Vets beware!“Modest” Tricare fee hike proposed

President 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 No. 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 Gate’s 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; tweaks 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 younger than 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 Department of Defense proposals to raise TRICARE fees would have doubled and tripled out-of-pocket costs over several years, and included retirees younger than 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-payment charges 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-payment. But officials want to widen the disparity.

They would end the $3 charge for mail order generic drugs and raise the co-payment for generics at retail outlets to $5, up from $3. Co-payments 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-payment would be raised to $25 for both mail order and retail.

The new co-payments could save TRICARE $2.6 billion over five years.

USFHP enrollment

More than 100,000 military beneficiaries are enrolled in Uniformed Service Family Health Plans in six areas of the country. These are former Public Health Service hospitals that Congress designated to be TRICARE Prime providers to enrolled military beneficiaries.

USFHP beneficiaries at age 65 don’t have to enroll now in Medicare. They can remain with the USFHP. That would change for future USFHP enrollees. They would have to go under Medicare, like other military beneficiaries who turn 65, and use TRICARE for Life as second payer.

TRICARE projects this will save $3.2 billion by fiscal 2016.

In presenting the new budget Feb. 16 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, in a letter to the Senate Armed Services Committee, “have strongly endorsed these and other cost-saving TRICARE reforms.”

Gates said any proposed change to military health fees “prompts vigorous political opposition. But let us be clear: the current TRICARE arrangement, one in which fees have not increased for 15 years, is simply unsustainable and, if allowed to continue, the Defense Department risks the fate of other corporate and government bureaucracies that were ultimately crippled by personnel costs, and in particular their retiree benefit packages.”

Gates bristled at comments by freshman Rep. Scott Rigell, R-Va., that raising TRICARE fees at all “was a breach of trust” to retirees who still believe recruiters years ago promised them free health care for life.

“Congress actually settled this issue, in 1995, that it wasn’t free for life,” Gates said. It did so by imposing current fees as the triple option TRICARE coverage began.

“Once you’ve acknowledged that there is going to be a fee,” Gates added, “the notion that the fee would never change is certainly nowhere in the legislation.”

Some in Congress still plan to oppose the fee increases. Sen. Jim Webb, D-Va., chairman of the Senate military personnel subcommittee, said he views any TRICARE increases as violating “a moral contract between our government and those who have stepped forward to serve.”

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