Pentagon seeks new out-of-pocket charges for TRICARE beneficiaries

Wednesday - 3/5/2014, 3:51am EST

Jared Serbu reports.

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The fiscal 2015 budget proposal the White House submitted to Congress Tuesday makes another attempt to shift at least some of the Defense Department's healthcare cost burden onto the beneficiaries of its TRICARE system.

The department's previous attempts to rein in some of its healthcare costs have been mostly centered on the idea of requiring working military-age retirees to pay more for their insurance.

Year after year, they've been met with immediate opposition from military associations, and mostly rejected by Congress. And on the idea of consolidating TRICARE, DoD hasn't fared much better, hitting a wall with Congress for the past several years.

So this year, officials say they tore up the old plan and went back to the drawing board.

"We have taken a very clean-sheet look at this, with [the assistant secretary for] health affairs leading the discussion, and we're going to submit a single, simplified TRICARE plan with a series of fees to incentivize not only the best care, but the most inexpensive care to the taxpayer," said Lt. Gen. Mark Ramsay, the Joint Staff's top budget official.

The budget proposal would combine DoD's managed care insurance plan, TRICARE Prime, with its fee-for-service plans, TRICARE Standard and TRICARE Extra, consolidating them into a single health plan.

Officials said one primary goal is to incentivize people to obtain services from the military's own treatment facilities rather than turning to private providers.

More recent retirees would pay more

Defense officials said the new unified plan would offer participants "more benefits and choices."

But it also would boost out-of-pocket costs for many DoD healthcare beneficiaries, a significant number of whom pay little or nothing for their health care under current law. Taken together, the changes would save DoD $12 billion over the next five years.

Active duty service members would continue to get free care, but their family members would be subject to new fees. They would pay between $10 and $50 per visit to a civilian healthcare provider within TRICARE's network and 20 percent of the total bill to non-network providers. Most services at military medical facilities would continue to be free of charge.

Military retirees below the Medicare eligibility age also would see their out-of-pocket costs increase. They would pay an enrollment fee of $572 per year, plus new co-pays at both military and civilian care facilities.

Older retirees entering the Medicare system for the first time also would begin paying a new annual fee to participate in DoD's "medigap" plan, TRICARE for Life. DoD has covered the entire cost of that program up until now; but under the proposal, retirees would pay 0.5 percent of their annual pension pay starting next year, escalating to 2 percent by 2019.

DoD officials say they are aware their healthcare proposals will meet opposition, but they said they have done everything else they can to reduce the department's health insurance bills while being fair to beneficiaries at the same time.

The department says it is saving $3 billion each year because of past decisions to consolidate purchases of prescription drugs and align its private-provider reimbursement rates with those paid by Medicare.

But TRICARE, officials argued Tuesday, has grown to be a more generous benefit each year since it was first created in 1996. Premiums for retirees have not increased at nearly the same rate as the nation's overall healthcare expenses. Pentagon analysts say beneficiaries paid about a quarter of their own medical costs when the TRICARE system was created in 1996. As of this year, the figure has fallen to 11 percent.

Defense Undersecretary Robert Hale, DoD's comptroller, said if Congress continues to block changes on health care and other forms of compensation, the money is going to have to come from somewhere else within the increasingly-constrained Pentagon budget.

"If they turn down all of these, it will create about a $2.1 billion hole in our fiscal 2015 budget and about a $30 billion hole over the next five years," he said.

Housing benefits to take a hit

The healthcare changes DoD officials proposed Tuesday are part of a series of compensation adjustments the department is proposing as part of its 2015 budget.

Ramsay said the lower budget levels the department is facing, with or without sequestration, require the department to not just reduce its overall size, but also address the fundamental drivers of its personnel costs.

"One of the things that became very obvious to us as we examined all of this last fall was the need to go look at our total military pay and compensation package. We have to keep a balance across the force," he said. "At any budget level, we know they're coming down, and we are looking at trying to balance what the force costs in terms of people against the capability, the capacity and readiness of that force. So we worked very hard with the Joint Chiefs of Staff and the senior enlisted leaders of the services to look at proposing a package of major initiatives."