Soaring health care costs at Defense portend future crisis

Lawmakers considering legislation to expand health care benefits for military reservists might want to first read a new report by the Congressional Budget Office, "Growth in Medical Spending by the Department of Defense." The report chronicles the near-doubling of Defense heath care spending, from $14.6 billion in 1988 to $27.2 billion in 2003.

"Furthermore, because DoD cut the size of the active-duty force by 38 percent over that same period, medical spending per active-duty service member nearly tripled, rising from $6,600 to $19,600," CBO found.

If current trends continue, CBO estimates annual spending on military health care could rise to between $40 billion and $52 billion by 2020. If the Defense Department offered reservists access to Tricare and expanded benefits for retirees under 65, the department's medical spending could increase by 15 percent, or $7 billion annually, by 2020, CBO found.

It is not clear how CBO's findings will affect the debate on Capitol Hill about expanding access to Defense health care to the 1.2 million members of the National Guard and military reserves, who now qualify for care only when serving on active duty. Last spring, Sen. Hillary Rodham Clinton, D-N.Y., and Sen. Lindsey Graham, R-S.C., championed a provision to grant reservists access to Tricare, the Defense Department's managed-care program for active duty military members, military retirees and their families. The program now has about 8 million beneficiaries.

Clinton and Graham estimate that extending medical benefits to reservists would cost about $7 billion over the next five years. Over White House objections, the Senate overwhelmingly supported the provision in its version of the 2004 defense authorization bill, but hasn't yet appropriated any funds to pay for it. Now a bipartisan group of senators plans to introduce an amendment to President Bush's supplemental budget request for $87 billion to pay for postwar operations in Iraq, earmarking funds for the provision.

Congress repeatedly has expanded military health benefits in recent years without appropriating adequate funds to pay for them, a situation that has frequently forced Pentagon officials to shift funds from other accounts to cover rising health care costs.

The most recent expansion of military health benefits occurred in October 2001, when the Defense Department began picking up the health care tab for Medicare-eligible military retirees over 65 and their dependents. Military retirees over 65 always have been eligible for treatment in military facilities on a space-available basis, but the 2001 National Defense Authorization Act required the department to allow them to sign up for Tricare.

The move was popular, because Tricare benefits are considerably more generous than what Medicare and most private health insurance programs provide. Tricare covers prescription drugs and some skilled nursing care not covered by Medicare.

The shift has been enormously costly for the Defense Department. As a group, older retirees consume more medical care and drugs than any other demographic group.

But while the pool of beneficiaries has been expanding, the armed forces have been shrinking, making it more and more difficult for the military medical system to accommodate its growing patient load. As a result, patients increasingly have been forced to use more costly civilian provider networks.