Military Update: Higher health fees planned for retirees
December 14, 2005
By Tom Philpott

Defense Department officials have drafted plans to raise TRICARE enrollment fees and deductibles sharply over the next three years for military retirees younger than 65 and their families.

That would affect about 3 million beneficiaries. If the changes touted by senior defense officials are adopted, annual enrollment fees for TRICARE Prime - the military's managed-care option - would triple by October 2008 for working-age retired officers. They would double for enlisted retirees.

Yearly deductibles for retirees using TRICARE Standard, the fee-for-service health insurance option, would double for officers and rise a third for enlisted. Also, for the first time, retirees who use TRICARE Standard would pay an enrollment fee in addition to their deductible.

Pharmacy co-payments also would be raised for all retirees and their families, regardless of age. That's if they use the retail drug network or the TRICARE mail-order program to buy brand-name drugs on the military formulary.

The aim of these initiatives is to slow the projected rise in military health care costs by as much as $12 billion over five years and $32 billion through fiscal 2015. This would occur, proponents argue, by having working-age retirees pay a greater share of TRICARE costs and by encouraging others to switch to their employer-provided health insurance.

One assumption being used to estimate cost savings is that for every 10 percent increase in out-of-pocket costs, the number of beneficiaries using TRICARE Prime or Standard will fall 1 percent. If accurate, 600,000 beneficiaries would drop out of TRICARE plans by 2015.

Defense officials have expressed alarm over a recent migration of retirees into TRICARE and away from employer-provided health insurance. Dr. William Winkenwerder, assistant defense secretary for health affairs, has said some civilian employers are offering their retired military workers cash incentives to use TRICARE, instead of company insurance.

Bryan Whitman is deputy assistant defense secretary for public affairs. He said defense health care spending, if left unchecked, could reach $64 billion by 2015, or 12 percent of total defense spending. That would endanger a prized benefit, he said. In fiscal 1995, he said, health care was only 5 percent of the defense budget.

Current TRICARE Prime enrollment fees are $230 a year for individual coverage and $460 for family coverage. The current TRICARE Standard deductibles are $150 for a single person and $300 for family coverage. They haven't been raised since they were set more than a decade ago. Whitman said this contributed to growth in department costs.

Budget documents contend that the TRICARE fee structure is only one-third as costly to users as equivalent civilian plans. Defense officials want fees and deductibles raised for retirees and their families in three hefty annual increments. They also want fees after that indexed to inflation so they climb in lockstep each year with growth in medical costs nationwide.

Some of the planned TRICARE increases won't require a change in law, only in regulation. However, department plans for fees are sure to be the subject of congressional hearings in 2006. Lawmakers could step in to block or amend the plan if the planned increases seem unreasonable.

Draft budget papers predict a "pushback" from retiree organizations. The first shot was fired Thursday: The Military Coalition, a consortium of 36 service associations and veterans' groups, sent a letter to members of the House and Senate armed service committees. The letter urged that the committees oppose department plans to shift a larger share of medical costs to retirees.

Congress gave military retirees better health benefits as an "offset to the unique demands and sacrifices inherent in a military career," the coalition wrote. Requiring them to pay more for health care, the letter read, "is not a prudent course of action, especially when the nation is at war."

The "benefit adjustment" scenario is discussed in the fiscal 2007 budget-formulation process and in the resource-sharing debate for the Quadrennial Defense Review. It calls for all younger-than-65 retirees to pay more to use TRICARE Prime, Standard and Extra, the preferred-provider network option. Retired officers also would pay more than enlisted retirees.

TRICARE Prime enrollment fees would increased for retired officers to $400 for individuals and $800 for a family in October. They would go to $600 for individuals and $1,200 for a family a year later and to $750 for a single person and $1,500 for a family by October 2008.

Enlisted retirees younger than 65 would see Prime enrollment fees climb to $300 for individuals and $600 for a family in October to $375 and $750 a year later and to $450 and $900 respectively in October 2008.

First-ever enrollment fees for TRICARE Standard would start for officers at $150 and $300 for family coverage, then rise to $225 and $450 by October 2007 and to $300 and $600 in 2008.

Enlisted retirees would pay $100 and $200 in October, then $150 and $300 the next year and $200 and $400 in 2008.

Annual deductibles under TRICARE Standard and Extra would climb for retired officers to $200 and $400 next fall, to $250 and $500 in October 2007 and to $300 and $600 in 2008.

Co-payments under the TRICARE pharmacy program would be reshaped to discourage purchase of maintenance medicines in the more expensive retail network.

The $3 co-payment for generic drugs will rise to $5 in the retail network but would be free if ordered by mail. The current $9 co-pay for brand-name drugs would rise to $15 in retail network and $10 by mail.