Watchdog groups call for cuts to Defense health benefits, contract spending

Government watchdogs are calling for an overhaul of the Defense Department's health care program for military retirees and cuts to contract spending in an effort to reduce the federal deficit.

A report issued Thursday by the nonprofit Project on Government Oversight and Taxpayers for Common Sense proposes more than $586 billion in cuts to national security spending over 10 years. In addition to a drawdown in weapons systems, the plan would reform TRICARE and reduce funding for service contracting.

"Without serious changes to how the DoD and other agencies spend money, we will be spending much more for a smaller and less effective force structure," the report stated. "National security and spending money wisely are not mutually exclusive, but rather are mutually reinforcing."

The proposal would raise TRICARE fees for ex-service members to bring premium costs in line with other health care plans. According to the report, many military retirees opt to keep TRICARE coverage over employer-backed insurance, which amounts to a taxpayer subsidy for private companies. A fee increase would affect primarily former military personnel between the ages of 38 and 65 and would save $60 billion over 10 years, the report estimated.

"We certainly didn't want to punish any active-duty service personnel," said Ben Freeman, national security fellow at POGO. "We're certainly not trying to take any benefits away from veterans, but we wanted to give everyone an incentive to go ahead and get on their employer's health insurance plan."

The military's health care benefits recently have come under fire after former Defense Secretary Robert Gates proposed an increase in TRICARE Prime fees for military retirees and their dependents enrolled in the program. Participant fees under TRICARE were set in 1995 and have remained at $460 per year for the basic family plan. But the cost for comparable coverage for federal workers is between $5,000 and $6,000 annually. Under authorization legislation passed by both the House and Senate, increases beginning in 2012 would be limited to the annual cost-of-living adjustment applied to retirement annuities.

Sen. Tom Coburn, R-Okla., also has proposed changes in TRICARE to bring down government spending. Under his plan, introduced Monday, working-age annuitants would be ineligible for TRICARE Prime coverage and would see an increase in the Standard and Extra options' monthly fees, totaling about $2,000 annually for individuals and $3,000 per year for families. Retirees also would see monthly prescription costs jump from $3 to $15 for generic drugs and from $9 to $25 for brand-name drugs. Those eligible for Medicare would be required to meet minimum out-of-pocket co-payments before receiving TRICARE coverage. These changes would save $174 billion over 10 years, according to Coburn.

The report also recommends a 15 percent cut in spending on service contractors at Defense and other national security-related agencies, including the Homeland Security and State departments. These reductions would save $300 billion at Defense and more than $72 billion at other agencies over one decade, according to the proposal. Some functions could be insourced, while others could be cut entirely as agencies determine the most efficient way to allot funds, Freeman said.

Taxpayers for Common Sense President Ryan Alexander said that the proposal offers very specific Defense cuts where other deficit reduction plans already circulating have been more general. Some savings estimates, such as those related to TRICARE, may be conservative compared to savings that may be achieved in the long term, she added.

"One of the criticisms is maybe we're low-balling," Freeman said. "I know there are some bigger savings out there, but for now I think this is very much a baseline of what we can expect to save."