The problems tended to overshadow what appeared to be a relatively smooth launch for most of the military's 1.5 million-strong Medicare-eligible population. Take, for example, Laura Beck of Honolulu, a 69-year-old widow of a retired Air Force technical sergeant. Beck said she relied on TFL, which began Oct. 1, 2001, for follow-up care after hip replacement surgery and for routine medical exams. With her internist, orthopedic surgeon, and gynecologist, TFL was working fine, covering all costs Medicare wouldn't pay. She no longer has to pay the $100-a-month premium charged for her old Medicare supplement.

For Beck, who received a letter from an Air Force hospital four years ago denying her access to routine care, TFL is a promise restored. "I'm just really pleased," she said.

Even so, Tricare officials concede that Beck's experience hasn't been universal. They acknowledge that TFL in its first few months has caused many beneficiaries little but frustration, the result of confusion over other insurance and mistakes in shaping a so-called crossover list of TFL-eligible beneficiaries that was sent to Medicare and TFL claims processors.

Under TFL, a Medicare-eligible beneficiary can visit the doctor of his choice. The doctor files a claim with Medicare. Medicare pays its share, checks for Other Health Insurance held by the patient, and finding a crossover match with TFL, sends claims electronically to TFL for processing. TFL usually covers whatever costs remain. The beneficiary receives two Explanation-of-Benefits forms, one from Medicare and one from Tricare. Usually, nothing more is required.

Dropping the Ball

Things didn't work that smoothly, however, for tens of thousands of TFL users who had contact with the program during the first months. In Pensacola, Fla., retired Navy Lt. Cmdr. Russell M. Saurey and his wife planned to keep their USAA Medicare supplement for a while after TFL began; they wanted to have time to assess the program's performance. But in September, he said, "we interviewed with the Tricare office and they were very confident everything would work out fine. So we submitted the paperwork to stop our insurance. We then hand carried the forms down to the Tricare office."

Subsequently, Mrs. Saurey was hospitalized for a week with a heart ailment. Medicare paid its share of the bill, but TFL in late November denied payment on the remaining $2,900 owed. The reason, according to Tricare's EOB: The Saureys still had USAA health coverage. That was incorrect, Saurey explained to the claim processors in several phone calls. Saurey was optimistic about the outcome, but as of late January, TFL still hadn't paid up.

"I kind of get the feeling this is not an isolated incident," said Saurey. "They have an appeals process all set up."

Retired Air Force CMSgt. Don Hawley, 69, said he doesn't know enough about TFL to feel comfortable dropping his supplement with its $139-a-month premium. Like many older retirees, Hawley watched access to military care disappear over the past decade as bases closed and hospital space became rare. Now he wonders if Congress will renege on this program. He wants to see statistics showing claims being paid and both doctors and patients satisfied.

"I spent 27 years in the military," he said. "Sometimes programs don't run as advertised. That's the main reason I haven't signed up."

Tricare officials understand the caution. They are trying to counter with the message that TFL benefits are excellent, and despite early "hiccups," they aren't going away.

"It is, without question, the best supplement to Medicare that's out there," said Thomas F. Carrato, executive director of the Tricare Management Activity, headquartered in Falls Church, Va. While beneficiaries have to make their own decisions on health insurance, Carrato said, "If I were 65, as knowledgeable as I am about supplements and health care, Medicare, Tricare for Life, and Tricare Senior Pharmacy, I wouldn't need any additional supplemental coverage."

The 20 Percent Problem

Even so, the kind of comforting performance statistics sought by Hawley and thousands like him are not yet available and may not be for a while. Indeed, Carrato in early February had stopped describing TFL's start-up effort as "flawless." Roughly five million claims had been filed during the program's first four months; more than 3.1 million, some 62 percent, had been paid. TFL officers say that 20 percent or more have been either denied or delayed over questions of eligibility.

Here is a rundown of major TFL claim processing problems, all of which, said officials, either have been or soon will be corrected:

• Names Glitch. In transferring to Medicare an initial list of TFL beneficiaries, the Defense Manpower Data Center left off 195,000 names, or 13 percent of the eligible population. About 10,600 were widows and widowers of members who died while on active duty. Another 184,000 were those who, ironically, provided early proof of their enrollment in Medicare Part B, a requirement for TFL.

"If they were proactive and sent in their paperwork early, those were the ones who got caught up in the troubles," said Donna Banks, site manager for the Tricare Worldwide Call Center in Falls Church.

Medicare, because it lacked their names, did not know to send their claims to TFL for payment as second payer. So the Medicare EOB that beneficiaries received said they were liable to pay the provider for all charges Medicare didn't cover.

In a mid-November letter to the affected beneficiaries, Carrato explained the problem, said it was temporary, and claimed that benefits would be paid in full. But beneficiaries, most of them unfamiliar with Tricare, had to refile the claim themselves with Tricare, attaching a copy of the Medicare EOB.

Once TFL officials understood the problem, they began putting holds on claims with eligibility problems and stopped denying them. By early December, Medicare had corrected the crossover list, and new claims from the 195,000 were moving electronically between Medicare and TFL, as planned.

About 70 percent of these claims had been paid by mid-January. But many early claims, those that beneficiaries had to refile, weren't settling easy. They had become part of a rising claims backlog fed by two other major challenges: confusion over Other Health Insurance and claim denials caused by the expiration of military identification cards.

• Expired ID Cards. Long before Oct. 1, Tricare urged TFL beneficiaries to update their information in DEERS, the Defense Enrollment Eligibility Reporting System. DEERS tracks military or dependency status, current address, and eligibility for benefits, including health care. Issuance or reissuance of a military ID card automatically updates DEERS information. IDs for dependents and survivors of retirees expire every four years. Military retiree cards have no expiration date themselves, but currently the cards note a date on the back that indicates medical coverage ends when a retiree turns 65.

Four months into TFL, more than 160,000 claims filed by some 65,000 beneficiaries had been denied because of the expiration of an ID. By late January, the number of denials had truly alarmed Tricare officials, who were then eyeing a rising claims processing backlog.

Part of the problem was that many of the beneficiaries had been inattentive about paperwork or were living away from bases or in nursing homes and were unable to renew their IDs. Another part of the problem, however, led back to that crossover list; it hadn't been screened for expired IDs.

Thus, Medicare and TFL claims processors were bouncing claims off a list that showed every person in DEERS enrolled in Medicare Part B was eligible for TFL. This was not true. Widows or widowers who had remarried a civilian, for example, knew they were ineligible for TFL. However, Medicare soon began sending unpaid bills not to private Medicare supplemental insurers but to TFL. Through no fault of the beneficiary, TFL was getting claims and rejecting them for reason of expired IDs.

TFL had a mess on its hands.

Worried that the expired ID problem could shake confidence in TFL among beneficiaries and providers, defense officials in early February announced a patient-friendly solution. TFL would pay the claims even of beneficiaries with expired IDs, whether the claims had been denied previously, were on hold, or were still coming in. It would be done automatically, too. Neither the beneficiary nor the provider would have to resubmit claims.

Moreover, TFL would continue to pay such claims for a six-month grace period that would run through July 2002. TFL also launched an aggressive information campaign to educate elderly beneficiaries on the need to obtain new ID cards.

"We want to ensure that our beneficiaries, some of whom are re-entering the military health system and using Tricare for the first time, have the best possible experience and receive their rightful benefits," said William Winkenwerder Jr., assistant secretary of defense for health affairs. "We will do everything we can to overcome initial difficulties that may arise."

Carrato added, "We will be paying for some people who aren't eligible. We're not supposed to do that, but we are also denying claims to people who, if they updated their eligibility information, we would be paying for. It's a benefit that is very rich, but this is an age group where you really have to do extraordinary outreach."

The government does have authority to later recoup erroneous payments, but officials aren't keen on using it or at least discussing it. Waivers also are possible, one noted, if repayment would be a hardship.

After Aug. 1, claims from beneficiaries with expired IDs will be denied until their eligibility information is updated.

• "Other" Insurance. Through January, Tricare for Life had denied 750,000 claims, 15 percent of all claims filed, because Medicare and TFL records showed beneficiaries had Other Health Insurance, or OHI. It's a troubling problem for Tricare for Life because, by law, Other Health Insurance, not TFL, must serve as second payer to Medicare.

It's a problem TFL officials tried to avoid by means of a survey mailed to elderly beneficiaries last summer. The survey asked whether the recipient had private insurance and whether he would drop it when TFL began. The return rate on the survey was only 60 percent, and that was not the only problem. Critics say that some beneficiaries never received the survey, either because they were not on the mailing list or because it never reached their hands.

Moreover, half of those who indicated they had Other Health Insurance failed to declare whether or not they planned to drop it as a result of the phase in of TFL.

Thousands of beneficiaries who did drop their supplements, like the Saureys, later learned that their claims processors never got the word. In some instances, insurance companies had delayed notifying Medicare until outstanding or disputed claims were settled. Some Medicare carriers were slow to update their files. And some beneficiaries themselves made paperwork errors or just forgot to cancel Other Health Insurance and continued to think they had done so.

By mid-January, TFL was rejecting so many claims for OHI reasons that Carrato directed claims processors to begin accepting the word of beneficiaries over the phone if they said they had or did not have other insurance.

"We overrode our system," said Carrato. "It is a very user-friendly solution, something you don't often times see in government--that is, trust the beneficiary."

The OHI problem will go away over time, he said, as a majority of 1.5 million beneficiaries settle into using their new benefits and TFL builds an OHI file on them. Most TFL-eligible beneficiaries did have Other Health Insurance. While many ignored last summer's survey, the calls were streaming into the Tricare phone center by January from beneficiaries saying they had now dropped their coverage.

Finally, there is another problem with which TFL didn't reckon: Twenty percent of qualified beneficiaries don't want to have anything to do with TFL. Some of them are angry that the TFL master list that was sent to Medicare changed their OHI designation from a private insurance to TFL, without their approval or permission.

This is exactly what happened to Frank Maxted, 74, of Fouke, Ark. The retired Army sergeant uses Blue Cross/Blue Shield as a second payer to cover charges Medicare won't pay. Premiums are deducted from his wife's retired pay. In November, however, TFL suddenly began covering his claims. Maxted called the claims processor to complain.

Maxted described the conversation: "I said, 'What happens to my regular insurance?' They said, 'Oh, you can drop that.' I said, 'No, I don't want to.' " He was asked to explain why he wanted to stick with Blue Cross/Blue Shield, which charges a premium. Maxted replied that, throughout his 20-year military career, he had been given assurances that he would receive free medical care for life. "And what happened to that deal? I didn't get it. The government [stuck it to] me once. I'm not going to give them a second chance."

• Busy Signals. January was a rough month for TFL executives. Claims denials were mounting. At the same time, many more beneficiaries entered the system for the first time because their other supplemental health insurance policies lapsed on the last day of 2001. In addition, call volumes soared because of the OHI and expired ID problems. Moreover, Carrato said, "We underestimated how long these calls would take. They end up to be fairly lengthy calls, with sometimes a callback."

Suddenly, TLF users with questions about claims had difficulty contacting the primary claims processor, Palmetto Government Benefits Administrators of South Carolina. Though PGBA was responsible for handling 85 percent of all TFL claims, it had woefully insufficient numbers of telephone lines and operators. The "blockage rate" on TFL calls to PGBA reached 78 percent. Most callers got busy signals or faced long waits.

To ease beneficiary frustrations, PGBA and the regional Tricare contractors ordered more telephone trunk lines, hired more staff, and began rolling some calls into alternative call centers.

Other problems surfaced. About one percent of TFL beneficiaries use doctors who don't "participate" in Medicare. That usually means they charge more than 115 percent of the Medicare authorized rate, an extra cost Tricare won't cover. These claims were delayed because TFL needed time to calculate its share of reimbursement. "That problem is now fixed," said Carrato.

As each TFL problem arose, Tricare officials kept military associations and the press informed and often worked with association representatives to find solutions. That open approach has served the system well. Advocates for beneficiaries have been able to prod and encourage the bureaucracy toward patient-friendly solutions.

For example, service groups were concerned that persons "aging in" to the Tricare for Life benefit weren't getting clear or timely information on the changes ahead. So the letter that previously advised persons approaching age 65 that they soon would lose Tricare eligibility was rewritten to explain TFL and the impact of not dropping Other Health Insurance.

A question many beneficiaries have is whether funding for TFL and the Tricare Senior Pharmacy Program (TSRx) is guaranteed. Congress set $3.9 billion aside to pay the benefits this year. Carrato said he thinks that will be enough.

If it is not, Congress will simply have to come up with more money, because both programs are now entitlements. Congress must fund them just like Medicare or federal retirement plans, and the programs don't require annual authorizations. The cost is still reflected in the defense budget's topline, but the only way Congress can stop the programs is to pass legislation rescinding the entitlement, an action virtually unprecedented in modern America.

Stunning Size

Still, the $8.1 billion cost of TFL and TSRx for 2003 stunned senior defense officials, according to one official. Half of that money will go into a new accrual account, called the Department of Defense Medicare-Eligible Retiree Health Care Fund. The money is to ensure these benefits will be there for future generations of Medicare-eligible retirees. In 2004, when general tax revenues begin covering current TFL and TSRx costs, actual payouts from DOD will drop to between $4 billion and $5 billion.

"I think folks truly recognize what this benefit means," Carrato said. While health benefits for service elderly have improved dramatically in the past year, they can read news stories of private sector employees seeing "premiums increasing, deductibles increasing, benefits being reduced."

In sum, the TFL start-up problems are only temporary obstacles to the smooth delivery of TFL benefits, Carrato claimed. They don't diminish the value of that benefit, and the benefit won't suddenly vanish someday. Many potential beneficiaries, however, continue to take a wait-and-see approach to TFL and will for some time to come.

Tom Philpott writes the weekly syndicated news column "Military Update." His book, Glory Denied: The Saga of Jim Thompson, America's Longest-Held Prisoner of War, will be released in paperback in April 2002. His most recent article for Air Force Magazine, "The Tricare Budget Drain," appeared in the August 2001 issue.