[Federal Register Volume 66, Number 148 (Wednesday, August 1, 2001)]
[Proposed Rules]
[Pages 39699-39705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-19185]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

RIN 0720-AA65


Civilian Health and Medical Program of the Uniformed Services; 
Individual Case Management Program for Persons with Extraordinary 
Conditions (ICMP-PEC)

AGENCY: Office of the Secretary, DoD.

ACTION: Proposed rule.

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SUMMARY: The Department of Defense (DoD) proposes to amend its 
regulations on the Individual Case Management Program (ICMP) to 
implement requirements stipulated by Section 703 of the Fiscal Year 
(FY) 2000 National Defense Authorization Act, Section 8118 of the FY 
2000 Defense Appropriations Act, Section 701 of the FY 2001 National 
Defense Authorization Act and Section 8100 of the FY 2001 Defense 
Appropriations Act. Other administrative amendments are also proposed 
to clarify specific policies that relate to the program. Public 
comments are invited and will be considered for possible revisions to 
the final rule.

DATES: Written comments will be accepted until October 1, 2001.

ADDRESESES: Please address all comments concerning this proposed rule 
to Mary Stockdale, Program Development Division, TRICARE Management 
Activity (TMA), Suite 810, 5111 Leesburg Pike, Falls Church, VA 22041.

FOR FURTHER INFORMATION CONTACT: Mary Stockdale 703-681-0039.

SUPPLEMENTARY INFORMATION:

I. Background

    Congressional actions in the last two fiscal years make important 
changes to the TRICARE Individual Case Management Program (ICMP). These 
actions continue the long-standing TRICARE/CHAMPUS definition of 
custodial care for purposes of the statutory exclusion from coverage 
under the basic TRICARE program. In addition, they reaffirm 
congressional policy of addressing the health care needs of custodial 
care patients through the TRICARE ICMP.
    To distinguish this special waiver program from other normal case 
management functions under the basic TRICARE program and to more 
clearly identify the type of beneficiaries for which it is intended, 
the program name is now expanded to the Individual Case Management 
Program for Persons with Extraordinary Conditions (ICMP-PEC). It is 
also important to distinguish the ICMP-PEC from the Program for Persons 
with Disabilities (PFPWD). The PFPWD is applicable only to family 
members of active duty service members and the benefit is limited to 
$1,000 per month. Its purpose is to provide financial assistance to 
reduce the effects of mental retardation or a serious physical 
disability. It is not a stand-alone program, is subject to certain 
restrictions, and it may be used concurrently with other TRICARE 
medical programs like the ICMP-PEC.

II. Synopsis

    This brief synopsis summarizes the primary requirements that are 
now applicable to the ICMP-PEC.

[[Page 39700]]

A. Custodial care continues to be statutorily excluded as a benefit 
under the basic TRICARE program.

B. The definition of custodial care in the CHAMPUS regulation remains 
in effect.

C. In some cases, however, otherwise excluded custodial care benefits 
may be extended through the ICMP-PEC to eligible beneficiaries who have 
extraordinary medical or psychological disorders and for whom custodial 
care services are medically necessary and appropriate and require the 
supervision of trained health care providers.

    To be authorized, such custodial care services must meet specified 
terms and conditions to ensure they are provided in a cost-effective 
manner. Such services may not include services that provide only for 
the essentials/activities of daily living unless such services are 
incidental to the provision of authorized skilled care.

D. The previous 365-day limit to custodial care services under the 
ICMP-PEC is no longer in effect as of October 5, 1999.

E. ICMP-PEC services are primary to Medicaid, other welfare programs, 
or charity-based care, but secondary to Medicare or other health 
insurance. However, benefits may be coordinated with Medicaid, other 
welfare or charity-based programs to ensure TRICARE beneficiaries 
receive the maximum level of benefits available to them in their 
communities as long as the primary payer status of ICMP-PEC services is 
maintained.

F. The total amount that the Department may pay for services provided 
to all beneficiaries granted coverage under the ICMP-PEC together with 
the costs of administering the program may not exceed $100,000,000 
within each fiscal year.

III. Statutory History of ICMP-PEC

    In 1985, Congress directed the DoD to conduct a demonstration 
project of providing home health care to certain CHAMPUS beneficiaries. 
[DoD Appropriations Act, 1986, Pub. L. 99-190, Section 8084.]
    In 1987, Congress enacted a similar provision that required the 
Department to conduct an expanded demonstration project of providing 
home health care as part of an individualized case-managed program that 
included a range of benefits that reasonably could deviate from 
otherwise payable types, amounts and levels of care for patients with 
exceptionally serious, long-range, costly and incapacitating physical 
or mental conditions. [DoD Appropriations Act, 1988, Pub. L. 100-202, 
Section 8071.] A similar provision was enacted the following year. [DoD 
Appropriations Act, 1989, Pub. L. 100-463, Section 8058.] Based on 
these two demonstration projects, in 1991 the House and Senate 
Appropriations Committees directed the Department to investigate the 
possibility of including comprehensive home health care as a CHAMPUS 
benefit and report to Congress on its findings. In 1992, the Department 
provided its Report to Congress: Comprehensive Home Health Care as a 
CHAMPUS Benefit, H. Rept. No. 102-95, p. 89; S. Rept. No. 102-154, p. 
37. The report was based on the findings from the evaluation of the 
CHAMPUS Home Health Care Case Management Demonstration Program which 
concluded that the program goals had been achieved. It emphasized the 
value of case management for those patients who are medically 
catastrophic and complex to support the provision of high quality and 
cost-effective care. This led to the provision of Section 704 of the 
National Defense Act for FY 1993. [Pub. L. 102-484.], which enacted 10 
U.S.C. 1079(a)(17) and provides:

    The Secretary of Defense may establish a program for the 
individual case management of a person covered by this section or 
section 1086 of this title who has extraordinary medical or 
psychological disorders and, under such a program, may waive benefit 
limitations contained in paragraph (5) and (13) of this subsection 
or section 1077(b)(1) of this title and authorize the payment for 
comprehensive home health care services, supplies, and equipment if 
the Secretary determines that such a waiver is cost-effective and 
appropriate.

    In enacting this provision, Congress took another major step to 
direct and allow the Department to, in the words of the previous 
statute [Pub. L. 100-202, Section 8071]:

Reasonably deviate from the normal, restrictive statutory coverage 
for health services for patients with exceptionally serious, long-
range, costly and incapacitating conditions.

    A dominant statutory restriction affecting health care for such 
patients is the statutory exclusion of custodial care. [10 U.S.C. 
Section 1077(b)(1).] This exclusion is made applicable to CHAMPUS by 10 
U.S.C. Section 1079(a) and is implemented in its most important aspect 
for CHAMPUS by regulations at 32 CFR 199.2 and 199.4(e)(12).
    Because these earlier versions of the regulations could have the 
effect of limiting otherwise medically necessary services, they have 
been the subject of litigation from time to time. See, for example, 
Barnett v. Weinberger, 818 F.2d953 (D.C. Cir. 1987. The impact of these 
regulations is also well understood by Congress, which has moved to 
authorize reasonable exceptions to the statutory and regulatory 
exclusion of custodial care under the ICMP-PEC.
    This was, in fact, a primary reason Congress established the case 
management program by enacting section 1079(a)(17), and why the statute 
expressly authorizes a waiver of the custodial care exclusion section 
of 1077(b)(1) under the ICMP-PEC when the Secretary determines that 
such a waiver is cost-effective and appropriate. This congressional 
purpose was explicitly stated in the explanation of the members of the 
Conference Committee that agreed to the final version of the section 
1079(a)(17). The Conference Report [H. Conf. Rept. 102-966, 102d Cong., 
2d Sess., 719] explains:

    The conferees believe the case management program is the best 
approach to address the needs of beneficiaries for whom regular 
CHAMPUS benefits are limited by the custodial care exclusion and 
other restrictions contained in the law and CHAMPUS regulations.

    The Department continues to agree with the congressional policy 
that the case management program is the best approach to address the 
custodial care issue.

IV. Implementing Regulations

    The new statutory authority was implemented by final regulations 
issued, after a public comment period, 64 FR 7084-89, Feb. 12, 1999. In 
view of the discretionary nature of the legislation and the requirement 
for cost-effectiveness, the Department did not view the legislation as 
creating a long-term health care program. Therefore, certain conditions 
were established in the regulations for waiving benefit limitations and 
authorizing otherwise excluded benefits under ICMP-PEC in order to 
transition the cases to those existing programs providing services to 
long-term care patients.
    Recognizing that the exclusion of health care coverage when a 
family member requires custodial care services is both a financial and 
emotional burden, the Department used the ICMP-PEC authority to 
transition custodial care patients from TRICARE/CHAMPUS coverage to 
alternate sources of support services such as Medicaid. To ensure 
transition out of the ICMP-PEC, the Department included a limitation of 
ICMP-PEC coverage for a maximum lifetime period of 365 calendar days. 
Because the ICMP-PEC provides for exceptions to otherwise excluded 
services, a second condition imposed by

[[Page 39701]]

the Department required that the ICMP-PEC be secondarily liable, not 
only to those health care programs for which TRICARE/CHAMPUS is second 
payer but also to Medicaid and other welfare programs. Both of these 
conditions were consistent with the concept that this discretionary 
program was a transition program; otherwise, the patient would not 
readily transition to alternate sources of support services as long as 
ICMP-PEC waives the custodial care exclusion and the alternative 
sources remain last pay. The ICMP-PEC was viewed as a program enabling 
TRICARE case managers to work with all sources of support services to 
help maximize available resources for military families without 
creating a long-term care program subject to significant funding 
increases.
    In the 1999 session, the Congress specifically considered 
legislation to address the Department's definition of custodial care 
under CHAMPUS. If adopted, the language would have dramatically changed 
the long-standing CHAMPUS definition of custodial care as sought by 
various groups. The proposed language would have changed the definition 
of custodial care under the TRICARE Basic Program and limited the 
custodial care exclusion to services that support activities of daily 
living. It is important to note, however, that the Congress did not 
enact the proposed legislation. Rather, by action of the Conference 
Committee, the proposed legislation was replaced with legislation that 
left intact the basic CHAMPUS definition and exclusion of custodial 
care. As enacted as Section 8118 of the DoD Appropriations Act, 2000 
[Pub. L. 106-79], the following provision specifically applies only to 
the ICMP-PEC:

    Sec. 8118. Notwithstanding any other provision of law, for the 
purpose of establishing all DoD policies governing the provision of 
care provided by and financed under the military health care 
system's case management program under 10 U.S.C. 1079(a)(17), the 
term custodial care shall be defined as care designed essentially to 
assist an individual in meeting the activities of daily living and 
which does not require the supervision of trained medical, nursing, 
paramedical or other specially trained individuals: Provided, That 
the case management program shall provide that members and retired 
members of the military services, and their dependents and 
survivors, have access to all medically necessary health care 
through the health care delivery system of the military services 
regardless of the health care status of the person seeking the 
health care: Provided further, That the case management program 
shall be the primary obligor for payment of medically necessary 
services and shall not be considered as secondarily liable to Title 
XIX of the Social Security Act, other welfare programs or charity-
based care.

Congress once again implicitly confirmed the Department's 
implementation of the statutory exclusion of custodial care under 
CHAMPUS while making significant changes to the ICMP-PEC.
    The same is true for other action taken by Congress in 1999. 
Section 703 of the National Defense Authorization Act for FY 2000 
addressed the CHAMPUS custodial care exclusion and the ICMP-PEC in 
several respects. First, it provided grandfather coverage to a number 
of beneficiaries who had been receiving custodial care coverage under 
the previous demonstration projects and whose continuing needs would be 
excluded from coverage under the regulations implementing the statutory 
custodial care exclusion and not adequately met under the ICMP-PEC 
exception to that exclusion. Second, it eliminated the 365-day limit on 
custodial care services under the ICMP-PEC. The Department issued an 
Interim Policy Memorandum on March 28, 2000, as a temporary measure to 
incorporate the mandated changes. That memorandum was supplemented on 
May 1, 2000, to include a requirement that an appeals and hearing 
procedure be included as part of the ICMP-PEC program.
    In the 2000 session, Congress again addressed the ICMP-PEC in 
several respects. Section 8100 of the DoD Appropriations Act, 2001 
[Pub. L. 106-259] reenacted for FY 2001 the provision that had been 
Section 8118 in FY 2000. Section 701(a) of the National Defense 
Authorization Act for FY 2001 [Pub. L. 106-398] amended Section 
703(a)(1) of the National Defense Authorization Act for FY 2000. It 
removed the prohibition against providing ICMP-PEC services to the 
grandfathered beneficiaries once they were entitled to hospital 
insurance benefits under Medicare part A. Section 701(c) amended 
Section 1079(a)(17) of 10 U.S.C. by adding a subparagraph designation 
of (A) after (17) and a subparagraph (B), which provides:

    The total amount expended under subparagraph (A) for a fiscal 
year may not exceed $100,000,000.

The cost limitation of $100 million for the ICMP-PEC is effective for 
fiscal years after 1999.
    Finally, in a separate action that affects the ICMP-PEC, section 
712 of the FY 2001 National Defense Authorization Act [Pub. L. 106-398] 
extends eligibility for TRICARE to persons who previously lost their 
eligibility upon becoming entitled to hospital insurance benefits under 
part A of Title XVIII of the Social Security Act (42 U.S.C. 1395c et 
seq.). Eligibility, which becomes effective October 1, 2001, is 
contingent upon purchase of Medicare part B under Title XVIII of the 
Social Security Act.

V. Program Scope

    Consistent with the authorizing legislation, 10 U.S.C. 1079(a)(17), 
the ICMP-PEC is a discretionary program that may be established and may 
waive, for a CHAMPUS-eligible beneficiary, benefit limitations or 
exclusions otherwise required by law where it is determined that such a 
waiver is cost-effective and appropriate. It is designed to provide a 
cost-effective plan of care by targeting appropriate resources to meet 
the medical needs of a beneficiary with a qualifying medical or 
psychological disorder.

VI. Case Management

    Case management is used in many TRICARE/CHAMPUS settings to 
organize acute and outpatient health care services. The focus of this 
proposed rule is specifically on the use of case management to address 
the complex health care needs of catastrophically ill or injured 
beneficiaries. The ICMP-PEC offers a system for organizing 
multidisciplinary services often required for management of 
extraordinary medical or psychological disorders. The objective is to 
improve the quality of care, control costs, and support patients and 
families through catastrophic medical events.
    Section 1077b(1) of title 10, U.S.Code, specifically prohibits the 
Military Health System from providing custodial care. Custodial care is 
therefore prohibited from being provided under the TRICARE basic 
program. Congress did not define the term custodial care, but 
prohibited the provision of such care. The original legislative history 
of the custodial care exclusion suggested that CHAMPUS be patterned 
after the Federal Employee health Benefits Program, Blue Cross and Blue 
Shield ``High Option'' plan. The CHAMPUS present definition of 
custodial care as set forth in 32 CFR 199.2 was derived from that 
source. A separate definition of the excluded custodial care services 
for the ICMP-PEC was provided by Congress for the ICMP-PEC under 
Section 8118 of the FY 00 Defense Appropriations Act [Pub. L. 106-79] 
and Section 8100 of the FY 01 Defense Appropriation Act [Pub. L. 106-
259]. These sections direct that the scope of services available for 
coverage under the ICMP-PEC for custodial care cases include all 
medically necessary services not designed essentially to assist an

[[Page 39702]]

individual in meeting the essentials/activities of daily living and 
which do not require the supervision of trained medical, nursing, 
paramedical or other specially trained individuals. Therefore, it is 
the Department's policy that, when a waiver of the benefit limits 
imposed by the custodial care exclusion is granted under the ICMP-PEC, 
the scope of services to be covered shall be consistent with the 
language of the legislation. The services and benefits provided under 
the ICMP-PEC must be medical services and supplies and they must be 
medically necessary and appropriate. Under the ICMP-PEC, alternatives 
to current TRICARE/CHAMPUS benefit limitations or exclusions are 
considered those that are both cost-effective and clinically 
appropriate. A waiver of benefit limits must be pre-authorized by case 
managers and may include, but is not limited to, services or supplies 
such as home health care, medical supplies, back-up durable medical 
equipment, and extended skilled nursing care. When a waiver of benefit 
limits imposed by the exclusion of custodial care is granted any 
service provided under the ICMP-PEC must require the supervision of 
trained medical, nursing, paramedical or other specially trained 
individuals. If a CHAMPUS-eligible beneficiary meets all the parameters 
for waiving benefit limits under the ICMP-PEC, all medically necessary 
care, as defined under TRICARE/CHAMPUS, will be covered even if the 
care will only stabilize or maintain life and comfort but not improve 
the health care status of the beneficiary.
    Services or supplies provided in the home by other than CHAMPUS 
authorized providers of care must fall under the auspices of a home 
health care agency that has been either authorized by Medicare or 
licensed by the State in which it operates. Providers of other services 
as a result of such waivers must meet CHAMPUS requirements as 
authorized providers or must obtain a specific waiver of that 
requirement.
    In a limited number of cases otherwise meeting ICMP-PEC parameters, 
a domiciliary care waiver may be granted, but only when the domiciliary 
care is directly related and essential to the delivery of medically 
necessary services and no other alternative is available. A domiciliary 
care waiver may be granted only when it will provide medically 
necessary services on a short-term or transitional basis from a high 
cost, normally inpatient setting, to an outpatient setting.
    The Department does not interpret the authorizing legislation and 
recent congressional action as creating a long-term care benefit under 
the TRICARE ICMP-PEC for medically unnecessary services. This 
interpretation is based, in part, upon Section 701 of the National 
Defense Authorization Act for FY 2001, which limits total annual 
expenditures under the ICMP-PEC to no more than $100 million.

VII. Eligibility

    Participation in the TRICARE ICMP-PEC program is voluntary and is 
available for CHAMPUS-eligible beneficiaries, Continued Health Care 
Benefit Program (CHCBP) enrollees, and those beneficiaries who have 
been granted continuation of care coverage as former participants in 
the DoD home health demonstration projects under section 703(a) of the 
National Defense Authorization Act for Fiscal Year 2000 [Pub. L. 106-
65], and section 701(a) of the Floyd D. Spence National Defense 
Authorization Act for Fiscal Year 2001 [Pub. L. 106-398]. Due to the 
potential for demand for services exceeding authorized expenditures, 
priority for participation in the ICMP-PEC shall be given first to 
family members of active duty personnel. This is consistent with 
longstanding policy firmly established in chapter 55 of title 10, U.S. 
Code. Authorization for participation by all beneficiaries under the 
ICMP-PEC shall be subject to availability of funding. At the beginning 
of each fiscal year, the Department will: (1) Assess available funding 
and review and prioritize continued coverage for all current 
participants; and (2) project anticipated new demand by family members 
of active duty personnel and all other eligible beneficiaries. The 
Department anticipates that administrative costs for the program will 
be between one to two percent of the total funds available each fiscal 
year to cover the cost associated with case management functions. If 
the current or projected demand is expected to exceed available funding 
for the fiscal year, a notice of termination will be issued to those 
participants who will be affected. These notices will include a 
continued authorization of coverage for a defined transition period not 
to exceed 60 days. The Department will ensure that all participants are 
advised when they first enter the program that authorization for 
services is subject to available funding and may be terminated with a 
60-day notice. Should it become necessary, the order of termination 
from coverage will be: (1) Non-active duty family members participants 
from last to first authorized; and then (2) active duty family member 
participants from last to first authorized.
    The program covers catastrophically ill or injured beneficiaries 
who meet the TRICARE definition of custodial care. The parameters for 
waiving CHAMPUS benefit limits are:
    (1) the patient has an existing extraordinary medical or 
psychological condition;
    (2) the patient meets the TRICARE definition of custodial care and 
can be treated more appropriately and cost effectively at a less 
intensive level of care;
    (3) waiver of certain benefit limits/exclusions is determined to be 
cost-effective and appropriate;
    (4) the ICMP-PEC services have been pre-authorized; and
    (5) for patients receiving care at home, there must be a primary 
caregiver present or the patient must be capable of self-support.

A. Extraordinary Medical or Psychological Condition

    In general, an extraordinary medical or psychological condition is 
a clinical condition contained in the latest revision of the 
International Classification of Disease Clinical Modification, or the 
Diagnostic and Statistical Manual of Mental Disorders which is complex.

B. Custodial

    For those beneficiaries with extraordinary medical or psychological 
disorders who have been determined to be custodial care cases under 
TRICARE, as defined in 32 CFR Section 199.2, the ICMP-PEC permits the 
waiver of benefit limits/exclusions to provide clinically appropriate 
care. That provision mandates a custodial care determination if the 
patient:
    (1) is disabled mentally or physically and such disability is 
expected to continue and be prolonged, and
    (2) requires a protected, monitored, or controlled environment 
whether in an institution or in the home, and
    (3) requires assistance to support the activities/essentials of 
daily living, and
    (4) is not under active and specific medical, surgical, or 
psychiatric treatment that will reduce the disability to the extent 
necessary to enable the patient to function outside the protected, 
monitored, or controlled environment.
    A determination of custodial care does not imply that the care 
being rendered is not required by the patient. It only means that it is 
the kind of care that is not covered under the basic TRICARE/CHAMPUS 
program. Care rendered to a beneficiary on a hospital

[[Page 39703]]

inpatient basis is not custodial care. In addition, a program of 
physical and mental rehabilitation that is designed to reduce a 
disability is not custodial care as long as the objective is a reduced 
level of care. A reduced level of care, in this context, means a 
reduction in the kinds and extent of services necessary to address the 
beneficiary's medical needs. We expect patients and their families will 
require varying levels of support and time to stabilize following a 
catastrophic illness. Case managers will determine, on a case-by-case 
basis, the specific need for waivers to custodial care exclusions. When 
a waiver of the custodial care exclusion is granted under the ICMP-PEC, 
the services and benefits provided must be medically necessary, and 
must require the supervision of trained, medical, nursing, paramedical 
or other specially trained individuals.

VIII. Prior Authorization

    Prior authorization from case managers is required before the 
delivery of any case managed benefits. Because eligibility for a waiver 
of benefit limits/exclusions is based on an in depth assessment of 
medical needs, as well as the cost-effectiveness and clinical 
appropriateness of alternate services, any services provided without 
prior authorization will not be covered by TRICARE/CHAMPUS. 
Retrospective requests for coverage under this program will not be 
authorized.

IX. Military Health System Case Management Structure

    For effective program implementation, the Department requires 
establishment of case management programs, as described in this rule, 
in all TRICARE/CHAMPUS managed care support contracts. Managed Care 
Support Contractors will be authorized to make available case 
management services to Military Medical Treatment Facilities (MTFs). 
MTFs will be provided the opportunity to refer potential candidates to 
the appropriate TRICARE/CHAMPUS case manager. Where possible, MTFs will 
provide care and services or supplies in support of regional case 
management programs.

X. Denial/Appeals Process

    Beneficiaries and/or providers who dispute either a custodial care 
determination or a determination of the type or level of care and 
services authorized under the ICMP-PEC have the right to appeal those 
decisions under section 199.10 of this Part.

XI. Program Goal.

    Since the inception of this special discretionary program, the 
Department has received many helpful suggestions for improvements and 
enhancements from our beneficiaries, case managers, clinicians and 
counterparts in other Federal programs. Their valuable insight and 
support are reflected in the program changes proposed in this rule. The 
Department's objective with the ICMP-PEC continues to be to improve the 
quality of care, control costs, and support patients and families with 
extraordinary needs that are covered by the program in keeping with the 
requirements mandated by law.

XII. Regulatory Procedures

    Executive Order (EO) 12866 requires that a comprehensive regulatory 
impact analysis be performed on any economically significant regulatory 
action, defined as one that would result in an annual effect of $100 
million or more on the national economy or which would have other 
substantial impacts. The Regulatory Flexibility Act (RFA) requires that 
each Federal agency prepare, and make available for public comment, a 
regulatory flexibility analysis when the agency issues a regulation 
which would have a significant impact on a substantial number of small 
entities. This rule will not significantly affect a substantial number 
of small entities. This rule imposes no burden as defined by the 
Paperwork Reduction Act of 1995.

List of Subjects in 32 CFR Part 199

    Case management, Claims, Custodial care, Health insurance.

    For the reasons set forth in the preamble, the DoD proposes to 
amend 32 CFR part 199 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 199.2 is proposed to be amended by adding a new 
definition of Activities of Daily Living to be placed in alphabetical 
order as follows:


199.2  Definitions.

* * * * *
    Activities of daily living. (See also Essentials of daily living.) 
Care that consists of providing food (including special diets), 
clothing, and shelter; personal hygiene services; observation and 
general monitoring; bowel training or management; safety precautions; 
general preventive procedures (such as turning to prevent bedsores); 
passive exercise; companionship; recreation; transportation; and such 
other elements of personal care that reasonably can be performed by an 
untrained adult with minimal instruction or supervision.

    3. Section 199.4 is proposed to be amended by revising paragraphs 
(e)(20) and (i) to read as follows:


199.4  Basic program benefits.

* * * * *
    (e) Special benefit information. * * *
    (20) Individual Case Management Program for Persons with 
Extraordinary Conditions (ICMP-PEC). The Individual Case Management 
Program for Persons with Extraordinary Conditions (ICMP-PEC), 
authorizes payment for services or supplies not otherwise covered by 
Program For Persons With Disabilities (PFPWD) or the basic TRICARE 
program for beneficiaries with extraordinary medical or psychological 
conditions when they are approved in accordance with section 199.4(i) 
of this Part. The ICMP-PEC is subject to a cost limitation not to 
exceed $100,000,000 per fiscal year (together with the costs of 
administering the ICMP-PEC) in accordance with the provision of 
1079(a)(17)(B) of title 10, United States Code. The cost limitation is 
effective for fiscal years after fiscal year 1999.
* * * * *
    (i) Individual Case Management Program for Persons with 
Extraordinary Conditions (ICMP-PEC). TRICARE benefit limitations can 
only be waived under the specific policies and procedures established 
under the authorizing legislation of 10 U.S.C. 1079(a)(17).
    (1) In general. Case management, as it applies to the ICMP-PEC, is 
a collaborative process that includes a case manager, beneficiary, 
primary caregiver, professional health care provider or providers and 
funding sources to meet the medical needs of an individual with an 
extraordinary medical or psychological condition. It is designed to 
promote quality and cost-effective outcomes through assessing, 
planning, implementing, monitoring and evaluating the options and 
services necessary to provide required medically necessary services at 
an appropriate level of care. Payment for services or supplies that are 
limited or not otherwise covered by the basic TRICARE/CHAMPUS program 
may be authorized and cost-shared through participation in the ICMP-PEC 
when it is demonstrated that the services:
    (i) are medically or psychologically necessary, and

[[Page 39704]]

    (ii) require the supervision of trained medical, nursing, 
paramedical or other specially trained individuals, and
    (iii) are cost effective.
    Payments will be determined based on provider reimbursement methods 
like those applicable to similar services under 32 CFR 199.14.
    (2) Fiscal Year Cost Limitation. The ICMP-PEC is subject to a cost 
limitation not to exceed $100,000,000 per fiscal year (together with 
the costs of administering the ICMP-PEC) in accordance with the 
provision of 1079(a)(17)(B) of title 10, United States Code. The cost 
limitation is effective for fiscal years after fiscal year 1999.
    (3) Applicability of case management program. CHAMPUS eligibility, 
or enrollment in the Continued Health Care Benefit Program (CHCPB), or 
continued coverage granted for certain beneficiaries as a participant 
in the former DoD home health care demonstration projects is a legal 
pre-requisite for participation in the ICMP-PEC. Priority for coverage 
under the ICMP-PEC shall be given first to eligible family members of 
active duty service members. This is consistent with longstanding 
policy firmly established in chapter 55 of title 10, U.S. Code. 
Authorization of participation by all beneficiaries will be subject to 
availability of funding. At the beginning of each fiscal year, the 
Department will: (1) Assess available funding and review and prioritize 
continued coverage for all current participants to include both health 
care services and administrative costs; and (2) project anticipated new 
demand by family members of active duty personnel and all other 
eligible beneficiaries. If the current or projected demand is expected 
to exceed available funding for the fiscal year, a notice of 
termination will be issued to those participants who will be affected. 
These notices will include continued coverage for a defined transition 
period not to exceed 60 days. The Department will ensure that all 
participants are advised when they first enter the program that 
authorization for services is subject to available funding and may be 
terminated with a 60-day notice. Should it become necessary, the order 
of termination from coverage will be non-active duty family member 
participants from last to first authorized and then active duty family 
member participants from last to first authorized.
    An eligible beneficiary may participate in the case management 
program if he/she has an extraordinary condition that is disabling and 
requires extensive utilization of medical resources. The medical or 
psychological condition must also:
    (i) Be contained in the latest revision of the International 
Classification of Diseases Clinical Modification, or the Diagnostic and 
Statistical Manual of Mental Disorders; and
    (ii) the beneficiary must meet the TRICARE/CHAMPUS definition of 
custodial care.
    (iii) If an eligible beneficiary meets all the parameters for 
waiving benefit limits under the ICMP-PEC, all medically necessary 
care, as defined under TRICARE/CHAMPUS, will be covered (subject to 
availability of funding) even if the care will only stabilize or 
maintain but not improve the health care status of the beneficiary.
    (4) Prior authorization required. Services or supplies allowable as 
a benefit exception under this Section shall be cost-shared only when a 
beneficiary's entire treatment has received prior authorization for the 
ICMP-PEC. Authorized services under the ICMP-PEC for custodial care 
cases may not include services that provide only for the essentials/
activities of daily living unless such services are incidental to the 
provision of authorized skilled care. Services for the activities/
essentials of daily living include services that do not require the 
supervision of trained medical personnel. Examples of activities/
essential of daily living include basic functions such as dressing, 
feeding, continence training and care, and transferring in and out of a 
chair or bed, grooming, and bathing. Retrospective requests for 
authorization of a waiver of benefit limits/exclusions will not be 
considered. Authorization of a waiver of benefit limits/exclusions is 
allowed only when determined to be clinically appropriate and cost-
effective.
    (5) Cost effective requirement. The statutory requirement for cost-
effectiveness of the treatment under a waiver of a benefit exclusion or 
limitation shall be based on a determination that the necessary care is 
provided in the most cost-effective manner. If a beneficiary is 
receiving skilled nursing services in the home, and a determination is 
made that the services could be provided in a more cost-effective 
manner in a skilled nursing facility, TRICARE will authorize a 
continuation of benefits under the ICMP-PEC in a skilled nursing 
facility, or, if benefits are continued in the home, TRICARE cost-
sharing will be limited to the amount for which TRICARE would be liable 
if the services were provided in a skilled nursing facility. The 
proposed treatment must also meet the requirements of medically or 
psychologically necessary and appropriate medical care as defined in 
section 199.2 of this Part.
    (6) Limited waiver of exclusions and limitations. Limited waivers 
of exclusions and limitations normally applicable to the basic program 
may be granted for specific services or supplies only when a 
beneficiary's entire treatment has received prior authorization through 
the ICMP-PEC described in paragraph (i) this section. The Director, 
TRICARE Management Activity may grant a patient-specific waiver for 
services or supplies in the following categories, subject to the waiver 
requirements of this section.
    (i) Durable equipment. The cost of a device or apparatus which does 
not qualify as Durable Medical Equipment (as defined in section 199.2 
of this Part) or back-up durable medical equipment may be covered when 
determined to be cost-effective and clinically appropriate. Such 
equipment must be required in the assessment or treatment of the 
beneficiary's medical condition.
    (ii) In home services. The cost of the following in-home services 
may be covered when determined to be cost-effective and clinically 
appropriate: nursing care, physical, occupational, speech therapy, 
medical social services, intermittent services of a home health aide, 
beneficiary transportation required for treatment plan implementation, 
and training for the beneficiary and primary caregiver sufficient to 
allow them to assume all feasible responsibility for the care of the 
beneficiary that will facilitate movement of the beneficiary to the 
least resource-intensive, clinically appropriate setting. 
Qualifications for home health aides shall be based on the standards at 
42 CFR 848.36. For patients receiving authorized care at home under the 
ICMP-PEC, there must be a primary caregiver present or the patient must 
be capable of self-support.
    (iii) Domiciliary care. The cost of services or supplies rendered 
to a beneficiary that would otherwise be excluded as domiciliary care 
(as defined in section 199.2 of this Part) may be covered only when 
authorized pursuant to paragraph (i)(3)(ii)(B) and only when provided 
as an essential component of otherwise medically necessary and 
appropriate treatment in the management of an extraordinary medical or 
psychological condition. The domiciliary care must be directly related 
and essential to the delivery of medically necessary services and no 
other alternative is available. A domiciliary waiver may be granted 
only when it will provide medically necessary services on a short-term 
or transitional basis from a high cost,

[[Page 39705]]

normally inpatient setting, to an outpatient setting.
    (7) Right of Appeal. Beneficiaries and/or providers who dispute 
either a custodial care determination or the type or level of care and 
services authorized under the ICMP-PEC have the right to appeal those 
decisions. Such appeals shall be processed under section 199.10, 
Appeals, of this Part.
    (8) Secondary liability for payment. By statute, TRICARE/CHAMPUS is 
second payer to all health care programs other than Medicaid (Title XIX 
of the Social Security Act) and certain other Federal or state 
programs. However, under the ICMP-PEC, TRICARE will pay, as primary 
obligor, for medically necessary services that might otherwise be 
covered by other welfare or charity based programs, in addition to 
Medicaid. TRICARE remains secondary payer under the ICMP-PEC for any 
comparable services under any other program for which the beneficiary 
is eligible. When in the best interests of the patient or the patient's 
family, benefits may be coordinated with Medicaid, other welfare or 
charity-based programs to ensure TRICARE beneficiaries receive the 
maximum level of benefits available to them in their communities as 
long as the primary payer status of ICMP-PEC services is maintained.
    (9) Other administrative requirements. 
    (i) Qualified providers of services or items not covered under the 
basic program, or who are not otherwise eligible for TRICARE/CHAMPUS 
authorized status, may be authorized for a time-limited period when 
such authorization is essential to implement the planned treatment 
under case management. Such providers must not have been excluded or 
suspended as a CHAMPUS provider, must hold Medicare or, if available, 
state certification or licensure appropriate to the service, and must 
agree to participate on all claims related to the case management 
treatment.
    (ii) Unproven treatment or procedures shall not be cost-shared as 
an exception to standard benefits under this part.
    (iii) The Executive Director, OCHAMPUS may establish other 
procedures for implementation of the case management program under this 
paragraph (i).
    (iv) TRICARE/CHAMPUS case management services may be provided by 
contractors designated by the Executive Director, OCHAMPUS.
* * * * *

    Dated: July 27, 2001.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 01-19185 Filed 7-31-01; 8:45 am]
BILLING CODE 5001-08-P