The TRICARE-MHS Benefits Development Process: Advances in Medicine and the NDAA

1. The TRICARE-MHS Benefits Development Process: Advances in Medicine and the NDAA TMA Lead Agent & Directors Summer Meeting August 13-15, 2002

2. TRICARE-MHS Purchased Care Benefits • Part I: The Evolution of Healthcare Benefits • TRICARE strives to be a uniform program in contrast to Medicare/Medicaid which vary widely • Title 10 requires we provide all medically necessary/appropriate, i.e. proven, health care • Experimental care prohibited with one exception • Part II: The Evolution of Programmatic Benefits • Statutory (NDAA) or Discretionary • Determines scope of benefits & methodologies • Title 10 does prohibit management of certain conditions & impacts on care evolution also

3. TRICARE is an Entitlement Program not an Insurance Plan Differences in Purchased Care versus Direct Care Benefits Development Process: MB&RS & OCMO Special and Emergent Provision Rare Diseases Provision Factual Appeals Process Experimental Therapy and Clinical Trials Part I: Evolution of Healthcare Benefits

4. TRICARE Purchased Care is an entitlement program governed by: Statute --Title 10, Chapter 55 32 Code of Federal Regulations (CFR), Part 199 Policy, Ops and Data Processing Manuals New benefits come into the program as soon as determined to be medically appropriate; i.e. Proven May differ from Standard of Care (e.g. OB/US) Title 10 excludes experimental (i.e. Unproven) therapy Exception for Clinical Trials under Interagency Agreements initiated at ASD discretion (1996 NCI/DoD) Entitlement/Insurance

5. There are benefit differences between direct care and purchased care systems Direct care does not have all of the same limitations as purchased care; e.g. Obesity Mgt Direct care does not have to define the benefits through 32 CFR and policy Purchased care cannot pay for services that are prohibited by statute/CFR CFR has the force of law Direct Care/Purchased Care

6. Treatments/procedures must be medically necessary and appropriate by standards of practice in the USA Cannot be unproven or excluded by Title 10/32 CFR Hierarchy of Reliable Evidence Prioritization, funding, contract modification, coding, implementation can take up to 1-2 years Special and Emergent Provision protects vulnerable TMA determines the purchased care benefits, not contractors and not the MTFs TRICARE Purchased Care Benefits Development Process

7. 1. Well controlled studies with clinically meaningful endpoints, published in refereed medical literature 2. Published formal technology assessments 3. Published reports of national professional medical associations; AMA, ACP, ANA 4. Published positions of medical policy organizations 5. Published reports of national expert opinion organizations; NIH panels, CPS Task Force, ACIP TRICARE HIERARCHY OF RELIABLE EVIDENCE (32 CFR)

8. A rare disease is defined as one which affects fewer than 1 in 200,000 Americans Definition is under review at this time Coverage for treatment is still dependent upon evidence which demonstrates that the proposed treatment is safe and effective The evidence of efficacy is less rigorous because there may be insufficient clinical material to perform well-controlled clinical trials There may be no US standard of care A single uncontrolled trial or case report may be sufficient RARE DISEASES

9. MCS Contractor denies Rx as unproven Beneficiary/provider appeals denial to MCSC MCS Contractor issues Reconsideration Denial Appealing party submits request for formal review to TMA Appeals and Hearings Division A&HD sends to MB&RS to review Coordination with OCMO Appeals and Hearings Division issues formal review decision Formal hearing with hearing officer on request FACTUAL APPEAL PROCESS

10. Title 10 prohibits TRICARE from paying for care within clinical trials; i.e. experimental care The statute permits waiver of this exclusion for trials sponsored/approved by the NIH at ASD discretion subject Interagency Agreement In 1996, the DoD/NCI Clinical Trials Phase II/III cancer treatment and prevention program Participation in additional clinical trials subject to expansion of the NIH Interagency Agreement However priority for funding would be in competition with proven benefits Experimental Therapy & Clinical Trials

11. Part II: Evolution of Programmatic Benefits • Most programmatic benefits are driven by the annual National Defense Authorization Act (NDAA) • The NDAA directs HA/TMA to implement programs and/or grants discretion to the HA/TMA to do so • Because these benefits affect the way we provide care they are generally subject to interagency and public review/comment via the process of regulation (rule) publication: 32 CFR Chapter 199 • Interim Final Rule >>>> Final Rule • Implements directed statutory language explicitly • Proposed Rule >>>> Final Rule • Implements discretionary aspects of legislation and other self-generated concepts

12. Program Benefit DevelopmentFrom Concept/Legislation to Implementation • Post-Legislation Planning: 30-60 days; analysis/interpretation, strategies, necessity for regulation (IFR/PR) leading to Final Rule • Rule Publication Activities (if necessary): 12-15 months; draft and coordinate internally, obtain IGCE, Obtain HA Policy Decisions, OMB approval, first publication, public comment period, analysis of comments/ & modification, internal coordination/signatures, final OMB approval, final publication • Contract Modification Preparatory Activities: 90-120 days; develop policies and instructions, final IGCE, CMB approval/program funding, contract language preparation • Contract Modification: Bilateral negotiation 90-150 days; unilateral change order <5 days but impact leads to retro-negotiation • Contractor Implementation Lag: 60-120 days (with exceptions); systems modifications/coding changes, contractor staff training • Total Concept/Legislation to Implementation: 12-24 months!

13. NDAA 02 Key Programs: Status Update • NAS Elimination • Skilled Nursing Facility- PPS • Home Health Care- PPS • Custodial Care Definition Change • Expanded Benefits for ADSM family members • Enhancing PFPWD >>> ECHO) • Custodial Care Transition Program (CCTP)

14. Elimination of Non Availability Statements • Scheduled Implementation: January 04 or earlier with T-NEX • Status: • IGCE completed • IFR to be completed in draft form by Oct 02 • Plans to address anticipated loss of OB services on the table • Proposed Concept: • Except for mental health, all NAS requirements will be eliminated • ASD(HA) may waive the NAS elimination requirement (except for OB) if: • Significant costs would be avoided by performing specific procedures at the affected MTFs, or • Specific procedures must be provided at the MTF to ensure proficiency levels of the practitioners, or • Elimination would interfere with contract administration • ASD(HA) waiver will require notification to the beneficiaries & HASC/SASC • Major Issue:ASD policies as regards exceptions to statute prior to, and after, implementation of healthcare delivery under T-NEX

15. Implementation of Skilled Nursing Facility Benefit & Prospective Payment System • Key Issues: • TRICARE SNF benefit currently unlimited • Reimbursement based upon TMAC rates and billed-charges • TFL beneficiaries pose huge potential liability • NDAA-02 directs benefit to mirror Medicare benefit except the Medicare 100-day SNF benefit limit: • Mandatory hospitalization prior to SNF admission • SNF admission to be within 30 days of hospital discharge • Prospective Payment System (PPS) methodology for reimbursement • Benefits to our Program: • TRICARE will be secondary to Medicare for TFL benes < 100 days • Most SNF admissions < 30 days • Much reduced liability for our program as regards TFL benes • Status: • IFR published 13 June 02 • Contract modification process now underway

16. SKILLED NURSING FACILITY (SNF) Government Costs FY '02 *Source Health Care Service Records / as of 5/31/02

17. TFL - TRICARE PRIMARY PAYER SNF Government Costs October 1, '01 to May 2002* *Source Health Care Service Records / as of 5/31/02

18. Skilled Nursing Facility Benefit and Prospective Payment System Rule Publication Activities Approximate Date for Services to be Provided Contract Mod (CM) Preparatory Activities Began October 01 May 03 Bilateral CM Negotiation Process (90-150 days?)* Implementation Period** TIME LINE Jun 03 Dec 03 Dec 01 June 02 Dec 02 **Usual time frame 60-120 days *Unilateral CM process 5 days Rev: 11 August 02

19. Implementation of Home Health Agency Prospective Payment System • Key Issues: • TRICARE HHC Benefit under the basic program is unlimited • Reimbursed based on CMAC billed charges methodology • Except for ICMP-PEC very few TRICARE benes require extensive HHC • Huge financial liability for our program with implementation of TFL • NDAA requires adoption of Medicare PPS for HHC • 28-35 hours maximum of part-time and intermittent care reimbursed based upon fixed case-mix and wage-adjusted 60-day episode amount • Renewable for 60 days at a time • Includes home health aides as providers (excluded under TRICARE) • Adopting Medicare benefit reduces TRICARE liability for TFL benes • However: • Abbreviated OASIS assessments will be required for beneficiaries who are under the age of eighteen or receiving maternity care • How shall we provide services for non-TFL benes requiring more than 28-35 hours/wk? TRICARE ECHO PROGRAM

20. TRICARE Definition(s) of Custodial Care • “Olde” Definition: Elements describe the Patient not the Care • Patient has a prolonged mental or physical disability • Patient requires protected, monitored, or controlled environment • Patient requires assistance to support activities of daily living • Patient is not receiving care likely to result in sufficient improvement to overcome first three elements of definition • New Definition: Elements describe the Care not the Patient • Treatment or Services that can be rendered safely and reasonably by a person who is not medically skilled • Designed mainly to assist with activities of daily living • Effective Date of Definition 28 December 2001 • Processes to implement provision of care under this definition contractually have been developed and implemented

21. What TRICARE provided for Custodial Care (Patients) • Prior to NDAA 02 and under “Olde” Definition: • One hour of skilled care in the home daily for the condition which has resulted in custodial care determination • One physician home visit per month for same • All medically necessary meds/DME subject to program limits • Additional in-home skilled care only under the ICMP-PEC program (a waiver of benefit limits program established 1999 and now eliminated by the NDAA 02) • After NDAA 02: • HHC and SNF (not nursing home) care subject to program limits applicable for all beneficiaries • Skilled care only, not assistance with activities of daily living

22. Extended Care Benefits for Active Duty DependentsTRICARE ECHO Program • NDAA Issues resultant from change to Custodial Care def. • ICMP-PEC terminated 28 Dec 2001 • Current ICMP-PEC beneficiaries grandfathered for ongoing care • Discretionary enhancement of PFPWD program permitted • May increase monthly cap from $1000 up to max of $2500 for traditional PFPWD services • May create an extended home health care benefit for dependents of ADSMs to accommodate those whose needs exceed the part-time or intermittent HHC benefit in basic program • May provide medically necessary care and custodial care • May provide a Respite Care benefit • Does not apply to retirees and their dependents • Major concern of beneficiary groups

23. Custodial Care Transitional Policy (CCTP)Implemented July 02 • Necessary until HHC/SNF/ECHO are in program • Provides additional in-home skilled services for custodial care benes under “olde” definition • Applies to all dependents, not just ADSMs • Contractors not at-risk for funds • Major Issues: • Once HHC & SNF are implemented retirees and their family members will be limited to 28-35 hours of part time, intermittent care only as they are not ECHO eligible

24. The TRICARE-MHS Benefits Development Process: Advances in Medicine and the NDAA TMA Lead Agent & Directors Summer Meeting August 13-15, 2002