[Federal Register Volume 66, Number 28 (Friday, February 9, 2001)]
[Rules and Regulations]
[Pages 9651-9658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-3240]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

RIN 0720-AA62


Civilian Health and Medical Program of the Uniformed Services 
(CHAMPUS)/TRICARE; Partial Implementation of Pharmacy Benefits Program; 
Implementation of National Defense Authorization Act Medical Benefits 
for Fiscal Year 2001

AGENCY: Office of the Secretary, DoD.

ACTION: Interim final rule.

-----------------------------------------------------------------------

SUMMARY: This interim final rule implements several sections of the 
Floyd D. Spence National Defense Authorization Act for Fiscal Year 
2001. The rule allows coverage of physical examinations for 
beneficiaries ages 5 through 11 that are required in connection with 
school enrollment; provides an additional two-year period for survivors 
of deceased active-duty members to remain eligible for TRICARE medical 
and dental benefits at active-duty dependent rates; extends eligibility 
for medical and dental benefits to Medal of Honor recipients and their 
immediate dependents in the same manner as if the recipient were 
entitled to retired pay; partially implements the Pharmacy Benefits 
Program establishing revised copays and cost-shares for the 
prescription drug benefit; implements the TRICARE Senior Pharmacy 
Program by establishing a new eligibility for prescription drug 
benefits for Medicare-eligible retirees; allows a waiver of copayments, 
cost-shares, and deductibles for all Uniformed Services TRICARE 
eligible active duty family members residing with their TRICARE Prime 
Remote eligible Active Duty Service Member Sponsor within a TRICARE 
Prime Remote designated area until implementation of the TRICARE Prime 
Remote for Family Member Program or October 30, 2001, whichever is 
later; provides for the elimination of TRICARE Prime copayments for 
active duty family members enrolled in TRICARE Prime; provides for the 
reimbursement of reasonable travel expenses for TRICARE Prime 
beneficiaries referred by a primary care provider to a specialty care 
provider who provides services over 100 miles away; and reduces the 
maximum amount which retirees, their family members and survivors would 
be liable from $7,500 to $3,000. The Department is publishing this rule 
as an interim final rule in order to meet statutorily required 
effective dates. Public comments, however, are invited and will be 
considered as to possible revisions to this rule.

DATES: This rule is effective April 10, 2001. Written comments will be 
accepted until April 10, 2001.

ADDRESSES: Forward comments to Medical Benefits and Reimbursement 
Systems, TRICARE Management Activity, 16401 East Centretech Parkway, 
Aurora, CO 80011-9043.

FOR FURTHER INFORMATION CONTACT: Tariq Shahid, Medical Benefits and 
Reimbursement Systems, TRICARE Management Activity, Office of the 
Assistant Secretary of Defense (Health Affairs), telephone (303) 676-
3801. Questions regarding payment of specific CHAMPUS claims should be 
addressed to the appropriate TRICARE/CHAMPUS contractor.

SUPPLEMENTARY INFORMATION:

I. Overview of the Rule

    On October 30, 2000, the Floyd D. Spence National Defense 
Authorization Act for Fiscal Year 2001 (Pub. L. 106-398) was signed 
into law. This interim final rule implements provisions of this Act 
that were effective upon the date of enactment or a date within 180 
days thereafter. Specifically, this rule implements the following 
sections of this Act:
    Section 703, school required physicals, which was effective on the 
date of enactment;
    Section 704, two-year extension of benefits for survivors, which 
was effective on the date of enactment;
    Section 706, benefits for Medal of Honor recipients, which was 
effective on the date of enactment;
    Section 711, TRICARE Senior Pharmacy Program, which is effective 
April 1, 2001;
    Section 722, that portion of TRICARE Prime Remote for Family 
Members that was effective on the date of enactment;
    Section 752, elimination of copayments for Active Duty Dependents 
in TRICARE Prime, which the statute requires be implemented within 180 
days;
    Section 758, reimbursement of certain travel expenses for TRICARE 
Prime beneficiaries, which was effective on the date of enactment; and
    Section 759, reduction of retiree catastrophic cap, which was 
effective on the date of enactment.
    In addition, because of the effect on the overall pharmacy program 
of the new TRICARE Senior Pharmacy Program and the change in TRICARE 
Prime active duty dependent copayments, this rule also partially 
implements the Pharmacy Benefits Program, as authorized by Section 
1074g of title 10, United States Code, as a significant step toward 
expected implementation late in 2001 of the comprehensive Pharmacy 
Benefits Program.

II. School Requried Physicals

    This rule implements Section 703 of the National Defense 
Authorization Act for Fiscal Year 2001 which extends coverage of 
physical examinations to CHAMPUS eligible beneficiaries ages 5 through 
11 that are required in connection with school enrollment. The scope of 
the legislative provision encompasses all programs and beneficiary 
categories (i.e., coverage extends to active duty dependents, retirees 
and their dependents under TRICARE Prime, Standard and Extra plans). 
These newly covered school physicals will be recognized as preventive 
services, and as such, subject to the same cost-sharing/copayment and 
referral/authorization requirements as prescribed under TRICARE Prime 
and Standard/Extra clinical preventive benefits. TRICARE Prime 
enrollees will not be required to pay copayments or seek referral/
authorization from their primary care managers (PCMs) unless they go to 
a non-network provider. While Standard and Extra beneficiaries will not 
require referral and/or authorization, they will have to pay the 
applicable cost-sharing and deductibles for preventive services as 
prescribed under their respective plans.
    School physicals for TRICARE Prime enrollees ages 5 through 11 will 
be covered under the enhanced benefit provision of the CHAMPUS 
administering regulation (32 CFR 199.18(b)(3)), which allows benefit 
enhancements and waiver or relaxation of benefit restrictions under the 
Uniform HMO Benefit at the discretion of the Assistant Secretary of 
Defense (Health Affairs). However, since coverage also

[[Page 9652]]

extends to both Standard and Extra beneficiaries, an exception will be 
added to the preventive care general exclusion (32 CFR 199.4(g)(37)) 
that will allow school physicals for these beneficiary categories 
(i.e., active duty family members, retirees and their family members 
that are seeking care under Standard or Extra plans).

III. Two-Year Extension of Benefits for Survivors

    This rule implements Section 704 of the National Defense 
Authorization Act for Fiscal Year 2001 which amended chapter 55 of 
title 10, United States Code, replacing the one-year period with an 
additional two-year extension for survivors of deceased active-duty 
members to remain eligible for TRICARE medical and dental benefits at 
active-duty dependent rate. Before the Authorization Act, survivors of 
members who die while on active duty were allowed to continue 
participation in TRICARE Prime, Extra, or Standard as active-duty 
dependent family members for a period of one year following the date of 
death of the deceased member. At the end of the one-year period, these 
family members continued eligibility for care under TRICARE, but faced 
higher out-of-pocket costs as non-active-duty dependents. With respect 
to the TRICARE dental insurance benefits, family members enrolled in 
the TRICARE Dental Program (TDP) at the time of the member's death, 
continued to receive benefits for one year from the member's date of 
death, with the Government paying 100 percent of the TDP premiums.

IV. Benefits for Medal of Honor Recipients

    This rule implements Section 706 of the National Defense 
Authorization Act for Fiscal Year 2001 which amended chapter 55 of 
title 10, United States Code, by adding a new Section 1074h. Section 
1074h expands eligibility to Medal of Honor recipients who are not 
otherwise entitled to medical and dental care including their immediate 
dependents. They are entitled to the same medical and dental benefit 
that is provided to former members who are entitled to military retired 
pay and the dependents of those former members. To receive TRICARE/
CHAMPUS benefits, they must register in the Defense Enrollment 
Eligibility Reporting System (DEERS).

V. Partial Implementation of Pharmacy Benefits Program

    The Secretary of Defense is required under title 10, United States 
Code, Section 1074g, to establish an effective, efficient, and 
integrated Pharmacy Benefits Program. The Secretary may establish cost 
sharing requirements under the Pharmacy Benefits Program as a 
percentage and/or fixed dollar amount for generic, formulary (non-
generic), and non-formulary pharmaceutical agents. Designation of 
pharmaceutical agents as non-formulary will be based upon an evaluation 
of the agent's clinical and cost-effectiveness in comparison to other 
agents in the therapeutic class by the Department of Defense (DoD) 
Pharmacy and Therapeutics Committee and the comments of that evaluation 
by the Uniform Formulary Beneficiary Advisory Committee. The Department 
is unable to implement the portion of the Pharmacy Benefits Program 
that allows classification of a drug as non-formulary until Proposed 
and Final Rules fully implementing the Pharmacy Benefits Program have 
been published and required Committees become operational. However, 
partial implementation of the Pharmacy Benefits Program, including 
reform of cost sharing requirements under Section 1074g should proceed 
now in connection with the April 1, 2001, start date of the TRICARE 
Senior Pharmacy Program and overall reform of TRICARE Prime active duty 
dependent copayments.
    The prescription drug and medicine benefit under CHAMPUS includes 
the Food and Drug Administration approved drugs and medicines that by 
United States law require a physician's or other authorized individual 
professional provider's prescription (acting within the scope of their 
license) that has been ordered or prescribed by them. The benefit does 
not include prescription drugs for medical conditions that are 
expressly excluded from the TRICARE benefit by statute or regulation. 
Pharmaceutical agents are subject to preauthorization or utilization 
review requirements to assure medical necessity. Until full 
implementation of the Pharmacy Benefits Program under which all 
authorized drugs will be classified as generic, formulary, or non-
formulary, during this period of partial implementation, drugs and 
medicines shall be designated as either generic drugs and medicines, 
which are those that have the identical chemical composition of a name 
brand drug or medicine, or non-generic (or brand name) drugs.
    Up to now, cost sharing requirements have been based upon 
beneficiary status, enrollment or non-enrollment in TRICARE Prime, and 
the location where the drug or medicine is purchased, i.e., the point 
of sale, such as a military treatment facility, network or non-network 
pharmacy, or the National Mail Order Pharmacy (NMOP). This led to a 
complex set of cost sharing requirements, difficult for beneficiaries 
to understand, lacking in clear incentives for appropriate use, and 
inconsistent with evolving industry practice. DoD is implementing new 
cost sharing requirements in this regulation, consistent with the 
Congressional direction to modernize the pharmacy program. Cost sharing 
requirements will no longer be based upon beneficiary status, except 
for active duty members who never pay copays. Cost sharing requirements 
of prescription drugs and medicines based upon their status as generic 
or non-generic are being implemented through this interim final rule. 
Cost sharing requirements will no longer be based upon a beneficiary's 
enrollment or non-enrollment in TRICARE Prime (except point of service 
charges will still apply), but will be based upon the drug or 
medicine's status as generic or non-generic and its point of sale.
    The new cost sharing structure is based on commercial industry 
practices in pharmacy benefit design and benefit management. Cost 
sharing amounts were selected to assure that all beneficiaries could 
obtain a reduction in their current cost sharing through use of generic 
products, and that brand-name cost sharing was substantially higher 
than generic without unduly penalizing beneficiaries in relation to 
their current cost sharing levels.
    Active duty members do not pay a cost-share. Cost sharing 
requirements for pharmaceutical agents for all other beneficiaries will 
be based upon the generic/non-generic status and the point of sale 
(i.e., network pharmacy, non-network pharmacy, NMOP) from which the 
agent was acquired. There is a $9.00 copay per prescription required 
under the retail pharmacy network program for up to a 30-day supply of 
a non-generic drug or medicine, and a $3.00 copay for up to a 30-day 
supply of a generic drug or medicine. There is a $9.00 copay per 
prescription required under the NMOP program for up to a 90-day supply 
of a non-generic drug or medicine, and a $3.00 copay for up to a 90-day 
supply of a generic drug or medicine. There is a 20 percent or $9.00 
(whichever is greater) copay per prescription required for all drugs 
obtained under the retail pharmacy non-network program for up to a 30-
day supply. The TRICARE Standard annual deductible of $150 individual/
$300 family (or $50 individual/$100 family for lower grade enlisted 
families) applies to services obtained from non-network pharmacies.

[[Page 9653]]

The TRICARE annual catastrophic cap of $1,000 for active duty families 
and $3,000 for retiree families (as reduced by the Fiscal Year 2001 
National Defense Authorization Act) also applies. TRICARE Prime 
enrollees generally face higher ``point-of-service'' cost sharing when 
they obtain non-network services, as described in Sec. 199.17(n). With 
regard to pharmacy services, TRICARE Prime beneficiaries who use non-
network pharmacies will face point-of-service cost sharing rather than 
the 20 percent cost sharing which applies to TRICARE Standard 
beneficiaries. This point-of-service cost sharing includes a deductible 
of $300 individual or $600 family, and a 50 percent cost share. No 
deductibles apply to prescription drugs acquired from network retail 
pharmacies and NMOP.
    The revised co-pay amounts simplify the cost share structure and 
are consistent with the best business practices used in the private 
sector. The co-pay amounts were selected because they provide an 
equitable adjustment across the current co-pay matrix, will encourage 
the use of cost effective sources of pharmaceuticals for both the 
beneficiaries and the government, and will encourage the use of generic 
products where clinically appropriate. For most beneficiaries and in 
most circumstances, cost sharing will be reduced under the new cost 
sharing structure; in all cases beneficiaries will have lower costs if 
they use generic products. The pricing structure reflects a reduction 
for active duty dependents using the National Mail Order Pharmacy. In 
some cases, beneficiaries will pay more than at present if they obtain 
brand-name products: active duty family members will pay $4 to $5 more 
for brand-name products, and retirees and their family members will pay 
$1.00 more for mail order brand-name products. We solicit comment on 
the structure and amount of pharmacy cost sharing described above.

VI. TRICARE Senior Pharmacy Program

    This rule implements Section 711 of the National Defense 
Authorization Act for Fiscal Year 2001, which establishes the TRICARE 
Senior Pharmacy Program for DoD beneficiaries who are 65 years of age 
and older, effective April 1, 2001. Under the TRICARE Senior Pharmacy 
Program, the Act requires the same coverage for pharmacy services and 
the same requirements for cost sharing and reimbursement as are 
applicable under Section 1086 of title 10, United States Code.
    As specified further in the regulation, to be eligible for the 
TRICARE Senior Pharmacy Program, a person is required to be a retiree, 
dependent, or survivor who is Medicare eligible, 65 years of age or 
older, and enrolled in Medicare Part B (except for a person who 
attained age 65 prior to April 1, 2001).
    To receive benefits under the TRICARE Senior Pharmacy Program, 
beneficiaries must register in the Defense Enrollment and Eligibility 
Reporting System (DEERS). Currently, the TRICARE Senior Pharmacy 
Program beneficiaries are not eligible to enroll in TRICARE Prime.
    The benefit under the TRICARE Senior Pharmacy Program includes the 
Basic Program pharmacy benefit as found under 32 CFR 199.4(d)(vi). The 
senior beneficiaries are entitled to the same pharmacy benefit that was 
found at 32 CFR 199.17(k), but it is no longer limited to the Base 
Realignment and Closure (BRAC) sites and access to non-network retail 
drugstores is included. These beneficiaries will have access to retail 
network pharmacies, non-network pharmacies, and the National Mail Order 
Pharmacy (NMOP) program with the associated revised copays and cost-
shares as described under Partial Implementation of Pharmacy Benefits 
Program, above. For prescription drugs acquired from non-network retail 
pharmacies, the Senior Pharmacy Program beneficiaries are subject to 
TRICARE Standard annual deductible of $150 individual/$300 family. The 
catastrophic cap of $3000.00 per federal fiscal year, as reduced by the 
Fiscal Year 2001 National Defense Authorization Act, will apply to 
beneficiaries who are eligible under the TRICARE Senior Pharmacy 
Program.
    The double coverage rules in 32 CFR 199.8 are applicable to 
services provided to all beneficiaries under the retail pharmacy 
network, retail pharmacy non-network, or NMOP programs. For this 
purpose, to the extent they provide a prescription drug benefit, 
Medicare supplemental insurance plans or Medicare HMO plans are double 
coverage plans and will be the primary payor.
    The TRICARE Senior Pharmacy Program will replace the BRAC pharmacy 
benefit and the Pharmacy Redesign Pilot Program in accordance with 
Section 711 of the Act.

VII. TRICARE Prime Remote for Family Members

    This interim final rule implements Section 722(b)(2) of the 
National Defense Authorization Act for Fiscal Year 2001 (Public Law 
106-398) which modified Section 731(b) of the National Defense 
Authorization Act for Fiscal Year 1998 (Public Law 105-85). This rule 
provides a waiver of charges for TRICARE eligible family members 
residing with their active duty uniformed services, TRICARE Prime 
Remote eligible sponsor who are not enrolled in TRICARE Prime.
    Full implementation of the TRICARE Prime Remote program for active 
duty family members will be subject of a proposed rule to be published 
soon. The TRICARE Prime Remote program will supplant the waiver of 
charges described in this rulemaking, effective October 30, 2001 or 
later. In order to obtain coverage under the follow-on TRICARE Prime 
Remote program, it will be proposed that eligible beneficiaries will be 
required to enroll in TRICARE Prime and be subject to many of the rules 
of TRICARE Prime. Full details will be provided in the proposed rule to 
be published soon.
    Some Active Duty Service Members (ADSM) are assigned Permanent 
Change of Station Orders to locations where Military Treatment 
Facilities are unavailable. TRICARE Prime Remote (TPR) was established 
by Section 731(b) of the National Defense Authorization Act for Fiscal 
Year 1998 to provide a TRICARE Prime-like benefit. As defined by 10 
U.S.C. 1074(c)(3) the benefit is for ADSM assigned to remote locations, 
who pursuant to that assignment, work and reside at a location that is 
more than 50 miles, or approximately one hour of driving time to the 
nearest military medical treatment facility. ADSM who are TPR eligible 
are required to enroll in TPR. Starting October 30, 2000, TRICARE 
eligible Active Duty Family Members residing with TPR eligible ADSM 
sponsors within a TRICARE Prime Remote designated area, have 
copayments, cost-shares, and deductibles waived for CHAMPUS covered 
benefits, except for pharmacy benefits, until the implementation of 
TRICARE Prime Remote for Family Members or October 30, 2001 whichever 
is later. Non-covered CHAMPUS benefits are not waived and shall be 
processed according to current requirements. The claims processor will 
pay the waived portion of the claim to the eligible family member or 
the provider, as appropriate. If the claims processor is able to 
determine the eligible family member has already paid the waived 
portion of the claim the processor shall reimburse the family member. 
Retrospective payments of waived charges for dates of service on or 
after October 30, 2000 are authorized.
    Eligible family members will be able to access authorized providers 
without preauthorization. However, when accessing care, eligible family 
members

[[Page 9654]]

are required to use network providers where and when available within 
the TRICARE access standards to obtain the waiver of charges. If a 
network provider cannot be identified within the access standards 
established under TRICARE, the eligible family member shall use an 
authorized provider to be eligible for the waiver. Existing specialty 
care preauthorization requirements remain in affect for eligible family 
members enrolled in TRICARE Prime. To the greatest extent possible, 
contractors will assist eligible family members in finding a TRICARE 
network, participating, or authorized provider.

VIII. Elimination of TRICARE Prime Copayments for Dependents of 
Active Duty Members

    Section 752 of the National Defense Authorization Act for Fiscal 
Year 2001 provides that no copayment shall be charged for care provided 
under TRICARE Prime to a dependent of a member of the uniformed 
services. Copayments for prescriptions and point-of-service (POS) 
charges are not covered by this provision and will continue to be 
applied. Copayments for prescriptions will be in accordance with those 
authorized by 10 U.S.C. 1074g, partially implemented by this rule. This 
is consistent with the Conference Committee Report statement that ``it 
is not the intent of the conferees to eliminate copayments for 
pharmaceutical benefits under the mail order pharmacy program or such 
similar cost shares.'' (H. Conf. Rept. No 106-945, p. 819-20.) Point-
of-service charges are not covered by Section 752 because they are not 
for care provided under TRICARE Prime, but rather for care provided 
outside the TRICARE Prime network structure under the POS option. The 
POS option allows enrollees to self-refer for non-emergency health care 
services to any TRICARE authorized civilian provider. The elimination 
of copayments applies to all CHAMPUS-covered services received by a 
TRICARE Prime active duty family member on or after April 1, 2001.

IX. Reimbursement of Reasonable Travel Expenses for Distant 
Referrals of TRICARE Prime Beneficiaries

    Section 758 of the National Defense Authorization Act for Fiscal 
Year 2001 provides reimbursement of reasonable travel expenses for 
TRICARE Prime beneficiaries referred by their primary care manager to a 
specialty care provider who provides services more than 100 miles from 
the primary care manager's office.

X. Reduction of Retiree Catastrophic Cap

    Section 759 of the National Defense Authorization Act for Fiscal 
Year 2001 modified chapter 55 of title 10, United States Code, by 
amending Section 1086(b)(4) and reducing the catastrophic cap on 
payments from $7,500 to $3,000 for retirees, their family members and 
survivors.

XI. 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 Interim Final Rule is a significant regulatory action under 
Executive Order 12866, as it would add over $200 million for DoD in 
annual healthcare benefit costs. This cost estimate is based on 
historical TRICARE costs and an assessment of potential users times 
average benefit costs per person for each of the provisions addressed. 
Benefits of the interim final rule include an increased level of health 
care, particularly pharmacy coverage for Medicare-eligible 
beneficiaries of the Department of Defense military health system. It 
has been determined to be major under the Congressional Review Act. 
However, this rule does not require a regulatory flexibility analysis 
as it would have no significant economic impact on a substantial number 
of small entities. This interim final rule will not impose additional 
information collection requirements on the public under the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501-3511).
    This rule is being issued as an interim final rule, with comment 
period, as an exception to our standard practice of soliciting public 
comments prior to issuance. The Acting Assistant Secretary of Defense 
(Health Affairs) has determined that following the standard practice in 
this case would be impracticable, unnecessary, and contrary to the 
public interest. This rule implements statutory requirements which 
became effective on the date of enactment of the Floyd D. Spence 
National Defense Authorization Act for Fiscal Year 2001 (Pub. L. 106-
398), October 30, 2000, or within 180 days thereafter. Public comments 
could not be solicited and considered within the period allowed by law.
    Public comments are invited. All comments will be carefully 
considered. A discussion of the major issues received by public 
comments will be included with the issuance of the final rule.

List of Subjects in 32 CFR Part 199

    Claims, Dental health, Health care, Health insurance, Individuals 
with disabilities, Military personnel.

    Accordingly, 32 CFR part 199 is 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. chapter 55.


    2. Section 199.3 is amended by revising paragraph (b)(2)(i)(D), by 
redesignating (b)(3) as paragraph (b)(2)(iii)(B)(3), by adding new 
paragraphs (b)(3) and (b)(4), and by revising paragraph (f)(3)(vi) and 
paragraph (f)(3)(vii) preceding the note to read as follows:


Sec. 199.3  Eligibility.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (D) Must not be eligible for Part A of Title XVIII of the Social 
Security Act (Medicare) except as provided in paragraphs (b)(3), 
(f)(3)(viii) and (f)(3)(ix) of this section; and
* * * * *
    (4) Eligibility under TRICARE Senior Pharmacy Program. Section 711 
of the National Defense Authorization Act for Fiscal Year 2001 (Public 
Law 106-398, 114 Stat. 1654) established the TRICARE Senior Pharmacy 
Program effective April 1, 2001. To be eligible for this program, a 
person is required to be:
    (i) Medicare eligible, who is:
    (A) 65 years of age or older; and
    (B) Entitled to Medicare Part A; and
    (C) Enrolled in Medicare Part B, except for a person who attained 
age 65 prior to April 1, 2001, is not required to enroll in Part B; and
    (ii) Otherwise qualified under one of the following categories:
    (A) A retired uniformed service member who is entitled to retired 
or retainer pay, or equivalent pay including survivors who are 
annuitants; or
    (B) A dependent of a member of the uniformed services described in 
one of the following:

[[Page 9655]]

    (1) A member who is on active duty for a period of more than 30 
days or died while on such duty; or
    (2) A member who died from an injury, illness, or disease incurred 
or aggravated while the member was:
    (i) On active duty under a call or order to active duty of 30 days 
or less, on active duty for training, or on inactive duty training; or
    (ii) Traveling to or from the place at which the member was to 
perform or had performed such active duty, active duty for training, or 
inactive duty training.

    Note to paragraph (b)(3)(ii)(B): Dependent under Section 711 of 
the National Defense Authorization Act for Fiscal Year 2001 includes 
spouse, unremarried widow/widower, child, parent/parent-in-law, 
unremarried former spouse, and unmarried person in the legal custody 
of a member or former member, as those terms of dependency are 
defined and periods of eligibility are set forth in 10 U.S.C. 
1072(2).

    (5) Medal of Honor recipients. (i) A former member of the armed 
forces who is a Medal of Honor recipient and who is not otherwise 
entitled to medical and dental benefits has the same CHAMPUS 
eligibility as does a retiree.
    (ii) Immediate dependents. CHAMPUS eligible dependents of a Medal 
of Honor Recipient are those identified in paragraphs (b)(2)(i) of this 
section (except for former spouses) and (b)(2)(ii) of this section 
(except for a child placed in legal custody of a Medal of Honor 
recipient under (b)(2)(ii)(H)(4) of this section).
    (iii) Effective date. The CHAMPUS eligibility established by 
paragraphs (b)(5)(i) and (ii) of this section is applicable to health 
care services provided on or after October 30, 2000.
* * * * *
    (f) * * *
    (3) * * *
    (vi) Attainment of entitlement to hospital insurance benefits (Part 
A) under Medicare except as provided in paragraphs (b)(3), (f)(3)(viii) 
and (f)(3)(ix) of this section. (This also applies to individuals 
living outside the United States where Medicare benefits are not 
available.)
    (vii) Attainment of age 65, except for dependents of active duty 
members, beneficiaries not eligible for Part A of Medicare, and as 
provided in paragraph (b)(3) of this section. CHAMPUS eligibility is 
lost at 12:01 a.m. on the last day of the month preceding the month of 
attainment of age 65 until implementation of section 712 of the 
National Defense Authorization Act for Fiscal Year 2001.
* * * * *

    3. Section 199.4 is amended by revising paragraphs (f)(10)(ii), 
(f)(10)(iii), and Note to paragraph (f)(10), and by adding new 
paragraphs (f)(11) and (g)(37)(xii) to read as follows:


Sec. 199.4  Basic program benefits.

* * * * *
    (f) * * *
    (10) * * *
    (ii) All other beneficiaries. For all other categories of 
beneficiary families (including those eligible under CHAMPVA) the 
fiscal year cap is $3,000.
    (iii) Payment after cap is met. After a family has paid the maximum 
cost-share and deductible amounts (dependents of active duty members 
$1,000 and all others $3,000), for a fiscal year, CHAMPUS will pay 
allowable amounts for remaining covered services through the end of 
that fiscal year.

    Note to paragraph (f)(10): Under the Defense Authorization Act 
for Fiscal Year 2001, the cap for beneficiaries other than 
dependents of active duty members was reduced from $7,500 to $3,000 
effective October 30, 2000. Prior to this, the Defense Authorization 
Act for Fiscal Year 1993 reduced this cap from $10,000 to $7,500 on 
October 1, 1992. The cap remains at $1,000 for dependents of active 
duty members.

    (11) Beneficiary or sponsor liability under the Pharmacy Benefits 
Program. Beneficiary or sponsor liability under the Pharmacy Benefits 
Program is addressed in Sec. 199.21.
    (g) * * *
    (37) * * *
    (xii) Physical examinations for beneficiaries ages 5 through 11 
that are required in connection with school enrollment, and that are 
provided on or after October 30, 2000.
* * * * *

    4. Section 199.5 is amended by revising paragraph (b)(1)(iii)(A) to 
read as follows:


Sec. 199.5  Program for Persons with Disabilities (PFPWD).

* * * * *
    (b) * * *
    (1) * * *
    (iii) * * *
    (A) For a period of three calendar years from the date an active 
duty sponsor dies; or
* * * * *

    5. Section 199.13 is amended by revising paragraph (c)(3)(ii)(E)(2) 
to read as follows:


Sec. 199.13  TRICARE Dental Program.

* * * * *
    (c) * * *
    (3) * * *
    (ii) * * *
    (E) * * *
    (2) Continuation of eligibility for dependents of service members 
who die while on active duty or while a member of the Selected Reserve 
or Individual Ready Reserve. Eligible dependents of active duty members 
while on active duty for a period of thirty-one (31) days or more and 
eligible dependents of Selected Reserve or Individual Ready Reserve 
members, as specified in 10 U.S.C. 10143 and 10144(b) respectively, who 
die on or after the implementation date of the TDP, and whose 
dependents are enrolled in the TDP on the date of the death of the 
active duty, Selected Reserve or Individual Ready Reserve member shall 
be eligible for continued enrollment in the TDP for up to 3 years from 
the date of the member's death where the member died on or after 
October 30, 1997.
* * * * *

    6. Section 199.17 is amended by removing paragraph (a)(6)(iii)(D), 
by revising paragraph (k), by revising paragraph (m)(5), and by adding 
new paragraphs (m)(7) and (n)(2)(vi) to read as follows:


Sec. 199.17  TRICARE program.

* * * * *
    (k) Pharmacy services. Pharmacy services under Prime are as 
provided in the Pharmacy benefits Program (see Sec. 199.21).
* * * * *
    (m) * * *
    (5) Prescription drugs. Cost sharing for prescription drugs is as 
provided under the Pharmacy Benefits Program in Sec. 199.21.
* * * * *
    (7) Cost sharing for additional beneficiaries under the TRICARE 
Prime Remote Program. (i) Active duty family members, defined as the 
lawful husband or wife of a member, and children, as defined in 
Sec. 199.3(b)(2)(ii)(A) through (b)(2)(ii)(F) and (b)(2)(ii)(H)(1), 
(b)(2)(ii)(H)(2), and (b)(2)(ii)(H)(4), residing with their Active Duty 
Service Member Sponsor who is TRICARE Prime Remote eligible will have 
cost-shares, co-payments, and deductibles waived for services provided 
on or after October 30, 2000. Pharmacy Benefits Program cost-shares 
established under Sec. 199.21 apply to services provided on or after 
April 1, 2001. Active Duty Service Member Sponsors who are TRICARE 
Prime Remote eligible are those who receive a remote permanent duty 
assignment, and pursuant to the assignment, reside at a location that 
is more than 50 miles, or approximately one hour of driving time from 
the nearest military medical treatment

[[Page 9656]]

facility adequate to provide the needed care. Remote permanent duty 
assignments include permanent duty as a recruiter; permanent duty at an 
educational institution to instruct, administer a program of 
instruction, or provide administrative services in support of a program 
of instruction for the Reserves Officers' Training Corps; permanent 
duty as a full-time adviser to a unit of a reserve component; or any 
other permanent duty designated by the Secretary. This waiver applies 
to TRICARE covered benefits only. Claims processed with a date of 
service beginning on or after October 30, 2000 will waive the cost-
share, copayment, and deductible. Active Duty Family Members residing 
with TPR eligible Active Duty Service Member (ADSM) have copayments, 
cost-shares, and deductibles for CHAMPUS covered benefits except 
pharmacy benefits waived until the implementation of TRICARE Prime 
Remote for Family Members or October 30, 2001, whichever is later. The 
claims processor will pay the waived portion of the claim to the 
eligible family member or to the provider, as appropriate.
    (ii) Eligible family members will be able to access their provider 
without preauthorization. To obtain the waiver of charges, eligible 
family members are required to use network providers, where available 
and within the TRICARE access standards. Failure to do so will result 
in claims being processed under TRICARE Standard rules. For 
beneficiaries who are enrolled in TRICARE Prime, existing specialty 
care preauthorization requirements and Point of Service rules remain in 
effect.
    (iii) To the greatest extent possible, contractors will assist 
eligible members in finding a TRICARE network, participating, or 
authorized provider. If a network provider cannot be identified within 
the access standards established under TRICARE, the eligible family 
member shall use an authorized provider to be eligible for the waiver.
    (n) * * *
    (2) * * *
    (vi) In accordance with guidelines issued by the Assistant 
Secretary of Defense for Health Affairs, certain travel expenses may be 
reimbursed when a TRICARE Prime enrollee is referred by the primary 
care manager for medically necessary specialty care more than 100 miles 
away from the primary care manager's office received on or after 
October 30, 2000. Such guidelines shall be consistent with appropriate 
provisions of generally applicable Department of Defense rules and 
procedures governing travel expenses.
* * * * *
    7. Section 199.18 is amended by revising paragraphs (c)(2), (c)(3), 
the heading for paragraph (d), paragraphs (d)(1), (d)(2)(i), 
(d)(2)(ii), (d)(2)(iii), (d)(2)(iv), (d)(2)(v), (d)(2)(vi), 
(d)(2)(vii), (d)(3), (e), and (g) to read as follows:


Sec. 199.18  Uniform HMO benefit.

* * * * *
    (c) * * *
    (2) Amount of enrollment fees. In fiscal year 2001, the annual 
enrollment fee for retirees and their dependents is $230 individual, 
$460 family.
    (3) Waiver of enrollment fee for certain beneficiaries. The 
Assistant Secretary of Defense (Health Affairs) may waive the 
enrollment fee requirements of this section for Medicare-eligible 
beneficiaries.
    (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 
periodically by the Assistant Secretary of Defense (Health Affairs). 
For care provided on or before April 1, 2001, no copayment shall be 
charged for care provided under TRICARE Prime to a dependent of an 
active duty member, except for the copayments charged under the 
Pharmacy Benefits Program (see Sec. 199.21) and under the point of 
service option of TRICARE Prime (see Sec. 199.17(n)(4)).
    (2) * * *
    (i) For most physician office visits and other routine services, 
there is a per visit fee for 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 
family health services, home health care visits, eye examinations, and 
immunizations. It does not apply to ancillary health services or to 
preventive health services described in paragraph (b)(2) of this 
section, or to maternity services under Sec. 199.4(e)(16).
    (ii) There is a copayment for outpatient mental health visits. It 
is a per visit fee for retirees and their dependents for individual 
visits. For group visits, there is a lower per visit fee for retirees 
and their dependents.
    (iii) There is a cost share of durable medical equipment, 
prosthetic devices, and other authorized supplies for retirees and 
their dependents.
    (iv) For emergency room services, there is a per visit fee for 
retirees and their dependents.
    (v) For ambulatory surgery services, there is a per service fee 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 and for retirees and their dependents under the 
Pharmacy Benefits Program (see Sec. 199.17(m)(5)).
    (vii) There is a copayment for ambulance services for retirees and 
their dependents.
    (3) Amount of outpatient cost sharing requirements. In fiscal year 
2001, 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 for 
retirees and their dependents is $12.
    (ii) For outpatient mental health visits, the per visit fee for 
retirees and their dependents is $25. For group outpatient mental 
health visits, there is a lower per visit fee for retirees and their 
dependents of $17.
    (iii) The cost share for durable medical equipment, prosthetic 
devices, and other authorized supplies for retirees and their 
dependents is 20 percent of the negotiated fee.
    (iv) For emergency room services, the per visit fee for retirees 
and their dependents is $30.
    (v) For primary surgeon services in ambulatory surgery, the per 
service fee for retirees and their dependents is $25.
    (vi) The copayments for prescription drugs are established under 
the Pharmacy Benefits Program (see Sec. 199.21).
    (vii) The copayment for ambulance services for retirees and their 
dependents is $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 periodically by the Assistant Secretary of Defense (Health 
Affairs). For services provided on or after April 1, 2001, no co-
payment shall be charged for inpatient care provided under TRICARE 
Prime to a dependent of an active duty member except under the point of 
service option of TRICARE Prime (see Sec. 199.17(n)(4)). In addition, 
for services provided on or after April 1, 2001, no copayment shall be 
charged for inpatient care provided under TRICARE Prime to a dependent 
of an active duty member in military medical treatment facilities.

[[Page 9657]]

    (2) Structure of cost sharing. For services other than mental 
illness or substance use treatment, there is a nominal copayment for 
retired members, dependents of retired members, and survivors. For 
inpatient mental health and substance use treatment, a separate per day 
charge is established. For services provided on or after April 1, 2001, 
no inpatient copayment shall be charged an active duty dependent 
enrolled in TRICARE Prime. This elimination of inpatient copayments 
applies to active duty dependents enrolled in TRICARE Prime who are 
admitted to a civilian or military inpatient facility.
    (3) Amount of inpatient cost sharing requirements. In fiscal year 
2001, the inpatient cost sharing requirements for retirees and their 
dependents for acute care admissions and other non-mental health/
substance use treatment admissions is a per diem charge of $11, with a 
minimum charge of $25 per admission. For mental health/substance use 
treatment admissions, and for partial hospitalization services, the per 
diem charge for retirees and their dependents is $40.
* * * * *
    (g) Updates. The enrollment fees for fiscal year 2001 set under 
paragraph (c) of this section and the per service specific dollar 
amounts for fiscal year 2001 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.

    8. A new Sec. 199.21 is added to read as follows:


Sec. 199.21  Pharmacy Benefits Program.

    (a) In general--(1) Statutory authority. 10 U.S.C. 1074g requires 
that the Department of Defense establish an effective, efficient, 
integrated Pharmacy Benefits Program for the Military Health System. 
This law is independent of a number of section of title 10 and other 
laws that affect the benefits, rules, and procedures of CHAMPUS/
TRICARE, resulting in changes to the rules otherwise applicable to 
TRICARE Prime, Standard, and Extra. Among these changes is an 
independent set of beneficiary co-payments for prescription drugs.
    (2) Partial implementation during interim period. Beginning April 
1, 2001, 10 U.S.C. 1074g is partially implemented to coincide with the 
start of the TRICARE Senior Pharmacy Program and substantial cost 
sharing changes for active duty dependents enrolled in Prime. Some 
authorities and requirements of Section 1074g, such as the 
classification of drugs as formulary or non-formulary under a ``uniform 
formulary of pharmaceutical agents,'' are not yet implemented. In this 
section, references to ``interim implementation period'' mean the 
period beginning April 1, 2001.
    (b) Program benefits. During the interim implementation period, 
prescription drugs and medicines are available under the otherwise 
applicable rules and procedures for military treatment facility 
pharmacies, TRICARE Prime, Standard, and Extra, and the Mail Order 
Pharmacy Program. There is not during this interim implementation 
period a ``uniform formulary'' of drugs and medicines available in all 
of these parts of the system. All cost sharing requirements for 
prescription drugs and medicines are established in this section for 
pharmacy services provided throughout the Military Health System.
    (c) Providers of pharmacy services. There are four categories of 
providers of pharmacy services: military treatment facilities (MTFs), 
network retail providers, non-network retail providers, and the mail 
service pharmacy program. Network retail providers are those non-MTF 
pharmacies that are a part of the network established for TRICARE Prime 
under Sec. 199.17. Non-network pharmacies are those non-MTF pharmacies 
that are not part of such a network.
    (d) Classifications of drugs and medicines. During the interim 
implementation period, a distinction is made for purposes of cost 
sharing between generic drugs and non-generic (or brand name) drugs.
    (e) TRICARE Senior Pharmacy Program. Section 711 of the Floyd D. 
Spence National Defense Authorization Act for Fiscal Year 2001 (Pub. L. 
106-398, 114 Stat. 1654) established the TRICARE Senior Pharmacy 
Program for Medicare eligible beneficiaries effective April 1, 2001. 
These beneficiaries are required to meet the eligibility criteria as 
prescribed in Sec. 199.3. The benefit under the TRICARE Senior Pharmacy 
Program includes the Basic Program pharmacy benefit as found under 
Sec. 199.4(d) and the pharmacy benefit and cost sharing as found under 
this part. The TRICARE Senior Pharmacy Program applies to prescription 
drugs and medicines provided on or after April 1, 2001.
    (f) Cost sharing. Beneficiary cost sharing requirements for 
prescription drugs and medicines are based upon the generic/non-generic 
status and the point of sale (i.e., MTF, network pharmacy, non-network 
pharmacy, mail service pharmacy) from which they are acquired. For this 
purpose, a generic drug is a non-brand name drug. A non-generic drug is 
a brand name drug. In the case of a brand name drug for which there is 
no generic equivalent, the non-generic cost share applies.
    (1) Military treatment facilities. There are no cost sharing 
requirements for drugs and medicines provided by MTF pharmacies.
    (2) Retail pharmacy network program. There is a $9.00 co-pay per 
prescription required under the retail pharmacy network program for up 
to a 30-day supply of a non-generic drug or medicine, and a $3.00 co-
pay for up to a 30-day supply of a generic drug or medicine. There is 
no annual deductible for drugs and medicines provided under the retail 
pharmacy network program.
    (3) Mail service pharmacy program. There is a $9.00 co-pay per 
prescription required under the mail service pharmacy program for up to 
a 90-day supply of a non-generic drug or medicine, and a $3.00 co-pay 
for up to a 90-day supply of a generic drug or medicine. There is no 
annual deductible for drugs and medicines provided under the mail 
service pharmacy program.
    (4) Non-network retail pharmacies. There is a 20 percent or $9.00 
(whichever is greater) co-pay per prescription required for up to a 30-
day supply of a drug obtained from a non-network pharmacy. A point of 
service cost-share of 50 percent applies in lieu of the 20 percent 
copay for TRICARE Prime enrollees who obtain their prescriptions from a 
non-network retail pharmacy without proper authorization. In addition, 
these TRICARE Prime enrollees are subject to higher deductibles as 
provided in Sec. 199.17(m)(1)(i) and (m)(2)(i). For prescription drugs 
acquired from non-network retail pharmacies, beneficiaries other than 
Prime enrollees (including TRICARE Senior Pharmacy Program 
beneficiaries) are subject to the $150.00 per individual or $300.00 
maximum per family (or for dependents of sponsors in pay grades below 
E-5, $50 per individual or $100 per family) annual fiscal year 
deductible.
    (g) Effect of other health insurance. The double coverage rules of 
Sec. 199.8 are applicable to services provided under the Pharmacy 
Benefits Program. For this purpose, to the extent they provide a 
prescription drug benefit, Medicare supplemental insurance plans or 
Medicare HMO plans are double coverage plans and will be the primary 
payor.

[[Page 9658]]

    (h) Procedures. The Director, TRICARE Management Activity shall 
establish procedures for the effective operation of the Pharmacy 
Benefit Program. Such procedures may include restrictions of the 
quantity of pharmaceuticals to be included under the benefit, 
encouragement or requirement of the use of generic drugs, 
implementation of quality assurance and utilization management 
activities, and other appropriate matters.

    9. Section 199.22 is amended by revising paragraph (d)(1)(i), the 
first sentence of paragraph (d)(3), and paragraph (d)(5) to read as 
follows:


Sec. 199.22  TRICARE Retiree Dental Program (TRDP).

* * * * *
    (d) * * *
    (1) * * *
    (i) Members of the Uniformed Services who are entitled to retired 
pay, or a former member of the armed forces who is a Medal of Honor 
recipient and who is not otherwise entitled to medical and dental 
benefits who has requested medical and dental care benefits in the 
manner described in Sec. 199.3(j)(1) or their immediate dependents as 
defined by Sec. 199.3(b)(ii);
* * * * *
    (3) Election of coverage. In order to initiate dental coverage, 
election to enroll must be made by the member or eligible dependent. * 
* *
* * * * *
    (5) Period of coverage. TRICARE Retiree Dental Program coverage is 
terminated when the member's entitlement to retired pay is terminated, 
the member's status as a member of the Retired Reserve is terminated, 
the member's status as a Medal of Honor recipient is terminated, a 
dependent child loses eligible child dependent status, or in the case 
of remarriage of the surviving spouse.
* * * * *

    Dated: February 1, 2000.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 01-3240 Filed 2-6-01; 2:57 pm]
BILLING CODE 5000-01-U