COMMITTEE ON APPROPRIATIONS

JAMIE L. WHITTEN, Mississippi, Chairman

FREDERICK G. MOHRMAN, Clerk and Staff Director

The Honorable Silvio O. Conte was Ranking Minority Member of the Committee until his death on February 8, 1991.

The Honorable William H. Gray III resigned from the Committee on September 11, 1991.

DEPARTMENT OF DEFENSE APPROPRIATIONS

FOR 1993

THURSDAY, MARCH 12, 1992.

MEDICAL PROGRAMS-DEPARTMENT OF DEFENSE

WITNESSES

HON. ENRIQUE MENDEZ, JR., ASSISTANT SECRETARY OF DEFENSE FOR HEALTH AFFAIRS, DEPARTMENT OF DEFENSE

LT. GEN. FRANK F. LEDFORD, JR., SURGEON GENERAL, U.S. ARMY

VICE ADM. DONALD F. HAGEN, SURGEON GENERAL, U.S. NAVY

LT. GEN. ALEXANDER M. SLOAN, SURGEON GENERAL, U.S. AIR FORCE

INTRODUCTION

Mr. MURTHA. The Committee will come to order.

We want to welcome Dr. Enrique Mendez, the Assistant Secretary of Defense for Health Affairs, and the three Services' Surgeons General. I know we always have an interesting hearing, but this morning at our public witness medical hearing, a number of problems came up in talking about the CHAMPUS Reform program that was instituted in California as a demonstration project by the Department, which we feel has worked very successfully.

We are looking forward to your testimony, and then getting to questions. So we will put your full testimony in the record and if you would summarize your remarks, we will get right to the questions.

SUMMARY STATEMENT OF DR. MENDEZ

Dr. MENDEZ. Mr. Chairman, distinguished Members of the Committee, I am pleased to be here this afternoon, and I thank you for the substantial support and thoughtful guidance your Committee has provided over the years. I want to thank you also for the opportunity to discuss with you the programs and initiatives under way within the Military Health Services System.

Mr. Chairman, I will proceed with a summary of my testimony. Our efforts this year span all avenues of health care pursuit: management, structure, organization, budget, delivery, quality, and systems. In each endeavor, this Committee has maintained active

interest and offered constructive guidance. I believe our progress is in keeping with the spirit and intent of your direction.

MANAGEMENT OF MILITARY MEDICINE

Now designated as the single official responsible for the effective execution of the medical missions of the Department, I have under my authority, direction and control the medical personnel, facilities, programs, funding and other resources within the Department. Along with this new designation, I prepare, present, justify and defend a unified medical program and budget to provide resources for all medical activities within the Defense Health Program. These responsibilities I have undertaken in full recognition of their prominence given the outlook for continued escalation in health care spending throughout our Nation.

Nationally, estimates are that the cost of both hospital and physician services will increase 11 percent in 1992. Growth in the Department of Defense health care costs are programmed at less than four percent per year through fiscal year 1997. This increase, small in comparison to national trends, looms large in a declining Defense budget.

FISCAL YEAR 1993 BUDGET REQUEST

The medical portion of the President's fiscal year 1993 amended budget for DOD approximates $15.3 billion or 5.7 percent. Of this amount, $9.5 billion comprises the newly established Defense Health Program 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. Military medical personnel represent another $5.5 billion. Medical military construction funding of $240 million, in a separate appropriation, continues under my direction and control. The fiscal year 1993 O&M medical program of $8.9 billion reflects an increase of $171.4 million, less than two percent over the fiscal year 1992 estimate. This budget submission reflects a fully funded CHAMPUS program of $3.9 billion, including the newly authorized disabled care benefit and the authorized increase to the dental benefit. It is significant to note that fiscal year 1991 CHAMPUS costs remained within appropriated funds, and we are confident fiscal year 1992 costs will as well.

COORDINATED CARE PROGRAM

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 8, I transmitted to the Service Secretaries the instructions to begin the Department's three-year phased implementation of our Coordinated Care Program. 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 25 percent of stateside hospital locations in the first year, an additional 50 percent in the second year, and the remaining 25 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.

This Committee has expressed special interest in several of our 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 external evaluation of these projects has not concluded, we have incorporated productive project features from all of them into the Coordinated Care Program. As we implement Coordinated Care, we will continue this process.

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. This distinction is the single greatest difference between CRI and coordinated care. The broader perspective of coordinated care represents an evolution from component tests to systemic reforms. There have been substantial improvements in the management of the CHAMPUS component apart from our many demonstrations. However, CHAMPUS is just 26 percent of our health care resources. Significant opportunities also exist, over time, for improving management in the remainder of the system, which consumes 74 percent of our resources. It is the reasonable, and judicious, course for me to capitalize on those management improvements realized in the CHAMPUS program and to progress on to permanent systemic reforms for the entire Military Health Services System. The Coordinated Care Program is the vehicle for accomplishing precisely that.

CHAMPUS COSTS IN CRI

In addition to the imperative to encompass virtually all of the Military Health Services System in our reforms, I have concerns about reported findings that portray CHAMPUS costs in CRI as growing much slower than other CHAMPUS costs. The reported figures are preliminary, and only look at fiscal year 1987 to fiscal year 1989 data.

Our current figures estimate that CHAMPUS costs in CRI areas grew over 14 percent from fiscal year 1990 to fiscal year 1991, whereas non-CRI CHAMPUS rose only 13 percent. From fiscal year 1991 to fiscal year 1992, CRI and CHAMPUS grew over 15 percent while the rest of CHAMPUS rose only 4 percent. Due to the significance and complexity of this issue, I have asked my staff to further evaluate these figures and to look also at the attendant expenditures in our military medical facilities. These analyses are essential for us until the RAND Corporation completes its evaluation.

Within the parameters of the Coordinated Care Program, we are evaluating the applicability and feasibility of management initiatives for areas where hospitals are scheduled for closure due to

base realignments and closures. An important characteristic of coordinated care is the ability to adapt many different organizational models of care under a management umbrella that promotes consistency and equity of the benefit for our beneficiaries.

MILITARY HEALTH BENEFIT

The military health benefit is a substantial one; one many of our beneficiaries identify as a top priority. Today it is a very good benefit, a quality of life benefit, and the Department is continually challenged to ensure that it retains its value. The preservation of this benefit so that it can serve equitably the largest number of military families with quality health care is the major goal for all of

us.

As the individual responsible for the effective execution of our medical mission, I am equally concerned that the health benefit offered to our military families and eligible beneficiaries is of the highest quality. This year, we have developed a Comprehensive Quality Management Plan addressing quality issues for care received both within our hospitals and through CHAMPUS.

A key component of the Coordinated Care Program is a scientifically based, quantifiable health promotion and disease prevention program. This program is particularly important because it holds the promise for individually enhancing our beneficiaries' quality of life. With education and encouragement, each of us can improve our health, and, in the long term, become less routinely reliant on the health care system.

SUMMARY

Military medicine is a vibrant part of the Department of Defense as well as an active leader in this Nation's health care arena. We are revitalizing management and delivery. And this pulse of activity drives each of us to accomplish our single purpose: quality patient care. The road ahead is not an easy one, it is ambitious: Grappling with the fine details of pulling together the Defense Health Program; forging ahead with the Composite Health Care System; initiating and refining quality assurance programs; moving out with health promotion initiatives; reconstituting our state of medical readiness; exploring sharing potentials with other Federal health agencies; promulgating physician payment reforms; and launching the Coordinated Care Program to bring about systemic changes in military medicine and its delivery for the benefit of all of our patients.

As we progress with Coordinated Care and these many activities and programs, I look forward to future deliberations with this committee, and hope you will continue your strong support for military medicine.

[The statement of Dr. Mendez follows:]