Subscribe

Alarmed that soaring health care costs are crimping budget dollars for higher-priority defense programs, the Joint Chiefs intend to endorse the Defense Department’s plan to raise Tricare fees sharply over the next three years for retirees under 65 and their families, say senior military officers.

One officer described a likely scenario, early in 2006, of the nation’s top military leaders sitting shoulder to shoulder before the armed services committees to testify that medical costs are now a critical readiness issue.

Higher Tricare fees for younger retirees also will be endorsed in the Quadrennial Defense Review report that the service chiefs are completing to propose a realignment of military programs to meet future needs. The QDR recommendations are expected to be unveiled in early February when the Bush administration also sends its 2007 defense budget request to Congress.

The “24-star” endorsement, a reference to the six four-star officers who make up the Joint Chiefs — the chairman, vice chairman, and top officer of the Army, Navy, Air Force and Marines Corps — is seen as necessary to persuade Congress to accept the first Tricare fee increases in a decade and then to help insulate supportive lawmakers from the wrath of angry retirees.

As first reported here three weeks ago, Defense officials want annual enrollment fees for Tricare Prime, the military’s managed care plan, to triple by October 2008 for working-age retired officers, from $230/$460 a year (individual/family coverage) up to $750/$1,500, and to double, to $450/$900, for under-65 enlisted retirees.

Retirees who use Tricare Standard, the military’s traditional fee-for-service health insurance, would see their annual deductible raised, too. They also would pay for the first time an annual enrollment fee. Beyond 2008, all Tricare fees and co-payments would be indexed to medical inflation.

Tricare retail pharmacy co-payments also would be raised, which would be the only change to affect Medicare-eligible retirees too. The goal would be to discourage purchase of maintenance medicines through the more expensive retail network, by increasing the $3 co-payment for generic drugs to $5 while offering free generic drugs by mail. The current $9 co-pay for brand drugs would jump to $15 retail and $10 by mail order. Officials assume a 14 percent shift of Tricare retail users to base pharmacies or into the mail order program.

Dr. William Winkenwerder Jr., assistant secretary of defense for health affairs, and his staff developed the proposed fee increases as a way to slow the rise in health costs, most of which is traced to the start in 2001 of the Tricare for Life and senior pharmacy programs for elderly beneficiaries.

The idea behind Winkenwerder’s plan is to have working-age retirees and family members pay a bigger share of their Tricare costs or use alternative health plans offered by civilian employers.

Tricare officials estimate that the higher fees and a decline in users will dampen projected health care costs by $12 billion within five years and $32 billion through fiscal 2015. But the numbers are viewed as optimistic, even by senior analysts, one source explained. They assume that 600,000 current beneficiaries, facing higher fees, will shift to employer-provided health insurance by 2011.

The “flaw” behind that figure, the official explained, is it’s based on civilian HMO surveys of disenrollments when their fees are raised. Most HMO users, however, seek lower-cost alternatives. For Tricare Prime users, even if the $460 enrollment fee for families is bumped to $1,500 a year, as proposed for under-65 retired officers, Tricare still will be a better deal.

If so, most of the projected cost savings will flow from the higher fees, which it might be argued is just a budget move to have younger military retirees and their families cover some of the cost of Tricare for Life and senior pharmacy benefits for older retirees, their spouses and survivors.

Senior leadership, this official said, “is finally beginning to realize that the primary driver of costs is the benefit offered. This is a constant source of frustration for senior civilian leadership … charged to deal with the growing top line for defense health care.” But, he added, the comparisons now being made between military benefits and medical costs paid by civilians “gloss over the sacrifices those retirees made and the promises made to them.”

Winkenwerder argues, however, that Tricare fee increases are overdue. Because they haven’t been raised since first set in 1995, more and more retirees are moving out of employer-provided health insurance, with its own rising cost shares, to use Tricare benefits.

In October, the Congressional Budget Office released an updated report on “The Long-Term Implications of Current Defense Plans” which presents the kind of kudzu-like cost projections for military health care that have persuaded the Joint Chiefs to back Winkenwerder’s plan.

By 2024, CBO says, military medical costs will grow “by 80 percent in real terms … from $37 billion in 2006 to $66 billion.” That is 37 percent of total budget growth expected across military operations, maintenance and personnel accounts, which represent 60 percent of the defense budget.

Other than the cost of war and contingency operations, CBO says, the greatest budget risk facing the military is health care costs. The CBO report encourages an increase in fees, but suggests that a “transformational” set of higher fees and co-payments would boost out-of-pocket costs to the level of civilian HMOs, and hit not only younger retirees and their families but Medicare-eligible beneficiaries and active duty family members too.

To comment, write Military Update, P.O. Box 231111, Centreville, VA, 20120-1111, e-mail milupdate@aol.com or visit www.militaryupdate.com.


Stripes in 7



around the web


Sign Up for Daily Headlines

Sign-up to receive a daily email of today’s top military news stories from Stars and Stripes and top news outlets from around the world.

Sign up