, B-287619, July 5, 2001

B-287619 Jul 05, 2001 Jump To VIEW DECISION DOWNLOADS RELATED PAGES GAO CONTACTS Highlights This report provides information on the legal requirements for recognizing and recording obligations under the Defense Health Program (DHP), specifically focusing on (1) the legal basis for obligations incurred by TRICARE Management Activity for, among other services, medical services provided directly by the Department of Defense (DOD) to beneficiaries as well as medical services provided by civilian contractors who subsequently bill DHP for those services, (2) the legal basis for obligations for costs of change orders or other negotiated settlements, and (3) whether the Antideficiency Act applies to DHP obligations and expenditures. GAO held that (1) DOD 's practices in obligating funds are consistent with federal regulations, (2) DOD should record obligations for change orders against the appropriation current at the time the services are rendered, and (3) DOD may enter into obligations in excess of available resources, but it must obtain appropriations sufficient to liquidate those obligations. View Decision Defense Health Program (DHP), B-287619, July 5, 2001 The Honorable Jerry Lewis Chairman, Subcommittee on Defense Committee on Appropriations House of Representatives Dear Mr. Chairman: This responds to your inquiry of April 4, 2001, concerning the legal requirements for recognizing and recording obligations under the Defense Health Program (DHP). You asked us to examine the legal basis for obligations incurred by TRICARE Management Activity for, among other services, medical services provided directly by DOD to beneficiaries as well as medical services provided by civilian contractors who subsequently bill DHP for those services. You also asked us to examine the legal basis for obligations for costs of change orders or other negotiated settlements. Finally, you asked whether the Antideficiency Act applies to DHP obligations and expenditures. By letter dated May 3, 2001, we asked the Acting Assistant Secretary of Defense for Health Affairs for information on DHP's obligations and DHP's views on the legal issues presented. On June 22, 2001 the Acting Assistant Secretary of Defense for Health Affairs responded to our request. (DOD response). We have incorporated information provided by DOD's response as appropriate throughout this opinion. In the discussion that follows we have set out the general rules for obligating funds for the medical services provided to beneficiaries and contractor provided services, and we conclude that DOD's practices in obligating funds are consistent with our holdings. For the reasons explained below, we conclude that due to DOD's legal liability for providing medical services to eligible beneficiaries, DOD may enter into obligations in excess of available budgetary resources without violating the Antideficiency Act. While DOD may enter into obligations in excess of available budgetary resources, it must obtain appropriations sufficient to liquidate those obligations. BACKGROUND Defense Health Program The Department of Defense's (DOD) primary medical mission is to maintain the health of active duty service members in peacetime and during military operations. DOD also provides health care to other individuals, including dependents of active duty members, military retirees and their dependents. /1/ DOD's health program, known as TRICARE, provides medical care to eligible beneficiaries through a combination of direct care and civilian provided care. DOD provides direct medical care through its military hospitals and clinics, known as military treatment facilities (MTFs). Medical services provided at MTFs include outpatient and inpatient care for medical and surgical conditions, pharmacy services, physical examinations, dental care, and diagnostic, laboratory and radiological tests and services. DOD supplements direct care with contracted civilian medical care. The TRICARE program provides beneficiaries with a choice among a health maintenance organization (TRICARE Prime), a preferred provider network (TRICARE Extra), and a fee-for-service benefit (TRICARE Standard). DOD contracts with managed care support contractors to administer its TRICARE program on a regional basis, which presently consists of seven contracts covering eleven geographic TRICARE regions. The TRICARE contracts consist of a base period and five option years. /2/ The TRICARE contractors perform administrative services, such as developing civilian provider networks, verifying provider credentials, negotiating reimbursement discounts, enrolling beneficiaries, referring and authorizing beneficiaries for health care, and processing health care claims. DOD awarded the TRICARE contracts as fixed-price, at-risk contracts in which the contractor assumes liability for payment of medical services subject to the requirements of the contract.