Another issue that constantly surfaces from the family's veterans and retirees is timely and nearby access to care. This is highlighted around many base closings, including the closing of Williams Air Force Base and from groups like the East Valley military retiree association. Even though there is an excellent working example of managed care in the area, called MEDEXCEL, there is little solace to the family that will not have immediate access to a military treatment facility or the 65 year old retiree who must now enroll in Medicare with no option for medical treatment in a military treatment facility. I think that it is clear that there is requirement for legislation that I am going to introduce to tackle this issue for retirees.

Another issue I have heard expressed at every meeting is the high cost of pharmaceuticals. Most career service members for years have become accustomed to receiving, as an earned benefit, the use of the pharmacy at military treatment facilities. When that privilege goes away because of a base closure or when a retiree turns 65 years of age and then is required to enroll in Medicare, then he has no other alternative. I think we need legislation which would bridge this gap with an alternative proposal of a mail-order pharmacy targeted especially for this group.

Mr. Chairman, grappling with these issues presents great challenges and I believe demands our attention. It is imperative that as our force and base structure changes, we stay fixated on not only the rising costs of health care, but take steps to retain the health care coverage so critical to our Nation's active duty personnel, their dependents, retirees, and survivors.

Today I am proposing legislation to address this issue, and I would like to take a minute to describe major features of it.

First, it would require the Department of Defense to solicit input from the active dependents, retirees, and their survivors who will be affected by the closure of a base that houses the military treatment facility at which they receive their health care.

It would require that a mail-order pharmacy service be established for members of the military community, active duty members, and their dependents, retirees, and survivors. There would be a 20 percent beneficiary co-payment and the beneficiary would be responsible for the cost of the mailing and customary processing fee. Those over the age of 65 who are losing access to their local military treatment facility would be eligible for participation.

It would lower the existing catastrophic cap for retirees and their dependents from $10,000 to $7,500.

It would eliminate the benefits-less-benefits approach to providing the disabled with continued CHAMPUS protection, thus restoring the provision to its original intent of the Senate.

In addition, it will prohibit the Department from going after disabled individuals who are provided benefits only to have the Department decide that the benefits never should have been provided in the first place.

It would create a demonstration project to track the current Medicare managed care risk contract, and it would require the Department of Defense to make a number of modifications to the Coordinated Care Program. Principal amongst these changes is an elimination of the rule that would deny those who elect not to

enroll in the Coordinated Care Program from using military treatment facilities except for emergencies and pharmacy services.

It would extend the life of the current CHAMPUŠ Reform Initiative demonstration in California and Hawaii and require that the contract be submitted to a competitive process.

Mr. Chairman, I believe we need to take care not to abandon the health care coverage needs of our Nation's active duty dependents, retirees, and survivors, as we work to redefine the force and base structure for our Nation's military. I look forward to working with you as we address these critical issues, and the testimony we will hear from this and the next panel of witnesses today I think will be of great benefit to us as we work on perhaps the issue that affects most military families and retirees and that is their health care needs.

I thank you, Mr. Chairman.

Senator GLENN. Thank you very much. Clearly you are addressing a number of areas there that need to be addressed. I look forward to looking at this in more detail and look forward to working with you on this.

Senator Thurmond is with us, and I understand you wish to make a statement, Senator Thurmond.

Senator THURMOND. Thank you very much, Mr. Chairman.

I am pleased to be here for this hearing on medical programs of the Department of Defense. I would like to thank the Chairman for scheduling this hearing and including S. 68, which would authorize the appointment of doctors of chiropractic as commissioned officers in the armed services. I introduced this bill which now has 16 cosponsors.

Presently, members of our armed services who desire the care of a doctor of chiropractic are forced to pay for this care out of their own pockets because the military does not recognize doctors of chiropractic as commissioned officers. However, doctors of medicine, doctors of osteopathy, dentists, veterinarians, optometrists, pharmacists, psychologists, physical therapists, occupational therapists, dieticians, and physician assistants may serve as commissioned officers.

This policy is not only unfair to our deserving men and women in uniform, but it is also outdated. The chiropractic profession is licensed in all 50 States and is an integral part of our Medicare, Medicaid and Federal employees health care systems. Additionally, colleges of chiropractic are recognized by the Department of Education.

Clearly, doctors of chiropractic are just as qualified in their area of expertise as any other profession accorded commissioned officer status. Their formal education includes a minimum of 2 years of college work concentrated in the biological and basic sciences and 4 years in a chiropractic college, which includes practice in a teaching clinic. Denying our dedicated service members access to chiropractic care, which is otherwise widely available in our society, is an unfair policy.

This bill will put an end to that policy. It will ensure that members of the armed services have a full range of health care services available. This bill does not mandate that service members receive treatment from doctors of chiropractic. It will simply give our serv

ice members the opportunity to receive chiropractic treatment from persons trained in the specialty if they so desire.

I am aware that there is opposition to allowing doctors of chiropractic to serve as commissioned officers. I am concerned, however, that this opposition is based on a longstanding bias against the chiropractic profession rather than any sound reason. I believe that the testimony presented here today will highlight the positive contribution that doctors of chiropractic can make to our armed services.

The underlying issue is one of fairness. Is it fair to continue to exclude doctors of chiropractic from the military? I believe the answer is no.

Thank you again for bringing this important matter before the subcommittee.

Incidentally, yesterday the House Armed Services Subcommittee on Military Personnel and Compensation included the substance of this bill, with some modifications, in the defense authorization bill for fiscal year 1993.

Thank you, Mr. Chairman.

Senator GLENN. Thank you, Senator Thurmond.

Our witnesses this morning have submitted written statements which we will, without objection, include in the record. I will ask each of our witnesses to briefly summarize their statements and, Dr. Mendez, we will start with you.

STATEMENT OF ENRIQUE MENDEZ, JR., M.D., ASSISTANT
SECRETARY OF DEFENSE FOR HEALTH AFFAIRS

Dr. MENDEZ. Thank you very much, Mr. Chairman, distinguished members of the committee. I am happy to be with you today. I will, indeed, summarize my statement.

I appreciate the opportunity to review with you the progress that has been made in the past year toward strengthening and coordinating the military health services system. We have moved forward, and we have tried to be responsive to those with compelling interests in military health care. This committee, in particular, has provided both encouragement and support for our beneficiaries' health care and for our ability to manage the system that provides that care.

One aspect of military medicine of preeminent importance to this committee is our readiness mission-I am aware of that our ability to provide medical support to our Armed Forces in both normal and unusual circumstances. A year ago I outlined the demonstrated capability of the Army, Navy, and Air Force to medically support our forces in the Persian Gulf conflict. That effort was impressive. We established a comprehensive, sophisticated health care delivery system in a harsh desert environment some 8,000 miles

away.

To be ready, many years and considerable effort were expended to ensure the manpower, the equipment, the training, and the supplies were what we needed. I know, and the military services know, the strong role that this committee has had in urging and in supporting many of those readiness initiatives.

Understanding the essentiality of medical readiness, I know you appreciate the necessity of a viable medical structure in which and from which our medical support for the unusual circumstance can be trained and drawn.

Our system of military facilities, research, and education programs, our day-to-day operation of military medicine, is what enables us to meet the challenges of a Desert Storm and to continue to care for our military families and other eligible beneficiaries. That is the base. We must focus on strengthening and coordinating this system if we are to continue in preparation for achieving our future readiness requirements.

On the 1st of October of 1991, the Deputy Secretary of Defense directed several actions to strengthen military medicine. He placed responsibility for the effective execution of the medical missions of the Department with a single official, namely, the Assistant Secretary of Defense for Health Affairs. Medical personnel, facilities, programs, funding, and other resources within the Department are then subject to the authority of this official, in this case myself, in terms of authority, direction, and control.

I now prepare, present, justify and defend a unified medical program and budget to provide resources for all medical activities within the Defense Health Program. I have undertaken these responsibilities in full recognition of the outlook for continued escalation in health care spending throughout our Nation.

A Defense Medical Advisory Council has been established to advise me in the execution of the Department's medical missions. This council of senior leadership from the military Departments is essential, I believe, for communicating health policies to the services and also essential for apprising me of their operations, programs and needs.

Finally, I was directed to implement the health care program that ensures coordination of the provision of care in our own medical facilities with that purchased through CHAMPUS. The objectives are to improve access and to maximize cost effectiveness in the delivery of high quality health care. The Department's budget realities demand that we accomplish this coordination prudently so as to provide quality care for our eligible beneficiaries.

For several years, creative initiatives have been applied to either the military treatment facilities or the CHAMPUS program to enhance beneficiary access and to stem the rise in costs. These initiatives have met with varied levels of success. However, to gain full effectiveness of the military health services system, to fulfill the direction of the Deputy Secretary, I must consider the entire system of health care delivery and not just one piece. We must build on strength and introduce new policies and programs where needed to effect that systemic change. I believe coordinated care offers such an opportunity.

Considering the whole of military medicine, it is clear that any opportunity for systemic improvement should have the military hospital as a focus. Most of our beneficiaries live near military hospitals. That is where most of our patients receive their care and where the majority of military beneficiaries wish to go for their

care.

As you know, our supplemental health care system, CHAMPUS, was established to offer our beneficiaries assistance in paying for their health care when a military treatment facility or a specific treatment was not available. This program, in operation now for over 25 years, was established with co-insurance and deductibles. As a percentage of regular military compensation, today's CHAMPUS deductible is about the same as when the program began. In recent years, as the costs of CHAMPUS steadily rose, management initiatives were applied and demonstration projects were employed to determine whether those rising costs could be contained. In some demonstrations generous incentives were offered to encourage beneficiary participation.

Today access to military health care and out-of-pocket costs are variable across the country, and clearly the same level of intensity of care cannot be provided in each and every location. However, with the assistance provided by this committee, there is much we can do managerially to bring consistency and equity to all of our beneficiaries.

Also embodied in coordinated care is the mandate for cost effectiveness in military medicine. We must achieve this for the entire system of health care delivery and at a time of declining defense budgets. As you have stated yourself, sir, the medical portion of the President's fiscal year 1993 amended budget approximates $15.3 billion. Of this amount, $9.5 billion comprise the newly established Defense Health Program. It is an appropriation which funds medical operations and maintenance at $8.9 billion, procurement at $294 million, and medical research and development at $313 million. Military medical personnel represent another $5.5 billion. The medical construction piece of that is a separate appropriation, but continues under the direction and control of our office with a funding projected at $240 million.

So, the fiscal year 1993 O&M program of $8.9 billion reflects an increase of some $171 million, which is about 2 percent over the current fiscal year 1992 estimate.

This budget submission, sir, reflects a fully funded CHAMPUS program of $3.9 billion. Significantly, fiscal year 1991 CHAMPUS costs remained within appropriated funds, and I am confident that fiscal year 1992 costs again will not exceed the appropriated amount.

Certainly one of the major aids to me in assuring the effective execution of that military medical mission is this committee's direction that sufficient medical manpower be retained on active duty.

Last year I reported to you that the environment for coordinated care had been created. This year I wish to report that on the 8th of January, I transmitted to the service Secretaries the instructions to begin the Department's 3-year phased implementation of such a program. It will involve approximately 25 percent of stateside military hospitals 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 that program is successful in redirecting existing CHAMPUS workload to military medical treatment facilities or to network providers, funds budgeted for CHAMPUS will be realigned to support this effort.