When it comes to providing health care, the US defense establishment has much in common with big civilian organizations. It wants to keep costs down. It wants to keep quality up. And, to balance those goals, it is moving rapidly into the world of health maintenance organizations, or HMOs. The Pentagon is doing this via implementation of the Tricare system.

However, there are unique aspects to the military health care system, as well. Unlike most private organizations, it must take care of a heterogeneous population that is spread all over the world and in constant motion. It must answer to the federal government. And, most importantly of all, it must be ready to operate in a combat zone.

"We're the world's largest HMO, that has to go to war," said Dr. Edward D. Martin, acting assistant secretary of defense for health affairs.

As Martin points out, carrying out this role has its difficulties. Even as US military medical readiness remains high, military health officials in recent months have had to struggle with everything from implementation of Tricare co-payment schedules to health care for military retirees age 65 and over.

Martin, the Pentagon's top health official, touched on many of these issues in a wide-ranging interview with Air Force Magazine in his Pentagon office. One major point: The Defense Department is not Blue Cross/Blue Shield. The special needs of military health care mean that "sometimes we have to use different approaches in order to either meet ... objectives or to meet ... expectations" of beneficiaries, Martin said.

When Retirees Hit 65

A major--some say the major--health question now facing the Pentagon concerns the provision of benefits to military retirees who have reached the age of 65.

Retirees, when they turn 65, are no longer eligible for coverage under the Tricare system. Such retirees are effectively pushed into the hands of the Medicare system. They can continue to obtain treatment in military treatment facilities on a space-available basis, but the closure of bases and the general downsizing of military medicine means that such low-priority appointments are very difficult to come by in many parts of the country.

Polls show that virtually all military retirees feel that they were promised free health care for life for themselves and their families when they joined the service, so long as they completed a full military career. Instead they must wrestle with Medigap insurance payments and the Medicare bureaucracy.

Top Pentagon officials no longer dispute, as they once did, that such promises were made. They say they know they have a moral obligation to address this situation in an equitable manner.

"The department is looking to put together an overall plan to try to improve a predictable benefit for these people," said Martin. The plan has three basic components.

The first core part of the Pentagon plan is Medicare Subvention. Under this program, 65-and-over military retirees would be able to use military facilities, receive a full Tricare benefit, and have the Medicare funding organization reimburse the Defense Department for the cost of treatment, as it does for other Medicare providers.

Theoretically, Medicare can reimburse DoD at a reduced rate, since care can be provided more cheaply within an MTF than in the private sector's facilities.

Already, Congress has approved a Medicare Subvention demonstration project, called "Tricare Senior," to test out the concept. The task of organizing the test has taken a little longer to plan than officials anticipated, but the final sites list should be determined this fall, said Martin.

Also under review at this time is a program called "Partners," the second part of what the Pentagon is studying for 65-plus health care. Retirees would stay enrolled in Medicare HMOs, instead of joining Tricare (as they would under Medicare Subvention). However, they would maintain a relationship with military medicine--possibly through some link to pharmacy benefits.

The third part of the Pentagon's plan for the 65-plus group entails Medicare Subvention for treatment at Veterans Affairs hospitals.

There is a problem, though. Even if all three of these steps are adopted, some military retirees would still be uncovered. Those who live far from a VA facility or MTF would need to be addressed by some other change of policy.

Among the alternatives for this final group: allowing them to use the Federal Employees Health Benefits Program as a second payer to Medicare; using a modified Tricare Standard as a second payer; or subsidization of retiree Medigap policies.

"I think everybody is looking at those options," said Martin.

The FEHBP Option

For the Pentagon, the FEHBP option is a particularly controversial issue in regard to military retiree medicine. Many military organizations, including the Air Force Association, say that all Medicare-eligible former military members and their families should be able to join the big federal employee health program.

After all, they argue, employees from all other federal agencies, as well as members of Congress and their staffs, can join FEHBP and stay in the system at and beyond 65. Why not those who wore their nation's uniform, as well?

According to Martin, the Department of Defense has long had "grave concerns" about FEHBP participation.

One of these concerns centers on cost. Congressional Budget Office estimates of the price of opening up FEHBP to the military run from $1.6 billion to $6 billion annually. The exact amount would depend on such variables as whether all retirees are eligible, or only those over 65, or all retirees, plus active duty dependents.

A second concern involves military readiness. The Defense Department has long contended that military doctors need to see older patients--who have a higher probability for surgery and complicated medical procedures--on a regular basis in order to sustain medical techniques needed for combat medicine.

"Basically, taking care of healthy young people does not make [sufficient] use of their skills," said Martin.

However, many of the proposals to open up FEHBP to the military are sweeping blueprints. If a more limited use of FEHBP were discussed--as in the aforementioned package plan to deal only with over-65s--"We'd have to reappraise it," said Martin.

Congressional hearings and further Washington discussion of the FEHBP subject will likely take place this spring.

Bills have been introduced in both the House and Senate to allow military retirees over the age of 65 to join FEHBP in demonstration programs at a few sites--testing the concept in a manner similar to the Medicare Subvention experiment that has already been approved.

The conference report of the Fiscal 1998 Department of Defense Appropriations Act, passed in September, said: "Alternative options [for providing health care to 65-and-over retirees], such as providing the Federal Employees Health Benefits [Program] to Medicare-eligible military retirees, exist and could serve to further ameliorate the problems caused by Tricare 'lockout.' "

The Changeover to Tricare

The biggest recent change in military health care, of course, is the implementation of the Tricare program. Tricare is the military's version of a managed care system for active duty members, their dependents, and under-65 military retirees.

Tricare is a three-choice system. Tricare Standard is a fee-for-service option that is the same as the old CHAMPUS (Civilian Health and Medical Program of the Uniformed Services). Tricare Extra is a preferred provider option that is less expensive than Standard for its beneficiaries. Tricare Prime uses MTFs as the principal source of health care services.

Under Tricare the military contracts out health services management to private firms in 12 domestic US regions, plus Europe, the Pacific, and Latin America. The last two regions in the US to get the program--the Northeast and the Mid-Atlantic--should have Tricare providers up and running by mid-1998.

Martin said that, by adopting the efficiencies, such as volume discounts, associated with managed care, the Department of Defense will be able to save money. And even though the system is not fully up and running yet, substantial savings have already been incurred.

"Otherwise, the money would have had to continue to come out of the services and much higher priority items," said Martin. "So you've got to understand the context of what we've tried to do in Tricare."

From the point of view of decreased cost and improved quality and access for beneficiaries, Tricare has been extremely successful, said defense officials. Regions where it has been in operation for over 18 months show high levels of consumer satisfaction, measured by such things as reenrollment rates.

However, as Martin acknowledges, the implementation of the program has been far from perfect. "We frankly made a whole bunch of mistakes, and there have been instances where our approach to particular communities [has] not worked," said the DoD doctor.

One fundamental mistake, he said, has been in marketing. Explaining health care plans is extremely complicated, as anyone who has ever tried to fully understand their coverage can attest. The FEHBP for nonmilitary government workers has 350 complicated options, for example.

Martin said that there is a need for much simpler, more effective ways of explaining Tricare. Consider the case of active duty dependents. Health officials need to convey that the bulk of dependent health care can be carried out within the military's own system. It is only when dependents need specialized services not available in MTFs that they have to make co-payments--and even then, such cost-sharing will be very limited.

"That's a different kind of explanation than we had used," said Martin.

Then there have been separate problems related to Tricare implementation. One concerns the question of "portability." Since the system has been implemented piece by piece across the country, beneficiaries have not been assured of being able to pull up stakes and move to any other region, while carrying their Tricare Prime benefits with them. That's a problem that should be solved over the next six to eight months as the last two regions go into operation.

Martin also noted another major problem: split families, with dependents residing in several different regions. This has caused major administrative headaches.

"I think we've found a means to be able to deal with that," said Martin. "I think our hope, our intention, is ultimately for a lot of this administrative activity, complications that we face, to be transparent or invisible to our beneficiaries."

Complaints About Co-Payments

Another major complaint concerns multiple co-payments. Frequently, a beneficiary would be referred to a specialist for additional lab work and other procedures and would have to ante up for all of the different bills. This is considered a glitch in the process and is being corrected by regulation, according to the Pentagon's top doctor.

Martin points out that the US military health care system is bringing managed care to some areas where there has not been a great deal of activity before. In fact, the Defense Department will not be able to offer Tricare Prime in some isolated communities where there are no HMOs.

"What we are trying to do, for our active duty dependents, is establish a program which covers people who are geographically isolated," he said. "So that even if there is not Tricare Prime in a particular area, they will have the Tricare Prime benefit. We'll make special arrangements with local providers to do that."

Health officials said that the military had no option but to go in the direction of Tricare. The old system, besides being too expensive, did not lend itself to such modern medical innovations as ambulatory care (vs. hospitalization) and disease prevention programs.

Remaining Tricare issues that need to be addressed include continued improvement in administrative processes and claims processing and ease of obtaining appointments. "I think we have made enormous progress and will continue to do so," said Martin.

Over the last six months the Pentagon's Health Affairs office has looked again at exactly how the military health system measures up in terms of quality care and service. Said Martin: "Although we meet or exceed all the standards and accreditation requirements of the private sector, we have determined there are significant and important improvements we could make" in this regard.

In general, the changes now sweeping through military medicine are similar to those that have greatly altered civilian health care in recent years.

"What we're seeing in Tricare is our effort in the military to make that revolution at least in step with, or in some cases a step ahead of, the private sector," said Martin.

Greater reliance on managed care is only one of the changes. Another is a move to health promotion and disease prevention--or, in other words, an effort to teach people to take better care of themselves and modify behavior that threatens their well-being.

That means military health care providers focus on such interventions as convincing people to quit smoking or stop drinking heavily. It can be as mundane as urging increased seatbelt use.

"I'm a pediatrician," said Martin. "So [I think] accident prevention among children is a good example" of this approach.

That means the focus of providers changes from the big hospital to the community and the family. Health care becomes a process, not a place, to paraphrase Air Force Surgeon General Charles H. Roadman II.

"We ought to look at it as a failure when we have to admit patients to hospitals," said Martin.

Health officials say there's no doubt that the number of military hospitals will decrease in the future and that the number of hospital beds will decrease even more, as hospital floor space is turned over to ambulatory care facilities.

The old four-story hospitals which now stand on many military facilities have become, in some senses, white elephants. But, said Martin, "We'll still need large facilities, like Wilford Hall, because we're going to need places where we have sophisticated training facilities and the ability to provide very sophisticated services."

The future military health system will also be marked by a mix of service providers.

"We need to find high-quality, cost-effective alternatives for our patients," said Martin, "particularly as they are very diffusely spread across all the countries of the world, all over the United States."

Peter Grier, the Washington bureau chief of the Christian Science Monitor, is a longtime defense correspondent and regular contributor to Air Force Magazine. His most recent article, "Reserve and Guard on Afterburner," appeared in the November 1997 issue.