GAO-02-875R 

United States General Accounting Office

Washington, DC 20548 

B-290740 

July 3, 2002 

The Honorable Carl Levin 

Chairman 

The Honorable John W. Warner 

Ranking Minority Member 

Committee on Armed Services 

United States Senate 

The Honorable Bob Stump 

Chairman 

The Honorable Ike Skelton 

Ranking Minority Member 

Committee on Armed Services 

House of Representatives 

Subject: Department of Defense, Office of the Secretary: TRICARE; Sub-Acute Care 

Program; Uniform Skilled Nursing Facility Benefit; Home Health Care 

Benefit; Adopting Medicare Payment Methods for Skilled Nursing Facilities 

and Home Health Care Providers

Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a 

major rule promulgated by the Department of Defense (DOD), Office of the 

Secretary, entitled “TRICARE; Sub-Acute Care Program; Uniform Skilled Nursing 

Facility Benefit; Home Health Care Benefit; Adopting Medicare Payment Methods for 

Skilled Nursing Facilities and Home Health Care Providers” (RIN: 0720-AA73). We 

received the rule on June 19, 2002. It was published in the Federal Register as an 

interim final rule on June 13, 2002. 67 Fed. Reg. 40597. 

The interim final rule establishes a sub-acute care benefits program with skilled 

nursing facility and home health care benefits modeled after those of the Medicare 

program. It adopts Medicare payment methods for skilled nursing facility, home 

health care, and certain other institutional health care providers. Also adopted are 

Medicare’s rules on balanced billing of beneficiaries, prohibiting it by institutional 

providers, and limiting it by non-institutional providers. Finally, the rule makes 

changes in the statutory exclusion of coverage for custodial and domiciliary care. 

Enclosed is our assessment of the DOD’s compliance with the procedural steps 

required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. 

Our review indicates that the DOD complied with the applicable requirements. 
Page 2 GAO-02-875R 

If you have any questions about this report, please contact James W. Vickers, 

Assistant General Counsel, at (202) 512-8210. The official responsible for GAO 

evaluation work relating to the subject matter of the rule is William Scanlon, 

Managing Director, Health Care. Mr. Scanlon can be reached at (202) 512-7114. 

 signed 

Kathleen E. Wannisky 

Managing Associate General Counsel 

Enclosure 

cc: D. O. Cooke 

 Director, Administration and 

 Management 

 Department of Defense 
ENCLOSURE 

ANALYSIS UNDER 5 U.S.C. § 801(a)(1)(B)(i)-(iv) OF A MAJOR RULE 

ISSUED BY 

DEPARTMENT OF DEFENSE, 

 OFFICE OF THE SECRETARY 

ENTITLED 

"TRICARE; SUB-ACUTE CARE PROGRAM; UNIFORM SKILLED 

NURSING FACILITY BENEFIT; HOME HEALTH CARE BENEFIT; 

ADOPTING MEDICARE PAYMENT METHODS FOR SKILLED NURSING 

FACILITIES AND HOME HEALTH CARE PROVIDERS" 

(RIN: 0720-AA73) 

(i) Cost-benefit analysis

DOD expects the interim final rule to result in reduced TRICARE payments to skilled 

nursing facilities in excess of $100 million per year. 

(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. §§ 603-605, 607, 

and 609

DOD states that it did not prepare a Regulatory Flexibility Analysis for the interim final 

rule because the rule merely implements significant policy action taken by Congress 

and that there were no potential options to evaluate where Congress has dictated the 

policy. We also note that since the rule was not previously issued as a notice of 

proposed rulemaking, it is exempt from the requirements of the act. 

(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform Act 

of 1995, 2 U.S.C. §§ 1532-1535

As defined in title II, the interim final rule does not contain either an intergovernmental 

or private sector mandate of more than $100 million, adjusted for inflation, in any one 

year. 

(iv) Other relevant information or requirements under acts and executive orders

Administrative Procedure Act, 5 U.S.C. §§ 551 et seq. 

Since the rule implements specific statutory requirements with specific effective dates, 

DOD issued the rule as an interim final rule without soliciting prior public comments. 

The Assistant Secretary determined that such action would be unnecessary, 

impractical, and contrary to the public interest. 

DOD is soliciting comments on the interim final rule until June 30, 2002. 
Page 2 GAO-02-875R

Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520 

The interim final rule does not contain any new or modified information collections 

that are subject to review by the Office of Management and Budget (OMB) under the 

Paperwork Reduction Act. 

Statutory authorization for the rule 

The interim final rule is promulgated under the authority contained in section 701 of 

the National Defense Authorization Act for Fiscal Year 2002 (Pub. L. 107-107, 

December 28, 2001) (10 U.S.C. 1074j). 

Executive Order No. 12866 

The interim final rule was reviewed by OMB and found to be an “economically 

significant” regulatory action under the order.