Old Soldiers' Insurance

Old soldiers may never die, but their health care fades away. Now Defense Department officials, federal health experts and members of Congress are trying to figure out what to do about the problem.

During the Cold War, most DoD beneficiaries--active duty, dependents, and retirees--simply got their care at base hospitals, virtually free. Defense Department health insurance (originally known as CHAMPUS, now called TRICARE) played a distinctly secondary role--and cut off at age 65 when retired soldiers became eligible for Medicare.

Now, as the DoD network of health facilities shrinks along with its military base structure, that insurance has become ever more important, and the lack of it for the oldest retirees ever more damaging.

The Pentagon's plan: a burden-sharing effort with the Health Care Financing Administration called "Medicare subvention." Under subvention, DoD would shift retirees over 65 into TRICARE, but would bill HCFA for each Medicare-eligible military beneficiary DoD treats in excess of the number military doctors see now. Beneficiaries would still have to visit DoD facilities to receive care.

On February 12, DoD and the Department of Health and Human Services announced a six-site, three-year pilot project to test the subvention concept. "I am elated," said Rep. Joel Hefley, R-Colo., who sponsored the legislation authorizing the subvention experiment. "It's been a long time coming." The legislation passed last August after several years of debate; February's announcement was originally due last fall.

Military retirees' associations, who lobbied for the law, are grumbling over the delay. Fingers point in all directions: at the DoD health bureaucracy, at HCFA's zealous guardianship of the Medicare trust fund, and at members of Congress lobbying over test sites--of the six sites, one is in Hefley's district and one in Delaware, home state of powerful Senate Finance Chairman William Roth.

"There's no question," says Dr. Edward Martin, acting assistant Secretary of Defense for health, "that this thing could've been, should've moved more quickly. ... But, having said that, it's also important to point out that, first of all, between September and now, to try to figure out what a very complicated Medicare program is gonna be actually is pretty quick."

Especially since the legislation stipulates that Medicare subvention may not result in any additional costs either to DoD or the Medicare trust fund--meaning that DoD facilities must operate, in essence, as Medicare HMOs. Martin acknowledges the challenge. "There are lots of civilian providers who've dropped out [of Medicare]," he says, and "lots more who've refused to participate. There are Medicare HMOs that have gone bankrupt. I mean, it's a tough business. [But] we think not only are we gonna be able to do as good a job, but we think we can do a better job less expensively."

Others are not so sanguine: "I'm not sure DoD can do the test," warns Dorsey Chescavage, a former military health activist now representing TRICARE contractors at the Jefferson Group, a Washington consulting and government relations firm. "They don't have the information systems to do this, they don't have the accounting systems for this. This is a whole new world."

While Chescavage and her military association comrades support subvention, they and their allies in Congress think it is not enough. The problem is, points out Rep. James Moran, D-Va., that more than 70 percent of retirees don't live within 50 miles of a military health facility. With the associations' support, Moran has proposed an alternative: allowing Medicare-eligible military retirees to enroll in the Federal Employees Health Benefits Program.

Moran insists adding the old soldiers would do no harm to FEHBP. "We'd keep two separate pools," he says, "so it wouldn't jeopardize rates on the existing population." And since he would add only Medicare-eligibles, "FEHBP only pays the difference" as a Medigap-style second payer.

The Congressional Budget Office still estimates that Moran's bill will cost $1.9 billion per year: $1.6 billion in FEHBP premiums paid by DoD, and $300 million of additional costs to the Medicare Trust Fund, since having a second payer removes the incentive not to run up one's Medicare bill.

What's more, Heritage Foundation health expert Bob Moffett warns that FEHBP, which is already open to civilian federal retirees, covers too many elderly as it is. "From an insurance standpoint, he says, "it's crazy to load up your pool with people 65 years and older."

Moffett prefers the plan Chescavage and others originally worked out from his research, and which is now included in a bill sponsored by Rep. J.C. Watts, R-Okla.: allow military retirees of all ages to enroll in FEHBP.

Most of the military associations regard this maximalist plan as a political impossibility, so they have thrown their weight behind a demonstration version of Moran's bill, hoping to show CBO's estimates are far too high. Even that pilot project may well not pass this year. So for now, it's Medicare subvention as far as the eye can see.

"My hope," says Hefley, "is that we will be able to prove its effectiveness and its cost-saving ... sooner than the three years" that his test bill allows. Until then, the old soldiers will just have to keep soldiering on.