Civilian Health and Medical Program of the Uniformed Services (CHAMPUS); TRICARE Program; Uniform HMO Benefit; Special Health Care Delivery Programs

DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

RIN 0720-AA21

[DoD 6010.8-R]

Civilian Health and Medical Program of the Uniformed Services

(CHAMPUS); TRICARE Program; Uniform HMO Benefit; Special Health Care

Delivery Programs

AGENCY: Office of the Secretary, DoD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule establishes requirements and procedures for

implementation of the TRICARE Program, the purpose of which is to move

toward a comprehensive managed health care delivery system in military

medical treatment facilities and CHAMPUS. Principal components of the

proposed rule include: establishment of a comprehensive enrollment

system; creation of a triple option benefit, including a Uniform HMO

Benefit required by law; a series of initiatives to coordinate care

between military and civilian delivery systems, including Resource

Sharing Agreements, Health Care Finders, PRIMUS and NAVCARE Clinics,

and new prescription pharmacy services; and a consolidated schedule of

charges, incorporating steps to reduce differences in charges between

military and civilian services. This proposed rule also includes

provisions expanding use of nonavailability statement authorities to

require use of designated civilian network providers for inpatient

hospital care, establishing a special civilian provider program

authority for active duty dependents overseas, and implementing

revisions to the Managed Care Program of the former Public Health

Service hospitals that now function as Uniformed Services Treatment

Facilities. The TRICARE Program is a major reform of the Military

Health Services System that will improve services to beneficiaries and

help sustain the system during this period of significant budgetary

limitations.

DATES: Written comments must be received on or before April 10, 1995.

ADDRESSES: Office of the Civilian Health and Medical Program of the

Uniformed Services (OCHAMPUS), Office of Program Development, Aurora,

CO 80045-6900.

FOR FURTHER INFORMATION CONTACT: Steve Lillie, Office of the Assistant

Secretary of Defense (Health Affairs), telephone (703) 695-3350.

Questions regarding payment of specific claims under the CHAMPUS

allowable charge method should be addressed to the appropriate CHAMPUS

contractor.

SUPPLEMENTARY INFORMATION:

I. Overview of the TRICARE Program

The medical mission of the Department of Defense is to provide, and

maintain readiness to provide, medical services and support to the

armed forces during military operations, and to provide medical

services and support to members of the armed forces, their family

members, and others entitled to DoD medical care.

Under the current Military Health Services System (MHSS), CHAMPUS-

eligible beneficiaries may receive care in the direct care system (that

is, care provided in military hospitals or clinics) or seek care from

civilian health care providers; the government shares in the cost of

such civilian care under the Civilian Health and Medical Program of the

Uniformed Services (CHAMPUS), or for some beneficiaries, the Medicare

program. The substantial majority of care for military beneficiaries is

provided within catchment areas of inpatient military treatment

facilities (MTFs), a catchment area being roughly defined as the area

within a 40-mile radius around an MTF.

Recently DoD has embarked on a new program, called TRICARE, which

will improve the quality, cost, and accessibility of services for its

beneficiaries. Because of the size and complexity of the military

health services system, TRICARE is being phased over a period of

several years. The principal mechanisms for the implementation of

TRICARE are the designation of the commanders of selected military

medical centers as Lead Agents for 12 TRICARE regions across the

country, operational enhancements to the Military Health Services

System, and the procurement of managed care support contracts for the

provision of civilian health care services in those regions.

Sound management of the MHSS requires a great degree of

coordination between the direct care system and CHAMPUS-funded civilian

care, which, unfortunately, has not always been present. The TRICARE

Program recognizes that ``step one'' of any process aimed at improving

management is to identify the beneficiaries for whom the health program

is responsible. Indeed, the dominant feature in some private sector

health plans, enrollment of beneficiaries in their respective health

care plans, is an essential element. This proposed rule moves toward

establishment of a basic structure of health care enrollment for the

MHSS. Under this structure, all health care beneficiaries become

enrolled in TRICARE and classified into one of five enrollment

categories:

1. Active duty members, all of whom are automatically enrolled in

TRICARE Prime, an HMO-type option;

2. TRICARE Prime enrollees, who (except for active duty members)

must be CHAMPUS eligible;

3. TRICARE Standard enrollees, which covers all CHAMPUS-eligible

beneficiaries who do not enroll in TRICARE Prime or another managed

care program affiliated with TRICARE;

4. Medicare-eligible beneficiaries, who, although not eligible for

TRICARE Prime, may participate in many features of TRICARE; and

5. Participants in other managed care programs affiliated with

TRICARE.

The second major feature of the TRICARE Program will be the

establishment of a triple option benefit. CHAMPUS-eligible

beneficiaries will be offered three options: They may enroll to receive

health care in an HMO-type program called ``TRICARE Prime;'' they may

use the civilian preferred provider [[Page 7490]] network on a case-by-

case basis, under ``TRICARE Extra;'' or they may remain in the standard

CHAMPUS benefit plan, called ``TRICARE Standard.'' Enrollees in Prime

will obtain most of their care within the network, and pay

substantially reduced CHAMPUS cost shares when they receive care from

civilian network providers. Enrollees in Prime will retain freedom to

utilize non-network civilian providers, but they will have to pay cost

sharing considerably higher than under Standard CHAMPUS if they do so.

Beneficiaries who choose not to enroll in TRICARE Prime will preserve

their freedom of choice of provider for the most part by remaining in

TRICARE Standard. These beneficiaries will face standard CHAMPUS cost

sharing requirements, except that their coinsurance percentage will be

lower when they opt to use the preferred provider network under TRICARE

Extra. All beneficiaries continue to be eligible to receive care in

military facilities. Active duty dependents who enroll in TRICARE Prime

will have a priority over other beneficiaries.

A third major feature of the TRICARE program is a series of

initiatives, affecting all beneficiary enrollment categories, designed

to coordinate care between military and civilian health care systems.

Among these is a program of resource sharing agreements, under which a

TRICARE contractor provides to a military treatment facility, personnel

and other resources to increase the availability of services from

military facilities and providers. Another initiative is establishment

of Health Care Finders, which are administrative offices to facilitate

referrals to appropriate services in the military facility or civilian

provider network. In addition, integrated quality and utilization

management services for military and civilian sector providers will be

instituted. Still another initiative is establishment of special

pharmacy programs for areas affected by base realignment and closure

actions. These pharmacy programs will include special eligibility for

some Medicare-eligible beneficiaries. TRICARE also makes permanent

authority for PRIMUS and NAVCAREClinics, which are dedicated

contractor-owned and operated clinics. These initiatives will have a

major impact on military health care delivery systems, improving

services for all beneficiary enrollment categories.

The fourth major component of TRICARE is the implementation of a

consolidated schedule of charges, incorporating steps to reduce

differences in charges between military and civilian services. In

general, the TRICARE Program reduces out-of-pocket costs for civilian

sector care. For example, the current CHAMPUS cost sharing requirements

for outpatient care for active duty dependents include a deductible of

$150 per person or $300 per family ($50/$100 for dependents of sponsors

in pay grades E-4 and below) and a copayment of 20 percent of the

allowable cost of the services. Under TRICARE Prime, which incorporates

the ``Uniform HMO Benefit,'' these cost sharing requirements will be

replaced by a standard charge for most outpatient visits of $12.00 per

visit, or $6.00 per visit for dependents of E-4 and below sponsors.

For retirees, their dependents and survivors, the current

deductible of $150 per person or $300 per family and 25 percent cost

sharing will also be replaced by a standard charge, which is likewise

$12.00 for most outpatient visits.

Beneficiaries who are not under TRICARE Prime will also have

significant opportunities to reduce expected out-of-pocket costs under

CHAMPUS. These opportunities include increased availability of MTF

services by virtue of resource sharing agreements, the new special

pharmacy programs, and access to PRIMUS and NAVCARE Clinics.

With respect to military hospitals, for retirees, their dependents,

and survivors, consideration may be given in the future to

establishment of nominal per-visit fees, for some or all retirees,

their family members, and survivors, and for some or all types of

services for those beneficiaries. Fees would be considered to help

control demand for military facility care, to free up capacity and

reduce waiting times, and lower the costs of health care.

A user fee can be structured in many different ways, for example,

exempting lower income segments of the covered population. Most

importantly, the motivation for a fee is to encourage the more

efficient provision of lower cost health care, and not to produce

budgetary savings. Accordingly, analysis of alternatives would be based

on the assumption that revenue produced by a user fee will be allocated

to other benefits or quality of life programs. When this issue is

considered for possible implementation in fiscal year 1998, if the

Department decides to establish a nominal fee for some or all

outpatient services provided to some or all retirees, their family

members, and survivors, a proposed rule will then be issued for public

comment. Again, it should be noted that this suggestion of a possible

outpatient fee does not include active duty service members or their

family members.

Taken as a whole, the TRICARE Program is a major reform of the

Military Health Services System--one that will accomplish the

transition to a comprehensive managed health care system that will help

to achieve DoD's medical mission into the next century.

II. Provisions of Proposed Rule Regarding the TRICARE Program

These regulatory changes are being published as an amendment to the

32 CFR part 199 because the operating details of CHAMPUS will be

altered significantly. Our regulatory approach is to leave the existing

CHAMPUS rules largely intact and to create new Secs. 199.17 and 199.18

to describe the TRICARE Program and the uniform HMO benefit. The major

provisions of the proposed new Sec. 199.17 regarding the TRICARE

Program are summarized below.

A. Establishment of the TRICARE Program (proposed Sec. 199.17(a))

This paragraph introduces the TRICARE Program, and describes its

purpose, statutory authority, and scope. It is explained that certain

usual CHAMPUS and MHSS rules do not apply under the TRICARE Program,

and that implementation of the Program occurs in a specific geographic

area, such as a local catchment area or a region. Public notice of

initiation of a Program will include a notice published in the Federal

Register.

With respect to statutory authority, major statutory provisions are

title 10, U.S.C. sections 1099 (which calls for a health care

enrollment system), 1097 (which authorizes alternative contracts for

health care delivery and financing), and 1096 (which allows for

resource sharing agreements). Significantly, the National Defense

Authorization Act for Fiscal Year 1995 amended section 1097 to

authorize the Secretary of Defense to provide for the coordination of

health care services provided pursuant to any contract of agreement

with a civilian managed care contractor with those services provided in

military medical treatment facilities. This amendment set the stage for

many features of TRICARE, including initiatives to improve coordination

between military and civilian health care delivery components and the

consolidated schedule of beneficiary charges.

B. Triple Option (proposed Sec. 199.17(b))

This paragraph presents an overview of the triple option feature of

the TRICARE Program. Most beneficiaries are offered enrollment in the

TRICARE [[Page 7491]] Prime Plan, or ``Prime.'' They are free to choose

to enroll to obtain the benefits of Prime, or not to enroll and remain

in the TRICARE Standard Plan, or ``Standard,'' with the option of using

the preferred provider network under the TRICARE Extra Plan, or

``Extra.'' When the TRICARE Program is implemented in an area, active

duty members will be enrolled in Prime.

C. Eligibility for Enrollment in Prime (proposed Sec. 199.17(c))

This paragraph describes who may enroll in the Program. All active

duty members are automatically enrolled; all CHAMPUS-eligible

beneficiaries may enroll. Since it is likely that priorities for

enrollment will be necessary owing to limited availability of Prime,

the order of priority for enrollment will be as follows: First priority

will be active duty members; second priority will be active duty family

members; and third priority will be CHAMPUS-eligible retirees, family

members of retirees, and survivors. At this time, TRICARE Prime will

not offer enrollment to non-CHAMPUS-eligible beneficiaries.

D. Health Benefits Under Prime (proposed Sec. 199.17(d))

This paragraph states that the benefits established for the Uniform

HMO Benefit option (see Sec. 199.18, Uniform HMO Benefit option) are

applicable to CHAMPUS eligible enrollees in TRICARE Prime.

Under TRICARE, all enrollees in Prime and all beneficiaries who do

not enroll remain eligible for care in MTFs. Active duty family members

who enroll in TRICARE Prime would be given priority for MTF access over

non-enrollees; priorities for other categories of beneficiary would be

unaffected by their enrollment. Regarding civilian sector care, active

duty member care will continue to be arranged as needed and paid for

through the supplemental care program.

E. Health Benefits Under Extra (proposed Sec. 199.17(e))

This paragraph describes the availability of the civilian preferred

provider network under Extra. When Extra is used, CHAMPUS cost sharing

requirements will be reduced. See Table 2 following the preamble for a

comparison of TRICARE Standard, TRICARE Extra, and TRICARE Prime cost

sharing requirements.

F. Health Benefits Under Standard (proposed Sec. 199.17(f))

This paragraph describes health benefits for beneficiaries who opt

to remain in Standard. Broadly, participants in Standard maintain their

freedom of choice of civilian provider under CHAMPUS (subject to

nonavailability statement requirements), and face standard CHAMPUS cost

sharing requirements, except when they take advantage of the preferred

provider network under Extra. The CHAMPUS benefit package applies to

Standard participants.

G. Coordination With Other Health Care Programs (proposed

Sec. 199.17(g))

This paragraph provides that, for beneficiaries enrolled in managed

health care programs not operated by DoD, DoD may establish a contract

or agreement with the other managed health care program for the purpose

of coordinating beneficiary entitlements under the other program and

the military health services system. This potentially includes any

private sector health maintenance organization (HMO) or competitive

medical plan, and any Medicare HMO. Any contract or agreement entered

into under this paragraph may integrate health care benefits, delivery,

financing, and administrative features of the other managed care plan

with some or all of the features of the TRICARE Program. This paragraph

is based on 10 U.S.C. section 1097(d), as amended by section 714 of the

National Defense Authorization Act for Fiscal Year 1995.

H. Resource Sharing Agreements (proposed Sec. 199.17(h))

This paragraph provides that military treatment facilities may

establish resource sharing agreements with the applicable managed care

support contractors for the purpose of providing for the sharing of

resources between the two parties. Internal and external resource

sharing agreements are authorized. Under internal resource sharing

agreements, beneficiary cost sharing requirements are the same as in

military facilities. Under internal or external resource sharing

agreements, a military treatment facility commander may authorize the

provision of services pursuant to the agreement to Medicare-eligible

beneficiaries, if this will promote the most cost-effective provision

of services under the TRICARE Program.

I. Health Care Finder (proposed Sec. 199.17(i))

This paragraph establishes procedures for the Health Care Finder,

an administrative office that assists beneficiaries in being referred

to appropriate health care providers, especially the MTF and civilian

network providers. Health Care Finder services are available to all

beneficiaries.

J. General Quality Assurance, Utilization Review, and Preauthorization

Requirements (proposed Sec. 199.17(j))

This paragraph emphasizes that all requirements of the CHAMPUS

basic program relating to quality assurance, utilization review, and

preauthorization of care apply to the CHAMPUS component of Prime, Extra

and Standard. These requirements and procedures may also be made

applicable to military facility services.

K. Pharmacy Network Services in Base Realignment and Closure Sites

(proposed Sec. 199.17(k))

This paragraph establishes two special pharmacy programs, a retail

pharmacy network program and a mail service pharmacy program. This

proposal is made with consideration of the existing mail service

pharmacy demonstration, under which features of the permanent,

nationwide program are being tested at a number of sites. Proceeding to

solicit public comment on design features at this point, prior to

completion of the demonstration, will enable us to move most

expeditiously to establish the nationwide program in the future.

An important aspect of the mail service and retail pharmacy

programs is that, under the authority of section 702 of the National

Defense Authorization Act for Fiscal Year 1993, Pub. L. 102-484, there

is a special rule regarding eligibility for prescription services. The

special rule is that Medicare-eligible beneficiaries, who are normally

ineligible for CHAMPUS, are under certain special circumstances

eligible for the pharmacy programs. The special circumstances are that

they live in an area adversely affected by the closure of a military

medical treatment facility. A provision of the National Defense

Authorization Act for Fiscal Year 1995 additionally provides

eligibility for Medicare eligible beneficiaries who demonstrate that

they had been reliant on a former military medical treatment facility

for pharmacy services.

Under the proposed rule, the area adversely affected by the closure

of a facility is established as the catchment area of the treatment

facility that closed. The catchment area is the existing statutory

designation of the geographical area primarily served by a military

hospital. The catchment area is defined in law as ``the area within

approximately 40 miles of a medical facility of the uniformed

services.'' Pub. L. 100-180, sec. 721(f)(1), 10 U.S.C.A.

[[Page 7492]] 1092 note. This is also the geographical basis in the law

for nonavailability statements that authorize CHAMPUS beneficiaries who

live within areas served by military hospitals to obtain care outside

the military facility. 10 U.S.C. 1079(a)(7). Because the purpose of the

special eligibility rule for Medicare-eligible beneficiaries is to

replace the pharmacy services lost as a consequence of the base

closure, and because the 40-mile catchment area is the only

geographical area designation established in law to describe the

beneficiaries primarily served by a military medical facility, we

believe it most appropriate to adopt the established 40-mile catchment

area for purposes of the applicability of the special eligibility rule

for pharmacy services. Thus, under the proposed rule, Medicare-eligible

beneficiaries who live within the established 40-mile catchment area of

a treatment facility that closed are eligible to use the pharmacy

programs if available in that area.

There are several noteworthy special rules regarding the area that

will be considered adversely affected by the closure of a military

treatment facility. First, 40-mile catchment area generally will apply

in the case of the closure of a military clinic, as it does in the case

of the closure of a hospital. Recognizing that there may be clinic

closure cases involving very small clinics that were not providing any

significant amount of pharmacy services to retirees and their

dependents, these cases will not be considered to be areas adversely

affected by the closure of a medical treatment facility. The reason for

this is simply that if the facility was not providing a significant

amount of services, its closure will not have a noteworthy adverse

affect in the area. Another circumstance in which a facility closure

will not be considered to have an adverse affect on an area is if the

area is also within the catchment area of another military medical

treatment facility that remains open and available to the

beneficiaries.

The Director, Office of CHAMPUS may establish other procedures for

the effective operation of the pharmacy programs, dealing with issues

such as encouragement of use of generic drugs for prescriptions and use

of appropriate drug formularies, as well as establishment of

requirements for demonstration of past reliance on a military medical

treatment facility for pharmacy services.

L. PRIMUS and NAVCARE Clinics (proposed Sec. 199.17(l))

The proposed rule would add a new Sec. 199.17(l). Under the

authority of 10 U.S.C. sections 1074(c) and 1097, this section would

authorize PRIMUS and NAVCARE Clinics, which have operated to date under

demonstration authority. Because these contractor owned and operated

clinics have increased beneficiariy access to care and become very

popular with beneficiaries, this provision will make permanent the

PRIMUS and NAVCARE Clinic authority.

As under the demonstration project, PRIMUS and NAVCARE Clinics will

function as extensions of military treatment facilities. As such, all

beneficiaries eligible for care in military treatment facilities

(including active duty members, Medicare-eligible beneficiaries, and

other non-CHAMPUS eligible beneficiaries) are eligible to use PRIMUS

and NAVCARE Clinics. For PRIMUS and NAVCARE Clinics established prior

to October 1, 1994, CHAMPUS deductibles and copayments will not apply.

Rather, military hospital policy regarding beneficiary charges will

apply. For PRIMUS and NAVCARE Clinics established after September 30,

1994, the provisions of the Uniform HMO Beneift regarding out patient

costsharing will apply (see proposed Sec. 199.18(d)(3)). Other CHAMPUS

rules and procedures, such as coordination of benefits requirements

will apply. The Director, OCHAMPUS may waive or modify CHAMPUS

regulatory requirements in connection with the operation of PRIMUS and

NAVCARE Clinics.

M. Consolidated Schedule of Beneficiary Charges (proposed

Sec. 199.17(m))

This paragraph establishes a consolidated schedule of beneficiary

charges applicable to health care services under TRICARE for Prime

enrollees (other than active duty members), Standard enrollees, and

Medicare-eligible beneficiaries. The schedule of charges is summarized

at Table 1, following the preamble. As demonstrated by the table,

TRICARE provides for reduced beneficiary out-of-pocket costs.

Included in the consolidated schedule of beneficiary charges is the

``Uniform HMO Benefit'' design required by law. This is further

discussed in the next section of the preamble.

N. Additional Health Care Management Requirements Under Prime (proposed

Sec. 199.17(n))

This paragraph describes additional health care management

requirements within Prime, and establishes the point-of-service option,

under which CHAMPUS beneficiaries retain the right to obtain services

without a referral, albeit with higher cost sharing. Each CHAMPUS-

eligible enrollee will select or be assigned a Primary Care Manager who

typically will be the enrollee's health care provider for most

services, and will serve as a referral agent to authorize more

specialized treatment if needed. Health Care Finder offices will also

assist enrollees in obtain referrals to appropriate providers.

Referrals for care will give first priority to the local MTF; other

referral priorities and practices will be specified during the

enrollment process.

O. Enrollment Procedures (proposed Sec. 199.17(o))

This paragraph describes procedures for enrollment of beneficiaries

other than active duty members, who must enroll. The Prime plan

features open season periods during which enrollment is permitted.

Prime enrollees will maintain participation in the plan for a 12 month

period, with disenrollment only under special circumstances, such as

when a beneficiary moves from the area. A complete explanation of the

features, rules and procedures of the Program in the particular

locality involved will be available at the time enrollment is offered.

The features, rules and procedures may be revised over time, coincident

with reenrollment opportunities.

P. Civilian Preferred Provider Networks (proposed Sec. 199.17(p))

This paragraph sets forth the rules governing civilian preferred

provider networks in the TRICARE Program. It includes conformity with

utilization management and quality assurance program procedures,

provider qualifications, and standards of access for provider networks.

In addition, the methods which may be used to establish networks are

identified.

DoD beneficiaries who are not CHAMPUS-eligible, such as Medicare

beneficiaries, may seek civilian care under the rules and procedures of

their existing health insurance program. Providers in the civilian

preferred provider network generally will be required to participate in

Medicare, so that when Medicare beneficiaries use a network provider

they will be assured of a participating provider.

Q. Preferred Provider Network Establishment Under Any Qualified

Provider Method (proposed Sec. 199.17(q))

This paragraph describes one process that may be used to establish

a preferred [[Page 7493]] provider network (the ``any qualified

provider method'') and establishes the qualifications which providers

must demonstrate in order to join the network.

R. General Fraud, Abuse, and Conflict of Interest Requirements Under

TRICARE Program (proposed Sec. 199.17(r))

This paragraph establishes that all fraud, abuse, and conflict of

interest requirements for the basic CHAMPUS program are applicable to

the TRICARE Program.

S. Partial Implementation of TRICARE (proposed Sec. 199.17(s))

This paragraph explains that some portions of TRICARE may be

implemented separately: A program without the HMO option, or a program

covering a subset of health care services, such as mental health

services.

T. Inclusion of Veterans Hospitals in TRICARE Networks (proposed

Sec. 199.17(t))

This paragraph would provide the basis for participation by

Department of Veterans Affairs facilities in TRICARE networks, based on

agreements between the VA and DoD.

U. Cost Sharing of Care for Family Members of Active Duty Members in

Overseas Locations (proposed Sec. 199.17(u))

This paragraph would permit establishment of special CHAMPUS cost

sharing rules for family members of active duty members when they

accompany the member on a tour of duty outside the United States. A

recently initiated demonstration program, described in the Federal

Register of September 2, 1994 (59 FR 45668), tests such a program for

active duty family members in countries served by OCHAMPUS, Europe.

V. Administrative Procedures (proposed Sec. 199.17(v))

This paragraph authorizes establishment of administrative

procedures for the TRICARE Program.

III. Provisions of the Rule Concerning the Uniform HMO Benefit

Option

A. In General. (Sec. 199.18(a))

This paragraph introduces the Uniform HMO Benefit option. The

statutory provision that establishes the parameters for determination

of the Uniform HMO Benefit option is section 731 of the National

Defense Authorization Act for Fiscal Year 1994. It requires the

establishment of a Uniform HMO Benefit option, which shall ``to the

maximum extent practicable'' be included ``in all future managed health

care initiatives undertaken by'' DoD. This option is to provide

``reduced out-of-pocket costs and a benefit structure that is as

uniform as possible throughout the United States.'' The statute further

requires a determination that, in the managed care initiative that

includes the Uniform HMO Benefit, DoD costs ``are no greater than the

costs that would otherwise be incurred to provide health care to the

covered beneficiaries who enroll in the option.''

In addition to this provision of the National Defense Authorization

Act for Fiscal Year 1994, a similar requirement is established by

section 8025 of the DoD Appropriations Act, 1994. As part of an

initiative ``to implement a nationwide managed health care program for

the military health services system,'' DoD shall establish ``a uniform,

stabilized benefit structure characterized by a triple option health

benefit feature.'' Our Uniform HMO Benefit also implements this

requirement of law.

In fiscal year 1993, DoD implemented the expansion of the CHAMPUS

Reform Initiative to the areas of Carswell and Bergstorm Air Force

Bases in Texas and England Air Force Base, Louisiana. (These sites were

singled out because they were military bases identified for closure in

the Bare Realignment and Closure, or ``BRAC'' process; thus the benefit

developed for them is called the ``BRAC Benefit.'') This expansion of

the CHAMPUS Reform Initiative offers positive incentives for enrollment

and preserves the basic design of the original CHAMPUS Reform

Initiative program, although it is not identical to that program. The

original CHAMPUS Reform Initiative design featured a $5 per visit fee

for most office visits, a very much reduced schedule of other

copayments, and no deductible or enrollment fee. Although its

generosity made it very popular with beneficiaries, it also caused

substantial concerns regarding government budget impact. This benefit

fails to meet the statutory requirement for cost neutrality to DoD.

The Carswell/Bergstrom/England HMO benefit (BRAC Benefit) model

attempts partially to address these concerns, while providing enhanced

benefits. It features enrollment fees for some categories of

beneficiaries, $5, $10, or $15 per visit fees, depending on beneficiary

category, and inpatient per diems of $125 for retirees, their family

members and survivors.

A new HMO benefit is being presented in this proposed rule as the

Uniform HMO Benefit. The principal features of the proposed benefit are

displayed in Table 3 following the preamble. Its most significant

change from the BRAC Benefit is that inpatient cost sharing for

retirees, their dependents and survivors is reduced to the levels faced

by active duty dependents, with concomitant increases in enrollment

fees for these beneficiaries. A second important change is that there

would be no enrollment fee for dependents of active duty members.

Finally, fees are set so that they may be held constant for a five-year

period, rather than escalating each year with price inflation.

The development of this proposed Uniform HMO Benefit included

painstaking analysis of utilization, cost, and administrative effect of

potential cost sharing schedules. This analysis included a series of

assumptions regarding most likely ramifications of various components

of the benefit and the operation of the TRICARE Program. Based on this

exhaustive analysis, the formulation of the Uniform HMO Benefit in the

proposed rule is the most generous benefit DoD can offer consistent

with the statutory cost-neutrality mandate.

B. Benefits Covered Under the Uniform HMO Benefit Option

(Sec. 199.18(b))

For CHAMPUS-eligible beneficiaries, the HMO Benefit option

incorporates the existing CHAMPUS benefit package, with potential

additions of preventive services and a case management program to

approve coverage of usually noncovered health care services (such as

home health services) in special situations.

C. Deductibles, Fees, and Cost Sharing Under the HMO Benefit Option

(proposed Sec. 199.18(c) through (f))

Instead of usual CHAMPUS cost sharing requirements, Uniform HMO

Benefit option participants will pay special per-service, specific

dollar amounts or special reduced cost sharing percentages, which would

vary by category of beneficiary.

The Uniform HMO Benefit also would include an annual enrollment

fee, which would be in lieu of the CHAMPUS deductible. The current

CHAMPUS deductible is $50 per person or $100 per family for family

members of active duty members in pay grades E-1 through E-4; and $150

per person or $300 per family for all other beneficiaries. The

enrollment fee under the Uniform HMO Benefit option would vary by

beneficiary category: $0 for active duty family members, and $230

individual or $460 family for retirees, their family members, and

survivors. [[Page 7494]]

The amount of proposed enrollment fees, outpatient charges and

inpatient copayment under the uniform HMO benefit are presented in

detail in Sec. 199.18(c) through (f).

D. Applicability of the Uniform HMO Benefit to the Uniformed Service

Treatment Facilities Managed Care Program (proposed Sec. 199.18(g))

The section would apply the uniform HMO Benefit provisions to the

Uniformed Services Treatment Facility Managed Care Program, beginning

in fiscal year 1996. This program includes civilian contractors

providing health care services under rules quite different from

CHAMPUS, the CHAMPUS Reform Initiative, or other CHAMPUS-related

programs.

The National Defense Authorization Act for Fiscal Year 1991,

section 718(c), required implementation of a ``managed-care delivery

and reimbursement model that will continue to utilize the Uniformed

Services Treatment Facilities'' in the MHSS. This provision has been

amended and supplemented several times since that Act. Most recently,

section 718 of the National Defense Authorization Act for Fiscal Year

1994 authorized the establishment of ``reasonable charges for inpatient

and outpatient care provided to all categories of beneficiaries

enrolled in the managed care program.'' This is a deviation from

previous practice, which had tied Uniformed Services Treatment

Facilities (USTF) rules to those of military hospitals. This new

statutory provision also states that the schedule and application of

the reasonable charges shall be in accordance with terms and conditions

specified in the USTF Managed Care Plan. The USTF Managed Care Plan

agreements call for implementation in the USTF Managed Care Program of

cost sharing requirements based on the level and range of cost sharing

required in DoD managed care initiatives.

Under section 731 of the FY-94 Authorization Act, the Uniform HMO

Benefit is to apply ``to the maximum extent practicable'' to ``all

future managed care initiatives undertaken by the Secretary.'' The

Conference Report accompanying this Act calls on DoD ``to develop and

implement a plan to introduce competitive managed care into the areas

served by the USTFs to stimulate competition'' among health care

provider organizations ``for the cost-effective provision of quality

health care services.'' We have determined that it is practicable to

use the Uniform HMO Benefit for the USTF Managed Care Program. In

addition, this action will stimulate competition between the USTFs and

firms operating the other DoD managed care program to which the Uniform

HMO Benefit applies. Based on these Congressional provisions, as well

as compelling need for a uniform HMO benefit, we propose to include the

USTF Managed Care Program under the Uniform HMO Benefit, effective

October 1, 1995.

IV. Provisions of the Proposed Rule Concerning Other Regulatory Changes

The proposed rule makes a number of additional changes to support

implementation of TRICARE.

A. Nonavailability Statements (proposed revisions to Secs. 199.4(a)(9)

and 199.15)

Proposed revisions to Sec. 199.4(a)(9) provide the basis for

administrative linkages between a determination of medical necessity

and the decision to issue or deny a Nonavailability Statement (NAS).

NASs are issued when an MTF lacks the capacity or capability to provide

a service, but carry no imprimatur of medical necessity. Proposed

revisions to Sec. 199.15 establish ground rules for CHAMPUS PRO review

of care in military medical treatment facilities, and would allow for

consolidated determinations of medical necessity applicable to both the

MTF and civilian contexts when the CHAMPUS PRO performs the review.

Additional proposed revisions to section 199.4 relate to the

issuance of NASs by designated military clinics. Beneficiaries residing

near such designated clinics would have to obtain a nonavailability

statement for the selected outpatient services subject to NAS

requirements under Sec. 199.4(A)(9)(i)(C).

In a notice of proposed rule making published on May 11, 1993, we

proposed a new provision to allow consideration of availability of care

in civilian preferred provider networks in connection with issuance of

non-availability statements; in conjunction with this, a considerable

expansion of the list of outpatient service for which an NAS is

required was proposed. That proposal was not finalized. Now we propose

a more limited program, covering only inpatient care. Recently, a

demonstration program was established in California and Hawaii,

allowing consideration of availability of care in civilian preferred

provider networks in connection with issuance of non-availability

statements for inpatient services only. The results of the

demonstration will be incorporated into a Report to Congress on the

expanded use of NASs, as required by section 735 of the National

Defense Authorization Act for FY 1995, due not later than December 31,

1994. Early indications are that the demonstration effort has saved

money without adverse impacts; the report to Congress will provide a

definitive assessment. No final action to expand the program will go

into effect until well after we comply with the Congressional reporting

requirement.

Finally, proposed revisions to Sec. 199.4(a)(9) would apply NAS

requirements in cases where military providers serving at designated

military outpatient clinics also provide inpatient care to

beneficiaries at civilian hospitals, under External Partnership or

Resource Sharing Agreements.

B. Participating Provider Program (proposed revisions to Sec. 199.14)

Proposed revisions to Sec. 199.14 change the Participating Provider

Program from a mandatory, nationwide program to a localized, optional

program. The initial intent of the program was to increase the

availability of participating providers by providing a mechanism for

providers to sign up as Participating Providers; a payment differential

for Participating Providers was to be added as an inducement. With the

advent of the TRICARE Program and its extensive networks of providers,

the nationwide implementation of the Participating Provider Program

would be redundant. Accordingly, this rule would eliminate the

nationwide program. Where the need arises, CHAMPUS contractors will act

to foster participation, including establishment of a local

Participating Provider Program when needed, but not including the

payment differential feature.

V. Regulatory Procedures

Executive Order 12866 requires certain regulatory assessments for

any ``significant regulatory action,'' defined as one which would

result in an annual effect on the economy of $100 million or more, or

have other substantial impacts.

The Regulatory Flexibility Act (RFA) requires that each Federal

agency prepare, and make available for public comment, a regulatory

flexibility analysis when the agency issues a regulation which would

have a significant impact on a substantial number of small entities.

This is not a significant regulatory action under the provisions of

Executive Order 12866, and it would not have a significant impact on a

substantial number of small entities.

This proposed rule will impose additional information collection

requirements on the public under the Paperwork Reduction Act of 1980

(44 [[Page 7495]] U.S.C. 3501-3511), because beneficiaries will be

required to enroll. Information collection requirements are under

review.

This is a proposed rule. Public comments are invited. All comments

will be considered. A discussion of the major issues raised by public

comments will be included with issuance of the final rule, anticipated

approximately 60 days after the end of the comment period.

Table 1.--Consolidated Schedule of Beneficiary Charges

------------------------------------------------------------------------

Medicare

TRICARE prime TRICARE standard eligible

beneficiaries

------------------------------------------------------------------------

Services from Uniform HMO TRICARE Extra Cost sharing for

TRICARE Network Benefit cost cost sharing Medicare

Providers. sharing applies applies (see participating

(see Table 4), Table 2). providers

except generally

unauthorized applies.

care covered by

point-of-service

rules.

Services from non- TRICARE Prime Standard CHAMPUS Standard

network point-of-service cost sharing Medicare cost

providers. rules apply: applies. sharing

deductible of applies.

$300 per person

or $600 per

family; cost

share of 50

percent.

Internal resource Same as military Same as military Where

sharing facility cost facility cost applicable,

agreements. sharing. sharing. same as

military

facility cost

sharing.

External resource For professional For professional Where

sharing charges, same as charges, same applicable, for

agreements. military as military professional

facility cost facility cost charges, same

sharing; for sharing; for as military

facility facility facility cost

charges, same as charges, same sharing; for

Uniform HMO as TRICARE facility

Benefit cost Extra cost charges, same

sharing. sharing. as standard

Medicare cost

sharing.

PRIMUS and Same as military Same as military Same as military

NAVCARE Clinics facilities. facilities. facilities.

established

before October

1, 1994.

PRIMUS and Uniform HMO Uniform HMO Uniform HMO

NAVCARE Clinics Benefit Benefit Benefit

established outpatient cost outpatient cost outpatient cost

after September sharing applies. sharing applies. sharing

30, 1994. applies.

Prescription As specified in For retail In facility

drugs from Uniform HMO pharmacy closure cases:

civilian Benefit (see network, 20 from retail

pharmacies. Table 4). percent cost pharmacy

share; for mail network, 20

service percent cost

pharmacy, $4 share; from

per mail service

prescription pharmacy, $8

for active duty per

dependents; $8 prescription;

per no deductible.

prescription

for retirees,

their

dependents and

survivors.

Outpatient No charge........ Same as TRICARE Same as TRICARE

services in Prime. Prime.

military

facilities.

Inpatient Applicable daily Same as TRICARE Same as TRICARE

services in subsistence Prime. Prime.

military charges.

facilities.

------------------------------------------------------------------------

Table 2.--Proposed TRICARE Triple Option Program

------------------------------------------------------------------------

TRICARE standard TRICARE extra TRICARE prime

------------------------------------------------------------------------

ENROLLMENT FEE... NONE............. NONE............ ACT DUTY DEPS--

NONE OTHERS--

$230

INDIVIDUAL,

$460 FAMILY.

OUTPATIENT $300 FAMILY ($100 SAME AS STANDARD NONE.

DEDUCTIBLE. E4 & BELOW). CHAMPUS.

OUTPATIENT ACT DUTY DEPS-- ACT DUTY DEPS-- SEE TABLE 3--

SERVICES COST 20% COPAY AFTER 15% COPAY AFTER SCHEDULE OF

SHARES, DEDUCTIBLE DEDUCTIBLE UNIFORM HMO

INCLUDING MENTAL OTHERS--25% OTHERS--20% BENEFIT

HEALTH, COPAY AFTER COPAY AFTER COPAYMENTS.

EMERGENCY DEDUCTIBLE. DEDUCTIBLE.

SERVICES, ETC.

INPATIENT COST ACT DUTY DEPS-- ACT DUTY DEPS-- ACT DUTY DEPS--

SHARES, $25 PER SAME AS $25 PER

INCLUDING ADMISSION OR STANDARD ADMISSION OR

MATERNITY AND CURRENT PER CHAMPUS OTHERS-- $11 PER DIEM,

SKILLED NURSING DIEM, WHICHEVER LESSER OF $250 WHICHEVER IS

FACILITIES, NOT IS GREATER PER DAY OR 25% GREATER.

INCLUDING MENTAL OTHERS--LESSER OF OTHERS--SAME AS

HEALTH. OF APPLICABLE INSTITUTIONAL ACT DUTY DEPS.

PER DIEM ($323 CHARGES, PLUS

IN FY 1995) OR 20% OF

25% OF PROFESSIONAL

INSTITUTIONAL CHARGES.

CHARGES, PLUS

25% OF

PROFESSIONAL

CHARGES.

AMBULATORY ACT DUTY DEPS-- ACT DUTY DEPS-- ACT DUTY DEPS--

SURGERY. $25 PER EPISODE $25 COPAY $25 COPAY

OTHERS--25% OF OTHERS--20% OTHERS--SAME AS

ALLOWABLE COPAY AFTER ACT DUTY DEPS.

CHARGES. DEDUCTIBLE.

PRESCRIPTION DRUG ACT DUTY DEPS-- ACT DUTY DEPS-- ACT DUTY DEPS--

BENEFITS. 20% COPAY AFTER 15% COPAY AFTER $5 PER

DEDUCTIBLE DEDUCTIBLE; NO PRESCRIPTION

OTHERS--25% OF DEDUCTIBLE IF OTHERS--$9 PER

ALLOWABLE NETWORK PRESCRIPTION.

CHARGES. PHARMACY

OTHERS--20%

COPAY AFTER

DEDUCTIBLE; NO

DEDUCTIBLE IF

NETWORK

PHARMACY.

[[Page 7496]]

HOSPITALIZATION ACT DUTY DEPS-- ACT DUTY DEPS-- ACT DUTY DEPS--

FOR MENTAL $25 PER SAME AS TRICARE SAME AS TRICARE

ILLNESS AND ADMISSION OR $20 STANDARD STANDARD

SUBSTANCE USE. PER DIEM OTHERS--20% OF OTHERS--$40 PER

WHICHEVER IS INSTITUTIONAL DIEM.

GREATER OTHERS-- AND

LESSER OF PROFESSIONAL

APPLICABLE PER CHARGES.

DIEM ($132 IN FY

1995) OR 25% OF

INSTITUTIONAL

CHARGES, PLUS

25% OF

PROFESSIONAL

CHARGES.

------------------------------------------------------------------------

Note: THIS CHART IS FOR ILLUSTRATIVE PURPOSES ONLY. IT DOES NOT INCLUDE

ALL DETAILS OF BENEFITS AND COPAYMENTS.

Table 3.--Uniform HMO Benefit Fee and Copayment Schedule

----------------------------------------------------------------------------------------------------------------

Retirees,

ADDs E4 and ADDs E5 and deps, and

below above survivors

----------------------------------------------------------------------------------------------------------------

Annual Enrollment Fee.................................................... $0/$0 $0/$0 $230/$460

Outpatient Visits, Including Separate Radiology or Lab Services, Family

Health, and Home Health Visits.......................................... 6 12 12

Emergency Room Visits.................................................... 10 30 30

Mental Health Visits, Individual......................................... 10 20 25

Mental Health Visits, Group.............................................. 6 12 17

Ambulatory Surgery....................................................... 25 25 25

Prescriptions............................................................ 5 5 9

Ambulance Services....................................................... 10 15 20

DME, Prostheses, Supplies................................................ 110 115 120

Inpatient Per Diem, General.............................................. 211 211 211

Inpatient Per Diem, MH/Substance Use..................................... 220 220 40

----------------------------------------------------------------------------------------------------------------

1Percent.

\2\Minimum $25 per admission.

List of Subjects in 32 CFR Part 199

Claims, Handicapped, Health insurance, and Military personnel.

Accordingly, 32 CFR part 199 is proposed to be amended as follows:

PART 199--[AMENDED]

1. The authority citation for part 199 continues to read as

follows:

Authority: 5 U.S.C. 301, 10 U.S.C. 1079, 1086.

2. Section 199.1 is proposed to be amended by adding a new

paragraph (r), to read as follows:

Sec. 199.1 General provisions.

* * * * *

(r) TRICARE Program. Many rules and procedures established in

sections of this part are subject to revision in areas where the

TRICARE Program is implemented. The TRICARE Program is the means by

which managed care activities designed to improve the delivery and

financing of health care services in the Military Health Services

System (MHSS) are carried out. Rules and procedures for the TRICARE

Program are set forth in Sec. 199.17.

3. Section 199.2(b) is proposed to be amended by adding the

following definitions and placing them in alphabetical order to read as

follows:

Sec. 199.2 Definitions.

* * * * *

(b) * * *

External Resource Sharing Agreement. A type of External Partnership

Agreement, established in the context of the TRICARE program by

agreement of a military treatment facility commander and an authorized

TRICARE contractor. External Resource Sharing Agreements may

incorporate TRICARE features in lieu of standard CHAMPUS features that

would apply to standard External Partnership Agreements.

* * * * *

Internal Resource Sharing Agreement. A type of Internal Partnership

Agreement, established in the context of the TRICARE program by

agreement of a military treatment facility commander and an authorized

TRICARE contractor. Internal Resource Sharing Agreements may

incorporate TRICARE features in lieu of standard CHAMPUS features that

would apply to standard Internal Partnership Agreements.

NAVCARE Clinics. Contractor owned, staffed, and operated primary

clinics exclusively serving uniformed services beneficiaries pursuant

to contracts awarded by a Military Department.

* * * * *

PRIMUS Clinics. Contractor owned, staffed, and operated primary

care clinics exclusively serving uniformed services beneficiaries

pursuant to contracts awarded by a Military Department.

* * * * *

TRICARE Program. The program established under Sec. 199.17.

* * * * *

TRICARE Extra Plan. The health care option, provided as part of the

TRICARE Program under Sec. 199.17, under which beneficiaries may choose

to receive care in facilities of the uniformed services, or from

special civilian network providers (with reduced cost sharing), or from

any other CHAMPUS-authorized provider (with standard cost sharing).

* * * * *

TRICARE Prime Plan. The health care option, provided as part of the

TRICARE Program under Sec. 199.17, under which beneficiaries enroll to

receive all health care from facilities of the uniformed services and

civilian network providers (with civilian care subject to substantially

reduced cost sharing).

* * * * * [[Page 7497]]

TRICARE Standard Plan. The health care option, provided as part of

the TRICARE Program under Sec. 199.17, under which beneficiaries are

eligible for care in facilities of the uniformed services and CHAMPUS

under standard rules and procedures.

* * * * *

Uniform HMO benefit. The health care benefit established by

Sec. 199.18.

* * * * *

Uniformed Services Treatment Facilities Managed Care Program. The

managed care program established pursuant to section 718(c) of the

National Defense Authorization Act for Fiscal Year 1991, Pub. L. 101-

510, for certain former Public Health Service hospitals deemed to be

facilities of the uniformed services by section 911 of the Military

Construction Authorization Act, 1982, Pub. L. 97-99, 42 U.S.C. 248C.

Certain rules pertaining to this program are established by

Sec. 199.18.

* * * * *

4. Section 199.4 is proposed to be amended by redesignating

paragraph (a)(1) as paragraph (a)(1)(i), by adding new paragraph

(a)(1)(ii), by revising paragraph (a)(9)(i)(C), and by adding new

paragraphs (a)(9)(vi) and (a)(9)(vii), to read as follows:

Sec. 199.4 Basic program benefits.

(a) * * *

(1) * * *

(ii) Impact of TRICARE Program. The basic program benefits set

forth in this section are applicable to the basic CHAMPUS program. In

areas in which the TRICARE Program is implemented, certain provisions

of Sec. 199.17 will apply instead of the provisions of this section. In

those areas, the provisions of Sec. 199.17 will take precedence over

any provisions of this section with which they conflict.

* * * * *

(9) * * *

(i) * * *

(C) An NAS is also required for selected outpatient procedures if

such services are not available at a Uniformed Service facility

(including selected facilities which are exclusively outpatient

clinics) located within a 40-mile radius (catchment area) of the

residence of the beneficiary. This does not apply to emergency services

or for services for which another insurance plan or program provides

the beneficiary primary coverage. Any changes to the selected

outpatient procedures will be published in the Federal Register at

least 30 days before the effective date of the change by the ASD(HA)

and will be limited to the following categories: Outpatient surgery and

other selected outpatient procedures which have high unit costs and for

which care may be available in military facilities generally. The

selected outpatient procedures will be uniform for all CHAMPUS

beneficiaries. A list of the selected outpatient clinics to which this

NAS requirement applies will be published periodically in the Federal

Register.

* * * * *

(vi) Consideration of availability of care in civilian preferred

provider networks in connection with issuance of Nonavailability

Statements.--(A) General requirement. With respect to any inpatient

health care service subject to a Nonavailability Statement requirement

under paragraph (a)(9)(B) of this section, in determining whether to

issue a Nonavailability Statement, the commander of the military

treatment facility may consider the availability of services from

selected civilian health care facilities within the same catchment

area. If the commander determines that, although the services are not

available from a military treatment facility, the services are

available from such a selected civilian facility, the commander may

deny a Nonavailability Statement. If a Nonavailability Statement is

denied on this basis, CHAMPUS cost sharing is not allowed if the

services are not obtained from the designated civilian facility.

Civilian facilities to which this requirement applies are those

facilities that are in a preferred provider network, established under

procedures specified by the Director, OCHAMPUS, within the 40-mile

catchment are, able to provider the services needed.

(B) Additional requirement under External Partnership/Resource

Sharing programs. The Assistant Secretary of Defense (Health Affairs)

may designate selected military outpatient clinics for additional NAS

requirements regarding inpatient hospital care available under an

External Partnership or External Resources Sharing agreement. Under

such an agreement, care will be provided at a civilian facility, but

professional services will be provided by on or more physicians (or

other individual health care providers) on staff at the military

outpatient clinic. With respect to the designated military outpatient

clinics and the specified services covered by such External Partnership

or External Resource Sharing agreement, Nonavailability Statements will

be required to the same extent as they are for inpatient military

hospitals located within an approximately 40-mile radius of a

beneficiary's residence. If services are available under an External

Partnership Resource Sharing agreement, the military clinic commander

may deny a Nonavailability Statement. If a Nonavailability Statement is

denied on this basis, CHAMPUS cost sharing is not allowed if the

services are not obtained from the designated civilian facility under

the External Partnership or External Resource Sharing agreement. A list

of selected military outpatient clinics and services covered by the

External Partnership or External Resource Sharing agreement NAS

requirement will be published periodically in the Federal Register.

(C) Exceptions. A Nonavailability Statement may not be withheld on

the basis of paragraphs (a)(9)(vi)(A) or (a)(9)(vi)(B) of this section

in any of the following circumstances:

(1) A case-by-case waiver is granted based on a medical judgment

made by the commander (or other official designated for this purpose)

of the military treatment facility (or Specialized Treatment Service

Center) that although the care is available from a designated civilian

provider, it would be medically inappropriate because of a delay in the

treatment or other special reason to require that such provider be

used; or

(2) A case-by-case waiver is granted by the commander (or other

official designated for this purpose) of the military treatment

facility (or Specialized Treatment Service Center) that although the

care is available from a designated civilian provider, use of that

provider would impose exceptional hardship on the beneficiary or the

beneficiary's family.

(D) Procedures. The waiver request and appeal procedures

established pursuant to paragraph (a)(10)(vii) of this section shall be

applicable to the case-by-case waivers referred to in paragraph

(a)(9)(vi)(C) of this section.

(E) Preference for military facility use. In any case in which

services subject to a Nonavailability Statement requirement under

paragraph (a)(9) of this section are available from both a military

treatment facility and from a designated civilian facility under

paragraph (a)(9)(vi) of this section, the military treatment facility

must be used unless use of the designated civilian facility is

specifically authorized.

(vii) In the case of any service subject to an NAS requirement

under paragraph (a)(9) of this section and also subject to a

preadmission (or other pre-service) authorization requirement under

Sec. 199.4 or Sec. 199.15, the administrative processes for the NAS and

pre-service authorization may be combined.

* * * * * [[Page 7498]]

Sec. 199.14 [Amended]

5. Section 199.14 is proposed to be amended by removing paragraph

(g)(1)(i)(C) and by redesignating paragraph (g)(1)(i)(D) as paragraph

(g)(1)(i)(C).

6. Section 199.15 is proposed to be amended by adding a new

paragraph (n), to read as follows:

Sec. 199.15 Peer Review Organization Program.

* * * * *

(n) Authority to integrate CHAMPUS PRO and military treatment

facility utilization review activities. (1) In the case of a military

medical treatment facility (MTF) that has established utilization

review requirements similar to those under the CHAMPUS PRO program, the

PRO may, at the request of the MTF, utilize procedures comparable to

the CHAMPUS PRO program procedures to render determinations or

recommendations with respect to MTF utilization review requirements.

(2) In any case in which a CHAMPUS PRO has comparable

responsibility and authority regarding utilization review in both an

MTF (or MFTs) and CHAMPUS, determinations as to medical necessity in

connection with services from an MTF or CHAMPUS-authorized provider may

be consolidated.

(3) In any case in which an MFT reserves authority to separate an

MTF determination on medical necessity from a CHAMPUS PRO program

determination on medical necessity, the MTF determination is not

binding on CHAMPUS.

7. Sections 199.17 and 199.18 are proposed to be added, to read as

follows:

Sec. 199.17 TRICARE Program.

(a) Establishment. The TRICARE Program is established for the

purpose of implementing a comprehensive managed health care program for

the delivery and financing of health care services in the MHSS.

(1) Purpose. The TRICARE Program implements management improvements

primarily through managed care support contracts that include special

arrangements with civilian sector health care providers and better

coordination between military treatment facilities and these civilian

providers. Implementation of these management improvements includes

adoption of special rules and procedures not ordinarily followed under

CHAMPUS or military treatment facility requirements. This section

establishes those special rules and procedures.

(2) Statutory authority. Many of the provisions of this section are

authorized by statutory authorities other than those which authorize

the usual operation of the CHAMPUS program, especially 10 U.S.C. 1079

and 1086. The TRICARE Program also relies upon other available

statutory authorities, including 10 U.S.C. 1099 (health care enrollment

system), 10 U.S.C. 1097 (contracts for medical care for retirees,

dependents and survivors: Alternative delivery of health care), and 10

U.S.C. 1096 (resource sharing agreements).

(3) Scope of the program. The TRICARE Program is applicable to all

of the uniformed services. Its geographical applicability is all 50

states and the District of Columbia. In addition, if authorized by the

Assistant Secretary of Defense (Health Affairs), the TRICARE Program

may be implemented in areas outside the 50 states and the District of

Columbia. In such cases, the Assistant Secretary of Defense (Health

Affairs) may also authorize modifications to TRICARE Program rules and

procedures as may be appropriate to the area involved.

(4) MTF rules and procedures affected. Much of this section relates

to rules and procedures applicable to the delivery and financing of

health care services provided by civilian providers outside military

treatment facilities. This section provides that certain rules,

procedures, rights and obligations set forth elsewhere in this part

(and usually applicable to CHAMPUS) are different under the TRICARE

Program. In addition, some rules, procedures, rights and obligations

relating to health care services in military treatment facilities are

also different under the TRICARE Program. In such cases, provisions of

this section take precedence and are binding.

(5) Implementation based on local action. The TRICARE Program is

not automatically implemented in all areas. Therefore, provisions of

this section are not automatically implemented. Rather, implementation

of the TRICARE Program and this section requires an official action by

an authorized individual, such as a military treatment facility

commander, a Surgeon General, the Assistant Secretary of Defense

(Health Affairs), or other person authorized by the Assistant

Secretary. Public notice of the initiation of the TRICARE Program will

be achieved through appropriate communication and media methods and by

way of an official announcement by the Director, OCHAMPUS, identifying

the military treatment facility catchment area or other geographical

area covered.

(6) Major features of the TRICARE Program. The major features of

the TRICARE Program, described in this section, include the following:

(i) Comprehensive enrollment system. Under the TRICARE Program, all

health care beneficiaries become enrolled in TRICARE and classified

into one of five enrollment categories:

(A) Active duty members, all of whom are automatically enrolled in

TRICARE Prime;

(B) TRICARE Prime enrollees, who (except for active duty members)

must be CHAMPUS eligible;

(C) TRICARE Standard enrollees, which covers all CHAMPUS-eligible

beneficiaries who do not enroll in TRICARE Prime or another managed

care program affiliated with TRICARE;

(D) Medicare-eligible beneficiaries, who, although not eligible for

TRICARE Prime, may participate in many features of TRICARE; and

(E) Participants in other managed care program affiliated with

TRICARE.

(ii) Establishment of a triple option benefit. A second major

feature of TRICARE is the establishment for CHAMPUS-eligible

beneficiaries of three options for receiving health care:

(A) Beneficiaries may enroll in the ``TRICARE Prime Plan,'' which

features use of military treatment facilities and substantially reduced

out-of-pocket costs for CHAMPUS care. Beneficiaries generally agree to

use military treatment facilities and designated civilian provider

networks.

(B) Beneficiaries may participate in the ``TRICARE Extra Plan''

under which the preferred provider network may be used on a case-by-

case basis, with somewhat reduced out-of-pocket costs. These

beneficiaries also continue to be eligible for military treatment

facility care.

(C) Beneficiaries may remain in the ``TRICARE Standard Plan,''

which preserves broad freedom of choice of civilian providers (subject

to nonavailability statement requirements of Sec. 199.4), but does not

offer reduced out-of-pocket costs. These beneficiaries continue to be

eligible to receive care in military treatment facilities.

(iii) Coordination between military and civilian health care

delivery systems. A third major feature of the TRICARE Program is a

series of activities affecting all beneficiary enrollment categories,

designed to coordinate care between military and civilian health care

systems. These activities include:

(A) Resource sharing agreements, under which a TRICARE contractor

provides to a military treatment facility personnel and other resources

to increase the availability of services in the facility. All

beneficiary enrollment [[Page 7499]] categories may benefit from this

increase.

(B) Health care finder, an administrative office that facilitates

referrals to appropriate health care services in the military facility

and civilian provider network. All beneficiary enrollment categories

may use the health care finder.

(C) Integrated quality and utilization management services,

potentially standardizing reviews for military and civilian sector

providers. All beneficiary categories may benefit from these services.

(D) Special pharmacy programs for areas affected by base

realignment and closure actions. This includes special eligibility for

Medicare-eligible beneficiaries.

(E) PRIMUS or NAVCARE Clinics, for which all beneficiary enrollment

categories are eligible.

(iv) Consolidated schedule of charges. A fourth major feature of

TRICARE is a consolidated schedule of charges, incorporating revisions

that reduce differences in charges between military and civilian

services. In general, the TRICARE Program reduces out-of-pocket costs

for civilian sector care.

(b) Triple option benefit in general. Where the TRICARE Program is

implemented, CHAMPUS-eligible beneficiaries are given the options of

enrolling in the TRICARE Prime Plan (also referred to as ``Prime'');

being a participant in TRICARE Extra on a case-by-case basis (also

referred to as ``Extra''); or remaining in the TRICARE Standard Plan

(also referred to as ``Standard'').

(1) Choice voluntary. With the exception of active duty members,

the choice of whether to enroll in Prime, to participate in Extra, or

to remain in Standard is voluntary for all eligible beneficiaries. This

applies to active duty dependents and eligible retired members,

dependents of retired members, and survivors. For dependents who are

minors, the choice will be exercised by a parent or guardian.

(2) Active duty members. For active duty members located in areas

where the TRICARE Program is implemented, enrollment in Prime is

mandatory.

(c) Eligibility for enrollment in Prime. Where the TRICARE Program

is implemented, all CHAMPUS-eligible beneficiaries are eligible to

enroll. However, some rules and procedures are different for dependents

of active duty members than they are for retirees, their dependents and

survivors. In addition, where the TRICARE Program is implemented, a

military treatment facility commander or other authorized individual

may establish priorities, consistent with paragraph (c) of this

section, based on availability or other operational requirements, for

when and whether to offer the enrollment opportunity.

(1) Active duty members. Active duty members are required to enroll

in Prime when it is offered. Active duty members shall have first

priority for enrollment in Prime. Because active duty members are not

CHAMPUS eligible, when active duty members obtain care from civilian

providers outside the military treatment facility, the supplemental

care program and its requirements (including Sec. 199.16) will apply.

(2) Dependents of active duty members. (i) Dependents of active

duty members are eligible to enroll in Prime. After all active duty

members, dependents of active duty members will have second priority

for enrollment.

(ii) If all dependents of active duty members within the area

concerned cannot be accepted for enrollment in Prime at the same time,

the MTF Commander (or other authorized individual) may establish

priorities within this beneficiary group category. The priorities may

be based on first-come, first-served, or alternatively, be based on

rank of sponsor, beginning with the lowest pay grade.

(3) Retired members, dependents of retired members, and survivors.

(i) All CHAMPUS-eligible retired members, dependents of retired

members, and survivors are eligible to enroll in Prime. After all

active duty members are enrolled and availability of enrollment is

assured for all active duty dependents wishing to enroll, this category

of beneficiaries will have third priority for enrollment.

(ii) If all CHAMPUS-eligible retired members, dependents of retired

members, and survivors within the area concerned cannot be accepted for

enrollment in Prime at the same time, the MTF Commander (or other

authorized individual) may allow enrollment within this beneficiary

group category on a first come, first served basis.

(4) Participation in Extra and Standard. All CHAMPUS-eligible

beneficiaries who do not enroll in Prime may particiate in Extra on a

case-by-case basis or remain in Standard.

(d) Health benefits under Prime. Health benefits under Prime, set

forth in paragraph (d) of this section, differ from those under Extra

and Standard, set forth in paragraphs (e) and (f) of this section.

(1) Military Treatment Facility (MTF) care. All participants in

Prime are eligible to receive care in military treatment facilities.

Active duty dependents who are participants in Prime will be given

priority for such care over other active duty dependents who declined

the opportunity to enroll in Prime. The latter group, however, retains

priority over retirees, their dependents and survivors. There is no

priority for MTF care among retirees, their dependents and survivors

based on enrollment status.

(2) Non-MTF care for active duty members. Under Prime, non-MTF care

needed by active duty members continues to be arranged under the

supplemental care program and subject to the rules and procedures of

that program, including those set forth in Sec. 199.16.

(3) Benefits covered for CHAMPUS eligible beneficiaries for

civilian sector care. The provisions of Sec. 199.18 regarding the

Uniform HMO Benefit apply to TRICARE Prime enrollees.

(e) Health benefits under the TRICARE Extra Plan. Beneficiaries not

enrolled in Prime, although not in general required to use the Prime

civilian preferred provider network, are eligible to use the network on

a case-by-case basis under Extra. The healthy benefits under Extra are

identical to those under Standard, set forth in paragraph (f) of this

section, except that the CHAMPUS cost sharing percentages are lower

than usual CHAMPUS cost sharing. The lower requirements are set forth

in the consolidated schedule of charges in paragraph (m) of this

section.

(f) Health benefits under the TRICARE Standard Plan. Where the

TRICARE Program is implemented, health benefits under Prime, set forth

under paragraph (d) of this section, and Extra, set forth under

paragraph (e) of this section, are different than health benefits under

Standard, set forth in this paragraph (f).

(1) Military Treatment Facility (MTF) care. All participants in

Standard and all nonenrollees (including beneficiaries not eligible to

enroll) continue to be eligible to receive care in military treatment

facilities on a space available basis.

(2) Freedom of choice of civilian provider. Except as stated in

Sec. 199.4(a) in connection with nonavailability statement

requirements, CHAMPUS-eligible participants in Standard maintain their

freedom of choice of civilian provider under CHAMPUS. All

nonavailability statement requirements of Sec. 199.4(a) apply to

Standard participants.

(3) CHAMPUS benefits apply. The benefits, rules and procedures of

the CHAMPUS basic program as set forth in this part, shall apply to

CHAMPUS-eligible participants in Standard.

[[Page 7500]]

(4) Perferred provider network option for Standard participants.

Standard participants, although not generally required to use the

TRICARE Program preferred provider network are eligible to use the

network on a case-by-case basis, under Extra.

(g) Coordination with other health care programs. (1) Authority. In

the case of any beneficiary of the military health services system,

other than active duty members, who is enrolled in a managed health

care program not operated by the military health services system, the

Director, OCHAMPUS may establish a contract or agreement with such

other managed health care program for the purpose of coordinating the

beneficiary's dual entitlements under such program and the military

health services system.

(2) Covered programs. A managed health care program with which

arrangements may be made under this paragraph (g) includes any health

maintenance organization, competitive medical plan, health care

prepayment plan, or other managed care program recognized by the

Director, OCHAMPUS. This includes managed care programs that operate

under the authority of the Medicare program.

(3) Coordination activities. Any contract or agreement entered into

under this paragraph (g) may integrate health care benefits, delivery,

financing, and administrative features of the other managed care plan

with some or all features of the TRICARE program.

(h) Resource sharing agreements. Under the TRICARE Program, any

military treatment facility commander may establish resource sharing

agreements with the applicable managed care support contractor for the

purpose of providing for the sharing of resources between the two

parties. Internal resource sharing and external resource sharing

agreements are authorized. The provisions of this paragraph (h) shall

apply to resource sharing agreements under the TRICARE Program.

(1) In connection with internal resource sharing agreements,

beneficiary cost sharing requirements shall be the same as those

applicable to health care services provided in facilities of the

uniformed services.

(2) Under internal resource sharing agreements, the double coverage

requirements of Sec. 199.8 may be replaced by the Third Party

Collection procedures of 32 CFR part 220. In such a case, payments made

to a resource sharing agreement provider through the TRICARE managed

care support contractor shall be deemed to be payments by the military

treatment facility concerned.

(3) Under internal or external resource sharing agreements, the

commander of the military treatment facility concerned may authorize

the provision of services pursuant to the agreement to Medicare-

eligible beneficiaries, if the commander determines that this will

promote the most cost-effective provision of services under the TRICARE

program.

(i) Health Care Finder. The Health Care Finder is an administrative

office that assists beneficiaries in being referred to appropriate

health care providers, especially the MTF and preferred providers.

Health Care Finder services are available to all beneficiaries. In the

case of TRICARE Prime enrollees, the Health Care Finder will facilitate

referrals in accordance with Prime rules and procedures. For Standard

enrollees, the Finder will provide assistance for use of Extra. For

Medicare-eligible beneficiaries, the Finder will facilitate referrals

to TRICARE network providers, generally required to be Medicare

participating providers. For participants in other managed care

programs, the Finder will assist in referrals pursuant to the

arrangements made with the other managed care program. For all

beneficiary enrollment categories, the finder will assist In obtaining

access to available services in the medical treatment facility.

(j) General quality assurance, utilization review, and

preauthorization requirements under TRICARE Program. All quality

assurance, utilization review, and preauthorization requirements for

the basic CHAMPUS program, as set forth in this part 199 (see

especially applicable provisions of Secs. 199.4 and 199.15), are

applicable to Prime, Extra and Standard under the TRICARE Program.

Under all three options, some methods and procedures for implementing

and enforcing these requirements may differ from the methods and

procedures followed under the basic CHAMPUS program in areas in which

the TRICARE Program has not been implemented. Pursuant to an agreement

between a military treatment facility and TRICARE managed care support

contractor, quality assurance, utilization review, and preauthorization

requirements and procedures applicable to health care services outside

the military treatment facility may be made applicable, in whole or in

part, to health care services inside the military treatment facility.

(k) Pharmacy services in base realignment and closure sites.--(1)

In general. TRICARE includes two special programs under which covered

beneficiaries, including Medicare-eligible beneficiaries, who live in

areas adversely affected by base realignment and closure actions are

given a pharmacy benefit for prescription drugs provided outside

military treatment facilities. The two special programs are the retail

pharmacy network program and the mail service pharmacy program.

(2) Retail pharmacy network program. To the maximum extent

practicable, a retail pharmacy network program will be included in the

TRICARE Program wherever implemented. Except for the special rules

applicable to Medicare-eligible beneficiaries in areas adversely

affected by military treatment facility closures, the retail pharmacy

network program will function in accordance with TRICARE rules and

procedures otherwise applicable. In addition, a retail pharmacy network

program may on a temporary, transitional basis be established in a base

realignment or closure site independent of other features of the

TRICARE program. Such a program may be established through arrangements

with one or more pharmacies in the area and may continue until a

managed care program is established to serve the affected

beneficiaries.

(3) Mail service pharmacy program. A mail service pharmacy program

will be established to the extent required by law as part of the

TRICARE Program. The special rules applicable to Medicare-eligible

beneficiaries established in this paragraph (k) shall be applicable.

(4) Medicare-eligible beneficiaries in areas adversely affected by

military treatment facility closures. Under the retail pharmacy network

program and mail service pharmacy program, there is a special

eligibility rule pertaining to Medicare-eligible beneficiaries in areas

adversely affected by military treatment facility closures.

(i) Medicare-eligible beneficiaries. The special eligibility rule

pertains to military system beneficiaries who are not eligible for

CHAMPUS solely because of their eligibility for part A of Medicare.

(ii) Area adversely affected by closure. To be eligible for use of

the retail pharmacy network program or mail service pharmacy program, a

Medicare-eligible beneficiary must maintain a principle place of

residency in the catchment area of the military medical treatment

facility that closed. In addition, there must be a retail pharmacy

network or mail service pharmacy established in that area. In

identifying areas adversely affected by a closure, the provisions of

this paragraph (k)(4)(ii) shall apply. [[Page 7501]]

(A) In the case of the closure of a military hospital, the area

adversely affected is the established 40-mile catchment area of the

military hospital that closed.

(B) In the case of the closure of a military clinic (a military

treatment facility that provided no inpatient care services), the area

adversely affected is an area approximately 40 miles in radius from the

clinic, established in a manner comparable to the manner in which

catchment areas of military hospitals are established. However, this

area will not be considered adversely affected by the closure of the

clinic if the Director, OCHAMPUS determines that the clinic was not,

when it had been in regular operation, providing a substantial amount

of pharmacy services to retirees and their dependents.

(C) An area that is within the 40-mile catchment area of a military

treatment facility that closed will not be considered adversely

affected by the closure if that area is also within a 40-mile catchment

area of another military medical treatment facility (inpatient or

outpatient) that the Director, OCHAMPUS determines can provide a

substantial amount of pharmacy services to retirees and their

dependents.

(iii) Other Medicare-eligible beneficiaries adversely affected. In

addition to beneficiaries identified in paragraph (k)(4)(ii) of this

section, eligibility for the retail pharmacy network program and mail

service pharmacy program is also established for Medicare-eligible

beneficiaries who can demonstrate to the satisfaction of the Director,

OCHAMPUS that he or she relied upon a military medical treatment

facility that closed for his or her pharmaceuticals. The Director,

OCHAMPUS shall establish guidelines for making such a demonstration.

(iv) Effective date of eligibility for Medicare-eligible

beneficiaries. In any case in which, prior to the complete closure of a

military treatment facility in the process of closure, the Director,

OCHAMPUS determines that the area has been adversely affected by severe

reductions in access to services, the Director, OCHAMPUS may establish

an effective date for eligibility for the retail pharmacy network

program or mail service pharmacy program for Medicare-eligible

beneficiaries prior to the complete closure of the facility.

(5) Effect of other health insurance. The double coverage rules of

Sec. 199.8 are applicable to services provided to all beneficiaries

under the retail pharmacy network program or mail service pharmacy

program. For this purpose, to the extent they provide a prescription

drug benefit, Medicare supplemental insurance plans are double coverage

plans and will be the primary payor.

(6) Procedures. The Director, OCHAMPUS shall establish procedures

for the effective operation of the retail pharmacy network program and

mail service pharmacy program. Such procedures may include the use of

appropriate drug formularies, restrictions of the quantity of

pharmaceuticals to be dispensed, encouragement of the use of generic

drugs, implementation of quality assurance and utilization management

activities, and other appropriate matters.

(l) PRIMUS and NAVCARE Clinics. (1) Authority. The Assistant

Secretary of Defense for Health Affairs may authorize the establishment

of PRIMUS and NAVCARE Clinics. These clinics are contractor owned,

staffed, and operated clinics that exclusively serve uniformed services

beneficiaries.

(2) Eligible beneficiaries. All TRICARE beneficiary enrollment

categories are eligible for care in PRIMUS and NAVCARE Clinics. This

includes active duty members, Medicare eligible beneficiaries and other

persons not eligible for CHAMPUS.

(3) Services and charges. (i) For care provided PRIMUS and NAVCARE

Clinics established prior to October 1, 1994, CHAMPUS rules regarding

program benefits, deductibles and cost sharing requirements do not

apply. Services offered and charges will be based on those applicable

to care provided in military medical treatment facilities.

(ii) For care provided in PRIMUS and NAVCARE Clinics established

after September 30, 1994, the provisions of Sec. 199.18(d)(3) regarding

outpatient cost sharing requirements under the Uniform HMO Benefit

shall apply.

(4) Procedures. The Director, OCHAMPUS will establish procedures

for PRIMUS and NAVCARE Clinics. Such procedures may waive normal

requirements of this part that are not required by law. Except to the

extent required by law, the procedures established by the Director for

PRIMUS and NAVCARE Clinics may be based on rules and procedures

applicable to military medical treatment facilities.

(m) Consolidated schedule of beneficiary charges. The following

consolidated schedule of beneficiary charges is applicable to health

care services provided under TRICARE for Prime enrollees, Standard

enrollees and Medicare-eligible beneficiaries. (There are no charges to

active duty members. Charges for participants in other managed health

care programs affiliated with TRICARE will be specified in the

applicable affiliation agreements.)

(1) Cost sharing for services from TRICARE network providers. (i)

For Prime enrollees, cost sharing is as specified in the Uniform HMO

Benefit in Sec. 199.18, except that for care not authorized by the

primary care manager or Health Care Finder, rules applicable to the

TRICARE point of service option (see paragraph (n)(3) of this section)

are applicable. The deductible is $300 per person and $600 per family.

The beneficiary copayment per service is 50 percent.

(ii) For Standard enrollees, TRICARE Extra cost sharing applies.

The deductible is the same as standard CHAMPUS. Copayments are:

(A) For outpatient professional services, cost sharing will be

reduced from 20 percent to 15 percent for dependents of active duty

members.

(B) For most services for retired members, dependents of retired

members, and survivors, cost sharing is reduced from 25 percent to 20

percent.

(C) In fiscal year 1995, the per diem inpatient hospital copayment

for retirees, dependents of retirees, and survivors when they use a

preferred provider network hospital is $250 per day, or 25 percent of

total charges, whichever is less. There is a nominal copayment for

active duty dependents, which is the same as under the CHAMPUS program

(see Sec. 199.4). The per diem amount may be updated for subsequent

years based on changes in the standard CHAMPUS per diem.

(D) For prescription drugs obtained from network pharmacies, the

CHAMPUS deductible will not apply.

(iii) For Medicare-eligible beneficiaries, cost sharing will

generally be as applicable to Medicare participating providers.

(2) Cost sharing for non-network providers. (i) For TRICARE Prime

enrollees, rules applicable to the TRICARE point of service option (see

paragraph (n)(3) of this section) are applicable. The deductible is

$300 per person and $600 per family. The beneficiary copayment per

service is 50 percent.

(ii) For Standard enrollees, cost sharing is as specified for the

basic CHAMPUS program.

(iii) For Medicare eligible beneficiaries, cost sharing is as

provided under the Medicare program.

(3) Cost sharing under internal resource sharing agreements. (i)

For Prime enrollees, cost sharing is as provided in military treatment

facilities.

(ii) For Standard enrollees, cost sharing is as provided in

military treatment facilities. [[Page 7502]]

(iii) For Medicare eligible beneficiaries, where made applicable by

the commander of the military treatment facility concerned, cost

sharing will be as provided in military treatment facilities.

(4) Cost sharing under external resource sharing. (i) For Prime

enrollees, cost sharing applicable to services provided by military

facility personnel shall be as applicable to services in military

treatment facilities; that applicable to institutional and related

ancillary charges shall be as applicable to services provided under

TRICARE Prime.

(ii) For Standard enrollees, cost sharing applicable to services

provided by Military facility personnel shall be as applicable to

services in military treatment facilities; that applicable to

institutional and related ancillary charges shall be as applicable to

services provided under TRICARE Extra.

(iii) For Medicare-eligible beneficiaries, where available, cost

sharing applicable to services provided by military facility personnel

shall be as applicable to services in military treatment facilities;

that applicable to institutional and related ancillary charges shall be

as applicable to services provided under Medicare.

(5) Prescription drugs. (i) For Prime enrollees, cost sharing is as

specified in the Uniform HMO Benefit.

(ii) For Standard enrollees, there is a 20 percent copayment for

prescription drugs provided by retail pharmacy network providers. The

copayment for all beneficiaries under the mail service pharmacy program

is $4.00 for active duty dependents and $8.00 for all other covered

beneficiaries per prescription; for up to a 60 day supply. There is no

deductible for this program.

(iii) For Medicare-eligible beneficiaries affected by military

treatment facility closures, there is a 20 percent copayment for

prescriptions provided under the retail pharmacy network program, and

an $8.00 copayment per prescription, for up to a 60-day supply, for

prescriptions provided by the mail service pharmacy program. There is

no deductible under their programs.

(6) Cost share for outpatient services in military treatment

facilities. (i) For dependents of active duty members in all enrollment

categories, there is no charge for outpatient visits provided in

military medical treatment facilities.

(ii) For retirees, their dependents, and survivors in all

enrollment categories, there is no charge for outpatient visits

provided in military medical treatment facilities.

(n) Additional health care management requirements under TRICARE

Prime. Prime has additional, special health care management

requirements not applicable under Extra, Standard or the CHAMPUS basic

program. Such requirements must be approved by the Assistant Secretary

of Defense (Health Affairs). In TRICARE, all care may be subject to

review for medical necessity and appropriateness of level of care,

regardless of whether the care is provided in a military treatment

facility or in a civilian setting. Adverse determinations regarding

care in military facilities will be appealable in accordance with

established military medical department procedures, and adverse

determinations regarding civilian care will be appealable in accordance

with Sec. 199.15.

(1) Primary care manager. All active duty members and Prime

enrollees will be assigned or be allowed to select a primary care

manager pursuant to a system established by the MTF Commander or other

authorized official. The primary care manager may be an individual

physician, a group practice, a clinic, a treatment site, or other

designation. The primary care manager may be part of the MTF or the

Prime civilian provider network. The enrollees will be given the

opportunity to register a preference for primacy care manager from a

list of choices provided by the MTF Commander. Preference requests will

be honored subject to availability under the MTF beneficiary category

priority system and other operational requirements established by the

commander (or other authorized person).

(2) Restrictions on the use of providers. The requirements of this

paragraph (n)(2) shall be applicable to health care utilization under

TRICARE Prime, except in cases of emergency care and under the point-

of-service option (see paragraph (n)(3) of this section).

(i) Prime enrollees must obtain all primary health care from the

primary care manager or from another provider to which the enrollee is

referred by the primary care manager or Health Care Finder.

(ii) For any necessary specialty care and all inpatient care, the

primary care manager or Health Care Finder will assist in making an

appropriate referral. All such nonemergency specialty care and

inpatient care must be preauthorized by the primary care manager or

Health Care Finder.

(iii) The following procedures will apply to health care referrals

and preauthorizations in catchment areas under TRICARE Prime:

(A) The first priority for referral for specialty care or inpatient

care will be to the local MTF (or to any other MTF in which catchment

area the enrollee resides).

(B) If the local MTF(s) are unavailable for the services needed,

but there is another MTF at which the needed services can be provided,

the enrollee may be required to obtain the services at that MTF.

However, this requirement will only apply to the extent that the

enrollee was informed at the time of (or prior to) enrollment that

mandatory referrals might be made to the MTF involved for the service

involved.

(C) If the needed services are available within civilian preferred

provider network serving the area, the enrollee may be required to

obtain the services from a provider within the network. Subject to

availability, the enrollee will have the freedom to choose a provider

from among those in the network.

(D) If the needed services are not available within the civilian

preferred provider network serving the area, the enrollee may be

required to obtain the services from a designated civilian provider

outside the area. However, this requirement will only apply to the

extent that the enrollee was informed at the time of (or prior to)

enrollment that mandatory referrals might be made to the provider

involved for the service involved (with the provider and service either

identified specifically or in connection with some appropriate

classification).

(E) In cases in which the needed health care services cannot be

provided pursuant to the procedures identified in paragraphs

(n)(2)(iii) (A) through (D) of this section, the enrollee will receive

authorization to obtain services from a CHAMPUS-authorized civilian

provider(s) of the enrollee's choice not affiliated with the civilian

preferred provider network.

(iv) When Prime is operating in noncatchment areas, the

requirements in paragraphs (n)(2)(iii) (B) through (E) of this section

shall apply.

(v) Any health care services obtained by a Prime enrollee not

obtained in accordance with the utilization management rules and

procedures of the Prime will not be paid for by Prime, but may be

covered by the point-of-service option (see paragraph (n)(3) of this

section). However, Prime may cover such services if the enrollee did

not know and could not reasonably have been expected to know that the

services were not obtained in accordance with the utilization

management rules and procedures of Prime.

(3) Point-of-service option. TRICARE Prime enrollees retain the

freedom to [[Page 7503]] obtain services from civilian providers on a

point-of-service basis. In such cases, all requirements applicable to

standard CHAMPUS shall apply, except that there shall be higher

deductible and cost sharing requirements (as set forth in paragraphs

(m)(1)(i) and (m)(2)(i) of this section).

(o) TRICARE Program enrollment procedures. There are certain

requirements pertaining to procedures for enrollment in Prime. (These

procedures do not apply to active duty members, whose enrollment is

mandatory.)

(1) Open season enrollment. Beneficiaries will be offered the

opportunity to enroll in Prime during designated periods of time.

Subject to exceptions for change of residence and other changes,

enrollment will be limited to the open season periods announced at the

time the TRICARE Program is implemented in a particular area.

(2) Enrollment period. The Prime enrollment period shall be 12

months. In general, enrollment will be effective on the first day of

the month following expiration of the open season enrollment period.

Enrollees must remain in Prime for a 12 month period, at which time

they may disenroll. This requirement is subject to exceptions for

change of residence and other changes announced at the time the TRICARE

Program is implemented in a particular area.

(3) Periodic revision. Periodically, certain features, rules or

procedures of Prime, Extra and/or Standard may be revised. If such

revisions will have a significant effect on participants' costs or

access to care, beneficiaries will be given the opportunity to change

their enrollment status coincident with the revisions.

(4) Effects of failure to enroll. Beneficiaries offered the

opportunity to enroll in Prime, who do not enroll within the time

provided to enroll, will be eligible to participate in Extra on a case-

by-case basis or remain in Standard.

(p) Civilian preferred provider networks. A major feature of the

TRICARE Program is the civilian preferred provider network.

(1) Status of network providers. Providers in the preferred

provider network are not employees or agents of the Department of

Defense or the United States Government. Rather, they are independent

contractors of the government (or other independent entities having

business arrangements with the government). Although network providers

must follow numerous rules and procedures of the TRICARE Program, on

matters of professional judgment and professional practice, the network

provider is independent and not operating under the direction and

control of the Department of Defense. Each preferred provider must have

adequate professional liability insurance, as required by the Federal

Acquisition Regulation, and must agree to indemnify the United States

government for any liability that may be assessed against the United

States government that is attributable to any action or omission of the

provider.

(2) Utilization management policies. Preferred providers are

required to follow the utilization management policies and procedures

of the TRICARE Program. These policies and procedures are part of

discretionary judgments by the Department of Defense regarding the

methods of delivering and financing health care services that will best

achieve health and economic policy objectives.

(3) Quality assurance requirements. A number of quality assurance

requirements and procedures are applicable to preferred network

providers. These are for the purpose of assuring that the health care

services paid for with government funds meet the standards called for

in the contract or provider agreement.

(4) Provider qualifications. All preferred providers must meet the

following qualifications:

(i) They must be CHAMPUS authorized providers and CHAMPUS

participating providers.

(ii) All physicians in the preferred provider network must have

staff privileges in a hospital accredited by the Joint Commission on

Accreditation of Health Care Organizations. This requirement may be

waived in any case in which a physician's practice does not include the

need for admitting privileges in such a hospital. However, in any case

in which the requirement is waived, the physician must comply with

alternative qualification standards as are established by the MTF

Commander (or other authorized official).

(iii) All preferred providers must agree to follow all quality

assurance and utilization management procedures established pursuant to

this section, make available to designated DoD utilization management

or quality monitoring contractors medical records and other pertinent

records, and to authorize the release of information to MTF Commanders

regarding such quality assurance and utilization management activities.

(iv) All preferred network providers must be Medicare participating

providers, unless this requirement is waived based on extraordinary

circumstances. This requirement that a provider be a Medicare

participating provider does not apply to providers not eligible to be

participating providers under Medicare.

(v) The provider must be available to Extra participants.

(vi) The provider must agree to accept the same payment rates

negotiated for Prime enrollees for any person whose care is

reimbursable by the Department of Defense, including, for example,

Extra participants, supplemental care cases, and beneficiaries from

outside the area.

(vii) All preferred providers must meet all other qualification

requirements, and agree to comply with all other rules and procedures

established for the preferred provider network.

(5) Access standards. Preferred provider networks will have

attributes of size, composition, mix of providers and geographical

distribution so that the networks, coupled with the MTF capabilities,

can adequately address the health care needs of the enrollees. Before

offering enrollment in Prime to a beneficiary group, the MTF Commander

(or other authorized person) will assure that the capabilities of the

MTF plus preferred provider network will meet the following access

standards with respect to the needs of the expected number of enrollees

from the beneficiary group being offered enrollment:

(i) Under normal circumstances, enrollee travel time may not exceed

30 minutes from home to primary care delivery site unless a longer time

is necessary because of the absence of providers (including providers

not part of the network) in the area.

(ii) The wait time for an appointment for a well-patient visit or a

specialty care referral shall not exceed four weeks; for a routine

visit, the wait time for an appointment for a well-patient visit shall

not exceed two weeks; and for an urgent care visit the wait time for an

appointment shall generally not exceed 24 hours.

(iii) Emergency services shall be available and accessible to

handle emergencies (and urgent care visits if not available from other

primary care providers pursuant to paragraph (p)(5)(ii) of this

section), within the service area 24 hours a day, seven days a week.

(iv) The network shall include a sufficient number and mix of board

certified specialists to meet reasonably [[Page 7504]] the anticipated

needs of enrollees. Travel time for specialty care share not exceed one

hour under normal circumstances, unless a longer time is necessary

because of the absence of providers (including providers not part of

the network) in the area. This requirement does not apply under the

Specialized Treatment Services Program.

(v) Office waiting times in nonemergency circumstances shall not

exceed 30 minutes.

(6) Special reimbursement methods for network providers. The

Director, OCHAMPUS may establish for preferred provider networks

reimbursement rates and methods different from those established

pursuant to Sec. 199.14. Such provisions may be expressed in terms of

percentage discounts off CHAMPUS allowable amounts, or in other terms.

In circumstances in which payments are based on hospital-specific rates

(or other rates specific to particular institutional providers),

special reimbursement methods may permit payments based on discounts

off national or regional prevailing payment levels, even if higher than

particular institution-specific payment rates.

(7) Methods for establishing preferred provider networks. There are

several methods under which the MTF Commander (or other authorized

official) may establish a preferred provider network. These include the

following:

(i) There may be an acquisition under the Federal Acquisition

Regulation, either conducted locally for that catchment area, in a

larger area in concert with other MTF Commanders, regionally as part of

a CHAMPUS acquisition, or on some other basis.

(ii) To the extent allowed by law, there may be a modification by

the Director, OCHAMPUS of an existing CHAMPUS fiscal intermediary

contract to add TRICARE Program functions to the existing

responsibilities of the fiscal intermediary contractor.

(iii) The MTF Commander (or other authorized official) may follow

the any qualified provider method set forth in paragraph (q) of this

section.

(iv) Any other method authorized by law may be used.

(q) Preferred provider network establishment under any qualified

provider method. The any qualified provider method may be used to

establish a civilian preferred provider network. Under this method, any

CHAMPUS-authorized provider within the geographical area involved that

meets the qualification standards established by the MTF Commander (or

other authorized official) may become a part of the preferred provider

network. Such standards must be publicly announced and uniformly

applied. Any provider that meets all applicable qualification standards

may not be excluded from the preferred provider network. Qualifications

include:

(1) The provider must meet all applicable requirements in paragraph

(p)(4) of this section.

(2) The provider must agree to follow all quality assurance and

utilization management procedures established pursuant to this section.

(3) The provider must be a Participating Provider under CHAMPUS for

all claims.

(4) The provider must meet all other qualification requirements,

and agree to all other rules and procedures, that are established,

publicly announced, and uniformly applied by the commander (or other

authorized official).

(5) The provider must sign a preferred provider network agreement

covering all applicable requirements. Such agreements will be for a

duration of one year, are renewable, and may be canceled by the

provider or the MTF Commander (or other authorized official) upon

appropriate notice to the other party. The Director, OCHAMPUS shall

establish an agreement model or other guidelines to promote uniformity

in the agreements.

(r) General fraud, abuse, and conflict of interest requirements

under TRICARE Program. All fraud, abuse, and conflict of interest

requirements for the basic CHAMPUS program, as set forth in this part

199 (see especially applicable provisions of Sec. 199.9) are applicable

to the TRICARE Program. Some methods and procedures for implementing

and enforcing these requirements may differ from the methods and

procedures followed under the basic CHAMPUS program in areas in which

the TRICARE Program has not been implemented.

(s) Partial implementation. The Assistant Secretary of Defense

(Health Affairs) may authorize the partial implementation of the

TRICARE Program. In such cases, the TRICARE Extra Plan and the TRICARE

Standard Plan may be offered without the TRICARE Prime Plan. Partial

implementation may also consist of establishment of a TRICARE Program

limited to particular services, such as mental health services.

(t) Inclusion of Department of Veterans Affairs Medical Centers in

TRICARE networks. TRICARE preferred provider networks may include

Department of Veterans Affairs Medical Centers pursuant to arrangements

between those centers and the Director, OCHAMPUS or designated TRICARE

contractor.

(u) Care provided outside the United States to dependents of active

duty members. The Assistant Secretary of Defense (Health Affairs) may,

in conjunction with implementation of the TRICARE program, authorize a

special CHAMPUS program for dependents of active duty members who

accompany the members in their assignments in foreign countries. Under

this special program, contracts or agreements may be made with health

care providers under which services will be provided to the covered

dependents with the requirements for deductibles and copayments waived

or reduced.

(v) Administrative procedures. The Assistant Secretary of Defense

(Health Affairs), the Director, OCHAMPUS, and MTF Commanders (or other

authorized officials) are authorized to establish administrative

requirements and procedures, consistent with this section, this part

and other applicable DoD Directives or Instructions, for the

implementation and operation of the TRICARE Program.

Sec. 199.18 Uniform HMO Benefit.

(a) In general. There is established a Uniform HMO Benefit. The

purpose of the Uniform HMO Benefit is to establish a health benefit

option modeled on health maintenance organization plans. This benefit

is intended to be uniform throughout the United States and to be

included in all managed care programs under the MHSS. Most care

purchased from civilian health care providers (outside a military

medical treatment facility) will be under the rules of the Uniform HMO

Benefit or the Basic CHAMPUS Program (see Sec. 199.4). The Uniform HMO

benefit shall apply only as specified in this section or other sections

of this part, and shall be subject to any special applications

indicated indicated in such other sections.

(b) Services covered under the Uniform HMO Benefit option. (1)

Except as specifically provided or authorized by this section, all

CHAMPUS benefits provided, and benefit limitations established,

pursuant to this part shall apply to the Uniform HMO Benefit.

(2) Certain preventive care services not normally provided as part

of basic program benefits under CHAMPUS are covered benefits when

provided to Plan enrollees by providers in the civilian provider

network. Such standards shall establish a specific schedule, including

frequency or age specifications for:

(i) Laboratory and x-ray tests, including blood lead, rubella,

cholesterol, fecal occult blood testing, and

mammography; [[Page 7505]]

(ii) Pap smears;

(iii) Eye exams;

(iv) Immunizations;

(v) Periodic health promotion and disease prevention exams;

(vi) Blood pressure screening;

(vii) Hearing exams;

(viii) Sigmoidoscopy or colonoscopy;

(ix) Serologic screening; and

(x) Appropriate education and counseling services. The exact

services offered shall be established under uniform standards

established by the Assistant Secretary of Defense (Health Affairs).

(3) In addition to preventive care services provided pursuant to

paragraph (b)(2) of this section, other benefit enhancements may be

added and other benefit restrictions may be waived or relaxed in

connection with health care services provided to include the Uniform

HMO Benefit. Any such other enhancements or changes must be approved by

the Assistant Secretary of Defense (Health Affairs) based on uniform

standards.

(c) Enrollment fee under the uniform HMO benefit. (1) The CHAMPUS

annual deductible amount (see Sec. 199.4(f)) is waived under the

Uniform HMO Benefit during the period of enrollment. In lieu of a

deductible amount, an annual enrollment fee is applicable. The specific

enrollment fee requirements shall be published annually by the

Assistant Secretary of Defense (Health Affairs), and shall be uniform

within the following groups: Dependents of active duty members in pay

grades E-4 and below; active duty dependents of sponsors in pay grades

E-5 and above; and retirees and their dependents.

(2) Amount of enrollment fees. Beginning in fiscal year 1995, the

annual enrollment fees are:

(i) for dependents of active duty members in pay grades of E-4 and

below, $0;

(ii) for active duty dependents of sponsors in pay grades E-5 and

above, $0; and,

(iii) for retirees and their dependents, $230 individual, $460

family.

(d) Outpatient cost sharing requirements under the Uniform HMO

Benefit--(1) In general. In lieu of usual CHAMPUS cost sharing

requirements (see Sec. 199.4(f)), special reduced cost sharing

percentages or per service specific dollar amounts are required. The

specific requirements shall be uniform and shall be published annually

by the Assistant Secretary of Defense (Health Affairs).

(2) Structure of outpatient cost sharing. The special cost sharing

requirements for outpatient services include the following specific

structural provisions:

(i) For most physician office visits and other routine services,

there is a per visit fee for each of the following groups: Dependents

of active duty members in pay grades E-1 through E-4; dependents of

active duty members in pay grades of E-5 and above; and retirees and

their dependents. This fee applies to primary care and specialty care

visits, except as provided elsewhere in this paragraph (d)(2) of this

section. It also applies to ancillary services (unless provided as part

of an office visit for which a copayment is collected), family health

services, home health care visits, eye examinations, and immunizations.

(ii) There is a copayment for outpatient mental health visits. It

is a per visit fee for dependents of active duty members in pay grades

E-1 through E-4; for dependents of active duty members in pay grades of

E-5 and above; and for retirees and their dependents for individual

visits. For group visits, there is a lower per visit fee for dependents

of active duty members in pay grades E-1 through E-4; for dependents of

active duty members in pay grades of E-5 and above; and for retirees

and their dependents.

(iii) There is a cost share for durable medical equipment,

prosthetic devices, and other authorized supplies for dependents of

active duty members in pay grades E-1 through E-4; for dependents of

active duty members in pay grades of E-5 and above; and for retirees

and their dependents.

(iv) For emergency room services, there is a per visit fee for

dependents of active duty members in pay grades E-1 through E-4; for

dependents of active duty members in pay grades of E-5 and above; and

for retirees and their dependents.

(v) For primary surgeon services in ambulatory surgery, there is a

per service fee for dependents of active duty members in pay grades E-1

through E-4; for dependents of active duty members in pay grades of E-5

and above; and for retirees and their dependents.

(vi) There is a copayment for prescription drugs per prescription,

including medical supplies necessary for administration, for dependents

of active duty members in pay grades E-1 through E-4; for dependents of

active duty members in pay grades of E-5 and above; and for retirees

and their dependents.

(vii) There is a copayment for ambulance services for dependents of

active duty members in pay grades E-1 through E-4; for dependents of

active duty members in pay grades of E-5 and above; and for retirees

and their dependents.

(3) Amount of outpatient cost sharing requirements. Beginning in

fiscal year 1995, the outpatient cost sharing requirements are as

follows:

(i) For most physician office visits and other routine services, as

described in paragraph (d)(2)(i) of this section, the per visit fee is

as follows:

(A) For dependents of active duty members in pay grades E-1 through

E-4, $6;

(B) For dependents of active duty members in pay grades of E-5 and

above, $12; and,

(C) For retirees and their dependents, $12.

(ii) For outpatient mental health visits, the per visit fee is as

follows:

(A) For individual outpatient mental health visits:

(1) For dependents of active duty members in pay grades E-1 through

E-4, $10;

(2) For dependents of active duty members in pay grades E-5 and

above, $20; and,

(3) For retirees and their dependents, $25.

(B) For group outpatient mental health visits, there is a lower per

visit fee, as follows:

(1) For dependents of active duty members in pay grades E-1 through

E-4, $6;

(2) For dependents of active duty members in pay grades E-5 and

above, $12; and,

(3) For retirees and their dependents, $17.

(iii) The cost share for durable medical equipment, prosthetic

devices, and other authorized supplies is as follows:

(A) For dependents of active duty members in pay grades E-1 through

E-4, 10 percent of the negotiated fee;

(B) For dependents of active duty members in pay grades E-5 and

above, 15 percent of the negotiated fee; and,

(C) For retirees and their dependents, 20 percent of the negotiated

fee.

(iv) For emergency room services, the per visit fee is as follows:

(A) For dependents of active duty members in pay grades E-1 through

E-4, $10;

(B) For dependents of active duty members in pay grades of E-5 and

above, $30; and,

(C) For retirees and their dependents, $30.

(v) For primary surgeon services in ambulatory surgery, the per

service fee is as follows:

(A) For dependents of active duty members in pay grades of E-1

through E-4, $25; [[Page 7506]]

(B) For dependents of active duty members in pay grades of E-5 and

above, $25; and,

(C) For retirees and their dependents, $25.

(vi) The copayment for prescription drugs per prescription, for a

maximum 30-day supply, is as follows:

(A) For dependents of active duty members in pay grades E-1 through

E-4, $5;

(B) For dependents of active duty members in pay grades of E-5 and

above, $5; and,

(C) For retirees and their dependents, $9.

(vii) The copayment for ambulance services is as follows:

(A) For dependents of active duty members in pay grades of E-1

through E-4, $10;

(B) For dependents of active duty members in pay grades of E-5 and

above, $15; and,

(C) For retirees and their dependents, $20.

(e) Inpatient cost sharing requirements under the Uniform HMO

Benefit.--(1) In general. In lieu of usual CHAMPUS cost sharing

requirements (see Sec. 199.4(f)), special cost sharing amounts are

required. The specific requirements shall be uniform and shall be

published as a notice annually by the Assistant Secretary of Defense

(Health Affairs).

(2) Structure of cost sharing. For services other than mental

illness or substance use treatment, there is a nominal copayment for

active duty dependents and for retired members, dependents of retired

members, and survivors. For inpatient mental health and substance use

treatment, a separate per day charge is established.

(3) Amount of inpatient cost sharing requirements. Beginning in

fiscal year 1995, the inpatient cost sharing requirements are as

follows:

(i) For acute care admissions and other non-mental health/substance

use treatment admissions, the per diem charge is as follows, with a

minimum charge of $25 per admission:

(A) For dependents of active duty members in pay grades E-1 through

E-4, $11;

(B) For dependents of active duty members in pay grades of E-5 and

above, $11; and,

(C) For retirees and their dependents, $11.

(ii) For mental health/substance use treatment admissions, and for

partial hospitalization services, the per diem charge is as follows,

with a minimum charge of $25 per admission:

(A) For dependents of active duty members in pay grades E-1 through

E-4, $20;

(B) For dependents of active duty members in pay grades of E-5 and

above, $20; and,

(C) For retirees and their dependents, $40.

(f) Updates. The enrollment fees for fiscal year 1995 set under

paragraph (c) of this section and the per services specific dollar

amounts for fiscal year 1995 set under paragraphs (d) and (e) of this

section may be updated for subsequent years to the extent necessary to

maintain compliance with statutory requirements pertaining to

government costs. This updating does not apply to cost sharing that is

expressed as a percentage of allowable charges; these percentages will

remain unchanged.

(g) Applicability of the Uniform HMO Benefit to Uniformed Services

Treatment Facilities Managed Care Program. The provisions of this

section concerning the Uniform HMO Benefit shall apply to the Uniformed

Services Treatment Facilities Managed Care Program, effective October

1, 1995. Under that program, non-CHAMPUS eligible beneficiaries have

the same payment responsibilities as CHAMPUS-eligible beneficiaries.

Dated: February 2, 1995.

L.M. Bynum,

Alternate OSD Federal Register Liaison Officer, Department of Defense.

[FR Doc. 95-3028 Filed 2-7-95; 8:45 am]

BILLING CODE 5000-04-M