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This is an archive page. The links are no longer being updated.

This is an archive page. The links are no longer being updated.

before the

March 14, 2001

Good morning, Chairman McHugh, Representative Meehan, and distinguished members of the Subcommittee. Thank you for inviting me to discuss our role in supporting the Department of Defense (DoD) as it administers health benefits for Medicare-eligible military retirees and their families. We are dedicated to ensuring that all of our beneficiaries receive the high quality care that they deserve, and that includes U.S. military retirees.

Last year, Congress enacted new benefits for military retirees and their families in the National Defense Authorization Act for Fiscal Year 2001 (NDAA). This law allows the retirees to continue to receive the same benefits they received before turning 65 by supplementing Medicare benefits with coverage by TRICARE, the Department of Defense's (DoD) health coverage program.

We are working together with the DoD to ensure that we are ready to exchange the data they will need to process claims for these retirees once the new TRICARE benefits become effective. While our role primarily will be that of sharing data with DoD, we recognize that this is an important aspect of administering the new benefit. We look forward to continuing to work with DoD to ensure that these new benefits are implemented efficiently, and that military retirees have the care they are entitled to receive.


The Health Care Financing Administration (HCFA) is the largest health insurer in the nation, covering some 74 million Americans through Medicare, Medicaid, and the State Children's Health Insurance Program. Until 1991, once a military retiree reached the Medicare eligibility age of 65, Medicare became the retiree's primary health insurer. However, Medicare benefits are not as extensive as those offered to military personnel through TRICARE. The DoD Authorization Act of 1991 extended TRICARE coverage as secondary payer to Medicare for military retirees under age 65 who were entitled to Medicare because they had End Stage Renal Disease (ESRD) or a disability. Last year, under the NDAA, Congress required that the DoD provide the same level of benefits for retirees over age 65 as it does for military personnel under age 65.

In order to meet this new requirement, Medicare will remain the primary payer for the retirees' care. TRICARE will pay for the retirees' out-of-pocket cost, including deductibles and coinsurance, for services covered under Medicare, plus any additional TRICARE benefits not covered by Medicare, such as medical services delivered overseas, and certain categories of home health and skilled nursing facility care that currently are not Medicare benefits. Military retirees will have TRICARE to supplement Medicare beginning on October 1, 2001, as long as they are eligible for Part A Medicare benefits and enrolled in Part B of the Medicare program, which requires a premium payment from the beneficiary.

The new law also provides a prescription drug benefit, administered by DoD, for the retirees and their families. Beginning April 1, 2001, the law allows them to continue to use the DoD's pharmacy program after they become eligible for Medicare. For this benefit, retirees who are already age 65 as of April 1, 2001, will be considered "grandfathered" into the program, and will not need to be enrolled in Part B. However, those retirees who have not yet reached age 65 by April 1, 2001, must enroll in Medicare Part B to receive the DoD drug benefit.

Data Sharing

While we act as a primary payer for more than 39 million Medicare beneficiaries, 11 million of these patients also have supplemental insurance, commonly referred to as Medigap, which is sold by private insurance companies to cover and pay for some additional items not covered by Medicare. We regularly exchange claims information with private sector Medigap insurers so they know what Medicare has covered and paid for and can determine what they are responsible for paying. In administering the new TRICARE benefits, DoD will have a role very similar to a Medigap insurer, and will cover and pay for some services that Medicare does not. And like any Medigap plan, TRICARE will want specific claims information about Medicare services provided to its beneficiaries.

There are two types of information that we will share with DoD to assist it in successfully implementing these new benefits. First, we will share Medicare enrollment data. Because Congress has tied eligibility for the additional TRICARE benefits to an individual's entitlement to Medicare, DoD will need to know which retirees are entitled to Medicare benefits, and enrolled in Part B. Second, we will share paid claims data. Since Medicare remains the primary payer for many retiree health services, DoD will need accurate claims data to determine when Medicare has already paid for retiree benefits, so that TRICARE can determine its appropriate supplemental payments. We regularly share this claims data, commonly referred to as "crossover" claims, with Medigap plans.

Enrollment Data

We maintain an extensive record of everyone who has ever been entitled to receive Medicare benefits on our Enrollment Data Base (EDB). The EDB is HCFA's single resource for managing Medicare entitlement data, and contains the names of entitled individuals and ties their Medicare entitlement history to them by using a unique health insurance claim number. The release of this data is governed by the Privacy Act of 1974. In certain circumstances, and for limited purposes, we share this data with outside parties such as Federal and State agencies, contractors, and insurance companies.

We will share this enrollment data with DoD, and we have been working diligently with DoD to ensure our respective systems will be able to exchange the data. We fully expect to be able to share this data by October 1, 2001. In the interim, when the pharmacy benefit begins in April 2001, we understand that the DoD will allow military retirees to confirm their eligibility for the new pharmacy benefit by showing their Medicare card, which indicates the cardholder is a Medicare beneficiary, as well as the beneficiary's Part B enrollment status.

Crossover Claims Data

By law, we contract with private sector insurance companies to process and pay Medicare claims. Currently, we contract with about 50 insurance companies for this purpose, and each has Trading Partner Agreements (TPAs) with numerous entities, including State Medicaid Agencies and Medigap plans, that need access to claims data to ensure that they pay only what Medicare does not cover. Private insurers that operate Medigap plans in multiple States generally execute a separate agreement with each Medicare contractor to obtain the Medicare processed claims data for all of their beneficiaries throughout the country.

We are working with DoD and each of our contractors to arrange TPAs. Our goal is to establish one standard TPA document that TRICARE can use with all of our contractors. Additionally, we soon will instruct our contractors to enter into TPAs with DoD, and we will continue to work with our contractors and the DoD to expedite this process and ensure its success. We fully expect the TPAs to be in place well in advance of the October 1, 2001, effective date of the TRICARE benefits. We are committed to improving customer service through standardizing and streamlining the TPA process. Our work with DoD will give us good experience to move forward with this effort.


Medical records privacy is an important issue, and we are working with DoD to ensure beneficiary data is exchanged securely. When we share data with outside entities, the Privacy Act of 1974, as amended by the Computer Matching and Privacy Protection Act of 1988 (CMPPA), requires that these entities prepare written agreements specifying the terms of the data exchange. This type of agreement provides safeguards against unauthorized use and redisclosure of such information by an outside organization. All agreements must contain specific details, including: the purpose and legal authority for the disclosure, the expected results, a description of the records to be used, how the records are to be used, and how the data will be secured.

We have met with DoD representatives, established key points of contact for them within our Agency, and are drafting a Computer Matching Agreement to safeguard the data to be exchanged. Once the agreement has been finalized, the CMPPA requires us to report the Computer Matching Agreement to Congress and the Office of Management and Budget, and to publish the agreement and an explanation in the Federal Register 30 days prior to its activation. We fully expect to fulfill these obligations and to complete the agreement in time to exchange beneficiary information appropriately, so retirees can receive their new benefits efficiently and securely by October 1, 2001.


We are committed to serving our beneficiaries, and we are very pleased that our Medicare beneficiaries who are military retirees will receive the expanded benefits mandated by Congress. We have been working cooperatively with the DoD to make sure our respective systems are well prepared to facilitate the exchange of beneficiary enrollment and crossover claims data that will allow these retirees to receive their new benefits. We have the required agreements under development, and we expect to be fully prepared to share the appropriate data with DoD in an efficient and secure way by October 1, 2001. I appreciate the opportunity to discuss these preparations with you today, and I am happy to answer your questions.

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Last revised: February 12, 2002