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TRICARE for Life and Senior Pharmacy Program

A Joint Statement By

The Honorable J. Jarrett Clinton, MD, MPH, 
Acting Assistant Secretary of Defense for Health Affairs

H. James T. Sears, MD
Executive Director, TRICARE Management Activity

 and

Ken Scheflen
Director, Defense Manpower Data Center

Mr. Chairman, distinguished Members of the Subcommittee, we are pleased to have this opportunity to appear before you to provide a status report on our implementation of the new benefits for our senior beneficiaries authorized by the National Defense Authorization Act (NDAA) for FY01, including expanding the pharmacy program.

            The Military Health System (MHS) is a unique and extraordinary health system with just under 80 hospitals and over 600 clinics worldwide serving an eligible population of 8.1 million. We ensure the health of our forces and care for them when ill or injured anywhere around the globe. Further, we provide comprehensive health coverage to the families of our service members, our retirees and their families, and the surviving family members of those who have died in service to our country. Our attention to the health of our forces involves research, prevention and health promotion, and appropriate care whether deployed or at home stations. This health and medical program demands timely, supportive, and quality care for family members and relies on fully trained and militarily prepared healthcare personnel. The support for deployed forces is inextricably linked to the operation of hospitals and clinics. We cannot provide Force Health Protection without a robust healthcare delivery system.

            The new benefits for military retirees aged-65 and older included in the Floyd D. Spence National Defense Authorization Act represent the most significant changes to the Military Health System in decades. Effective April 1, 2001, eligible uniformed services beneficiaries age 65 and older will have access to a worldwide pharmacy benefit. Effective October 1, 2001, TRICARE will act as a second payer to Medicare for Medicare-eligible retirees, their family members, and survivors. The effect of these benefits will be to cover most out-of-pocket healthcare costs for approximately 1.5 million Medicare-eligible beneficiaries. We assure you that the Department is working aggressively to deliver these new benefits in a timely and effective manner. 

            This morning we will address the Department's efforts to implement these new benefits. We will then comment on the Department's implementation of other significant benefit changes contained in the National Defense Authorization Act for FY 2001.

            We began our efforts to implement these new provisions immediately once the bill was signed. Our guiding principles included teamwork, simplicity, and visibility. Working closely with the military services, the DoD Comptroller, the Director of Program Analysis and Evaluation, the DoD General Counsel, the DoD Actuary, the Office of Management and Budget, and beneficiary representatives, we designed and will put into operation these new benefits in time to meet statutory effective dates. We posed questions regarding eligibility, applicability, contractual mechanisms, processes, regulatory requirements, beneficiary behavior, timelines, and costs. While we continue to pursue some of the answers, the Department's leadership is committed to ensuring that the pharmacy benefit and TRICARE as a second payer to Medicare are on track for implementation April 1 and October 1 of this year, respectively.

Pharmacy Program

            Pharmacy costs continue to rise at rates far above that of other healthcare costs in the United States. With direction from this Committee plus recommendations from the General Accounting Office, we conducted a detailed review of our pharmacy structure and programs considering the best business practices of the private sector. We established a working group comprised of military and civilian experts, consultants with expertise in pharmacy benefit design, and the pharmacy directors of our Managed Care Support Contractors. The workgroup sought information from beneficiaries, professional pharmacy organizations and the pharmaceutical industry; they identified best business practices and conducted comparisons with the military pharmacy programs. Several recommendations emerged from this effort to include an integrated information system across all sources of pharmaceuticals within the TRICARE benefit. This system would enable pharmacists and providers to screen for drug interactions and allow comprehensive pharmacy benefit management. Other recommendations included uniform pharmacy benefit policies, a uniform formulary, centralized pharmacy benefit management, and extending best federal pricing to the network retail pharmacies. Implementation of these recommendations will significantly enhance the quality of care delivered to our beneficiaries and curb the rising costs of pharmacy benefits.

            The pharmacy program we begin in just two weeks incorporates many of the recommendations from that previous effort, and very importantly includes our senior beneficiaries. As prescribed by statute, this pharmacy benefit will be open to uniformed services beneficiaries age 65 and older who are registered in the Defense Enrollment Eligibility Reporting System (DEERS). Beneficiaries who will be 65 years of age before April 1, 2001, do not have to enroll in Medicare Part B. Those who turn 65 on or after that date must be enrolled in Part B in order to use the mail order and retail pharmacy benefits. Eligible beneficiaries can obtain their prescription drugs at military treatment facilities, through the National Mail Order Program, and at TRICARE network and non-network retail pharmacies. There is no enrollment fee for this new program.

As part of the pharmacy program, we will introduce a simplified tiered co-pay system that will apply to all active duty family members and retirees and their families. Effective April 1, beneficiaries will pay $3 for a generic drug and $9 for a brand-name drug on the formulary when they obtain their prescriptions through the National Mail Order Program or network retail pharmacies. The mail order program will provide up to a 90-day supply for this amount, while the network retail pharmacies will provide up to a 30-day supply. All beneficiaries may continue to use military pharmacies without co-pays for their medications. There will be higher co-pays for use of non-network pharmacies. When using a non-network pharmacy for medications, beneficiaries will pay for their drugs and submit claims for reimbursement. Once the deductible of $150 has been met ($300 for families), the medications will cost either $9 or 20 percent, whichever is greater, for up to a 30-day supply. Additionally, the Point of Service penalty of 50 percent of billed charges will apply for TRICARE Prime beneficiaries who use a non-network pharmacy without first obtaining approval. The intent of these changes is to develop a uniform, consistent and equitable co-pay structure for all beneficiaries that will influence participation in the most economic point of service and product selection.

            We are delighted to report that the Pharmacy Data Transaction Service (PDTS) successfully completed Alpha testing at Wright-Patterson AFB in November 2000. We have it operating in the mail order pharmacy program and at three of our five US regional managed care support contractors. Over 50 of our military hospitals and clinics have the system in operation and worldwide deployment is on schedule; expected completion date is August of this year. This system creates a centralized data repository that will record information about prescriptions filled for beneficiaries at military medical facilities, the TRICARE retail pharmacy network pharmacies and the national mail order pharmacy program. The PDTS conducts an on-line prospective drug utilization review against a beneficiary's complete medication history for each new or refilled prescription before it is dispensed to the patients. It also provides an aggregate screening capability across the highly transient population of active duty and retired beneficiaries. This system improves the quality of prescription services and enhances patient safety by reducing the likelihood of adverse drug to drug interactions, therapeutic overlaps and duplicate treatments.   

The interim final rule for the new pharmacy program was published on February 9, 2001. We are nearing completion of contract negotiations with our managed care support contractors, who will implement the retail pharmacy benefit, and our national mail order contractor is ready to serve our senior beneficiaries on April 1. Beginning last month, our managed care support contractors mailed marketing materials to beneficiaries to inform them about the new benefit. The response from our beneficiaries has been impressive: our government call center now receives over 3,000 calls per day. We have staffed the call center to field these calls on a timely basis and to answer questions beneficiaries have about the new pharmacy program.

Expanding TRICARE to Medicare Eligibles

            Implementation of expanded TRICARE benefits, beyond pharmacy, is well underway. Effective October 1, our age 65 and over beneficiary population will become eligible for TRICARE benefits as well as having TRICARE become a secondary payer to Medicare for care received outside military medical facilities. The law requires that all Medicare-eligible beneficiaries be enrolled in Medicare Part B to receive the new TRICARE benefits. With enrollment in Part B, these new benefits will provide the following coverage:

·        If the medical care received is a benefit of both Medicare and TRICARE, Medicare will pay the allowable amount for the care. TRICARE will pay the amount that is the Medicare cost share, as well as any Medicare deductible. Almost all medical services are a benefit under both Medicare and TRICARE.

·        If the medical care received is a benefit of Medicare, but not a benefit of TRICARE, Medicare will pay its normal amount and the beneficiary will be responsible only for the Medicare deductible and cost-share. An example would be certain types of chiropractic care covered by Medicare, but not by TRICARE. 

·        If the medical care received is a benefit of TRICARE, but not a benefit of Medicare, Medicare pays nothing. TRICARE will pay the amount it pays for the same service received by a retiree under the age of 65. In this case, the beneficiary must pay applicable TRICARE co-pays and deductibles. The primary example of this type of coverage is the prescription drug benefit.

As we began our planning for covering our senior beneficiaries, we considered initiating separate contracts, or carve-outs, for TRICARE as second payer to Medicare and the senior pharmacy program. However, to meet our timelines and to ensure adequate beneficiary service, we determined that our current contractors could best administer these programs. These contractors know TRICARE, have participated in our senior demonstration programs, and have experience working with the Health Care Financing Administration (HCFA) and Medicare programs. This decision has confirmed that those who do business with us want to work with us for the purpose of providing an excellent benefit and not simply for earning a profit. Similarly, discussions with HCFA have indicated that using our current claims processors, which also provide Medicare claims processing in their areas, is the most expedient course to meet the October 1 date. With outstanding cooperation from HCFA we are establishing the mechanisms to conduct data exchanges that will assist us in determining those of our beneficiaries who have purchased Medicare Part B, thus verifying eligibility to participate in the program.

            The secondary payer provisions of TRICARE for Medicare eligibles apply to healthcare received outside military medical facilities. As you know, except for the on-going TRICARE Senior Prime demonstration project, Medicare does not reimburse the Department for care we provide to Medicare-eligible beneficiaries. Under this new law, Medicare-eligible retirees can continue to use military medical facilities for their care and we are confident that many of them will want to do so. About 60 percent of our senior population reside near a military hospital or clinic -- within approximately 40-miles of a hospital and about 20 miles of a clinic. In response to survey questions sent earlier this year, the initial returns suggest a majority of respondents would prefer to use military medical facilities. We continue our decision-making process on how to structure this care under the new benefit. This decision involves how military hospitals and clinics would enroll retirees over age-65 and how this care would be reimbursed. In this effort we must consider implications for our readiness missions and are working closely with the Surgeons General and our military treatment facilities commanders.

            TRICARE coverage in our military medical facilities requires examination of capability and capacity of these facilities. We have asked each of our Surgeons General to provide that information on a facility-by-facility basis. We know that this senior beneficiary population, as a whole, requires significant and often more intense healthcare, estimated to be about three times the healthcare required by our active duty force and their families. Additionally, patient education and customer service activities will increase three-fold. The challenge we face is one where we have a limited capability in terms of manpower, specialties, and structure, with the services expressing a strong desire to bring this population into the military medical facilities, and a population that wants to receive their care from military medical personnel. We have undertaken an examination of a number of options - TRICARE Standard, TRICARE Extra, and TRICARE Senior Prime in military medical facilities and in civilian networks, as well as an approach similar to the MacDill model of primary care empanelment. We continue to look at all possibilities recognizing the readiness, legal and cost implications of those options. Our objective is to submit an interim final rule for publication this summer. 

As you know, the NDAA extended the TRICARE Senior Prime demonstration program for one year beyond its original expiration date of December 31, 2000. We are continuing discussions with the Health Care Financing Administration on issues concerning this program.

Informing Our Beneficiaries about the New Benefits

            Informing our beneficiaries and other stakeholders is critical to the success of these new programs. We have taken an aggressive, proactive approach to inform our beneficiaries, our providers, our military and civilian leadership, the line leadership throughout the Armed Forces, and other Uniformed Services beneficiaries. Most significant among these efforts is the two-tiered initiative with our beneficiary associations represented by the Military Coalition and the National Military and Veterans Alliance. Meeting every two weeks, a working level panel addresses all aspects of the new legislative authorities in detail with the program managers of the various elements. Second, Dr. Clinton chairs a quarterly meeting with the Presidents and Executive Directors of representative associations to review our progress, seek their counsel and address any questions. These sessions have been valuable and productive. We have issued press releases, conducted media roundtables and interviews, established a special section on our TRICARE web site, produced pamphlets and briefing materials, and established a toll free call center for the pharmacy program. Our managed care support contractors have taken a leading role in creating materials for both beneficiaries and providers. Our military medical facilities also will be conducting community and beneficiary briefings. We are revising our TRICARE course materials and updating TRICARE marketing products. At the recommendation of our beneficiary associations, we have taken several steps to reach hard-to-find senior beneficiaries; this might include those who have not associated with the military in many years and those in assisted living facilities or nursing homes. We are hopeful that these outreach efforts will be successful in letting our beneficiaries know how the new programs work and in answering questions they may have.

  Determining eligibility to participate in the new TRICARE benefits rests with the Defense Manpower Data Center (DMDC). This center operates the Defense Enrollment Eligibility Reporting System (DEERS), the principal source for determining and verifying military healthcare eligibility. While DEERS is ready to implement the verification of eligibility for the new benefits, issues remain:

·        Some retirees have allowed identification cards and eligibility of family members lapse since they have not been using military facilities. These individuals will have to take action to re-establish their eligibility.

·        A small number of survivors of deceased service members who died prior to the creation of DEERS, in the early 1980's, are not in the DEERS database. These individuals will need to identify themselves and re-establish their eligibility.

·        DMDC anticipates a surge of claims for equitable relief by individuals who previously waived enrollment in Medicare Part B and now do not want to pay the penalty for late enrollment.

·        The DMDC operational call center has experienced a dramatic increase in call volume due to the forthcoming new benefits. This increase has begun to stretch resources.

·        DMDC will depend on active cooperation and on-going data exchange with HCFA to maintain accurate records on eligibility.

  Funding the new benefits in the Defense Health Program budget is challenging. Our own military hospitals and clinics provide most of the healthcare delivered in our TRICARE program, consequently they receive over 60 percent of the Defense Health Program dollars; less than 30 percent is used to purchase care from the civilian sector. The President's budget request for fiscal year 02 will include an increase of $3.9 billion in the Defense Health Program funding to fund the new TRICARE for Life benefits. It is imperative that the Department identify where it is most prudent to deliver services considering our military facility and manpower resources as well as funding. The Medicare-eligible Retiree Health Care Fund begins operation in fiscal year 2003. At present, we have discussions underway with OMB, and within the Department to define the parameters for establishing the fund. In the next few weeks we will forward a report to the Congress on the fund.

  At your request, Mr. Chairman, in our testimony we have focused on the pharmacy and TRICARE for Life aspects of the Floyd D. Spence National Defense Authorization Act for FY 01. However, we note also that we are working to implement the many other new benefit changes included in this legislation. Specifically, we will eliminate co-pays in the civilian network for all active duty Prime family members, except for pharmacy, on April 1. In addition, on October 1, 2001, we plan to implement the TRICARE Prime Remote program for those family members of active duty personnel who reside with their sponsors in locations designated remote, that is, locations more than 50 miles from a military medical facility. Medical and dental benefits for Medal of Honor recipients and their immediate family members will begin April 1, as will medical and dental benefits to survivors of deceased service members. We are also working toward implementation of provisions offering school physicals, lowering the catastrophic cap and travel reimbursement.

  In closing Mr. Chairman and Distinguished Members of the Subcommittee, we are working aggressively to fully implement the new benefits for our retirees, as well as our active duty members and their families. Behind these many implementation actions lies extraordinary staff work - building and projecting sound options, developing policy positions, preparing and coordinating federal rules, and negotiating contract modifications. This work continues on all aspects of the new legislative authorities as well as the work to sustain current TRICARE operations.

  I want to point out that as a whole, TRICARE is improving for all our beneficiaries:

·        Our beneficiary satisfaction rates continue to rise;

·        We have greatly improved our claims processing record;

·        We have added Beneficiary Counseling and Assistance Officers and Debt Collection Assistance Officers to help our beneficiaries with problems and overdue medical bills, as well as to understand the causes of the events;

·        We continue to focus on population health in all our communities while optimizing our military medical facilities;

·        We have again opened discussions with the Department of Veterans Affairs in an effort to pursue prudent sharing opportunities;

·        We have continued our initiatives for attaining excellent quality and better patient safety in the delivery of healthcare.

  As we work together within the Department, with the Congress, and with other federal agencies to construct the new benefits authorized by the National Defense Authorization Act for FY 01, we must ensure that all decisions reflect our most important mission, that of readiness. We must ensure that our service members are fit and healthy, that we have done all we can to ensure the prevention of casualties, and that our military medical personnel are ready and able to provide casualty care when and wherever that care may be needed.

  We thank you, Mr. Chairman and the entire subcommittee, for your continued support of TRICARE and look forward to working closely with you, our beneficiaries, and our line leadership as we shape and begin to deliver these new health care benefits.

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