TRICARE Might Be Vastly Overpaying for Some Medical Procedures, IG Probe Concludes

This article by Corey Dickstein originally appeared on Stripes.com. Stars and Stripes serves the U.S. military community by providing editorially independent news and information around the world.

Inconsistencies between states could have cost U.S. taxpayers and Tricare beneficiaries millions of dollars in excessive payments for some medical procedures and devices, a watchdog report has found.

The cost of certain medical procedures and devices varied greatly from state to state, according to a Pentagon inspector general audit published May 1. That probe found Tricare — the military's Defense Health Agency-run medical insurance provider that covers some 9.5 million troops, veterans and their family members — paid out thousands of dollars more for similar procedures and medical devices in some states versus others. The report found inconsistent DHA policies governing the amount of money that Tricare pays for medical care.

[READ THE REPORT]

In one instance, the IG found Tricare was paying some $11,500 for custom sleep apnea mouthguards in Illinois that were costing it about $3,000 in neighboring Iowa. The payment discrepancy came about because Tricare, which is split into two regions in the U.S. with Illinois in its east section and Iowa in its west, uses contractors to establish a basic pay rate, known as a prevailing rate, for standard procedures and devices based on the amounts that providers in those states had charged Tricare in the past. The state's prevailing rate is then set at the 80th percentile of all those charges.

The IG found there were no efforts to ensure payment rates were more consistent from one state to another. The auditors recommended Defense Health Agency officials reevaluate their methodology and ensure payment rates are not based on fraudulent or unreasonable rates charged in the past.

"Because the DHA did not determine that the state prevailing rates were reasonable, the [Defense Department] is at risk of wasteful spending and increasing DOD beneficiaries' risk of unreasonable cost-shares for health care services and items that are paid with state prevailing rates," the report states.

The probe also found Tricare might have been overpaying for some more rare procedures that do not have a set reimbursement rate. In fiscal 2023, Tricare paid some $183.3 million for 184 of those "miscellaneous procedure costs." The IG found in some cases Tricare might have paid greatly inflated rental rates for medical equipment in that miscellaneous category.

[UPDATED MONTHLY: MOAA's TRICARE Toolkit]

In one Tricare East case, the organization paid about $5,000 per month to rent a compression device for a beneficiary when another supplier advertised renting the same device for $675 per month. Still another supplier advertised it sold a different model of a similar device for $409.50, according to the report.

The IG said despite the discrepancies, recent changes to Tricare policies have led to lowered costs for the organization since 2021.

The IG report said Defense Health Agency officials agreed with their findings and committed to implementing their recommendations.