Senator’s/Congressman’s Name                                                                       Date

Address

Address

 

Your Name

Address

Address

 

Honorable (Senator’s/Congressman’s name)

 

I am contacting you to solicit your assistance in correcting a severe inequity in the TRICARE Overseas Program (TOP).

 

The TRICARE Management Activity (TMA) has developed a plan to reduce the maximum allowable charges to the point that a significant portion of routine health care will no longer be covered for payment. Their plan was not well thought out, was never checked against actual charges and the effect on retirees and their families was not considered. There are a number of flaws in their plan ranging from the improper implementation and use of World Bank comparison factors to the improper use of hospital diagnosis and the improper development of US per diem rates.

 

As a result retirees in the Philippines can look forward to paying as much as 60% of the cost of a normal heart bypass procedure. Under the new rules retirees can expect to pay 85% of the cost of a routine Complete Blood Count (CBC), 95% of the cost for blood typing, 94% for an SGOT and SGPT which are common liver function studies. The wife of a retiree or active duty member will have to pay 88% of the cost of a PAP smear. These are all common lab tests. The statutory cost share is 25%.

 

To add insult to injury and to show just how much thought went into this plan the Department of Defense Inspector General’s (DODIG) own example of what a reasonable cost is for a heart bypass procedure will exceed the maximum allowable charge by 30% making a retiree’s actual cost share 48% and that example is more than two years old.

 

That's not the end of it either. They plan to port this new process to most overseas countries over the next few years.

 

Please understand this has nothing to do with another initiative the Department of Defense has that proposes to increase deductibles and co-pays and is being addressed in H.R. 579, the Military Retirees Health Care Protection Act. These separate and independent changes, contained in change 77 to the TRICARE Reimbursement Manual, apply only to overseas retirees and are being implemented without Congressional approval.

 

As a retired military member, I served my country faithfully for many years and in return received a reduced retirement with the promise of lifetime medical care for my family and me. I reside in the Philippines but vote in your district. (Add your personal comment about yourself  here. This is important as it will personalize the letter for the people you send it to.)

I request that, at the very least, you take the necessary action to insure that these inequities are corrected by TMA as soon as possible. In addition, request that you take action to have TMA institute provider networks, as outlined by Daniel Boucek a Defense Criminal Investigative Service (DCIS) agent, and published in the Journal of Public Inquiry, Fall/Winter 2005 edition, available at http://www.ignet.gov/randp/fw05jpi.pdf), so that U.S. Military retirees, no matter where they live, are treated the same by TRICARE.

 

Inaction, to correct this grievous wrongdoing, will only serve to tell me and other retirees that you condone increasing the cost of medical benefits without congressional approval.

 

(Attached is a document that includes an in-depth background and explanation of the issues with examples for further clarification.)

 

 

Respectfully,

 

 

 

 

 

Your name

Background

 

In the mid 1990s military retirees reported potential fraud in the Philippines to TRICARE Management Activity (TMA). The primary offender was a company, Health Visions Corporation (HVC), who was submitting 80% of all claims from the Philippines. The response to these fraud alerts was slow to non-existent. In the Philippines, only TRICARE certified providers can be used by beneficiaries if they expect to be reimbursed. But even as late as 2006, HVC was still listed on the TRICARE Area Office-Pacific (TAO-P) official web site as a certified provider.

 

Department of Defense Inspector General (DODIG) findings emphasized that the fraud problem in the Philippines, and specifically with HVC, was caused by a TMA contractor, Wisconsin Physician Services (WPS), and TMA by not “paying attention” to the signs of fraud and failure to quickly react to the complaints of beneficiaries concerning HVC’s fraudulent activities. (See DODIG report D-2006-051, DODIG report D-2006-045, DODIG report D-2008-045 and an article written by Daniel M. Boucek, Defense Criminal Investigative Service (DCIS) agent, and published in the Journal of Public Inquiry, Fall/Winter 2005 edition, available at http://www.ignet.gov/randp/fw05jpi.pdf). The failure to quickly respond and take appropriate action resulted in the lose of close to ninety million dollars of taxpayers money. Since this time many of us have reported additional providers suspected of fraud but years go by and it's business as usual for them.

 

Because of these negative DODIG findings, TMA instituted a number of changes to attempt to fix the problems. Unfortunately, many of these changes have a negative impact on how retirees and their families can obtain and receive payment for their earned benefit. One significant result is constant delays and improper management of claims filed with WPS. It is apparent that the development of these changes done with little or no concern for the adverse effects they would have on military retirees.

 

On 8 November 2006 TMA secretly notified its contractor WPS to suspend payment of claims received for care provided by hundreds of hospitals in the Philippines. These hospitals were used by HVC to file fraudulent claims. HVC would use a hospital to treat a member and pay the local normal rate to the hospital in cash on discharge of the patient. Then they would modify the bill from the hospital and submit it to WPS for payment. The local hospitals received no benefit from this fraud and TMA knew it. The suspended hospitals constituted about 90% of hospitals in the Philippines. The apparent purpose of keeping this secret was to deny payment for care to retirees and their families by simply not processing them. By March 2007 hundreds of claims had not been paid causing hardship on hundreds of retirees. Finally, on 16 March 2007 the list was officially released. Complaints sent to TMA about this secret and deliberate attempt to punish retirees resulted in the suspension being lifted on 22 March 2007. But that did not remove the hardship suffered by hundreds of retirees.

 

In the past TMA failed to properly develop a table of maximum allowable charges unique to the Philippines but paid whatever providers billed. This made it easy for groups like HVC to overcharge for services, sometimes by more than 3,000%. The most recent attempt to rectify that deficiency has resulted in changes as outlined in Change 77 to the TRICARE Reimbursement Manual 6010.55-M (TRM). The attempt by TMA is commendable, although late in coming, and it appears to have been hastily conceived and researched, once again without concern for the adverse effects on military retirees. In Daniel Boucek's article, he makes it clear that other methods were available to resolve the fraud and get cost in line with the local, prevailing charges, including; partnering with Blue Cross of the Philippines to use their network of providers and their reimbursement rates, (negotiated with their network providers) and identify qualified and trustworthy providers. Because of TMA’s failure to utilize the other options recommended by the DCIS and DODIG, retirees and their families in many overseas areas can look forward to increased personal cost above and beyond the statutory deductibles and 25% co-pays. TMA intends to implement these new rules within a few months in the Philippines and Panama and in other countries shortly after that.

 

In-depth Explanations of each Issue

 

I. TMA is using World Bank International Comparison Program (ICP) Purchasing Power Parity (PPP) rates to determine the percentage of TMA developed U.S. average per diem rates for medical care. They call the PPPs “country specific index factors”. The U.S. per diem rate is multiplied by this factor to determine the country specific per diem rate. To apply these per diem rates, bills paid in Philippine pesos are converted to dollars using the exchange rate of the date of care. Then the dollar amount is compared to the per diem rate times the number of days stay. If the converted dollar amount is higher than the per diem rate, the amount over the rate is deducted and the result is called the “allowed amount” and TMA pays 75% of this. For example, if the billed amount was Php 6,000, for services provided on 1 May 2008, the dollar equivalent would be $141.81. If TMA’s allowed amount is $100, Tricare will deduct the $100 from the $141.81 and then apply the 25% cost share to the $100. The beneficiary or provider will receive $75 but will have to absorb the $41.81 as out of pocket expenses which are not reimbursable or applied to the catastrophic cap. In many cases, the total cost to the retiree can exceed 50% of the total bill.

 

These charges are not inflated charges but prevailing charges for the specific medical conditions in the Philippines. The problem occurs primarily because of TMA’s improper implementation of PPPs. The World Bank ICP develops PPPs by utilizing relative prices of a very large number of comparable goods and services between nations at a fixed point in time; in this case 2005. So when the PPP of 22.9% for the Philippines was developed it said that it took the equivalent of about $0.229 dollars to buy an equivalent product or service worth $1.00. Of course, when this was developed the exchange rate was about 55.88 pesos to the dollar. So $0.229 dollars would purchase 12.80 pesos to purchase that product or service. On 1 May 2008, the exchange rate was 42.31 pesos to the dollar. So today that same equivalent dollar would purchase 9.69 pesos presumably to purchase the same product or service the 12.80 pesos purchased in 2005. Obviously, this is wrong, and even the ICP states that exchanges rates must be considered when people like tourists, compensation administrators and traders use PPPs. (See the ICP 2003-2006 Handbook, Chapter 1 at http://go.worldbank.org/MW520NNFK0 )

 

Let me give you an example. If in 2005, when the PPPs were developed, a two day hospitalization cost $3,500 in the US, the same hospitalization in the Philippines would cost $802 in dollars using the Philippine PPP of .229 ($3,500 times .229). In 2005 with an exchange rate of 55.88 pesos to the dollar, $802 would become 44,788 pesos to pay for the care which is what it would have cost in pesos in the Philippines at that time. If that same hospitalization was purchased on 1 May 2008 and the retiree was given the same $802 to purchase the same 44,788 peso hospitalization using the 1 May 2008 exchange rate of 42.31 the retiree would only receive 33,911 pesos. He would be required to make up the difference of 10,877 pesos which would cost him, at the same exchange rate, $257. So if TRICARE paid 75% of the $802 the retiree would pay his 25% of $200 plus an additional $257 or $457 which would be 43.2% of the total bill.

 

To put it another way, if the PPPs were in use in 2005, the retiree would have been required to pay only his 25% cost share. But three years later TMA would be asking him to pay 43.2% of the bill; in essence asking the retiree to bear the burden of lower exchange rates. Now take this example and consider what will happen with a hospital bill that cost ten times more. This is what TRICARE proposes to do.

 

However if they used the base year, 2005, exchange rate to convert the dollar Philippine rates to pesos, part of the problem would go away and they would be properly applying World Bank ICP PPPs.

 

The rest of the problem concerns how the PPPs were developed. There were only four market items used in the development of the PPPs, individual outpatient, government outpatient, individual inpatient and government inpatient fees. Government hospitals in the Philippines offer very cheap rates but they have little sanitation or equipment. Many Filipinos, about 45%, fall below the poverty line. When they seek medical care they utilize the cheapest they can find. These hospitals cater to them by offering open wards with 20 or more patients. The housekeeping is done by relatives of the patients on the ward and in the bathrooms. When medication or medical supplies are needed, the nurse gives the written order to the patient or their relative who is expected to go to a local pharmacy or medical supply store and purchase the items; they are not included on the hospital bill. Each patient is expected to have a "watcher", mostly relatives, that stay with the them 24/7. If there are problems they go get a nurse as most hospitals don't have call systems. They are expected to go to the nurses station and pick up medications and administer them to the patient. They change bed linen as needed. That's how it works here. These hospitals come nowhere near to meeting even the basic standards required of hospitals in the US. When you average the cost of care here across all segments of the population then you get a cost that does not provide the same level of care that most military retirees expect and would get in the US.

 

Another consideration is that most hospitals in the Philippines do not include the cost of medication and medical supplies as part of the hospital bill. In the case of government hospitals many ancillary services are also not included. So when these average costs are compared to US average costs, which do include all these services then is there any wonder why the rate is so low?

 

See the attached spreadsheet to see actual examples and the consequences of the above misuses of PPPs.

 

II. The second problem is how TMA determines which diagnosis to use to calculate the per diem rate. Chapter 1 Section 34 paragraph IV. F. 2. of the TRICARE Reimbursement Manual 6010.55-M Change 77 states in part: "Only the primary diagnosis, on the date of admission, will be taken into consideration when determining the group for a payment rate." The per diem rates, computed by TMA, are based on principal diagnosis at time of discharge so they should be applied in the same manner. Many times the primary diagnosis at admission is preliminary based on initial findings and may not truly reflect the real underlying condition that is later found and treated. Because of this it is very possible that a lower per diem rate will be applied that does not truly reflect the cost of the care. One real life example is the case of an individual that was admitted with a primary diagnosis of acute anemia but at discharge, 5 days later, the principle discharge diagnosis was multiple myeloma. The per diem rate between these two diagnoses is significant which will result in the retiree paying a significant portion of the bill beyond his normal cost share of 25%. The above paragraph of the Manual should be changed to read “Only the principle diagnosis, at discharge, will be taken into consideration when determining the group for a payment rate." This will make the determination the same for all retirees regardless of if they live in the U.S. or abroad.

 

See the attached spreadsheet for an example of the consequences of this rule.

 

III. The third problem is how TMA computes the US per diem rates. Simply put hundreds of diagnoses are combined into a few major groups. Within each group there are diagnosis that result in high cost inpatient stays and diagnosis that result in low cost inpatient stays. The result is per diem rates that understates approximately half of the actual hospital stay costs by diagnosis and overstates the other half. (Generally if 50 similar values are averaged, the result is a value approximately midway between all the other values. An extremely high or low value may shift averages somewhat.) This will result in some retirees having to shoulder a significant portion of the higher cost conditions. The current averages will overstate some hospitalizations by up to 100% again opening the door to fraud; see the examples below. TMA should develop an average per diem rate for each diagnosis and where surgery is involved develop two rates, one with and one without surgery. Retirees in the US are provided more than this level of detail to preclude underpayment why should not retirees living overseas. The data is available, the rates can be developed with little extra effort, and it would result in much fairer rates.

 

The spreadsheet below demonstrates only a few examples of how far some actual rates are above or below the maximum allowable charges.

Also see the attached spreadsheet for an example of a heart bypass which was taken directly from the DODIG report D-2008-045 where they tote it as a good example of how the computed per diem rates in conjunction with PPPs will bring hospital inpatient prices more in line with what is customary and reasonable in the Philippines. But in fact it shows just how understated the per diem rates are as the retiree will be required to pay 48% of the total cost. Even when the PPPs are applied properly, using the 2005 exchange rate, the retiree still has to pay 31% of the total cost not the customary 25% which demonstrates using the DODIGs own data that the per diem rates are also improperly developed.

 

IV. The fourth problem is indirectly related to the first and third problems. Because TMA knows that the cost of prescription drugs is as high or higher in some cases as in the U.S., they are using the same methods as in the U.S. to manage Maximum Allowable Charges for prescriptions. In other words they do not utilize the PPP of .229 to reduce the rates but pay at the same rates as in the U.S. Obviously one of the reasons is because there were only four market items used in the development of the ICP PPPs, individual outpatient, government outpatient, individual inpatient and government inpatient fees. The problem comes in when they include prescription drugs and medical supplies as part of the per diem when paying for inpatient care. Because they are using the PPP of .229 to apply the Maximum Allowable Charge for inpatient per diem rates the prescription drugs and supplies used during the hospitalization are also included in the lower calculation of 22.9% of the US cost. To compound the problem government hospital inpatient cost brought the average down while military retirees do not use these facilities due to their low standards.

 

TMA may argue that the World Bank accounted for inpatient drugs and medical supplies in their rate of 22.9% back in 2005. But most medications and other medical supplies like IV kits etc. are not included in local hospital charges. All government hospitals and most private hospitals require the patient to purchase drugs and supplies outside the hospital. A few hospitals, like St Lukes and Asian Hospital, provide these items. But the vast majority does not. In government hospitals, where half the PPP rate comes from, they have no standards to meet, the buildings are dirty, no window glass or screens in many cases, patients are placed in open wards of 20 or so patients, and they have no semi or private rooms or air conditioning. Patients supply their own sheets, food, water, etc. as well. So not only are drugs not included in their bills but the level of care received is far below what would be considered acceptable in the U.S. (It should be understood that policies and standards that are considered the norm in the U.S. are not always the case in other countries and in particular in third world countries.)

 

High-end private hospitals like St Lukes, and there are probably five or six of them in the Philippines, operate pretty much like US hospitals in regards to drugs and supplies. The rest require the patient to purchase these items. Most private hospitals will have a pharmacy that offers some of the drugs and supplies that are in demand like IV kits and IV solutions and the patient can buy directly from the hospital pharmacy but usually they have limited stock. So for many items the patient has to purchase from outside locations. If you go to most local hospitals, you will find numerous pharmacy and medical supply outlets operating just outside the grounds. Even if the hospital pharmacy has the items, they are purchased separately and paid for in cash and not included on the bill. Essentially the hospital bill covers room charges, lab and x-ray, operating room etc. So when the market basket items in the Philippines were compared to the like items in the US to determine the PPP of 22.9% the inpatient stays in government and private hospitals in the Philippines did not include the cost of drugs and medical supplies while those in the US did. That’s part of the reason the PPP is as low as it is, not to mention the lack of modern standards in government hospitals. It is unlikely that the World Bank, even if they were aware of this difference, would have been able to capture the cost since there is no hospital record to show what medications and medical supplies were bought by relatives. There would be no way to connect these purchases at local pharmacies to specific patients or their hospitalizations. Local pharmacies do not keep records on who received a specific medication like in the US. Military retirees, receiving care in the Philippines, would submit the hospital bill, which essentially covers room charges, ancillary charges such as x-ray, lab, operating room, etc., and submit the receipts for prescriptions and medical supplies. Under the changes in Chapter 1 Section 34 of TRICARE Reimbursement Manual 6010.55-M Change 77 they will be added to the hospital charges which will be applied against the reduced per diem rates. That’s assuming that WPS will even accept receipts for these items for inclusion with the hospital bill. In particular this is a significant problem for hospitalizations for patients that are undergoing chemo therapy where the drugs used are extremely expensive.

 

Inpatient drugs and medical supplies should be handled separately from the per diem rates and TMA should make the necessary changes to their manuals.

 

V. The fifth problem concerns the use of the ICP PPP as the basis to discount the National CHAMPUS Maximum Allowable Charge (CMAC) rate for ancillary and medical supply costs. When the ICP PPPs were developed, as noted in item I. above, these costs were not included in the items compared, individual outpatient, government outpatient, individual inpatient and government inpatient fees. The information in item I. above explains why they were not included in the inpatient portion. In addition individual outpatient visit costs both in the US and in the Philippines do not include the cost of ordered laboratory, x-ray, ultrasound or other ancillary services. So they were not even considered. Yet TMA plans to use the artificially low ICP PPP to develop maximum allowable charges for all ancillary care which includes laboratory, x-ray, ultrasound, MRI, CT and other procedures. The result is that a majority of the cost of these services will be born by the retiree. Note there are two spreadsheets with identical information except the first one depicts the consequences of the interim rate of .52 and the second the consequences of the final rate of .229 up to 95% of the cost of care will be born by retirees.

 

See the attached spreadsheet for an example of the consequences of this rule.