[Federal Register Volume 68, Number 83 (Wednesday, April 30, 2003)]
[Rules and Regulations]
[Pages 23030-23034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-10092]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

RIN 0720-AA66


TRICARE Program; Eligibility and Payment Procedures for Civilian 
Health and Medical Program of the Uniformed Services Beneficiaries Age 
65 and Over

AGENCY: Office of the Secretary, DoD.

ACTION: 

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inal rule.

SUMMARY: This final rule implements section 712 of the Floyd D. Spence 
National Defense Authorization Act for Fiscal Year 2001. Section 712 
extends TRICARE eligibility to beneficiaries age 65 and over who would 
otherwise have lost their TRICARE eligibility due to attainment of 
entitlement to hospital

[[Page 23031]]

insurance benefits under Part A of Medicare.

DATES: This rule was effective October 1, 2001.

FOR FURTHER INFORMATION CONTACT: Stephen E. Isaacson, Medical Benefits 
and Reimbursement Systems, TMA, telephone (303) 676-3572.

SUPPLEMENTARY INFORMATION:

I. Summary of Final Rule Provisions

    This fine rule implements section 712 of the Floyd D. Spence 
National Defense Authorization Act for Fiscal Year 2001 (Pub. L. 106-
398, 114 Stat. 1654), and was effective October 1, 2001. It extends 
TRICARE eligibility to beneficiaries age 65 and over. This beneficiary 
group previously lost TRICARE eligibility due to attaining entitlement 
to hospital insurance benefits under Part A of Medicare. In order for 
these individuals to retain their TRICARE eligibility, they must be 
enrolled in the supplementary medical insurance program under Part B of 
Medicare. In general, in the case of medical or dental care provided to 
these individuals for which payment may be made under both Medicare and 
TRICARE, Medicare is the primary payer and TRICARE will normally pay 
the actual out-of-pocket costs incurred by the person. This rule 
prescribes TRICARE payment procedures and makes revisions to TRICARE 
rules to accommodate Medicare-eligible CHAMPUS beneficiaries.
    The reader should refer to the interim final rule that was 
published on August 3, 2001, (66 FR 40601) for detailed information 
regarding eligibility requirements, the scope of the benefit, and other 
aspects of this significant expansion of the Military Health System.
    We also want to clarify an erroneous statement in the preamble to 
the interim final rule. Since the error was in the preamble and not in 
the regulatory language, it does not actually affect this final rule, 
but we want to ensure the TRICARE policy is understood. In section C. 
of the supplementary information on page 40603, we stated in two places 
that if a TRICARE-required preauthorization is not obtained, TRICARE 
will make no payment. This is not correct. If a required 
preauthorization is not obtained, TRICARE will still pay for any 
covered services, but the TRICARE payment will be reduced by not less 
than 10 percent.

II. Public Comments

    We issued this rule as an interim final rule, with comment period, 
as an exception to our standard practice of soliciting public comments 
prior to issuance. The Assistant Secretary of Defense (Health Affairs) 
determined that following the standard practice would have been 
impracticable, unnecessary, and contrary to public interest. This 
determination was based on the fact that this change directly 
implemented a statutory entitlement enacted by Congress expressly for 
this purpose, with a statutory effective date of October 1, 2001. 
Public comments were invited, though, and we received comments from one 
individual.
    Comment--Individuals who are over age 65, are currently employees 
of the U.S. Government, are retired from the military, and meet all 
eligibility requirements for TFL, should be able to drop their coverage 
under the Federal Employees Health Benefits Program (FEHBP) and 
subsequently re-enroll in the FEHBP during any open season with no 
penalty.
    Response--This is permitted.
    Comment--TRICARE should pay any premium and deductible costs for 
employer-provided insurance for individuals eligible for TFL and who 
are employed. Alternatively, any such costs paid by individuals 
eligible for TFL should be applied to that individual's catastrophic 
cap.
    Response--TRICARE has statutory authority only to pay for medically 
necessary services and supplies. We have no authority to pay for the 
type of costs identified in this comment. Therefore, this type of 
change goes beyond the regulatory process and would require a 
legislative change.
    Comment--An individual who is eligible for TFL and is also enrolled 
in employer-provided health insurance should not have to file the 
paperwork, i.e., submit claims. Providers should be required to submit 
all claims.
    Response--We cannot, through the regulatory process, require 
providers to submit claims to employer-provided health insurance plans 
that are primary to TRICARE. Nevertheless, we recognize that having to 
submit claims can present a significant burden to our beneficiaries, 
but there are several things that mitigate this burden. Under current 
procedures for both TRICARE and Medicare, providers are required to 
submit the claim in the vast majority of cases. More importantly, we 
have gone to great efforts to establish a process under TFL so that 
after the Medicare contractors process a claim, they send the claims 
directly to the appropriate TRICARE contractor with no beneficiary 
action required. As a result, there are almost no instances where 
beneficiaries have had to submit their claim to TRICARE.

III. Changes in the Final Rule

    The only change we have made to the language in the interim final 
rule is to clarify certain provisions in Sec.  199.17 regarding TRICARE 
Standard. In the interim final rule there were a number of areas where 
enrollment in TRICARE Standard was explicitly stated or implied. 
TRICARE Standard is the default coverage under TRICARE, and there is no 
enrollment action required of beneficiaries to be covered under 
Standard. We have, therefore, reworded various places in Sec.  199.17 
to ensure that this is clear. These changes have no substantive effect 
on the policies or procedures contained in either the interim final 
rule or this final rule.

IV. Regulatory Procedures

    This final rule will not impose additional information collection 
requirements on the public under the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501-3511).
    Executive Order 12866 requires certain regulatory assessments for 
any significant regulatory action, defined as one which would result in 
an annual effect on the economy of $100 million or more, or have other 
substantial impacts. The Regulatory Flexibility Act (RFA) requires that 
each Federal agency prepare, and make available for public comment, a 
regulatory flexibility analysis when the agency issues a regulation 
which would have a significant impact on a substantial number of small 
entities. This final rule is an economically significant regulatory 
action under Executive Order 12866, as it implements a statutory 
program that has added about $1.7 billion for DoD in annual healthcare 
benefit and administrative costs based on cost data collected for 
October 1, 2001, through September 30, 2002. These costs exclude 
pharmacy benefits that are addressed in the rulemaking for the TRICARE 
Senior Pharmacy Program. The benefits of this final rule include an 
increased level of health care for Medicare-eligible beneficiaries of 
the Department of Defense military health system. It has been 
determined to be major under the Congressional Review Act. However, 
this rule does not require a regulatory flexibility analysis, as it is 
not economically significant and will not significantly affect a 
substantial number of small entities. This rule has been designated as 
significant and has been reviewed by the Office of Management and 
Budget as required under the provisions of E.O. 12866.

[[Page 23032]]

List of Subjects in 32 CFR Part 199

    Claims, Handicapped, Health insurance, Military personnel.

0
Accordingly, 32 CFR part 199 is amended to read as follows:

PART 199--[AMENDED]

0
1. The authority citation for part 199 continues to read as follows:

    Authority: 5 U.S.C. 301 and 10 U.S.C. chapter 55.


0
2. Section 199.2(b) is amended by adding at the appropriate place in 
alphabetical order the following definition:


Sec.  199.2  Definitions.

* * * * *
    (b) * * *
    Director, TRICARE Management Activity. This term includes the 
Director, TRICARE Management Activity, the official sometimes referred 
to in this part as the Director, Office of CHAMPUS (or OCHAMPUS), or 
any designee of the Director, TRICARE Management Activity or the 
Assistant Secretary of Defense for Health Affairs who is designated for 
purposes of an action under this part.

0
3. Section 199.3 is amended by revising paragraphs (b)(2)(i)(D), 
(f)(3)(vi), and (f)(3)(vii) and the note following paragraph 
(f)(3)(vii) to read as follows:


Sec.  199.3  Eligibility.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (D) Must not be eligible for Part A of Title XVIII of the Social 
Security Act (Medicare) except as provided in paragraphs (f)(3)(vii), 
(f)(3)(viii), and (f)(3)(ix) of this section; and
* * * * *
    (f) * * *
    (3) * * *
    (vi) Attainment of entitlement to hospital insurance benefits (Part 
A) under Medicare except as provided in paragraphs (f)(3)(vii), 
(f)(3)(viii), and (f)(3)(ix) of this section. (This also applies to 
individuals living outside the United States where Medicare benefits 
are not paid.)
    (vii) Attainment of age 65, except for dependents of active duty 
members, beneficiaries not entitled to part A of Medicare, and 
beneficiaries entitled to Part A of Medicare who have enrolled in Part 
B of Medicare. For those who do not retain CHAMPUS, CHAMPUS eligibility 
is lost at 12:01 a.m. on the first day of the month in which the 
beneficiary becomes entitled to Medicare.

    Note: If the person is not eligible for Part A of Medicare, he 
or she must file a Social Security Administration ``Notice of 
Disallowance'' certifying to that fact with the Uniformed Service 
responsible for the issuance of his or her identification card so a 
new card showing CHAMPUS eligibility can be issued. Individuals 
entitled only to supplementary medical insurance (Part B) of 
Medicare, but no Part A, or Part A through the Premium HI provisions 
(provided for under the 1972 Amendments to the Social Security Act) 
retain eligibility under CHAMPUS (refer to Sec.  199.8 for 
additional information when a double coverage situation is 
involved).

* * * * *
0
4. Section 199.8 is amended by redesignating paragraph (c)(5) as (c)(6) 
and the second paragraph (c)(4) as (c)(5) and by revising paragraph 
(d)(1) to read as follows:


Sec.  199.8  Double Coverage.

* * * * *
    (d) Special consideration.--(1) CHAMPUS and Medicare.--(i) General 
rule. In any case in which a beneficiary eligible for both Medicare and 
CHAMPUS receives medical or dental care for which payment may be made 
under Medicare and CHAMPUS, Medicare is always the primary payer. For 
dependents of active duty members, payment will be determined in 
accordance to paragraph(c) of this section. For all other beneficiaries 
eligible for Medicare, the amount payable by CHAMPUS shall be the 
amount of the actual out-of-pocket costs incurred by the beneficiary 
for that care over the sum of the amount paid for that care under 
Medicare and the total of all amounts paid or payable by third party 
payers other than Medicare.
    (ii) Payment limit. The total CHAMPUS amount payable for care under 
paragraph (d)(1)(i) of this section may not exceed the total amount 
that would be paid under CHAMPUS if payment for that care were made 
solely under CHAMPUS.
    (iii) Application of general rule. In applying the general rule 
under paragraph (d)(1)(i) of this section, the first determination will 
be whether payment may be made under Medicare. For this purpose, 
Medicare exclusions, conditions, and limitations will be the basis for 
the determination.
    (A) For items or services or portions or segments of items or 
services for which payment may be made under Medicare, the CHAMPUS 
payment will be the amount of the beneficiary's actual out of pocket 
liability, minus the amount payable by Medicare, also minus amount 
payable by other third party payers, subject to the limit under 
paragraph (d)(1)(ii) of this section.
    (B) For items or services or segments of items or services for 
which no payment may be made under Medicare, the CHAMPUS payment will 
be the same as it would be for a CHAMPUS eligible retiree, dependent, 
or survivor beneficiary who is not Medicare eligible.
    (iv) Examples of applications of general rule. The following 
examples are illustrative. They are not all-inclusive.
    (A) In the case of a Medicare-eligible beneficiary receiving 
typical physician office visit services, Medicare payment generally 
will be made. CHAMPUS payment will be determined consistent with 
paragraph (d)(1)(iii)(A) of this section.
    (B) In the case of a Medicare-eligible beneficiary residing and 
receiving medical care overseas, Medicare payment generally may be 
made. CHAMPUS payment will be determined consistent with paragraph 
(d)(1)(iii)(B) of this section.
    (C) In the case of a Medicare-eligible beneficiary receiving 
skilled nursing facility services a portion of which is payable by 
Medicare (such as during the first 100 days) and a portion of which is 
not payable by Medicare (such as after 100 days), CHAMPUS payment for 
the first portion will be determined consistent with paragraph 
(d)(1)(iii)(A) of this section and for the second portion consistent 
with paragraph (d)(1)(iii)(B) of this section.
    (v) Application of catastrophic cap. Only in cases in which CHAMPUS 
payment is determined consistent with paragraph (d)(1)(iii)(B) of this 
section, actual beneficiary out of pocket liability remaining after 
CHAMPUS payments will be counted for purposes of the annual 
catastrophic loss protection, set forth under Sec.  199.4(f)(10). When 
a family has met the cap, CHAMPUS will pay allowable amounts for 
remaining covered services through the end of that fiscal year.
    (vi) Effect of enrollment in Medicare+Choice plan. In the case of a 
beneficiary enrolled in a Medicare+Choice plan who receives items or 
services for which payment may be made under both the Medicare+Choice 
plan and CHAMPUS, a claim for the beneficiary's normal out-of-pocket 
costs under the Medicare+Choice plan may be submitted for CHAMPUS 
payment. However, consistent with paragraph (c)(4) of this section, 
out-of-pocket costs do not include costs associated with unauthorized 
out-of-system care or care otherwise obtained under circumstances that 
result in a denial or limitation of coverage for care that would have 
been

[[Page 23033]]

covered or fully covered had the beneficiary met applicable 
requirements and procedures. In such cases, the CHAMPUS amount payable 
is limited to the amount that would have been paid if the beneficiary 
had received care covered by the Medicare+Choice plan.
    (vii) Effect of other double coverage plans, including medigap 
plans. CHAMPUS is second payer to other third-party payers of health 
insurance, including Medicare supplemental plans.
    (viii) Effect of employer-provided insurance. In the case of 
individuals with health insurance due to their current employment 
status, the employer insurance plan shall be first payer, Medicare 
shall be the second payer, and CHAMPUS shall be the tertiary payer.
* * * * *

0
5. Section 199.10 is amended by revising paragraph (a)(1)(ii) to read 
as follows:


Sec.  199.10  Appeal and hearing procedures.

    (a) * * *
    (1) * * *
    (ii) Effect of initial determination. (A) The initial determination 
is final unless appealed in accordance with this chapter, or unless the 
initial determination is reopened by the TRICARE Management Activity, 
the CHAMPUS contractor, or the CHAMPUS peer review organization.
    (B) An initial determination involving a CHAMPUS beneficiary 
entitled to Medicare Part A, who is enrolled in Medicare Part B, may be 
appealed by the beneficiary or their provider under this section of 
this Part only when the claimed services or supplies are payable by 
CHAMPUS and are not payable under Medicare. Both Medicare and CHAMPUS 
offer an appeal process when a claim for healthcare services or 
supplies is denied and most healthcare services and supplies are a 
benefit payable under both Medicare and CHAMPUS. In order to avoid 
confusion on the part of beneficiaries and providers and to expedite 
the appeal process, services and supplies denied payment by Medicare 
will not be considered for coverage by CHAMPUS if the Medicare denial 
of payment is appealable under Medicare. Because such claims are not 
considered for payment by CHAMPUS, there can be no CHAMPUS appeal. If, 
however, a Medicare claim or appeal results in some payment by 
Medicare, the services and supplies paid by Medicare will be considered 
for payment by CHAMPUS. In that situation, any decision to deny CHAMPUS 
appealable issues involving Medicare-eligible CHAMPUS beneficiaries are 
illustrative; they are not all-inclusive:
    (1) If Medicare processes a claim for a healthcare service or 
supply that is a Medicare benefit and the claim is denied by Medicare 
for a patient-specific reason, the claim is appealable through the 
Medicare appeal process. The Medicare decision will be final if the 
claim is denied by Medicare. The claimed services or supplied will not 
be considered for CHAMPUS payment and there is not CHAMPUS appeal of 
the CHAMPUS decision denying the claim.
    (2) If Medicare processes a claim for a healthcare service or 
supply that is a Medicare benefit and the claim is paid, either on 
initial submission or as a result of a Medicare appeal decision, the 
claim will be submitted to CHAMPUS for processing as a second payer to 
Medicare. If CHAMPUS denies payment of the claim, the Medicare-eligible 
beneficiary or their provider have the same appeal rights as other 
CHAMPUS beneficiaries and their providers under this section.
    (3) If Medicare processes a claim and the claim is denied by 
Medicare because it is not a healthcare service or supply that is a 
benefit under Medicare, the claim is submitted to CHAMPUS. CHAMPUS will 
process the claim under this Part 199 as primary payer (or as secondary 
payer if another double coverage plan exists). If any part of the claim 
is denied, the Medicare-eligible beneficiary and their provider will 
have the same appeal rights as other CHAMPUS beneficiaries and their 
providers under this section.
* * * * *

0
6. Section 199.15 is amended by revising paragraph (a)(6) to read as 
follows:


Sec.  199.15  Quality and Utilization Review Peer Review Organization 
Program.

    (a) * * *
    (6) Medicare rules used as model. The CHAMPUS Quality and 
Utilization Review Peer Review Organization program, based on specific 
statutory authority, follows many of the quality and utilization review 
requirements and procedures in effect for the Medicare Peer Review 
Organization program, subject to adaptations appropriate for the 
CHAMPUS program. In recognition of the similarity of purpose and design 
between the Medicare and CHAMPUS PRO programs, and to avoid unnecessary 
duplication of effort, the CHAMPUS Quality and Utilization Review Peer 
Review Organization program will have special procedures applicable to 
supplies and services furnished to Medicare-eligible CHAMPUS 
beneficiaries. These procedures will enable CHAMPUS normally to rely 
upon Medicare determinations of medical necessity and appropriateness 
in the processing of CHAMPUS claims as a second payer to Medicare. As a 
general rule, only in cases involving Medicare-eligible CHAMPUS 
beneficiaries where Medicare payment for services and supplies is 
denied for reasons other than medical necessity and appropriateness 
will the CHAMPUS claim be subject to review for quality of care and 
appropriate utilization under the CHAMPUS PRO program. TRICARE will 
continue to perform a medical necessity and appropriateness review for 
quality of care and appropriate utilization under the CHAMPUS PRO 
program where required by statute, such as inpatient mental health 
services in excess of 30 days in any year.
* * * * *

0
7. Section 199.17 is amended by revising paragraphs (a) introductory 
text, (a)(6) introductory text, (a)(6)(i), (a)(6)(ii), (b) introductory 
text, (b)(1), (c) introductory text, (c)(3), (c)(4), and (v) 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 Military 
Health System.
* * * * *
    (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 four 
categories:
    (A) Active duty members, all of whom are automatically enrolled in 
TRICARE Prime;
    (B) TRICARE Prime enrollees;
    (C) TRICARE Standard participants, who are all CHAMPUS eligible 
beneficiaries who are not enrolled in TRICARE Prime;
    (D) Non-CHAMPUS beneficiaries, who are beneficiaries eligible for 
health care services in military treatment facilities, but not eligible 
for CHAMPUS;
    (ii) Establishment of a triple option benefit. A second major 
feature of TRICARE is the establishment of three options for receiving 
health care:
    (A) ``TRICARE Prime,'' which is a health maintenance organization 
(HMO)-like program. It generally features use of military treatment 
facilities and substantially reduced out-

[[Page 23034]]

of-pocket costs for CHAMPUS care. Beneficiaries generally agree to use 
military treatment facilities and designated civilian provider networks 
and to follow certain managed care rules and procedures.
    (B) ``TRICARE Extra,'' which is a preferred provider organization 
(PPO) program. It allows TRICARE Standard beneficiaries to use the 
TRICARE provider network, including both military facilities and the 
civilian network, with reduced out-of-pocket costs. These beneficiaries 
also continue to be eligible for military medical treatment facility 
care on a space-available basis.
    (C) ``TRICARE Standard'' which is the basic CHAMPUS program. All 
eligible beneficiaries are automatically included in Standard unless 
they have enrolled in Prime. It preserves broad freedom of choice of 
civilian providers, 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.
* * * * *
    (b) Triple option benefit in general. Where the TRICARE program is 
fully implemented, eligible beneficiaries are given the option of 
enrolling in TRICARE Prime (also referred to as ``Prime'') or remaining 
in TRICARE Standard (also referred to as ``Standard''). In the absence 
of an enrollment in Prime, coverage under Standard is automatic.
    (1) Choice voluntary. With the exception of active duty members, 
the choice of whether to enroll in Prime is voluntary for all eligible 
beneficiaries. For dependents who are minors, the choice will be 
exercised by a parent or guardian.
* * * * *
    (c) Eligibility for enrollment. Where the TRICARE program is fully 
implemented, all CHAMPUS-eligible beneficiaries who are not Medicare 
eligible on basis of age are eligible to enroll in Prime or to remain 
covered under Standard. CHAMPUS beneficiaries who are eligible for 
Medicare on basis of age (and are enrolled in Medicare Part B) are 
automatically covered under TRICARE Standard. Further, some rules and 
procedures are different for dependents of active duty members and 
retirees, 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 enrollment in 
Prime.
* * * * *
    (3) Retired members, dependents of retired members, and survivors. 
(i) Where TRICARE is fully implemented, all CHAMPUS-eligible retired 
members, dependents of retired members, and survivors who are not 
eligible for Medicare on the basis of age 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 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) Coverage under Standard. All CHAMPUS-eligible beneficiaries who 
do not enroll in Prime will remain in Standard.
* * * * *
    (v) Administrative procedures. The Assistant Secretary of Defense 
(Health Affairs), the Director, TRICARE Management Activity, 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.

    Dated: April 17, 2003.
L.M. Bynum,
Alternate OSD Federal Register, Liaison Officer, Department of Defense.
[FR Doc. 03-10092 Filed 4-29-03; 8:45 am]
BILLING CODE 5001-08-M