Lawmaker plans to gut TRICARE fee-hike proposal

House Armed Services Military Personnel Subcommittee Chairman John McHugh, R-N.Y., plans to gut an unpopular Defense Department cost-saving proposal to raise fees for many of the 1.9 million military retirees eligible for TRICARE healthcare coverage.

During a markup Wednesday of his panel's portion of the fiscal 2007 defense authorization bill, McHugh will propose barring any increases to premiums and enrollment fees until at least Dec. 31, 2007, buying Congress time to study the effects and savings generated by the Pentagon plan.

McHugh also wants to create a commission, possibly consisting of defense health officials and outside experts, to review the military's healthcare structure, costs and benefits, he said in a telephone interview Monday. And he will recommend Government Accountability Office and Congressional Budget Office studies on the matter.

"We're not going to burn retirees with more costs at this time," McHugh said.

But McHugh also acknowledged Congress needs to begin to "take a hard look" at how to preserve the TRICARE system for future beneficiaries.

"None of what I'm proposing is intended to say there's not a challenge here," he added "There is a very serious one."

Healthcare costs are quickly becoming a dominant portion of the Pentagon budget. In fiscal 2006, the military will pay $37 billion for healthcare programs, which amounts to 8 percent of the Defense budget and $18 billion more than the department paid in 2001.

Without any major changes to the program, the military is on track to spend $64 billion annually on health care by 2015 -- nearly twice this year's entire Homeland Security Department budget.

The Pentagon's TRICARE proposal, which would affect retirees under age 65, would save $735 million in fiscal 2007 and $11 billion over the next five years, defense officials say. And it would be the first increase in TRICARE cost shares in more than a decade.

But Republicans and Democrats alike have battled the Pentagon over the proposal at public hearings and private meetings since the plan for higher fees was disclosed with the Bush administration's fiscal 2007 defense budget request in February.

Lawmakers have been joined by a vocal and persistent coalition of military organizations that has protested increased fees as an undeserved financial burden on some recent veterans of U.S. military operations in Iraq and Afghanistan. Higher fees, distributed on a sliding scale based on rank at retirements, could cost some families an additional $100 a month, opponents say.

While he wants to punt most of the Pentagon plan during the subcommittee markup, McHugh said he will defer debate on proposed increases to retail pharmacy co-payments to the full committee markup scheduled for next week. Those increases are considered mandatory spending and would require offsets.

The full committee likely will keep intact Pentagon plans to increase pharmacy co-pays to encourage retirees to use cost-saving mail-order prescription services, congressional aides said. Mail-order prescriptions would be free under plans now being developed by committee aides and lawmakers.

That proposal would be easier to swallow for affected retirees, but military organizations still will oppose any increases to pharmacy co-payments. They prefer keeping pharmacy fees static, while decreasing the cost of mail-order prescriptions.

"The best way to do that is to make people happy about shifting rather than driving them toward it with higher co-pays," said Steve Strobridge director of government relations at the Military Officers Association of America. "The real key is the behavior change."

Strobridge estimates that using mail-order services can save the department $58 to $157 per prescription, largely because of better pricing and lower overhead costs.

Last year, the Defense Department's drug expenditures were slightly more than $5 billion, up from $798 million in 1995, according to January 2006 Defense Department briefing slides. Roughly 6 percent of prescriptions were ordered by mail last year.