This is kind of hard to wrap your head around but if everything is declined it won't be the full 8.5M. Seems like that's the number if he exercises his club option next year.
But we will have the opportunity to exercise a 3 year option prior to him deciding on his option. But having the two year option as the fallback could force his hand on the 1 year option. But it's hard to say without knowing all the exact numbers.
Regardless, Fangraphs had him ranked as the #42 overall FA this offseason, even with his injury. Ahead of pitchers like Kenley Jansen, Zach Eflin, Kimbrel, etc. So this is a pretty significant signing.