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###### Department of Defense

###### Office of the Secretary

# AGENCY:

Office of the Secretary, Department of Defense.

# ACTION:

Notice of TRICARE Co-Pay waiver at Captain James A. Lovell Federal Health Care Center demonstration project.

# SUMMARY:

This notice is to advise interested parties of a demonstration project entitled “TRICARE Co-Pay Waiver at Captain James A. Lovell Federal Health Care (FHCC) Demonstration Project.” Under this demonstration, there would be no deductibles, cost shares, or co-pays for eligible beneficiaries seeking care at the FHCC. This demonstration would take place under the authority of 10 U.S.C. Section 1092(a)(1)(B) Cost-sharing by eligible beneficiaries. The effectiveness of this demonstration will be tested by comparing the volume of care for beneficiaries that would have paid co-payments to the prior year volume to determine if increased utilization actually occurred as a result of the elimination of co-payments. Increased utilization would be an indicator of what to expect in future Department of Defense (DoD)/Department of Veterans Affairs (VA) mergers of this nature and would influence decisions regarding financial integration.

# DATES:

*Effective Date:*                         This five-year demonstration project will be effective October 1, 2010.                    

# FOR FURTHER INFORMATION CONTACT:

Mr. Kenneth E. Cox, Director, DoD/VA Program Coordination Office, Health Affairs, Telephone (703) 681-4258.

# SUPPLEMENTARY INFORMATION:

*A. Background:*                     The Captain James A. Lovell FHCC, which is scheduled to open in October 2010, will be the first Federal health care facility in the nation to be operated jointly between the VA and the Navy. New construction will be completed to combine the North Chicago VA Medical Center (NCVAMC) and Naval Health Clinic Great Lakes (NHCGL) into a single, fully integrated federal health care facility. The completely integrated medical center will be led by a VA Chief Executive Officer, and a U.S. Navy medical department officer as the Deputy.                

Title XVII of the National Defense Authorization Act (NDAA) for Fiscal Year 2010 authorized the Department of Defense and Department of Veterans Affairs Medical Facility Demonstration Project in North Chicago/Great Lakes, IL. Because the legislation did not address the issue of beneficiary cost sharing, it is being addressed through this notice.

DoD and VA have carefully analyzed the impact of requiring co-pays by beneficiaries, and believe that the requirement may adversely impact the success of the integration. At this time, it is estimated that keeping the co-pays in place would result in at least a 50 percent reduction in DoD beneficiaries treated at the FHCC since those patients would see no added benefit to traveling to FHCC and will seek care at facilities closer to home. Furthermore, beneficiaries who had previously received care at the NHCGL when it was designated as an MTF, would be required to make a co-payment for medical care provided, including emergency, hospitalization, and behavioral health services. Since the VAMC will no longer be a separate authorized TRICARE provider, but will be under the integrated structure, there will be no health care claim prepared to bill TRICARE. The organizations are merged financially in accordance with the Executive Agreement. The Department will therefore test whether waiver of the co-pay by the beneficiary will impact the utilization and cost effectiveness of the demonstration.

*B. Details of the Demonstration:*                     The April 23, 2010, Executive Agreement (EA) between VA and DoD reads “Active                           ( print page 59238)                        Duty members and Active Duty dependents enrolled in TRICARE Prime pay no co-payments for inpatient or outpatient health care services. DoD may establish special co-pay rules for the FHCC under demonstration project authority of 10 U.S.C. 1092 for other beneficiaries.” Under this demonstration, co-pays will be waived for any eligible DoD beneficiary seeking healthcare at the FHCC. The waiver of cost sharing applies to all impatient, outpatient, and ancillary services and all outpatient prescription drugs provided at the FHCC. The waiver is consistent with current policies and procedures followed at all MTFs. According to an Independent Government Cost Estimate (IGCE), it is estimated that waiving the co-pays for all beneficiaries including Medicare-eligible beneficiaries will cost DoD an additional $101,518 a year. This cost assumes that the lack of co-pays would lead to a 20 percent increase in utilization by the affected groups (i.e. induced demand) at this facility. Without this assumption, the waiver would cost DoD an additional $84,599 annually. The cost of additional staffing required to compute and collect co-payments could easily be more than $100,000 per year.                

The effectiveness of this demonstration will be tested by comparing the volume of care for beneficiaries that would have paid co-payments to the prior year volume to determine if increased utilization actually occurred as a result of the elimination of co-payments. Increased utilization would be an indicator of what to expect in future DoD/VA mergers of this nature and would influence decisions regarding financial integration. The final report on this demonstration will accompany the final report on the FHCC demonstration required by Section 1701, NDAA 2010.

Dated: September 20, 2010.

Patricia L. Toppings,

OSD Federal Register Liaison Officer, Department of Defense.

[FR Doc. 2010-24092 Filed 9-24-10; 8:45 am]

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