Currently, according to DOD records,  over 8 million active duty and retired military personnel along with their  dependents and survivors are eligible for health care benefits from the  military health care system. Thirteen facilities were not  adequately identifying patients with third party insurance, and even when  sufficient data were available, billing was not always done. In addition to the weaknesses found in the physical controls over personal  property assets, the three facilities provided little or no independent  documentation to adequately support the cost or acquisition dates of their  personal property items. Recommendations for Executive Action

Because having sound financial and management practices affects the  ability of program directors and managers to make better decisions and  achieve results, we recommend that the Under Secretary of Defense for  Personnel and Readiness and the military services’ Surgeons General, in  conjunction with the senior management at the three MTFs, as appropriate,  develop a strategy to make short-term and long-term improvements in  data quality in the automated eligibility, cost, and clinical health care  systems;  develop and utilize analytical tools for facilitating the identification of  erroneous records in the eligibility, cost, and clinical health care  systems such as comparisons between SSA records and facility  automated medical management records;    reiterate through correspondence with MTF personnel the importance   completing or updating the DOD Form 2569, as required, to  document whether each health care beneficiary has third party  insurance;  entering patient insurance coverage information into the automated  medical information system so that more complete and accurate  reports can be generated to better identify reimbursable care for  billing;  billing third party insurance carriers promptly for admissions,  outpatient visits, and pharmacy care, including items identified in our  testing as well as other care not billed; and  collecting third party reimbursements due to the government to the  fullest extent allowed as required by DOD policy;   require MTFs to maintain an itemized list of the names and quantities of  drugs to be returned to the pharmaceutical return goods contractor for  credit or disposal, and require MTFs to routinely monitor and evaluate,  based on the management reports provided by the contractor and the  pharmaceutical prime vendor, the credits received from the returns of  drugs and net losses of those drugs to use as an indicator in determining  whether on hand inventory levels are appropriate;  require property office management to maintain, and have readily  available, independent documentation supporting the cost and date of  acquisition for all accountable personal property;  require property office management to promptly report the loss of any  personal property items detected during their periodic physical  inventories, and to adjust the property records accordingly; and   review and modify the existing processes and requirements to improve  documentation of purchase card transaction approvals, independent  receipt of the items, and invoices to better verify costs and quantities. An additional contact and staff acknowledgments are listed in  appendix V.

Scope and Methodology

We used a case study approach to review key internal control activities in  five areas—eligibility, third party billings and collections, pharmacy  expired drugs, personal property management, and government purchase  card usage at three MTFs. We also did not assess the overall  control environment or perform a comprehensive risk assessment nor did  we independently verify DOD’s financial information used in this report. Comments from the Department of Defense

The following are GAO’s comments on the Department of Defense’s letter  dated September 27, 2002. Report number was changed to reflect issuance in fiscal year 2003.
What GAO Found

The $24 billion Military Health System provided health care to over 8 million eligible beneficiaries. Although Congress has provided sizeable increases in funding for health care over the past few years, the Department of Defense (DOD) has needed supplemental appropriations for 6 of the last 8 fiscal years from 1994 to 2001 because its costs were higher than expected. The growing budgetary pressure increases the risk of not achieving the mission of the organization. DOD's military treatment facilities (MTF) represent over half of DOD's health care expenditures. The three MTF's reviewed have not effectively implemented internal control activities in the areas of eligibility, billings and collections, expired drugs, personal property management, and government purchase card usage. The three MTFs also did not identify all patients with third party insurance coverage. In addition, they frequently did not bill those insurers even when they knew that such coverage existed, thereby losing opportunities to collect millions of dollars of reimbursements for services. Ineffective physical and financial controls over personal property assets and indications of control breakdowns in the use of government purchase cards existed at the three facilities.