[Federal Register Volume 60, Number 26 (Wednesday, February 8, 1995)]
[Proposed Rules]
[Pages 7489-7506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3028]



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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

RIN 0720-AA21
[DoD 6010.8-R]


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

AGENCY: Office of the Secretary, DoD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule establishes requirements and procedures for 
implementation of the TRICARE Program, the purpose of which is to move 
toward a comprehensive managed health care delivery system in military 
medical treatment facilities and CHAMPUS. Principal components of the 
proposed rule include: establishment of a comprehensive enrollment 
system; creation of a triple option benefit, including a Uniform HMO 
Benefit required by law; a series of initiatives to coordinate care 
between military and civilian delivery systems, including Resource 
Sharing Agreements, Health Care Finders, PRIMUS and NAVCARE Clinics, 
and new prescription pharmacy services; and a consolidated schedule of 
charges, incorporating steps to reduce differences in charges between 
military and civilian services. This proposed rule also includes 
provisions expanding use of nonavailability statement authorities to 
require use of designated civilian network providers for inpatient 
hospital care, establishing a special civilian provider program 
authority for active duty dependents overseas, and implementing 
revisions to the Managed Care Program of the former Public Health 
Service hospitals that now function as Uniformed Services Treatment 
Facilities. The TRICARE Program is a major reform of the Military 
Health Services System that will improve services to beneficiaries and 
help sustain the system during this period of significant budgetary 
limitations.

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

ADDRESSES: Office of the Civilian Health and Medical Program of the 
Uniformed Services (OCHAMPUS), Office of Program Development, Aurora, 
CO 80045-6900.

FOR FURTHER INFORMATION CONTACT: Steve Lillie, Office of the Assistant 
Secretary of Defense (Health Affairs), telephone (703) 695-3350.
    Questions regarding payment of specific claims under the CHAMPUS 
allowable charge method should be addressed to the appropriate CHAMPUS 
contractor.

SUPPLEMENTARY INFORMATION:

I. Overview of the TRICARE Program

    The medical mission of the Department of Defense is to provide, and 
maintain readiness to provide, medical services and support to the 
armed forces during military operations, and to provide medical 
services and support to members of the armed forces, their family 
members, and others entitled to DoD medical care.
    Under the current Military Health Services System (MHSS), CHAMPUS-
eligible beneficiaries may receive care in the direct care system (that 
is, care provided in military hospitals or clinics) or seek care from 
civilian health care providers; the government shares in the cost of 
such civilian care under the Civilian Health and Medical Program of the 
Uniformed Services (CHAMPUS), or for some beneficiaries, the Medicare 
program. The substantial majority of care for military beneficiaries is 
provided within catchment areas of inpatient military treatment 
facilities (MTFs), a catchment area being roughly defined as the area 
within a 40-mile radius around an MTF.
    Recently DoD has embarked on a new program, called TRICARE, which 
will improve the quality, cost, and accessibility of services for its 
beneficiaries. Because of the size and complexity of the military 
health services system, TRICARE is being phased over a period of 
several years. The principal mechanisms for the implementation of 
TRICARE are the designation of the commanders of selected military 
medical centers as Lead Agents for 12 TRICARE regions across the 
country, operational enhancements to the Military Health Services 
System, and the procurement of managed care support contracts for the 
provision of civilian health care services in those regions.
    Sound management of the MHSS requires a great degree of 
coordination between the direct care system and CHAMPUS-funded civilian 
care, which, unfortunately, has not always been present. The TRICARE 
Program recognizes that ``step one'' of any process aimed at improving 
management is to identify the beneficiaries for whom the health program 
is responsible. Indeed, the dominant feature in some private sector 
health plans, enrollment of beneficiaries in their respective health 
care plans, is an essential element. This proposed rule moves toward 
establishment of a basic structure of health care enrollment for the 
MHSS. Under this structure, all health care beneficiaries become 
enrolled in TRICARE and classified into one of five enrollment 
categories:
    1. Active duty members, all of whom are automatically enrolled in 
TRICARE Prime, an HMO-type option;
    2. TRICARE Prime enrollees, who (except for active duty members) 
must be CHAMPUS eligible;
    3. TRICARE Standard enrollees, which covers all CHAMPUS-eligible 
beneficiaries who do not enroll in TRICARE Prime or another managed 
care program affiliated with TRICARE;
    4. Medicare-eligible beneficiaries, who, although not eligible for 
TRICARE Prime, may participate in many features of TRICARE; and
    5. Participants in other managed care programs affiliated with 
TRICARE.
    The second major feature of the TRICARE Program will be the 
establishment of a triple option benefit. CHAMPUS-eligible 
beneficiaries will be offered three options: They may enroll to receive 
health care in an HMO-type program called ``TRICARE Prime;'' they may 
use the civilian preferred provider [[Page 7490]] network on a case-by-
case basis, under ``TRICARE Extra;'' or they may remain in the standard 
CHAMPUS benefit plan, called ``TRICARE Standard.'' Enrollees in Prime 
will obtain most of their care within the network, and pay 
substantially reduced CHAMPUS cost shares when they receive care from 
civilian network providers. Enrollees in Prime will retain freedom to 
utilize non-network civilian providers, but they will have to pay cost 
sharing considerably higher than under Standard CHAMPUS if they do so. 
Beneficiaries who choose not to enroll in TRICARE Prime will preserve 
their freedom of choice of provider for the most part by remaining in 
TRICARE Standard. These beneficiaries will face standard CHAMPUS cost 
sharing requirements, except that their coinsurance percentage will be 
lower when they opt to use the preferred provider network under TRICARE 
Extra. All beneficiaries continue to be eligible to receive care in 
military facilities. Active duty dependents who enroll in TRICARE Prime 
will have a priority over other beneficiaries.
    A third major feature of the TRICARE program is a series of 
initiatives, affecting all beneficiary enrollment categories, designed 
to coordinate care between military and civilian health care systems. 
Among these is a program of resource sharing agreements, under which a 
TRICARE contractor provides to a military treatment facility, personnel 
and other resources to increase the availability of services from 
military facilities and providers. Another initiative is establishment 
of Health Care Finders, which are administrative offices to facilitate 
referrals to appropriate services in the military facility or civilian 
provider network. In addition, integrated quality and utilization 
management services for military and civilian sector providers will be 
instituted. Still another initiative is establishment of special 
pharmacy programs for areas affected by base realignment and closure 
actions. These pharmacy programs will include special eligibility for 
some Medicare-eligible beneficiaries. TRICARE also makes permanent 
authority for PRIMUS and NAVCAREClinics, which are dedicated 
contractor-owned and operated clinics. These initiatives will have a 
major impact on military health care delivery systems, improving 
services for all beneficiary enrollment categories.
    The fourth major component of TRICARE is the implementation of a 
consolidated schedule of charges, incorporating steps to reduce 
differences in charges between military and civilian services. In 
general, the TRICARE Program reduces out-of-pocket costs for civilian 
sector care. For example, the current CHAMPUS cost sharing requirements 
for outpatient care for active duty dependents include a deductible of 
$150 per person or $300 per family ($50/$100 for dependents of sponsors 
in pay grades E-4 and below) and a copayment of 20 percent of the 
allowable cost of the services. Under TRICARE Prime, which incorporates 
the ``Uniform HMO Benefit,'' these cost sharing requirements will be 
replaced by a standard charge for most outpatient visits of $12.00 per 
visit, or $6.00 per visit for dependents of E-4 and below sponsors.
    For retirees, their dependents and survivors, the current 
deductible of $150 per person or $300 per family and 25 percent cost 
sharing will also be replaced by a standard charge, which is likewise 
$12.00 for most outpatient visits.
    Beneficiaries who are not under TRICARE Prime will also have 
significant opportunities to reduce expected out-of-pocket costs under 
CHAMPUS. These opportunities include increased availability of MTF 
services by virtue of resource sharing agreements, the new special 
pharmacy programs, and access to PRIMUS and NAVCARE Clinics.
    With respect to military hospitals, for retirees, their dependents, 
and survivors, consideration may be given in the future to 
establishment of nominal per-visit fees, for some or all retirees, 
their family members, and survivors, and for some or all types of 
services for those beneficiaries. Fees would be considered to help 
control demand for military facility care, to free up capacity and 
reduce waiting times, and lower the costs of health care.
    A user fee can be structured in many different ways, for example, 
exempting lower income segments of the covered population. Most 
importantly, the motivation for a fee is to encourage the more 
efficient provision of lower cost health care, and not to produce 
budgetary savings. Accordingly, analysis of alternatives would be based 
on the assumption that revenue produced by a user fee will be allocated 
to other benefits or quality of life programs. When this issue is 
considered for possible implementation in fiscal year 1998, if the 
Department decides to establish a nominal fee for some or all 
outpatient services provided to some or all retirees, their family 
members, and survivors, a proposed rule will then be issued for public 
comment. Again, it should be noted that this suggestion of a possible 
outpatient fee does not include active duty service members or their 
family members.
    Taken as a whole, the TRICARE Program is a major reform of the 
Military Health Services System--one that will accomplish the 
transition to a comprehensive managed health care system that will help 
to achieve DoD's medical mission into the next century.

II. Provisions of Proposed Rule Regarding the TRICARE Program

    These regulatory changes are being published as an amendment to the 
32 CFR part 199 because the operating details of CHAMPUS will be 
altered significantly. Our regulatory approach is to leave the existing 
CHAMPUS rules largely intact and to create new Secs. 199.17 and 199.18 
to describe the TRICARE Program and the uniform HMO benefit. The major 
provisions of the proposed new Sec. 199.17 regarding the TRICARE 
Program are summarized below.
A. Establishment of the TRICARE Program (proposed Sec. 199.17(a))
    This paragraph introduces the TRICARE Program, and describes its 
purpose, statutory authority, and scope. It is explained that certain 
usual CHAMPUS and MHSS rules do not apply under the TRICARE Program, 
and that implementation of the Program occurs in a specific geographic 
area, such as a local catchment area or a region. Public notice of 
initiation of a Program will include a notice published in the Federal 
Register.
    With respect to statutory authority, major statutory provisions are 
title 10, U.S.C. sections 1099 (which calls for a health care 
enrollment system), 1097 (which authorizes alternative contracts for 
health care delivery and financing), and 1096 (which allows for 
resource sharing agreements). Significantly, the National Defense 
Authorization Act for Fiscal Year 1995 amended section 1097 to 
authorize the Secretary of Defense to provide for the coordination of 
health care services provided pursuant to any contract of agreement 
with a civilian managed care contractor with those services provided in 
military medical treatment facilities. This amendment set the stage for 
many features of TRICARE, including initiatives to improve coordination 
between military and civilian health care delivery components and the 
consolidated schedule of beneficiary charges.
B. Triple Option (proposed Sec. 199.17(b))
    This paragraph presents an overview of the triple option feature of 
the TRICARE Program. Most beneficiaries are offered enrollment in the 
TRICARE [[Page 7491]] Prime Plan, or ``Prime.'' They are free to choose 
to enroll to obtain the benefits of Prime, or not to enroll and remain 
in the TRICARE Standard Plan, or ``Standard,'' with the option of using 
the preferred provider network under the TRICARE Extra Plan, or 
``Extra.'' When the TRICARE Program is implemented in an area, active 
duty members will be enrolled in Prime.
C. Eligibility for Enrollment in Prime (proposed Sec. 199.17(c))
    This paragraph describes who may enroll in the Program. All active 
duty members are automatically enrolled; all CHAMPUS-eligible 
beneficiaries may enroll. Since it is likely that priorities for 
enrollment will be necessary owing to limited availability of Prime, 
the order of priority for enrollment will be as follows: First priority 
will be active duty members; second priority will be active duty family 
members; and third priority will be CHAMPUS-eligible retirees, family 
members of retirees, and survivors. At this time, TRICARE Prime will 
not offer enrollment to non-CHAMPUS-eligible beneficiaries.
D. Health Benefits Under Prime (proposed Sec. 199.17(d))
    This paragraph states that the benefits established for the Uniform 
HMO Benefit option (see Sec. 199.18, Uniform HMO Benefit option) are 
applicable to CHAMPUS eligible enrollees in TRICARE Prime.
    Under TRICARE, all enrollees in Prime and all beneficiaries who do 
not enroll remain eligible for care in MTFs. Active duty family members 
who enroll in TRICARE Prime would be given priority for MTF access over 
non-enrollees; priorities for other categories of beneficiary would be 
unaffected by their enrollment. Regarding civilian sector care, active 
duty member care will continue to be arranged as needed and paid for 
through the supplemental care program.
E. Health Benefits Under Extra (proposed Sec. 199.17(e))
    This paragraph describes the availability of the civilian preferred 
provider network under Extra. When Extra is used, CHAMPUS cost sharing 
requirements will be reduced. See Table 2 following the preamble for a 
comparison of TRICARE Standard, TRICARE Extra, and TRICARE Prime cost 
sharing requirements.
F. Health Benefits Under Standard (proposed Sec. 199.17(f))
    This paragraph describes health benefits for beneficiaries who opt 
to remain in Standard. Broadly, participants in Standard maintain their 
freedom of choice of civilian provider under CHAMPUS (subject to 
nonavailability statement requirements), and face standard CHAMPUS cost 
sharing requirements, except when they take advantage of the preferred 
provider network under Extra. The CHAMPUS benefit package applies to 
Standard participants.
G. Coordination With Other Health Care Programs (proposed 
Sec. 199.17(g))
    This paragraph provides that, for beneficiaries enrolled in managed 
health care programs not operated by DoD, DoD may establish a contract 
or agreement with the other managed health care program for the purpose 
of coordinating beneficiary entitlements under the other program and 
the military health services system. This potentially includes any 
private sector health maintenance organization (HMO) or competitive 
medical plan, and any Medicare HMO. Any contract or agreement entered 
into under this paragraph may integrate health care benefits, delivery, 
financing, and administrative features of the other managed care plan 
with some or all of the features of the TRICARE Program. This paragraph 
is based on 10 U.S.C. section 1097(d), as amended by section 714 of the 
National Defense Authorization Act for Fiscal Year 1995.
H. Resource Sharing Agreements (proposed Sec. 199.17(h))
    This paragraph provides that military treatment facilities may 
establish resource sharing agreements with the applicable managed care 
support contractors for the purpose of providing for the sharing of 
resources between the two parties. Internal and external resource 
sharing agreements are authorized. Under internal resource sharing 
agreements, beneficiary cost sharing requirements are the same as in 
military facilities. Under internal or external resource sharing 
agreements, a military treatment facility commander may authorize the 
provision of services pursuant to the agreement to Medicare-eligible 
beneficiaries, if this will promote the most cost-effective provision 
of services under the TRICARE Program.
I. Health Care Finder (proposed Sec. 199.17(i))
    This paragraph establishes procedures for the Health Care Finder, 
an administrative office that assists beneficiaries in being referred 
to appropriate health care providers, especially the MTF and civilian 
network providers. Health Care Finder services are available to all 
beneficiaries.
J. General Quality Assurance, Utilization Review, and Preauthorization 
Requirements (proposed Sec. 199.17(j))
    This paragraph emphasizes that all requirements of the CHAMPUS 
basic program relating to quality assurance, utilization review, and 
preauthorization of care apply to the CHAMPUS component of Prime, Extra 
and Standard. These requirements and procedures may also be made 
applicable to military facility services.
K. Pharmacy Network Services in Base Realignment and Closure Sites 
(proposed Sec. 199.17(k))
    This paragraph establishes two special pharmacy programs, a retail 
pharmacy network program and a mail service pharmacy program. This 
proposal is made with consideration of the existing mail service 
pharmacy demonstration, under which features of the permanent, 
nationwide program are being tested at a number of sites. Proceeding to 
solicit public comment on design features at this point, prior to 
completion of the demonstration, will enable us to move most 
expeditiously to establish the nationwide program in the future.
    An important aspect of the mail service and retail pharmacy 
programs is that, under the authority of section 702 of the National 
Defense Authorization Act for Fiscal Year 1993, Pub. L. 102-484, there 
is a special rule regarding eligibility for prescription services. The 
special rule is that Medicare-eligible beneficiaries, who are normally 
ineligible for CHAMPUS, are under certain special circumstances 
eligible for the pharmacy programs. The special circumstances are that 
they live in an area adversely affected by the closure of a military 
medical treatment facility. A provision of the National Defense 
Authorization Act for Fiscal Year 1995 additionally provides 
eligibility for Medicare eligible beneficiaries who demonstrate that 
they had been reliant on a former military medical treatment facility 
for pharmacy services.
    Under the proposed rule, the area adversely affected by the closure 
of a facility is established as the catchment area of the treatment 
facility that closed. The catchment area is the existing statutory 
designation of the geographical area primarily served by a military 
hospital. The catchment area is defined in law as ``the area within 
approximately 40 miles of a medical facility of the uniformed 
services.'' Pub. L. 100-180, sec. 721(f)(1), 10 U.S.C.A. 
[[Page 7492]] 1092 note. This is also the geographical basis in the law 
for nonavailability statements that authorize CHAMPUS beneficiaries who 
live within areas served by military hospitals to obtain care outside 
the military facility. 10 U.S.C. 1079(a)(7). Because the purpose of the 
special eligibility rule for Medicare-eligible beneficiaries is to 
replace the pharmacy services lost as a consequence of the base 
closure, and because the 40-mile catchment area is the only 
geographical area designation established in law to describe the 
beneficiaries primarily served by a military medical facility, we 
believe it most appropriate to adopt the established 40-mile catchment 
area for purposes of the applicability of the special eligibility rule 
for pharmacy services. Thus, under the proposed rule, Medicare-eligible 
beneficiaries who live within the established 40-mile catchment area of 
a treatment facility that closed are eligible to use the pharmacy 
programs if available in that area.
    There are several noteworthy special rules regarding the area that 
will be considered adversely affected by the closure of a military 
treatment facility. First, 40-mile catchment area generally will apply 
in the case of the closure of a military clinic, as it does in the case 
of the closure of a hospital. Recognizing that there may be clinic 
closure cases involving very small clinics that were not providing any 
significant amount of pharmacy services to retirees and their 
dependents, these cases will not be considered to be areas adversely 
affected by the closure of a medical treatment facility. The reason for 
this is simply that if the facility was not providing a significant 
amount of services, its closure will not have a noteworthy adverse 
affect in the area. Another circumstance in which a facility closure 
will not be considered to have an adverse affect on an area is if the 
area is also within the catchment area of another military medical 
treatment facility that remains open and available to the 
beneficiaries.
    The Director, Office of CHAMPUS may establish other procedures for 
the effective operation of the pharmacy programs, dealing with issues 
such as encouragement of use of generic drugs for prescriptions and use 
of appropriate drug formularies, as well as establishment of 
requirements for demonstration of past reliance on a military medical 
treatment facility for pharmacy services.
L. PRIMUS and NAVCARE Clinics (proposed Sec. 199.17(l))
    The proposed rule would add a new Sec. 199.17(l). Under the 
authority of 10 U.S.C. sections 1074(c) and 1097, this section would 
authorize PRIMUS and NAVCARE Clinics, which have operated to date under 
demonstration authority. Because these contractor owned and operated 
clinics have increased beneficiariy access to care and become very 
popular with beneficiaries, this provision will make permanent the 
PRIMUS and NAVCARE Clinic authority.
    As under the demonstration project, PRIMUS and NAVCARE Clinics will 
function as extensions of military treatment facilities. As such, all 
beneficiaries eligible for care in military treatment facilities 
(including active duty members, Medicare-eligible beneficiaries, and 
other non-CHAMPUS eligible beneficiaries) are eligible to use PRIMUS 
and NAVCARE Clinics. For PRIMUS and NAVCARE Clinics established prior 
to October 1, 1994, CHAMPUS deductibles and copayments will not apply. 
Rather, military hospital policy regarding beneficiary charges will 
apply. For PRIMUS and NAVCARE Clinics established after September 30, 
1994, the provisions of the Uniform HMO Beneift regarding out patient 
costsharing will apply (see proposed Sec. 199.18(d)(3)). Other CHAMPUS 
rules and procedures, such as coordination of benefits requirements 
will apply. The Director, OCHAMPUS may waive or modify CHAMPUS 
regulatory requirements in connection with the operation of PRIMUS and 
NAVCARE Clinics.
M. Consolidated Schedule of Beneficiary Charges (proposed 
Sec. 199.17(m))
    This paragraph establishes a consolidated schedule of beneficiary 
charges applicable to health care services under TRICARE for Prime 
enrollees (other than active duty members), Standard enrollees, and 
Medicare-eligible beneficiaries. The schedule of charges is summarized 
at Table 1, following the preamble. As demonstrated by the table, 
TRICARE provides for reduced beneficiary out-of-pocket costs.
    Included in the consolidated schedule of beneficiary charges is the 
``Uniform HMO Benefit'' design required by law. This is further 
discussed in the next section of the preamble.
N. Additional Health Care Management Requirements Under Prime (proposed 
Sec. 199.17(n))
    This paragraph describes additional health care management 
requirements within Prime, and establishes the point-of-service option, 
under which CHAMPUS beneficiaries retain the right to obtain services 
without a referral, albeit with higher cost sharing. Each CHAMPUS-
eligible enrollee will select or be assigned a Primary Care Manager who 
typically will be the enrollee's health care provider for most 
services, and will serve as a referral agent to authorize more 
specialized treatment if needed. Health Care Finder offices will also 
assist enrollees in obtain referrals to appropriate providers. 
Referrals for care will give first priority to the local MTF; other 
referral priorities and practices will be specified during the 
enrollment process.
O. Enrollment Procedures (proposed Sec. 199.17(o))
    This paragraph describes procedures for enrollment of beneficiaries 
other than active duty members, who must enroll. The Prime plan 
features open season periods during which enrollment is permitted. 
Prime enrollees will maintain participation in the plan for a 12 month 
period, with disenrollment only under special circumstances, such as 
when a beneficiary moves from the area. A complete explanation of the 
features, rules and procedures of the Program in the particular 
locality involved will be available at the time enrollment is offered. 
The features, rules and procedures may be revised over time, coincident 
with reenrollment opportunities.
P. Civilian Preferred Provider Networks (proposed Sec. 199.17(p))
    This paragraph sets forth the rules governing civilian preferred 
provider networks in the TRICARE Program. It includes conformity with 
utilization management and quality assurance program procedures, 
provider qualifications, and standards of access for provider networks. 
In addition, the methods which may be used to establish networks are 
identified.
    DoD beneficiaries who are not CHAMPUS-eligible, such as Medicare 
beneficiaries, may seek civilian care under the rules and procedures of 
their existing health insurance program. Providers in the civilian 
preferred provider network generally will be required to participate in 
Medicare, so that when Medicare beneficiaries use a network provider 
they will be assured of a participating provider.
Q. Preferred Provider Network Establishment Under Any Qualified 
Provider Method (proposed Sec. 199.17(q))
    This paragraph describes one process that may be used to establish 
a preferred [[Page 7493]] provider network (the ``any qualified 
provider method'') and establishes the qualifications which providers 
must demonstrate in order to join the network.
R. General Fraud, Abuse, and Conflict of Interest Requirements Under 
TRICARE Program (proposed Sec. 199.17(r))
    This paragraph establishes that all fraud, abuse, and conflict of 
interest requirements for the basic CHAMPUS program are applicable to 
the TRICARE Program.
S. Partial Implementation of TRICARE (proposed Sec. 199.17(s))
    This paragraph explains that some portions of TRICARE may be 
implemented separately: A program without the HMO option, or a program 
covering a subset of health care services, such as mental health 
services.
T. Inclusion of Veterans Hospitals in TRICARE Networks (proposed 
Sec. 199.17(t))
    This paragraph would provide the basis for participation by 
Department of Veterans Affairs facilities in TRICARE networks, based on 
agreements between the VA and DoD.
U. Cost Sharing of Care for Family Members of Active Duty Members in 
Overseas Locations (proposed Sec. 199.17(u))
    This paragraph would permit establishment of special CHAMPUS cost 
sharing rules for family members of active duty members when they 
accompany the member on a tour of duty outside the United States. A 
recently initiated demonstration program, described in the Federal 
Register of September 2, 1994 (59 FR 45668), tests such a program for 
active duty family members in countries served by OCHAMPUS, Europe.
V. Administrative Procedures (proposed Sec. 199.17(v))
    This paragraph authorizes establishment of administrative 
procedures for the TRICARE Program.

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

A. In General. (Sec. 199.18(a))
    This paragraph introduces the Uniform HMO Benefit option. The 
statutory provision that establishes the parameters for determination 
of the Uniform HMO Benefit option is section 731 of the National 
Defense Authorization Act for Fiscal Year 1994. It requires the 
establishment of a Uniform HMO Benefit option, which shall ``to the 
maximum extent practicable'' be included ``in all future managed health 
care initiatives undertaken by'' DoD. This option is to provide 
``reduced out-of-pocket costs and a benefit structure that is as 
uniform as possible throughout the United States.'' The statute further 
requires a determination that, in the managed care initiative that 
includes the Uniform HMO Benefit, DoD costs ``are no greater than the 
costs that would otherwise be incurred to provide health care to the 
covered beneficiaries who enroll in the option.''
    In addition to this provision of the National Defense Authorization 
Act for Fiscal Year 1994, a similar requirement is established by 
section 8025 of the DoD Appropriations Act, 1994. As part of an 
initiative ``to implement a nationwide managed health care program for 
the military health services system,'' DoD shall establish ``a uniform, 
stabilized benefit structure characterized by a triple option health 
benefit feature.'' Our Uniform HMO Benefit also implements this 
requirement of law.
    In fiscal year 1993, DoD implemented the expansion of the CHAMPUS 
Reform Initiative to the areas of Carswell and Bergstorm Air Force 
Bases in Texas and England Air Force Base, Louisiana. (These sites were 
singled out because they were military bases identified for closure in 
the Bare Realignment and Closure, or ``BRAC'' process; thus the benefit 
developed for them is called the ``BRAC Benefit.'') This expansion of 
the CHAMPUS Reform Initiative offers positive incentives for enrollment 
and preserves the basic design of the original CHAMPUS Reform 
Initiative program, although it is not identical to that program. The 
original CHAMPUS Reform Initiative design featured a $5 per visit fee 
for most office visits, a very much reduced schedule of other 
copayments, and no deductible or enrollment fee. Although its 
generosity made it very popular with beneficiaries, it also caused 
substantial concerns regarding government budget impact. This benefit 
fails to meet the statutory requirement for cost neutrality to DoD.
    The Carswell/Bergstrom/England HMO benefit (BRAC Benefit) model 
attempts partially to address these concerns, while providing enhanced 
benefits. It features enrollment fees for some categories of 
beneficiaries, $5, $10, or $15 per visit fees, depending on beneficiary 
category, and inpatient per diems of $125 for retirees, their family 
members and survivors.
    A new HMO benefit is being presented in this proposed rule as the 
Uniform HMO Benefit. The principal features of the proposed benefit are 
displayed in Table 3 following the preamble. Its most significant 
change from the BRAC Benefit is that inpatient cost sharing for 
retirees, their dependents and survivors is reduced to the levels faced 
by active duty dependents, with concomitant increases in enrollment 
fees for these beneficiaries. A second important change is that there 
would be no enrollment fee for dependents of active duty members. 
Finally, fees are set so that they may be held constant for a five-year 
period, rather than escalating each year with price inflation.
    The development of this proposed Uniform HMO Benefit included 
painstaking analysis of utilization, cost, and administrative effect of 
potential cost sharing schedules. This analysis included a series of 
assumptions regarding most likely ramifications of various components 
of the benefit and the operation of the TRICARE Program. Based on this 
exhaustive analysis, the formulation of the Uniform HMO Benefit in the 
proposed rule is the most generous benefit DoD can offer consistent 
with the statutory cost-neutrality mandate.
B. Benefits Covered Under the Uniform HMO Benefit Option 
(Sec. 199.18(b))
    For CHAMPUS-eligible beneficiaries, the HMO Benefit option 
incorporates the existing CHAMPUS benefit package, with potential 
additions of preventive services and a case management program to 
approve coverage of usually noncovered health care services (such as 
home health services) in special situations.
C. Deductibles, Fees, and Cost Sharing Under the HMO Benefit Option 
(proposed Sec. 199.18(c) through (f))
    Instead of usual CHAMPUS cost sharing requirements, Uniform HMO 
Benefit option participants will pay special per-service, specific 
dollar amounts or special reduced cost sharing percentages, which would 
vary by category of beneficiary.
    The Uniform HMO Benefit also would include an annual enrollment 
fee, which would be in lieu of the CHAMPUS deductible. The current 
CHAMPUS deductible is $50 per person or $100 per family for family 
members of active duty members in pay grades E-1 through E-4; and $150 
per person or $300 per family for all other beneficiaries. The 
enrollment fee under the Uniform HMO Benefit option would vary by 
beneficiary category: $0 for active duty family members, and $230 
individual or $460 family for retirees, their family members, and 
survivors. [[Page 7494]] 
    The amount of proposed enrollment fees, outpatient charges and 
inpatient copayment under the uniform HMO benefit are presented in 
detail in Sec. 199.18(c) through (f).
D. Applicability of the Uniform HMO Benefit to the Uniformed Service 
Treatment Facilities Managed Care Program (proposed Sec. 199.18(g))
    The section would apply the uniform HMO Benefit provisions to the 
Uniformed Services Treatment Facility Managed Care Program, beginning 
in fiscal year 1996. This program includes civilian contractors 
providing health care services under rules quite different from 
CHAMPUS, the CHAMPUS Reform Initiative, or other CHAMPUS-related 
programs.
    The National Defense Authorization Act for Fiscal Year 1991, 
section 718(c), required implementation of a ``managed-care delivery 
and reimbursement model that will continue to utilize the Uniformed 
Services Treatment Facilities'' in the MHSS. This provision has been 
amended and supplemented several times since that Act. Most recently, 
section 718 of the National Defense Authorization Act for Fiscal Year 
1994 authorized the establishment of ``reasonable charges for inpatient 
and outpatient care provided to all categories of beneficiaries 
enrolled in the managed care program.'' This is a deviation from 
previous practice, which had tied Uniformed Services Treatment 
Facilities (USTF) rules to those of military hospitals. This new 
statutory provision also states that the schedule and application of 
the reasonable charges shall be in accordance with terms and conditions 
specified in the USTF Managed Care Plan. The USTF Managed Care Plan 
agreements call for implementation in the USTF Managed Care Program of 
cost sharing requirements based on the level and range of cost sharing 
required in DoD managed care initiatives.
    Under section 731 of the FY-94 Authorization Act, the Uniform HMO 
Benefit is to apply ``to the maximum extent practicable'' to ``all 
future managed care initiatives undertaken by the Secretary.'' The 
Conference Report accompanying this Act calls on DoD ``to develop and 
implement a plan to introduce competitive managed care into the areas 
served by the USTFs to stimulate competition'' among health care 
provider organizations ``for the cost-effective provision of quality 
health care services.'' We have determined that it is practicable to 
use the Uniform HMO Benefit for the USTF Managed Care Program. In 
addition, this action will stimulate competition between the USTFs and 
firms operating the other DoD managed care program to which the Uniform 
HMO Benefit applies. Based on these Congressional provisions, as well 
as compelling need for a uniform HMO benefit, we propose to include the 
USTF Managed Care Program under the Uniform HMO Benefit, effective 
October 1, 1995.

IV. Provisions of the Proposed Rule Concerning Other Regulatory Changes

    The proposed rule makes a number of additional changes to support 
implementation of TRICARE.
A. Nonavailability Statements (proposed revisions to Secs. 199.4(a)(9) 
and 199.15)
    Proposed revisions to Sec. 199.4(a)(9) provide the basis for 
administrative linkages between a determination of medical necessity 
and the decision to issue or deny a Nonavailability Statement (NAS). 
NASs are issued when an MTF lacks the capacity or capability to provide 
a service, but carry no imprimatur of medical necessity. Proposed 
revisions to Sec. 199.15 establish ground rules for CHAMPUS PRO review 
of care in military medical treatment facilities, and would allow for 
consolidated determinations of medical necessity applicable to both the 
MTF and civilian contexts when the CHAMPUS PRO performs the review.
    Additional proposed revisions to section 199.4 relate to the 
issuance of NASs by designated military clinics. Beneficiaries residing 
near such designated clinics would have to obtain a nonavailability 
statement for the selected outpatient services subject to NAS 
requirements under Sec. 199.4(A)(9)(i)(C).
    In a notice of proposed rule making published on May 11, 1993, we 
proposed a new provision to allow consideration of availability of care 
in civilian preferred provider networks in connection with issuance of 
non-availability statements; in conjunction with this, a considerable 
expansion of the list of outpatient service for which an NAS is 
required was proposed. That proposal was not finalized. Now we propose 
a more limited program, covering only inpatient care. Recently, a 
demonstration program was established in California and Hawaii, 
allowing consideration of availability of care in civilian preferred 
provider networks in connection with issuance of non-availability 
statements for inpatient services only. The results of the 
demonstration will be incorporated into a Report to Congress on the 
expanded use of NASs, as required by section 735 of the National 
Defense Authorization Act for FY 1995, due not later than December 31, 
1994. Early indications are that the demonstration effort has saved 
money without adverse impacts; the report to Congress will provide a 
definitive assessment. No final action to expand the program will go 
into effect until well after we comply with the Congressional reporting 
requirement.
    Finally, proposed revisions to Sec. 199.4(a)(9) would apply NAS 
requirements in cases where military providers serving at designated 
military outpatient clinics also provide inpatient care to 
beneficiaries at civilian hospitals, under External Partnership or 
Resource Sharing Agreements.
B. Participating Provider Program (proposed revisions to Sec. 199.14)
    Proposed revisions to Sec. 199.14 change the Participating Provider 
Program from a mandatory, nationwide program to a localized, optional 
program. The initial intent of the program was to increase the 
availability of participating providers by providing a mechanism for 
providers to sign up as Participating Providers; a payment differential 
for Participating Providers was to be added as an inducement. With the 
advent of the TRICARE Program and its extensive networks of providers, 
the nationwide implementation of the Participating Provider Program 
would be redundant. Accordingly, this rule would eliminate the 
nationwide program. Where the need arises, CHAMPUS contractors will act 
to foster participation, including establishment of a local 
Participating Provider Program when needed, but not including the 
payment differential feature.

V. Regulatory Procedures

    Executive Order 12866 requires certain regulatory assessments for 
any ``significant regulatory action,'' defined as one which would 
result in an annual effect on the economy of $100 million or more, or 
have other substantial impacts.
    The Regulatory Flexibility Act (RFA) requires that each Federal 
agency prepare, and make available for public comment, a regulatory 
flexibility analysis when the agency issues a regulation which would 
have a significant impact on a substantial number of small entities.
    This is not a significant regulatory action under the provisions of 
Executive Order 12866, and it would not have a significant impact on a 
substantial number of small entities.
    This proposed rule will impose additional information collection 
requirements on the public under the Paperwork Reduction Act of 1980 
(44 [[Page 7495]] U.S.C. 3501-3511), because beneficiaries will be 
required to enroll. Information collection requirements are under 
review.
    This is a proposed rule. Public comments are invited. All comments 
will be considered. A discussion of the major issues raised by public 
comments will be included with issuance of the final rule, anticipated 
approximately 60 days after the end of the comment period.

         Table 1.--Consolidated Schedule of Beneficiary Charges         
------------------------------------------------------------------------
                                                            Medicare    
                     TRICARE prime    TRICARE standard      eligible    
                                                          beneficiaries 
------------------------------------------------------------------------
Services from      Uniform HMO        TRICARE Extra     Cost sharing for
 TRICARE Network    Benefit cost       cost sharing      Medicare       
 Providers.         sharing applies    applies (see      participating  
                    (see Table 4),     Table 2).         providers      
                    except                               generally      
                    unauthorized                         applies.       
                    care covered by                                     
                    point-of-service                                    
                    rules.                                              
Services from non- TRICARE Prime      Standard CHAMPUS  Standard        
 network            point-of-service   cost sharing      Medicare cost  
 providers.         rules apply:       applies.          sharing        
                    deductible of                        applies.       
                    $300 per person                                     
                    or $600 per                                         
                    family; cost                                        
                    share of 50                                         
                    percent.                                            
Internal resource  Same as military   Same as military  Where           
 sharing            facility cost      facility cost     applicable,    
 agreements.        sharing.           sharing.          same as        
                                                         military       
                                                         facility cost  
                                                         sharing.       
External resource  For professional   For professional  Where           
 sharing            charges, same as   charges, same     applicable, for
 agreements.        military           as military       professional   
                    facility cost      facility cost     charges, same  
                    sharing; for       sharing; for      as military    
                    facility           facility          facility cost  
                    charges, same as   charges, same     sharing; for   
                    Uniform HMO        as TRICARE        facility       
                    Benefit cost       Extra cost        charges, same  
                    sharing.           sharing.          as standard    
                                                         Medicare cost  
                                                         sharing.       
PRIMUS and         Same as military   Same as military  Same as military
 NAVCARE Clinics    facilities.        facilities.       facilities.    
 established                                                            
 before October                                                         
 1, 1994.                                                               
PRIMUS and         Uniform HMO        Uniform HMO       Uniform HMO     
 NAVCARE Clinics    Benefit            Benefit           Benefit        
 established        outpatient cost    outpatient cost   outpatient cost
 after September    sharing applies.   sharing applies.  sharing        
 30, 1994.                                               applies.       
Prescription       As specified in    For retail        In facility     
 drugs from         Uniform HMO        pharmacy          closure cases: 
 civilian           Benefit (see       network, 20       from retail    
 pharmacies.        Table 4).          percent cost      pharmacy       
                                       share; for mail   network, 20    
                                       service           percent cost   
                                       pharmacy, $4      share; from    
                                       per               mail service   
                                       prescription      pharmacy, $8   
                                       for active duty   per            
                                       dependents; $8    prescription;  
                                       per               no deductible. 
                                       prescription                     
                                       for retirees,                    
                                       their                            
                                       dependents and                   
                                       survivors.                       
Outpatient         No charge........  Same as TRICARE   Same as TRICARE 
 services in                           Prime.            Prime.         
 military                                                               
 facilities.                                                            
Inpatient          Applicable daily   Same as TRICARE   Same as TRICARE 
 services in        subsistence        Prime.            Prime.         
 military           charges.                                            
 facilities.                                                            
------------------------------------------------------------------------


            Table 2.--Proposed TRICARE Triple Option Program            
------------------------------------------------------------------------
                    TRICARE standard    TRICARE extra     TRICARE prime 
------------------------------------------------------------------------
ENROLLMENT FEE...  NONE.............  NONE............  ACT DUTY DEPS-- 
                                                         NONE OTHERS--  
                                                         $230           
                                                         INDIVIDUAL,    
                                                         $460 FAMILY.   
OUTPATIENT         $300 FAMILY ($100  SAME AS STANDARD  NONE.           
 DEDUCTIBLE.        E4 & BELOW).       CHAMPUS.                         
OUTPATIENT         ACT DUTY DEPS--    ACT DUTY DEPS--   SEE TABLE 3--   
 SERVICES COST      20% COPAY AFTER    15% COPAY AFTER   SCHEDULE OF    
 SHARES,            DEDUCTIBLE         DEDUCTIBLE        UNIFORM HMO    
 INCLUDING MENTAL   OTHERS--25%        OTHERS--20%       BENEFIT        
 HEALTH,            COPAY AFTER        COPAY AFTER       COPAYMENTS.    
 EMERGENCY          DEDUCTIBLE.        DEDUCTIBLE.                      
 SERVICES, ETC.                                                         
INPATIENT COST     ACT DUTY DEPS--    ACT DUTY DEPS--   ACT DUTY DEPS-- 
 SHARES,            $25 PER            SAME AS           $25 PER        
 INCLUDING          ADMISSION OR       STANDARD          ADMISSION OR   
 MATERNITY AND      CURRENT PER        CHAMPUS OTHERS--  $11 PER DIEM,  
 SKILLED NURSING    DIEM, WHICHEVER    LESSER OF $250    WHICHEVER IS   
 FACILITIES, NOT    IS GREATER         PER DAY OR 25%    GREATER.       
 INCLUDING MENTAL   OTHERS--LESSER     OF                OTHERS--SAME AS
 HEALTH.            OF APPLICABLE      INSTITUTIONAL     ACT DUTY DEPS. 
                    PER DIEM ($323     CHARGES, PLUS                    
                    IN FY 1995) OR     20% OF                           
                    25% OF             PROFESSIONAL                     
                    INSTITUTIONAL      CHARGES.                         
                    CHARGES, PLUS                                       
                    25% OF                                              
                    PROFESSIONAL                                        
                    CHARGES.                                            
AMBULATORY         ACT DUTY DEPS--    ACT DUTY DEPS--   ACT DUTY DEPS-- 
 SURGERY.           $25 PER EPISODE    $25 COPAY         $25 COPAY      
                    OTHERS--25% OF     OTHERS--20%       OTHERS--SAME AS
                    ALLOWABLE          COPAY AFTER       ACT DUTY DEPS. 
                    CHARGES.           DEDUCTIBLE.                      
PRESCRIPTION DRUG  ACT DUTY DEPS--    ACT DUTY DEPS--   ACT DUTY DEPS-- 
 BENEFITS.          20% COPAY AFTER    15% COPAY AFTER   $5 PER         
                    DEDUCTIBLE         DEDUCTIBLE; NO    PRESCRIPTION   
                    OTHERS--25% OF     DEDUCTIBLE IF     OTHERS--$9 PER 
                    ALLOWABLE          NETWORK           PRESCRIPTION.  
                    CHARGES.           PHARMACY                         
                                       OTHERS--20%                      
                                       COPAY AFTER                      
                                       DEDUCTIBLE; NO                   
                                       DEDUCTIBLE IF                    
                                       NETWORK                          
                                       PHARMACY.                        
[[Page 7496]]                                                           
                                                                        
HOSPITALIZATION    ACT DUTY DEPS--    ACT DUTY DEPS--   ACT DUTY DEPS-- 
 FOR MENTAL         $25 PER            SAME AS TRICARE   SAME AS TRICARE
 ILLNESS AND        ADMISSION OR $20   STANDARD          STANDARD       
 SUBSTANCE USE.     PER DIEM           OTHERS--20% OF    OTHERS--$40 PER
                    WHICHEVER IS       INSTITUTIONAL     DIEM.          
                    GREATER OTHERS--   AND                              
                    LESSER OF          PROFESSIONAL                     
                    APPLICABLE PER     CHARGES.                         
                    DIEM ($132 IN FY                                    
                    1995) OR 25% OF                                     
                    INSTITUTIONAL                                       
                    CHARGES, PLUS                                       
                    25% OF                                              
                    PROFESSIONAL                                        
                    CHARGES.                                            
------------------------------------------------------------------------
Note: THIS CHART IS FOR ILLUSTRATIVE PURPOSES ONLY. IT DOES NOT INCLUDE 
  ALL DETAILS OF BENEFITS AND COPAYMENTS.                               


                            Table 3.--Uniform HMO Benefit Fee and Copayment Schedule                            
----------------------------------------------------------------------------------------------------------------
                                                                                                      Retirees, 
                                                                           ADDs E4 and  ADDs E5 and   deps, and 
                                                                              below        above      survivors 
----------------------------------------------------------------------------------------------------------------
Annual Enrollment Fee....................................................        $0/$0        $0/$0    $230/$460
Outpatient Visits, Including Separate Radiology or Lab Services, Family                                         
 Health, and Home Health Visits..........................................            6           12           12
Emergency Room Visits....................................................           10           30           30
Mental Health Visits, Individual.........................................           10           20           25
Mental Health Visits, Group..............................................            6           12           17
Ambulatory Surgery.......................................................           25           25           25
Prescriptions............................................................            5            5            9
Ambulance Services.......................................................           10           15           20
DME, Prostheses, Supplies................................................          <SUP>110          <SUP>115          <SUP>120
Inpatient Per Diem, General..............................................          <SUP>211          <SUP>211          <SUP>211
Inpatient Per Diem, MH/Substance Use.....................................          <SUP>220          <SUP>220           40
----------------------------------------------------------------------------------------------------------------
<SUP>1Percent.                                                                                                       
\2\Minimum $25 per admission.                                                                                   

List of Subjects in 32 CFR Part 199

    Claims, Handicapped, Health insurance, and Military personnel.

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

PART 199--[AMENDED]

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

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

    2. Section 199.1 is proposed to be amended by adding a new 
paragraph (r), to read as follows:


Sec. 199.1   General provisions.

* * * * *
    (r) TRICARE Program. Many rules and procedures established in 
sections of this part are subject to revision in areas where the 
TRICARE Program is implemented. The TRICARE Program is the means by 
which managed care activities designed to improve the delivery and 
financing of health care services in the Military Health Services 
System (MHSS) are carried out. Rules and procedures for the TRICARE 
Program are set forth in Sec. 199.17.

    3. Section 199.2(b) is proposed to be amended by adding the 
following definitions and placing them in alphabetical order to read as 
follows:


Sec. 199.2   Definitions.

* * * * *
    (b) * * *
    External Resource Sharing Agreement. A type of External Partnership 
Agreement, established in the context of the TRICARE program by 
agreement of a military treatment facility commander and an authorized 
TRICARE contractor. External Resource Sharing Agreements may 
incorporate TRICARE features in lieu of standard CHAMPUS features that 
would apply to standard External Partnership Agreements.
* * * * *
    Internal Resource Sharing Agreement. A type of Internal Partnership 
Agreement, established in the context of the TRICARE program by 
agreement of a military treatment facility commander and an authorized 
TRICARE contractor. Internal Resource Sharing Agreements may 
incorporate TRICARE features in lieu of standard CHAMPUS features that 
would apply to standard Internal Partnership Agreements.
    NAVCARE Clinics. Contractor owned, staffed, and operated primary 
clinics exclusively serving uniformed services beneficiaries pursuant 
to contracts awarded by a Military Department.
* * * * *
    PRIMUS Clinics. Contractor owned, staffed, and operated primary 
care clinics exclusively serving uniformed services beneficiaries 
pursuant to contracts awarded by a Military Department.
* * * * *
    TRICARE Program. The program established under Sec. 199.17.
* * * * *
    TRICARE Extra Plan. The health care option, provided as part of the 
TRICARE Program under Sec. 199.17, under which beneficiaries may choose 
to receive care in facilities of the uniformed services, or from 
special civilian network providers (with reduced cost sharing), or from 
any other CHAMPUS-authorized provider (with standard cost sharing).
* * * * *
    TRICARE Prime Plan. The health care option, provided as part of the 
TRICARE Program under Sec. 199.17, under which beneficiaries enroll to 
receive all health care from facilities of the uniformed services and 
civilian network providers (with civilian care subject to substantially 
reduced cost sharing).
* * * * * [[Page 7497]] 
    TRICARE Standard Plan. The health care option, provided as part of 
the TRICARE Program under Sec. 199.17, under which beneficiaries are 
eligible for care in facilities of the uniformed services and CHAMPUS 
under standard rules and procedures.
* * * * *
    Uniform HMO benefit. The health care benefit established by 
Sec. 199.18.
* * * * *
    Uniformed Services Treatment Facilities Managed Care Program. The 
managed care program established pursuant to section 718(c) of the 
National Defense Authorization Act for Fiscal Year 1991, Pub. L. 101-
510, for certain former Public Health Service hospitals deemed to be 
facilities of the uniformed services by section 911 of the Military 
Construction Authorization Act, 1982, Pub. L. 97-99, 42 U.S.C. 248C. 
Certain rules pertaining to this program are established by 
Sec. 199.18.
* * * * *
    4. Section 199.4 is proposed to be amended by redesignating 
paragraph (a)(1) as paragraph (a)(1)(i), by adding new paragraph 
(a)(1)(ii), by revising paragraph (a)(9)(i)(C), and by adding new 
paragraphs (a)(9)(vi) and (a)(9)(vii), to read as follows:


Sec. 199.4  Basic program benefits.

    (a) * * *
    (1) * * *
    (ii) Impact of TRICARE Program. The basic program benefits set 
forth in this section are applicable to the basic CHAMPUS program. In 
areas in which the TRICARE Program is implemented, certain provisions 
of Sec. 199.17 will apply instead of the provisions of this section. In 
those areas, the provisions of Sec. 199.17 will take precedence over 
any provisions of this section with which they conflict.
* * * * *
    (9) * * *
    (i) * * *
    (C) An NAS is also required for selected outpatient procedures if 
such services are not available at a Uniformed Service facility 
(including selected facilities which are exclusively outpatient 
clinics) located within a 40-mile radius (catchment area) of the 
residence of the beneficiary. This does not apply to emergency services 
or for services for which another insurance plan or program provides 
the beneficiary primary coverage. Any changes to the selected 
outpatient procedures will be published in the Federal Register at 
least 30 days before the effective date of the change by the ASD(HA) 
and will be limited to the following categories: Outpatient surgery and 
other selected outpatient procedures which have high unit costs and for 
which care may be available in military facilities generally. The 
selected outpatient procedures will be uniform for all CHAMPUS 
beneficiaries. A list of the selected outpatient clinics to which this 
NAS requirement applies will be published periodically in the Federal 
Register.
* * * * *
    (vi) Consideration of availability of care in civilian preferred 
provider networks in connection with issuance of Nonavailability 
Statements.--(A) General requirement. With respect to any inpatient 
health care service subject to a Nonavailability Statement requirement 
under paragraph (a)(9)(B) of this section, in determining whether to 
issue a Nonavailability Statement, the commander of the military 
treatment facility may consider the availability of services from 
selected civilian health care facilities within the same catchment 
area. If the commander determines that, although the services are not 
available from a military treatment facility, the services are 
available from such a selected civilian facility, the commander may 
deny a Nonavailability Statement. If a Nonavailability Statement is 
denied on this basis, CHAMPUS cost sharing is not allowed if the 
services are not obtained from the designated civilian facility. 
Civilian facilities to which this requirement applies are those 
facilities that are in a preferred provider network, established under 
procedures specified by the Director, OCHAMPUS, within the 40-mile 
catchment are, able to provider the services needed.
    (B) Additional requirement under External Partnership/Resource 
Sharing programs. The Assistant Secretary of Defense (Health Affairs) 
may designate selected military outpatient clinics for additional NAS 
requirements regarding inpatient hospital care available under an 
External Partnership or External Resources Sharing agreement. Under 
such an agreement, care will be provided at a civilian facility, but 
professional services will be provided by on or more physicians (or 
other individual health care providers) on staff at the military 
outpatient clinic. With respect to the designated military outpatient 
clinics and the specified services covered by such External Partnership 
or External Resource Sharing agreement, Nonavailability Statements will 
be required to the same extent as they are for inpatient military 
hospitals located within an approximately 40-mile radius of a 
beneficiary's residence. If services are available under an External 
Partnership Resource Sharing agreement, the military clinic commander 
may deny a Nonavailability Statement. If a Nonavailability Statement is 
denied on this basis, CHAMPUS cost sharing is not allowed if the 
services are not obtained from the designated civilian facility under 
the External Partnership or External Resource Sharing agreement. A list 
of selected military outpatient clinics and services covered by the 
External Partnership or External Resource Sharing agreement NAS 
requirement will be published periodically in the Federal Register.
    (C) Exceptions. A Nonavailability Statement may not be withheld on 
the basis of paragraphs (a)(9)(vi)(A) or (a)(9)(vi)(B) of this section 
in any of the following circumstances:
    (1) A case-by-case waiver is granted based on a medical judgment 
made by the commander (or other official designated for this purpose) 
of the military treatment facility (or Specialized Treatment Service 
Center) that although the care is available from a designated civilian 
provider, it would be medically inappropriate because of a delay in the 
treatment or other special reason to require that such provider be 
used; or
    (2) A case-by-case waiver is granted by the commander (or other 
official designated for this purpose) of the military treatment 
facility (or Specialized Treatment Service Center) that although the 
care is available from a designated civilian provider, use of that 
provider would impose exceptional hardship on the beneficiary or the 
beneficiary's family.
    (D) Procedures. The waiver request and appeal procedures 
established pursuant to paragraph (a)(10)(vii) of this section shall be 
applicable to the case-by-case waivers referred to in paragraph 
(a)(9)(vi)(C) of this section.
    (E) Preference for military facility use. In any case in which 
services subject to a Nonavailability Statement requirement under 
paragraph (a)(9) of this section are available from both a military 
treatment facility and from a designated civilian facility under 
paragraph (a)(9)(vi) of this section, the military treatment facility 
must be used unless use of the designated civilian facility is 
specifically authorized.
    (vii) In the case of any service subject to an NAS requirement 
under paragraph (a)(9) of this section and also subject to a 
preadmission (or other pre-service) authorization requirement under 
Sec. 199.4 or Sec. 199.15, the administrative processes for the NAS and 
pre-service authorization may be combined.
* * * * * [[Page 7498]] 


Sec. 199.14  [Amended]

    5. Section 199.14 is proposed to be amended by removing paragraph 
(g)(1)(i)(C) and by redesignating paragraph (g)(1)(i)(D) as paragraph 
(g)(1)(i)(C).
    6. Section 199.15 is proposed to be amended by adding a new 
paragraph (n), to read as follows:


Sec. 199.15  Peer Review Organization Program.

* * * * *
    (n) Authority to integrate CHAMPUS PRO and military treatment 
facility utilization review activities. (1) In the case of a military 
medical treatment facility (MTF) that has established utilization 
review requirements similar to those under the CHAMPUS PRO program, the 
PRO may, at the request of the MTF, utilize procedures comparable to 
the CHAMPUS PRO program procedures to render determinations or 
recommendations with respect to MTF utilization review requirements.
    (2) In any case in which a CHAMPUS PRO has comparable 
responsibility and authority regarding utilization review in both an 
MTF (or MFTs) and CHAMPUS, determinations as to medical necessity in 
connection with services from an MTF or CHAMPUS-authorized provider may 
be consolidated.
    (3) In any case in which an MFT reserves authority to separate an 
MTF determination on medical necessity from a CHAMPUS PRO program 
determination on medical necessity, the MTF determination is not 
binding on CHAMPUS.

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


Sec. 199.17  TRICARE Program.

    (a) Establishment. The TRICARE Program is established for the 
purpose of implementing a comprehensive managed health care program for 
the delivery and financing of health care services in the MHSS.
    (1) Purpose. The TRICARE Program implements management improvements 
primarily through managed care support contracts that include special 
arrangements with civilian sector health care providers and better 
coordination between military treatment facilities and these civilian 
providers. Implementation of these management improvements includes 
adoption of special rules and procedures not ordinarily followed under 
CHAMPUS or military treatment facility requirements. This section 
establishes those special rules and procedures.
    (2) Statutory authority. Many of the provisions of this section are 
authorized by statutory authorities other than those which authorize 
the usual operation of the CHAMPUS program, especially 10 U.S.C. 1079 
and 1086. The TRICARE Program also relies upon other available 
statutory authorities, including 10 U.S.C. 1099 (health care enrollment 
system), 10 U.S.C. 1097 (contracts for medical care for retirees, 
dependents and survivors: Alternative delivery of health care), and 10 
U.S.C. 1096 (resource sharing agreements).
    (3) Scope of the program. The TRICARE Program is applicable to all 
of the uniformed services. Its geographical applicability is all 50 
states and the District of Columbia. In addition, if authorized by the 
Assistant Secretary of Defense (Health Affairs), the TRICARE Program 
may be implemented in areas outside the 50 states and the District of 
Columbia. In such cases, the Assistant Secretary of Defense (Health 
Affairs) may also authorize modifications to TRICARE Program rules and 
procedures as may be appropriate to the area involved.
    (4) MTF rules and procedures affected. Much of this section relates 
to rules and procedures applicable to the delivery and financing of 
health care services provided by civilian providers outside military 
treatment facilities. This section provides that certain rules, 
procedures, rights and obligations set forth elsewhere in this part 
(and usually applicable to CHAMPUS) are different under the TRICARE 
Program. In addition, some rules, procedures, rights and obligations 
relating to health care services in military treatment facilities are 
also different under the TRICARE Program. In such cases, provisions of 
this section take precedence and are binding.
    (5) Implementation based on local action. The TRICARE Program is 
not automatically implemented in all areas. Therefore, provisions of 
this section are not automatically implemented. Rather, implementation 
of the TRICARE Program and this section requires an official action by 
an authorized individual, such as a military treatment facility 
commander, a Surgeon General, the Assistant Secretary of Defense 
(Health Affairs), or other person authorized by the Assistant 
Secretary. Public notice of the initiation of the TRICARE Program will 
be achieved through appropriate communication and media methods and by 
way of an official announcement by the Director, OCHAMPUS, identifying 
the military treatment facility catchment area or other geographical 
area covered.
    (6) Major features of the TRICARE Program. The major features of 
the TRICARE Program, described in this section, include the following:
    (i) Comprehensive enrollment system. Under the TRICARE Program, all 
health care beneficiaries become enrolled in TRICARE and classified 
into one of five enrollment categories:
    (A) Active duty members, all of whom are automatically enrolled in 
TRICARE Prime;
    (B) TRICARE Prime enrollees, who (except for active duty members) 
must be CHAMPUS eligible;
    (C) TRICARE Standard enrollees, which covers all CHAMPUS-eligible 
beneficiaries who do not enroll in TRICARE Prime or another managed 
care program affiliated with TRICARE;
    (D) Medicare-eligible beneficiaries, who, although not eligible for 
TRICARE Prime, may participate in many features of TRICARE; and
    (E) Participants in other managed care program affiliated with 
TRICARE.
    (ii) Establishment of a triple option benefit. A second major 
feature of TRICARE is the establishment for CHAMPUS-eligible 
beneficiaries of three options for receiving health care:
    (A) Beneficiaries may enroll in the ``TRICARE Prime Plan,'' which 
features use of military treatment facilities and substantially reduced 
out-of-pocket costs for CHAMPUS care. Beneficiaries generally agree to 
use military treatment facilities and designated civilian provider 
networks.
    (B) Beneficiaries may participate in the ``TRICARE Extra Plan'' 
under which the preferred provider network may be used on a case-by-
case basis, with somewhat reduced out-of-pocket costs. These 
beneficiaries also continue to be eligible for military treatment 
facility care.
    (C) Beneficiaries may remain in the ``TRICARE Standard Plan,'' 
which preserves broad freedom of choice of civilian providers (subject 
to nonavailability statement requirements of Sec. 199.4), but does not 
offer reduced out-of-pocket costs. These beneficiaries continue to be 
eligible to receive care in military treatment facilities.
    (iii) Coordination between military and civilian health care 
delivery systems. A third major feature of the TRICARE Program is a 
series of activities affecting all beneficiary enrollment categories, 
designed to coordinate care between military and civilian health care 
systems. These activities include:
    (A) Resource sharing agreements, under which a TRICARE contractor 
provides to a military treatment facility personnel and other resources 
to increase the availability of services in the facility. All 
beneficiary enrollment [[Page 7499]] categories may benefit from this 
increase.
    (B) Health care finder, an administrative office that facilitates 
referrals to appropriate health care services in the military facility 
and civilian provider network. All beneficiary enrollment categories 
may use the health care finder.
    (C) Integrated quality and utilization management services, 
potentially standardizing reviews for military and civilian sector 
providers. All beneficiary categories may benefit from these services.
    (D) Special pharmacy programs for areas affected by base 
realignment and closure actions. This includes special eligibility for 
Medicare-eligible beneficiaries.
    (E) PRIMUS or NAVCARE Clinics, for which all beneficiary enrollment 
categories are eligible.
    (iv) Consolidated schedule of charges. A fourth major feature of 
TRICARE is a consolidated schedule of charges, incorporating revisions 
that reduce differences in charges between military and civilian 
services. In general, the TRICARE Program reduces out-of-pocket costs 
for civilian sector care.
    (b) Triple option benefit in general. Where the TRICARE Program is 
implemented, CHAMPUS-eligible beneficiaries are given the options of 
enrolling in the TRICARE Prime Plan (also referred to as ``Prime''); 
being a participant in TRICARE Extra on a case-by-case basis (also 
referred to as ``Extra''); or remaining in the TRICARE Standard Plan 
(also referred to as ``Standard'').
    (1) Choice voluntary. With the exception of active duty members, 
the choice of whether to enroll in Prime, to participate in Extra, or 
to remain in Standard is voluntary for all eligible beneficiaries. This 
applies to active duty dependents and eligible retired members, 
dependents of retired members, and survivors. For dependents who are 
minors, the choice will be exercised by a parent or guardian.
    (2) Active duty members. For active duty members located in areas 
where the TRICARE Program is implemented, enrollment in Prime is 
mandatory.
    (c) Eligibility for enrollment in Prime. Where the TRICARE Program 
is implemented, all CHAMPUS-eligible beneficiaries are eligible to 
enroll. However, some rules and procedures are different for dependents 
of active duty members than they are for retirees, their dependents and 
survivors. In addition, where the TRICARE Program is implemented, a 
military treatment facility commander or other authorized individual 
may establish priorities, consistent with paragraph (c) of this 
section, based on availability or other operational requirements, for 
when and whether to offer the enrollment opportunity.
    (1) Active duty members. Active duty members are required to enroll 
in Prime when it is offered. Active duty members shall have first 
priority for enrollment in Prime. Because active duty members are not 
CHAMPUS eligible, when active duty members obtain care from civilian 
providers outside the military treatment facility, the supplemental 
care program and its requirements (including Sec. 199.16) will apply.
    (2) Dependents of active duty members. (i) Dependents of active 
duty members are eligible to enroll in Prime. After all active duty 
members, dependents of active duty members will have second priority 
for enrollment.
    (ii) If all dependents of active duty members within the area 
concerned cannot be accepted for enrollment in Prime at the same time, 
the MTF Commander (or other authorized individual) may establish 
priorities within this beneficiary group category. The priorities may 
be based on first-come, first-served, or alternatively, be based on 
rank of sponsor, beginning with the lowest pay grade.
    (3) Retired members, dependents of retired members, and survivors. 
(i) All CHAMPUS-eligible retired members, dependents of retired 
members, and survivors are eligible to enroll in Prime. After all 
active duty members are enrolled and availability of enrollment is 
assured for all active duty dependents wishing to enroll, this category 
of beneficiaries will have third priority for enrollment.
    (ii) If all CHAMPUS-eligible retired members, dependents of retired 
members, and survivors within the area concerned cannot be accepted for 
enrollment in Prime at the same time, the MTF Commander (or other 
authorized individual) may allow enrollment within this beneficiary 
group category on a first come, first served basis.
    (4) Participation in Extra and Standard. All CHAMPUS-eligible 
beneficiaries who do not enroll in Prime may particiate in Extra on a 
case-by-case basis or remain in Standard.
    (d) Health benefits under Prime. Health benefits under Prime, set 
forth in paragraph (d) of this section, differ from those under Extra 
and Standard, set forth in paragraphs (e) and (f) of this section.
    (1) Military Treatment Facility (MTF) care. All participants in 
Prime are eligible to receive care in military treatment facilities. 
Active duty dependents who are participants in Prime will be given 
priority for such care over other active duty dependents who declined 
the opportunity to enroll in Prime. The latter group, however, retains 
priority over retirees, their dependents and survivors. There is no 
priority for MTF care among retirees, their dependents and survivors 
based on enrollment status.
    (2) Non-MTF care for active duty members. Under Prime, non-MTF care 
needed by active duty members continues to be arranged under the 
supplemental care program and subject to the rules and procedures of 
that program, including those set forth in Sec. 199.16.
    (3) Benefits covered for CHAMPUS eligible beneficiaries for 
civilian sector care. The provisions of Sec. 199.18 regarding the 
Uniform HMO Benefit apply to TRICARE Prime enrollees.
    (e) Health benefits under the TRICARE Extra Plan. Beneficiaries not 
enrolled in Prime, although not in general required to use the Prime 
civilian preferred provider network, are eligible to use the network on 
a case-by-case basis under Extra. The healthy benefits under Extra are 
identical to those under Standard, set forth in paragraph (f) of this 
section, except that the CHAMPUS cost sharing percentages are lower 
than usual CHAMPUS cost sharing. The lower requirements are set forth 
in the consolidated schedule of charges in paragraph (m) of this 
section.
    (f) Health benefits under the TRICARE Standard Plan. Where the 
TRICARE Program is implemented, health benefits under Prime, set forth 
under paragraph (d) of this section, and Extra, set forth under 
paragraph (e) of this section, are different than health benefits under 
Standard, set forth in this paragraph (f).
    (1) Military Treatment Facility (MTF) care. All participants in 
Standard and all nonenrollees (including beneficiaries not eligible to 
enroll) continue to be eligible to receive care in military treatment 
facilities on a space available basis.
    (2) Freedom of choice of civilian provider. Except as stated in 
Sec. 199.4(a) in connection with nonavailability statement 
requirements, CHAMPUS-eligible participants in Standard maintain their 
freedom of choice of civilian provider under CHAMPUS. All 
nonavailability statement requirements of Sec. 199.4(a) apply to 
Standard participants.
    (3) CHAMPUS benefits apply. The benefits, rules and procedures of 
the CHAMPUS basic program as set forth in this part, shall apply to 
CHAMPUS-eligible participants in Standard.
[[Page 7500]]

    (4) Perferred provider network option for Standard participants. 
Standard participants, although not generally required to use the 
TRICARE Program preferred provider network are eligible to use the 
network on a case-by-case basis, under Extra.
    (g) Coordination with other health care programs. (1) Authority. In 
the case of any beneficiary of the military health services system, 
other than active duty members, who is enrolled in a managed health 
care program not operated by the military health services system, the 
Director, OCHAMPUS may establish a contract or agreement with such 
other managed health care program for the purpose of coordinating the 
beneficiary's dual entitlements under such program and the military 
health services system.
    (2) Covered programs. A managed health care program with which 
arrangements may be made under this paragraph (g) includes any health 
maintenance organization, competitive medical plan, health care 
prepayment plan, or other managed care program recognized by the 
Director, OCHAMPUS. This includes managed care programs that operate 
under the authority of the Medicare program.
    (3) Coordination activities. Any contract or agreement entered into 
under this paragraph (g) may integrate health care benefits, delivery, 
financing, and administrative features of the other managed care plan 
with some or all features of the TRICARE program.
    (h) Resource sharing agreements. Under the TRICARE Program, any 
military treatment facility commander may establish resource sharing 
agreements with the applicable managed care support contractor for the 
purpose of providing for the sharing of resources between the two 
parties. Internal resource sharing and external resource sharing 
agreements are authorized. The provisions of this paragraph (h) shall 
apply to resource sharing agreements under the TRICARE Program.
    (1) In connection with internal resource sharing agreements, 
beneficiary cost sharing requirements shall be the same as those 
applicable to health care services provided in facilities of the 
uniformed services.
    (2) Under internal resource sharing agreements, the double coverage 
requirements of Sec. 199.8 may be replaced by the Third Party 
Collection procedures of 32 CFR part 220. In such a case, payments made 
to a resource sharing agreement provider through the TRICARE managed 
care support contractor shall be deemed to be payments by the military 
treatment facility concerned.
    (3) Under internal or external resource sharing agreements, the 
commander of the military treatment facility concerned may authorize 
the provision of services pursuant to the agreement to Medicare-
eligible beneficiaries, if the commander determines that this will 
promote the most cost-effective provision of services under the TRICARE 
program.
    (i) Health Care Finder. The Health Care Finder is an administrative 
office that assists beneficiaries in being referred to appropriate 
health care providers, especially the MTF and preferred providers. 
Health Care Finder services are available to all beneficiaries. In the 
case of TRICARE Prime enrollees, the Health Care Finder will facilitate 
referrals in accordance with Prime rules and procedures. For Standard 
enrollees, the Finder will provide assistance for use of Extra. For 
Medicare-eligible beneficiaries, the Finder will facilitate referrals 
to TRICARE network providers, generally required to be Medicare 
participating providers. For participants in other managed care 
programs, the Finder will assist in referrals pursuant to the 
arrangements made with the other managed care program. For all 
beneficiary enrollment categories, the finder will assist In obtaining 
access to available services in the medical treatment facility.
    (j) General quality assurance, utilization review, and 
preauthorization requirements under TRICARE Program. All quality 
assurance, utilization review, and preauthorization requirements for 
the basic CHAMPUS program, as set forth in this part 199 (see 
especially applicable provisions of Secs. 199.4 and 199.15), are 
applicable to Prime, Extra and Standard under the TRICARE Program. 
Under all three options, some methods and procedures for implementing 
and enforcing these requirements may differ from the methods and 
procedures followed under the basic CHAMPUS program in areas in which 
the TRICARE Program has not been implemented. Pursuant to an agreement 
between a military treatment facility and TRICARE managed care support 
contractor, quality assurance, utilization review, and preauthorization 
requirements and procedures applicable to health care services outside 
the military treatment facility may be made applicable, in whole or in 
part, to health care services inside the military treatment facility.
    (k) Pharmacy services in base realignment and closure sites.--(1) 
In general. TRICARE includes two special programs under which covered 
beneficiaries, including Medicare-eligible beneficiaries, who live in 
areas adversely affected by base realignment and closure actions are 
given a pharmacy benefit for prescription drugs provided outside 
military treatment facilities. The two special programs are the retail 
pharmacy network program and the mail service pharmacy program.
    (2) Retail pharmacy network program. To the maximum extent 
practicable, a retail pharmacy network program will be included in the 
TRICARE Program wherever implemented. Except for the special rules 
applicable to Medicare-eligible beneficiaries in areas adversely 
affected by military treatment facility closures, the retail pharmacy 
network program will function in accordance with TRICARE rules and 
procedures otherwise applicable. In addition, a retail pharmacy network 
program may on a temporary, transitional basis be established in a base 
realignment or closure site independent of other features of the 
TRICARE program. Such a program may be established through arrangements 
with one or more pharmacies in the area and may continue until a 
managed care program is established to serve the affected 
beneficiaries.
    (3) Mail service pharmacy program. A mail service pharmacy program 
will be established to the extent required by law as part of the 
TRICARE Program. The special rules applicable to Medicare-eligible 
beneficiaries established in this paragraph (k) shall be applicable.
    (4) Medicare-eligible beneficiaries in areas adversely affected by 
military treatment facility closures. Under the retail pharmacy network 
program and mail service pharmacy program, there is a special 
eligibility rule pertaining to Medicare-eligible beneficiaries in areas 
adversely affected by military treatment facility closures.
    (i) Medicare-eligible beneficiaries. The special eligibility rule 
pertains to military system beneficiaries who are not eligible for 
CHAMPUS solely because of their eligibility for part A of Medicare.
    (ii) Area adversely affected by closure. To be eligible for use of 
the retail pharmacy network program or mail service pharmacy program, a 
Medicare-eligible beneficiary must maintain a principle place of 
residency in the catchment area of the military medical treatment 
facility that closed. In addition, there must be a retail pharmacy 
network or mail service pharmacy established in that area. In 
identifying areas adversely affected by a closure, the provisions of 
this paragraph (k)(4)(ii) shall apply. [[Page 7501]] 
    (A) In the case of the closure of a military hospital, the area 
adversely affected is the established 40-mile catchment area of the 
military hospital that closed.
    (B) In the case of the closure of a military clinic (a military 
treatment facility that provided no inpatient care services), the area 
adversely affected is an area approximately 40 miles in radius from the 
clinic, established in a manner comparable to the manner in which 
catchment areas of military hospitals are established. However, this 
area will not be considered adversely affected by the closure of the 
clinic if the Director, OCHAMPUS determines that the clinic was not, 
when it had been in regular operation, providing a substantial amount 
of pharmacy services to retirees and their dependents.
    (C) An area that is within the 40-mile catchment area of a military 
treatment facility that closed will not be considered adversely 
affected by the closure if that area is also within a 40-mile catchment 
area of another military medical treatment facility (inpatient or 
outpatient) that the Director, OCHAMPUS determines can provide a 
substantial amount of pharmacy services to retirees and their 
dependents.
    (iii) Other Medicare-eligible beneficiaries adversely affected. In 
addition to beneficiaries identified in paragraph (k)(4)(ii) of this 
section, eligibility for the retail pharmacy network program and mail 
service pharmacy program is also established for Medicare-eligible 
beneficiaries who can demonstrate to the satisfaction of the Director, 
OCHAMPUS that he or she relied upon a military medical treatment 
facility that closed for his or her pharmaceuticals. The Director, 
OCHAMPUS shall establish guidelines for making such a demonstration.
    (iv) Effective date of eligibility for Medicare-eligible 
beneficiaries. In any case in which, prior to the complete closure of a 
military treatment facility in the process of closure, the Director, 
OCHAMPUS determines that the area has been adversely affected by severe 
reductions in access to services, the Director, OCHAMPUS may establish 
an effective date for eligibility for the retail pharmacy network 
program or mail service pharmacy program for Medicare-eligible 
beneficiaries prior to the complete closure of the facility.
    (5) Effect of other health insurance. The double coverage rules of 
Sec. 199.8 are applicable to services provided to all beneficiaries 
under the retail pharmacy network program or mail service pharmacy 
program. For this purpose, to the extent they provide a prescription 
drug benefit, Medicare supplemental insurance plans are double coverage 
plans and will be the primary payor.
    (6) Procedures. The Director, OCHAMPUS shall establish procedures 
for the effective operation of the retail pharmacy network program and 
mail service pharmacy program. Such procedures may include the use of 
appropriate drug formularies, restrictions of the quantity of 
pharmaceuticals to be dispensed, encouragement of the use of generic 
drugs, implementation of quality assurance and utilization management 
activities, and other appropriate matters.
    (l) PRIMUS and NAVCARE Clinics. (1) Authority. The Assistant 
Secretary of Defense for Health Affairs may authorize the establishment 
of PRIMUS and NAVCARE Clinics. These clinics are contractor owned, 
staffed, and operated clinics that exclusively serve uniformed services 
beneficiaries.
    (2) Eligible beneficiaries. All TRICARE beneficiary enrollment 
categories are eligible for care in PRIMUS and NAVCARE Clinics. This 
includes active duty members, Medicare eligible beneficiaries and other 
persons not eligible for CHAMPUS.
    (3) Services and charges. (i) For care provided PRIMUS and NAVCARE 
Clinics established prior to October 1, 1994, CHAMPUS rules regarding 
program benefits, deductibles and cost sharing requirements do not 
apply. Services offered and charges will be based on those applicable 
to care provided in military medical treatment facilities.
    (ii) For care provided in PRIMUS and NAVCARE Clinics established 
after September 30, 1994, the provisions of Sec. 199.18(d)(3) regarding 
outpatient cost sharing requirements under the Uniform HMO Benefit 
shall apply.
    (4) Procedures. The Director, OCHAMPUS will establish procedures 
for PRIMUS and NAVCARE Clinics. Such procedures may waive normal 
requirements of this part that are not required by law. Except to the 
extent required by law, the procedures established by the Director for 
PRIMUS and NAVCARE Clinics may be based on rules and procedures 
applicable to military medical treatment facilities.
    (m) Consolidated schedule of beneficiary charges. The following 
consolidated schedule of beneficiary charges is applicable to health 
care services provided under TRICARE for Prime enrollees, Standard 
enrollees and Medicare-eligible beneficiaries. (There are no charges to 
active duty members. Charges for participants in other managed health 
care programs affiliated with TRICARE will be specified in the 
applicable affiliation agreements.)
    (1) Cost sharing for services from TRICARE network providers. (i) 
For Prime enrollees, cost sharing is as specified in the Uniform HMO 
Benefit in Sec. 199.18, except that for care not authorized by the 
primary care manager or Health Care Finder, rules applicable to the 
TRICARE point of service option (see paragraph (n)(3) of this section) 
are applicable. The deductible is $300 per person and $600 per family. 
The beneficiary copayment per service is 50 percent.
    (ii) For Standard enrollees, TRICARE Extra cost sharing applies. 
The deductible is the same as standard CHAMPUS. Copayments are:
    (A) For outpatient professional services, cost sharing will be 
reduced from 20 percent to 15 percent for dependents of active duty 
members.
    (B) For most services for retired members, dependents of retired 
members, and survivors, cost sharing is reduced from 25 percent to 20 
percent.
    (C) In fiscal year 1995, the per diem inpatient hospital copayment 
for retirees, dependents of retirees, and survivors when they use a 
preferred provider network hospital is $250 per day, or 25 percent of 
total charges, whichever is less. There is a nominal copayment for 
active duty dependents, which is the same as under the CHAMPUS program 
(see Sec. 199.4). The per diem amount may be updated for subsequent 
years based on changes in the standard CHAMPUS per diem.
    (D) For prescription drugs obtained from network pharmacies, the 
CHAMPUS deductible will not apply.
    (iii) For Medicare-eligible beneficiaries, cost sharing will 
generally be as applicable to Medicare participating providers.
    (2) Cost sharing for non-network providers. (i) For TRICARE Prime 
enrollees, rules applicable to the TRICARE point of service option (see 
paragraph (n)(3) of this section) are applicable. The deductible is 
$300 per person and $600 per family. The beneficiary copayment per 
service is 50 percent.
    (ii) For Standard enrollees, cost sharing is as specified for the 
basic CHAMPUS program.
    (iii) For Medicare eligible beneficiaries, cost sharing is as 
provided under the Medicare program.
    (3) Cost sharing under internal resource sharing agreements. (i) 
For Prime enrollees, cost sharing is as provided in military treatment 
facilities.
    (ii) For Standard enrollees, cost sharing is as provided in 
military treatment facilities. [[Page 7502]] 
    (iii) For Medicare eligible beneficiaries, where made applicable by 
the commander of the military treatment facility concerned, cost 
sharing will be as provided in military treatment facilities.
    (4) Cost sharing under external resource sharing. (i) For Prime 
enrollees, cost sharing applicable to services provided by military 
facility personnel shall be as applicable to services in military 
treatment facilities; that applicable to institutional and related 
ancillary charges shall be as applicable to services provided under 
TRICARE Prime.
    (ii) For Standard enrollees, cost sharing applicable to services 
provided by Military facility personnel shall be as applicable to 
services in military treatment facilities; that applicable to 
institutional and related ancillary charges shall be as applicable to 
services provided under TRICARE Extra.
    (iii) For Medicare-eligible beneficiaries, where available, cost 
sharing applicable to services provided by military facility personnel 
shall be as applicable to services in military treatment facilities; 
that applicable to institutional and related ancillary charges shall be 
as applicable to services provided under Medicare.
    (5) Prescription drugs. (i) For Prime enrollees, cost sharing is as 
specified in the Uniform HMO Benefit.
    (ii) For Standard enrollees, there is a 20 percent copayment for 
prescription drugs provided by retail pharmacy network providers. The 
copayment for all beneficiaries under the mail service pharmacy program 
is $4.00 for active duty dependents and $8.00 for all other covered 
beneficiaries per prescription; for up to a 60 day supply. There is no 
deductible for this program.
    (iii) For Medicare-eligible beneficiaries affected by military 
treatment facility closures, there is a 20 percent copayment for 
prescriptions provided under the retail pharmacy network program, and 
an $8.00 copayment per prescription, for up to a 60-day supply, for 
prescriptions provided by the mail service pharmacy program. There is 
no deductible under their programs.
    (6) Cost share for outpatient services in military treatment 
facilities. (i) For dependents of active duty members in all enrollment 
categories, there is no charge for outpatient visits provided in 
military medical treatment facilities.
    (ii) For retirees, their dependents, and survivors in all 
enrollment categories, there is no charge for outpatient visits 
provided in military medical treatment facilities.
    (n) Additional health care management requirements under TRICARE 
Prime. Prime has additional, special health care management 
requirements not applicable under Extra, Standard or the CHAMPUS basic 
program. Such requirements must be approved by the Assistant Secretary 
of Defense (Health Affairs). In TRICARE, all care may be subject to 
review for medical necessity and appropriateness of level of care, 
regardless of whether the care is provided in a military treatment 
facility or in a civilian setting. Adverse determinations regarding 
care in military facilities will be appealable in accordance with 
established military medical department procedures, and adverse 
determinations regarding civilian care will be appealable in accordance 
with Sec. 199.15.
    (1) Primary care manager. All active duty members and Prime 
enrollees will be assigned or be allowed to select a primary care 
manager pursuant to a system established by the MTF Commander or other 
authorized official. The primary care manager may be an individual 
physician, a group practice, a clinic, a treatment site, or other 
designation. The primary care manager may be part of the MTF or the 
Prime civilian provider network. The enrollees will be given the 
opportunity to register a preference for primacy care manager from a 
list of choices provided by the MTF Commander. Preference requests will 
be honored subject to availability under the MTF beneficiary category 
priority system and other operational requirements established by the 
commander (or other authorized person).
    (2) Restrictions on the use of providers. The requirements of this 
paragraph (n)(2) shall be applicable to health care utilization under 
TRICARE Prime, except in cases of emergency care and under the point-
of-service option (see paragraph (n)(3) of this section).
    (i) Prime enrollees must obtain all primary health care from the 
primary care manager or from another provider to which the enrollee is 
referred by the primary care manager or Health Care Finder.
    (ii) For any necessary specialty care and all inpatient care, the 
primary care manager or Health Care Finder will assist in making an 
appropriate referral. All such nonemergency specialty care and 
inpatient care must be preauthorized by the primary care manager or 
Health Care Finder.
    (iii) The following procedures will apply to health care referrals 
and preauthorizations in catchment areas under TRICARE Prime:
    (A) The first priority for referral for specialty care or inpatient 
care will be to the local MTF (or to any other MTF in which catchment 
area the enrollee resides).
    (B) If the local MTF(s) are unavailable for the services needed, 
but there is another MTF at which the needed services can be provided, 
the enrollee may be required to obtain the services at that MTF. 
However, this requirement will only apply to the extent that the 
enrollee was informed at the time of (or prior to) enrollment that 
mandatory referrals might be made to the MTF involved for the service 
involved.
    (C) If the needed services are available within civilian preferred 
provider network serving the area, the enrollee may be required to 
obtain the services from a provider within the network. Subject to 
availability, the enrollee will have the freedom to choose a provider 
from among those in the network.
    (D) If the needed services are not available within the civilian 
preferred provider network serving the area, the enrollee may be 
required to obtain the services from a designated civilian provider 
outside the area. However, this requirement will only apply to the 
extent that the enrollee was informed at the time of (or prior to) 
enrollment that mandatory referrals might be made to the provider 
involved for the service involved (with the provider and service either 
identified specifically or in connection with some appropriate 
classification).
    (E) In cases in which the needed health care services cannot be 
provided pursuant to the procedures identified in paragraphs 
(n)(2)(iii) (A) through (D) of this section, the enrollee will receive 
authorization to obtain services from a CHAMPUS-authorized civilian 
provider(s) of the enrollee's choice not affiliated with the civilian 
preferred provider network.
    (iv) When Prime is operating in noncatchment areas, the 
requirements in paragraphs (n)(2)(iii) (B) through (E) of this section 
shall apply.
    (v) Any health care services obtained by a Prime enrollee not 
obtained in accordance with the utilization management rules and 
procedures of the Prime will not be paid for by Prime, but may be 
covered by the point-of-service option (see paragraph (n)(3) of this 
section). However, Prime may cover such services if the enrollee did 
not know and could not reasonably have been expected to know that the 
services were not obtained in accordance with the utilization 
management rules and procedures of Prime.
    (3) Point-of-service option. TRICARE Prime enrollees retain the 
freedom to [[Page 7503]] obtain services from civilian providers on a 
point-of-service basis. In such cases, all requirements applicable to 
standard CHAMPUS shall apply, except that there shall be higher 
deductible and cost sharing requirements (as set forth in paragraphs 
(m)(1)(i) and (m)(2)(i) of this section).
    (o) TRICARE Program enrollment procedures. There are certain 
requirements pertaining to procedures for enrollment in Prime. (These 
procedures do not apply to active duty members, whose enrollment is 
mandatory.)
    (1) Open season enrollment. Beneficiaries will be offered the 
opportunity to enroll in Prime during designated periods of time. 
Subject to exceptions for change of residence and other changes, 
enrollment will be limited to the open season periods announced at the 
time the TRICARE Program is implemented in a particular area.
    (2) Enrollment period. The Prime enrollment period shall be 12 
months. In general, enrollment will be effective on the first day of 
the month following expiration of the open season enrollment period. 
Enrollees must remain in Prime for a 12 month period, at which time 
they may disenroll. This requirement is subject to exceptions for 
change of residence and other changes announced at the time the TRICARE 
Program is implemented in a particular area.
    (3) Periodic revision. Periodically, certain features, rules or 
procedures of Prime, Extra and/or Standard may be revised. If such 
revisions will have a significant effect on participants' costs or 
access to care, beneficiaries will be given the opportunity to change 
their enrollment status coincident with the revisions.
    (4) Effects of failure to enroll. Beneficiaries offered the 
opportunity to enroll in Prime, who do not enroll within the time 
provided to enroll, will be eligible to participate in Extra on a case-
by-case basis or remain in Standard.
    (p) Civilian preferred provider networks. A major feature of the 
TRICARE Program is the civilian preferred provider network.
    (1) Status of network providers. Providers in the preferred 
provider network are not employees or agents of the Department of 
Defense or the United States Government. Rather, they are independent 
contractors of the government (or other independent entities having 
business arrangements with the government). Although network providers 
must follow numerous rules and procedures of the TRICARE Program, on 
matters of professional judgment and professional practice, the network 
provider is independent and not operating under the direction and 
control of the Department of Defense. Each preferred provider must have 
adequate professional liability insurance, as required by the Federal 
Acquisition Regulation, and must agree to indemnify the United States 
government for any liability that may be assessed against the United 
States government that is attributable to any action or omission of the 
provider.
    (2) Utilization management policies. Preferred providers are 
required to follow the utilization management policies and procedures 
of the TRICARE Program. These policies and procedures are part of 
discretionary judgments by the Department of Defense regarding the 
methods of delivering and financing health care services that will best 
achieve health and economic policy objectives.
    (3) Quality assurance requirements. A number of quality assurance 
requirements and procedures are applicable to preferred network 
providers. These are for the purpose of assuring that the health care 
services paid for with government funds meet the standards called for 
in the contract or provider agreement.
    (4) Provider qualifications. All preferred providers must meet the 
following qualifications:
    (i) They must be CHAMPUS authorized providers and CHAMPUS 
participating providers.
    (ii) All physicians in the preferred provider network must have 
staff privileges in a hospital accredited by the Joint Commission on 
Accreditation of Health Care Organizations. This requirement may be 
waived in any case in which a physician's practice does not include the 
need for admitting privileges in such a hospital. However, in any case 
in which the requirement is waived, the physician must comply with 
alternative qualification standards as are established by the MTF 
Commander (or other authorized official).
    (iii) All preferred providers must agree to follow all quality 
assurance and utilization management procedures established pursuant to 
this section, make available to designated DoD utilization management 
or quality monitoring contractors medical records and other pertinent 
records, and to authorize the release of information to MTF Commanders 
regarding such quality assurance and utilization management activities.
    (iv) All preferred network providers must be Medicare participating 
providers, unless this requirement is waived based on extraordinary 
circumstances. This requirement that a provider be a Medicare 
participating provider does not apply to providers not eligible to be 
participating providers under Medicare.
    (v) The provider must be available to Extra participants.
    (vi) The provider must agree to accept the same payment rates 
negotiated for Prime enrollees for any person whose care is 
reimbursable by the Department of Defense, including, for example, 
Extra participants, supplemental care cases, and beneficiaries from 
outside the area.
    (vii) All preferred providers must meet all other qualification 
requirements, and agree to comply with all other rules and procedures 
established for the preferred provider network.
    (5) Access standards. Preferred provider networks will have 
attributes of size, composition, mix of providers and geographical 
distribution so that the networks, coupled with the MTF capabilities, 
can adequately address the health care needs of the enrollees. Before 
offering enrollment in Prime to a beneficiary group, the MTF Commander 
(or other authorized person) will assure that the capabilities of the 
MTF plus preferred provider network will meet the following access 
standards with respect to the needs of the expected number of enrollees 
from the beneficiary group being offered enrollment:
    (i) Under normal circumstances, enrollee travel time may not exceed 
30 minutes from home to primary care delivery site unless a longer time 
is necessary because of the absence of providers (including providers 
not part of the network) in the area.
    (ii) The wait time for an appointment for a well-patient visit or a 
specialty care referral shall not exceed four weeks; for a routine 
visit, the wait time for an appointment for a well-patient visit shall 
not exceed two weeks; and for an urgent care visit the wait time for an 
appointment shall generally not exceed 24 hours.
    (iii) Emergency services shall be available and accessible to 
handle emergencies (and urgent care visits if not available from other 
primary care providers pursuant to paragraph (p)(5)(ii) of this 
section), within the service area 24 hours a day, seven days a week.
    (iv) The network shall include a sufficient number and mix of board 
certified specialists to meet reasonably [[Page 7504]] the anticipated 
needs of enrollees. Travel time for specialty care share not exceed one 
hour under normal circumstances, unless a longer time is necessary 
because of the absence of providers (including providers not part of 
the network) in the area. This requirement does not apply under the 
Specialized Treatment Services Program.
    (v) Office waiting times in nonemergency circumstances shall not 
exceed 30 minutes.
    (6) Special reimbursement methods for network providers. The 
Director, OCHAMPUS may establish for preferred provider networks 
reimbursement rates and methods different from those established 
pursuant to Sec. 199.14. Such provisions may be expressed in terms of 
percentage discounts off CHAMPUS allowable amounts, or in other terms. 
In circumstances in which payments are based on hospital-specific rates 
(or other rates specific to particular institutional providers), 
special reimbursement methods may permit payments based on discounts 
off national or regional prevailing payment levels, even if higher than 
particular institution-specific payment rates.
    (7) Methods for establishing preferred provider networks. There are 
several methods under which the MTF Commander (or other authorized 
official) may establish a preferred provider network. These include the 
following:
    (i) There may be an acquisition under the Federal Acquisition 
Regulation, either conducted locally for that catchment area, in a 
larger area in concert with other MTF Commanders, regionally as part of 
a CHAMPUS acquisition, or on some other basis.
    (ii) To the extent allowed by law, there may be a modification by 
the Director, OCHAMPUS of an existing CHAMPUS fiscal intermediary 
contract to add TRICARE Program functions to the existing 
responsibilities of the fiscal intermediary contractor.
    (iii) The MTF Commander (or other authorized official) may follow 
the any qualified provider method set forth in paragraph (q) of this 
section.
    (iv) Any other method authorized by law may be used.
    (q) Preferred provider network establishment under any qualified 
provider method. The any qualified provider method may be used to 
establish a civilian preferred provider network. Under this method, any 
CHAMPUS-authorized provider within the geographical area involved that 
meets the qualification standards established by the MTF Commander (or 
other authorized official) may become a part of the preferred provider 
network. Such standards must be publicly announced and uniformly 
applied. Any provider that meets all applicable qualification standards 
may not be excluded from the preferred provider network. Qualifications 
include:
    (1) The provider must meet all applicable requirements in paragraph 
(p)(4) of this section.
    (2) The provider must agree to follow all quality assurance and 
utilization management procedures established pursuant to this section.
    (3) The provider must be a Participating Provider under CHAMPUS for 
all claims.
    (4) The provider must meet all other qualification requirements, 
and agree to all other rules and procedures, that are established, 
publicly announced, and uniformly applied by the commander (or other 
authorized official).
    (5) The provider must sign a preferred provider network agreement 
covering all applicable requirements. Such agreements will be for a 
duration of one year, are renewable, and may be canceled by the 
provider or the MTF Commander (or other authorized official) upon 
appropriate notice to the other party. The Director, OCHAMPUS shall 
establish an agreement model or other guidelines to promote uniformity 
in the agreements.
    (r) General fraud, abuse, and conflict of interest requirements 
under TRICARE Program. All fraud, abuse, and conflict of interest 
requirements for the basic CHAMPUS program, as set forth in this part 
199 (see especially applicable provisions of Sec. 199.9) are applicable 
to the TRICARE Program. Some methods and procedures for implementing 
and enforcing these requirements may differ from the methods and 
procedures followed under the basic CHAMPUS program in areas in which 
the TRICARE Program has not been implemented.
    (s) Partial implementation. The Assistant Secretary of Defense 
(Health Affairs) may authorize the partial implementation of the 
TRICARE Program. In such cases, the TRICARE Extra Plan and the TRICARE 
Standard Plan may be offered without the TRICARE Prime Plan. Partial 
implementation may also consist of establishment of a TRICARE Program 
limited to particular services, such as mental health services.
    (t) Inclusion of Department of Veterans Affairs Medical Centers in 
TRICARE networks. TRICARE preferred provider networks may include 
Department of Veterans Affairs Medical Centers pursuant to arrangements 
between those centers and the Director, OCHAMPUS or designated TRICARE 
contractor.
    (u) Care provided outside the United States to dependents of active 
duty members. The Assistant Secretary of Defense (Health Affairs) may, 
in conjunction with implementation of the TRICARE program, authorize a 
special CHAMPUS program for dependents of active duty members who 
accompany the members in their assignments in foreign countries. Under 
this special program, contracts or agreements may be made with health 
care providers under which services will be provided to the covered 
dependents with the requirements for deductibles and copayments waived 
or reduced.
    (v) Administrative procedures. The Assistant Secretary of Defense 
(Health Affairs), the Director, OCHAMPUS, and MTF Commanders (or other 
authorized officials) are authorized to establish administrative 
requirements and procedures, consistent with this section, this part 
and other applicable DoD Directives or Instructions, for the 
implementation and operation of the TRICARE Program.


Sec. 199.18  Uniform HMO Benefit.

    (a) In general. There is established a Uniform HMO Benefit. The 
purpose of the Uniform HMO Benefit is to establish a health benefit 
option modeled on health maintenance organization plans. This benefit 
is intended to be uniform throughout the United States and to be 
included in all managed care programs under the MHSS. Most care 
purchased from civilian health care providers (outside a military 
medical treatment facility) will be under the rules of the Uniform HMO 
Benefit or the Basic CHAMPUS Program (see Sec. 199.4). The Uniform HMO 
benefit shall apply only as specified in this section or other sections 
of this part, and shall be subject to any special applications 
indicated indicated in such other sections.
    (b) Services covered under the Uniform HMO Benefit option. (1) 
Except as specifically provided or authorized by this section, all 
CHAMPUS benefits provided, and benefit limitations established, 
pursuant to this part shall apply to the Uniform HMO Benefit.
    (2) Certain preventive care services not normally provided as part 
of basic program benefits under CHAMPUS are covered benefits when 
provided to Plan enrollees by providers in the civilian provider 
network. Such standards shall establish a specific schedule, including 
frequency or age specifications for:
    (i) Laboratory and x-ray tests, including blood lead, rubella, 
cholesterol, fecal occult blood testing, and 
mammography; [[Page 7505]] 
    (ii) Pap smears;
    (iii) Eye exams;
    (iv) Immunizations;
    (v) Periodic health promotion and disease prevention exams;
    (vi) Blood pressure screening;
    (vii) Hearing exams;
    (viii) Sigmoidoscopy or colonoscopy;
    (ix) Serologic screening; and
    (x) Appropriate education and counseling services. The exact 
services offered shall be established under uniform standards 
established by the Assistant Secretary of Defense (Health Affairs).
    (3) In addition to preventive care services provided pursuant to 
paragraph (b)(2) of this section, other benefit enhancements may be 
added and other benefit restrictions may be waived or relaxed in 
connection with health care services provided to include the Uniform 
HMO Benefit. Any such other enhancements or changes must be approved by 
the Assistant Secretary of Defense (Health Affairs) based on uniform 
standards.
    (c) Enrollment fee under the uniform HMO benefit. (1) The CHAMPUS 
annual deductible amount (see Sec. 199.4(f)) is waived under the 
Uniform HMO Benefit during the period of enrollment. In lieu of a 
deductible amount, an annual enrollment fee is applicable. The specific 
enrollment fee requirements shall be published annually by the 
Assistant Secretary of Defense (Health Affairs), and shall be uniform 
within the following groups: Dependents of active duty members in pay 
grades E-4 and below; active duty dependents of sponsors in pay grades 
E-5 and above; and retirees and their dependents.
    (2) Amount of enrollment fees. Beginning in fiscal year 1995, the 
annual enrollment fees are:
    (i) for dependents of active duty members in pay grades of E-4 and 
below, $0;
    (ii) for active duty dependents of sponsors in pay grades E-5 and 
above, $0; and,
    (iii) for retirees and their dependents, $230 individual, $460 
family.
    (d) Outpatient cost sharing requirements under the Uniform HMO 
Benefit--(1) In general. In lieu of usual CHAMPUS cost sharing 
requirements (see Sec. 199.4(f)), special reduced cost sharing 
percentages or per service specific dollar amounts are required. The 
specific requirements shall be uniform and shall be published annually 
by the Assistant Secretary of Defense (Health Affairs).
    (2) Structure of outpatient cost sharing. The special cost sharing 
requirements for outpatient services include the following specific 
structural provisions:
    (i) For most physician office visits and other routine services, 
there is a per visit fee for each of the following groups: Dependents 
of active duty members in pay grades E-1 through E-4; dependents of 
active duty members in pay grades of E-5 and above; and retirees and 
their dependents. This fee applies to primary care and specialty care 
visits, except as provided elsewhere in this paragraph (d)(2) of this 
section. It also applies to ancillary services (unless provided as part 
of an office visit for which a copayment is collected), family health 
services, home health care visits, eye examinations, and immunizations.
    (ii) There is a copayment for outpatient mental health visits. It 
is a per visit fee for dependents of active duty members in pay grades 
E-1 through E-4; for dependents of active duty members in pay grades of 
E-5 and above; and for retirees and their dependents for individual 
visits. For group visits, there is a lower per visit fee for dependents 
of active duty members in pay grades E-1 through E-4; for dependents of 
active duty members in pay grades of E-5 and above; and for retirees 
and their dependents.
    (iii) There is a cost share for durable medical equipment, 
prosthetic devices, and other authorized supplies for dependents of 
active duty members in pay grades E-1 through E-4; for dependents of 
active duty members in pay grades of E-5 and above; and for retirees 
and their dependents.
    (iv) For emergency room services, there is a per visit fee for 
dependents of active duty members in pay grades E-1 through E-4; for 
dependents of active duty members in pay grades of E-5 and above; and 
for retirees and their dependents.
    (v) For primary surgeon services in ambulatory surgery, there is a 
per service fee for dependents of active duty members in pay grades E-1 
through E-4; for dependents of active duty members in pay grades of E-5 
and above; and for retirees and their dependents.
    (vi) There is a copayment for prescription drugs per prescription, 
including medical supplies necessary for administration, for dependents 
of active duty members in pay grades E-1 through E-4; for dependents of 
active duty members in pay grades of E-5 and above; and for retirees 
and their dependents.
    (vii) There is a copayment for ambulance services for dependents of 
active duty members in pay grades E-1 through E-4; for dependents of 
active duty members in pay grades of E-5 and above; and for retirees 
and their dependents.
    (3) Amount of outpatient cost sharing requirements. Beginning in 
fiscal year 1995, the outpatient cost sharing requirements are as 
follows:
    (i) For most physician office visits and other routine services, as 
described in paragraph (d)(2)(i) of this section, the per visit fee is 
as follows:
    (A) For dependents of active duty members in pay grades E-1 through 
E-4, $6;
    (B) For dependents of active duty members in pay grades of E-5 and 
above, $12; and,
    (C) For retirees and their dependents, $12.
    (ii) For outpatient mental health visits, the per visit fee is as 
follows:
    (A) For individual outpatient mental health visits:
    (1) For dependents of active duty members in pay grades E-1 through 
E-4, $10;
    (2) For dependents of active duty members in pay grades E-5 and 
above, $20; and,
    (3) For retirees and their dependents, $25.
    (B) For group outpatient mental health visits, there is a lower per 
visit fee, as follows:
    (1) For dependents of active duty members in pay grades E-1 through 
E-4, $6;
    (2) For dependents of active duty members in pay grades E-5 and 
above, $12; and,
    (3) For retirees and their dependents, $17.
    (iii) The cost share for durable medical equipment, prosthetic 
devices, and other authorized supplies is as follows:
    (A) For dependents of active duty members in pay grades E-1 through 
E-4, 10 percent of the negotiated fee;
    (B) For dependents of active duty members in pay grades E-5 and 
above, 15 percent of the negotiated fee; and,
    (C) For retirees and their dependents, 20 percent of the negotiated 
fee.
    (iv) For emergency room services, the per visit fee is as follows:
    (A) For dependents of active duty members in pay grades E-1 through 
E-4, $10;
    (B) For dependents of active duty members in pay grades of E-5 and 
above, $30; and,
    (C) For retirees and their dependents, $30.
    (v) For primary surgeon services in ambulatory surgery, the per 
service fee is as follows:
    (A) For dependents of active duty members in pay grades of E-1 
through E-4, $25; [[Page 7506]] 
    (B) For dependents of active duty members in pay grades of E-5 and 
above, $25; and,
    (C) For retirees and their dependents, $25.
    (vi) The copayment for prescription drugs per prescription, for a 
maximum 30-day supply, is as follows:
    (A) For dependents of active duty members in pay grades E-1 through 
E-4, $5;
    (B) For dependents of active duty members in pay grades of E-5 and 
above, $5; and,
    (C) For retirees and their dependents, $9.
    (vii) The copayment for ambulance services is as follows:
    (A) For dependents of active duty members in pay grades of E-1 
through E-4, $10;
    (B) For dependents of active duty members in pay grades of E-5 and 
above, $15; and,
    (C) For retirees and their dependents, $20.
    (e) Inpatient cost sharing requirements under the Uniform HMO 
Benefit.--(1) In general. In lieu of usual CHAMPUS cost sharing 
requirements (see Sec. 199.4(f)), special cost sharing amounts are 
required. The specific requirements shall be uniform and shall be 
published as a notice annually by the Assistant Secretary of Defense 
(Health Affairs).
    (2) Structure of cost sharing. For services other than mental 
illness or substance use treatment, there is a nominal copayment for 
active duty dependents and for retired members, dependents of retired 
members, and survivors. For inpatient mental health and substance use 
treatment, a separate per day charge is established.
    (3) Amount of inpatient cost sharing requirements. Beginning in 
fiscal year 1995, the inpatient cost sharing requirements are as 
follows:
    (i) For acute care admissions and other non-mental health/substance 
use treatment admissions, the per diem charge is as follows, with a 
minimum charge of $25 per admission:
    (A) For dependents of active duty members in pay grades E-1 through 
E-4, $11;
    (B) For dependents of active duty members in pay grades of E-5 and 
above, $11; and,
    (C) For retirees and their dependents, $11.
    (ii) For mental health/substance use treatment admissions, and for 
partial hospitalization services, the per diem charge is as follows, 
with a minimum charge of $25 per admission:
    (A) For dependents of active duty members in pay grades E-1 through 
E-4, $20;
    (B) For dependents of active duty members in pay grades of E-5 and 
above, $20; and,
    (C) For retirees and their dependents, $40.
    (f) Updates. The enrollment fees for fiscal year 1995 set under 
paragraph (c) of this section and the per services specific dollar 
amounts for fiscal year 1995 set under paragraphs (d) and (e) of this 
section may be updated for subsequent years to the extent necessary to 
maintain compliance with statutory requirements pertaining to 
government costs. This updating does not apply to cost sharing that is 
expressed as a percentage of allowable charges; these percentages will 
remain unchanged.
    (g) Applicability of the Uniform HMO Benefit to Uniformed Services 
Treatment Facilities Managed Care Program. The provisions of this 
section concerning the Uniform HMO Benefit shall apply to the Uniformed 
Services Treatment Facilities Managed Care Program, effective October 
1, 1995. Under that program, non-CHAMPUS eligible beneficiaries have 
the same payment responsibilities as CHAMPUS-eligible beneficiaries.

    Dated: February 2, 1995.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 95-3028 Filed 2-7-95; 8:45 am]
BILLING CODE 5000-04-M