More than 168,000 TRICARE Prime enrollees -- those in managed care networks set up more than 40 miles from a military base or a base closure site -- could lose access to those networks and therefore pay higher out-of-pocket costs under new TRICARE support contracts to take effect in 2009.

Retiree advocates say a proposed change to the next generation of contracts, floated by TRICARE in a draft bid proposal, would encourage contractors like Humana, TriWest and Health Net to make more cost-competitive bids by dismantling provider networks that aren’t near military treatment facilities or Base Realignment and Closure (BRAC) sites.

Cutting the number of Prime Service Areas, or PSAs, would save the government money, but it would hit thousands of beneficiaries in the wallet. Retirees, their spouses and survivors living more than 40 miles from base would lose access both to TRICARE Prime and also to TRICARE Extra, the military’s preferred provider option. They would have to shift to TRICARE Standard, which for beneficiaries is the most costly of TRICARE’s three options. The number of doctors willing to accept TRICARE patients also could tighten in areas where PSAs no longer would exist.

TRICARE officials declined to comment on the potential effect of the draft Request for Proposal, or RFP, which was released for review by potential bidders and other interested parties a few months ago. Officials said they don’t want to influence comments they receive. An official did emphasize that the RFP is only a draft. But the comment period in fact closed July 19 with few filed. A final RFP is expected to be issued soon.

The new contracts likely will be awarded next year, take effect in March 2009 and run for six years. Such contracts are vital to TRICARE, the health plan of 9.2 million military beneficiaries. More than half of all beneficiaries, roughly 5 million, are enrollees in Prime, the managed care option. Service members get care at no charge. Other Prime enrollees pay an annual fee of $230 for individual or $460 for family coverage, and modest co-payments for doctor visits, lab tests and hospital care. 

Beneficiaries who prefer to chose their own doctors, or who can’t access Prime where they live, use TRICARE Standard instead, a fee-for-service plan. Standard users pay an annual deductible of up to $150 for individuals or $300 for families, plus a hefty share of all medical bills -- 20 or 25 percent of “allowed charges” depending on patient category. Standard users can be stuck with additional costs if doctors won’t accept TRICARE allowable rates. But total medical costs per family cannot exceed a $3000 a year catastrophic cap.

A third option is TRICARE Extra, also for patients not enrolled in Prime. Extra provides a five percent discount on co-payments set under Standard because beneficiaries agree to use a Prime network provider.

Because the military only has hospitals, clinics and staff to treat a fraction its beneficiary population, it partners with large private-sector healthcare companies to run robust networks of healthcare providers. Support contracts for Prime alone cost the Department of Defense an estimated $6 billion a year.

Humana Military Health Services, headquartered in Louisville, Ky., has the managed care contract for the south region. TriWest Healthcare Alliance of Phoenix services the western region. Health Net Federal Services, of Rancho Cordova, Calif., has the north region contract.

When these current contracts were let, companies were allowed to add millions of dollars to their offers by promising to establish PSAs for beneficiaries living far from any base. Contractors were rewarded, or at least not punished, for such initiatives. Even if they could not claim to be the lowest bidder, they could still win the contract by claiming best value.

The draft RFP for the next generation of contracts says specifically that bids will be judged on providing Prime networks only for “government mandated PSAs,” those near military treatment facilities and BRAC sites. Any additional PSAs “will be evaluated as neutral,” which means a contractor will not help their competitiveness in this round by promising to extend the number of PSAs beyond base catchment areas.

At our request, TRICARE officials gathered from the three current contractors their estimate on the number of beneficiaries enrolled in PSAs that are more than 40 miles from bases or BRAC sites.

Humana, which touts 100 percent Prime coverage across the South region, reports 90,281 beneficiaries enrolled in these non-government Prime service areas. In the North region, Health Net has 18 PSAs outside of government areas with 59,049 beneficiaries enrolled. In the West region, TriWest operates only eight of these PSAs. They have 18,738 enrollees.

No representative for any of the three current contractors agreed to speak on the record about the potential impact on beneficiaries if the next support contracts adhere to TRICARE’s draft guidance. One source said Humana officials are particularly upset, given their investment in creating Prime service areas across the South region. With stiff competition expected for the next multi-billion dollar contract, Humana officials reportedly see the proposed neutrality toward operating region-wide PSAs as targeting a key advantage they hold over competitors.

TRICARE Prime Remote coverage would be unaffected by the new contracts. This special program allows active duty members and their families assigned away from military treatment facilities to get whatever care they need, from whatever doctor they choose, without paying more out of pocket than they would if they were enrolled in

TRICARE Eyes Fewer 'Prime' Networks
                     Tom Philpott | August 17, 2007
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