Summary

Pursuant to a congressional request, GAO reviewed: (1) whether the prospective payment system used by the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) was achieving its goal of saving money; and (2) the extent to which CHAMPUS was reimbursing hospitals in excess of the amounts that they billed CHAMPUS.

GAO found that: (1) the CHAMPUS prospective payment system saved both the government and beneficiaries a substantial amount of money compared to the previous system of paying billed charges; (2) for the claims examined, which represented nearly three-fourths of the expected fiscal year 1989 volume, the government and beneficiaries paid about $202 million less for hospital care than they would have paid under the previous system; (3) during fiscal year 1989, the government saved about $223 million and beneficiaries saved about $43 million on hospital claims; (4) diagnosis-related groups (DRG) have been successful in reducing CHAMPUS costs per hospital admission; and (5) total DRG payments for claims involving other insurance were nearly $3 million more than the billed charges.