Director, Healthcare Operations and Chief Medical Officer, DHA   TRICARE: 2017 and Beyond! MG Richard Thomas, Director, Healthcare Operations and Chief Medical Officer, DHA Ms. Mary Kaye Justis, SES Director, TRICARE Health Plan

Disclosures The presenter has no financial relationships to disclose. This continuing education activity is managed and accredited by Professional Education Services Group in cooperation with AMSUS. Neither PESG,AMSUS, nor any accrediting organization support or endorse any product or service mentioned in this activity. PESG and AMSUS staff has no financial interest to disclose. Commercial support was not received for this activity.

Learning Objectives: At the conclusion of this activity, the participant will be able to: Learn about the key changes in the TRICARE 2017contract Learn about some of the reform initiatives that are part of the FY 2016 NDAA Learn about TRICARE initiatives on mental health parity and Extended Care Health Option (ECHO) Expansion Gain a better understanding of the TRICARE Program

History of TRICARE – Program Development Civilian Health & Medical Program of the Uniformed Services (CHAMPUS) TRICARE Mail Order Pharmacy; TRICARE Global Remote Overseas Birth of 1st TRICARE Region TRICARE For Life; TRICARE Senior Pharmacy; Dental Program TRICARE Reserve Select; Extended Care Health Option CHAMPUS Reform Initiative TRICARE Young Adult 1965 1995 1999 2001 2003 2005 2007 2006 2004 2002 2000 1997/98 1988/92 1967 2010 2008/09 2011 TRICARE Overseas Program; TRICARE Retired Reserve TRICARE Prime enrollment portable across Regions; TRICARE Management Activity; Retiree Dental Program Birth of Medicare and Medicaid TRICARE Retail Pharmacy Program; Regions Consolidated 3 Domestic Regions & 1 Overseas Region 2004 12 Domestic Regions & 3 Overseas Regions

The Military Health System*: Who We Are and Who We Serve 151,785 personnel (84,564 military / 67,221 civilians) 55 Inpatient hospitals and medical centers 373 Ambulatory care clinics 264 Dental clinics 253 Vet clinics 550,194 Network providers 3,812 TRICARE network acute care hospitals 1,757 Behavioral health facilities 59,670 Contracted (network) retail pharmacies Who We Serve: 9.5 M Beneficiaries 5.0 M TRICARE Prime 3.7 M in direct care 1.3 M in contractor networks 2.3 M TRICARE Standard/Extra 2.0 M TRICARE For Life In line with the larger force reduction, we’re shrinking our footprint within the MHS. With our new analytic capabilities, we improve our ability to assess our resource needs and productivity data in real time. Further, we’re able to provide an enterprise view across the entire system – this is especially critical in our enhanced multi-service markets as we develop business plans, joint manpower requirements and other critical areas. Over the last year, we continued to work to ensure the Purchased Care system augmented and complemented the direct care system. Almost 50% of all providers nationwide accept TRICARE About 80% of TRICARE providers who are taking new patients from any insurance accept new TRICARE patients. In addition, any hospital that accepts Medicare is required to accept TRICARE, and about 90% of inpatient facilities nationwide accept TRICARE. As you can see, we’ve been successful in expanding the number of providers, hospitals and BH facilities participating in TRICARE. *FY 2015 TRICARE Annual Report 5

TRICARE & TRICARE Transformation TRICARE Prime TRICARE Standard TRICARE Extra TRICARE Overseas TRICARE For Life TRICARE Reserve Select TRICARE Retired Reserve TRICARE Young Adult TRICARE Pharmacy TRICARE Dental Plans Optimize purchased care contracts Align incentives with health outcomes Change how we "buy care" Standardize definitions and metrics Tricare Regional Office (TRO) governance Data sharing eMSM best practices Emerging Technologies and Treatment (ET2) Referral Management Reform (RMR) Comprehensive, worldwide medical / dental health benefit program Civilian network care augments and compliments the military treatment facilities Fully integrate the purchased care and direct care sectors by modernizing TRICARE benefit.

Key Changes in Managed Care Support Contracts (T-2017) Goal: Modernize and Sustain the Benefit while Preparing for the Future and taking into account the dynamic changes in healthcare such as the ACA, EHR and PCMH Two Regions Improved Efficiency / Automation: Electronic data system for the Medical Management/Utilization Management program that will offer real time access, reporting and information Encourages electronic claims processing Electronic Delivery of beneficiary notifications and education Contractors must connect to Government Referral Management System and health information exchanges (HIEs) Align Call Centers with Best Practices Improved Efficiency/ Automation: Two Regions Facilitates uniform provision of the TRICARE benefit by reducing the variation between regions. Reduces # of contract modification Improves the continuity of care fro special needs ADFMs moving transferring between posts. Reduction in contract overhead and gain in savings due to economy of scale Referral Management Referrals will continue – ROFRs Processed electronically interfacing with standardized RMS Providers will be encouraged to use HIE in preparation for the implementation of the HER Encourages electronic claims processing Electronic delivery of explanation of benefits and beneficiary education Electronic data system for Medical Management – real time access Enhanced Quality: RFP includes requirement changes based on the MHS review Network providers will have access to the PDTS – Pharmacy Data Transaction Service Focused review of the quality of ambulatory care (ER, UCC, AmbSurgi Centers) Use of Predictive Modeling: To reduce gaps in care, reduce medical errors and address quality concerns

Key Changes in Managed Care Support Contracts (T-2017) Enhanced Quality: Revisions made to the clinical quality and patient safety requirements based on MHS review Improved disease management, case management and advanced analytics Increased Integration between Purchased and Direct Care: Provider agreements to include communication with MTFs Increased engagement with eMSMs (Care Coordination Manager at each eMSM Improved Efficiency/ Automation: Two Regions Facilitates uniform provision of the TRICARE benefit by reducing the variation between regions. Reduces # of contract modification Improves the continuity of care fro special needs ADFMs moving transferring between posts. Reduction in contract overhead and gain in savings due to economy of scale Referral Management Referrals will continue – ROFRs Processed electronically interfacing with standardized RMS Providers will be encouraged to use HIE in preparation for the implementation of the HER Encourages electronic claims processing Electronic delivery of explanation of benefits and beneficiary education Electronic data system for Medical Management – real time access Enhanced Quality: RFP includes requirement changes based on the MHS review Network providers will have access to the PDTS – Pharmacy Data Transaction Service Focused review of the quality of ambulatory care (ER, UCC, AmbSurgi Centers) Use of Predictive Modeling: To reduce gaps in care, reduce medical errors and address quality concerns

TRICARE Initiatives – FY 2016 NDAA Access to care for Prime beneficiaries Waiver of recoupment of erroneous payments Portability of TRICARE Prime coverage Pilot program on urgent care visits Pilot program on incentive programs (value based contracting) Plan to improve experience with and eliminate performance variability (Purchased Care)

TRICARE Initiatives – Mental Health Parity Eliminates any differential in cost-sharing between mental health and substance use disorder (SUD) benefits and medical/surgical benefits: Reduce outpatient mental health copayments for Non Active Duty Dependents (NADD) under TRICARE Prime from $25 per visit to $12 per visit for individual visits from $17 per visit to $12 per visit for group visits Reduce Retiree and NADD Prime per diem for PHP from $40 inpatient rate billed to outpatient rate of $12 per day Reduce Active Duty Family Member (ADFM) Extra/Standard cost sharing for inpatient mental health from a $20 per day to $18/day (medical/surgical) While the Mental Health Parity Act of 1996, Mental Health Parity Addiction Equity Act (MHPAEA) of 2008, and plan benefit provisions contained in the Patient Protection and Affordable Care Act do not apply to the TRICARE program, DoD fully supports the principle of mental health parity; aligning the TRICARE benefit with Mental Health Parity is one of the President’s MH Executive Actions (Aug 2014)

TRICARE Initiatives – TRICARE Extended Care Health Option (ECHO) Expansion* Identify Gaps in ECHO Provided Services Survey being developed on EFMP, ECHO and institutional care Evaluate increasing respite care and providing incontinence supplies Proposed rule to decouple respite care with another ECHO benefit is in coordination Incontinence supply coverage for those ECHO enrolled beneficiaries over age 3 started Oct 1, 2015 Conduct an Investigation into Requirements for Providing Custodial Care High level cost analysis performed but need survey results to determine ECHO expansion to incorporate custodial care, consumer-directed care or other Medicaid Home and Community Based Services Identify Services Provided under State Medicaid for Utility for our Population Survey will be used to identify gaps in care so TRICARE does not expend unnecessary resources for services that would not be useful or valued by ECHO beneficiaries Identify Requirements and Costs Associated with Consumer Directed Care Program *Military Compensation and Retirement Modernization Commission (MCRMC) Recommendations

The“ Why” This isn’t just “business.” We are in a different business than anyone else in this country. Medics are called to go to some very bad places and practice very good medicine. We’re not Kaiser Permanente. However, that doesn’t mean we can’t learn from them. While Readiness will always be our priority, we can improve how we perform in the “business” of medicine.

Questions?

History of TRICARE – Major Statutory Enhancements to the TRICARE Benefit since 1995 Active Duty & Their Families Introduced TRICARE Prime Remote for service members and their families Eliminated all Prime cost-sharing for care delivered to AD Family Members by civilian providers Added TRICARE Reserve Select for activated Guard and Reserve members and their families; expanded in NDAA for FY 06 and 07 Prime travel benefit Extended Care Health Option for family members Retirees & Families Reduced catastrophic cap for retirees under age 65 in TRICARE Standard from $7,500 to $3,000 Introduced a civilian network prescription drug benefit for Medicare-eligible beneficiaries Introduced TRICARE For Life, which established TRICARE as a second payer to Medicare for dual- eligible beneficiaries Congress enacted a number of enhancements to the TRICARE benefit over the past 11 years…each of them increasing the value of the program. The costs for these changes have all accrued to the government. For active duty, We fixed the problem for service members assigned to remote locations away from military installations – recruiters, ROTC instructors, those working with industry and active duty serving with Guard/Reserve units…they get the same Prime benefit as every other active duty person now. We completely eliminated the co-payments for outpatient care from civilian doctors in 2001. It used to cost $6 or $12 a visit, depending on your rank. Now, it costs $0 ! And we also introduced a program – TRICARE Reserve Select – allowing certain Guard and Reserve members and their families to buy-in to TRICARE with significant government subsidy of the premium. And for retirees, the benefit expansions were historic: These benefit expansions added over $4 billion per year to DoD annual costs…and that number is growing. Thanks to the change in the catastrophic cap no retiree under the age of 65 can expect to pay no more than $3000 in one year for medical care, down from $7500. We are proud of our success in implementing these expansions smoothly and in a timely manner…and we wish to sustain these benefit expansions….but the costs of these changes have been entirely borne by DoD, because there have been no increases in TRICARE cost-sharing.

TRICARE Today - TRICARE Family of Plans TRICARE Prime TRICARE Standard TRICARE Extra TRICARE Overseas TRICARE For Life TRICARE Reserve Select TRICARE Retired Reserve TRICARE Young Adult TRICARE Pharmacy TRICARE Dental Plans Serving 9.5 million beneficiaries 1.41 Active Duty 1.91 Active Duty Family Members 5.37 Retirees & Family Members 0.85 Guard/Reserve & Family Members

TRICARE Today – A Week in the Life of TRICARE 20,000 inpatient admissions 4,900 direct care 15,100 purchased care 1.818M outpatient visits 744,000 direct care 1,074,000 purchased care 2,360 births 960 direct care 1,400 purchased care 5.2M claims processed 2.47M prescriptions 882,000 direct care 616,000 retail pharmacy 98,000 home delivery 876,000 TFL 94,000 behavioral health outpatient visits 60,000 direct care 34,000 purchased care 74,000 emergency room visits 27,000 direct care 47,000 purchased care Source: FY 2015 Evaluation of the TRICARE Program Report to Congress, except for BH numbers (Source: MHS DataMart CAPER; TED-NI – 2015-03-26). For BH direct care, MDC 19 & 20 encounters are used. For BH purchased care, MDC 19 & 20 evaluative visits are used. Note that encounters and evaluative visits are not comparable measures. Medicare-eligible beneficiaries are EXcluded from BH purchased care evaluative visits. Medicare-eligible beneficiaries are EXcluded from Retail and Home Delivery prescriptions, and INcluded in the TFL count. based on FY 2014 data

Military Health System Expenditures Drivers of Healthcare Costs Health care inflation (5.7% projected between 2013-23) Demographics (age, lifestyle, chronic conditions) Emerging (and often expensive) new treatments We’ve begun to bend the cost curve leveraging economies of scale and some of the savings initiatives within the Shared Services -- the projected FY16 Unified Medical Program of $47.81B is nearly 3% lower than expenditures in FY14 ($49.12 B) and almost 9% lower than peak spending in FY 12 ($52.47 B). Despite those gains, external and internal factors continue to contribute to rising healthcare costs. CMS projects healthcare inflation will average nearly 6% over the next 7 years. As a nation, we’re getting older, heavier with a corresponding chronic disease burden You’ve all heard about the new Hepatitis C pill, Sovaldi, that costs nearly $1000 for a single dose and $84,000 for an entire course of treatment. That treatment represents one of the larger shifts in medicine. Patients want the latest, cutting edge technologies and treatments many of which can be very, very expensive. In order to maximize how we spend dollars we’re: Leveraging our Shared Services to standardize across the enterprise where appropriate. The standardization has the added benefit of making us more interoperable and integrated. We deploy and fight as a Joint team. Greater standardization and interoperability will enhance those capabilities. We need to optimize our direct care system. We’ll do that by improving our ability to see ourselves, by sharing resources across the Services, by leveraging our EMSMs. The direct care represent our training base and our connection to our local communities, we must preserve those capabilities by making them more efficient. The days of the Direct Care MTF Commander focusing on his or her population and not concerned about what is happening in the network are behind us. We will continue to better integrate our direct and purchased care system so that as we make critical buy/build decisions within the direct care system, we have the capabilities necessary to complement out direct care system in the purchased care system. Finally, all of us have to help ourselves by making choices which improve the overall health of the Force. For a long time, we’ve focused on the medical readiness of the active duty, guard and reserve. However, the health of our family members and retirees have a profound impact on how we allocate and consume healthcare. Many of the current initiatives in the DoD, Operation Live Well, the Healthy Base Initiative and the Performance Triad focus on changing the paradigm of the healthcare system treating illness and injuries to instead promoting life and lifestyle choices which optimize health. MHS Spending Over Time Drivers of Healthcare Savings Standardization across the enterprise Optimization of direct care system Integration across direct and purchased care systems Health of the Force Includes Normal Cost contributions to the Medicare Eligible Retiree Health Care Fund (MERHCF)

MHS Quadruple Aim and Supporting Lines of Effort Eliminate unnecessary duplication of effort, inefficiency and suboptimal performance by modernizing enterprise management Continually improve medical capabilities and capacity to provide contemporary health care Ensure that a ready medical force is balanced to meet Combatant Commanders’ requirements Develop and support strategic partnerships Reform the Tricare Benefit program to ensure the program’s long term viability Better define and develop the MHS core resources and competencies needed to support Global Health Engagement While aware of the challenges, we also have a strategy within the MHS for our way forward The Quadruple Aim is the “True North” for the MHS. Supporting the Quadruple Aim are six lines of effort. Many of the initiatives we’ve undertaken align under or directly support the quadruple aim. “Medically Ready Force…Ready Medical Force”

Multi-Service Markets The Eight Largest Markets (and Service/Department Leads) = eMSM = Single Service National Capital Region (DHA) Tidewater, Virginia (Navy) Ft. Bragg (Army) San Antonio, Texas (rotate Air Force/Army) Oahu, Hawaii (Army) San Diego (Navy) Puget Sound, Washington (Army) Colorado Springs, Colorado (rotate Air Force/Army) “Medically Ready Force…Ready Medical Force”

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