Health care calculations for military draw fire Investigators say budget may cost billions more

February 25, 1997|By Tom Bowman | Tom Bowman,SUN NATIONAL STAFF

WASHINGTON -- The military's health care budget in coming years is likely to cost billions of dollars more than expected, according to congressional investigators, because the Pentagon has used "unrealistic" and "questionable" methods of calculation.

The $15 billion Defense Health Program is expected to rise 18 percent by 2003, according to the Defense Department's calculations.

But the General Accounting Office, the investigative arm of Congress, said in a new report that the budget could rise by anywhere between 18 percent and 56 percent in that period. The medical program, which accounts for 6 percent of the Pentagon's budget, is used by 6.3 million personnel, retirees and dependents. There are 8.2 million people eligible.

"Our analysis showed that one key assumption DOD used to estimate future program costs appeared to be unrealistic, and another was questionable," wrote Richard Davis, director of national security analysis for the GAO.

The Pentagon has a history of underestimating its medical budget, the investigators said, which Pentagon officials say is a result of difficulty in estimating the fee-for-service option of its medical program. For eight of the past 12 fiscal years, the Defense Department has asked for and received more money beyond the amount it had budgeted.

In their most recent calculations, Pentagon planners assumed no rise in costs from advances in medical technology and intensity of treatment, GAO said, even though experts expect a growth rate of 1 percent to 2 percent from those cost factors.

Also, the GAO said, the Defense Department's expected savings rate of 7 percent from new management techniques was not analyzed properly.

The GAO pointed to a 1995 study by the Congressional Budget Office, which found that such techniques could generate a savings of no more than 1 percent under optimistic assumptions and would actually increase costs by 6 percent under pessimistic assumptions.

Assuming increased costs for technology and treatment and downplaying the Pentagon's rosy scenario for savings, the GAO said the health budget could increase by up to $8.4 billion.

"We disagree with GAO's assertion that DOD has underfunded the Defense Health Program by $8.4 billion," said one Pentagon official who requested anonymity.

The Defense Department expects a slight increase in retirees using the system, from 39 percent of total beneficiaries to 41 percent between 1997 and 2003, according to the report. That move would likely increase costs, given that older users tend to have higher health care costs.

The cost of the medical program will have risen from $2 billion in fiscal 1970 to an estimated $17 billion in fiscal 2001.

The GAO said it began reviewing the Pentagon's support programs -- of which its medical program is the third largest -- because the military wants to reduce such costs to pay for modernizing its weapons systems.

A possible shortfall in the Pentagon's health care system budget for the next fiscal year drew criticism from Capitol Hill two weeks ago when Defense Secretary William S. Cohen and other top officials testified.

"You are very much aware of the shortfall we had in the medical budget last year," Rep. Steve Buyer, an Indiana Republican, said at the hearing. "And here comes another budget duplicating the very same thing and ignoring the message sent to the Pentagon, 'Hey, let's not do this again, use the wrong baselines,' and boom, we got a $600 million shortfall in the medical budget."

But John J. Hamre, the Pentagon's comptroller, criticized the Defense Department's Health Services branch for "circulating a document that says our budget is underfunded by $600 million."

"I was shocked," Hamre said. "At no time did anyone from Health Services come to me and say the budget was underfunded."

Pub Date: 2/25/97

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