TRICARE Moves Toward Risk-Based Contracting

By Leslie Small

The Dept. of Defense (DoD) is taking the first steps toward bringing value-based contracting to the TRICARE program — the government's health insurance program for members of the armed forces, military retirees and their dependents.

Currently, Centene Corp. subsidiary Health Net Federal Services LLC holds a contract to cover the West TRICARE region, while Humana Military Healthcare Services Inc. controls the East region.

In a request for information (RFI) issued in late September, the DoD's Defense Health Agency (DHA) says it's "planning the future generation of managed care contracts," which will be called T-5.

In that RFI, the DHA ask stakeholders what TRICARE should consider when developing incentives for T-5 contract holders to increase access to and utilization of high-value care, and how it can design contracts that encourage contractors to create alternative payment methodologies for their in-network providers.

Dan Mendelson, founder of the consulting firm Avalere Health, says the moves TRICARE is considering would be a major departure from the current version of the program, which involves administrative services only contracts with insurers.

"This is really interesting — I mean historically it's not a heavily managed product," he says. "I think that the DoD is coming to the understanding that a heavily managed product could be in the best interest of military personnel and dependents if done right."

TRICARE may simply need to look at another booming public-private partnership for a model, he suggests. "Where I see them going is really using Medicare Advantage as a model, where there's specific payments that are tied to specific outcomes."

Citi analyst Ralph Giacobbe recently cautioned investors that it's not yet clear "if the contracts will move entirely from ASO to risk in the next awards or if the DoD could adopt more of a test or partial risk approach."

"Regardless, if there is some transition to risk, then [Centene] and [Humana] could see billions of incremental revenue, assuming that they retain their contracts," he wrote.

From Health Plan Weekly