managed care initiative is designed to better accomplish the medical mission by improving access to quality health care services, while controlling health care cost growth. This program will provide medical treatment facility Commanders with the tools, authority and flexibility needed to perform more effectively the health care mission. The centerpiece of the program will be local health care delivery systems and networks based on arrangements between military and civilian health care providers and organizations.

With the instructions to implement Coordinated Care, I have issued policy guidance to the military departments concerning enrollment, site selection, network development, specialized treatment facilities, education, communication strategies, quality management, and health promotion and disease prevention. The three year phased implementation will involve twenty-five percent of stateside hospital locations in the first year, an