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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

Attentive to the Committee's concerns and with its blessing, the Department has implemented significant measures to strengthen the management of military medicine. At the direction of the Deputy Secretary of Defense, responsibility for the effective execution of the medical missions of the Department now rests with a single official. That official is the Assistant Secretary of Defense for Health Affairs. Medical personnel, facilities, programs, funding and other resources within the Department are subject to the authority, direction and control of the Assistant Secretary. Exercise of those new authorities is through the issuance of instructions to the Secretaries of the Military

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Additionally, as the responsible official, 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. The Department of Commerce estimates that both hospital and physician services will increase 11 percent, and total health care spending will consume 14 percent of the GNP in 1992. Growth in the Department of Defense health care costs presently is programmed at 3.87 percent per year through FY 1997. This increase, small in comparison to national trends, looms large in a declining Defense budget.

A Defense Medical Advisory Council has been established to advise me in the execution of the Department's medical missions. This council consists of a Presidential appointee from each military department and a general or flag officer from each of the military services. Also, a general or flag representative of the Chairman of the Joint Chiefs of Staff and the President of the Uniformed Services University of the Health Sciences round out the membership. As Assistant Secretary, I chair the council.

This council of senior leadership from the military departments is essential for both communicating health policy to the services and apprising me of their operations and programs.

Finally, I was asked to implement a health care program that ensures coordination of the provision of care in our own medical facilities with that purchased through CHAMPUS. The objectives, very much in line with this committee's guidance, are to improve access and to maximize cost effectiveness in the delivery of high quality health care. The declining budget realities demand that we accomplish this coordination prudently so as to provide quality care for the greatest possible number of our

beneficiaries.

Since issuance of these new directions, I have met with the Service Secretaries; chaired two meetings of the Advisory Council; expanded my budget and programs office with temporary assistance from the military medical departments in order to oversee FY 92 program execution, prepare the FY 93 medical budget justification and develop the FY 94-99 Defense Health Program (DHP) Program Objective Memorandum (POM); and, issued initial guidance to the military services for implementing the

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The Department's medical portion of the President's FY 93 Amended Budget approximates $15.3 billion (5.7 percent). of this amount, $9.5 billion comprises the newly established Defense Health Program (DHP) 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. Medical military construction funding of $240 million, in a separate appropriation, continues under my direction and control.

In FY 92, $8.1 billion was appropriated to the Defense Agency, Operations and Maintenance account for the medical program. Previously, these funds were part of the Military Departments' O&M accounts. An additional $600 million was retained in the Services and Defense Agencies medical O&M accounts. The FY 93 O&M medical program of $8.9 billion reflects an increase of $171.4 million...less than two percent...over the FY 92 current estimate.

The Defense Health Program (FY 93) provides resources for the health care needs of 8.4 million eligible beneficiaries.

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both delivered worldwide in 148 hospitals and 554 clinics and purchased from the civilian sector through the CHAMPUS program and the Uniform Services Treatment Facilities (USTFs). The budget is developed based on projected workload, anticipated changes in force structure, and programmed base closures and realignments.

This budget submission reflects a fully funded CHAMPUS program of $3.9 billion, primarily based on the CHAMPUS Actuarial Projection Systems (CAPS) model forecast for the CHAMPUS benefit program, estimates for contracts and demonstration projects, and adjustments for known program changes. The budget includes the newly authorized disabled care benefit and the authorized increase to the dental benefit. Significantly, FY 91 CHAMPUS costs remained within appropriated funds, and we are confident FY92 costs will as well.