Providing managed care options for a large population: evaluating the CHAMPUS reform initiative. Civilian Health and Medical Program of the Uniformed Services.

OBJECTIVES: To evaluate a managed care demonstration project in CHAMPUS (Civilian Health and Medical Program of the Uniformed Services), the insurance program covering physical and mental health care services for the dependents of active duty military personnel, military retirees, and the retirees' dependents. The demonstration project added a health maintenance organization (HMO) option and a preferred provider organization (PPO) option to the standard CHAMPUS coverage and allowed beneficiaries to select the coverage option they preferred. DATA SOURCES: Utilization, costs, access, and beneficiary satisfaction were measured using data from CHAMPUS claims records, the Defense Enrollment Eligibility Reporting System, the demonstration project contractor's HMO enrollment file, the contractor's list of network hospitals, and two surveys of CHAMPUS beneficiaries. STUDY DESIGN: Changes in utilization at 11 demonstration sites were compared with changes in utilization at 11 matched control sites. The effect of the demonstration project on costs was evaluated by estimating the costs for the demonstration sites both with and without the managed care options based on data from the control sites. Access to care and satisfaction were compared between the demonstration sites and control sites based on beneficiary surveys. DATA COLLECTION: All claims in both demonstration and control sites were used in estimating utilization changes. Two mailed surveys were sent to a randomly selected sample of active duty and retiree households with CHAMPUS beneficiaries; the sample was stratified by beneficiary type (active duty or retiree) and site. PRINCIPLE FINDINGS: Overall utilization in the CHAMPUS system decreased at the demonstration sites but stayed approximately the same at the control sites. Utilization among the enrollees in the HMO demonstration option, however, increased dramatically. Patient access to care and satisfaction generally remained at the same levels at both demonstration and control sites, but enrollees in the HMO option reported higher satisfaction. Costs to the government at the demonstration areas, based on regression estimates from the control sites, were about the same or slightly higher than what they would have been under the standard CHAMPUS system. CONCLUSIONS: Managed care plans for large government-sponsored insurance programs can reduce utilization and maintain patient access and satisfaction. Careful structuring of such plans is needed, however, if they are to reduce costs.

The effects of benefit design and managed care on health care costs.

Recently, the Department of Defense replaced its traditional fee-for-service insurance plan for military health care beneficiaries with an HMO/PPO hybrid. Using survey and claims data, we compare changes in costs over two years at sites that implemented this initiative (CRI) with changes at matched control sites. The results indicate that CRI substantially raised per beneficiary government costs for providing benefits (as compared to predicted costs in the absence of CRI). We attribute this difference to the higher overhead of managed care and the increased expenditures by HMO participants.

The effects of preferred provider options in fee-for-service plans on use of outpatient mental health services by three employee groups.

Descriptions of how preferred provider organizations (PPOs), offered as options to employees enrolled in fee-for-service plans, affected use of outpatient mental health services are provided. Data are from the RAND Preferred Provider Organization Study, which has a sample of employees who enrolled in fee-for-service plans 1 year before and 2 years after a PPO option was offered by three employers in two U.S. sites. To study effects of the optional PPOs on access to mental health care, usage patterns among those who initially stated that they did or did not intend to use PPO providers were examined. By the end of the second post-PPO year, employees had a similar annual probability of having an outpatient mental health visit whether or not they initially intended to use PPO providers. However, during the first post-PPO year, there was a decrease in the probability of use for those initially intending to use PPO providers, relative to those who did not intend to do so, among employees who had no regular medical provider. To study effects of the PPO option on usage levels of mental health care services, users of mental health services who primarily visited PPO were compared with those who primarily visited non-PPO providers. Users who visited PPO providers had significantly lower levels of use, controlling for other factors, than those who primarily visited non-PPO providers. Therefore, despite lower cost sharing for services received from PPO providers, the PPO option appeared to lower outpatient mental health care costs while having no more than a transient effect on access. This study did not evaluate mental health outcomes.

Mental health and selection of preferred providers. Experience in three employee groups.

While Preferred Provider Organizations (PPOs) are designed to contain the costs of health care, they may not be able to do so if sicker individuals opt not to use PPO providers. This study examined how level of mental health status and prior use of mental health services affected the decision to use or not use PPO providers for mental health care for employees enrolled in fee-for-service plans with a PPO option. Data were obtained from an employee survey and claims data on three large employee groups. It was not possible to examine effects of sickliness on the intent to select PPO providers for mental health care directly because about one half of employees could not identify who they would visit for mental health care or even how they would select a provider for such care. The intent to use PPO or non-PPO providers for general medical care, however, was not significantly associated with mental health status when other factors were controlled. Furthermore, among persons who used mental health services after implementation of the PPO option, those who had previously visited providers who were to become part of the PPO panel tended to stay with PPO providers, while those who previously visited providers who were not to enter the PPO panel subsequently selected away from PPO providers for mental health care. This pattern of results suggests that established individual patient-provider relationships, rather than sickliness, determined the selection of PPO versus non-PPO providers for mental health care for employees enrolled in these optional PPO fee-for-service plans.

Using DRGs to pay for inpatient substance abuse services: an assessment of the CHAMPUS reimbursement system.

In October 1988, the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) introduced a prospective payment system based on diagnostic-related groups (DRGs) to pay for substance abuse services. These services were initially excluded from the new payment system because of concerns that a DRG-based system may have a large and poorly understood financial impact on individual hospitals. This report assesses the performance of a DRG system in explaining variation in costs at the individual patient level and evaluates how well this payment system predicts resource use across hospitals. Overall, the substance abuse DRGs explained only 4.2% of the total variance in charges. It was found that the Medicare DRG-based system had to be modified to reflect the characteristics of the younger CHAMPUS population by splitting DRG 435 to account for the increased costliness of beneficiaries younger than 21 years. In addition, the study revealed substantial variation in the impact of the DRG system on hospital revenue. These differences largely reflected significant differences between general and specialty hospitals.