Military urged to overhaul health care system

klunney@govexec.com

Witnesses criticized the slow and costly claims processing system of Tricare, the Defense Department's managed health care system, at a hearing Thursday before a House Budget Committee task force.

Panelists who appeared before the Budget Committee's Task Force on Defense and International Relations said increasing the use of electronic claims filing will help reduce the very high costs of claims reviews and will improve customer service.

The average cost to process a TRICARE claim is $7.50 to $8.00, according to an estimate by Palmetto Government Benefits Administration, a subsidiary of Blue Cross Blue Shield of South Carolina. All of the witnesses who testified were optimistic about eventually reducing Tricare's processing costs to between $2 to $4 per claim.

By comparison, it cost $1.78 on average to process a Medicare claim in fiscal 1999, according to the Health Care Financing Adminstration. More than 8.2 million active-duty personnel, retirees and their dependents are eligible to receive health care under Tricare, a $16 billion-a-year managed health care system.

"Complaints and frustrations stem from perceived inaccurate and late payments; complex program rules, processes and reporting requirements; and high costs. All agree that the claims adjudication system needs to be simplified and made more user-friendly, and that it could benefit from increased use of technology," said Stephen P. Backhus, director of veterans' affairs and military health care issues at the General Accounting Office.

Backhus said the complexity and size of the Tricare system contributes to the high cost of claims processing. Tricare offers three health care packages that include different benefits, copayments, and deductibles-resulting in different procedures for processing claims.

Beneficiaries are often baffled by the system's complexity, making Tricare claim inquiry rates four times higher than Medicare inquiries, Backhus said.

According to William J. Meyer, senior vice president of Palmetto, more than 80 percent of Tricare claims are filed on paper. Meyer agreed with Backhus that the complexity of Tricare is responsible for its high administrative costs.

Blue Cross Blue Shield of South Carolina, through its subsidiaries, is the largest claims processor in the country for both Medicare and Tricare.

Dr. James T. Sears, executive director of DoD's Tricare Management Activity, acknowledged the problems facing the health care system, but also noted the progress that Tricare has made in improving claims processing. New standards that took effect in October 1999 require contractors to process 95 percent of accurately submitted claims within 30 calendar days from the date of receipt. Seards said statistics from March and April 2000 show a 97.5 percent processing rate within the 30-day period.

Tricare is also moving toward streamlining its record database system and standardizing claims processing formats to make it easier for contractors to submit claims data, thereby reducing administrative costs.

Backhus said a partnership between DoD and the Department of Veterans Affairs in purchasing pharmaceuticals could also yield substantial savings.

"The expectation is that, as the two agencies buy more of a particular drug, their leverage-particularly under competitively bid contracts-would permit them to obtain even greater discounts from drug manufacturers and to save funds for both departments," Backhus testified.

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