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The Department of Defense is finalizing an interim final rule that temporarily amended 32 CFR part 199 to revise certain elements of the TRICARE program under 32 CFR part 199 to: (1) waive the three-day prior hospital qualifying stay requirement for coverage of skilled nursing facility care; (2) add coverage for treatment use of investigational drugs under expanded access authorized by the United States (U.S.) Food and Drug Administration (FDA) when for the treatment of coronavirus disease 2019 (COVID-19); (3) waive certain provisions for acute care hospitals that permitted authorization of temporary hospital facilities and freestanding ambulatory surgical centers providing inpatient and outpatient hospital services; and, consistent with similar changes under the Centers for Medicaid and Medicare Services; (4) revise diagnosis related group (DRG) reimbursement by temporarily reimbursing DRGs at a 20 percent higher rate for COVID-19 patients; and (5) waive certain requirements for long term care hospitals. The final action permanently adopts Medicare's New Technology Add-On Payments adjustment to DRGs for new medical services and technologies and adopted Medicare's Hospital Value Based Purchasing Program.

The final rule adopts the interim final rule with changes, except for the note to section 199.4(g)(15)(i)(A), published at 85 FR 54923, September 3, 2020, which remains interim.

Statement of Need:

Pursuant to the President’s emergency declaration and as a result of the worldwide coronavirus disease 2019 (COVID-19) pandemic, the Assistant Secretary of Defense for Health Affairs is temporarily modifying the following regulations, but in each case, only to the extent necessary to ensure that TRICARE beneficiaries have access to the most up-to-date care required for the diagnosis and treatment of COVID-19, and that TRICARE continues to reimburse like Medicare, to the extent practicable, as required by statute.

The modification to paragraph 199.4(b)(3)(xiv) waives the requirement for a minimum three-day prior hospital stay, not including leave day, for coverage of a skilled nursing facility admission. This provision reduces stress on acute care hospitals.

The modification to paragraph 199.4(g)(15) permits cost-sharing of investigational new drugs (INDs). This provision also increases access to emerging therapies.

The modification to paragraph 199.6(b)(4)(i) waives certain provisions for acute care hospitals that will permit authorization of temporary hospital facilities and freestanding ambulatory surgical centers. This provision supports increased access to acute care.

The modifications to paragraph 199.14(a)(1)(iii)(E) increase the diagnosis related group (DRG) amount by 20 percent for an individual diagnosed with COVID-19 and adopt Medicare’s New Technology Add-On Payments (NTAPs) and Hospital Value-Based Purchasing (HVBP) Program. These provisions support the requirement that TRICARE reimburse like Medicare. The NTAPs and HVBP Program are adopted permanently.

The modification to paragraph 199.14(a)(9) waives site neutral payment provisions by reimbursing all long-term care hospitals (LTCHs) at the standard federal rate for claims. This provision supports the requirement that TRICARE reimburse like Medicare.

Summary of the Legal Basis:

This rule is issued under 10 U.S.C. 1073 (a)(2) giving authority and responsibility to the Secretary of Defense to administer the TRICARE program.

Alternatives:

1) No action

2) The second alternative the Department of Defense considered was implementing a more limited benefit change for COVID-19 patients by not covering treatment INDs. While this would have the benefit of reimbursing only care that has more established evidence in its favor, this alternative is not preferred because early access to treatments is critical for TRICARE beneficiaries given the rapid progression of the disease and the lack of available approved treatments.

Anticipated Costs and Benefits:

Health Care and Administrative Costs

The cost estimates related to the changes discussed in this Interim Final Rule (IFR) include incremental health care cost increases as well as administrative costs to the government. The duration of the COVID-19 national emergency and Health and Human Services Public Health Emergency (PHE) are uncertain, resulting in a range of estimates for each provision in this IFR. Cost estimates are provided for an approximate nine-month (ending 12/31/2020) and eighteen-month scenario (ending 9/30/2021). The nine-month and 18-month periods would be longer for those provisions applicable beginning in January of this year, and shorter for those effective the date this IFR publishes. The terms nine-month and 18-month period are used throughout this estimate for the sake of simplicity.

The cost estimates consider whether the outbreak will have more than one active stage. The first active stage is considered to be March through August 2020, based on the Institutes for Health Metrics and Evaluation data as of May 12, 2020 (https://covid19.healthdata.org/united-states-of-america). A two-wave scenario would have a second stage in winter/spring 2021, while a three-wave scenario would have additional waves from September 2020 to December 2020 and from January 2021 to June 2021.

Based on these factors, we estimate that the total cost estimate for this IFR will be between $43.6M and $59.4M for a nine-month period, and $66.3M to $82.1M for an 18-month period. This estimate includes just over $1M in administrative start-up costs and no ongoing administrative costs. The primary cost drivers in this analysis are the reimbursement changes being adopted under the statutory requirement that TRICARE reimburse like Medicare; that is, the 20 percent DRG increase for COVID-19 patients, the adoption of NTAPs and HVBP, and the waiver of LTCH site neutral payment reductions.

A breakdown of costs, by provision, is provided in the below table. A discussion of assumptions follows.

Benefits to the TRICARE Program

Depending on the impact of certain provisions of this IFR, some cost savings could be achieved from a reduction in hospitalization rates (i.e., use of treatment INDs), estimated from no savings to $40M over 18 months. The amount of cost-savings achieved will be determined by the therapies developed, how widespread their usage is, the extent to which the therapies are authorized as treatment INDs, the effectiveness of the therapies in reducing hospitalizations and/or the use of mechanical ventilators, and how long the therapies remain as INDs before transitioning to United States Food and Drug Administration-approval, clearance, or emergency use authorization.

Any benefits achieved in reduced hospitalizations and/or mechanical ventilator use are also benefits to TRICARE beneficiaries, for whom avoidance of more serious COVID-19 illness is of paramount concern. While we cannot estimate the value of this avoidance in quantitative figures, the potential long-term consequences of a serious COVID-19 illness, including permanent cardiac or lung damage, are not insignificant. If beneficiaries are able to access emerging therapies that prevent long-term consequences (including death), this will be a benefit to the beneficiary.

The largest creators of costs under this IFR (reimbursement changes) are not anticipated or intended to create any cost savings. However, these changes will benefit TRICARE institutional providers and take stress off the entire health care system by ensuring adequate reimbursement during the PHE, at a time during which hospitals are losing revenue due to reduced elective procedures and patients who delay care due to fears of contracting COVID-19 during health care encounters. Ensuring a robust health care system is of benefit to our beneficiaries and the general public, particularly in rural or underserved areas, even though this benefit is not quantifiable.

Risks:

None. This rule will promote the efficient functioning of the economy and markets by modifying the regulations to better reimburse health care providers for care provided during the COVID-19 pandemic, particularly as strain on the health care economy is being felt due to reductions in higher cost elective procedures.