So I wish you wouldn't keep saying that because it is inequitable we are going to have to change it, because the other people don't have as good a system, because we would like to see the figures of what it would cost in addition to the expenditures.

Mr. DICKS. Are you saying if you took the CRI program and expanded it across the country to everybody it will cost a half a billion dollars more?

Dr. MENDEZ. No. I am saying that if you deleted the co-payment, that if you decreased the visit to $5.00 a head for everyone in the system, that that would cost about half a billion dollars. In other words

Mr. DICKS. Would you also be imposing all of the managed care principals so that they would be reducing the cost of certain services that are given today and are reimbursed under CHAMPUS without the benefit of a system approach?

Dr. MENDEZ. No, sir. The reason coordinated care

Mr. DICKS. You can't say it is going to cost you more to do this, but we are not going to look at the benefits of the system because on this side it will reduce costs.

Dr. MENDEZ. I believe managed care will reduce costs, but I do not believe that those costs will give you a straight line or that if you reduce today you will necessarily reduce next year and years following in the same type of way. There are certain things that you fix and you get a cost reduction, out of that your base line for the curve changes, and then you continue with that new base line. What I am saying is that we can accommodate CRI, within the system of coordinated care, number one. Number two, that as of late, namely not in the first two years but as of late, a question has come up in terms of CRI savings. Since that has come up then the assurance that replicating it would cause savings in a continuum, has a question behind it. And, I would like to see that question clarified.

Mr. LIVINGSTON. I appreciate your comment, Doctor, about not being able to tell where we are on the New Orleans plan because it has only been going three months. How long has the CaliforniaHawaii plan been going?

Dr. MENDEZ. I believe it began in 1988. I was not here.

Mr. LIVINGSTON. And it was initially let for what, a five-year plan?

Dr. MENDEZ. Yes, sir.

Mr. LIVINGSTON. This is 1992, so it has only been four years, actually three that have gone by. Doesn't it seem sensible to let the thing go through its original term until you get more accurate figures and find out where you are before you let another RFP out and start over again?

Dr. MENDEZ. We will get further data this year. The projections for this year are not dissimilar to those of last year, but they are projections. We will have the experience data in terms of savings, when the Rand folks complete the study. I am just as eagerly awaiting that as I am sure you are. So I see the logic of that.

[CLERK'S NOTE.-Questions submitted by Mr. Livingston and the answers thereto follow:]

BASE CLOSURES

Question. Your testimony refers to a joint service task force to analyze the impact base closures will have on the health care of beneficiaries in affected communities. Your testimony seems to refer to a limited charter for this task force in terms of what areas impacted by base closures it will study. Is this task force going to look at all areas impacted by base closures? If not, why not?

Answer. The task force is analyzing all sites included in the current Base Realignment and Closure (BRAC) I and BRAC II lists. Question. What specific areas is the task force currently studying?

Answer. The task force is studying all BRAC I and BRAC II sites as well as all sites/regions which are currently non-catchment

areas.

Question. When will the results of the task force's efforts be available?

Answer. The task force's initial recommendations are in the final stages of completion. They are presently in coordination among the senior staff at the Office of the Assistant Secretary of Defense (Health Affairs) and the Surgeons General. Following that process, they will be presented to the ASD(HA) and, in turn, presented by the ASD(HA) to the Service Secretaries.

Question. Will the task force provide specific recommendations on how to address the health care needs of impacted areas?

Answer. The task force recommendations will include strategies and operational design for health care initiatives for specific base closure sites and non-catchment areas.

Question. Your Department already has the authority to implement managed health care programs. What kind of programs do you envision offering military beneficiaries in areas impacted by base closings? Only Coordinated Care Programs?

Answer. The extent to which the establishment of coordinated care programs (networks) is feasible is dependent on several factors to include the projected residual military population and its anticipated utilization. Where fully developed coordinated care programs are not feasible, other options will be considered, such as extending the Health Care Finder/Participating Provider Program currently in operation in catchment areas.

Question. Provide detailed specifics on the type of program the Department plans to offer beneficiaries impacted by the closing of Carswell AFB in Texas.

Answer. These details are not yet available. The Department, with the Air Force as the lead agent, has begun developing plans with the current intent of establishing a coordinated care program for the Dallas-Fort Worth area. At this time, there are plans to issue a draft RFP and conduct a presolicitation conference for interested parties. The final RFP, when issued, will comply with the provisions of the Department's Coordinated Care Program guid

ance.

Question. Press reports indicate that beneficiaries have asked the Department to implement a program that offers the positive beneficiary incentives the Department approved for the New Orleans

area project. Will the Carswell program be the same as New Orleans or CRI in California/Hawaii in terms of beneficiary benefits?

Answer. The project will have features which comply with the Department's Coordinated Care Program guidance. In that sense, it will more closely resemble the Coordinated Care Support Program for California and Hawaii, the CFI successor program.

Question. How long will it take to implement the program at Carswell? Provide specific milestones.

Answer. The acquisition schedule has not been fully developed, but the Air Force hopes to have the program in place by the scheduled closure date for the Carswell hospital, which is June 1993.

Question. Why doesn't the Department use its current authority to immediately offer and begin to implement managed health plans to other communities and areas impacted by base closings?

Answer. Before implementing coordinated care programs or other health care initiatives at base closure sites, we feel it is imperative to determine which programs are feasible and desirable based on many factors including projected eligible populations and utilization. This is the charter of the task force. When the task force's recommendations are completed, an implementation plan will be developed with milestones which are realistically achievable.

Question. Provide specifics on how the Department determines the number of beneficiaries for each catchment or non catchment

area.

Answer. The Defense Enrollment Eligibility Reporting System (DEERS), receives extracts from each Service Personnel Center with daily gains and losses of active duty personnel. Data includes unit of assignment with its appropriate zip code. Monthly information is also received from Retired Pay centers which includes address and zip code updates for retired personnel.

Address updates are included in medical treatment facilities upon admission, receipt of a non-availability statement for care not available in the MTF, and at pharmacies. Addresses are also updated upon the issuance of new identification cards for all categories of beneficiaries.

Based upon these updates, the zip code information provided places beneficiaries inside or outside catchment areas.

[CLERK'S NOTE.-End of questions submitted by Mr. Livingston.] Mr. MURTHA. Mr. Dicks?

EXPANSION OF CRI

Mr. DICKS. The fiscal year 1992 Appropriations Act also directed the expansion of CRI to the states of Oregon, Washington and Florida and to the Tidewater area of Virginia. The Committee is aware of no movement to effect the expansions at this time by state and region. In your statement you are saying something will happen. this summer?

Dr. MENDEZ. Yes, sir. In fiscal year 1992, the RFP will be let, this current fiscal year, and the start would be projected for February of 1994.

Mr. MURTHA. An RFP that duplicates what is happening in California or an RFP that is changed substantially?

Dr. MENDEZ. An RFP that, at this point, would look like the one sent out for California.

Mr. Dicks. It has been suggested by many who are critical of the RFP that what might have happened here was that a draft RFP would have been put out for comment and then finalized. Are you ruling that out?

Dr. MENDEZ. Putting out a draft RFP at this point for Oregon and Washington?

Mr. DICKS. Right.

Dr. MENDEZ. I am not ruling that out.

Mr. DICKS. What about Hawaii and California-that might not be a bad idea to go back, and let there be comment from the people. Dr. MENDEZ. Do I believe that there will be a draft RFP for Washington and Oregon—the answer is yes. For Florida, to finish answering your question, we have an existing managed care demonstration in Florida now, a contract which needs to be completed. So to that effect we project that RFP being issued in 1993, sir. Mr. DICKS. What about the Tidewater area in Virginia?

Dr. MENDEZ. There was contention in the language from the authorization and Appropriations Committees. We consulted the General Counsel and were advised to follow the authorization language since that measure was signed last by the President.

Mr. DICKS. I understand that the operation in Florida is supposed to be a joint operation with the Veterans Administration?

Dr. MENDEZ. The Committee has asked that we look at the input from the Veterans Administration and I have no problem with doing that. I think it is proper. I welcome the relationship.

TIDEWATER DEMONSTRATION

Mr. DICKS. Your current design in the Tidewater area features the modification of the existing claims processors contract. What modifications are within scope?

Dr. MENDEZ. I don't have that as yet. The United States Navy is the executive agent for the area. I have not received the plan of implementation. That is due at the beginning of April. If you wish I will submit that to you when I receive it.

Mr. DICKS. Are these a sole source

Dr. MENDEZ. No, sir. Sole source for what, for Tidewater?

Mr. DICKS. Yes.

Dr. MENDEZ. Yes. The ability to be able to modify the contract with the existing fiscal intermediary was given in the same authorization language.

COST OF COORDINATED CARE IMPLEMENTATION

Mr. Dicks. It is my understanding that the cost of your proposed coordinated care program significantly exceeds any savings in the near term. Is that true?

Dr. MENDEZ. No, sir. Costs are reflected in 1993 that are basically start-up costs. They go with any new program. So savings for this type of expenditure will not occur at the same time.

Mr. DICKS. Budget officials have indicated that the cost of coordinated care is not reflected in 1993, but the bulk of the costs will be in the outyears.

Dr. MENDEZ. The dollars that we have reflected are in 1992 and 1993, the majority of those dollars would go to information systems to support the management requirements of coordinated care, sir. Mr. DICKS. Have you begun to allocate funds to implement coordinated care?

Dr. MENDEZ. In 1992 and 1993 we will be allocating, but those dollars are primarily in information systems to support the requirements.

Mr. DICKS. Your answer was yes, so how much, and where did these excess funds come from?

Dr. MENDEZ. There were no excess funds. They were funds projected and allocated. I will provide a breakdown of them for the record.

[The information follows:]

Approximately $213.4 million is included in fiscal year 1992 and $253.0 million in fiscal year 1993 for automated systems support for new and existing systems that contribute to improved business practices in a coordinated care environment. These systems are not exclusive to the Coordinated Care Program. The information derived from these systems provides for capabilities to assess workload, allocate costs, and project requirements, all necessary information for operating military treatment facilities, a coordinated care environment, or other existing demonstration projects. To the extent that the Coordinated Care Program is successful in redirecting existing CHAMPUS workload to military medical treatment facilities or network providers, operation and maintenance funds budgeted for CHAMPUS will be realigned to support this effort.

Mr. DICKS. What are these funds for?

Dr. MENDEZ. Primarily for information systems.

UNIFORMED SERVICES TREATMENT FACILITIES IN SEATTLE

Mr. DICKS. I have one more question. One of the uniformed service treatment facilities is located in Seattle, which is the center of the most populous region of Washington. The congressionally mandated USTF managed care program began in January of 1993. Can you explain the role envisioned for the USTF in the CRI as well as I guess in the coordinated care program?

Dr. MENDEZ. You mean as CRI comes to the State of Washington?

Mr. DICKS. Yes.

Dr. MENDEZ. I would envision the USTF to be a subcontractor to the major contractor in the area. The role of the USTF in terms of coordinated care is not unlike that of the role of one of the military treatment facilities.

Mr. DICKS. I have a few additional questions that I would like to ask for the record.

Mr. MURTHA. Without objection.

[CLERK'S NOTE.-Questions submitted by Mr. Dicks and the answers thereto follow:]

CHAMPUS REFORM INITIATIVE INTO WASHINGTON

Question. It is my understanding that the Department will move forward with an expansion of the CRI into the States of Oregon and Washington as directed by the Congress. Please specifically explain your schedule for doing so in Washington, and when you expect to begin providing care under such a program.