TRICARE: Today and Tomorrow
When it was signed into law Dec. 23, 2011, the Department of Defense’s (DoD) fiscal year 2012 budget contained a provision that had never appeared in a military appropriation, despite the repeated attempts of previous administrations: a modest increase in the enrollment fee for “working-age retirees” (those under 65) enrolled in TRICARE Prime, the military’s HMO-style health insurance plan.
This was a big deal. TRICARE fees had not been increased since the program was created in 1996. The reason for this freeze – and for the ongoing and sometimes heated debates about the program – is almost entirely political. Since 2001, taxpayers and their elected legislators have sought to reward, with expanded benefits, service members’ sacrifices in the long and bloody wars in Iraq and Afghanistan. Salary, health care benefits, pensions, and special pay rates have all risen steadily in the post-9/11 era. In its budget overview, the Pentagon introduced its health care provisions by explaining that the Military Health System (MHS), which now covers 9.6 million beneficiaries, costs more than twice as much as the $19 billion spent in FY 2001 – the FY 2013 request calls for $48.7 billion.
A persistently sluggish economy, meanwhile, has reduced tax revenues, helped balloon the national debt, and compelled the Department of Defense and many lawmakers to overcome their reluctance to trim personnel costs. When the DoD released its 2013 defense budget proposal in February, it introduced its section on health care benefits with the admonition: “To address these rapidly rising costs, the Department has taken a comprehensive look at all facets of the MHS health care model – emphasizing the need to balance the number one priority of continuing to provide the highest quality care and service, while ensuring fiscally responsible management for long-term sustainment of the MHS benefit.”
The 2013 budget proposal revealed several provisions that would increase the cost of health care for retired service members and their families in 2013 and in the years ahead, including:
- Continued increases in TRICARE Prime enrollment fees. For the highest-earning working-age retirees, the proposal called for the current (2012) annual family enrollment fee of $520 to climb to $2,048 by FY 2017; for those in the lower tier of retirement pay, it would increase from $520 to $850.
- TRICARE Standard/Extra fees and deductibles. There is currently no annual enrollment fee for the military’s fee-for-service programs, but the 2013 budget proposed a $140 annual fee for families, to be raised to $250 in 2017. In addition, the Pentagon proposed an increase in the plans’ deductibles, from $300 per family in 2012 to $580 in 2017.
- TRICARE For Life annual enrollment fees. The proposal called for the first-ever enrollment fees for military retirees over the age of 65 – for the highest-earning retirees, $115 annually, increasing to $475 annually over the next five years; for the lowest-earning, $35 annually, increasing to $158.
- Higher pharmacy co-payments. The Pentagon proposed higher co-payments in every category – generic, brand name, and non-formulary – over the next five years, with the exception of generic mail-order medications, which will remain free until 2017. Under the proposal, the non-formulary prescriptions will only be available by mail beginning in FY 2013.
In its proposal, the Pentagon pointed out that none of the proposed changes would affect servicemen and women currently on active duty.
Unsurprisingly, these proposals have not been popular with service members or military retirees – but the increase to TRICARE Prime enrollments fees seems particularly to have shocked some; $2,048, after all, is nearly four times the current family enrollment fee for the highest-paid retirees.
The rationale for such an increase goes as follows: It only seems huge because the enrollment fee has remained flat for 16 years, while private-sector health care premiums have soared. According to the annual index compiled by Milliman, an international actuarial and consulting firm, the average American family pays $4,728 in annual health insurance premiums.
Working-age retirees have been targeted particularly for fee increases because many – though certainly not all – have launched second careers in the private sector. The Pentagon believes the artificially low TRICARE benefit gives these retirees an incentive to stay with government-purchased insurance, rather than join an employer’s plan.
Of course, a budget proposal is only the beginning of a debate, and the TRICARE Prime provision is one of many benefit cuts that Congress has signaled it may want to walk back – though, given the provisions of the Budget Control Act of 2011, it’s not clear whether some current proposals would comply with current legislation.