Military Groups Brace for Battle Against Higher Health Care Costs

Lawmakers expected to stall on benefit cuts in midterm election year.

Army soldiers carry an injured soldier who was shot in the leg, through a poppy field on April 24, 2011 in the Arghandab River Valley, Kandahar Province, Afghanistan.
National Journal
Stacy Kaper
March 4, 2014, 1:14 p.m.

The ad­min­is­tra­tion’s push to shift more health care costs onto cur­rent mil­it­ary per­son­nel and re­tir­ees met with res­ist­ance in Con­gress even be­fore the de­tails were re­vealed in the pres­id­ent’s fisc­al 2015 budget Tues­day.

Now the Pentagon’s pro­pos­al to cut costs by con­sol­id­at­ing its three health care op­tions un­der Tri­care in­to one, tack on new fees for those eli­gible for Medi­care, and in­crease phar­macy co-pays is ex­pec­ted to re­ceive an even chil­li­er re­cep­tion on Cap­it­ol Hill.

After all, it’s an elec­tion year, and law­makers from both parties have said re­peatedly they want to wait un­til a com­mis­sion they cre­ated comes up with a com­pre­hens­ive plan be­fore they over­haul com­pens­a­tion and be­ne­fits. The com­mis­sion is not due to make re­com­mend­a­tions un­til next year.

The force of the push­back on Cap­it­ol Hill is likely to mir­ror the strength of the op­pos­i­tion from mil­it­ary groups. Many raised ini­tial con­cerns Tues­day but were look­ing for more spe­cif­ics from the Pentagon be­fore they launched their plans of at­tack.

Oth­ers came out swinging right away, ar­guing that any health care in­creases were non­nego­ti­able.

“The Amer­ic­an Le­gion adam­antly op­poses any in­creases to Tri­care, wheth­er they be co-pays or ad­di­tion­al fees of any kind,” said Joseph Grassi, a deputy dir­ect­or with the Amer­ic­an Le­gion. “The ad­min­is­tra­tion and Con­gress keeps go­ing to Tri­care as a way to save money, and it’s the wrong an­swer.”

Act­ive-duty sol­diers will push back, too, said Mi­chael Hay­den, le­gis­lat­ive dir­ect­or with the Mil­it­ary Of­ficers As­so­ci­ation of Amer­ica.

“The Pentagon’s pro­pos­als will face a very tough road ahead. This is an­oth­er at­tempt to shift sig­ni­fic­ant costs onto be­ne­fi­ciar­ies, but with a twist. Not just re­tir­ees, but these pro­pos­als will im­pact the pock­ets of cur­rently-serving mem­bers and their fam­il­ies,” Hay­den said.

Law­makers just went through a hellish polit­ic­al mess, yield­ing to out­rage from vet­er­ans’ groups and re­vers­ing a meas­ure to re­duce mil­it­ary re­tir­ee pen­sions that was in­cluded in last year’s budget agree­ment.

Now the De­part­ment of De­fense is back at law­makers’ door­step, ask­ing for a series of sens­it­ive cuts to shrink mil­it­ary be­ne­fits — in­clud­ing re­du­cing com­mis­sary be­ne­fits, slash­ing hous­ing al­low­ances, and cap­ping pay in­creases — which were de­tailed in a de­fense-budget sneak-peek last week.

On Tues­day, the Pentagon un­veiled more de­tails of its plan to tackle health care costs, which have long been a prime tar­get for re­form be­cause they are the largest and fast­est-rising of the per­son­nel costs that threaten to over­take the de­part­ment’s budget.

“In­tern­al sav­ings ini­ti­at­ives are not enough to curb the ex­pec­ted in­crease in health care costs the de­part­ment ex­pects to ex­per­i­ence in the com­ing years,” said a de­fense budget over­view from the of­fice of the un­der­sec­ret­ary of De­fense.

“There­fore, DoD must pur­sue reas­on­able health be­ne­fit re­form now as part of a bal­anced ap­proach to cost con­tain­ment.”

The comp­troller’s de­fense-budget over­view noted that health care costs ac­coun­ted for only 4 per­cent of the de­part­ment’s base budget in 1990, com­pared with al­most 10 per­cent in 2012.

The Pentagon con­tends that while health care costs have ex­ploded, Con­gress has largely res­isted ef­forts to al­low be­ne­fi­ciar­ies to cov­er more of the cost — a trend that can­not con­tin­ue.

The de­part­ment ar­gues that in 1996, a typ­ic­al work­ing-age mil­it­ary re­tir­ee’s fam­ily that used ci­vil­ian health care con­trib­uted on av­er­age roughly 27 per­cent of the total cost of its health care, while today that per­cent­age has dropped to less than 11 per­cent. Health care costs, DoD says, have doubled or tripled dur­ing this time, but a fam­ily’s out-of-pock­et ex­penses, in­clud­ing en­roll­ment fees, de­duct­ibles, and cost shares, has grown by only 30 to 40 per­cent.

The pro­pos­al would nearly triple phar­macy co-pays over the next dec­ade. But it would also re­quire all be­ne­fi­ciar­ies with long-term main­ten­ance med­ic­a­tions to fill their pre­scrip­tions by mail, which is sig­ni­fic­antly cheap­er and is un­likely to be op­posed by mil­it­ary and vet­er­ans’ ser­vice or­gan­iz­a­tions.

For an act­ive-duty mil­it­ary mem­ber with three de­pend­ents who uses a mix of Tri­care and ci­vil­ian health care, the share of costs borne by the fam­ily would in­crease to 3.3 per­cent from 1.4 per­cent, or to $364 from $158, un­der the pro­posed con­sol­id­ated Tri­care plan, ac­cord­ing to the Pentagon.

For a non-Medi­care-eli­gible re­tir­ee un­der 65 with three de­pend­ents, the costs would go to $1,526 from $1,378, and raise the per­cent of the costs borne by the be­ne­fi­ciary to 10.8 per­cent from 9.3 per­cent.

Both the George W. Bush and Obama ad­min­is­tra­tions have tried for the bet­ter part of a dec­ade to rein in the soar­ing costs of Tri­care, which provides cov­er­age for both mil­it­ary per­son­nel and re­tir­ees.

But in the face of massive push­back from mil­it­ary and vet­er­ans’ ser­vice or­gan­iz­a­tions, the Pentagon has made only mod­est in­roads in this quest since 2005.

Last year, law­makers re­jec­ted all of DoD’s Tri­care pro­pos­als, which called for rais­ing an­nu­al fees by at least $1,000 for all mil­it­ary re­tir­ees, im­pos­ing means-test­ing of mil­it­ary health be­ne­fits, and sig­ni­fic­antly in­creas­ing phar­macy co-pays.

Be­cause health costs have been a source of such long-stand­ing ten­sion, however, Con­gress has oc­ca­sion­ally sur­rendered to the pres­sure and thrown DoD a bone.

In fisc­al 2012, Con­gress al­lowed cer­tain fee in­creases, en­roll­ment rates to in­crease with in­fla­tion, and phar­macy co-pay in­creases. In fisc­al 2013, Con­gress re­jec­ted most of the Pentagon’s Tri­care-re­form re­quests to in­crease fees, es­tab­lish new ones, im­pose means-test­ing for mil­it­ary re­tir­ees, and in­crease phar­macy co-pays. In­stead, Con­gress agreed to re­quire Medi­care-eli­gible be­ne­fi­ciar­ies to fill long-term pre­scrip­tions by mail to re­duce costs.

Mil­it­ary as­so­ci­ations say that there are some pro­pos­als, like ini­ti­at­ing fees for Medi­care-eli­gible be­ne­fi­ciar­ies, that have been re­ques­ted be­fore and are bound to keep com­ing back un­til DoD suc­ceeds.

In oth­er cases, the de­part­ment has taken in­to ac­count some of the past cri­ti­cisms of pro­posed cost in­creases and tried to lay out a set of re­forms that con­ceiv­ably stand a chance of ap­prov­al on Cap­it­ol Hill.

“Some of these fees are ac­tu­ally more reas­on­able than what they have tried to put for­ward be­fore. They are try­ing to work the art of the pos­sible, I think. It’s a sign that they want something to pass be­cause they are un­der such budget pres­sures,” said Joyce Raez­er, the ex­ec­ut­ive dir­ect­or of the Na­tion­al Mil­it­ary Fam­ily As­so­ci­ation.

“But to com­ment more on some of the spe­cif­ics, we have a lot of ques­tions, and we are go­ing to be look­ing for some an­swers and then we’ll circle back and see what is the im­pact, es­pe­cially for our act­ive-duty fam­il­ies,” Raez­er said.

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