Background

Military medical care is a congressionally authorized entitlement that has expanded in size and scope since the late 19^th century. Chapters 55 and 56 of Title 10, U.S. Code entitle certain health benefits to military personnel, retirees, and their families. These health benefits are administered by a Military Health System (MHS). The primary objectives of the MHS, which includes the Defense Department's hospitals, clinics, and medical personnel, are (1) to maintain the health of military personnel so they can carry out their military missions, and (2) to be prepared to deliver health care during wartime. The MHS is one of the largest health systems in the United States and serves over 9.6 million beneficiaries.¹ The MHS is to maintain the health and wellness of military personnel so they can carry out their military missions, and to be prepared to deliver health care during wartime.² This mission is further defined in law as follows:

• "... to create and maintain high morale in the uniformed services by providing an improved and uniform program of medical and dental care for members and certain former members of those services, and their dependents."³
• "To support the medical readiness of the armed forces and the readiness of medical personnel...."⁴
• Perform medical research that is "of potential medical interest to the Department of Defense."⁵
• Conduct "humanitarian and civic assistance activities in conjunction with authorized military operations...."⁶

Health care within the MHS is delivered through either Department of Defense (DOD) medical facilities, known as military treatment facilities (MTFs), as space is available, or through networks of participating civilian health care providers. The MHS operates 721 MTFs and employs nearly 61,000 civilians and 78,000 military personnel across the United States and in overseas locations.⁷

The MHS also covers dependents of active duty personnel, military retirees, and their dependents, including some members of the reserve components. Since 1966, civilian health care to millions of retirees, as well as dependents of active duty military personnel and retirees, has been provided through a program still known in law as the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), but more commonly known as TRICARE.⁸ A Medicare wrap-around option (TRICARE for Life) for Medicare-eligible retirees was added in 2002. Other TRICARE plans include TRICARE Young Adult, TRICARE Reserve Select, and TRICARE Retired Reserve. TRICARE also includes a pharmacy program and optional dental and vision plans. Options available to beneficiaries vary by the sponsor's duty status and geographic location.

Questions and Answers

1. How is the Military Health System Structured?

Five primary DOD organizations participate in administering the MHS: Office of the Assistant Secretary of Defense for Health Affairs (ASD[HA]), Defense Health Agency (DHA), Army Medical Command (MEDCOM), Navy Bureau of Medicine and Surgery (BUMED), and Air Force Medical Readiness Agency (AFMRA). Each maintains separate and distinct responsibilities in executing the primary mission of the MHS:

• Office of the ASD(HA). Responsible for the development of MHS-wide policies, budget administration, and oversight activities.⁹
• DHA. Responsible for policy execution, administration and management of MTFs, coordination of Defense Health Program research funding, and the delivery of health care through the TRICARE program.¹⁰
• Service Medical Departments (MEDCOM, BUMED, AFMRA). Responsible for recruiting, organizing, training, and equipping military medical forces to DHA or combatant commanders for the provision of medical care or health services support.¹¹

DOD has established a governance structure to facilitate the decisionmaking process, maintain oversight of DOD health care, and coordinate health programs, services, resources, and benefits within the MHS (see Figure 1).

MHS Governance Entities

Defense Health Board (DHB)

The DHB is chartered under the Federal Advisory Committee Act to advise the Secretary of Defense (SECDEF).¹² The Board provides "independent advice and recommendations to maximize the safety and quality of, as well as access to, health care" for DOD beneficiaries.¹³ The Board does not have a formal role in governing the MHS, rather, provides advice specifically on DOD:

• health care policy and program management;
• health research programs;
• requirements for the treatment and prevention of disease and injury;
• health promotion and wellness, including the effective and efficient delivery of high-quality health care services; and
• other health-related matters of special interest.¹⁴

The DHB is composed of no more than 19 members who are not full-time or permanent part-time federal officers or employees and are considered "eminent authorities" in public health, health system management, health care delivery, medical research, or other related disciplines.¹⁵

Military Health System Executive Review (MHSER)

The MHSER serves as a senior-level forum for DOD leadership input on strategic, transitional, and emerging issues. The MHSER advises the SECDEF and the Office of the Deputy Secretary of Defense (DEPSECDEF) about performance challenges and direction. The MHSER is composed of the following senior DOD leaders:

• Under Secretary of Defense (Personnel and Readiness) (USD[P&R]) (Chair);
• Principal Deputy Under Secretary of Defense (Personnel and Readiness);
• ASD(HA);
• Military Service Vice Chiefs;
• Military Department Assistant Secretaries for Manpower and Reserve Affairs;
• Director of Cost Assessment and Program Evaluation;
• Principal Deputy Under Secretary of Defense (Comptroller);
• Director of the Joint Staff; and
• Military Service Surgeons General (ex-officio members).¹⁶

Senior Military Medical Action Council (SMMAC)

The SMMAC is the highest governing body in the MHS, which presents enterprise-level guidance and operational issues for decisionmaking by the ASD(HA). The SMMAC is comprised of the following senior military health leaders:

• ASD(HA) (Chair);
• Principal Deputy Assistant Secretary of Defense (Health Affairs) (PDASD[HA]);
• Military Service Surgeons General;
• DHA Director;
• Joint Staff Surgeon (JSS); and
• other attendees as required.¹⁷

Joint Medical Oversight Council (JMOC)

Reporting to the SMMAC is the JMOC, which ensures that actions are coordinated and aligned with MHS strategy, policies, directives, and initiatives. The JMOC is comprised of the following military health leaders:

• PDASD(HA) (Chair);
• Military Service Deputy Surgeons General;
• DHA Deputy Director; and
• JSS Representative.¹⁸

Figure 1. Military Health System Governance

Source: CRS graphic based on email communication with DOD officials, August 25, 2021.

Defense Health Agency

The DHA is a designated Combat Support Agency that focuses on enabling medical readiness of the Armed Forces and delivering a ready medical force to Combatant Commanders during peacetime and wartime.¹⁹ Established in September 2013, the role of DHA is to

• manage the TRICARE program;
• manage and execute the Defense Health Program appropriation and the Medicare Eligible Retiree Health Care Fund (MERHCF);
• support coordinated management of military health care markets to create and sustain a cost-effective, coordinated, and high-quality health care system;
• exercise management responsibility for shared services, functions, and activities of the MHS;
• exercise authority, direction, and control over MTFs within the National Capital Region;²⁰ and
• support the effective execution of the DOD medical mission.²¹

Pursuant to 10 U.S.C. §1073c, as amended, DHA is also responsible for administering all MTFs and coordinating Defense Health Program funding for Research, Development, Test, and Evaluation (RDT&E) programs.²² The DHA Director leads the organization and is appointed by and reports to the ASD(HA). The Director is typically a general or flag officer in the grade of Lieutenant General/Vice Admiral.

Military Service Medical Departments

The military service medical departments (i.e., MEDCOM, BUMED, AFMRA) are established under each respective military department to recruit, organize, train, and equip military medical personnel, maintain medical readiness of the Armed Forces, and advise their military service chief on medical matters. The medical departments are led by a Surgeon General,²³ who also functions as the principal advisor to their respective military service secretary and service chief for all health and medical matters.²⁴

Figure 2. Military Health System Organizational Structure

Source: CRS graphic based on 10 U.S.C. §7036, §8077, §9036; and DOD, "Plan 3: Implementation Plan for the Complete Transition of Military Medical Treatment Facilities to the Defense Health Agency," June 24, 2019.

2. How is the Military Health System Funded?

The ASD(HA) prepares and submits a unified medical budget that includes resources for all DOD medical activities under his or her responsibility.²⁵ The unified medical budget is primarily discretionary funding for all fixed MTFs and military medical activities, including costs for real property maintenance, environmental compliance, minor construction, base operations support, health care delivery, medical personnel and accrual payments to the Medicare Eligible Retiree Health Care Fund (MERHCF).²⁶ The unified medical budget does not include funding associated with combat support medical units/activities; in these instances the funding responsibility is typically assigned to combatant or military service commands.

While DOD submits its funding request for the MHS in a unified medical budget, Congress historically appropriates these funds in several accounts within the annual Defense appropriations bill and the Military Construction, Veterans Affairs, and Related Agencies appropriations bill (see Table 1).

In the past, Congress appropriated funds for war-related military health care in supplemental appropriations bills or designated certain funds for Overseas Contingency Operations/Global War on Terrorism in the annual Defense appropriations bill. For FY2022, DOD requests war-related military health care funding in the DHP account only.

As illustrated in Figure 3, the President's FY2022 unified medical budget request totals $53.9 billion and includes the following:²⁷

• $35.6 billion for the DHP;
• $8.5 billion for MILPERS;
• $0.5 billion for medical MILCON; and
• $9.3 billion for accrual payments to the MERHCF.

Figure 3. FY2022 Unified Medical Budget Request (billions)

Source: Department of Defense, FY 2022 Budget Request Overview, May 2021, p. 5-5. Notes: Graphic adapted by CRS.

Other resources are made available to the MHS from third-party collections²⁸ authorized by 10 U.S.C. §1097b(b) and a number of other reimbursable program and transfer authorities.²⁹

3. What is the Medicare-Eligible Retiree Health Care Fund (MERHCF)?

The Floyd D. Spence NDAA for FY2001 directed the establishment of the Medicare-Eligible Retiree Health Care Fund to pay for Medicare-eligible retiree health care beginning on October 1, 2002, via a program called TRICARE for Life.³⁰ Prior to this date, Medicare-eligible beneficiaries could only receive space-available care in an MTF. The MERHCF covers Medicare-eligible beneficiaries, regardless of age.

The FY2001 NDAA also established an independent three-member DOD Medicare-Eligible Retiree Health Care Board of Actuaries appointed by the Secretary of Defense. Historically, Congress appropriates annual discretionary funds to the military departments within DOD and other federal agencies that administer a uniformed service and serve as the accrual deposits into the MERHCF based upon estimates of future TRICARE for Life expenses.³¹ Mandatory transfers out are made to the Defense Health Program based on estimates of the cost of care to be provided each year.³² As of September 30, 2019, the fund had assets of over $277.8 billion to cover future expenses.³³

The board is required to review the actuarial status of the fund, report annually to the Secretary of Defense, and report to the President and Congress on the status of the fund at least every four years. The DOD Office of the Actuary provides all technical and administrative support to the board. The Secretary of Defense delegates operational oversight responsibilities and management of the MERHCF to the ASD(HA). The Defense Finance and Accounting Service provides accounting and investment services for the fund.

4. What are Military Treatment Facilities?

By law, DOD is required to maintain MTFs to "support the medical readiness of the armed forces and the readiness of medical personnel."³⁴ MTFs are typically located on or near military installations in the United States or overseas.³⁵ The DHA Director, after reviewing nominations from the military services, appoints a civilian director or military commander to lead an MTF.³⁶ There are three types of MTFs that vary in clinical scope and size.

• Medical Centers. Facilities that provide multi-specialty inpatient and outpatient care in "areas with a large population" of beneficiaries, serves as a tertiary referral center, administers graduate medical education programs, and has comprehensive trauma care capabilities.³⁷
• Hospitals. Facilities that provide limited-specialty inpatient and outpatient care in "areas where civilian health care facilities are unable to support the health care needs" of beneficiaries.³⁸
• Ambulatory Care Centers. Facilities that provide outpatient primary care required to "maintain medical readiness."³⁹

5. What is TRICARE?

Section 1072(7) of Title 10, U.S. Code defines TRICARE as the

various programs carried out by the Secretary of Defense under this chapter and any other provision of law providing for the furnishing of medical and dental care and health benefits to members and former members of the uniformed services and their dependents....

More generally, TRICARE is a health insurance-like program that pays for care delivered by civilian providers. TRICARE has three main benefit plans: a health maintenance organization option (TRICARE Prime), a preferred provider option (TRICARE Select), and a Medicare wrap-around option (TRICARE for Life) for Medicare-eligible retirees. Other TRICARE plans include TRICARE Young Adult, TRICARE Reserve Select, and TRICARE Retired Reserve. TRICARE also includes a pharmacy program and optional dental or vision plans. Options available to beneficiaries vary by the beneficiary's relationship to a sponsor, sponsor's duty status, and geographic location.

The foundations of TRICARE began with the Dependents Medical Care Act of 1956 (P.L. 84-569), which provided a statutory basis for dependents of active duty members, retirees, and dependents of retirees to seek care at MTFs. The 1956 act allowed DOD to contract for a health insurance plan for coverage of civilian hospital services for active duty dependents. Due to growing use of MTFs by eligible civilians and resource constraints, Congress adopted the Military Medical Benefits Amendments in 1966 (P.L. 89-614), which allowed DOD to contract with civilian health providers to provide non-hospital-based care to eligible dependents and retirees. Since 1966, civilian care to millions of retirees and dependents of active duty military personnel and retirees has been provided through a program still known in law as the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), but since 1994 more commonly known as TRICARE.⁴⁰

TRICARE Regional Managed Health Care Support Contracts

TRICARE within the United States (not including certain U.S. commonwealths or territories) is overseen by two DHA regional offices and administered through two managed care support contracts. Each contractor is required to perform tasks organized under a variety of categories, including: claims processing, management of enrollment processes, health care finder and referral services, establishment and maintenance of adequate provider networks, customer services for beneficiaries and network providers, and medical management of certain beneficiary populations.⁴¹

• DHA Regional Office—East oversees the East Region, which includes Alabama, Arkansas, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, West Virginia, Wisconsin, and portions of Iowa, Missouri, Tennessee, and most of Texas. The East region contractor is Humana Military.
• DHA Regional Office—West oversees the West Region, which includes Alaska, Arizona, California, Colorado, Hawaii, Idaho, most of Iowa, Kansas, Minnesota, most of Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oregon, South Dakota, western portions of Texas, Utah, Washington, and Wyoming. The West region contractor is HealthNet Federal Services.

Figure 4. TRICARE Regions in the United States

Source: DOD, Defense Health Agency, TRICARE Regions, accessed August 12, 2021, https://www.tricare.mil/About/Regions.

These two contracts were recompeted in 2015, and after resolving bid protests, the new contracts known as T-2017 became operational in 2017. Both contracts are scheduled to end in 2023.⁴² The total value of the T-2017 contracts is $58 billion.⁴³

TRICARE outside of the United States (including certain U.S. commonwealths and territories) is overseen by the TRICARE Overseas Program Office and administered by the health services support contractor, International SOS.

6. Who Is Eligible for TRICARE?

Eligibility for TRICARE is determined by the uniformed services and recorded in the Defense Enrollment Eligibility Reporting System (DEERS).⁴⁴ All eligible beneficiaries must have their eligibility status recorded in DEERS.

TRICARE beneficiaries can be divided into two main categories: sponsors and dependents. Sponsor refers to the person who is serving or who has served on active duty or in the National Guard or Reserves. Dependent is defined in 10 U.S.C. §1072 and includes a variety of familial relationships, (e.g., spouses [including same-sex spouses], children, certain unremarried former spouses, and dependent parents).

Figure 5 illustrates the major categories of eligible beneficiaries.

Figure 5. Eligible Beneficiaries, FY2020

Source: DOD, Evaluation of the TRICARE Program: Fiscal Year 2021 Report to Congress, February 26, 2021, p. 33.

7. What are the Different TRICARE Plans?

TRICARE Prime

TRICARE Prime is a managed health care option similar to a health maintenance organization (HMO) program. This plan features a military or civilian primary care provider who manages a beneficiary's overall health care and facilitates referrals to specialists. Referrals generally are required for specialty care visits. Enrollees receive first priority for appointments at MTFs and pay less out-of-pocket than beneficiaries enrolled in other TRICARE plans. TRICARE Prime does not have an annual deductible.

Active duty servicemembers are required to use TRICARE Prime. Active duty servicemembers, their dependents, and transitional survivors⁴⁵ are exempt from the annual enrollment fee. Retired servicemembers, their families, survivors of active duty servicemembers, eligible former spouses, and others are required to pay an annual enrollment fee, which is applied to the annual catastrophic cap.⁴⁶

TRICARE Prime is offered only in geographic areas designated as a Prime Service Area (PSA). PSAs are typically near an MTF and former military locations subjected to Base Realignment and Closure (BRAC).⁴⁷

Table 2 shows the costs and fees associated with TRICARE Prime.

TRICARE Select

TRICARE Select is a self-managed, preferred provider option (PPO) available worldwide for eligible beneficiaries. Active duty servicemembers and TRICARE for Life beneficiaries are not eligible for this plan. TRICARE Select allows beneficiaries greater flexibility in managing their own health care and does not require a referral for specialty care. This plan allows enrollees to use authorized, non-network civilian providers, but at a higher out-of-pocket cost than using a network civilian provider. Some services may require prior authorization (e.g., hospice care, home health services, applied behavioral analysis).

TRICARE Select features an annual enrollment fee, deductibles, and fixed co-pays when receiving care from a network provider or paying a percentage of the allowable charge when receiving care from a TRICARE-authorized, non-network provider. Eligible beneficiaries residing outside of the United States may still enroll in TRICARE Select, however the availability of network providers may be limited based on geographic location.

Table 3 outlines the costs and fees associated with TRICARE Select.

TRICARE Reserve Select

The TRICARE Reserve Select (TRS) program was authorized by Section 701 of the Ronald W. Reagan NDAA for FY2005 (P.L. 108-375).⁴⁸ TRS is a premium-based health plan available worldwide for qualified Selected Reserve members of the Ready Reserve and their families.⁴⁹ Servicemembers are not eligible for TRS if they are on active duty orders, covered under the Transitional Assistance Management Program,⁵⁰ eligible for or enrolled in the Federal Employees Health Benefits Program (FEHBP), or currently covered under the FEHBP through a family member.⁵¹

In general, TRS mirrors the benefits, costs, and fees established for TRICARE Select. The government subsidizes the cost of the program with members paying 28% of the cost of the program in the form of premiums. For CY2021, the monthly premiums are $47.20 for member-only and $238.99 for member and family coverage.⁵²

TRICARE Retired Reserve

Section 705 of the NDAA for FY2010 (P.L. 111-84) authorized a TRICARE coverage option for so-called gray area reservists, defined as those who have retired but are too young to draw retirement pay.⁵³ The program established under this authority is known as TRICARE Retired Reserve (TRR). Previously, such individuals were not eligible for any TRICARE coverage.

TRR is a premium-based health plan that qualified retired members of the National Guard and Reserve under the age of 60 may purchase for themselves and eligible family members. TRR differs from TRS in that there is no government subsidy. As such, retired Reserve Component members who elect to purchase TRR must pay the full cost of the calculated premium plus an additional administrative fee. For CY2021, the monthly premiums are $484.83 for member-only and $1,165.01 for member and family coverage.⁵⁴ Upon reaching the age of 60, retired Reserve Component members and their eligible family members become eligible to purchase TRICARE Prime or TRICARE Select.

TRICARE Young Adult

Section 702 of the Ike Skelton NDAA for Fiscal Year 2011 (P.L. 111-383) extended TRICARE eligibility for dependents, allowing unmarried children up to age 26, who are not otherwise eligible to enroll in an employer-sponsored plan, to purchase TRICARE coverage.⁵⁵ The option established under this authority is known as TRICARE Young Adult (TYA). Unlike insurance coverage mandated by the Patient Protection and Affordable Care Act (P.L. 111-148), TYA provides individual coverage, rather than coverage under a family plan. A separate premium is charged. The law requires payment of a premium equal to the cost of the coverage as determined by the Secretary of Defense on an appropriate actuarial basis.⁵⁶ For CY2021, the monthly premiums are $459 for TYA Prime and $257 TYA Select.⁵⁷

TRICARE for Life

TRICARE for Life (TFL) was created as supplemental coverage for Medicare-eligible military retirees by Section 712 of the Floyd D. Spence NDAA for FY2001 (P.L. 106-398). TFL functions as a secondary payer, or wrap-around, to Medicare. As a wrap-around, TFL will pay the out-of-pocket costs for Medicare-covered services as well as those only covered by TRICARE. Prior to the creation of TFL, coverage for Medicare-eligible individuals was limited to space-available care in MTFs. TFL cost sharing for beneficiaries is limited and there is no enrollment charge or premium.

To participate in TFL, TRICARE-eligible beneficiaries must enroll in and pay monthly premiums for Medicare Part B.⁵⁸ TRICARE-eligible beneficiaries who are entitled to Medicare Part A based on age, disability, or diagnosis of End Stage Renal Disease (ESRD), but decline Part B, lose eligibility for TRICARE benefits.⁵⁹ Individuals who choose not to enroll in Medicare Part B upon becoming eligible may elect to do so later during the special enrollment period or an annual enrollment period; however, the Medicare Part B late enrollment penalty may apply (see question "13. How Does the Patient Protection and Affordable Care Act Affect TRICARE?").⁶⁰

8. When can beneficiaries enroll in or change their TRICARE plan?

In general, eligible beneficiaries may enroll in a TRICARE health plan during the annual open enrollment season, which DHA typically designates during a four-week period between November and December.⁶¹ Eligible beneficiaries may also enroll, change, or terminate their enrollment within 90 days after a Qualifying Life Event (QLE).⁶² Table 4 identifies military or family-related life changes that are deemed a QLE:

9. What is the DOD Pharmacy Benefits Program?

Section 701 of the NDAA for FY2000 (P.L. 106-65) directed the creation of an "effective, efficient, integrated pharmacy benefits program," also known as the DOD pharmacy benefits program.⁶³ Features of the program include

• availability of pharmaceutical agents for all therapeutic classes;
• establishing a uniform formulary based on clinical effectiveness and cost-effectiveness; and
• assuring the availability of clinically appropriate pharmaceutical agents to uniformed servicemembers, retirees, and family members.

The program dispenses pharmaceuticals to eligible beneficiaries through three venues: MTF pharmacies, TRICARE retail pharmacies, and the TRICARE Mail Order Program. Currently, MTF pharmacies are administered and managed by each military service medical department (i.e., MEDCOM, BUMED, and AFMRA), while the TRICARE retail and mail order pharmacy programs are managed by the DHA. Since 2003, DOD has contracted a pharmacy benefits manager, Express Scripts, Inc. (ESI), to administer the TRICARE pharmacy programs.⁶⁴ ESI maintains a national network of retail pharmacies and a home-delivery program, and it processes pharmacy claims on behalf of beneficiaries. There are no additional costs to participate in the DOD pharmacy benefits program.

The program is required to maintain a formulary of pharmaceutical agents (hereinafter also referred to as drugs or medications) in the complete range of therapeutic classes. This is known as the Uniform Formulary. Selection of drugs for inclusion on the formulary is based on the relative clinical and cost effectiveness of the agents in each class.⁶⁵ The law further specifies that the formulary is to be maintained and updated by a Pharmacy and Therapeutics Committee whose membership is composed of representatives of both MTF pharmacies and health care providers.⁶⁶

A Beneficiary Advisory Panel (BAP) is required to review and comment on formulary recommendations presented by the Pharmacy and Therapeutics Committee prior to those recommendations going to the DHA Director for approval.⁶⁷ The BAP is composed of representatives of nongovernmental organizations and associations that represent the views and interests of a large number of eligible beneficiaries, contractors responsible for the TRICARE retail pharmacy program, contractors responsible for the national mail-order pharmacy program, and TRICARE network providers.

Prescriptions Filled Through Military Treatment Facilities

At an MTF, TRICARE beneficiaries may fill prescriptions from a civilian or military provider without a co-payment. Enrollment in a specific TRICARE plan is not required to fill a prescription at an MTF. As of May 2021, 159 MTF pharmacies accept electronic prescriptions from civilian health care providers.⁶⁸

MTFs are required to stock a subset of the Uniform Formulary known as the Basic Core Formulary. Additional drugs on the Uniform Formulary may also be carried by individual MTFs in order to meet local requirements. Nonformulary drugs are generally not available through MTFs. Certain Uniform Formulary-covered pharmaceuticals, however, may not be carried due to national contracts with pharmaceutical manufacturers.⁶⁹ The DHA's Pharmacy Operations Division collaborates with the Defense Supply Center Philadelphia (DSCP) in coordination with the Department of Veterans Affairs (VA) Pharmacy Benefits Management Strategic Health Group and the VA National Acquisition Center in Hines, Illinois, in developing contracting strategies and technical evaluation factors for national pharmaceutical contracting initiatives.⁷⁰

Prescriptions Filled Through Retail Pharmacies

TRICARE beneficiaries may also fill prescriptions through retail pharmacies. DOD contracts for a TRICARE pharmacy benefit manager to administer both the retail and mail order options. The current contractor is ESI, to which DOD awarded a potential eight-year contract in 2021.⁷¹ Among other matters, ESI maintains a national network of retail pharmacies that beneficiaries may use without having to file a claim for reimbursement. Beneficiaries may also use non-network pharmacies. However, at non-network pharmacies, beneficiaries pay the full price of the medication up front and then file a claim for reimbursement.

DOD requires prescriptions to be filled with generic drugs when available.⁷² These are defined as medications approved by the Food and Drug Administration that are clinically the same as brand-name medications. Brand-name drugs that have a generic equivalent are only dispensed after the prescribing health care provider completes a clinical assessment that indicates the brand-name drug should be used in place of the generic medication and ESI grants a prior authorization.

Prescriptions Filled by Mail Order

TRICARE beneficiaries may arrange for home delivery of prescription drugs through the mail by registering with ESI. DOD negotiates drug prices with pharmaceutical manufacturers. The prices for drugs dispensed by mail order are considerably lower than drugs dispensed through retail pharmacies. In recent years, use of home delivery as compared to retail pharmacies by TRICARE beneficiaries decreased from 65% in FY2017 to 49% in FY2020.⁷³ DOD attributes this decrease in use of the home delivery program to congressionally directed co-payment increases.⁷⁴

Co-payment Adjustments

Section 702 of the NDAA for FY2018 (P.L. 115-91) adjusted pharmacy co-payment amounts. The co-payment amounts for 2018 to 2027 are codified in 10 U.S.C. §1074g(a) and are listed in Table 5. After 2027, the Secretary of Defense is authorized to set and adjust cost sharing amounts to "reflect changes in the costs of pharmaceutical agents and prescription dispensing, rounded to the nearest dollar."⁷⁵

10. Who Pays First When a Beneficiary is Enrolled in TRICARE and Other Health Insurance (OHI)?

In general, TRICARE is a secondary payer of health care claims when beneficiaries are dually enrolled in other health insurance (OHI) programs (e.g., employer-sponsored insurance, private health insurance, Medicare), or covered by liability insurance policies or third-party payers. Section 1079(i)(1) of Title 10, U.S. Code and 32 C.F.R. §199.8 generally prohibits TRICARE from serving as the primary payer for health care claims of beneficiaries with OHI. Typically, when a health care provider bills for services rendered, the beneficiary's OHI policy will first pay a specified amount according to their benefit plan. TRICARE then pays the remaining cost of TRICARE-covered services other than specified out-of-pocket costs (e.g., co-payments). In certain instances, TRICARE serves as the primary payer when a beneficiary is

enrolled in Medicaid;

enrolled in certain federal health programs (e.g., Indian Health Service); or

eligible for a State Crime Victims Compensation program.⁷⁶

11. How Are Priorities for Care in Military Treatment Facilities Assigned?

Title 10 of the U.S. Code assigns general priorities for MTF care. "A member of the uniformed services on active duty" is the only TRICARE beneficiary group entitled to care in any MTF.⁷⁷ Dependents of active duty personnel are also entitled to receive MTF care on a space-available basis.⁷⁸ Military retirees and their dependents do not have an entitlement or right to MTF care, although they may receive care on a space-available basis (see question "17. Have Military Personnel Been Promised Free Medical Care for Life?").⁷⁹

DOD issued regulations and implementation policy to clarify the basic priorities for MTF care:

Priority 1: Active-duty servicemembers;

Priority 2: Active-duty family members enrolled in TRICARE Prime;

Priority 3: Retirees, their family members and survivors enrolled in TRICARE Prime;

Priority 4: Active-duty family members not enrolled in TRICARE Prime and TRICARE Reserve Select enrollees; and

Priority 5: All other eligible persons.⁸⁰

MTF commanders are also authorized to grant certain exceptions to these priority groups. These may include care required by law or DOD policy (e.g., employees exposed to health hazards, occupational health, workplace injuries, medical emergencies), patients needed to support the clinical case mix of a Graduate Medical Education program, overseas or remote geographic location, or other extraordinary cases.

12. What are DOD's Access to Care Standards?

In 1995, DOD established access to care standards to ensure beneficiaries enrolled in TRICARE Prime receive timely care in an MTF or from a civilian health care provider. The current access to care standards, outlined in DOD regulation and implementation policy, include the following:

• Urgent/Acute Care: Beneficiary must be offered an appointment to visit an appropriate health care provider within 24 hours and within a 30-minute drive-time from the beneficiary's residence;
• Routine Care: Beneficiary must be offered an appointment to visit an appropriate health care provider within one week and within a 30-minute drive-time from the beneficiary's residence;
• Well-Patient Visit/Preventive Care: Beneficiary must be offered an appointment to visit an appropriate health care provider within four weeks;
• Specialty Care: Beneficiary must be offered an appointment to visit an appropriate health care provider within four weeks and within a one-hour drive-time from the beneficiary's residence;
• Office Wait Times: In non-emergency circumstances, office waiting times shall not exceed 30 minutes; and
• Access to Primary Care Manager: Beneficiary must have access to their primary care manager or designee by telephone, 24 hours a day, 7 days a week.⁸¹

13. How Does the Patient Protection and Affordable Care Act Affect TRICARE?

In general, the Patient Protection and Affordable Care Act (ACA)⁸² does not directly affect TRICARE administration, health care benefits, eligibility, or cost to beneficiaries.⁸³ Section 3110 of the ACA did open a special Medicare Part B enrollment window to enable certain individuals to gain eligibility for TFL.⁸⁴ The ACA also waived the Medicare Part B late enrollment penalty during the 12-month special enrollment period (SEP) for military retirees, their spouses (including widows/widowers), and dependent children who are otherwise eligible for TRICARE and are entitled to Medicare Part A based on disability or end-stage renal disease, but had previously declined Part B. The ACA required the SECDEF to identify and notify individuals of their eligibility for the SEP. Section 3110 of the ACA was amended by the Medicare and Medicaid Extenders Act of 2010⁸⁵ to clarify that Section 3110 applies to Medicare Part B elections made on or after the date of enactment of the ACA, which was on March 23, 2010.

14. How does DOD Determine What Health Care Services are Covered by TRICARE?

Chapter 55 of Title 10, U.S. Code authorizes TRICARE coverage of specific health care services.⁸⁶ For health care services not specified in statute, TRICARE may only cover services that are

medically or psychologically necessary to prevent, diagnose, or treat a mental or physical illness, injury, or bodily malfunction as assessed or diagnosed by a physician, dentist, clinical psychologist, certified marriage and family therapist, optometrist, podiatrist, certified nurse-midwife, certified nurse practitioner, certified clinical social worker, or other class of provide as designated by the Secretary of Defense...⁸⁷

Periodically, DOD reviews certain non-covered health care services to determine whether "safety and efficacy have been proven to be comparable or superior to conventional therapies."⁸⁸ DOD uses a "hierarchy of reliable evidence" to review and determine whether a non-covered health care service has shifted from "unproven" to a "nationally accepted medical practice."⁸⁹ TRICARE coverage policy is revised once DOD determines a health care service is "proven."⁹⁰

15. How does DOD Determine the TRICARE Reimbursement Rates?

In general, DOD utilizes reimbursement methods similar to those of Medicare for inpatient care, outpatient care, and other related services. Sections 1079(h) and 1079(i) of Title 10, U.S. Code require that payment levels for health care services provided under TRICARE be aligned with Medicare's fee schedule "to the extent practicable." DHA has the authority to grant exceptions to Medicare's fee schedule when "adequate access to care would be impaired" or when an existing Medicare rate does not exist.⁹¹

Reimbursement for Inpatient Care

The CHAMPUS Diagnosis Related Groups (DRG)-based payment system is used to reimburse civilian hospitals and other health care facilities for providing inpatient care to TRICARE beneficiaries. To ensure standardization with U.S.-based medical coding and reimbursement classifications, DOD adopted the same DRG coding scheme and nomenclature as Medicare's Inpatient Prospective Payment System.⁹² Reimbursement rates assigned to each DRG are determined by DOD and updated annually. In general, rates are calculated in a similar manner as those published by the Centers for Medicare and Medicaid Services (CMS).⁹³

Reimbursement for Hospital-based Outpatient Care

Hospital-based outpatient services are reimbursed using the TRICARE outpatient prospective payment system (OPPS).⁹⁴ Modeled after Medicare's OPPS program, TRICARE pays for hospital-based outpatient services on a rate-per-service basis.⁹⁵ Each service is assigned a Health Care Procedure Coding System (HCPCS) code and descriptor, then categorized into an Ambulatory Payment Classification (APC) group based on clinical and cost similarities. A reimbursement rate is assigned to each group, which applies to any service in the APC. DOD publishes quarterly updates for TRICARE APC reimbursement rates, which are consistent with those published by the CMS.⁹⁶

Reimbursement for Outpatient Care and Health Care-Related Services

Other outpatient care and services provided in a nonhospital setting are reimbursed using the allowable charge method.⁹⁷ By law (10 U.S.C. §1097b) and federal regulation (32 C.F.R. §199.14), civilian health care providers treating TRICARE patients cannot be reimbursed more than 115% of charges authorized by the DOD fee schedule, also known as the CHAMPUS Maximum Allowable Charge (CMAC). CMAC rates are updated annually, calculated on a national basis, and then adjusted for locality differences.⁹⁸

TRICARE reimburses health care providers at the CMAC rate or the billed charge, whichever is lower. In some instances, TRICARE may reimburse above the CMAC rate in localities where "excessive balance billing" occurs or to ensure "adequate beneficiary access to care."⁹⁹

16. What DOD Health Benefits are Available to Reservists?

In recent years, especially as members of the Reserve Component¹⁰⁰ have had a larger role in combat operations overseas, Congress has enlarged the health benefits available for members of the Reserve Component. Typically, DOD health benefits for members of the Reserve Component vary based on their duty status, which are outlined in Table 6.

Health benefits for members of the National Guard who are activated by their governor for state active duty (e.g., disaster response duty) varies from state to state and may include eligibility for their state's employee health insurance program.

17. Have Military Personnel Been Promised Free Medical Care for Life?

Some military personnel and retirees maintain that they and their dependents were promised "free medical care for life" at the time of their enlistment. Such promises may have been made by military recruiters and in recruiting brochures; however, if they were made, they were not based upon laws or official regulations.¹⁰¹ In 1993, the Deputy Assistant Secretary of Defense for Health Affairs acknowledged this notion in a statement to the House Committee on Armed Services and attempted to clarify that an entitlement to free medical care for life does not exist:

We have a medical care program for the life of our beneficiaries, and it is pretty well defined in the law. That easily gets interpreted to, or reinterpreted into, free medical care for the rest of your life. That is a pretty easy transition for people to make in their thinking, and it is pervasive. We spend an incredible amount of effort trying to reeducate people that that is not their benefit.¹⁰²

Federal courts have held that current statutes or regulations do not grant a right or promise for free medical care for retirees and their dependents.¹⁰³ In Sebastian v. U.S., the U.S. Court of Appeals for the Eleventh Circuit ruled as follows:

Nothing in these regulations provided for unconditional lifetime free medical care or authorized recruiters to promise such care as an inducement to joining or continuing in the armed forces. While the Retirees argue that the above mentioned section 4132.1 gave those of them who served as officers in the Navy and Marine Corps the right to free unconditional medical care, we cannot agree. The [1922 Manual of the Medical Department of the United States Navy] Manual provided guidelines for the Navy's Medical Department, but did not create any right in such officers to the free unconditional lifetime medical care they claim. It related only to hospital care, not the broader services that these Retirees seek, and covered only the period when it was in effect. In any event, in view of the general pattern of the military regulations that provides medical care to retirees only when facilities and personnel were available, we decline to read into the creation of such an enduring and broad right to unconditional free lifetime medical care.

In sum, we conclude that the Retirees have not shown that they have a right to the health care they say was "taken" by the government. Since the basic premise of their claim fails, their taking claim necessarily also fails.¹⁰⁴

In 2002, an appeal of Schism v. U.S. also held that a legal, contractual right to free health care for life does not exist:

The promise of such health care was made in good faith and relied upon. Again, however, because no authority existed to make such promises in the first place, and because Congress has never ratified or acquiesced to this promise, we have no alternative but to uphold the judgement against the retirees' breach-of-contract claim.¹⁰⁵

18. Does TRICARE Cover Abortion?

10 U.S.C. §1093 provides that "Funds available to the Department of Defense may not be used to perform abortions except where the life of the mother would be endangered if the fetus were carried to term or in a case in which the pregnancy is the result of an act of rape or incest."¹⁰⁶

19. What is DOD's policy on Use Animals in Medical Research or Training?

Yes. DOD policy is that live animals will not be used for training and education or medical research purposes except where, after exhaustive analysis, no alternatives are available.¹⁰⁷ The policy also requires that training or research procedures used "cause the least pain or distress to the minimum number of animals" and include a "non-terminal disposition," when possible.¹⁰⁸

Appendix. Glossary of Acronyms