The Department of Defense contracts with more than 11,000 health care professionals, at an annual cost of about $1 billion. A recent Government Accountability Office report says the military could do more to coordinate its contracting duties to save money and avoid duplication.

Military Health Spending:

The Military Health System provides health care to almost 10 million active-duty service men and women, military retirees, and their families. TRICARE, the military’s health plan primarily for civilian dependents and retirees, covers care both at military treatment facilities and at non-military providers.

The military is a huge health care purchaser, spending $52.5 billion on health care in fiscal year 2011. Prescription drug benefits accounted for about $5 billion dollars and direct health care $17.8 billion of total health spending. The Department of Defense (DOD) operates 56 hospitals and 365 clinics worldwide, and employs nearly 60,000 civilians and 86,000 military personnel.

Better Coordination Needed in Health Professional Contracting:

More than 11,000 military health care professionals are contractors, including nurses and physicians, most of whom work in on-base military treatment facilities. The military spent just over $1 billion on contracted health professionals in 2011. Contracts can help the DOD control health costs and spending by setting a fixed price for services over a period of time.

In a recent brief, the Government Accountability Office (GAO) said the DOD’s health provider contracting is fragmented among its different branches. Coordinating contracting could allow the DOD to reap health cost savings from economies of scale in contract administration, and could avoid some unnecessary duplication in contract services.

A quick summary of the GAO findings:

  • The military departments had not consolidated their staffing requirements by developing joint contracts beyond a limited number of instances amounting to about 8 percent of the fiscal year 2011 spending on health care professionals.
  • The GAO identified several instances where multiple task orders were placed for the same type of provider in the same area or facility.
  • On the positive side, the DOD often uses multiple-award contracts, which result in lower prices compared to other contract arrangements and go to small businesses.

The GAO’s short but informative report is a good complement to other materials on the Military Health System. See this Congressional Research Service brief for a good overview of the subject, and see the veterans health care section of my blog for more posts on military health care.