In fiscal year 2010, DOD offered health care to almost 9.7 million eligible beneficiaries through its TRICARE program. TRICARE is organized into three regions, and within these regions, beneficiaries may obtain health care from either providers at military treatment facilities or civilian providers. TRICARE provides three basic options for its non-Medicare-eligible beneficiary population. These options vary according to TRICARE beneficiary enrollment requirements, the choices TRICARE beneficiaries have in selecting civilian and military treatment facility providers and the amount TRICARE beneficiaries must contribute towards the cost of their care. (See table 1.) TRICARE also offers other options, including TRICARE Reserve Select, a premium-based health plan that certain Reserve and National Guard servicemembers may purchase. Under TRICARE Reserve Select, beneficiaries may obtain health care from either nonnetwork or network providers, similar to beneficiaries using TRICARE Standard or Extra, respectively, and pay lower cost-shares for using network providers. TRICARE is a regionally structured program that is organized into three main regions—North, South, and West. (See fig. 1 for the location of the three regions.) TMA manages civilian health care in each of these regions through contractors. As of March 2011, the second generation of TRICARE contracts were in operation, and TMA was in the process of awarding the third generation of contracts. The contractors are required to establish and maintain adequate networks of civilian providers within designated locations referred to as Prime Service Areas. In these areas, civilian provider networks are required to be large enough to provide access for all TRICARE beneficiaries, regardless of enrollment status or Medicare eligibility. These civilian provider networks are also required to meet specific access standards for TRICARE Prime beneficiaries—such as for travel times or wait times. However the access standards do not apply to beneficiaries using options other than TRICARE Prime, such as TRICARE Standard or Extra. The contractors are also responsible for helping TRICARE beneficiaries locate providers and for informing and educating TRICARE beneficiaries and providers on all aspects of the TRICARE program. In addition, they provide customer service to any TRICARE beneficiary who requests assistance, regardless of their enrollment status. TMA has a TRICARE Regional Office in each region that helps to manage health care delivery. These offices are responsible for overseeing the contractors, including monitoring network quality and adequacy and customer-satisfaction outcomes. Similar to the contractors’ efforts, these offices provide customer service to all TRICARE beneficiaries who request assistance, regardless of their enrollment status. Civilian providers must be TRICARE-authorized to be reimbursed for care under the program. Such authorization requires a provider to be licensed by their state, accredited by a national organization, if one exists, and meet other standards of the medical community. There are two types of authorized civilian providers—network and nonnetwork providers, and both types of providers may accept TRICARE beneficiaries as patients on a case-by-case basis, regardless of enrollment status. Network providers are TRICARE-authorized providers who enter into a contract with the regional contractor to provide care to TRICARE beneficiaries and agree to accept TRICARE reimbursement rates as payment in full. By law, TRICARE reimbursement rates for civilian providers are generally limited to Medicare rates, but network providers may agree to accept lower reimbursements as a condition of network membership. Network providers are not obligated to accept all TRICARE beneficiaries seeking care. For example, network providers may decline to accept TRICARE beneficiaries as patients because their practices do not have sufficient capacity or for other reasons. Nonnetwork providers are TRICARE-authorized providers who have not entered into a contractual agreement with a contractor to provide care to TRICARE beneficiaries. Nonnetwork providers may accept the TRICARE reimbursement rate as payment in full or they may charge up to 15 percent above the reimbursement amount. The beneficiary is responsible for paying the extra amount billed in addition to the required cost-shares. Claims data from fiscal years 2006 through 2010 show that overall TRICARE claims paid to civilian providers have increased by more than 50 percent, even though the eligible population increased by less than 6 percent. (See table 2.) Between fiscal years 2006 through 2010, TRICARE Standard and Extra beneficiaries’ use of network providers—as measured by the number of claims paid to network providers—has increased significantly, while their use of nonnetwork providers—as measured by the number of claims paid to nonnetwork providers—has slightly decreased. (See fig. 2.) Specifically, their use of network providers has increased more than 66 percent between fiscal years 2006 and 2010, compared to about a 10 percent decrease in the use of nonnetwork providers over the same time period. Reimbursement rates have been cited as the primary impediment that hinders beneficiaries’ access to civilian health care and mental health care providers under TRICARE Standard and Extra. TMA can increase reimbursement rates in certain circumstances when a need has been demonstrated. Although national and local shortages of certain types of providers have also been cited as an impediment to TRICARE Standard and Extra beneficiaries’ access to civilian providers, TMA is limited in its ability to address this impediment as it affects the general population and not just TRICARE beneficiaries. Additionally, beneficiaries’ access to mental health care is affected by provider shortages and other issues and is of particular concern because the stress of deployment and redeployment has increased the demand for these services. Since TRICARE was implemented in 1995, some civilian providers—both network and nonnetwork—have expressed concerns about TRICARE’s reimbursement rates. For example, in 2006, we reported that both network and nonnetwork civilian providers said that TRICARE’s reimbursement rates tended to be lower than those of other health plans, and as a result, some of these providers had been unwilling to accept TRICARE Standard and Extra beneficiaries as patients. More recent studies by TMA and others have cited TRICARE’s reimbursement rates as the primary reason civilian providers may be unwilling to accept these beneficiaries as patients, for example: TMA’s first multiyear survey of civilian providers (2005 through 2007) showed that TRICARE’s reimbursement rates were the primary reason cited by providers for not accepting TRICARE Standard and Extra beneficiaries as new patients. Similarly, results from the first 2 years (2008 and 2009) of TMA’s second multiyear provider survey showed that the responding providers cited TRICARE’s reimbursement rates as one of the primary reasons that they would not accept new TRICARE patients even though they would accept new Medicare patients. In a 2008 study on civilian providers’ acceptance of TRICARE Standard and Extra beneficiaries, CNA reported that the medical society officials and physicians they interviewed cited low reimbursement as the primary reason for limiting their acceptance of TRICARE beneficiaries as patients. The providers who were interviewed as part of this study noted that while they could accept more TRICARE beneficiaries as patients, there are services for which the reimbursement was so low that accepting more TRICARE beneficiaries as patients hurt rather than helped them. In addition to these studies, officials from each of the TRICARE Regional Offices and two of the contractors, as well as a national provider organization, told us that reimbursement rates were civilian providers’ primary concern about TRICARE. Concerns about TRICARE’s reimbursement rates—which generally mirror the Medicare program’s physician fee schedule—have increased by the uncertainty surrounding the annual update to these Medicare fees. All of the contractors expressed concerns about the proposed decreases to Medicare rates and how that would affect providers’ acceptance of TRICARE patients. One contractor told us that providers already were expressing concerns about the Medicare rate decreases and that some providers said they would no longer accept TRICARE beneficiaries as patients if the rates were reduced. Furthermore, as of September 2010, this contractor noted that one provider had stopped accepting TRICARE beneficiaries as patients because of concerns about potential Medicare reimbursement reductions. TMA has the authority to adjust TRICARE reimbursement rates under certain conditions to increase beneficiaries’ access to civilian providers, and has done so in some instances. In response to various concerns about providers’ willingness to accept TRICARE patients, TMA contracted with a consulting firm to conduct a number of studies about TRICARE reimbursement rates, and some of these studies have resulted in increases to reimbursement amounts for certain procedures. (See app. II for a summary of the studies.) For example, in response to civilian obstetric providers’ concerns about TRICARE reimbursement rates, TMA conducted an analysis of historical TRICARE claims data and made nationwide changes to its physician payment rates for obstetric care in 2006. These changes included an additional payment for ultrasounds for uncomplicated pregnancies that is likely to result in overall higher payments for civilian physicians who perform one or more ultrasounds during the course of pregnancy. TMA also has the authority to adjust reimbursement rates through the use of waivers in areas where it determines that the rates have had a negative impact on TRICARE beneficiaries’ access to civilian providers. TMA can issue three types of reimbursement waivers, depending on the type of adjustment that is needed: Locality waivers may be used to increase rates for specific medical services in specific areas where access to civilian providers has been severely impaired and are applicable to both network and nonnetwork providers. Network waivers may be used to increase reimbursement rates for network providers up to 15 percent above the TRICARE reimbursement rate in an effort to ensure an adequate number and mix of primary and specialty care network civilian providers in a specific location. TMA can restore TRICARE reimbursement rates in specific localities to the levels that existed before a reduction was made to align TRICARE reimbursement rates with Medicare rates for both network and nonnetwork providers. Waivers can be requested by providers, beneficiaries, contractors, military treatment facilities, or TRICARE Regional Office directors, although all requests must be submitted through the TRICARE Regional Office directors.