Mr. MURTHA. The preview of the findings we have from RAND shows CRI had a 28 percent drop in the costs and there was a 64 percent increase in the non-CRI areas. This is the preview in the mental health area of the evaluation by RAND.

Dr. MENDEZ. Were those for the same year? Was that 1989?

Mr. MURTHA. That is the most recent data. I don't know what year it is, but it is the most recent finding.

DOCTORS COMMANDING HOSPITALS

Mr. SABO. Those are pretty dramatic differences. I am curious about what is happening over the congressional requirements of last year that command positions should have demonstrated professional and administrative skills. Secretary Atwood, I believe, has directed you to issue guidelines by March 18. I know that is about a week away. Will they be ready on time?

Dr. MENDEZ. Yes, sir, I believe that guidance will be ready on time. I appointed a task force to that effect, to include the services and several people from my department, including experts in health care administrative education, et cetera. That report, it is my understanding-I have not seen it as yet-is just about ready. It is being staffed intramurally within my office prior to coming to

me.

Mr. SABO. Will we get it quickly after you get it?

Dr. MENDEZ. Yes, sir.

Mr. SABO. Does it come to you for preliminary review?

Dr. MENDEZ. It has to clear the Department, and then by all

means.

CRI VERSUS CHAMPUS

Mr. SABO. Let me come back to Mr. Dicks' question. As best I could understand it, the answer was that the problem with CRI was that they were doing a better job than the balance of CHAMPUS and therefore the people who were enrolled in CHAMPUS in non-CRI areas were unhappy because their benefits and services weren't as good, so therefore we are going to try and make an attempt to equalize. That is what the answer sounded like to me.

Dr. MENDEZ. Then I wasn't explicit enough. When I speak to consistency, I speak to the expectation of the total system. The consistency issue is very real to me, because I must consider the directions from everywhere, the patient, the Congress and the Department. The cost factor that comes in to play on consistency works like this: on the low side of things, okay, to decrease the payments from the individual-going with that premise, then I have to have assurance that I am financially able to do that. How are we able to do that? I am talking about in terms of dollars, in terms of expenditures.

The data that I have for expenditures, particularly after the first two years of CRI experience, subsequent years experience, does not, at this point, support an ability to apply a consistent low individual patient payment and still contain health care costs.

Mr. SABO. I think we should get some numbers from the doctor. We keep hearing about projected numbers, which I gather we don't have.

Mr. MURTHA. I made the recommendation that we have never shorted them for any funds they have asked for. Obviously, the Comptroller's office is telling them they have a certain amount of money-it is cost driven.

Dr. MENDEZ. In the first two years of the CRI program, indeed the figures used are correct. In fiscal year 1990, to bring it a little closer, the annual increase in CRI was less than the increase experienced by the total CHAMPUS program without CRI. The CRI increased about 8.6 percent to 18.6 percent for total CHAMPUS without CRI.

However, in the following year, the annual CRI-area CHAMPUS increase this is fiscal year 1991-has been greater. For fiscal year 1990-1991 the increase in expenditures were 14.4 percent, while nonCRI CHAMPUS expenditures were increased 12.8 percent. That is not RAND's study; these are our figures.

Mr. MURTHA. Our study agrees with RAND so far.

Dr. MENDEZ. I look forward, like you do, to receiving those final numbers from RAND.

Mr. SABO. Thank you.

Mr. MURTHA. Mr. Livingston?

CRI IN NEW ORLEANS

Mr. LIVINGSTON. Thank you, Mr. Chairman, and Mr. Secretary and gentlemen. I too would like to start off on a positive note, and tell you that I was one of the fortunate members of this Committee, most of the members of this Committee got over there once or possibly twice during the war last year, and not only were you able to keep up your provision of health care services for the families back home, but it appeared to us that when the time came you were well prepared to take care of significant numbers of casualties.

We visited the USNS MERCY and I was most impressed and luckily neither the USNS MERCY nor the USNS COMFORT had to be utilized to full capacity or even near it, but you were ready and I genuinely appreciate how well prepared you were.

But we are in different conditions now, and we are in the process of paring down the Defense budget and laying off maybe some 4200 military personnel a week, and it seems to me that making sure that in a time of war we are taking care of not only the soldiers and the sailors and airmen but their families, and even in a time of peace we still have the obligation to take care of those folks that need help.

So we all are concerned about these numbers that have been cited, Mr. Secretary, on the CRI, because according to the RAND and the GAO and the Committee investigative staff, there have been significant savings in CRI in the past. I would like to see CRI expanded.

In fact, I mentioned that I would hope that it might be expanded to take care of those people impacted by base closures, and to that end we have one base in Louisiana, England Air Force base. On behalf of my colleagues, Clyde Holloway, Jerry Huckaby, Jim McCrery and the two Senators from Louisiana, I would like to submit questions for the record and ask that you address those, re

garding the people impacted not only by base closure but in the general context around the country, military folks and dependents who are impacted in that way.

Mr. Secretary, I appreciate the job that you have. It is very difficult particularly in these budgetary times. I appreciate the department's efforts to finally get the military health program in the New Orleans area going. We were trying some six or seven years to get a demonstration project there. We are delighted that it is going, but it has taken-it did take about six years to get implemented, and at various points along the way I became fairly convinced that there was an attitude at the time that it is not our program, it is not our idea and we are not too enthusiastic about it, so we need not hurry about it.

When the Department decided to go ahead with one program, they let out the bids, but they put so many restrictions on it that it couldn't fly, and they got no bidders.

So with a little persistence we came back and did it again. We have a plan down there and it seems to be working. It has only been going three or four months so it is too early to tell if it is reaping the savings projected by RAND and GAO in California and Hawaii, but we hope that it does.

I can tell you that many people jumped onto the program, in three months, 4,000 people have signed up. I can tell you the people of our area are very enthusiastic about it, and the positive incentives of lower co-payments, no deductibles, voluntary enrollment, little paperwork-those are real incentives. From what I understand from talking to all the people that projected how many people would sign up, they would have been surprised if we got 1,500 people to sign up, and we have 4,000 people signed up already.

So it is doing very well, and if it is saving money, it seems to me it ought to be left alone. I am concerned about this new RFP in California. It doesn't affect us yet. But, it may well down the line since options have to be renewed on the New Orleans project. I am concerned about the precedents in California because I have to wonder exactly what is being accomplished. Is the intent to get in there and change really budget-driven as the chairman has indicated, is it the old resistance, that it is not our plan so we don't want it to work in the first place, or is it an attitude that, frankly I have seen in the 15 years that I have been in government that says, if we are going to save money here we might not have that money to spend somewhere else so we better grab hold of the savings and spend it quickly somewhere else so therefore our budget will be maintained?

I will tell you, we are on the Appropriations Committee, we see it. The average agency in the bureaucracy, not necessarily in DOD or any particular place-I am not criticizing anybody-the attitude is if we are getting toward the end of the year, and we are about to bring in some savings to the taxpayer, we better spend it real fast or otherwise we won't get that much money next year to spend. I just wonder to what extent that attitude has crept into this whole program. The CRI is a good program, saving taxpayers money, the constituents and beneficiaries like it, but we are not spending all the money that was appropriated, and if we don't do something to

adjust quickly, Congress will take that money away from us and spend it somewhere else.

That is an attitude. I don't know if it exists. I will ask for your comments. But it is an attitude that flies in the face of the interest of the taxpayer. It shouldn't exist. I guess the proof of the pudding will be in those figures you cited today. If there is no savings in CRI that is one thing, and that will be borne out. But if there is savings, if CRI actually provides greater benefit for less money, then we better reevaluate where we are going.

Dr. MENDEZ. I have, sir, first of all, no objection to providing more benefits for less money. I would like the same thing as you would like. As I have said before, it is a system that I grew up with, and I want to preserve it. I am a military retiree myself. Three of my four children receive their health care in the Military Health Services System and five out of my six grandchildren. I get input from them the same as I do from the rest of the folks, many of whom have been my patients. I want to have that benefit contin

ue.

In terms of New Orleans now, I, like you, have not, at this point the ability to evaluate the savings because it has been in operation only a short period of time. My statistics are the same as yours. Out of the 23,000 beneficiaries, my understanding is that 4,000 have signed up for the program.

Concerning ownership of CRI, it is not a matter of disowning the program because CRI was started by DOD. I have no problem with that, the same as I said that I had no problem with the figures as presented.

The reality I am given now is a different reality, in terms of savings over time. I have had figures very recently presented to me. I sent them to the staff when I received them. I asked my staff to evaluate them further. I have asked my staff specifically, because of the significance and because of the importance of this, to tease these numbers apart even more.

In terms of attitude, I understand what you are saying. Do I possess that attitude? I do not possess it. Do I feel it directly from my staff? I do not. That is the best I can tell you about that. I will make our numbers available to the GAO because I think that that should happen. They have looked at this before and I think that that is a proper thing to do.

Mr. LIVINGSTON. Thank you, doctor.

With respect to the New Orleans project, last year when you testified you said New Orleans would be the department's first opportunity to implement coordinated care principals. Since the project uses positive incentives to facilitate patient management, it is not clear what coordinated care principles have been implemented. Which ones have been implemented?

Dr. MENDEZ. I think that the majority, practically all of them. Coordinated care is an umbrella name for a whole series of actions. Those actions include several modes of managed care, of which CRI is one. There can be other modes of managed care. Fiscal intermediaries would be another mode. One that the services have tried is the Catchment Area Management (CAM) concept. Are all those concepts acceptable within the umbrella coverage of coordinated care? The answer is yes.

Significantly, coordinated care includes something else. It includes the efficiency and productivity of military treatment facilities run by the military and the relationships between those MTFs and civilian providers as extensions of the MTFs into a series of networks.

So I think that the idea that CRI and coordinated care cannot come together, or the idea that that is an abhorrent thought, or that they are separate, or that we must put CAM in, et cetera, that is not in my thinking.

Mr. LIVINGSTON. So it is a broad concept and it includes the use of positive incentives?

Dr. MENDEZ. Yes.

Mr. LIVINGSTON. Also if you change those positive incentives to negative incentives, it can include that too. Do you plan to modify the CRI contract in New Orleans to force the use of negative incentives like higher co-payments, deductibles and non-voluntary entitlements?

Dr. MENDEZ. Here equity throughout the system comes into play. Allow me first to get the same data that you would like to have so we can make a value judgment. I can't make that value judgment yet.

CRI VERSUS CHAMPUS

Mr. Dicks. What is your definition of equity? I am a lawyer. Equity means fairness. What is equitable about having another system that works with a $5.00 co-payment and people like itthen completely change the program and then we have to charge them more? How is that equity? There is no justice there.

Dr. MENDEZ. Nothing like that. I also want to advantage people as much as possible. The thought is for the individual who does not receive it, the one who is not within a demonstration project, and the majority are not in a demonstration project. Will that fellow then say that the continuity of an advantage past a demonstration project becomes arbitrary if she/he does not get it?

Mr. DICKS. Did anybody from any other area complain about this?

Dr. MENDEZ. The issue is not the demonstration, I don't believe. The demonstration is a test. The test achieves a result. Assuming no question had come into the result, the reality is how do you deal with the whole system in terms of the consistency of that benefit for everybody.

Mr. MURTHA. If the gentleman would yield?

Mr. LIVINGSTON. Yes. I have a couple more questions, but go ahead.

Mr. MURTHA. We have been known to put money in the budget in areas where people didn't ask. If you tell us for $500 million you can take care of all people under CRI, it is a better system, and in the end it is going to save money, be assured we will consider that very seriously. We don't hesitate to fund important projects. We want to give the best possible care to people. If OSD is saying to you that you can't give good care because we lack the money, let us make the decision about whether we can find money someplace else to fund this program. That is what we offer you.