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The U.S. Department of Defense’s TRICARE Management Activity (TMA), which provides health care coverage to 9.4 million active duty military family members, military retirees and their eligible family members, awarded up to $55.5 billion in U.S. regional managed care support (MCS) services contracts to 3 companies – TriWest Healthcare Alliance Corp. in Phoenix, AZ for the West; Aetna Government Health Plans in Hartford, CT for the North; and UnitedHealth Military & Veterans Services in Minnetonka, MN for the South.

The hefty price tag reflects an upward cost trend for the TRICARE program, which is becoming a lot more expensive in part because of greater usage and in part because of benefits increases with long-term cost implications. See “US DoD IG: Global TRICARE Services Vulnerable to Fraud,” “TRICARE Trials and Tribulations” and “US DoD Trying to Slow Ballooning Prescription Drug Costs” for more background on the burgeoning TRICARE costs.

DID has a detailed breakdown of the 3 contracts as well as more information on the TRICARE program…

Under the regional TRICARE MCS services contracts, which take effect April 1/10, the 3 companies will provide the U.S. military with management of healthcare provider networks and referrals, medical management, enrollment, claims processing, customer service and access to data, among other requirements. The companies will serve as intermediaries between the U.S. military personnel and the U.S. military’s medical care system, similar to the role of a healthcare insurance provider in the private sector.

Below are details about each region:

• West: TriWest Healthcare Alliance Corp won a cost-plus-fixed-fee contract (H94002-09-C-0010) with a base period plus 1 option period for $2.8 billion. The total potential contract value, including a 10-month base period (transition-in) and 5 one-year option periods for health care delivery, plus a transition-out period, is estimated at $17 billion. The West region includes Alaska, Arizona, California, Colorado, Hawaii, Idaho, Iowa (except the Rock Island Arsenal area), Kansas, Minnesota, Missouri (except the St. Louis area), Montana, Nebraska, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Texas (areas of Western Texas only), Utah, Washington, and Wyoming. This contract was competitively procured via the TRICARE Management Activity e-solicitation Web site with 2 offers received.

• North: Aetna Government Health Plans won a cost-plus-fixed-fee contract (H94002-09-C-0008) with a base period plus 1 option period for $2.8 billion. The total potential contract value, including the 10-month base period (transition-in) and 5 one-year option periods for health care delivery, plus a transition-out period, is estimated at $16.7 billion. The North Region includes the District of Columbia, Connecticut, Delaware, Illinois, Indiana, Iowa (Rock Island Arsenal area only), Kentucky (except the Fort Campbell area), Maine, Maryland, Massachusetts, Michigan, Missouri (St. Louis area only), New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia, and Wisconsin. This contract was competitively procured via the TRICARE Management Activity e-solicitation Web site with 2 offers received.

• South: UnitedHealth Military & Veterans Services won a cost-plus-fixed-fee contract (H94002-09-C-0009) with a base period plus 1 option period for $3.7 billion. The total potential contract value, including the 10-month base period (transition-in) and 5 one-year option periods for health care delivery, plus a transition-out period, is estimated at $21.8 billion. The South Region includes Alabama, Arkansas, Florida, Georgia, Kentucky (the Fort Campbell area only), Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas (excluding areas of Western Texas). This contract was competitively procured via the TRICARE Management Activity e-solicitation Web site with 3 offers received.

Jack Sheehan, director of communications at UnitedHealth Military & Veterans Services, said that his company will be carrying out “back office work” for the military. “We will do referral management, medical management, we’ll set up networks, customer service – if TRICARE members need information they will call our call centers – processing claims, risk management, preventing fraud and abuse, and making certain that the services meet the quality standards that the TRICARE Management Activity sets.”

TMA said that it will offer financial incentives for contractors to meet quality standards; exceptional customer service; detection of fraud, waste, and abuse; increased electronic claims processing; better program management, improved preventive care and cost savings. To apply these incentives fairly, TMA said it has improved methods to measure and assess network providers, beneficiaries, and military treatment facility commander satisfaction.

TMA said that the transition from the current contracts – known as 3rd generation (T-3) MCS contracts – is scheduled to begin immediately, with the start of health care delivery under the new contracts anticipated to be April 1/10. The contractors under the existing MCS contracts are HealthNet Federal Services (North), Humana Military Healthcare Services (South), and TriWest Healthcare Alliance (West), the winner of the new West contract.

Reacting to the news that it was unsuccessful in winning the new South contract, Humana Military President and CEO Dave Baker said the company “looks forward to obtaining further clarity via a debriefing on the bidding process. Our company will evaluate its strategic options with respect to the government’s decision, including protesting the award, and will act expeditiously to best position Humana for continued success.”