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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 such as 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 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 are enrollees in Prime, the managed-care option. Servicemembers 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 choose 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 percent 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 $3,000 a year catastrophic cap.

A third option is Tricare Extra, also for patients not enrolled in Prime. Extra provides a 5 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 of its beneficiary population, it partners with private-sector health care companies to run networks of providers.

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 assigned, 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 contractors will not help their competitiveness in this round by promising to extend the number of PSAs beyond base catchment areas.

One source said Humana officials are particularly upset, given their investment in creating Prime service areas across the South. With stiff competition expected for the next multibillion-dollar contract, Humana reportedly sees the proposed neutrality toward operating regionwide PSAs as targeting a key advantage it holds over competitors.

To comment, e-mail milupdate@aol.com, write Military Update, P.O. Box 231111, Centreville, VA 20120-1111 or visit: www.militaryupdate.com

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