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additional fifty percent in the second year, and the remaining twenty-five percent in the third year. To the extent that the program is successful in redirecting existing CHAMPUS workload to military medical treatment facilities or network providers, funds budgeted for CHAMPUS will be realigned to support this effort.

of the many program features detailed to date, our enrollment feature has sparked the most discussion within the Department. And, I believe it is one of interest to the committee. So, I would like to dwell on it for just a moment. Enrollment is the feature that will assist each hospital commander in determining the demographics of the beneficiary population for whom he or she is responsible. It is from this base that he or she will build resource requirements; the enrollment design must afford workload management. The design elements include:

* Automatic enrollment for active duty members

⭑ Voluntary enrollment for all other beneficiaries.

*

Advantages and disadvantages to be weighed in choosing whether or not to enroll were designed in keeping with the

committee's guidance of a year ago.

-

Essentially,

Beneficiaries enrolling are assured availability of care and incur lower out-of-pocket costs when using civilian network providers who have accepted negotiated rates. However, enrolled beneficiaries must select a provider from the panel of providers offered by the military hospital commander.

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Beneficiaries electing NOT to enroll after having been offered the opportunity to do so, retain their freedom of choice of providers and may use the military hospital for emergent care and pharmacy services. They will forego routine care in the military hospital and face higher CHAMPUS deductibles.

This committee has expressed special interest in several of our CHAMPUS alternative health care delivery programs. Most of these efforts are demonstration projects designed to test various management and delivery concepts and strategies in the CHAMPUS portion of our Military Health Services System. Although the final, formal evaluation of these projects has not concluded, we have incorporated the most effective and productive project features into the Coordinated Care program. For example, the CHAMPUS Reform Initiative experience shows that it is essential for the contractor to work hand-in-hand, every day with each commander regarding management of health care finders, coordination between the military hospital and network providers, and resource sharing. For this reason, the relationship with military hospitals is strengthened in the new Request for Proposals for California and Hawaii, and it is a key feature in Coordinated Care. As we implement Coordinated Care, we will continue this process.

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An important characteristic of coordinated care is the ability to adapt many different organizational models of care under a management umbrella that maintains consistency and equity of the benefit and offers assurances of that consistency and equity to the beneficiaries.

There has been some confusion in the distinction between demonstration projects, which test certain components of the Military Health Services System, and the Coordinated Care Program, which encompasses the entire health care delivery system. The broader perspective of coordinated care represents an actual evolution from component tests to systemic reforms. It takes on particular importance in light of the recent consolidation of the Department's health care resources under my purview, as well as the tremendous budget pressures faced by DoD as a whole. Given that the medical program funds, which amount to $15.3 billion, include the new Defense Health Program ($9.5 billion), Military Construction ($240 million), and Military Personnel ($5.5 billion), I must consider the requirements of all medical programs. CHAMPUS expenditures, projected at $3.9 billion in FY 93, are 26 percent of the total medical program. There have been many substantial improvements in the management of the CHAMPUS component. Significant opportunities exist, over time, for improving management in the remainder of the system, as well, which will use $11.4 billion, or 74 percent of the FY 93

program.

It is the reasonable, and judicious, course for me to capitalize on those management improvements realized in the CHAMPUS program and to incorporate them now into permanent systemic reforms for the entire Military Health Services System. The Coordinated Care Program is the vehicle for accomplishing precisely that.

As the committee is aware, the CHAMPUS Reform Initiative in California and Hawaii is reaching the completion of its demonstration period. The Department faced a dilemma when conflicting direction was received from Congress regarding this project. To ensure objectivity, we requested guidance from the Comptroller General. Acquisition Regulations, and mindful of the myriad of activities necessary in conducting a competitive procurement, we released a Request for Proposals (RFP) in January.

Meanwhile, being cognizant of the Federal

The release of that RFP

was in no way prejudicial to the Comptroller General's opinion or the final determination. Clearly stated in the RFP was that the start date would be either August 1993 or February 1994. The Comptroller General's decision now establishes that date as August 1993. Bids from interested vendors are expected by the end of May.

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The scope of work in this RFP reflects our coordinated care thrust to achieve management and delivery improvements in our total system.

In New Orleans, with strong committee support, a contract was awarded last year for an out-of-catchment area demonstration project bringing the many benefits of a managed...or coordinated...care program to the 24,000 CHAMPUS beneficiaries in that metropolitan area. The demonstration is underway; following a six month implementation period, services began December 1st.

The first tri-service coordinated care site, also known as TRICARE, in the Tidewater area of Virginia, is another project of particular interest to the committee. As required by law, we

Additionally,

have begun negotiations for modification to the fiscal intermediary (FI) contract for assistance with network development, marketing and claims processing. through the FI, a TRICARE Service Center will operate near Naval Hospital, Portsmouth, with health care finder, health benefits advisor and triage functions available. The Tidewater project is only one of many coordinated care site initiatives. It is unique in that it attempts to bring together three catchment areas each sponsored by one of the three military services.