Auditors question Pentagon projections for health care savings

The Pentagon's proposal to cut health care spending by increasing the share of costs paid by some TRICARE beneficiaries is unlikely to achieve the large savings the agency projects, according to a recent report by the Government Accountability Office.

From 2000 to 2005, the report (GAO-07-647) noted, the Defense Department's health spending more than doubled, from $17.4 billion to $35.4 billion. It primarily went toward TRICARE, the program that provides health care to 9.2 million active duty personnel and others, including military retirees. The agency projects that health spending will continue to rise in coming years and will consume 12 percent of the Defense budget by 2015, up from 7.5 percent in 2005.

GAO reviewed the Pentagon's Sustain the Benefit Program, which the agency projects will generate $9.8 billion in savings over five years by increasing TRICARE enrollment fees and deductibles for retirees and dependents under age 65.

The report found that Defense's projections rely heavily on the assumption that the increased fees and deductibles will result in about 500,000 current beneficiaries leaving or choosing not to enroll in TRICARE. But this estimate is likely too high, GAO said, adding that many beneficiaries in this group, particularly older and sicker individuals, are unlikely to have lower-priced options available and would therefore be likely to continue using the program.

GAO projected that Defense's proposed fees and deductible increases would achieve $2.3 billion in savings over five years, absent from any beneficiaries leaving the program. "Neither GAO nor DoD can make a more accurate savings estimate, in part because DoD does not collect and compile certain data, such as the cost of other health insurance options," the report stated.

Defense also has projected $1.5 billion in savings by increasing retail pharmacy co-payments for all beneficiaries except active duty personnel. It based its estimates on a study that measured savings from increased pharmacy co-payments in non-Defense, employer-sponsored insurance programs.

"This study was not analogous to DoD's situation, which resulted in DoD overestimating the reduction in the number of prescriptions obtained from retail pharmacies, and thereby overestimating its savings," the report said.

Defense has attributed its increase in health care spending to medical care inflation and benefit enhancements required by law, including the TRICARE for Life program, which supplements Medicare coverage for TRICARE beneficiaries generally over age 65. Other factors include an increased number of enrollees in TRICARE as well as rising costs for reservists and their families affected by the war on terror, the report noted.

GAO recommended that Defense begin collecting and compiling information that could help identify the reasons why a beneficiary may or may not choose TRICARE. "Such data could include beneficiaries' access to and cost of other health insurance," the report said.

Defense officials agreed, but added that the report leaves the impression that savings from the proposed changes "may be as low as $2.3 billion." GAO should have made a stronger statement on the most likely effect or a range of the effect on savings, Defense argued.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

    Download
  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download
  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

    Download
  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.

    Download

When you download a report, your information may be shared with the underwriters of that document.