Answer. We expect to issue a draft Request for Proposal (RFP) for the states of Washington and Oregon in June of 1992. A presolicitation conference is planned for July of 1992 and the final RFP will be issued in September of 1992. We would expect health care delivery to begin in early 1994 (approximately six months after the current start date for the California and Hawaii successor program).

Question. One of the Uniformed Services Treatment Facilities is located in Seattle, which is the center of the most populous region in the state of Washington. The Congressionally-mandated USTF Managed Care Program [USTF/MCP] will begin in January of 1993. Can you explain/describe the role envisioned for the USTF in the CRI as well as how both programs can be effectively undertaken and evaluated in the same area, targeting the same beneficiaries.

Answer. Once Coordinated Care Support (CCS) is implemented in the state of Washington, Pacific Medical Center Uniform Services Treatment Facility (USTF) will continue to operate the Managed Care Plan. After October 1, 1994, the CCS contractor will market the CCS program to beneficiaries residing in the service area of the USTF. Both the USTF and the CCS contractor will compete for the same beneficiary. At present, the Department of Defense spends approximately $18 million in CHAMPUS funds in the area of Seattle; this does not include the amount spent on the USTF Program in Seattle. Therefore, ample opportunity exists for both providers to meet the health care needs of the uniformed services population located here.

Pacific Medical Center will have the right to participate in the CCS project as a provider to the CCS contractor under terms no less favorable than terms negotiated with other like providers in the community. This arrangement will be described in the Request for Proposal (RFP) issued by DOD.

Evaluation of USTF MCP will focus on determining if the MCP is the most cost-effective utilization of the USTFs within the Military Health Services System (MHSS). The USTF MCP will be evaluated according to the methodology specified in the MCP. The CCStype contract will be evaluated according to the criteria specified in each location's RFP.

Question. There would be a problem of overlap between the USTF/MCP and the CRI. One possible solution that has been suggested is to assign CRI enrollees to the USTF up to its capacity, allowing the USTF to function as the CRI preferred provider as well as the USTF/MCP provider, reimbursing it for both programs under the MCP rate structure.

Would the Department consider such an approach?

Answer. The Coordinated Care Support (CCS) Program design places the contractor financially at risk for all eligible CHAMPUS beneficiaries in the region. Therefore, the contractor has an incentive to enroll CHAMPUS reliant beneficiaries in their managed health care program. As part of the offerors response to the Department's request for proposals they will be required to describe their managed health care delivery system. Offerors are free to negotiate a subcontractual relationship with the USTF or any other

provider or provider system that they feel would enhance their proposal.

Question. Local Military Treatment Facilities and the USTF play integral roles in the provision of health care services to military beneficiaries in Washington. How does the Department plan to involve them in preparing the CRI request for proposals and otherwise managing the CRI implementation?

Answer. In preparing the RFP we will issue a draft RFP and conduct a presolicitation conference to solicit input from the health care industry and other interested parties. During this presolicitation phase the local military treatment facilities (MTF) commanders and the USTF will have ample opportunity to provide their input into development of the final RFP. With regard to program implementation the MTF commander will play a key role, consistent with that specified in the Coordinated Care Program policy.

RESPONSE TO THE RELEASED REQUEST FOR PROPOSAL

Question. Since the RFP has been released, what kind of response have you received from agencies expressing interest to compete?

Answer. We believe interest in this acquisition among potential offerors is high and expect considerable competition for the award. Over 180 organizations/individuals are on the bidders list for the RFP. Over 100 individuals are expected to attend a preproposal conference in Denver, CO, on March 25, 1992, and 13 companies have submitted written questions concerning the RFP.

Question. Given the controversy over the current RFP, could the current RFP be used as a draft to evaluate types of programs available, and then issue a final RFP at a later date?

Answer. In order to ensure that a successor contract is in place when the current contract expires, we believe it is critical that the current RFP remain in effect. This does not rule out the possibility of amendments to the RFP, should they become appropriate. For example, an amendment could become necessary if concerns expressed by potential offerors revealed an impracticality in a certain RFP provision.

CHAMPUS NATIONAL CLAIMS SYSTEM

Question. How effectively could a National Claims System be implemented?

Answer. Recent experiences in the private sector with single, fixed system solutions clearly demonstrate that a high risk is attached to system developments and system acquisitions that focus on a single system to be implemented all at once as a replacement for existing systems currently operating. Advice provided by private industry to OCHAMPUS as a result of a Request for Information, clearly recommends that CHAMPUS undertake a strategy that improves or replaces existing major claims processing functions through acquisition or development of new systems technology. Pursuit of this strategy under a carefully developed plan that is responsive to changing requirements will result in effective implementation over the National Claims System program life cycle.

Question. How could the program benefit overall with such a system?

Answer. Functional development, acquisition and implementation of the National Claims System program will assure that CHAMPUS FIs are responsive to emerging coordinated care program requirements and advances in claims processing technology where return on investment warrants adoption of the advanced capabilities. Improved service to CHAMPUS providers and beneficiaries and control of benefit costs are major considerations in evaluating proposals for investment in new system capabilities.

Question. Would not such a program be cost effective?

Answer. The functional development, acquisition and implementation of a National Claims System program permits critical costbenefit analysis of the application of new claims technology in which the merits of adoption can be evaluated in terms of its impact on both benefit and administrative costs. This evaluation will consider as well the cost effectiveness of various options for delivery of claims processing functions equipped with the new technology.

CRI/OVER 65

Question. A key feature of the USTF program for the Government has been caring for the over 65 population. The goal of the CRI is to provide the maximum amount of care for CHAMPUS-eligible beneficiaries, what will be the Department's goal with respect to the responsibility for care of over age 65 beneficiaries?

Answer. In the Department's Coordinated Care Program, Medicare eligible beneficiaries will have the opportunity to enroll in the direct care portion of the program. Those who enroll will be referred to providers in the civilian sector who accept Medicare assignment when care is not available in the military treatment facility (MTF). MTF commanders will be responsible for maintaining a list of providers who accept Medicare assignment and will ensure availability of the provider list to beneficiaries via the Health Care Finders. Many MTF commanders will want to ensure that Medicare eligible beneficiaries use the MTF so the skills of specialists can be maintained by treating this group of older patients. In the Coordinated Care Support Program, which is the successor to the CHAMPUS Reform Initiative, the contractor will be required to incorporate these same features for Medicare eligible beneficiaries.

CURRENT SATISFACTION OF CRI

Question. Currently, there is a high beneficiary satisfaction rate (97 percent) as well as a high acceptance by military treatment facilities commanders (96 percent). Why would you rationally change something that affects so many people with such an incredible success rate?

Answer. The Deputy Secretary of Defense has approved the Department's Coordinated Care Program (CCP) for implementation as the permanent program which will reform the MHSS and thereby address its access, quality and cost concerns. All new CCP initiatives, or projects which are successors to managed care program now operating, will comply with all CCP provisions. Requiring all projects, whether they are regional programs or localized projects,

to conform to CCP will achieve greater equity across the MHSS with regard to access and uniform benefits within beneficiary categories. Moreover, by its very design, CRI addressed CHAMPUS costs primarily not MTF cost. CHAMPUS accounts for only 26 per cent of DoD's health care expenditures. In contrast, the CCP addresses our total MHSS and is designed to achieve greater efficiencies in the whole system.

The design of the CRI successor program, the Coordinated Care Support Program (CCS) reflects the changes that were necessary to bring the CRI in compliance with the provisions of CCP. While there have been changes in the new program, it is important to note that many of the features of the current CRI program were retained, including those that proved to be the most successful in achieving CRI's objectives.

The RFP for the CCS contract builds upon the "lessons learned” and the strengths of all our current managed health care demonstrations and initiatives. Current CRI components, including Service Centers, Health Care Finders and Resource Sharing are retained since these features contributed significantly to increased access, higher beneficiary satisfaction, and more efficient use of both MTF and civilian provider network resources MTF commander/contractor interface activities and quality/utilization review functions have also been enhanced.

CCS will also provide new features such as a mechanism to refer Medicare eligible beneficiaries who require care which is not available in the MTF to civilian providers who accept Medicare assignment. In addition, all beneficiaries will be directed to DoD designated specialized treatment facilities (STFs) when appropriate. The new contract will also require a single claims processing system for both network and non-network claims which will simplify management of this critical program component.

The new features of CCS, as well as the CRI features which have been retained or enhanced, will result in a program which is more effective than its predecessor. Therefore, the availability of care which is on high quality and accessibility and is cost effective will be greater than that which is presently available in the CRI.

CHAMPUS REFORM INITIATIVE (CRI)

Question. We met with several representatives this morning who applauded the benefits and the success of the CRI programs in their areas, but expressed grave concerns of the amount of increased expense and limited availability the health care plans proposed under the new RFP. They also discussed the fact that the actuarial costs will be more expensive.

How much more expensive will the actuarial costs be for the enrollees?

Answer. In pursuit of the principle of benefit equity under Coordinated Care Support, this Department sought to eliminate the disparity of health care benefits to beneficiaries based on non-medical peculiarities. The goal has been to improve the medical care of all beneficiaries and eliminate the disparity of benefits which are based on military assignment and geographic location, not necessarily medical necessity.

The enrolled beneficiaries of CRI, who amount to more than 20% of CHAMPUS eligibles within California and Hawaii, will be required to contribute a more equitable portion for their health benefit. The remaining enrolled beneficiaries throughout the world should experience no change in CHAMPUS financial requirements.

MILITARY HEALTH BENEFITS

Question. From this morning's session we learned of a 22 year Navy veteran who became disabled, and through a loophole, 1 year after the accident, was completely cut off by the CHAMPUS/DOD benefits. This loophole discriminated against military retirees who become 100 percent disabled. Then we learned further that the DOD is now trying to recoup the $200,000 of benefits it granted before the veteran was cut off, and now, the DOD is suing this disabled 22 year military veteran. Our Committee, through Mr. Young, introduced legislation that was signed into law by the President on November 26, to amend this type of inequity against the disabled retirees. Yet, to date, there is little if any verification that any notification has been sent out to those disabled retirees, nor has any verification sent to any of the key agencies that were represented this morning.

Why hasn't any notification taken place? What other Congressional mandates need to be given to direct you to change this problem?

How is it that a postal worker or any other type of Federal employee can be cared for, but the Department of Defense cannot take care of its own?

Answer. Because of the need to clarify, through a DOD General Counsel review, differences in the language contained in the Authorization and Appropriation Acts, there was a delay before we could begin implementation of the provision. A news release concerning the restored CHAMPUS eligibility for Medicare disability beneficiaries is in preparation and will be distributed to more than 4,000 beneficiary and provider media outlets. Additionally, a notice will be mailed to the approximately 14,000 individuals identified by the Defense Enrollment and Eligibility System (DEERS) as potentially affected by the new legislation. I have directed that this legislation be implemented immediately. CHAMPUS has provided guidance to the claims processing contractors. I have been assured that the contractors will be prepared to receive and process claims effective March 18, 1992.

Under the provisions of law that existed prior to the new legislation, all CHAMPUS beneficiaries, other than the dependents of Active Duty Service Members, lost eligibility for CHAMPUS benefits upon becoming entitled to coverage under Part A of Medicare. I am not aware that the Congress applied the same provision to Federal programs covering postal workers or other Federal employees, but such programs are underwritten in the private sector and vary in many respects, including employee premiums.

Question. This morning, we were informed that under the new RFP, the proposal is higher cost shares for enrollees, and even higher deductions for those opting not to enroll, those opting not to