[Federal Register Volume 60, Number 193 (Thursday, October 5, 1995)]
[Rules and Regulations]
[Pages 52077-52103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24576]



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[[Page 52078]]


DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

[DoD 6010.8-R]
RIN 0720-AA21


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: Final rule.

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SUMMARY: This final rule establishes requirements and procedures for 
implementation of the TRICARE Program, the purpose of which is to 
implement a comprehensive managed health care delivery system composed 
of military medical treatment facilities and CHAMPUS. Principal 
components of the final 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 
final rule also includes provisions establishing a special civilian 
provider program authority for active duty family members overseas. The 
TRICARE Program is a major reform of the MHSS that will improve 
services to beneficiaries while helping to contain costs.

EFFECTIVE DATE: November 1, 1995.

ADDRESSES: Office of the Civilian Health and Medical Program of the 
Uniformed Services (OCHAMPUS), Program Development Branch, 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. Introduction and Background

A. 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), all care 
for active duty members is provided or arranged by military medical 
treatment facilities (MTFs). CHAMPUS-eligible beneficiaries may receive 
care in the direct care system (that is, care provided in military 
hospitals or clinics) on a space-available basis, 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). Medicare eligible military beneficiaries 
also are eligible for care in the direct care system on a space-
available basis, and may be reimbursed for civilian care under the 
Medicare program. The majority of care for military beneficiaries is 
provided within catchment areas of 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 MHSS, TRICARE 
implementation is being phased in over a period of several years. The 
principal mechanisms for the implementation of TRICARE are the 
designation of the commanders of selected MTFs as Lead Agents for 12 
TRICARE regions across the country, operational enhancements to the 
MHSS, and the procurement of managed care support contracts for the 
provision of civilian health care services within those regions.
    Sound management of the MHSS requires a great degree of 
coordination between the direct care system and CHAMPUS-funded civilian 
care. 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 final rule 
moves toward establishment of a basic structure of health care 
enrollment for the MHSS. Under this structure, all health care 
beneficiaries become participants in TRICARE and classified into one of 
four 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 participants, which includes all CHAMPUS-
eligible beneficiaries who do not enroll in TRICARE Prime; or
    4. Medicare-eligible beneficiaries and other non-CHAMPUS-eligible 
DoD beneficiaries, who, although not eligible for TRICARE Prime, may 
participate in many features of TRICARE.
    Eventually, we anticipate that there will be a fifth category: 
participants in other managed care programs affiliated with TRICARE. 
However, no such affiliations have yet been made.
    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 (1) enroll to 
receive health care in an HMO-type program called ``TRICARE Prime;'' 
(2) use the civilian preferred provider network on a case-by-case 
basis, under ``TRICARE Extra;'' or (3) choose to receive care from non-
network providers and have the services reimbursed under ``TRICARE 
Standard.'' (TRICARE Standard is the same as standard CHAMPUS.) 
CHAMPUS-eligible 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 
TRICARE Standard 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 MTFs, but active duty family members who 
enroll in TRICARE Prime will have priority over other beneficiaries.
    A third major feature of the TRICARE program is a series of 
initiatives, affecting all beneficiary categories, designed to 
coordinate care between military and civilian health care systems. 
Among these is a program of resource sharing agreements, under which a 
Managed Care Support contractor provides personnel and other 

[[Page 52079]]
resources to an MTF in order to increase the availability of services. 
It is our expectation that the Partnership Program, an existing 
mechanism for increasing the availability of services in MTFs, will be 
phased out as TRICARE managed care support contracts are implemented. 
Another TRICARE initiative is establishment of Health Care Finders, 
which facilitate referrals to appropriate services in the MTF or 
civilian provider network. In addition, integrated quality and 
utilization management services for military and civilian sector 
providers will be insituted. 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 will 
feature TRICARE Outpatient Clinics, which will be direct care system 
resources serving as primary care managers and providing related 
services. (This final rule also provides a transitional authority for 
continued operation of PRIMUS and NAVCARE Clinics, which are dedicated 
contractor-owned and operated clinics, until TRICARE is implemented.) 
These initiatives will have a major impact on military health care 
delivery systems, improving services for all beneficiary 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 beneficiaries' out-of-pocket costs 
for civilian sector care. For example, the current CHAMPUS cost sharing 
requirements for outpatient care for active duty family members include 
a deductible of $150 per person or $300 per family ($50/$100 for family 
members of active duty 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, for 
CHAMPUS beneficiaries who enroll, by a standard charge for most 
civilian provider network outpatient visits of $12.00 per visit, or 
$6.00 per visit for family members of E-4 and below sponsors. For 
CHAMPUS-eligible retirees, their family members and survivors, the 
current deductible of $150 per person or $300 per family and 25 percent 
cost sharing for outpatient services will also be replaced by a 
standard charge, which is likewise $12.00 for most outpatient visits. 
Retirees, their family members and survivors will also be charged a 
$230/$460 annual individual/family enrollment fee. Active duty members 
will face no cost sharing under TRICARE Prime.
    Beneficiaries who are not enrolled in TRICARE Prime will also have 
significant opportunities to reduce expected out-of-pocket costs under 
CHAMPUS. These opportunities include the new special pharmacy programs, 
and access to network providers and to TRICARE Outpatient Clinics, on a 
space-available basis.
    One design consideration for TRICARE is the mobile nature of our 
beneficiary population. Some features of TRICARE, such as the 
uniformity of the benefit and the consistency of program rules across 
the country, are crafted with this factor in mind. In the future, we 
hope to increase the ``portability'' of the TRICARE benefit, by making 
TRICARE more accessible to beneficiaries who have multiple residences, 
have family members in several locations, and so forth.
    With respect to military hospitals, in the future consideration 
will be given 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 MTF 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 use of health care services. When this issue is considered 
for possible implementation in fiscal year 1988, 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.
    The TRICARE Program is a major reform of the MHSS--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.

B. Public Comments

    The proposed rule was published in the Federal Register on February 
8, 1995. We received 17 comment letters. We thank those who provided 
comments; specific matters raised by commenters are summarized below in 
the appropriate sections of the preamble.

II. Provisions of the Rule Regarding the Tricare Program

    These regulatory changes are being published as an amendment to 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 sections 199.17 and 199.18 to 
describe the TRICARE Program and the uniform HMO benefit. The major 
provisions of new section 199.17 regarding the TRICARE Program are 
summarized below. A summary of the relevant proposed rule provision is 
presented, followed by an analysis of major public comments, and by a 
summary of the final rule provisions.

A. Establishment of the TRICARE Program (Section 199.17(a))

1. Provisions of Proposed Rule
    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 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 or agreement with a civilian managed 
care contractor with those services provided in MTFs. 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.
2. Analysis of Major Public Comments
    Several commenters objected to the concept that all beneficiaries 
were ``enrolled,'' and classified into one of five enrollment 
categories; they suggest that the only true enrollment is in TRICARE 
Prime.

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    One commenter questioned implementation of TRICARE in Washington 
and Oregon effective March 1, 1995, in advance of publication of this 
final rule.
    One commenter suggested that initiation of TRICARE in an area be 
widely announced, including advance publication in the Federal Register 
to inform providers how to join preferred provider networks, mailed 
notice to current providers, and notifications to national associations 
representing providers. The commenter also suggested that it is 
inappropriate for DoD to have made decisions on how and in what order 
TRICARE is to be implemented nationally, in advance of final rule 
promulgation.
    Response. We acknowledge the confusion that arose as a result of 
some of the explanation in the preamble to the proposed rule. The 
commenters correctly point out that the only TRICARE option which 
requires an affirmative ``enrollment'' action is TRICARE Prime. Our 
intent was to emphasize the all-encompassing nature of TRICARE, and the 
fact that care for all MHSS beneficiaries will be affected by the 
advent of TRICARE; in a very real sense, all peacetime care provided or 
paid for by DoD will become part of TRICARE.
    Regarding the implementation of TRICARE in Washington and Oregon on 
March 1, 1995, prior to promulgation of this final rule, we point out 
that the program in Washington and Oregon is being implemented under a 
special demonstration authority (10 U.S.C. 1092) in advance of the 
promulgation of this rule. If features of the program in Washington and 
Oregon conflict with the provisions of this final rule, they will be 
revised after the rule becomes effective.
    Regarding notifications to providers about the initiation of 
TRICARE, we believe that the competitive procurements being conducted 
for regional managed care support contracts provide ample opportunity 
for providers to become aware of and involved in the program. We 
publish advance notices in the Commerce Business Daily, issue formal 
requests for proposals, and publicize and conduct bidders conferences, 
in order to inform interested parties as fully as possible.
    On the point of DoD making decisions about TRICARE implementation 
strategies in advance of final rule publication, the promulgation of 
this rule is entirely separate from operational decisions about the 
phasing of program implementation. The basic nature of our approach to 
implementing TRICARE managed care support contracts was directed by 
Congress, and we reported to Congress in December 1993 on our plan for 
implementing the program region by region, achieving nationwide 
coverage in 1997.
3. Provisions of the Final Rule
    The final rule clarifies that, while all beneficiaries participate 
in TRICARE, only the HMO-like option, TRICARE Prime, requires an action 
on the part of the beneficiary to enroll.

B. Triple Option (Section 199.17(b))

1. Provisions of Proposed Rule
    This paragraph presents an overview of the triple option feature of 
the TRICARE Program. Most beneficiaries are offered enrollment in the 
TRICARE 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 automatically in Prime.
2. Analysis of Major Public Comments
    None.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

C. Eligibility for Enrollment in Prime (Section 199.17(c))

1. Provisions of Proposed Rule
    This paragraph describes who may enroll in the Program. All active 
duty members are automatically enrolled in Prime; all CHAMPUS-eligible 
beneficiaries who live in areas covered by TRICARE Prime are eligible 
to 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 does not offer enrollment to 
non-CHAMPUS-eligible beneficiaries.
2. Analysis of Major Public Comments
    Several commenters objected to the exclusion of Medicare-eligible 
military beneficiaries from enrollment eligibility, and questioned the 
legal basis for such exclusion.
    One commenter suggested that enrollment priorities be set 
nationally rather than locally, with local authority to follow the 
enrollment priority system only if all eligible beneficiaries cannot be 
enrolled.
    One commenter raised the issue of a CHAMPUS beneficiary with 
Worker's Compensation coverage related to civilian government 
employment, receiving care from military providers, asking what effect 
TRICARE would have on this circumstance.
    Response. Regarding the exclusion of Medicare beneficiaries, this 
is not the Department's preferred position. However, we are unable to 
offer enrollment to this group without reimbursement from the Medicare 
trust funds, which would require a statutory revision. Were we to 
include Medicare-eligible beneficiaries under TRICARE Prime, we would 
be unable to comply with the cost requirement of section 731 of the 
National Defense Authorization Act for Fiscal Year 1994. That section 
requires that the ``Uniform HMO Benefit,'' mandated for TRICARE Prime, 
must not increase DoD costs. Under law, civilian sector care provided 
to almost all Medicare beneficiaries is at no expense to DoD because 
they are not covered by CHAMPUS. TRICARE Prime, however, includes 
comprehensive civilian sector coverage. Were this to be provided at DoD 
expense, the additional costs to DoD would be considerable. There is no 
feasible way to restructure TRICARE Prime to accommodate those costs 
under the statutory cost neutrality requirement or under current 
budgetary realities.
    With respect to DoD's legal authority to exclude Medicare-eligible 
beneficiaries from TRICARE Prime, the legal authority for TRICARE 
Prime, 10 U.S.C. 1097, allows DoD to establish health care plans 
covering selected health care services or selected beneficiaries. For 
the reasons explained above, the TRICARE Prime plan adopts the same 
exclusion of most Medicare beneficiaries as is required by law for 
CHAMPUS (10 U.S.C. 1086(d)), on which the civilian sector component of 
TRICARE Prime is based.
    Regarding the primacy of national priorities for enrollment, we 
agree, and reaffirm that the statutory priorities for access to space-
available care in MTFs will be used as the national priorities for 
enrollment; if priorities are needed at the local level owing to 
limited availability of enrollment during the phase-in of TRICARE, then 
the statutory priorities will be followed. The only additional 
prioritizing that is authorized is that, during a phase-in process, 
priority may be given to family members of members in lower pay grades. 
Eventually, however, in locations where Prime is offered, all CHAMPUS-
eligible 

[[Page 52081]]
beneficiaries who wish to enroll will be accommodated.
    Regarding the effect of TRICARE on beneficiaries with Worker's 
Compensation coverage, the answer is that we anticipate little change: 
under TRICARE, MTFs will continue to have authority to bill Worker's 
Compensation programs and similar parties, and health care from 
military providers will continue to be subject to availability.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

D. Health Benefits Under Prime (Section 199.17(d))

1. Provisions of Proposed Rule
    This paragraph states that the benefits established for the Uniform 
HMO Benefit option (see section 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, 
under the proposed rule, 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.
2. Analysis of Major Public Comments
    Several commenters recommended that preference for MTF care be 
given to all TRICARE Prime enrollees over all nonenrollees.
    Response. We agree that granting preference to MTFs based on 
enrollment in TRICARE Prime would be an incentive to enroll. In the 
case of active duty family members, this preference is being granted. 
However, other considerations must be taken into account when granting 
such preference for retirees. In particular, because Medicare 
beneficiaries are not eligible for enrollment in TRICARE Prime, 
granting such preference would necessarily limit access to MTFs and 
increase out-of-pocket costs for this large group of DoD beneficiaries. 
Several options are under consideration to ensure fair and equitable 
treatment of Medicare-eligible retirees under TRICARE Prime, and we 
will revisit the issue of access priority as we have more information 
about these options. In the meantime, we believe that the appropriate 
course of action is not to base retiree preference for MTFs on 
enrollment in TRICARE Prime.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

E. Health Benefits Under Extra (Section 199.17(e))

1. Provisions of Proposed Rule
    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.)
2. Analysis of Major Public Comments
    No public comments were received relating to this section of the 
rule.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

F. Health Benefits Under Standard (Section 199.17(f))

1. Provisions of Proposed Rule
    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.
2. Analysis of Major Public Comments
    No public comments were received relating to this section of the 
rule.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

G. Coordination with Other Health Care Programs (Section 199.17(g))

1. Provisions of Proposed Rule
    This paragraph of the proposed rule provided 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 programs for the purpose of coordinating beneficiary 
entitlements under the other programs and the MHSS. 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.
2. Analysis of Major Public Comments
    One commenter asked whether this section applied only to managed 
care plans, or to any medical plan.
    Response. To clarify, the section applies only to managed care 
plans, such as health maintenance organizations. The intent of the 
provision is to enable MTFs to become participating providers in the 
networks established by such private plans, or to make other 
coordinating arrangements, so that military beneficiaries who are 
enrolled in the private plans may utilize the services of the MTF as 
part of their managed care enrollment.
    The Health Care Financing Administration (HCFA) expressed concerns 
about the expressed DoD intent to include arrangements with Medicare 
HMOs under this provision. Further discussions between DoD and the 
Department of Health and Human Services will be necessary before we 
complete action on this proposed regulatory provision.
3. Provisions of the Final Rule
    The final rule does not include provisions relating to coordination 
with other health plans. Action is reserved, pending further 
development.

H. Resource Sharing Agreements (Section 199.17(h))

1. Provisions of Proposed Rule
    This paragraph provides that MTFs 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 MTFs. Under internal or 
external resource sharing agreements, an MTF commander may authorize 
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.

[[Page 52082]]

2. Analysis of Major Public Comments
    One commenter suggested that the final rule specify how resource 
sharing agreements will be established, how providers will be selected, 
which providers would qualify for resource sharing, and how internal 
disputes among practitioners would be resolved.
    Response. We note that that resource sharing takes place in the 
context of regional managed care support contracts, established in 
support of TRICARE. These competitively procured contracts will be the 
vehicle for selection of providers participating in resource sharing 
programs, and disputes would be resolved through the contract 
mechanisms. Any services offered in MTFs or covered by CHAMPUS could, 
in concept, be subject to resource sharing; hence any CHAMPUS 
authorized provider category potentially could be part of the program 
if desired by the local military medical authorities.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule, except for a 
clarification of the circumstances under which services provided to 
Medicare beneficiaries are potentially reimbursable by Medicare: 
Medicare could pay civilian hospital charges in an external resource 
sharing circumstance.

I. Health Care Finder (Section 199.17(i))

1. Provisions of Proposed Rule
    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.
2. Analysis of Major Public Comments
    One commenter suggested that the health care finder should refer 
beneficiaries to both network and non-network sources of care, as 
appropriate for the particular case, and that health care finder staff 
be experienced, so that beneficiaries may be properly directed.
    Response. We do not foresee circumstances in which health care 
finders would routinely refer beneficiaries to non-network providers. 
It is in the beneficiary's interest to use a network provider, because 
of reduced cost sharing, guaranteed participation, and enhanced quality 
assurance provisions; it is also in the Government's interest to 
maximize use of network providers, whose services are provided at 
preferred rates. Of course, health care finders will attempt to assist 
beneficiaries in finding non-network sources if no network provider is 
available; this is likely to be an unusual occurrence, because networks 
typically will have the full range of CHAMPUS authorized services 
available.
    Health care finder staff will be qualified in their areas of 
responsibility, often with Registered Nurses providing referral 
services and appropriately trained clerical staff providing 
administrative support and services.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

J. General Quality Assurance, Utilization Review, and Preauthorization 
Requirements (Section 199.17(j))

1. Provisions of Proposed Rule
    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 MTF services.
2. Analysis of Major Public Comments
    No public comments were received relating to this section of the 
rule.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

K. Pharmacy Services, Including Special Services in Base Realignment 
and Closure Sites (Section 199.17(k))

1. Provisions of Proposed Rule
    This paragraph establishes two special pharmacy programs, a retail 
pharmacy network program and a mail service pharmacy program.
    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 an MTF. 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 
MTF for pharmacy services.
    Under the 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 an MTF. The catchment area 
is defined in law as ``the area within approximately 40 miles of a 
medical facility of the uniformed services.'' Public Law 100-180, sec. 
721(f)(1), 10 U.S.C.A. 1092 note. This is also the geographical basis 
in the law for nonavailability statements that authorized 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 by 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 rule, Medicare-
eligible beneficiaries who live within the established 40-mile 
catchment area of a closed medical treatment facility 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 an MTF. First, 
a 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, their family members and 
survivors, these cases will not be considered to be areas adversely 
affected by the closure of an MTF. 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 effect in the area.
    The Director, Office of CHAMPUS, may establish other procedures for 
the effective operation of the pharmacy programs, dealing with issues 
such as encouragement of the use of generic drugs for prescriptions and 
of appropriate drug formularies, as well as establishment of 
requirements for 

[[Page 52083]]
demonstration of past reliance on an MTF for pharmacy services.
2. Analysis of Major Public Comments
    One public comment urged prompt action to implement the program in 
base closure sites; another commenter suggested establishment of a 
timetable for defining eligibility and documentation requirements. 
Another recommended that the definition of beneficiaries affected by 
the closure of an MTF not be limited to the 40-mile catchment area. 
Another recommended that eligible Medicare beneficiaries should include 
all who used the closed pharmacy within the past 12 months.
    Response. We agree with the comments provided, and have clarified 
in the final rule the special rules for eligibility of Medicare 
beneficiaries for this program.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule, except that it 
clarifies the procedures for establishing eligibility for Medicare 
beneficiaries who live outside the former catchment area of a closed 
facility. Medicare beneficiaries who obtained pharmacy services at a 
facility in its last 12 months of operation (or the last twelve months 
during which pharmacy services were available to non-active duty 
beneficiaries) will be deemed to have been reliant on the facility; 
they can establish their reliance through a written statement to that 
effect.
    The pharmacy provisions of the rule are part of the Department's 
efforts to consolidate its pharmacy programs, and move towards a 
uniform pharmacy component for TRICARE.

L. PRIMUS and NAVCARE Clinics (Section 199.17(1))

1. Provisions of Proposed Rule
    The proposed rule added a new section 199.17(1). 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. This provision would have made permanent the 
PRIMUS and NAVCARE Clinic authority.
    In the proposed rule, we proposed that PRIMUS and NAVCARE Clinics 
would function in a manner similar to MTF clinics that, as under the 
demonstration project. As such, all beneficiaries eligible for care in 
MTFs (including active duty members, Medicare-eligible beneficiaries, 
and other non-CHAMPUS eligible beneficiaries) would be eligible to use 
PRIMUS and NAVCARE Clincis. For PRIMUS and NAVCARE Clinics established 
prior to October 1, 1994, CHAMPUS deductibles and copayments would not 
apply. Rather, military hospital policy regarding beneficiary charges 
would apply. For PRIMUS and NAVCARE Clinics established after September 
30, 1994, the provisions of the Uniform HMO Benefit regarding 
outpatient cost sharing would apply (see section 199.18(d)(3)). Other 
CHAMPUS rules and procedures, such as coordination of benefits 
requirements would apply. The Director, OCHAMPUS, could waive or modify 
CHAMPUS regulatory requirements in connection with the operation of 
PRIMUS and NAVCARE Clinics.
2. Analysis of Major Public Comments
    Several commenters sought Clarification of the fees applicable to 
PRIMUS and NAVCARE clinics established after September 30, 1994, 
whether Medicare eligibles would be allowed to use the clinics or even 
enroll in TRICARE using PRIMUS or NAVCARE clinics as primary care 
managers, and whether PRIMUS and NAVCARE clinics will be limited to 
space-available care for non-enrollees.
    Response. The Department has determined that no new PRIMUS or 
NAVCARE Clinics will be established, so the distinction made in the 
proposed rule between existing and new clinics is no longer necessary. 
As TRICARE is implemented over the next few years, existing PRIMUS and 
NAVCARE Clinics will be phased out; PRIMUS and NAVCARE Clinics may be 
converted into TRICARE Outpatient Clinics, as described below, or 
similar clinics may emerge as components of the managed care support 
contractor's network. TRICARE Outpatient Clinics will be Army, Navy or 
Air Force military medical treatment facilities (MTFs): the Government 
will operate the facilities, credential providers, and be liable for 
care provided therein; the clinic will be staffed with military 
personnel, civilian Federal employees, or contractors, or a combination 
of these; the clinic providers will be direct care primary care 
managers for TRICARE enrollees (see section 199.17(n)(1)); access 
priority for care in TRICARE Outpatient Clinics will be the same as for 
MTFs (see section 199.17(d)(1)); cost sharing for services in TRICARE 
Outpatient Clinics will be the same as in MTFs (see section 
199.17(m)(6)); and collections from third-party insurance will be under 
the provisions of 32 CFR Part 220, which establishes rules for 
collections by facilities of the Uniformed Services. Incidentally, the 
Department is developing a financing approach for TRICARE in which MTF 
funding will be based on a capitated payment per person enrolled with 
an MTF primary care manager, and TRICARE managed care support 
contractors will receive a capitated payment per enrollee with a 
civilian primary care manager. Under this approach, it is our intention 
to include funding of TRICARE Outpatient Clinics within the MTF 
capitation, so that their operation will be a part of the direct care 
system rather than part of the managed care support contract. Any 
outpatient clinics or similar facilities established or operated by 
TRICARE managed care support contractors will be components of the 
civilian provider network, and will utilize the cost sharing 
requirements specified in section 199.18(d)(3), which establishes 
outpatient cost sharing requirements for the Uniform HMO Benefit. These 
include specific dollar copayments for physician office visits and 
other routine care, mental health visits, ambulatory surgery services, 
and prescription drugs, as well as cost sharing percentages for durable 
medical equipment.
    Medicare-eligible military beneficiaries will be eligible for care 
in TRICARE Outpatient Clinics on a space-available basis, but they will 
not be allowed to enroll in TRICARE Prime (see section 
199.17(a)(6)(i)(D)), unless they have dual CHAMPUS-Medicare 
eligibility.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule, except that it 
is clarified that operation of a PRIMUS and NAVCARE Clinic will cease 
upon initiation of a TRICARE program in the location of the PRIMUS or 
NAVCARE Clinic.

M. Consolidated Schedule of Beneficiary Charges (Section 199.17(m))

1. Provisions of Proposed Rule
    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 participants; 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.

[[Page 52084]]

2. Analysis of Major Public Comments
    One commenter noted the perception of many military beneficiaries 
that they were promised perpetual free care for their families when 
they joined the military service. Several commenters representing 
beneficiaries raised objections to the preamble section describing 
DoD's plans to consider user fees in MTFs, for some categories of 
beneficiaries and for some types of care. One commenter pointed out 
that mental health cost sharing was not addressed in the schedule, and 
that cost sharing for Medicare-eligible beneficiaries is unclear. 
Another commenter questioned whether retirees with service-connected 
disabilities, who in some cases receive treatment for their condition 
in MTFs, are in effect being charged for this care via the enrollment 
fee for TRICARE Prime.
    Response. Regarding promises of perpetual free care and the 
preamble material regarding potential future imposition of fees for 
certain services in MTFs, we would point out that some elements of the 
MHSS, notably CHAMPUS, have always had beneficiary charges associated 
with them, and there has never been a system of unlimited free health 
care for family members and other beneficiaries. In considering options 
for the Uniform HMO Benefit, we considered imposition of fees in MTF's; 
because of the high volume of services provided there, a very small fee 
could have a dramatic impact on other cost sharing requirements 
necessary to meet the statutory requirements for budget neutrality. It 
was decided that we would not propose MTF fees in this rulemaking 
proceeding, but describe some of the considerations regarding such fees 
in the preamble to set the stage for a possible future rulemaking 
action.
    Regarding mental health cost sharing, we would point out that the 
Consolidated Schedule of Beneficiary Charges includes several 
references to the TRICARE Triple Option cost sharing schedule, and the 
Uniform HMO Benefit Schedule, where mental health cost sharing 
requirements are described in detail.
    Regarding cost sharing for Medicare beneficiaries, the rules of the 
Medicare program will generally apply for civilian care (with 
exceptions under PRIMUS and NAVCARE clinics, the special pharmacy 
program, and certain resource sharing agreements). The details of cost 
sharing for private sector services, prescribed under the Medicare 
program, are not presented here, but are available from any Social 
Security Administration Office.
    Regarding beneficiaries with service-connected disabilities, they 
may elect to enroll in TRICARE Prime, or continue to exercise their 
entitlements to CHAMPUS, and to space-available care in MTF's or to 
receive priority care from Department of Veterans Affairs Medical 
Centers.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

N. Additional Health Care Management Requirements Under Prime (Section 
199.17(n)

1. Provisions of Proposed Rule
    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 obtaining 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.
2. Analysis of Major Public Comments
    One commenter noted that enrollees would access MTF care only 
through their primary care manager, while non-enrollees could seek MTF 
care unfettered. This would limit access for enrollees to routine care 
at MTFs and to the additional services sometimes available in MTFs. 
Additionally, the commenter suggested that variations in MTF primary 
care capacity in different locations would create disparities in 
benefits and in access to MTF services.
    Another commenter recommended that patient access to his/her 
medical specialist of choice be guaranteed, and that beneficiaries not 
be forced to be evaluated and treated for mental illness by non-
physicians.
    A commenter representing beneficiaries asked how far enrollees 
could be required to travel outside the area if needed care was 
unavailable locally.
    One commenter questioned how referrals outside the network or area 
would be carried out, and how beneficiaries would obtain approval for 
such care.
    Response. It is true that the capacity and capabilities of the 
direct care system of MTFs vary across the country, and that this 
creates some disparities in access to free health care services. The 
basic entitlement to CHAMPUS (or to Medicare) fills in many of the 
``gaps'' arising from this circumstance; the Government shares in the 
costs of civilian health care obtained by beneficiaries. TRICARE 
attempts to further ameliorate disparities in access and cost through 
creation of an integrated military-civilian health care program. Under 
TRICARE Prime, outpatient care continues to be free in MTFs, and the 
Government assumes a greater share of the cost of civilian health care 
services. It is our firm belief that under a managed health care 
approach, beneficiaries will receive much better access to needed 
health care services than they do under the existing approach, in which 
MTF care and civilian care are largely uncoordinated.
    Regarding the comments about access to specialist of choice, 
requirements to travel to receive care, and referrals for out-of-
network care, we emphasize that one of the key features of TRICARE 
Prime is the assignment of a primary care manager for each enrollee. 
The primary care manager, supported by the Health Care Finder, will be 
responsible for providing or arranging all nonemergency care for the 
enrollee. As specified in section 199.17(n)(2)(iii)(C), when needed 
referral care is unavailable in MTF, the enrollee will have the freedom 
to choose a provider from among those in the civilian network, subject 
to availability. Beneficiaries will be authorized to receive care from 
providers not affiliated with the network in cases where neither 
military facilities nor the civilian network can provide the care, 
pursuant to section 199.17(n)(2)(iii)(E). Mandatory referrals 
necessitating travel are also addressed in section 199.17(n)(2): they 
can be required only if the enrollee was informed of the policy at or 
prior to enrollment. Travel will not be reimbursed, except in the 
context of the Specialized Treatment Services program. See 32 CFR 
199.4(a)(10) and 58 FR 58955 for further information about that 
program.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

[[Page 52085]]


O. Enrollment Procedures (Section 199.17(o))

1. Provisions of Proposed Rule
    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. 
These features, rules and procedures may be revised over time, 
coincident with reenrollment opportunities.
2. Analysis of Major Public Comments
    One commenter asked us to define the ``significant effect on 
participant's costs or access to care'' which would trigger an 
opportunity to change enrollment status under 199.17(0)(3).
    One commenter asked if the installment method would be available 
for payment of the enrollment fee, and urged that no maintenance fee 
apply if so.
    Response. Regarding definition of ``significant effect'' on costs 
or access, which would trigger an opportunity to change enrollment 
status, we define a significant effect as follows: a change in cost 
sharing or access policy expected to result in an increase in average 
annual beneficiary out-of pocket costs of $100 or more.
    Regarding installment payment of enrollment fees, a provision has 
been added to authorize installment payments; we hope to offer 
allotment payments in the future. While the rule provides only a 
general provision in this regard, we would point out that current 
practice in TRICARE is to offer a quarterly payment option, with the 
option to pay the full amount remaining at any time; an additional 
charge of $5.00 is added to each periodic payment to cover the 
additional administrative costs associated with the installment method. 
Some beneficiaries have expressed concern about the inclusion of such a 
``maintenance fee.'' Our position is that, given that the enrollment 
fee has been set at the minimum amount needed to comply with statutory 
requirements of budget neutrality, we cannot ignore the additional 
costs associated with installment payment methods. We believe it is 
appropriate, and consistent with private sector practice, to add a 
small amount to each payment, rather than to spread this cost across 
all beneficiaries who enroll in TRICARE Prime.
    The rule also includes exclusion from TRICARE Prime for one year 
for failure to make an installment payment on a timely basis, including 
a grace period. Eligibility for TRICARE Standard and Extra would be 
unaffected by the exclusion penalty.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule, with several 
exceptions. Provisions regarding open season enrollment have been 
broadened to include continuous open enrollment, wherein beneficiaries 
may enroll at any time, and each enrollee has an individualized, 
specific anniversary date. In addition, provisions have been added 
regarding the installment payment option.

P. Civilian Preferred Provider Networks (Section 199.17(p))

1. Provisions of Proposed Rule
    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.
2. Analysis of Major Public Comments
    Two public comments indicated that the requirement for providers to 
accept Medicare assignment would adversely affect network development, 
one suggesting that the requirement was unlawful and repugnant. One 
commenter indicated that reductions in CHAMPUS payment amounts in 
recent years will make it increasingly difficult to establish and 
maintain an adequate network of providers, leading to lower quality 
providers and dissatisfaction on the part of beneficiaries.
    One commenter pointed out that some categories of providers, while 
not ineligible for Medicare participation, have not participated in 
Medicare because it is irrelevant to their lines of business. The 
commenter suggested that, in such cases, the requirement to participate 
in Medicare should not apply.
    One commenter objected to the requirement that preferred providers 
must meet all other qualifications and requirements, and agree to 
comply with all other rules and procedures established for the network, 
suggesting that any such additional requirements must be subjected to 
the rulemaking process.
    One commenter questioned the lack of specificity in 199.17(p)(6) 
regarding special reimbursement methods for network providers, and 
recommended additional specificity in the final rule. Another commenter 
recommended that the rule specify if rate setting methods for network 
providers will be the same as in standard CHAMPUS, and that any 
differences in rate setting for the ``any qualified provider method'' 
be made subject to the rulemaking process.
    One commenter recommended that network requirements specify the 
inclusion of psychiatrists, allowed to provide a full range of 
diagnostic and treatment services.
    One commenter urged that we require that the network contain a 
sufficient number and mix of all provider types, not just physicians, 
and explicitly prohibit discrimination against a health care provider 
solely on the basis of the professional's licensure or certification, 
to prohibit exclusion of an entire class of health care professional.
    One commenter asked who would pay for travel or overnight 
accommodations if a beneficiary must travel more than 30 minutes from 
home to a primary care delivery site.
    One commenter asked why 199.17(p)(5)(ii) allows a four-week wait 
for a well-patient visit, and a two-week wait for a routine well-
patient visit.
    One commenter suggested that the wide latitude in network 
development methods provided by 199.17(p)(7) would create undesirable 
inconsistencies across the nation.
    One commenter suggested that any qualified provider be allowed into 
the preferred provider network, regardless of the method used to 
develop the network.
    One commenter recommended that the rule specify if rate setting 
methods for network providers will be the same as in standard CHAMPUS, 
and that any differences in rate setting for the any qualified provider 
method be made subject to the rulemaking process.
    Response. Regarding the requirement that providers accept Medicare 
assignment as a condition of 

[[Page 52086]]
participation in the TRICARE network, we believe that this requirement 
is reasonable. Payment amounts under the CHAMPUS and Medicare programs 
are very similar, so there would not seem to be an economic issue 
involved. The vast majority of physicians nationally (83 percent in 
1993) already participate in Medicare, so there should be a large pool 
of providers available. For hospitals, CHAMPUS and Medicare 
participation is linked by statute. Physician participation is not 
linked for the standard CHAMPUS program, but in the context of 
establishing a managed care network is entirely appropriate and 
consistent with statutory authority to establish reasonable 
requirements for network providers, including acceptance of Medicare 
assignment.
    Regarding the suggestions that some providers may not be Medicare 
participating providers because it is irrelevant to their line of 
business, and thus should be exempted from the requirement, we agree 
that there may be some classes of providers which, while providing 
services of importance to CHAMPUS beneficiaries, provide no services 
covered by Medicare. Such a case may be covered by the waiver for 
``extraordinary circumstances'' which is included in this provision.
    Regarding the comment that any additional requirements established 
for network providers should be subject to the rule making process, we 
point out that this provision refers to additional, local requirements 
established for network providers, consistent with the program-wide 
rules established in this regulation and other program documents. 
Further rulemaking activity in this regard is neither necessary nor 
appropriate.
    Regarding the suggestion that we provide additional specificity 
concerning the special reimbursement methods for network providers, we 
do not agree that additional specifics should be provided. The rule 
provides added flexibility to vary payment provisions from those 
established by regulation, to accommodate local market conditions. To 
attempt to specify in advance the possible reimbursement approaches 
would defeat our purpose of providing a flexible mechanism. We also 
disagree that network rate setting should be the same as under standard 
CHAMPUS rules; a key aim of managed care programs is to negotiate lower 
rates of reimbursement with networks of preferred providers.
    Regarding the comments which recommended specification of provider 
types to be included in the network, or suggested anti-discrimination 
provisions, we point out that section 199.17(p)(5) requires that the 
network have an adequate number and mix of providers such that, coupled 
with MTF capabilities, it can meet the reasonably expected health care 
needs of enrollees. Beneficiaries will have available the full range of 
needed health care services, and network managers will be responsible 
for arranging to meet any unanticipated health care needs which cannot 
be accommodated in the network. We do not think it is appropriate to 
specify which provider types and how many will be included in the 
network, because this will vary by location, depending on beneficiary 
demographics and local health care marketplace conditions.
    Regarding payment for travel or overnight accommodations if a 
beneficiary must travel more than 30 minutes from home to a primary 
care delivery site, we will not make such payments. Payment for travel 
is authorized only in association with the specialized treatment 
services program, under section 199.4(a)(10).
    Regarding why 199.17(p)(5)(ii) allows a four-week wait for a well-
patient visit, and a two-week wait for a routine well-patient visit, 
this was a typographical error in the proposed rule. The provision 
should be, a four-week wait for a well-patient visit, and a one-week 
wait for a routine visit.
    Regarding the comment that the wide latitude in network development 
methods provided by 199.17(p)(7) would create undesirable 
inconsistencies across the nation, we point out that a single method is 
being implemented nationally: competitive solicitation of regional 
TRICARE support contractors. We expect that alternative methods will be 
used only to address special circumstances.
    Regarding the suggestion that any qualified provider be allowed 
into the preferred provider network, regardless of the method used to 
develop the network, we disagree. The rule contains provisions (section 
199.17(q)) for using such a method, but our preferred method, which we 
are implementing, is to establish regional TRICARE support contracts on 
a competitive basis, with offerors proposing a selective provider 
network.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule, except for 
correction of a typographical error; the rule now specifies maximum 
wait time for a routine visit of one week.

Q. Preferred Provider Network Establishment Under Any Qualified 
Provider Method (Section 199.17(q))

1. Provisions of Proposed Rule
    This paragraph describes one process that may be used to establish 
a preferred provider network (the ``any qualified provider method'') 
and establishes the qualifications which providers must demonstrate in 
order to join the network.
2. Analysis of Major Public Comments
    Several commenters urged that the ``any qualified provider'' method 
not be used in the development of managed care network for DoD.
    One commenter recommended that the requirement that providers 
follow all quality assurance and utilization management procedures 
established by OCHAMPUS be linked to the requirement that providers 
must meet all other rules and procedures that are established, publicly 
announced, and uniformly applied.
    Response. As provided in section 199.17(p)(7), there are several 
possible methods for establishing a civilian preferred provider 
network, including competitive acquisitions, modification of and 
existing contract, or use of the ``any qualified provider'' approach 
described in section 199.17(q). The current method of choice in 
implementing TRICARE is the first approach: DoD plans to award several 
regional managed care support contracts in the next few years. The 
managed care support contractors will establish the civilian provider 
networks according to the requirements specified in the government's 
request for proposals (RFP) for each procurement; these RFP 
requirements will be consistent with the provisions of section 
199.17(p). At this point, we do not anticipate any broad use of the 
``any qualified provider'' approach; it could be used under special 
circumstances, however.
    A commenter suggested that we link two of the ``any qualified 
provider'' requirements--section 199.17(q)(2), which specifies that 
providers must meet all quality assurance and utilization management 
requirements established pursuant to section 199.17, and section 
199.17(q)(4), which requires that providers follow all rules and 
procedures established, publicly announced and uniformly applied by the 
commander or other authorized official. A linkage is not appropriate. 
The former requirement specifically emphasizes some of nationally 
established regulatory requirements will apply to providers under the 
``any qualified provider'' approach. The latter 

[[Page 52087]]
requirement enables establishment of additional, uniform, local 
requirements for the ``any qualified provider'' approach. These could 
include, for example, a requirement for a five percent discount off 
prevailing CHAMPUS payment amounts, applicable to all providers in the 
network. The amount of discount feasible would depend on local market 
conditions and the degree of military presence in the community, hence 
it would be more appropriate as a local requirement than a nationally 
established standard.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

R. General Fraud, Abuse, and Conflict of Interest Requirements Under 
TRICARE Program (Section 199.17(r))

1. Provisions of Proposed Rule
    This paragraph establishes that all fraud, abuse, and conflict of 
interest requirements for the basic CHAMPUS program are applicable to 
the TRICARE Program.
2. Analysis of Major Public Comments
    No public comments were received relating to this section of the 
rule.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

S. Partial Implementation of TRICARE (Section 199.17(s))

1. Provisions of Proposed Rule
    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.
2. Analysis of Major Public Comments
    One commenter suggested that partial implementation of TRICARE 
would be inconsistent with the Congressional mandate for a uniform 
benefit across the country, and urged commitment to full implementation 
of all TRICARE options in all regions.
    Response. We are indeed intent upon implementing TRICARE 
nationally. It would not be inconsistent with Congressional direction 
to implement TRICARE partially in a location, given that the 
Congressional mandate for establishment of the Uniform HMO Benefit is 
to make it applicable throughout the country, to the maximum extent 
practicable. If local circumstances were to make full implementation 
impracticable, it might be preferable to implement at least some 
features of TRICARE.
    One potential circumstance for partial implementation of TRICARE is 
the offering of TRICARE Prime to selected beneficiary groups in remote 
sites. This would be consistent with the Congressional direction to 
implement the Uniform HMO Benefit nationally, to the extent 
practicable. For example, military recruiters are often assigned to 
duty in locations without MTFs, and thus their families may be at a 
disadvantage in terms of health care cost or access, compared to most 
families of active duty members.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule, except that we 
have clarified that partial implementation of TRICARE may include 
offering TRICARE Prime to limited groups of beneficiaries in remote 
sites, and that some of the normal requirements of TRICARE Prime may be 
waived in this regard.

T. Inclusion of Veterans Hospitals in TRICARE Networks (Section 
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.
2. Analysis of Major Public Comments
    One public comment was received relating to this section of the 
rule, applauding the inclusion of VA facilities in TRICARE and urging 
prompt action to implement the provision.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

U. Cost Sharing of Care for Family Members of Active Duty Members in 
Overseas Locations (Section 199.17(u))

1. Provisions of Proposed Rule
    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.
2. Analysis of Major Public Comments
    No public comments were received relating to this section of the 
rule.
3. Provisions of the Final Rule
    The Final Rule is consistent with the proposed rule, except that it 
provides further details of the circumstances under which alternatives 
to CHAMPUS cost sharing rules may be approved, in the context of 
management care programs in overseas locations. Programs will include 
networks of providers who have agreed to accept CHAMPUS assignment for 
all care. Beneficiary cost sharing for care obtained from network 
providers will be zero.

V. Administrative Procedures (Section 199.17(v))

1. Provisions of Proposed Rule
    This paragraph authorizes establishment of administrative 
procedures for the TRICARE Program.
2. Analysis of Major Public Comments
    One commenter asked whether MTF billing of other primary health 
insurance would continue under TRICARE.
    Response. MTF billing of third party insurance, governed by 
provisions of 32 CFR Part 220, will continue under TRICARE.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

III. Provisions of the Rule Concerning the Uniform HMO Benefit Option

A. In General (Section 199.18(a))

1. Provisions of Proposed Rule
    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 

[[Page 52088]]
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 MHSS,'' 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 Bergstrom 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 Base 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. This benefit also fails to meet the statutory 
requirement for cost neutrality to DoD.
    A new HMO benefit is being presented in this rule as the Uniform 
HMO Benefit. The principal features of the 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 family 
members and survivors is reduced to the levels faced by active duty 
family members, with concomitant increases in enrollment fees for these 
beneficiaries. A second important change is that there would be no 
enrollment fee for family members of active duty members. Finally, fees 
are set so that if the predicted costs remain valid, they may be held 
constant for a five-year period, rather than escalating each year with 
price inflation.
    The development of this 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 
rule is the most generous benefit DoD can offer consistent with the 
statutory cost-neutrality mandate.
2. Analysis of Major Public Comments
    No public comments were received relating to this section of the 
rule.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

B. Benefits Covered Under the Uniform HMO Benefit Option (Section 
199.18(b))

1. Provisions of Proposed Rule
    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.
2. Analysis of Major Public Comments
    One commenter suggested that the extent of case management benefits 
and the circumstances under which they would be provided should be 
clarified.
    Response. Case management of services for CHAMPUS beneficiaries 
will be addressed in a separate, forthcoming rule making action. We 
anticipate publication of a proposed rule on this subject later in 
1995.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

C. Deductibles, Fees, and Cost Sharing Under the Uniform HMO Benefit 
Option (Sections 199.18 (c) through (f))

1. Provisions of Proposed Rule
    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 or 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.
    The amount of enrollment fees, outpatient charges and inpatient 
copayment under the Uniform HMO benefit are presented in detail in 
sections 199.18 (c) through (f).
2. Analysis of Major Public Comments
    Two commenters suggested that high enrollment fees might deter 
CHAMPUS-eligible retirees, survivors, and their family members from 
enrolling. One demanded that separate and higher copayments for mental 
health services be eliminated.
    Another commenter indicated that the cost share proposed for 
durable medical equipment and prostheses, coupled with the catastrophic 
cap of $7,500 for retirees, survivors and their family members, 
presented a risk of costs too high, and suggested lowering the 
catastrophic cap to $2,500.
    Another commenter objected to the provision allowing for annual 
updates in enrollment fees and copayments, since the Uniform HMO 
Benefit cost sharing was calculated to be constant over a five year 
period.
    One commenter objected to application of enrollment fees to 
retirees, their survivors, and family members, and not to active duty 
families and suggested that this represents an inappropriate subsidy.
    One commenter noted the requirement that the Uniform HMO Benefit be 
modeled on private sector HMO plans, and pointed out that the average 
office visit copayment was $6.23 for in civilian HMOs in 1993, compared 
to $12 for most beneficiaries under the Uniform HMO Benefit. It was 
suggested that DoD thus ignored a basic requirement of the statute.
    Response. Regarding the suggestion that high enrollment fees might 
deter CHAMPUS-eligible retirees, survivors, and their family members 
from enrolling, we recognize that each family has different health care 
needs and circumstances, and all will not find enrollment in TRICARE 
Prime as the right choice. However, it does offer a cost-effective 
alternative to TRICARE Standard, and will be the best option for many 
people.
    Regarding the demand that separate and higher copayment for mental 
health services be eliminated, we cannot 

[[Page 52089]]
comply. Cost sharing, utilization management, and other requirements 
are different for mental health services in standard CHAMPUS, just as 
they are in many civilian sector health plans. Given the need to craft 
a benefit design which is cost-effective for beneficiaries and the 
Government, we found no alternative but to preserve the distinct 
treatment of mental health services.
    Regarding comments about potentially high costs for durable medical 
equipment and prostheses, we agree, and have lowered the catastrophic 
cap to $3,000 for retirees, their family members and survivors enrolled 
in TRICARE Prime.
    Regarding objections to the provision allowing for annual updates 
in enrollment fees and copayments, since the uniform HMO Benefit cost 
sharing was calculated to be constant over a five-year period, we 
acknowledge this concern, and are committed to maintaining a stable 
benefit. We have retained the provision allowing updates, however, 
because of the statutory direction to administer the Uniform HMO 
Benefit so the DoD costs are no higher than they would be without the 
program. If the program is not budget neutral, enrollment fees or other 
cost sharing will need to be increased, or other actions taken, to 
assure budget neutrality. We recognize that this is a sensitive issue, 
and we strongly believe that no increases in enrollment fees will be 
necessary during the first five years of the program, because we 
performed exhaustive analysis in arriving at the cost sharing 
structure, and critically reviewed all the assumptions we made about 
program performance. Considerations leading to retention of the 
provision permitting updates to fees include, first, that the 
enrollment fees in the Uniform HMO Benefit are set at the absolute 
minimum necessary to comply with the budget neutrality dictates; there 
is no ``cushion'' built in. Second, the Congressional Budget Office, in 
reviewing the Uniform HMO Benefit, determined that there is so much 
uncertainty about the performance of managed care systems that precise 
predictions are impossible. CBO has formally estimated that the Uniform 
HMO Benefit will increase DoD's costs of health care delivery, despite 
the statutory requirement that it be budget neutral, and that total 
cost will probably increase by about 3 percent. Finally, the 
implementation of TRICARE over the next several years provides an 
opportunity to confirm the assumptions we made in establishing the 
Uniform HMO Benefit.
    Regarding objections to application of enrollment fees to retirees, 
their survivors, and family members, and not to active duty families, 
and suggestions that this represents an inapporpriate subsidy, we would 
point out that our analysis considered the costs of retirees, their 
family members and survivors separately from the costs of active duty 
family members. There is no subsidy of active duty family members by 
other beneficiaries inherent in the benefit design; instead the 
differences in cost sharing reflect the differences established 
statutorily when CHAMPUS was created in 1966, and revised numerous 
times since then.
    Regarding the comment that we ignored the statutory requirement 
that the Uniform HMO Benefit be modeled on private sector HMO plans, 
because its cost sharing requirements were higher in some, we disagree. 
The Uniform HMO Benefit does include somewhat higher copayment than are 
used in most private sector HMO plans, owing to the other statutory 
requirements we must address; however, we feel that the Uniform HMO 
Benefit is ``modeled'' on HMO plans, because it employs the same 
approach they do, replacing percentage-based cost sharing with fixed 
dollar copayment to limit beneficiary out-of-pocket expenses and reduce 
incentives for over-provision of care. The statute imposes several 
conflicting requirements for the Uniform HMO Benefit, and our design 
attempts to ``harmonize'' these requirements to the maximum extent 
feasible. These include the requirement to model the benefit on private 
sector plans, the requirement that beneficiary out-of-pocket costs be 
reduced, and that government costs be no greater than would otherwise 
be incurred for enrollees. Replicating a typical HMO plan offered in 
the Federal Employee Health Benefits Program, for example, would 
violate the out-of-pocket cost provisions, because (although per-visit 
copayments are very low) annual out-of-pocket costs are much higher 
than in CHAMPUS owing to much higher premiums. Using the very 
attractive (low) copayments from one of these plans along with low 
enrollment fees would violate the requirement for budget neutrality. In 
a nutshell, the Uniform HMO Benefit design reflects a careful balancing 
of several statutory requirements; considering any one of them in 
isolation is inappropriate.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule, except for one 
important change. We have revised the benefit in response to concerns 
about the vulnerability of a small number of retirees to high out-of-
pocket costs, owing to the percentage cost share for durable medical 
equipment, coupled with a catastrophic cap of $7,500 per family. 
Instead of incorporating the standard CHAMPUS catastrophic cap of 
$7,500, the Uniform HMO Benefit will include a catastrophic cap of 
$3,000 for retirees, survivors, and their family members. Thus 
retirees, survivors, and their family members who enroll in TRICARE 
Prime will have a considerably lower limit on their annual out-of-
pocket expenses, in addition to the dramatically lower per-service 
charges features in the Uniform HMO Benefit.

D. Applicability of the Uniform HMO Benefit to the Uniformed Service 
Treatment Facilities Managed Care Program (Section 199.18(q))

1. Provisions of Proposed Rule
    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 MTFs. 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.
    The Conference Report accompanying National Defense Authorization 
Act for Fiscal Year 1994 calls on DoD ``to develop and implement a plan 
to introduce competitive managed care 

[[Page 52090]]
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 most 
appropriate to use the Uniform HMO Benefit for the USTF Managed -Care 
Program. 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 considerations, we proposed to 
include the USTF Managed Care Program under the Uniform HMO Benefits, 
effective October 1, 1995.
2. Analysis of Major Public Comments
    One commenter asked if Medicare-eligible beneficiaries currently 
enrolled in the USTF managed care program will continue to be enrolled 
after October 1, 1995.
    One commenter suggested that tying the USTF program to TRICARE was 
inappropriate, arbitrary, and should be done only after direct notice 
to those beneficiaries who would be affected. Another commenter 
indicated that it was inappropriate to increase cost sharing for USTFs 
while exempting PRIMUS and NAVCARE clinics.
    One commenter suggested that the use of the rulemaking process for 
establishing cost sharing in Uniformed Services Treatment Facilities 
(USTFs) commits DoD to using the rulemaking process for addressing USTF 
cost sharing in the future.
    One commenter took issue with the applicability of Section 731 of 
the National Defense Authorization Act for Fiscal Year 1994 to USTFs, 
since it applies to ``health care initiatives undertaken * * * after 
the date of enactment of the act,'' and services were initiated under 
the USTF managed care program prior to that time. Also, the commenter 
questioned whether Congressional Conference report language 
recommending the introduction of competitive managed care into areas 
now served by USTFs justifies imposing the TRICARE costs shares (i.e., 
the Uniform HMO Benefits) on USTFs.
    One commenter suggested that the statute directing the Uniform HMO 
Benefit provides latitude for differences in cost sharing requirements, 
because it specifies only reduced out of pocket costs for enrollees, 
and mandates uniformity in the range of health care services to be 
available to enrollee. Focusing on the requirement for reduced out-of-
pocket costs, the commenter notes that out-of-pocket costs for USTF 
enrollees would be increased substantially under the Uniform HMO 
Benefit. Because applying the Uniform HMO Benefit cost sharing to USTFs 
would be inappropriate and unnecessary, and because the range of health 
care services in CHAMPUS and the USTF program are similar, the 
commenter suggests that proposed Sec. 199.18(g) not be included in the 
final rule.
    One commenter suggested that the separate, capitated arrangements 
between the Government and USTFs meet the requirement that the costs 
incurred by the Secretary under each managed care initiative be no 
greater than would otherwise be incurred. It is argued that, because 
USTFs are fully at risk for excess health care costs, the Uniform HMO 
Benefit cost sharing is unnecessary for the USTF program.
3. Provisions of the Final Rule
    We have deleted as unnecessary this provision of the final rule. 
The USTF managed care plan agreements provide for adoption of the DoD 
policy for cost sharing under managed care programs. Thus, 
incorporation of the Uniform HMO Benefit, which now has been 
promulgated as DoD policy for managed care programs, into the USTF 
managed care plan has already been provided for through contractual 
agreement and need not be repeated in this regulation.
    DoD's policy is to phase the uniform HMO benefit into the USTF 
program, coincident with implementation of the TRICARE regional managed 
care contract in the respective area. This will assure equitable 
treatment for beneficiaries within a region and nationality. 
Eventually, USTFs would be fully integrated into the TRICARE system, on 
an equal footing with other contract providers of health care. The 
intention is to provide a level playing field for the operation of 
managed care programs, and to assure equity among beneficiaries.

IV. Provisions of the Rule Concerning Other Regulatory Changes

    The rule makes a number of additional changes to support 
implementation of TRICARE.

A. Nonavailability Statements (Revisions to Sections 199.4(a)(9) and 
199.15)

1. Provisions of Proposed Rule
    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 
section 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-availiability statements; in conjunction with this, a considerable 
expansion of the list of outpatient services for which an NAS is 
required was proposed. That proposal was not finalized. In the proposed 
rule, we outlined 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.
    Finally, proposed revisions to section 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.
2. Analysis of Major Public Comments
    Several commenters objected to the notion of employing non-
availability statements under TRICARE, since beneficiaries are being 
given the choice of enrolling the TRICARE Prime or exercising their 
benefit under TRICARE Standard with higher cost shares accompanied by 
freedom of choice.
    One commenter recommended that NAS requirements be uniform 
throughout the nation, to avoid confusing the highly mobile beneficiary 
population.
    Several commenters suggested that requiring non-enrolled 
beneficiaries to use network providers or civilian facilities with an 
external partnership or resource sharing agreement, through issuance of 
a ``restricted'' NAS, was unfair to those unable to enroll in TRICARE 
Prime, and to those with chronic conditions who might have long-
standing provider relationships.
    One commenter sought clarification of the applicability of the 
restricted NAS provisions to beneficiaries under TRICARE Prime, Extra, 
and Standard and suggested that restricting use of non-network care by 
TRICARE Standard beneficiaries is an unreasonable curb on their freedom 
of choice, as well arbitrarily preventing an authorized CHAMPUS 
provider from furnishing 

[[Page 52091]]
care to qualifying CHAMPUS beneficiaries. One commenter suggested that 
limiting freedom of choice of civilian provider for TRICARE Standard 
beneficiaries through the ``restricted NAS'' provisions of 199.4(a)(9) 
would be unlawful.
    One commenter objected to the use of the provisions for external 
partnership or resource sharing for mental health care, suggesting that 
it would be inappropriate mental health services because military 
mental health providers would provide limited interventions, disrupting 
care for mental health patients, particularly children and adolescents. 
Also, the commenter suggested that use of this provision would deny 
beneficiaries their right to seek care from any qualified CHAMPUS-
authorized providers in the catchment area.
    One commenter suggested that we define the terms for exceptions to 
the restricted NAS provision related to ``exceptional hardship'' or 
``other special reason,'' recommending that special reason include that 
more effective or appropriate care is available, and that hardships 
include financial and geographic hardships.
    Response. We acknowledge that there is a legitimate point of view 
that TRICARE Standard, as the fee-for-service type option, should 
provide total freedom of choice of provider. However, the requirement 
that beneficiaries determine whether nearby MTFs can provide a needed 
service, before obtaining it from a civilian source, is important to 
the vitality of military medicine and the maintenance of medical 
readiness training for wartime.
    Regarding the recommendation that NAS requirements be uniform 
throughout the nation, to avoid confusing the highly mobile beneficiary 
population, we agree, in the main. The only exceptions to nationally 
standard NAS requirements are those imposed in the context of the 
specialized treatment services program, wherein catchment areas of up 
to 200 miles surrounding a service site may be established for highly 
specialized, high cost services.
    Regarding the comments that requiring non-enrolled beneficiaries to 
use network providers or civilian facilities with an external 
partnership or resource sharing agreement, through issuance of a 
``restricted'' NAS, would be unfair to some beneficiaries, we point out 
that these NAS requirements in the proposed rule related to inpatient 
care and a limited, specific list of outpatient procedures. The 
requirements would not limit beneficiary freedom to choose a provider 
for most care, particularly care for chronic conditions.
    Regarding the request for clarification of the applicability of the 
restricted NAS provisions, the proposed rule would have applied these 
to all CHAMPUS-eligible beneficiaries. Regarding the comment that 
restricting use of non-network care by TRICARE Standard beneficiaries 
would represent an unreasonable curb on their freedom of choice, we 
point out, as above, that these provisions apply to a very limited 
subset of care, and would not impede choice of provider in most cases. 
Regarding the comment that the restricted NAS would arbitrarily prevent 
an authorized CHAMPUS provider from furnishing care to qualifying 
CHAMPUS beneficiaries, this is true in a sense, for the very limited 
array of services covered. However, many rules and requirements are 
applicable to the provision and reimbursement of health care services 
under CHAMPUS, and we believe this limited extension of NAS 
requirements, specifically authorized by law, would not be arbitrary. 
Regarding the suggestion that limiting freedom of choice of civilian 
provider for TRICARE Standard beneficiaries (199.17(a)(6)(ii)(C)) 
through the ``restricted NAS'' provisions of 199.4(a)(9) would be 
unlawful, we would point out that the application of NAS requirements 
to services available in civilian provider networks is authorized under 
10 U.S.C. section 1080(b).
    Regarding objections to the use of provisions for external 
partnership or resource sharing for mental health care, again, we point 
out that the only services to which these proposed requirements would 
have applied are those subject to normal NAS requirements: inpatient 
admissions and a limited set of outpatient technical procedures. They 
would not disrupt ongoing relationships with civilian providers.
    Regarding the suggestion that we define the terms for exceptions to 
the restricted NAS provision related to ``exceptional hardship'' or 
``other special reason,'' we agree with the commenters that the 
availability of more effective or appropriate care would constitute a 
valid reason for a determination that denying the NAS would be 
medically inappropriate. Also, we agree that the concept of hardship 
should include financial and geographic hardships.
3. Provisions of the Final Rule
    Provisions regarding the ``restricted NAS'' have been deleted from 
the final rule. Our current plan is to evaluate the results of the 
California/Hawaii demonstration project, consider the desirability of 
expanding the activity more broadly, and report to Congress on our 
conclusions. Should we decide to go forward with some use of the 
restricted NAS authority, we would initiate a new rulemakng proceeding.
    The expanded authority pertaining to outpatient NASs for a limited 
set of procedures at a limited number of highly capable outpatient 
clinics is included in the final rule, consistent with the proposed 
rule.

B. Participating Provider Program (Revisions to 199.14)

1. Provisions of Proposed Rule
    Revisions to section 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 network 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.
2. Analysis of Major Public Comments
    No public comments were received relating to this section of the 
rule.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

C. Administrative Linkages of Medical Necessity Determinations and 
Nonavailability Statement Issuance (Revisions to 199.4(a)(9)(vii) and 
199.15)

1. Provisions of Proposed Rule
    Revisions to section 199.4(a)(9) would provide the basis for 
administrative linkages between a determination of medical necessity 
and the decision to issue or deny an Nonavailability Statement (NAS). 
NAS's are issued when an MTF lacks the capacity or capability to 
provide a service, but carry no imprimatur of medical necessity. 
Proposed revisions to section 199.15 establish ground rules for CHAMPUS 
PRO review of care in MTFs, and would allow for consolidated 
determinations of medical necessity applicable to both the 

[[Page 52092]]
MTF and civilian contexts when the CHAMPUS PRO performs the review.
2. Public Comments
    One commenter suggested that the provisions for integration of 
CHAMPUS Peer Review Organization and military utilization review 
activities are unclear. Also, the commenter indicated that the 
provisions allowing separate determinations of medical necessity by the 
MTF and CHAMPUS, with the military decision not binding on CHAMPUS 
would place the provider and beneficiary at risk.
    Response. We disagree that separate decisions of medical necessity 
place beneficiaries and providers at risk in this context. We believe 
just the opposite is true. The rule simply provides that if an MTF 
reserves authority to make its own determinations on medical necessity, 
which it might do for reasons relating to management and operation of 
that particular facility, those determinations are not binding on 
CHAMPUS. The CHAMPUS system has a well-established decision-making 
structure, complete with numerous procedural requirements and appeal 
mechanisms. The preservation of the functioning of this structure 
protects the interests of beneficiaries and providers.
3. Provisions of the Final Rule
    The final rule is consistent with the proposed rule.

V. Regulatory Procedures

    Executive Order 12866 requires certain regulatory assessments for 
any ``economically 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.
    This is not an economically significant regulatory action under the 
provisions of Executive Order 12866; however, OMB has reviewed this 
rule as significant under other provisions of the Executive Order. One 
commenter on the proposed rule questioned this assessment, since the 
imposition of enrollment fees on many retirees would have an 
economically significant impact. We point out that, while the cost 
sharing structure of TRICARE Prime is changed significantly from 
standard CHAMPUS cost sharing, the overall effects on beneficiary out-
of-pocket costs are relatively minor. For retirees, their family 
members and survivors, TRICARE Prime enrollment fees in essence replace 
the deductibles and high inpatient care cost sharing under standard 
CHAMPUS. The mix of cost sharing requirements in TRICARE Prime is 
expected to produce aggregate annual out-of-pocket cost reductions for 
these beneficiaries of about $100 per person, compared to what would be 
expected absent the program.
    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. 
The Department of Defense has certified that this regulatory action 
would not have a significant impact on a substantial number of small 
entities.
    This rule will impose additional information collection 
requirements on the public, associated with beneficiary enrollment, 
under the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3511). 
Information collection requirements have been forwarded to OMB for 
review. The collection instrument serves as an application form for 
enrollment in TRICARE Prime. The information is needed to indicate 
beneficiary agreement to abide by the rules of the program and to 
obtain necessary information to process the beneficiary's request to 
enroll in TRICARE Prime. The third party administrator chosen to manage 
the enrollment program, which will be the managed care support 
contractor in each region, will make enrollment applications available 
to those who wish to enroll in Prime. The following information is 
included in the information requirements that have been forwarded to 
OMB for review:
    Number of Respondents: 300,000.
    Responses Per Respondent: 1.
    Annual Responses: 300,000.
    Average Burden Per Response: 15 Minutes.
    Annual Burden Hours: 75,000.
    Other information collected includes necessary data to determine 
beneficiary eligibility, other health insurance liability, premium 
payment, and to identify selection of health care provider.

         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 3),     Table 2).         providers      
                    except                               applies.       
                    unauthorized                                        
                    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.    

[[Page 52093]]
                                                                        
Prescription       As specified in    For retail        In facility     
 drugs from         Uniform HMO        pharmacy          closure cases: 
 civilian           Benefit (see       network,          from retail    
 pharmacies.        Table 3); for      TRICARE Extra     pharmacy       
                    mail service       Cost sharing      network, 20    
                    pharmacy, $4 per   applies; for      percent cost   
                    prescription for   mail service      share; from    
                    active duty        pharmacy, $4      mail service   
                    dependents; $8     per               pharmacy, $8   
                    per prescription   prescription      per            
                    for retirees,      for active duty   prescription;  
                    their dependents   dependents; $8    no deductible. 
                    and survivors.     per                              
                                       prescription                     
                                       for retirees,                    
                                       their                            
                                       dependents and                   
                                       survivors; for                   
                                       other civilian                   
                                       pharmacies,                      
                                       standard                         
                                       CHAMPUS cost                     
                                       sharing applies.                 
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.--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--   See Table 3--   
 shares,            $25 Per            Same as           Schedule of    
 including          admission or       Standard          Uniform HMO    
 maternity and      current per        CHAMPUS;          Benefit        
 skilled nursing    diem, whichever    others--lesser    Copayments.    
 facilities, not    is greater;        of $250 per day                  
 including mental   others--Lesser     or 25% of                        
 health.            of applicable      institutional                    
                    per diem ($323     billed charges,                  
                    in FY 1995) or     plus 20% of                      
                    25% of             professional                     
                    institutional      charges.                         
                    billed charges,                                     
                    plus 25% of                                         
                    professional                                        
                    charges.                                            
Ambulatory         ACT DUTY DEPS--    ACT DUTY DEPS--   See Table 3--   
 Surgery.           $25 per episode;   $25 copay;        Schedule of    
                    others--25% of     others--20%       Uniform HMO    
                    allowable          copay after       Benefit        
                    charges.           deductible.       Copayments.    
Prescription drug  ACT DUTY DEPS--    ACT DUTY DEPS--   ACT DUTY DEPS-- 
 benefits.          20% cost share     15% cost share;   $5 per         
                    after deductible   no deductible;    prescription;  
                    others--25% cost   others--20%       others--$9 per 
                    share after        cost share; no    prescription.  
                    deductible. For    deductible. For   For mail       
                    mail service       mail service      service        
                    pharmacy, $4 per   pharmacy, $4      pharmacy, $4   
                    prescription for   per               per            
                    active duty        prescription      prescription   
                    dependents; $8     for active duty   for active duty
                    per prescription   dependents; $8    dependents; $8 
                    for retirees,      per               per            
                    their dependents   prescription      prescription   
                    and survivors.     for retirees,     for retirees,  
                                       their             their          
                                       dependents and    dependents and 
                                       survivors.        survivors.     
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        
------------------------------------------------------------------------
                         ADDs E4 and      ADDs E5 and    Retirees, deps,
                            below            above        and survivors 
------------------------------------------------------------------------
Annual Enrollment Fee  $0/$0..........  $0/$0..........  $230/$460.     
Outpatient Visits,     $6.............  $12............  $12.           
 Including Separate                                                     
 Radiology or Lab                                                       
 Services, Family                                                       
 Health, and Home                                                       
 Health Visits.                                                         
Emergency Room Visits  $10............  $30............  $30.           
Mental Health Visits,  $10............  $20............  $25.           
 Individual.                                                            
Mental Health Visits,  $6.............  $12............  $17.           
 Group.                                                                 
Ambulatory Surgery...  $25............  $25............  $25.           
Prescriptions........  $5.............  $5.............  $9.            
Ambulance Services...  $10............  $15............  $20.           
DME, Prostheses,       10 percent.....  15 percent.....  20 percent.    
 Supplies.                                                              
Inpatient Per Diem,    $11, minimum     $11, minimum     $11, minimum   
 General.               $25 per          $25 per          $25 per       
                        admission.       admission.       admission.    

[[Page 52094]]
                                                                        
Inpatient Per Diem,    $20, minimum     $20, minimum     $40.           
 MH/Substance Use.      $25 per          $25 per                        
                        admission.       admission.                     
Catastrophic Cap on    $1,000.........  $1,000.........  $3,000.        
 Out-of-Pocket Costs                                                    
 related to Allowable                                                   
 Charges.                                                               
------------------------------------------------------------------------



List of Subjects in 32 CFR Part 199

    Claims, handicapped, health insurance, and military personnel.

    Accordingly, 32 CFR part 199 is 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. chapter 55.

    2. Section 199.1 is 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 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 External Partnership 
Agreement, established in the context of the TRICARE program by 
agreement of a military medical 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 medical treatment facility commander and 
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 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.
    TRICARE program. The program establish under Sec. 199.17.
    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.
* * * * *
    4. Section 199.4 is amended by redesignating paragraph (a)(1) as 
paragraph (a)(1)(i), by revising paragraph (a)(9)(i)(C), by adding new 
paragraph (a)(1)(ii), and by adding new paragraph (a)(9)(vi) before the 
note 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 by the Assistance Secretary of 
Defense (Health Affairs) in the Federal Register at least 30 days 
before the effective date of the change 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) 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.
* * * * *


Sec. 199.14  [Amended]

    5. Section 199.14 is amended by removing paragraph (h)(1)(i)(C) and 
by 

[[Page 52095]]
redesignating paragraph (h)(1)(i)(D) as paragraph (h)(1)(i)(C).
    6. Section 199.15 is amended by adding a new paragraph (n) to read 
as follows:


Sec. 199.15  Quality and utilization review peer review organization 
program.

* * * * *
    (n) Authority to integrate CHAMPUS PRO and military medical 
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 contractor carrying out this function may, 
at the request of the MTF, utilize procedures comparable to the CHAMPUS 
PRO program procedures to render determinations or recommendations with 
respect to utilization review requirements.
    (2) In any case in which such a contractor has comparable 
responsibility and authority regarding utilization review in both an 
MTF (or MTFs) 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 MTF 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. Section 199.17 amd 199.18 are 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 medical treatment facilities (MTFs) and 
these civilian providers. Implementation of these management 
improvements includes adoption of special rules and procedures not 
ordinarily followed under CHAMPUS or MTF 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 where it is potentially 
applicable. 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 medical 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 medical 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 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 eligible beneficiaries, 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 (when such affiliation arrangements are made).
    (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, in accordance with enrollment provisions.
    (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 medical 
treatment facility care on a space-available basis.
    (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 medical treatment facilities on a 
space-available basis.
    (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 medical treatment 

[[Page 52096]]
facility, personnel and other resources to increase the availability of 
services in the facility. All beneficiary enrollment categories may 
benefit from this increase.
    (B) Health care finder, an administrative activity 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.
    (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 medical 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 medical 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 member, 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 participate 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 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 health 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 nonenrollees 
(including beneficiaries not eligible to enroll) continue to be 
eligible to receive care in military treatment facilities on a space 
available basis.
    (a) 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 basis program as set forth in this part, shall apply to 
CHAMPUS-eligible participants in Standard.

[[Page 52097]]

    (4) Preferred 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. [Reserved.]
    (h) Resource sharing agreements. Under the TRICARE program, any 
military medical treatment facility (MTF) 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 shall be replaced by the Third Party 
Collection procedures of 32 CFR part 220, to the extent permissible 
under such Part. 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 MTF concerned.
    (3) Under internal or external resource sharing agreements, the 
commander of the MTF concerned may authorize the provision of services, 
pursuant to the agreement, to Medicare-eligible beneficiaries, if such 
services are not reimbursable by Medicare, and 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 
activity 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 
participants, 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 medical 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 medical treatment facility may be made 
applicable, in whole or in part, to health care services inside the 
military medical treatment facility.
    (k) Pharmacy services, including special 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 medical 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 medical 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 medical 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 
based on residency, a Medicare-eligible beneficiary must maintain a 
principal place of residency in the catchment area of the MTF 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.
    (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 
medical 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, their dependents, and 
survivors.
    (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 

[[Page 52098]]
pharmacy program is also established for any Medicare-eligible 
beneficiary who can demonstrate to the satisfaction of the Director, 
OCHAMPUS, that he or she relied upon an MTF that closed for his or her 
pharmaceuticals. Medicare beneficiaries who obtained pharmacy services 
at the facility that closed within the 12-month period prior to its 
closure will be deemed to be reliant on the facility. Validation that 
any such beneficiary obtained such services may be provided through 
records of the facility or by a written declaration of the beneficiary. 
Beneficiaries providing such a declaration are required to provide 
correct information. Intentionally providing false information or 
otherwise failing to satisfy this obligation is grounds for 
disqualification for health care services from facilities of the 
uniformed services and mandatory reimbursement for the cost of any 
pharmaceuticals provided based on the improper declaration.
    (iv) Effective date of eligibility for Medicare-eligible 
beneficiaries. In any case in which, prior to the complete closure of a 
military medical treatment facility which is 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 or Medicare HMO 
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) Description and authority. PRIMUS and NAVCARE clinics are 
contractor owned, staffed, and operated clinics that exclusively serve 
uniformed services beneficiaries. They are authorized as transitional 
entities during the phase-in of TRICARE. This authority to operate a 
PRIMUS or NAVCARE clinic will cease upon implementation of TRICARE in 
the clinic's location, or on October 1, 1997, whichever is later.
    (2) Eligible beneficiaries. All TRICARE beneficiary categories are 
eligible for care in PRIMUS and NAVCARE Clinics. This includes active 
duty members, Medicare-eligible beneficiaries and other MHSS-eligible 
persons not eligible for CHAMPUS.
    (3) Services and charges. For care provided PRIMUS and NAVCARE 
Clinics, 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.
    (4) Priority access. Access to care in PRIMUS and NAVCARE Clinics 
shall be based on the same order of priority as is established for 
military treatment facilities care under paragraph (d)(1) of this 
section.
    (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. For such unauthorized care, the deductible is 
$300 per person and $600 per family. The beneficiary cost share is 50 
percent of the allowable charges for inpatient and outpatient care, 
after the deductible.
    (ii) For Standard enrollees, TRICARE Extra cost sharing applies. 
The deductible is the same as standard CHAMPUS. Cost shares are as 
follows:
    (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 1996, 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.
    (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 cost share is 50 percent of the allowable charges, after 
the deductible.
    (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.
    (iii) For Medicare eligible beneficiaries, where made applicable by 
the commander of the military medical 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 TRICARE Standard participants, cost sharing applicable to 
services provided by military facility personnel shall be as applicable 
to services in military treatment facilities; that applicable to non-
military providers, including institutional and related ancillary 
charges, shall be as applicable to services provided under TRICARE 
Extra.
    (iii) For Medicare-eligible beneficiaries, where available, cost 

[[Page 52099]]
    sharing applicable to services provided by military facility personnel 
shall be as applicable to services in military treatment facilities; 
that applicable to non-military providers, including 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, except that the copayment 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 90 day 
supply.
    (ii) For Standard participants, there is a 15 percent cost share 
for active-duty dependents and a 20 percent cost share for retirees, 
their dependents and survivors for prescription drugs provided by 
retail pharmacy network providers; for prescription drugs obtained from 
network pharmacies, the CHAMPUS deductible will not apply. 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 90 day supply. There is no 
deductible for this program.
    (iii) For Medicare-eligible beneficiaries affected by military 
medical 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 90-day supply, for 
prescriptions provided by the mail service pharmacy program. There is 
no deductible under either program.
    (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 medical 
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 primary 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 an authorized Health Care 
Finder.
    (ii) For any necessary specialty care and all inpatient care, the 
primary care manager or the 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 the 
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, but not 
obtained in accordance with the utilization management rules and 
procedures of Prime will not be paid for under Prime rules, but may be 
covered by the point-of-service option (see paragraph (n)(3) of this 
section). However, Prime rules 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 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 

[[Page 52100]]
members, whose enrollment is mandatory.)
    (1) Open Enrollment. Beneficiaries will be offered the opportunity 
to enroll in Prime on a continuing basis.
    (2) Enrollment period. The Prime enrollment period shall be 12 
months. 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) Quarterly installment payments of enrollment fee. The 
enrollment fee required by Sec. 199.18(c) may be paid in quarterly 
installments, each equal to one-fourth of the total amount, plus an 
additional maintenance fee of $5.00 per installment. For any 
beneficiary paying his or her enrollment fee in quarterly installments, 
failure to make a required installment payment on a timely basis 
(including a grace period, as determined by the Director, OCHAMPUS) 
will result in termination of the beneficiary's enrollment in Prime and 
disqualification from future enrollment in Prime for a period of one 
year.
    (4) Period 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.
    (5) Effects of failure to enroll. Beneficiaries offered the 
opportunity to enroll in Prime, who do not enroll, will remain in 
Standard and will be eligible to participate in Extra on a case-by-case 
basis.
    (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 (JCAHO). 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, or in 
locations where no JCAHO accredited facility exists. 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, utilization management, and patient referral procedures 
established pursuant to this section, to 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 shall not exceed one week; 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 the anticipated needs of 
enrollees. Travel time for specialty care shall 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.

[[Page 52101]]

    (v) Office waiting times in nonemergency circumstances shall not 
exceed 30 minutes, except when emergency care is being provided to 
patients, and the normal schedule is disrupted.
    (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. Also under this method, any provider who 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. The following are examples of partial implementation:
    (1) The TRICARE Extra Plan and the TRICARE Standard Plan may be 
offered without the TRICARE Prime Plan.
    (2) In remote sites, where complete implementation of TRICARE is 
impracticable, TRICARE Prime may be offered to a limited group of 
beneficiaries. In such cases, normal requirements of TRICARE Prime 
which the Assistant Secretary of Defense (Health Affairs) determines 
are impracticable may be waived.
    (3) The TRICARE program may be 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 health facilities pursuant to 
arrangements, made with the approval of the Assistant Secretary of 
Defense (Health Affairs), 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, a preferred provider network will be established 
through contracts or agreements with selected health care providers. 
Under the network, CHAMPUS covered services will be provided to the 
covered dependents with all CHAMPUS requirements for deductibles and 
copayments waived. The use of this authority by the Assistant Secretary 
of Defense (Health Affairs) for any particular geographical area will 
be announced in the Federal Register. The announcement will include a 
description of the preferred provider network program and other 
pertinent information.
    (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 wherever offered 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 an MTF) 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 in such other sections.
    (b) Services covered under the uniform HMO benefit option.

[[Page 52102]]

    (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 Prime enrollees by providers in the civilian provider 
network. Standards for preventive care services shall be developed 
based on guidelines from the U.S. Department of Health and Human 
Services. 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;
    (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 of 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 1996, 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 grade 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 of 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 ambulatory surgery services, 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 1996, 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 of 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 of 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:

[[Page 52103]]

    (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 of 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 E-1 through 
E-4, $25;
    (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 each 30-day supply (or smaller quantity) of 
a prescription drug 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 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 1996, 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) Limit on out-of-pocket costs for retired members, dependents of 
retired members, and survivors under the uniform HMO benefit. Total 
out-of-pocket costs per family of retired members, dependents of 
retired members and survivors under the Uniform HMO Benefit may not 
exceed $3,000 during the one-year enrollment period. For this purpose, 
out-of-pocket costs means all payments required of beneficiaries under 
paragraphs (c), (d), and (e) of this section. In any case in which a 
family reaches this limit, all remaining payments that would have been 
required of the beneficiary under paragraphs (c), (d), and (e) of this 
section will be made by the program in which the Uniform HMO Benefit is 
in effect.
    (g) Updates. The enrollment fees for fiscal year 1996 set under 
paragraph (c) of this section and the per service specific dollar 
amounts for fiscal year 1996 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. The Secretary shall ensure that the TRICARE program 
complies with statutory cost neutrality requirements.

    Dated: September 28, 1995.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 95-24576 Filed 10-4-95; 8:45 am]
BILLING CODE 5000-04-M