Defense pitch to hike TRICARE fees hit by cost slowdown

Aug. 2, 2012

by Tom Philpott

The Defense Department’s push to phase in substantial TRICARE fee increases for military retirees came under fresh attack from Congress and military associations this week after officials conceded an unexpected "downward spike" in TRICARE cost growth tied to private sector health care.

Robert Hale, the DoD comptroller, held a press conference Thursday morning to defend the credibility of department claims that soaring health costs make the TRICARE benefit "unsustainable" unless retirees pay more.

Defense officials had based their TRICARE budget request for fiscal 2012 on projections that the cost of care delivered through private sector providers would jump by 12.9 percent for active duty and by 8.9 percent for all other beneficiaries including military retirees.

Instead, in the first six months of the fiscal year, private sector health costs grew at "historically low rates," according to budget documents. The rate was only 0.6 percent for active duty. More surprising, private sector care costs for retirees, their families and survivors actually fell 2.7 percent.

As a result, the health program has a $708 million surplus, which the department wants to "reprogram" into other accounts to cover higher than expected fuel prices, the unscheduled deployment of a second aircraft carrier to the Middle East, and higher transportation costs tied to Pakistan’s closure of the main land route for U.S. supplies into Afghanistan.

But the health budget surplus has angered critics on Capitol Hill and advocates for military retirees. They say it suggests senior defense officials knowingly have exaggerated the trajectory of health budgets to try to persuade Congress to approve higher TRICARE fees for retirees.

Hale and Dr. Jonathan Woodson, assistant secretary of defense for health affairs, said the issue of a "reasonable" two-percent miss on health cost projections for fiscal 2012 is unrelated to their call to raise TRICARE fees on retirees. These officials maintain that growth in military health costs will continue to outpace defense spending generally, straining other programs.

The House already has refused to back the DoD plan to raise TRICARE fees on military retirees in fiscal 2013. The Senate Armed Services Committee also has rejected these proposals to phase in higher enrollment fees for TRICARE Prime, the managed care benefit; to establish a first-ever enrollment fee for TRICARE Standard, the fee-for-service insurance plan option, and for TRICARE Extra, the preferred provider network option; and to establish a first-ever enrollment fee for elderly under TRICARE for Life, the military’s insurance supplement to Medicare.

But these ideas will be raised again as Defense officials continue to argue that, unless fees increase, additional force cuts will be needed.

Rep. Joe Wilson (R-S.C.), chairman of the House armed services’ subcommittee on military personnel, said he recently also learned that this is the second year of health budget surpluses. In fiscal 2011, DoD had $500 million in excess TRICARE funds reprogrammed to other accounts. Hale said Thursday he could not confirm that information.

"I was surprised," Wilson said in a phone interview. "Because the information we had been provided is that the reason for increasing the TRICARE premiums, up to 365 percent…is ever increasing health care costs. As it turns out, there really is a downward spike in health care costs."

Wilson said his first reaction to this year’s surplus was to try to roll back modest TRICARE Prime fee increases imposed on working-age retirees and to return those dollars to beneficiaries. He’s been told it can’t be done, Wilson said. But "at the very least" higher fees sought in defense plans beyond 2012 "should be withdrawn and premiums should be frozen," he said.

Wilson and 23 House colleagues, including a few Democrats on the armed services committee, sent a letter of "concern" July 24 to Defense Secretary Leon Panetta, suggesting the reprogramming request raises doubts about department arguments that health care costs are out of control.

"We do not understand how DoD can justify a request to raise fees on a class of people whose costs to the department are actually decreasing," said colleague letter, which requested more briefings on the issue.

Lawmakers also pressed Panetta to explain why his department doesn’t use "excess" health dollars to find more effect treatments for signature wounds of the Iraq and Afghanistan wars such as traumatic brain injury and post-traumatic stress, or to address rising suicides in the force that, so far this year, are averaging out to one suicide every day.

Hale responded to Wilson and his colleaguesin a July 30 letter, explaining that the surplus was due to "uncertainty about medical inflation and health care use, and the impact of continual benefit changes and efficiency initiatives." Budget documents also referred to a shift in beneficiary population but neither Hale nor Woodson could explain that.

Hale told Wilson that in years past money had to be shifted into TRICARE accounts because spending was higher than projected. In any case, the need for TRICARE fee increases is unrelated, Hale wrote.

"We requested higher fees for TRICARE to control our rapidly growing health care costs while moving the cost-sharing ratio [for beneficiaries] back toward the levels originally mandated by Congress. As you know, these fees have not been increased significantly for about 15 years," Hale wrote.

He noted that total military health costs rose from $19 billion in fiscal 2001 to more than $52 billion last year, a climb of 174 percent.

"These sharply rising costs threaten to leave our military budget unbalanced – with too much funding for military compensation and too little for training and equipping our forces," Hale wrote. That especially worrisome given funding limits imposed on defense budgets by last year’s Budget Control Act, which Congress passed to begin to address the nation’s debt.

That DoD has found a surplus of TRICARE dollars two years running should spur Congress to be skeptical of claims that beneficiaries need to pay more, said Steve Strobridge, director of government relations for Military Officers Association of America. This, combined with DoD’s decision to take the path of least resistance to streamline its medical commands, "gives lie to all their uproar" about health costs sinking future defense budgets, he said.

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