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United States Government Accountability Office: 
GAO: 

Report to the Committee on Armed Services, U.S. Senate: 

June 2014: 

Defense Health Care: 

TRICARE Dental Services Contracts' Requirements and Structure: 

GAO-14-497: 

GAO Highlights: 

Highlights of GAO-14-497, a report to the Committee on Armed Services, 
U.S. Senate. 

Why GAO Did This Study: 

DOD offers comprehensive health care coverage to millions of 
beneficiaries through TRICARE, a system of health care that DOD 
purchases from private insurers to supplement the health care that DOD 
provides through its military and dental treatment facilities (DTF). 
Purchased dental services are provided through separate programs for 
different groups of beneficiaries: (1) the ADDP provides dental care 
to active duty servicemembers who do not have ready access to a DTF; 
(2) the TDP provides dental insurance to eligible dependents of active 
duty servicemembers, and to National Guard and Reserve members and 
their dependents; and (3) the TRDP provides dental insurance to 
retired uniformed service members and their dependents. DHA is 
responsible for awarding, administering, and overseeing contracts with 
private insurers for these programs. 

Senate Report 112-173, which accompanied the Senate Committee on Armed 
Services' version of the National Defense Authorization Act for fiscal 
year 2013, mandated that GAO review DOD's private sector care 
contracts, including its contracts for dental services. GAO examined 
(1) how DHA developed the requirements for its current dental services 
contracts and (2) the reasons for DHA's use of separate contracts for 
different beneficiary groups. GAO reviewed relevant laws, regulations, 
and DOD contracts and acquisition planning documents. GAO also 
interviewed DHA officials and other stakeholders. 

What GAO Found: 

To develop requirements for its current dental services contracts, 
officials from the Department of Defense's (DOD) Defense Health Agency 
(DHA) analyzed market research, data from contractors' past 
performance, legislation, independent cost estimates, and other 
information. DHA officials used this information to align the contracts'
requirements with contract goals to deliver high quality dental 
services in a cost effective manner and to facilitate access to care. 

* Market research: DHA officials gathered information through market 
research and analyzed it to determine the capabilities within the 
dental services market to satisfy the agency's needs. 

* Performance monitoring: DHA officials analyzed information about 
contractors' past performance, including claims payment data, to 
assess and revise contract requirements. 

* Legal requirements: DHA officials reviewed laws relevant to each 
dental services contract to identify changes required by statute. 

* Independent cost estimates: DHA officials reviewed cost estimates 
for new benefit requirements they were considering for the TRICARE 
Retiree Dental Program (TRDP) and TRICARE Dental Program (TDP) 
contracts to assess cost efficiency. 

* Other sources of information: DHA officials reviewed lessons learned 
from previous procurements, current dental services contract 
requirements, and dental best practices and changes in the 
professional practice of dentistry. 

DHA uses separate contracts for different beneficiary groups in part 
because the programs that serve them are funded differently. The TRDP 
contract is separate from the TRICARE Active Duty Dental Program 
(ADDP) and the TDP contracts because the government does not 
contribute any funds for the TRDP, but does contribute funds for the 
ADDP and TDP. To provide assurance that government funds are not 
expended for the TRDP, contractors said they would have to operate the 
programs separately. As a result, DHA officials determined that there 
would be minimal cost savings from combining contracts. Differences in 
how the ADDP and TDP programs are funded also influenced DHA's 
decision to use separate contracts for these programs. DOD pays all 
costs for necessary care provided to active duty servicemembers 
through the ADDP. In contrast, the TDP is an insurance program: DOD 
and TDP beneficiaries share in the costs of premiums, which are paid 
to the contractor; the contractor is at risk for payment to providers. 
DHA officials concluded that the disadvantages of combining these two 
contracts outweighed the potential advantages. Other factors that 
contributed to DHA's decision to use separate contracts for different 
beneficiary groups included differences in program purposes, dental 
services, and network access standards. 

In comments on a draft of this report, DOD agreed with its findings 
and provided a technical comment, which was incorporated. 

What GAO Recommends: 

GAO made no recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-14-497]. For more 
information, contact Vijay A. D'Souza at (202) 512-7114 or 
dsouzav@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

DHA Analyzed Market Research, Performance Data, and Other Information 
in Developing Dental Services Contract Requirements: 

DHA Uses Separate Contracts Because of Funding Differences and Other 
Factors: 

Agency Comments: 

Appendix I: Comments from the Department of Defense: 

Appendix II: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: TRICARE Dental Services Contracts: 

Figure: 

Figure 1: Selected Phases and Activities in the Defense Health 
Agency's Acquisition Process: 

Abbreviations: 

ADDP: Active Duty Dental Program: 

DFARS: Defense Federal Acquisition Regulation Supplement: 

DHA: Defense Health Agency: 

DOD: Department of Defense: 

DTF: dental treatment facility: 

FAR: Federal Acquisition Regulation: 

FEDVIP: Federal Employee Dental and Vision Insurance Program: 

NDAA: National Defense Authorization Act: 

OPM: Office of Personnel Management: 

RFI: request for information: 

RFP: request for proposals: 

TDP: TRICARE Dental Program: 

TRDP: TRICARE Retiree Dental Program: 

VA: Department of Veterans Affairs: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

June 13, 2014: 

The Honorable Carl Levin: 
Chairman: 
The Honorable James M. Inhofe: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

In fiscal year 2012, the Department of Defense's (DOD) military health 
system offered comprehensive health care coverage to nearly 9.7 
million eligible beneficiaries through its TRICARE programs, with more 
than 4.6 million beneficiaries enrolled for TRICARE dental services. 
TRICARE is a system of health care that DOD purchases from private 
insurers to supplement the health care that DOD provides through its 
military treatment facilities and dental treatment facilities (DTF). 
The purchased dental services are provided through separate programs 
for different groups of beneficiaries: (1) the TRICARE Active Duty 
Dental Program (ADDP), which provides dental care to active duty 
servicemembers who require care not available from a DTF or who do not 
have ready access to a DTF; (2) the TRICARE Dental Program (TDP), 
which provides dental insurance to eligible dependents of active duty 
servicemembers, and to National Guard and Reserve members and their 
dependents;[Footnote 1] and (3) the TRICARE Retiree Dental Program 
(TRDP), which provides dental insurance to retired uniformed 
servicemembers and their dependents. DOD's Defense Health Agency (DHA) 
is responsible for awarding, administering, and overseeing contracts 
with private insurers for these programs.[Footnote 2] 

Senate Report No. 112-173, which accompanied the Senate Committee on 
Armed Services' version of the National Defense Authorization Act 
(NDAA) for fiscal year 2013, mandated that we review DOD's private 
sector health care contracts, including its contracts for dental 
services.[Footnote 3] This report describes: 

1. How DHA developed the requirements for its current dental services 
contracts. 

2. The reasons for DHA's use of separate contracts for different 
beneficiary groups. 

To address these objectives, we reviewed relevant laws, regulations, 
and DOD documents. Specifically, we reviewed DOD documents related to 
the acquisition of dental services--including the TRICARE dental 
services contracts, acquisition plans and strategies, documentation of 
market research, and requests for proposals (RFP)[Footnote 4]--and 
compared them to requirements for acquisition planning included in the 
Federal Acquisition Regulation (FAR) and the Defense Federal 
Acquisition Regulation Supplement (DFARS).[Footnote 5] In addition, we 
interviewed DHA officials to learn more about these programs. We also 
interviewed dental service contractors and other stakeholders 
including the American Dental Association, the Military Officers 
Association of America, the Reserve Officers Association, and the 
National Military Family Association, to obtain their perspectives on 
DOD's approach to the acquisition of dental services. 

We conducted this performance audit from August 2013 to June 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

Dental care is a key component of the health care services provided by 
the military to active duty servicemembers, and a key benefit provided 
to those who are eligible to enroll for health care coverage through 
TRICARE. DHA's TRICARE Dental Care Office administers and oversees the 
TRICARE dental care programs. 

TRICARE Dental Care Programs: 

The TRICARE Active Duty Dental Program: 

The ADDP supplements the dental services available to active duty 
servicemembers through DTFs with the goal of maintaining readiness for 
deployment.[Footnote 6] Active duty servicemembers are required to 
have a dental examination annually, during which their dental 
readiness is assessed. Dental readiness is a prerequisite for 
deployment and must be maintained among servicemembers who have been 
deployed. 

Active duty servicemembers may obtain necessary dental care at no cost 
to them at a DTF or through the ADDP. The majority of active duty 
servicemembers' dental care is provided in DTFs, which are staffed 
with general dentists and, in some cases, dental specialists.[Footnote 
7] If a necessary service cannot be provided in a timely way through 
an accessible DTF, the servicemember may obtain dental care from a 
private dentist through the ADDP.[Footnote 8] To facilitate reasonable 
access to care, the ADDP includes a network of dental care providers 
throughout the United States and its territories.[Footnote 9] 

ADDP is not an insurance program, and active duty servicemembers do 
not pay premiums for their dental care, do not share in the costs of 
the care, and do not face any annual or lifetime maximums on the cost 
of that care. Prior to establishing the ADDP, DOD paid the full cost 
of necessary dental care provided to active duty servicemembers who 
were referred to private dentists, and the prices for such privately 
provided dental services were uncontrolled. By negotiating standard 
prices for dental services with a private insurance carrier, the ADDP 
was intended to contain the costs of providing necessary care to 
active duty servicemembers. 

The TRICARE Dental Program: 

The TDP is a dental insurance program that is available to dependents 
of active duty servicemembers, and to members of the National Guard 
and Reserve and their dependents.[Footnote 10] Enrollees are 
responsible for cost-sharing premiums, certain procedure fees, and 
costs above annual and lifetime maximums. Enrollees' share of premiums 
varies with the status of the enrollee. For example, DOD pays: 

* 100 percent of the premiums of survivors of active duty 
servicemembers who died while on active duty and to eligible 
dependents of certain Reserve members; 

* Up to 60 percent of the premiums of the dependents of active duty 
service members and of certain Reserve members; and: 

* 0 percent of the premiums of certain Reserve members who are not on 
active duty and their dependents. 

The TRICARE Retiree Dental Program: 

The TRDP is a dental insurance program that is available to retired 
uniformed service members and their dependents.[Footnote 11] DOD does 
not contribute to paying the costs of this program. Enrollees are 
responsible for the full premium, any cost-sharing fees, and costs 
above the annual and lifetime maximums. 

For information about the contracts for these programs, see table 1. 

Table 1: TRICARE Dental Services Contracts: 

Contract information: Contractor; 
TRICARE Program: 
ADDP: United Concordia Companies, Inc.; 
TDP: Metropolitan Life Insurance Company, Inc.; 
TRDP: Delta Dental of California. 

Contract information: Approximate number of beneficiaries as of March 
2014; 
TRICARE Program: 
ADDP: 1.4 million[A]; 
TDP: 1.8 million; 
TRDP: 1.4 million. 

Contract information: Effective date; 
TRICARE Program: 
ADDP: Dec. 2, 2013; 
TDP: Feb. 1, 2011; 
TRDP: Jan. 2, 2013. 

Contract information: End date[B]; 
TRICARE Program: 
ADDP: July 31, 2019; 
TDP: Jan. 31, 2017; 
TRDP: Dec. 31, 2018. 

Contract information: Estimated cost to DOD[C]; 
TRICARE Program: 
ADDP: $728 million; 
TDP: $1.9 billion; 
TRDP: $0. 

Contract information: Estimated value for the contractor[C]; 
TRICARE Program: 
ADDP: $728 million; 
TDP: $3.1 billion; 
TRDP: $2.6 billion. 

Source: GAO analysis of information from the Defense Health Agency 
(DHA). GAO-14-497. 

Note: The TRICARE dental programs include the Active Duty Dental 
Program (ADDP), the TRICARE Dental Program (TDP), and the TRICARE 
Retiree Dental Program (TRDP). 

[A] The approximate number of ADDP beneficiaries is the entire active 
duty force. 

[B] Each contract includes a base interval and five option periods. 
End dates assume that all option periods will be executed. 

[C] The estimated costs and values are those at the time the contract 
was awarded, assuming that all option periods would be executed. 
Differences between the estimated cost to the Department of Defense 
(DOD) and the estimated value for the contractor reflect contributions 
from beneficiaries. 

[End of table] 

Dental Services Acquisition Process: 

The acquisition process for DHA's dental services contracts includes 
three main phases, each of which are governed by federal and 
department-level requirements.[Footnote 12] The phases include (1) 
acquisition planning, (2) RFP, and (3) award. (See figure 1.) 

Figure 1: Selected Phases and Activities in the Defense Health 
Agency's Acquisition Process: 

[Refer to PDF for image: illustration] 

Acquisition planning: 
* Define requirements; 
* Conduct market research, including requests for information; 
* Finalize acquisition planning documents. 

Request for proposals: 
* Issue request for proposals; 
* Receive proposals. 

Award: 
* Evaluate proposals; 
* Award contracts. 

Source: GAO analysis of DOD information. GAO-14-497. 

[End of figure] 

Acquisition Planning. Federal regulations require agencies to perform 
acquisition planning activities for all contracts to ensure that the 
government meets its needs in the most effective, economical, and 
timely manner possible. In the acquisition planning phase, DHA 
officials are to develop a strategy and plan to define and fulfill 
contract requirements in a timely manner and at a reasonable cost. 
Federal regulations also require that acquisition planning include 
market research, which can involve the development and use of requests 
for information (RFI).[Footnote 13] An internal working group 
consisting of a dental program manager, contracting officer, 
contracting officer's representatives, and a requirements specialist 
review information gathered during the acquisition planning process to 
determine contract requirements, according to DHA officials.[Footnote 
14] 

RFP. In the RFP phase, DHA officials issue the RFP and receive 
proposals. 

Award. In the award phase, DHA officials are responsible for 
evaluating the proposals and awarding the contract to the offeror 
presenting the best value to the government based on a combination of 
technical, cost, and performance-based factors. 

Performance Monitoring: 

After the contract is awarded, the contracting officer's 
representative is responsible for the day-to-day monitoring of 
contractor activities to ensure that the services are delivered in 
accordance with the contract's performance standards. Each dental 
service contract includes quality assurance standards for provider 
access, claims processing, and customer service (telephone coverage 
and correspondence timeliness) against which the contractor's 
performance is assessed. Contractors are required to meet these 
standards. Although DHA officials use a variety of methods to monitor 
contractors' performance, the primary method of monitoring performance 
is through monthly reports submitted by each contractor to DHA. 
[Footnote 15] 

DHA Analyzed Market Research, Performance Data, and Other Information 
in Developing Dental Services Contract Requirements: 

To develop requirements for each of its current dental services 
contracts, DHA officials analyzed market research, data from 
contractors' past performance, legislation, independent cost 
estimates, and other information.[Footnote 16] DHA officials used this 
information to align the contracts' requirements with contract goals 
to deliver high quality dental services in a cost effective manner, 
and to facilitate access to care.[Footnote 17] 

Market Research. As part of its development of contract requirements, 
DHA officials gathered information through market research and 
analyzed it to determine the capabilities within the dental services 
market to satisfy the agency's needs. DHA's market research included 
soliciting information from current and potential dental services 
contractors. To do this, DHA officials issued RFIs and draft RFPs for 
comment.[Footnote 18] These documents included questions related to 
potential benefit changes--such as how the offeror would implement a 
specific benefit--and potential data requirements--such as how the 
offeror would submit required data to DHA. In addition to RFIs and 
draft RFPs, DHA's market research activities included one-on-one 
meetings with dental services contractors.[Footnote 19] 

DHA officials used information from these market research activities 
to revise contract requirements. For example, according to DHA 
officials, feedback from contractors indicated that DOD's contract 
requirements related to information security were costing dental 
contractors (and DOD) a substantial amount of money. Partly as a 
result of contractors' feedback, DHA determined that it would be more 
economical for contractors to comply with the information security 
standards used in the commercial sector, according to these officials. 
In all three new contracts, DHA officials therefore required 
contractors to comply with commercial information security 
requirements instead of those developed by DOD. 

DHA officials also used market research to determine the technical 
feasibility of potential contract requirements. For example, after 
encountering delays in treatment preauthorization decisions due to 
poor quality radiographs (commonly known as x-rays), the RFI that DHA 
issued for the ADDP contract included questions to determine the 
feasibility of the electronic submission of radiographs. According to 
DHA officials, dental technology has progressed to allow for easy 
electronic submission of this data, resulting in better radiograph 
quality. Partly as a result of information collected through the RFI, 
DHA officials incorporated a requirement into the new ADDP contract 
for the contractor to submit radiographs electronically when 
requesting pretreatment authorization from DHA. This requirement was 
intended to increase the quality of the diagnostic information and 
thus DHA's efficiency in making preauthorization decisions. 

Performance Monitoring. DHA officials analyzed information about 
contractors' past performance, including contractors' monthly reports 
and claims payment data, to assess and revise contract requirements 
for future contractors. DHA uses a variety of methods to monitor 
performance, primarily relying on their review of monthly reports 
submitted by each contractor to DHA, which reflect how well the 
contractor is performing against the performance standards. They use 
this information to assess and revise requirements for each future 
dental services contract. For example, according to DHA officials, 
before issuing the RFP for the current TRDP contract, DHA officials' 
review of the then current TRDP contractor's performance against the 
existing contract's network access standard indicated that the 
contractor consistently exceeded the standard. As a result, DHA raised 
the network access standard in the new TRDP contract from 90 to 99 
percent, thus requiring that 99 percent of enrollees living within the 
United States, District of Columbia, Puerto Rico, Guam, and the U.S. 
Virgin Islands have access to a network general dentist within a 
specified distance of their primary residence.[Footnote 20] 

DHA officials also used other performance monitoring information, such 
as claims payment data submitted by contractors, when developing 
contract requirements. For example, DHA officials' review of the ADDP 
contractor's claims payment data confirmed reports they received from 
DTFs that some servicemembers were being treated twice (and DHA paid 
more than they would have otherwise) for the same dental problem 
because they were treated by general dentists, not dental specialists, 
and the initial treatment was not successful, according to DHA 
officials. Partly as a result of their review of this information, DHA 
officials incorporated a new requirement in the new ADDP contract that 
requires that 90 percent of all DTF-referred endodontic procedures 
(such as root canals) or oral surgeries be completed by an endodontist 
or oral surgeon, respectively.[Footnote 21] 

Legal requirements. DHA officials reviewed laws relevant to each 
dental services contract to identify changes required by statute. DHA 
officials used the information to determine whether any changes to the 
benefit or eligibility structures of the contracts would be required. 
For example, DHA added a survivor benefit to the TDP contract as a 
result of a legislative change. In addition, the Transition Assistance 
Management Program, which provides 180 days of premium-free 
transitional health care benefits after regular TRICARE benefits end, 
was added to the ADDP contract as a result of a legislative change. 

Independent Cost Estimates. DHA officials reviewed independent cost 
estimates for new benefit requirements they were considering to assess 
cost efficiency. Specifically, prior to incorporating new benefit 
requirements into the TRDP and TDP contracts, DHA obtained and 
reviewed cost estimates from a private consulting firm to determine 
the impact of these benefits on enrollees' monthly premiums. For 
example, DHA requested cost estimates for increasing the TDP 
contract's maximum lifetime orthodontic benefit requirement from 
$1,500 to $1,750 and from $1,500 to $2,000.[Footnote 22] The estimates 
indicated that monthly premiums would increase 65 cents and $1.30, 
respectively. Based in part on the cost estimate, DHA increased the 
benefit requirement in the final TDP contract so that the contractor 
must provide coverage for benefits up to $1,750. According to DHA 
officials, they do not incorporate benefits if doing so would result 
in large increases in monthly premiums. 

Other Sources of Information. Other sources of information DHA 
officials reviewed prior to determining whether to add, change, or 
eliminate requirements from their dental service contracts included: 

* Lessons learned from previous procurements for other health 
services. We previously reported that DHA incorporated lessons learned 
into the RFP for the dental services contracts as a result of 
challenges to DHA's contract award decisions for certain managed care 
support contracts.[Footnote 23] Specifically, in drafting the RFP for 
the TDP contract, officials more clearly defined how DHA officials 
planned to assess the evaluation factors when awarding the contract. 
[Footnote 24] 

* Current dental services contract requirements. DHA officials told us 
that they review current contract requirements and solicit feedback on 
them from stakeholders, including officials from various branches of 
the military and organizations representing beneficiaries, before each 
new solicitation.[Footnote 25] For example, DHA officials conducted a 
forum with military services officials through which they identified 
potential new requirements for the ADDP contract, including a referral 
tracking system that would indicate authorized care that was not 
completed and thereby allow military commanders ready access to 
information about servicemembers' dental readiness. As a result of 
this and other information they reviewed, the new ADDP contract 
required the contractor to develop a referral tracking system and 
train DHA staff on its use. 

* Dental best practices and changes in the professional practice of 
dentistry. DHA officials review industry best practices and changes in 
the practice of dentistry to determine new contract requirements. For 
example, when developing new benefits for the current TDP contract, 
DHA officials researched common dental insurance benefits and best 
practices and solicited feedback from the American Dental 
Association's Council on Government Affairs. In addition, DHA 
officials told us that they used their knowledge of changes in the 
field of dentistry, including dentistry's increased use of digital 
technology, to help them identify the electronic submission of 
radiographs as a potential solution to the previously discussed 
problem of poor radiograph quality. 

DHA Uses Separate Contracts Because of Funding Differences and Other 
Factors: 

DHA uses separate contracts for different beneficiary groups, in part, 
because the programs that serve them are funded differently. For 
example, the TRDP contract is separate from the ADDP and the TDP 
contracts because the government does not contribute any funds for the 
TRDP, but does contribute funds for the ADDP and TDP. Other factors 
that contributed to DHA's decision to use separate contracts for its 
different beneficiary groups included differences between programs, 
such as differences in their purposes, covered dental services, and 
network access standards. 

TRDP Contract: 

To provide assurance that government funds are not expended for the 
TRDP, the administrative costs associated with the TRDP must be kept 
separate from the administrative costs associated with government-
funded programs. DHA officials told us that they discussed this issue 
with potential contractors, who said that they would have to operate 
the programs separately. DHA officials determined that there would be 
minimal cost savings or efficiencies from combining contracts under 
these circumstances.[Footnote 26] 

Because the TRDP is not directly supported by DOD funds, DHA is 
exploring the possibility of shifting the option for military retirees 
to purchase dental insurance, which is currently provided through the 
TRDP, to the Federal Employee Dental and Vision Insurance Program 
(FEDVIP), which is administered by the Office of Personnel Management 
(OPM).[Footnote 27] Unlike the TRDP, the FEDVIP allows enrollees to 
select from among several plan options. DHA and OPM are in the 
preliminary process of determining the viability of this plan. DHA 
officials said that this option has both advantages and disadvantages. 
The primary advantages would include: 

* lowering the workload of staff within the TRICARE Dental Care 
Office, thereby allowing them to devote more of their time to 
administering and overseeing the remaining two programs; and: 

* allowing retirees greater flexibility to choose among insurance 
plans that differ in their premiums and coverage options. 

The primary disadvantages of shifting the option to purchase dental 
insurance to the FEDVIP would include: 

* the loss, for retirees, of the increased ease in use that results 
from similarities that have been built into the various TRICARE 
programs, such as similarities across programs in educational 
materials; 

* potentially higher premiums if the enrollee selects a plan with more 
extensive dental benefits; and: 

* potential resistance to the change among military retirees. 

DHA officials told us that it is too soon to determine whether it 
would be possible to shift the TRDP to the FEDVIP. If it is found to 
be a viable option, legislative action would be necessary for OPM to 
open the FEDVIP to military retirees and for DOD to terminate the TRDP. 

ADDP and TDP Contracts: 

Among other factors, differences in how the ADDP and TDP programs are 
funded also influenced DHA's decision to use separate contracts for 
these programs. For example, DOD pays all costs for necessary care 
provided to active duty servicemembers through the ADDP upon receipt 
of invoices for individually priced services. In contrast, the TDP is 
an insurance program: DOD and TDP beneficiaries share in the costs of 
premiums, which are paid to the contractor; and the contractor is at 
risk for payment to providers. Thus, unlike the ADDP contractor, the 
TDP contractor bears the risk of loss if total costs through the 
program are greater than predicted. (If total costs are lower than 
predicted, the contractor would earn a larger profit than expected.): 

DHA officials told us that they consulted with potential contractors 
to identify advantages and disadvantages of merging the ADDP and TDP 
contracts and they concluded that the disadvantages of combining these 
two contracts, which are largely due to the differences in funding, 
outweighed the potential advantages.[Footnote 28] The potential 
advantages of combining the contracts that DHA officials and 
contractors identified included: 

* enhanced continuity of care when individuals switch from reserve to 
active duty; 

* fewer instances in which two contractors would need to work together 
to reconcile payments when an error has been made about whether 
someone is on active or reserve duty because a single contractor would 
be responsible for both programs; 

* greater leverage in fee negotiations because the pool of potential 
enrollees would be larger; and: 

* slight gains in the efficiency of contract administration, 
particularly for monitoring contractors' performance, thereby allowing 
TRICARE Dental Care Office staff more time to devote to their other 
responsibilities. 

The potential disadvantages of combining the contracts that DHA 
officials and contractors identified included: 

* a reduction in competition if carriers do not want to participate in 
one or the other program, do not want to manage two different programs 
simultaneously under the same contract, or do not want to undertake a 
contract of the resultant size; 

* greater difficulty in selecting the best contractor to award the 
contract, as one offer may be a better match for the ADDP requirements 
and another offer a better match for the TDP requirements; 

* the potential for confusion among beneficiaries, dentists, and 
contractor staff because of differences between the programs (such as 
different benefits and payment requirements); and: 

* the potential for a compromise on quality if the contractor is not 
able to meet the requirements of both programs simultaneously and 
well. In the past, there was an interval during which a single 
contractor held both the ADDP and TDP contracts, and DHA officials 
told us that there were problems with this arrangement, including 
obstacles to care; operational challenges; and confusion among 
beneficiaries, the contractor, and the military DTFs. They said that 
these problems negatively affected both the delivery of dental care 
and the reputation of the military health system. 

Having just awarded the ADDP contract, DHA officials stated that they 
are not exploring options for combining these contracts. They noted 
that the government would have to either terminate the ADDP contract 
early or sole-source the TDP contract to extend it until the ADDP 
contract expires. They also stated that having to re-solicit a 
contract would be inefficient. 

Agency Comments: 

We requested comments on a draft of this product from DOD. In its 
written comments, reproduced in appendix I, DOD concurred with the 
findings of the report and stated that the review provided a critical 
examination of DOD's contracting initiatives supporting the ADDP, TDP, 
and TRDP. DOD also provided a technical comment, which was 
incorporated. 

We are sending copies of this report to appropriate congressional 
committees, the Secretary of Defense, the Assistant Secretary of 
Defense (Health Affairs), and other interested parties. The report 
also will be available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7114 or dsouzav@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix II. 

Signed by: 

Vijay A. D'Souza: 
Acting Director, Health Care: 

[End of section] 

Appendix I: Comments from the Department of Defense: 

The Assistant Secretary of Defense: 
Health Affairs: 
1200 Defense Pentagon: 
Washington, DC 20301-1200: 

May 16 20014: 

Mr. Vijay D'Souza: 
Acting Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. D'Souza: 

This is the Department of Defense's response to the United States 
Government Accountability Office (GAO) Draft Report, GAO-14-497, 
"Defense Health Care: TRICARE Dental Services Contracts' Requirements 
and Structure," dated April 25, 2014, (GAO Code 291148). Thank you for 
the opportunity to review the GAO #291148 Draft Report. 

I concur with the report's findings and conclusion and appreciate the 
GAO's efforts in reviewing this subject. The review provided a 
critical examination of our contracting initiatives supporting the 
TRICARE Active Duty Dental Program, the TRICARE Dental Program, and 
the TRICARE Retiree Dental Program. 

Again, thank you for your informative review and the opportunity to 
comment on the Draft Report. Your support of the Military Health 
System is appreciated. 

My points of contact are Colonel (Col) Gary Martin (Functional), and 
Mr. Gunther Zimmerman (Audit Liaison). Col Martin may be reached at 
(703) 681-8862, or Gary.Martin@dha.mil. Mr, Zimmerman may be reached 
at (703) 681-4360, or Gunther.Zimmerman@dha.mil. 

Sincerely, 

Signed by: 

Jonathan Woodson, M.D. 

[End of section] 

Appendix II: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Vijay A. D'Souza, (202) 512-7114 or dsouzav@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, key contributors to this 
report were Kristi Peterson, Assistant Director; Kristen Joan 
Anderson; Jacquelyn Hamilton; Jennel Lockley; and Drew Long. 

[End of section] 

Footnotes: 

[1] The units and members of the Army National Guard of the United 
States and of the Air National Guard of the United States are in the 
Ready Reserve of the Army and the Ready Reserve of the Air Force, 
respectively. 10 U.S.C. § 10145(b). 

[2] Beginning on Oct. 1, 2013, responsibilities for the TRICARE 
program were transitioned from the TRICARE Management Activity, which 
was terminated on that date, to the DHA. In this report, we use the 
term DHA to cover both its current responsibilities and those that 
were previously assigned to TRICARE Management Activity. For 
additional information about the establishment of DHA, see GAO, 
Defense Health Care Reform: Additional Implementation Details Would 
Increase Transparency of DOD's Plans and Enhance Accountability, 
[hyperlink, http://www.gao.gov/products/GAO-14-49] (Washington, D.C.: 
November 2013). 

[3] S. Rep. No. 112-173, at 131-32 (2012). For our work on TRICARE 
pharmacy service contracts, see GAO, Defense Health Care: Evaluation 
of TRICARE Pharmacy Services Contract Structure Is Warranted, 
[hyperlink, http://www.gao.gov/products/GAO-13-808] (Washington, D.C.: 
September 2013). For our work on TRICARE managed care support 
contracts, see GAO, Defense Health Care: Acquisition Process for 
TRICARE's Third Generation of Managed Care Support Contracts, 
[hyperlink, http://www.gao.gov/products/GAO-14-195] (Washington, D.C.: 
March 2014). 

[4] RFPs include descriptions of the contract requirements, the 
anticipated terms and conditions that will be contained in the 
contract, the information that the prospective offerors must include 
in their proposal, and the factors that will be used to evaluate the 
proposal. 

[5] The FAR defines uniform policies for the acquisition of supplies 
and services across the federal government. The FAR System is codified 
in title 48 of the Code of Federal Regulations. The DFARS defines 
uniform policies for the acquisition of supplies and services for DOD 
that supplement the FAR, and delegates authorities for deviations from 
the FAR requirements. In general, agencies may grant deviations from 
the FAR when necessary to meet the specific needs and requirements of 
each agency, unless precluded by law, executive order, or regulation. 
See FAR § 1.402. 

[6] Active duty servicemembers who are on continuous active duty 
orders for more than 30 days are eligible to receive ADDP dental 
coverage, subject to certain requirements and limitations provided in 
the ADDP. The ADDP serves active duty servicemembers of the Army, the 
Navy, the Air Force, the Marine Corps, the Coast Guard, and the 
Commissioned Corps of the National Oceanic and Atmospheric 
Administration. Others who are eligible for the ADDP include members 
of the Reserves and National Guard who serve on continuous active duty 
for more than 30 days, Reserve Component members discharged after 
serving more than 30 days on active duty in support of a contingency 
operation, and others as specified in statute. See 10 USC § 1074(c)(1). 

[7] DOD officials told us that as of April 2014, DOD had 403 DTFs 
worldwide. DHA officials told us that the number fluctuates from month 
to month and has been declining due, in part, to a reduction in forces. 

[8] Active duty servicemembers may be referred for treatment through 
the ADDP if a nearby DTF cannot provide routine dental care within 21 
days or specialty dental care within 28 days. Active duty 
servicemembers with a duty location and residence greater than 50 
miles from a DTF are automatically eligible for the ADDP and may 
obtain care through the ADDP without a referral from a DTF, although 
pre-treatment authorization is required under certain circumstances. 
Authorization is required for non-emergency treatments costing more 
than $750 per procedure or appointment, for treatment plans that are 
expected to cost $1,500 or more within a consecutive 12-month period, 
and for certain specialty procedures. 

[9] The contractor's network of providers covers the United States, 
District of Columbia, U.S. Virgin Islands, Guam, Puerto Rico, American 
Samoa, and the Northern Mariana Islands. Active duty servicemembers 
who are deployed in other locations around the world may obtain dental 
care services through a separate program, the TRICARE Overseas 
Program, which is the broad DOD health care program that supplements 
care provided by military and dental treatment facilities outside of 
the United States and its territories. Because the TRICARE Overseas 
Program is primarily a health care program, rather than a dental 
services program, it was not within the scope of our work. 

[10] The TDP offers coverage to eligible dependents of uniformed 
service active duty personnel, and to members of the Selected Reserve 
and Individual Ready Reserve and their eligible dependents. Active 
duty servicemembers, disabled veterans, foreign personnel, and 
retirees and their families are not eligible for the TDP. See 10 USC 
§§ 1076a, 10143, 10144(a), and 10144(b). The TDP provides worldwide 
coverage. 

[11] The TRDP offers coverage to eligible personnel who retired from 
the uniformed services, certain unremarried surviving spouses, certain 
dependents of retirees, and former members of the armed forces who are 
Medal of Honor recipients and their immediate dependents. See 10 USC § 
1076c. The TRDP currently includes two programs: a basic program, 
which is closed to new enrollees (except for the addition of a 
dependent), and a more expensive enhanced program. The basic program 
offers coverage within the U.S. and its territories and in Canada; the 
enhanced program offers coverage worldwide. 

In addition, eligible veterans may qualify for certain dental care 
services through the Department of Veterans Affairs (VA). For example, 
veterans who have certain dental conditions that are connected to 
their military service and veterans who were prisoners of war are 
eligible to receive any dental care they need from the VA. In 
addition, veterans who have a dental condition that aggravates a 
medical condition that resulted from their military service are 
eligible for treatment of that dental condition. Eligible veterans may 
also enroll in a dental insurance program through the VA. 

[12] In addition to federal regulations (including the FAR and DFARS), 
DOD and DHA issue other manuals, policies, and guidance to assist in 
the acquisition process. 

[13] Market research is the collection and analysis of information 
about capabilities within the market to satisfy the agency's needs. 
See FAR § 10.001(a) and DFARS § 210.001(a). RFIs are publicly released 
documents that allow the government to obtain feedback from potential 
contractors on various acquisition elements, such as the terms and 
conditions of the contract and the feasibility of potential new 
contract requirements. 

[14] Contracting officer's representatives are senior technical 
experts designated by the contracting officer to serve as a liaison 
between the contracting officer and contractors. 

[15] Each contract includes a contract data requirements list that 
describes the type of data the contractor must submit to DHA and the 
frequency with which it must be submitted. In addition, each dental 
services contract specifies that the contractor is accountable for 
assuring that reports submitted to DHA contain accurate and complete 
data. Moreover, the contractor must describe its procedures for 
collecting and preparing the data, and all reports must be supported 
with sufficient documentation. In addition to reviewing monthly 
reports, DHA officials may monitor contractor performance through 
contractor on-site observations; review of data reported by the 
contractor; and audits of contractor records, such as processed claims 
data. 

[16] These activities were detailed in DHA's acquisition plans for 
each contract. The FAR requires that the acquisition plan address all 
the technical, business, management, and other significant 
considerations that will control the acquisition, but the specific 
content of a plan will vary. FAR §7.105. The acquisition plans also 
described the need for dental services and the goals of each contract, 
among other things. 

[17] As required by 10 U.S.C. § 1073a, award of TRICARE contracts is 
done on the basis of best value to the United States to the maximum 
extent consistent with furnishing high quality health care in a manner 
that protects the fiscal and other interests of the United States. All 
of the contracts included these goals, but varied somewhat in how they 
were stated in the acquisition plan or final contract. For example, 
the acquisition plan for TRDP and the final contract for TDP stated 
that the objectives of the contract were to deliver high quality 
dental services in a cost effective manner, while the acquisition plan 
for the ADDP stated that the goals of the contract were to provide 
needed care to maintain dental readiness and deployability within a 
reasonable cost structure. 

[18] Although DHA is not required to use them, RFIs are considered a 
best practice for service acquisition in the federal government. RFIs 
allowed DHA to assess the capability of the market to meet 
requirements that DHA was considering for each new contract. See, for 
example, Office of Management and Budget, Office of Federal 
Procurement Policy, "Myth-Busting": Addressing Misconceptions to 
Improve Communication with Industry During the Acquisition Process, 
Memorandum for Chief Acquisition Officers, Senior Procurement 
Representatives, Chief Information Officers (Washington, D.C.: Feb. 2, 
2011), and Office of Management and Budget, Office of Federal 
Procurement Policy, "Myth-Busting 2": Addressing Misconceptions and 
Further Improving Communication During the Acquisition Process, 
Memorandum for Chief Acquisition Officers, Senior Procurement 
Representatives, Chief Information Officers (Washington, D.C.: May 7, 
2012). 

[19] Dental services contractors told us that, in comparison to 
industry forums conducted by DHA and attended by multiple contractors, 
one-on-one meetings with DHA officials during the market research 
process resulted in a greater willingness among contractors to discuss 
their concerns and ideas. 

[20] DHA included a 95 percent network access standard in the RFP; 
however, the successful offeror proposed a higher network access 
standard in response to the RFP and that higher standard was 
incorporated into the final contract. The TRDP network access standard 
does not apply to all areas in which dental services are covered. 

[21] In the RFP, DHA included a requirement that 85 percent of all DTF-
referred endodontic procedures be completed by endodontists and 80 
percent of all DTF-referred oral surgeries be completed by oral 
surgeons; however, the successful offeror proposed a higher standard 
in response to the RFP and that higher standard was incorporated into 
the final contract. 

[22] Senate Armed Services Committee Report No.111-035, which 
accompanied NDAA for fiscal year 2010, directed the Secretary of 
Defense to examine the costs and levels of coverage available through 
the TDP, and to consult with beneficiary organizations on needed 
improvements; in particular, for coverage for orthodontics. 

[23] An offeror that was not awarded a contract may challenge a 
federal agency's award or proposed award of a contract based on an 
alleged violation of statute or regulation. Such a challenge is known 
as a post-award bid protest. 

[24] See [hyperlink, http://www.gao.gov/products/GAO-14-195]. 

[25] Beneficiary groups with whom we spoke told us that DHA had made 
changes to program benefits that were responsive to beneficiaries' 
needs. 

[26] We previously reported that sound acquisition planning includes 
an assessment of lessons learned to identify improvements, as well as 
a comparative evaluation of the costs and benefits of alternatives. 
See GAO, Acquisition Planning: Opportunities to Build Strong 
Foundations for Better Services Contracts, [hyperlink, 
http://www.gao.gov/products/GAO-11-672] (Washington, D.C.: August 
2011), and GAO, Cost Estimating and Assessment Guide: Best Practices 
for Developing and Managing Capital Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009). 

[27] The Federal Employee Dental and Vision Benefits Enhancement Act 
of 2004 provided OPM with the opportunity to establish arrangements 
under which dental and vision benefits are made available to federal 
employees, retirees, and their dependents. Eligible employees and 
annuitants can choose among four nationwide and three regional dental 
insurance plans. These benefits are available on an enrollee-pay-all 
basis. This program allows dental insurance to be purchased on a group 
basis, which means competitive premiums and no pre-existing condition 
limitations for enrollment. 

[28] The TDP developed out of a program called the Basic Active Duty 
Dependents Dental Benefit Plan, which was implemented in 1987. When 
the ADDP was established in 2008, DHA officials decided to keep it 
separate from the previously established TDP to avoid extending the 
TDP contract on a sole-source basis until the agency was ready to 
procure ADDP services. While federal statute and acquisition 
regulations generally require that contracts be awarded on the basis 
of full and open competition, they also permit federal agencies to 
award noncompetitive contracts in certain circumstances, for example, 
when only one vendor can supply the requirements or when a sole-source 
award is made under specified small business programs. Generally, 
noncompetitive contracts must be supported by written justifications 
and approvals that address the specific exception to full and open 
competition that is being applied to the procurement. See, for 
example, GAO, Defense Contracting: Actions Needed to Increase 
Competition, [hyperlink, http://www.gao.gov/products/GAO-13-325] 
(Washington, D.C.: March 2013). 

[End of section] 

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