Defense Secretary Robert Gates is likely to face an uphill battle as he pushes a proposal to increase fees for some beneficiaries of the military’s TRICARE health insurance system. As in past years, Gates will have to persuade skeptical members of Congress, something he has not managed to do since he began proposing higher fees in 2007.
Additionally, associations that represent military retirees are girding for another fight, though they said in interviews that they are still waiting to see the full details of Gates proposal. The organizations helped to beat back DoD’s proposed increases in the last several years’ defense appropriations bills, but Secretary Gates made clear last week that he wants to try again to impose “modest” increases on working-age retirees.
“Many of these beneficiaries are employed full-time while receiving their full pensions, and often forgo their employers’ health plan to remain with TRICARE,” Gates said. “This should not come as a surprise given that the current TRICARE enrollment fee was set in 1995, and has not been raised since.”
It’s an issue that DoD’s individual service chiefs and the Joint Chiefs chairman have spoken about as well, saying the increased personnel costs caused by heath care may pose a future threat to military readiness.
This past summer, now-former Coast Guard commandant Admiral Thad Allen said at a Navy League forum that personnel costs had risen to 66 percent of his service’s budget. At that point, he was just about to become a retiree on TRICARE.
“I just signed my TRICARE Prime form. For the entire year for my wife and I, it was only $469. I think at some point we’re going to have to come to grips with this,” he said.
Allen is entitled to a pension of a little over $182,000 this year, according to the military’s pension calculator. He, however, is a retired four-star admiral with nearly 40 years of service. Numbers prepared by the Association of the United States Army say the average military retiree, in that branch at least, is a senior enlisted service member with about 20 years of service. An annual pension at that pay grade is closer to $20,000 in 2011 dollars.
That disparity is one reason that DoD’s 2007 task force on military health care recommended a tiered system. The panel suggested that premiums be raised in three bands – one for retirees with pensions of less than $20,000 per year, another between $20,000 and $40,000, and another above $40,000. At the highest band, premiums would have gone up to $1,750 by now, while the lowest band would have paid $900 this year.
DoD asked Congress to institute the Task Force’s recommendations in its 2009 budget, but lawmakers declined. Navy Capt. Cathy Beasley (Ret.), who is now with the Military Officers Association of America said she hopes the department doesn’t try again.
“Whether you’re an E-1 or an O-6 or O-7, you earned the same level of benefit,” she said. “The President pays the same FEHB premium as another federal worker lower down in the GS rating. So we don’t believe in means testing at all.”
Beasley said the income of a military retiree shouldn’t matter, nor should the fact that private and civilian sector employees have seen dramatic healthcare premium increases over the last 15 years.
“People in civilian jobs have not had to endure the kinds of duties which we equate to paying for people’s premiums up front with this type of service,” she said. “Take for instance, anybody who’s had a career in the military, the kind of hazardous duty they’ve had to do. Service in foreign and often hostile environments. Multiple extended forced family separations. Long duty hours without extra pay. Frequent forced relocations. Disruptions of spouses’ careers. Those are the kinds of hardships that military folks have had to endure over the course of a 20 or 30 year career, and we think that equates to, if not overcompensates health care premiums up front.”
Deirdre Holleman, executive director of The Retired Enlisted Association said a tiered system in which where retirees with lower pensions would pay less than retired generals and admirals would be less painful for her members than an across-the-board increase. But she said any increase would be painful.
“With my guys it would be a real hit,” she said. “It really would be. My folks are living very tightly. The healthcare benefits are extremely important to them, and it’s something they’ve earned. It’s something that they were promised, it’s something that they depended on. Not only do people agree to risk their lives for all these years, but they also take less pay, more moves and miserable conditions.”
Holleman said many of her members are among those who are struggling in the current economy.
“You’re not talking about a four-star,” she said. “You’re not talking about someone who goes and works for Booz Allen after retiring as a full colonel. Those are unusual situations. Most retirees are enlisted retirees who have served 20 years at least and retire probably as an E-6 or an E-7.”
Secretary Gates has been fond of reminding reporters for at least the past year that TRICARE premiums have not increased since 1995.
“I ask anybody to point me to a health insurance program that has not had a premium increase in 15 years,” he said at a February news conference.
But Holleman said rates haven’t gone up during that period because DoD never asked for increases until a few years ago. She said small increases that are indexed to inflation might be something her members could live with. “Obviously there are some proposals that are less awful than other proposals,” she said.
But she said imposing large increases all at once–what she would view as “retroactive” increases–would be unfair.
“The problem of doing something like that is that people on fixed incomes have plans,” she said. They have made their plans based on this. If they had done this in 1995, that would have been a far different thing. It would have been much less of a hit to people on fixed incomes who have made their plans.”
DoD has pressed Congress, unsuccessfully, for TRICARE fee increases for several years in a row. But Gates has said there is reason to believe that attitudes on Capitol Hill might be changing.
Maren Leed, director of the New Defense Approaches project at the < a href="http://csis.org">Center for Strategic and International Studies said he may be right.
“I think there is some receptivity to it,” she said. “I think it will depend how it’s structured, is it a means tested type of a change in copayments and premiums? I think something like that, there probably could be some accommodation found. Whether it’s going to truly going to get after the magnitude of the problem that they face on rising health care costs – it’s not going to come close. But it would certainly help.”
Indeed, Gates said last week that the fee increases he’ll propose-even combined with yet-to-be-annoucend efficiency savings in the military health care system–will only save about $7 billion over the next five years. The group that would be subject to higher premiums – working age retirees enrolled in TRICARE Prime – is a pool of about 586,000 families, a TRICARE spokesman said. TRICARE has nearly six million total enrolled users.
One key member of Congress who might be swayed to support the fee increases is Sen. Lindsay Graham (R-S.C.), who sits on the armed services committee. At a hearing last year he said DoD should do everything it can to spend its healthcare dollars more efficiently, but acknowledged the trajectory of the military’s health care costs is unsustainable.
“I want to be generous and fair to all those who serve, but there’s a cost containment problem within DoD’s budget…I don’t see how we can sustain this forever, where TRICARE is never subject to adjustment in terms of the premiums to be paid. If we’re going to do that, we’re going to have to come up with a lot more money for Defense, because it’s going to eat away at readiness.”
DoD says its 2011 health care costs are a little over $50 billion. They estimate those costs will reach $65 billion in 2015. The details of Gates’ TRICARE fee proposal are expected to be released when he unveils the department’s proposed 2012 budget, which is due next month.
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