President Barack Obama’s fiscal 2012 defense budget request brought a few surprises for military retirees.

First, the plan to raise Tricare fees for working age retirees is more “modest” than retiree advocates had expected, and might be viewed favorably in light of harsher possibilities and the mounting debt crisis.

Surprise 2 could discourage 103,000 veterans forced by non-combat disabilities to retire on disability short of serving 20 years. After two tries, this administration no longer is asking Congress to extend “concurrent receipt” eligibility to this large group of so-called “Chapter 61” retirees.

The Obama plan had been to phase in, over five years, some retired pay based on total years served, which would be provided atop current disability pay. Congress the past two years couldn’t find dollars to fund the president’s initiative, citing the effect of pay-as-you-go budget rules.

House Republicans last month tightened those rules even more, disallowing any new entitlement fund by raising taxes. That, and removal of any mention of concurrent receipt in the new budget, appears to kill chances this year that Obama can fulfill his promise to these retirees.

Defense Secretary Robert Gates’ budget plan to control military health care costs includes: the limited Tricare Prime fee hike; an automatic adjustment to those fees, starting in 2013, to keep pace with medical inflation; a tweak to pharmacy co-payments; and changes to Uniformed Service Family Health Plans (USFHP) for future enrollees who reach Medicare age.

Here are more details:

Tricare fees: The increases are small and target only retirees under 65 enrolled in Tricare Prime, the managed care network. No users of Tricare Standard, the fee-for-service option, or Tricare for Life, the prized insurance supplement to Medicare, would see higher fees.

Retirees’ annual enrollment fee for Tricare Prime would climb by $60, to $520, for family coverage and by $30, to $260, for singles.

Previous DOD proposals to raise Tricare fees would have doubled and tripled out of pocket costs over several years, and included retirees under age 65 using Tricare Standard. Congress rejected “much more far-reaching proposals … pretty much flat,” said Defense Comptroller Robert Hale. “We are hopeful that by starting slowly … we will get their agreement.”

Medical inflation: Tricare Prime fees for retirees would be raised annually starting in 2013 to keep pace with health care costs.

“We likely will not use an index that is identical to the Medicare Part B index,” Defense officials explained. But it will reflect “increases in the cost of medical care” and the methodology will be “fair and transparent.”

The one-time fee adjustment and follow-on indexing to medical inflation are projected to save $434 million over the five-year defense budget program. When savings are projected out 10 or 20 years, Hale said, “it will have a major influence” on controlling costs.

Pharmacy co-payments: Prescriptions filled on base will remain free. But to encourage greater use of mail order, now called “home delivery,” and to discourage use of far more costly retail pharmacies, drug co-pay changes are to change.

Mail order already is a bargain, providing patients with 90-day supplies of pills rather than 30 dispensed at retail outlets for the same co-pay.

But officials want to widen the disparity. They would end the $3 charge for mail order generic drugs and raise the co-pay for generics at retail outlets to $5, up from $3. Co-pays for brand name drugs on the military formulary would stay at $9 by mail but would climb to $12 through neighborhood retail pharmacies. For “Tier 3” or non-formulary brand drugs, the current $22 co-pay would be raised to $25 for both mail order and retail.

The new co-pays could save Tricare $2.6 billion over five years.

In presenting the new budget Wednesday to the House Armed Services Committee, Gates warned again that “health care costs are consuming an ever larger share of this department’s budget, growing from $19 billion in 2001 to $52.5 billion in this request.”

He said all six members of the Joint Chiefs “have strongly endorsed these and other cost-saving Tricare reforms.”

To comment, send e-mail to or write to Military Update, P.O. Box 231111, Centreville, VA. 20120-1111

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