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New Health Plan Being Considered

December 14, 1985

WASHINGTON (AP) _ The Pentagon’s top health official, in a move that could affect millions of people, is proposing to dramatically change the way the Defense Department pays civilian physicians for providing medical care to dependents or retirees.

The change, outlined over the past few days by Dr. William Mayer to top officials of the department and military services, would involve a single, nationwide contract with a private health insurer who would provide care to dependents and retirees at a fixed cost.

Such a system would place the insurer instead of the Pentagon ″at risk″ if the cost of such care during any given year exceeded the contractually set price, said Mayer, the assistant secretary of defense for health affairs.

″The Department of Defense would use its substantial buying power to obtain the current health care benefit at lower beneficiary and taxpayer cost than under the current CHAMPUS self-insurance system,″ Mayer wrote in a ″concept paper″ given to top officials.

″We must embark now on a partnership of excellence with civilian medicine to take advantage of today’s highly competitive health care marketplace.″

Although it is possible the program could start with the award of three regional contracts, the goal is a single national contract. If the contract totaled anywhere near what the Pentagon pays now for civilian care, would turn the winner into one of the Defense Department’s top 20 contractors.

The current system is known as the Civilian Health and Medical Program of the Uniformed Services, or CHAMPUS. It is a Defense Department medical insurance program for dependents and retirees who elect to use a civilian hospital or doctor.

All 2.1 million active-duty personnel are entitled to free medical care at military hospitals. Military facilities are also available to the 7.6 million dependents and retirees when space is available. Roughly 75 percent of the medical care given dependents and retirees is provided at military facilities.

The remaining 25 percent using civilian doctors or hospitals, however, must pay a small annual deductible, plus either 20 percent or 25 percent of their bill. The remainder is paid by CHAMPUS, which is funded by taxpayers.

CHAMPUS pays subcontractors such as Blue Cross-Blue Shield to process the claims. In fiscal 1986, CHAMPUS is expected to cost roughly $1.5 billion.

Mayer was unavailable Friday to discuss his new initiative. But a Pentagon official who agreed to discuss the matter if not identified said Mayer was strongly pushing the idea, and had even established a schedule for putting out a request for bids by late next summer and activating the new system by the middle of 1987.

This source said Mayer has dubbed the new program Project IMPRINT, standing for ″Improved Medical Programs and Readiness Immediately, Not Tomorrow.″

The source said Mayer has grown increasingly concerned over rising costs of CHAMPUS, averaging about 11 percent in recent years.

His position paper also notes that CHAMPUS ″is one of the few major health care purchasers still reimbursing doctors and hospitals on a billed-charges basis, with few incentives for efficiency or cost consciousness and none of the discount arrangements now so widely available to prudent buyers of civilian health care.″

That system of paying what a doctor or hospital charges differs from Medicare, which has now switched to a system of pre-set payments to hospitals depending on the patient’s diagnosis.

Rather than explore such a switch to pre-set payments for CHAMPUS, ″Mayer wants to reform the system in one step and take advantage of the competition within the marketplace,″ the source explained.

The source stressed that Mayer does not want to eliminate any options for dependents and retirees. The winner of a national contract would probably be asked to establish a network of Health Maintenance Organizations or Preferred Provider Groups where beneficiaries would receive care ″and avoid all or a large part of the current co-payment requirement.″

But if a beneficiary wished to continue using a private physician, the individual could still do so if he was willing to continue paying a larger share of the doctor’s bill, the source added.

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