Military Update

Graham forecasts House-Senate deal in Tricare fee hikes

By TOM PHILPOTT | | Published: April 26, 2012

The House armed services subcommittee on military personnel has declined to give the Obama administration new authority it sought to phase in higher Tricare fees on military retirees over the next four years and to peg future Tricare fee hikes to medical inflation nationwide.

But in marking up its version of the fiscal 2013 defense authorization bill, the subcommittee did not adopt discreet language, as it has in the past years, that would block any Tricare fee increases.

It also did not include language, as it has previously, that would prohibit the Department of Defense from using existing authority to raise co-payments on prescription drugs for dependents and retirees who use neighborhood pharmacies or the Tricare mail order pharmacy program.

Another sign that the issue of higher Tricare fees is not settled for this year comes from Sen. Lindsey Graham (S.C.), ranking Republican on the armed services’ subcommittee on military personnel.  A day before the House panel marked up its portion of its defense bill, and stayed silent on raising medical out-of-pocket costs for retirees, Graham predicted a compromise on health fee hikes between the two chambers by Sept. 30

“Between now and the end of the fiscal year, I hope we can convince the House to accept some adjustments in premiums for Tricare, because it’s just unsustainable right now,” Graham told me in a phone interview.

So far House Republicans oppose the Defense Department’s “balanced” approach for slicing $487 billion from defense budgets over the next decade, a figure agreed to in the Budget Control Act enacted last year.

About 10 percent of those cuts must occur to personnel accounts, defense leaders argue, primarily by raising out-of-pockets costs on military retirees through higher enrollment fees, deductibles and co-payments.  Without higher fees, national security is at greater risk, they contend.

“If Congress rejects all of the modest changes we've proposed in Tricare fees and co-pays for retirees, than almost $13 billion in savings over the next five years will have to be found in other areas such as readiness, or we could be forced to further reduce our troop strength,” Defense Secretary Leon Panetta told Pentagon reporters this month.

But Rep. Buck McKeon (R-Calif.), chairman of the House Armed Services Committee, said in a speech Wednesday the panel will “seek to eliminate the military health care fees proposed by the administration.”

Ignoring that retirees are targeted for most of the fee hikes, McKeon added: “Our forces on the front lines shouldn’t have to worry about caring for their families’ health back home.”

The House subcommittee mark not only ignores administration plans to raise Tricare fees, it also proposes new benefits -- 180-days of Tricare Standard and Tricare dental coverage to members of the drilling reserve who are involuntarily separated during the force drawdown now underway.

It also expresses “the sense of Congress” that military members and their families make extraordinary sacrifices over their careers, which should be viewed as a “significant pre-paid premium for their health care” in retirement.  This, of course, would serve as a caution against any straight-line comparison of military benefits to what civilian workers receive.

Graham, however, was blunt in arguing that retirees must be required to pay higher fees to make their Tricare benefit “sustainable” and to ensure that weapon modernization and force structure aren’t cut more deeply than planned to satisfy reduced targets that Congress agreed to last year.

“Tricare premiums have to be adjusted,” Graham said.  “There have been no meaningful premium adjustments since 1995.  And when the [Tricare] program was first introduced, beneficiaries were providing 24 percent of the cost.  Now they are down to 10. That’s unsustainable.”

Graham doesn’t endorse every feature for controlling personnel costs proposed in the administration’s budget request.  For example, he opposes capping active duty pay raises, starting in 2005.  He also won’t back tying future Tricare fee hikes to medical inflation, although he agrees with defense officials that increases tied to retiree cost-of-living adjustments, which Congress voted for last year, isn’t adequate either.

“Somewhere between a COLA-adjustment increase and medical inflation is where we need to be,” Graham said.

He does supports higher pharmacy co-pays to encourage more cost-efficient choices on filling prescriptions, and favors a tiered system of Tricare fees “based on your income and retired rank, sort of a means test.”

Graham knows some military associations oppose a tiered approach.  But as an Air Force Reserve lawyer who will be eligible for Tricare when he reaches age 60, Graham said tiered fees simply would be fairer.

“When I get my retirement and am Tricare-eligible, clearly based on my income level I can afford a different premium versus someone who is retired as an E-7 or E-8,” Graham said.

Graham was asked if he was sympathetic to the view that imposing an annual enrollment fee on elderly beneficiaries using Tricare for Life would break faith with a generation promised free lifetime military health care. 

“I don’t believe anybody was promised free lifetime medical care.  That’s a popular myth,” Graham said.  “I think we have an obligation to the retired force to be generous and to be compassionate to help recruiting and retention.  But, you know, there was never any contract with anybody that, for the rest of your life, you will get free medical care.  That’s not part of the deal and was never part of the deal.”

Retirees do have a valid argument that the health system should become more efficient before Tricare fees are raised sharply, he said. But that shouldn’t be an excuse to delay reasonable fee increases now.

It’s time Congress got honest with the American people, Graham said, including military retirees, Medicare beneficiaries and Social Security recipients.  All of them, he said, “are going to have to accept change to get us out of this big [debt] hole that we’re in.”

With 2012 being an election year, Graham doesn’t predict passage of major Tricare fee increases.  But allowing retirees to continue to pay only 10 percent toward health costs “is just not sustainable,” he concluded.

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