DoD: squeeze TRICARE, slash grocery savings, cap BAH

February 27, 2014

By Tom Philpott

One of the two biggest changes to military compensation proposed in the president’s 2015 defense budget request would roll back, after 20 years, an offering of multiple health insurance options to millions of beneficiaries.

The other would end deep discounts on groceries, a benefit that is decades old and long had been viewed as critical to a volunteer force.

But military leaders, worried about post-war budget cuts, see gaps in readiness, risks to key weapons programs and deeper force cuts if Congress continues to block these types of compensation reforms. So they propose bold moves sure to anger service members, retirees and families.

Odds are slim Congress will approve most of them in 2014, an election year. Some lawmakers already are complaining that pay and benefit reforms should be reviewed by the blue ribbon Military Compensation and Retirement Modernization Commission, which will report its findings in February 2015.

Here, however, is how Defense Secretary Chuck Hagel and Army Gen. Martin Dempsey, chairman of the Joint Chiefs, hope to save $11 billion in compensation costs over the next five years:

PAY CAPS – The January 2015 military raise would be capped at one percent, identical to this year’s increase. Flag and general officers would not get a raise in 2015. More pay caps would follow but no one’s pay would be cut, officials emphasize.

HEALTH INSURANCE -- The triple-option TRICARE program of Prime, Extra and Standard would be merged into some sort of fee-for-service insurance option, like Standard, for beneficiaries under age 65.

While active duty members still would have access to free health care, dependents and working-age retirees would face higher costs to include a share of medical expenses and perhaps a new annual enrollment fee, set initially at $285 for individuals and $569 for families.

Patient costs would be lower if they can access military treatment facilities or use “preferred” providers who offer military discounts. New co-pays would be set for retiree visits to military treatment facilities.  Co-pays also would be set for military families and retirees who use emergency rooms inappropriately for routine care.

“We’re merging our TRICARE health insurance programs into a single health plan that’s restructured to encourage members to use the most affordable means of care, like military treatment facilities, preferred providers and generic prescriptions,” said a Defense official.

TRICARE Prime, the managed care option that allows beneficiaries to enroll in an approved network of providers for a small annual fee plus modest co-payments for care, presumably would end.  Defense health officials argue Congress hasn’t allowed fees to be raised enough to keep Prime affordable. While managed care in the private sector still serves to dampen health costs, Prime is seen as too costly to operate for the military.

Health care changes will focus more closely on integrating military direct care with private sector health services. Civilian support contracts will be reshaped “in ways that can improve integration with military medical facilities, reduce unnecessary overhead and achieve greater simplicity for the beneficiary and the government,” senior health officials testified Feb. 26.

Beneficiaries 65 and older would continue to have access to TRICARE for Life, the robust insurance supplement to their Medicare coverage.  But they would face a small enrollment fee. It might be set at one percent of military retired pay but capped so as not to exceed $300 a year. Exact details will be available March 4 when the budget is formally rolled-out.

COMMISSARY CUTS -- The prized commissary system, which offers deep discounts on groceries, would see taxpayer support slashed from $1.4 billion annually to $400 million. This would occur over three years and lower average shopper discounts from 30 percent down to 10 percent compared to commercial grocers. The military would continue to subsidize commissaries overseas and at remote U.S. bases.

The intent, said Hagel, is not to close any stores. But resale industry experts say closings are inevitable once stateside stores can’t offer enough savings to keep patrons from using commercial discounters off base.

“We are not closing commissaries,” agreed one Defense official. “They will be forced to close on their own."

Exchanges, or base department stores, are self-sustaining.  But they too could be jeopardized if they lose patrons because their top priority for shopping on base is discounted groceries. If exchanges profits fall, so too will funds for base morale, welfare and recreation programs, critics contend.

Populations hardest hit would be young military families and older retirees and survivors who prize store discounts as deferred compensation for years of service when pay and allowances were relatively low.

Defense Secretary Hagel should understand that the benefit of commissaries stateside is not just to have stores on base, said Joyce Wessel Raezer, executive director of the National Military Family Association.

“The 30 percent savings is the benefit.  If savings go down to 10 percent, that benefit is gone,” Raezer said.

HOUSING ALLOWANCES – Service members living off base stateside would see Basic Allowance for Housing (BAH) level off for a few years. The plan is not to cut payments but to cap yearly adjustments until members must pay five percent of monthly rent and utility costs using other income.

In the late 1990s, BAH rates covered only 82 percent of average rental costs off base.  When war broke out, Congress gradually closed that allowance gap. Today BAH fully covers average rent, utilities and renter’s insurance. Defense officials now call that coverage “unsustainable.”

Hagel and military chiefs want to cap the allowance until average BAH covers 95 percent of rent and utilities. BAH also no longer would be set to cover renter’s insurance, saving perhaps $200 a year per recipient.

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