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Office of the Secretary of Defense (Health Affairs)/TRICARE Management Activity

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Department of Defense.


Notice of a TRICARE demonstration project for the State of Alaska

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This notice is to advise interested parties of a Military Health System (MHS) demonstration project entitled TRICARE Provider Reimbursement Demonstration Project for the State of Alaska. The delivery of health care services in the State of Alaska represents a unique situation that cannot be addressed fully by strictly applying the same reimbursement rules that apply to TRICARE programs in the other 49 states without some modification. Typically, provider payments are the same as under Medicare, unless the Department has taken specific action to increase payment rates in response to a particular, severe access problem in a location. Under this demonstration, payment rates for physicians and other non-institutional individual professional providers in the State of Alaska will be set at a rate higher than the Medicare rate. The demonstration project will test the effect of this change on provider participation in TRICARE, beneficiary access to care, cost of health care services, military medical readiness, morale and welfare. In particular, the demonstration will test whether the increased costs of provider payments are offset in whole or part by savings in travel costs, lost duty time, and other factors. This demonstration will be conducted under statutory authority provided in 10 U.S.C. 1092.


January 1, 2007. This demonstration will remain in effect for a period of 3 years.


TRICARE Management Activity (TMA), TRICARE Operations Directorate, 5111 Leesburg Pike, Suite 810, Falls Church, VA 22041-3206.

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CAPT Cynthia DiLorenzo, Office of the Assistant Secretary of Defense (Health Affairs)—TRICARE Management Activity, telephone (619) 236-5304.

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A. Background

Alaska is a land of extremes and contradictions. It is the largest state in the United States, containing one-fifth of all United States land, yet is one of the least populated. It boasts both the highest mountain in North America and the longest coastline of any state. There are just a few major roads providing residents the ability to travel to the major cities in the State. Other means of transportation are by boat or plane. which places severe hardships on beneficiaries attempting to access needed health care services. It has geography characterized by harsh ice islands and desert tundra. Alaska's citizens are no less diverse.

Alaska's population is just under 627,000. Of these, approximately 71,000 are Military Health System (MHS) beneficiaries. More than half of these beneficiaries reside in south-central Alaska in the State's largest city—Anchorage. Alaska's military treatment facilities (MTFs) meet a large percentage of Alaska's beneficiary health care needs. Those remaining are referred to local civilian providers or to the lower 48 states. Access to health care services in Alaska is often severely limited by the overall dearth of providers, their reluctance to accept TRICARE payment rates, transportation issues, and other factors. In response TRICARE has taken steps to increase payment rates, as detailed below.

B. Past Efforts to Address Access Issues

In 2000, TRICARE created a new payment locality encompassing all of Alaska except Anchorage, and increased payment rates by 28 percent in the new locality. In 2004, pursuant to specific Congressional action, Medicare increased its payment rates in Alaska by 50 percent, and TRICARE rates were increased to match the new Medicare rates. The higher Medicare rates continued though the end of 2005, when the special Congressional provision expired; the Medicare rates reverted to former levels. TRICARE rates reverted to their former level, 28 percent higher than Medicare rates.

C. Other Payers in Alaska

As noted, TRICARE payment rates in Alaska are 28 percent above Medicare rates. It is estimated that commercial rates in Alaska are about 70 percent above TRICARE rates. The Department of Veterans' Affairs purchases some health care services for Veterans in Alaska, using a specially developed rate schedule. Most rates are higher than TRICARE rates, and a few are lower; on average, the VA rates are approximately 35 percent higher than TRICARE rates.

D. Current Status of Access

Large numbers of providers in Alaska are considering no longer treating military beneficiaries owing to low payment rates. Over 70 providers or provider groups in a wide range of specialties are of concern, some of them the sole provider in Alaska for their specialty.

The alternatives to local purchase of services for military officials are to transport patients to Seattle or another location for treatment, or to relocate scarce military medical assets to Alaska to provide services. The first is an expensive proposition that brings with it considerable lost duty time and other complications; the second approach is untenable in wartime, and as a practical matter medical practice in Alaska would not provide sufficient opportunity for military medical specialists to maintain their skills.

Under a recent policy change, TRICARE limits its payment in cases where Medicare providers “opt out” of Medicare and enter into private contracts with Medicare patients. This may be problematic in Alaska, with the very small number of providers available.

E. Description of Demonstration Project

Under this demonstration, DoD will waive, for services provided in the State of Alaska, the provisions of 10 U.S.C. section 1079(h) that require TRICARE payments for physicians and other individual professional, non-institutional providers to be the same as under Medicare. Instead, TRICARE will adopt a rate that is 1.35 times the current TRICARE allowable rate. In addition, DoD will be the primary payer for services obtained from providers who have opted out of Medicare by Medicare-eligible uniformed services beneficiaries.

This action will directly increase reimbursement levels for providers, and is expected to result in increased access to care for military beneficiaries; reduced travel to Seattle, accompanied by a reduction in lost duty days; and improved morale for military members and families as a result of increased access and reduced separation.

F. Implementation

The demonstration will go into effect on January 1, 2007.

G. Evaluation

An independent evaluation of the demonstration will be conducted. The evaluation will be designed to use a combination of administrative and survey measures of health care access to provide analyses and comment on the effectiveness of the demonstration in meeting its goal of improving beneficiary access to health care by maximizing the potential pool of health care providers in Alaska.

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Dated: November 14, 2006.

L. M. Bynum,

Alternate OSD Federal Register Liaison Officer, Department of Defense.

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[FR Doc. E6-19553 Filed 11-17-06; 8:45 am]