TRICARE fee hike likely for military retirees, say former Pentagon officials

Military retirees enrolled in the TRICARE program likely will see a fee increase in the next year, a panel of defense experts and former Pentagon officials said on Tuesday.

"The chances are good" that Congress will agree to raise participant fees modestly starting in 2012 for military retirees eligible for TRICARE health care coverage, said Lawrence Korb, a senior fellow at the Center for American Progress who was an assistant secretary of Defense during the Reagan administration. Korb spoke at an event sponsored by the liberal-leaning think tank that also included David S.C. Chu, former Defense undersecretary for personnel and readiness and currently president of the Institute for Defense Analyses; Rudy deLeon, senior vice president of national security and international policy at CAP and Chu's predecessor at the Pentagon; and Vice Adm. Norbert Ryan, president of the Military Officers Association of America.

The House Armed Services Subcommittee Military Personnel earlier this month approved a version of the fiscal 2012 Defense authorization bill that included a provision to prohibit for one year fee increases to TRICARE Prime, one of the options in the military's health care plan. A House Armed Services spokesman said, however, that the full committee's markup will include a fee increase in 2012 and an indexed increase tied to the cost-of-living adjustment beginning in 2013.

The prospects on the Senate side are looking up, too, now that Sen. Jim Webb, D-Va., who had earlier expressed strong reservations about a fee hike, said in his latest statement that he is keeping an open mind about initiatives to improve the efficiency and effectiveness of military health care benefits.

The Defense Department had proposed a 13 percent increase in 2012, indexed thereafter to slightly more than 6 percent. Defense's fiscal 2012 budget request includes $52.5 billion for the TRICARE program, a 300 percent increase from its budget a decade ago. And in April, the military launched the TRICARE Young Adult Program, a provision in the fiscal 2011 Defense Authorization Act that gives unmarried dependents who don't have their own employer-based insurance the option of buying month-to-month health coverage until age 26. Previously, children were eligible for TRICARE until age 21, or 23 if they were full-time students.

Defense Secretary Robert Gates has repeatedly called for a fee increase for working-age military retirees enrolled in TRICARE, but it is a politically sensitive subject, with lawmakers and advocates of the military wary of appearing ungrateful for the sacrifices of service members. All four panelists at the CAP event, however, agreed that the time has come to raise participant fees modestly and begin the debate on how to restructure the system to rein in costs while providing enrollees with quality health care that is affordable to them. While fees associated with the cost of health care for most Americans, including federal civilian employees, have spiked over the years, participant fees under TRICARE were set in 1995 and remain at $460 per year for the basic family plan. The cost for comparable coverage for federal workers is between $5,000 and $6,000 annually.

Ryan, whose organization advocates for service members and their families, said he supported a modest fee increase for 2012, and increases tied to the cost of living thereafter. He also said the creation of a mail-order system for pharmaceutical delivery would produce more savings to the department.

One of the byproducts of TRICARE's low cost has been that some enrollees who already have employer-sponsored insurance through a civilian job opt for enrollment in TRICARE Prime, which has the lowest out-of-pocket costs in the TRICARE system. Many military retirees are still young enough to have second careers after they leave the service. "We all know when there is no cost, people overuse the system," Korb said.

"Some [civilian] employers would pay their employees to take TRICARE," Chu said, criticizing that practice. The former defense undersecretary said TRICARE needs to be revamped, but in a way that "preserves the excellence of the system."

Korb argued for even farther-reaching reforms to TRICARE, including increased cost-sharing to encourage responsible use of TRICARE for Life benefits and limiting double coverage for working-age retirees above a certain income level.

"I think the TRICARE debate will be part of the federal health care debate," Chu said.