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The Bush administration, in its fiscal 2007 defense budget, unveiled its plan to raise Tricare fees and deductibles for military retirees under age 65 and their dependents. Co-payments in the Tricare retail pharmacy network also would climb, but for all beneficiaries except active duty.

Marine Corps Gen. Peter Pace, chairman of the Joint Chiefs, immediately endorsed the plan, describing it as a necessary “renorming” of Tricare fees and deductibles left unchanged since they were set in 1995.

With equal speed, military associations attacked the proposal.

Compared to an earlier draft, the final plan accelerates phase-in of Tricare increases so major changes occur over two years, not three. For a schedule of changes, go to

Annual enrollment fees for Tricare Prime, the managed care program, would double for senior enlisted (E-7 and above) and nearly triple for officer retirees. But the final plan includes a lower, third tier of fees and deductibles for retirees E-6 and below and their dependents. Their Prime enrollment fees would only rise by 41 percent, sparing a million beneficiaries from steeper increases planned for senior enlisted.

The decision to vary the Tricare fees, said Dr. William Winkenwerder Jr., assistant secretary of defense for health affairs, “reflected significant input from the military uniform leadership … recognizing that some people have fewer dollars in retirement income than others.”

The plan also calls for a raise in annual deductibles for Tricare Standard, the military fee-for-service insurance option. And it calls for a first-ever enrollment fee for Standard users.

Once new Tricare fees are fully reset, in 2008, they would be adjusted annually based by health care inflation, in fact, applying the same percentage increase used to raise premiums each year for federal civilians covered under the Federal Employees Health Benefit Plan (FEHBP).

Finally, to slow military health costs more, co-payments under the Tricare retail pharmacy network would be raised, for generic drugs to $5, up from $3, and for brand name drugs to $15, from $9.

To encourage use of the more efficient mail order program, that $3 co-pay for a three-month supply of a generic drug would end. But a new “100 percent co-payment” would be set for a “few certain medications,” officials said. Thus, for some still-to-be determined narrow group of drugs, beneficiaries themselves would pay the entire cost unless they can show medical necessity or unless there is no cheaper and effective alternative.

Testifying before the Senate and House armed services committees, Pace and Defense Secretary Donald Rumsfeld said the Tricare changes are unanimously backed by all of the Joint Chiefs.

“We believe this health care benefit is unique and superb,” Pace said. “We want it to continue for all of our members of the active-retired community and we believe renorming, to what you [Congress] established in 1995, is one way to assist … the goal of long-term sustained health care.”

Sen. Lindsey Graham, R-S.C., chairman of the military personnel subcommittee, lauded Pace and Rumsfeld “for putting on the table some new ways of looking at military health care … I stand ready to help.”

The plan got a cooler reception from House committee members. Rep. Neil Abercrombie, D-Hawaii, said the fee increases were more evidence that the only Americans paying for the war in Iraq are military people.

Rep. John McHugh, military personnel subcommittee chairman, worried that of $578 million in projected cost savings from the Tricare plan for 2007, $420 million “are imputed savings,” which depend on “changes in behavior.” In other words, McHugh said, the department expects a lot of people not to use Tricare because of the higher fees and deductibles.

“I guess we could talk about the morality of that, if that’s the way to contain costs [by] persuading people not to use health care,” McHugh told Rumsfeld and Pace. “But I’m going to put that aside.”

Of more immediate concern, he continued, is what will happen if the imputed savings, which jump to $1.6 billion for 2008, aren’t achieved? Because those savings are imbedded in the defense budget, he suggested, other defense programs will be put at risk if the savings aren’t realized.

Pace said he didn’t know how savings were calculated. The Joint Chiefs focused their discussions, he said, on preserving a benefit whose annual costs have soared from $19 billion in 2001 to $37 billion in 2006. Yet the “very reasonable” Tricare fees, set 11 years ago, have not been raised.

Rumsfeld said low fees have turned Tricare into a “magnet” for working-age military retirees who increasingly are encouraged by civilian second-career employers to use Tricare rather than company health plans.

The Military Coalition, a consortium of three dozen military and veterans associations, opposes the higher fees, deductibles and co-pays.

Jim Lokovic, director of government relations for the Air Force Sergeants Association, co-chairs the coalition’s retired affairs committee. He said a big worry for enlisted retirees is the effect of linking future fee adjustments to the percentage rise in FEHBP premiums. FEHBP increases typically outpace retiree cost-of-living adjustments which would mean a steady decline in the value of military retirement as health costs climb.

Steve Strobridge, with Military Officers Association of America and the coalition’s co-chairman, said the changes “are worse than expected.” He called Pace’s argument that 1995 fees need to be readjusted “bogus.”

Working retirees, in effect, are being asked to pay a portion of the cost of enacting Tricare for Life in 2001 for service elderly, Strobridge said. He argues the administration is ignoring a law that “pretty clearly states” payments for the TFL trust fund should be coming out of the Treasury Department’s budget so they do not impinge on Defense programs.

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