The outlook for military health care reform debated

Congress and the Administration battle costs, demographics, and organized retirees as they try to reform military health care.

Few issues in civilian life are more intractable, or more emotional, than balancing people's need for quality health care against the costs to society at large. Those difficult choices are at the heart of the controversy over how best to fix Medicare and Medicaid. So it should come as no surprise that the same dilemma bedevils the largest unified health care system in the country: the Pentagon's $16 billion-a-year program for treating America's more than 8 million active-duty troops and military retirees and their families. But military medicine faces an added complication uniquely its own.

The military must train and maintain their own extensive staff of doctors and nurses because, as the Pentagon's top physician, Assistant Defense Secretary for Health Affairs Sue Bailey, noted, "Blue Cross Blue Shield and Kaiser will not send docs into a war zone." The military must be able, at a moment's notice, to dispatch thousands of highly trained medical personnel overseas to treat the wounded, while keeping enough medical staff at home to ensure that the remaining troops are fit to fight. In recent years, the increasing number of overseas peacekeeping missions and the rising threat of biological or chemical attack has redoubled demands on military medical personnel.

But those medics have a peacetime mission as well, a burden increased over the years by demographics, the move to the all-volunteer force, and the end of the Cold War. Since World War II, military doctors have taken on more responsibility for caring for military family members and retirees who served 20 or more years in uniform. This was in part by design and in part by accident. In peacetime, with most uniformed troops young and healthy, military doctors needed more and sicker patients on whom to hone their skills; at the same time, spouses, children, and retirees needed medical care. So opening the vast Cold War infrastructure of base hospitals to more patients was logical and easy.

But times changed. The end of the draft in 1973 made the military force far more career oriented, which meant a greater number of older, married members with children. Then came the end of the Cold War in 1989. The huge Cold War force was no longer needed, and nearly a million troops were mustered out, many as retirees. Dozens of base hospitals closed. (Since 1989 the Pentagon's active-duty force has been cut by nearly 40 percent.) The result: Today retirees and dependents outnumber the active-duty troops 4-to-1.

Those millions of military family members and retirees are not shy about complaining when the quality of their medical care, as well as their access to it, is found wanting. Indeed, problems with military medicine are often cited by troops as a key reason for leaving the force: In Pentagon parlance, it is one of the key "quality-of-life" factors affecting morale. So the Pentagon is under pressure from all sides: It is trying to control medical costs and shrink infrastructure at precisely the same time that demands from retirees and family members are rising, and the need to keep uniformed troops happy is acute. To care for dependents and retirees affordably when its own hospital system is shrinking, the Pentagon has increasingly farmed them out to private civilian medical contractors and to Medicare. This troubled transition to a military managed care system, called Tricare, has left some military personnel fighting off collection agencies after the insurance plan failed to pay their families' medical bills and has left many retirees 65 and older out of the system altogether, covered only by Medicare, with no employer-provided insurance.

Discontent has swelled, particularly among politically well-organized retirees. After last year's big boost in military pay and pensions, expectations grew that 2000 would be the year Congress and the White House put military medicine on the road to recovery.

At first sight, all the legislative stars seem to be in alignment for a positive fix. "It has to be one of the highest priorities in our committee and in Congress, no doubt about it," said Rep. Ike Skelton of Missouri, top Democrat on the House Armed Services Committee, who has introduced a reform bill. "I'm very optimistic," he added. Senate Majority Leader Trent Lott, R-Miss., a prime mover in last year's pay and pension plan, also has pledged his attention. Said Lott spokesman John Czwartacki: "It could not be higher on his agenda for the military." A Republican maverick, Rep. Charlie Norwood of Georgia, and a Democratic freshman, Rep. Ronnie Shows of Mississippi, have sponsored a bill that would direct a sweeping overhaul of health care for military retirees. It has amassed more than 270 House co-sponsors in less than five months and has recently been introduced in the Senate. Shows says of his fast-moving bill: "Get on or get run over."

Although it appears the political steamroller that pushed through pay and pension boosts last year is picking up speed again, other members of Congress are more cautious. "Don't get too excited," warned Rep. Stephen Buyer, R-Ind., chairman of the House Armed Services Military Personnel Subcommittee. "Do I believe the planets are all aligned and we'll have something big this year? I don't."

The causes for caution? Last year, when pay and pensions were on the agenda, the Pentagon had produced a detailed plan well before Congress returned to town in January. And Lott raised the ante in mid-January with a yet more generous Senate bill. This time, on health care, the Defense Department remained noncommittal until the proposed fiscal 2001 budget was released on Feb. 7 and it became clear that an ambitious program outlined earlier by Army Gen. Henry H. Shelton, chairman of the Joint Chiefs of Staff, had been whittled down considerably. The revised plan promises an extra $348 million to cover the rapidly rising costs of current programs (not enough, even according to the Pentagon); $80 million to improve care for the families of active-duty troops; and for the retirees, nothing. "They're reviewing what they might do" for retirees over age 65, Pentagon Comptroller William J. Lynn told reporters after the budget briefing. Whether any Administration proposal will be forthcoming is "unclear," Lynn said.

Why such a difference between this year and last? The irresistible political force for change is much the same: Everyone wants to help the troops and their families. But the object being pushed this year may be nearly immovable. While low pay and pensions were simple problems with a simple solution-raise them-fixing health care is far more complex.

Even under existing programs, health care costs are hard to predict. "Every year, [the Pentagon asks] for inadequate amounts [for health care], for as long as I've been on the committee," said veteran House Appropriations Committee powerhouse Rep. John P. Murtha, D-Pa. Those shortfalls require regular year-end requests by the military for supplemental funds, something that does not sit well with lawmakers. Another problem is the intramural budget game in the Pentagon, where health care accounts compete directly with high-tech weapons and ongoing military operations-and usually lose.

All of these complexities suggest that this year's legislative battle over military benefits will be less like last year's cakewalk and more like the charge up San Juan Hill. Victory may come eventually, but it will not come easily.

A Tale of Two Missions

Like the 50-year-old "temporary" quarters that still house some military offices, the Defense Department's health care program reflects not rational design, but a legacy of improvisation dating back to World War II. "In 1942, they were just providing whatever was left over in health care to the families [and retirees]," said Sue Bailey. The vast, bloody battlefields of World War II, Korea, and Vietnam-and the ever-looming threat of World War III-required a massive military and a correspondingly immense medical system. Few of the young, single draftees stayed in long enough to have children while in uniform, still fewer put in the 20 years needed to earn retirement benefits, so the big base hospitals could easily slip in what few children and elderly patients there were for free care.

Such care was not a legal entitlement, however. Congress specifically said so when it codified the practice on June 7, 1956, allowing care for retirees only if space was available-but in practice it always was. Commanders, recruiters, and even official pamphlets printed as late as 1993 all told military careerists that they would have lifetime medical care. "The promise of health care once I retired is what kept me in," said Rep. Randy "Duke" Cunningham, R-Calif., a retired Navy pilot. "It was something that every officer, every enlisted man I knew counted on," agreed retired Army Lt. Col. Thomas J. Compton, who lost all access to his local base hospital upon turning 65. "It was quite a shock to find out that that really wasn't the way it was."

The problem was demographics. Already in the 1960s, when the many career soldiers who had enlisted during World War II reached their 20-year retirement, the military system had begun to show the strain; so when Congress created Medicare in 1966, it also established the Civilian Health and Medical Program of the Uniformed Services-CHAMPUS-essentially an insurance program to cover needed supplemental care from civilian doctors for military dependents and for retirees until Medicare kicked in at age 65. But the ranks of the retired kept growing, joined after the end of the draft in 1973 by the children of long-serving volunteers. CHAMPUS began to break down. It was a "non-system," a "free-for-all," recalled Maj. Gen. Harold L. Timboe, who after 32 years in the Army now commands Walter Reed Army Medical Center in Washington. The Army, Air Force, and Navy maintained three, often redundant, medical systems (Marines fall under the Navy's care). "There was no system of coordination between us and the civilian sector," Timboe said. In fact, Timboe noted, when he commanded a base hospital in the 1980s, "our doctors were threatened with legal action" for referring patients to one civilian specialist over another, a technical violation of federal fair-and-open-competition rules.

Controlling costs became impossible: CHAMPUS spending, in constant dollars, tripled from 1984-94. So, like civilian employers, the Defense Department began to experiment with managed care. The Pentagon quietly refined its plan before, during, and after the Clinton Administration's 1993 health care debacle, and in 1995 Tricare was born: a joint Army-Air Force-Navy system offering a three-way choice between a fee-for-service plan much like the old CHAMPUS, a preferred-provider-organization-style plan in which patients were directed to physicians in a network, and, the centerpiece, a health maintenance organization called Tricare Prime. The Pentagon hoped that most military families would join Tricare Prime.

The push toward the HMO coincided with the downsizing of the military. As base hospitals were stripped of inpatient beds, specialists, and emergency rooms, not only retirees but also active personnel and their families had to turn to Tricare civilian managed care contractors-"a tough concept to sell to folks who thought the military had promised them something else," recalled Edwin Dorn, who was Defense undersecretary for personnel and readiness during the transition. A second difficulty was that in many areas of the country in which the Pentagon set up its HMOS and PPOs, it was the first time such managed care systems had ever been established.

On the West Coast, managed care was relatively well-established. But many civilian doctors were unfamiliar with, and even hostile to, HMOs in the more central regions of the country, particularly in rural areas-precisely the places in which most military personnel are based. Even today, "in places like Mississippi, there is no other managed care product," said Ellen Waddle, government affairs director of Tricare contractor Humana Military Healthcare Services. To ease the transition to managed care, the Pentagon rolled out Tricare region by region. It started with the Pacific Northwest in 1995, then headed south and east. Tricare only came to Washington, D.C., in June 1998. Though the system now covers the nation, it is hardly national: Five different contractors operate in a dozen administrative regions under subtly, but significantly, different contracts. The result, acknowledged one Defense official, is a "patchwork." And with the frequent reassignments that are characteristic of life in uniform, military families must move in and out of different Tricare regions, as often as every two years, learning a new set of rules and procedures each time. But, irritated as the families often are by the situation, at least they have coverage. Tricare's most glaring, and politically explosive, flaw is its failure to cover retirees over age 65.

Out in the Cold

The anger over health care is greatest among older military retirees. While many have private health insurance from a second civilian career, and a few are severely enough disabled or impoverished to qualify for care at Veterans Affairs Department hospitals, most once depended on the Defense Department to get their care. But military hospitals, whose first responsibility is to active-duty troops, by law may only take retirees when extra beds are available. While the capacious Cold War hospitals had space to spare, today's downsized system often does not. Retirees frozen out of military facilities can seek civilian treatment through Tricare-until they become eligible for Medicare, at which point the 1966 statute that created military health insurance simply drops them. So, except for the comparatively few who live near the small number of bases that still can cram them in, military retirees lose their employer-provided health care benefit the moment they turn 65. Most retirees see this as a broken commitment.

"We were promised that if we stayed 20 years for retirement, we were guaranteed medical care for ourselves and our dependents for the rest of our lives," said retired Air Force Lt. Col. Donald R. Currier. "We got screwed out of that."

"There are tremendously strong emotions [and] a lot of pain out there," said Sen. Max Cleland of Georgia, top Democrat on the Senate Armed Services Personnel Subcommittee and a disabled Vietnam veteran himself. Such sentiments attract congressional attention. The rapidly rising cost of prescription drugs-not covered by Medicare-is the No. 1 concern among military retirees, as it is for the civilian elderly. A test of expanding the Pentagon's pharmacy benefit to over-65 retirees is already under way. But what has really caught fire in Congress is a far more comprehensive solution: allowing retired troops access to the same system that is available to retired civil servants, the Federal Employees Health Benefits Program. Under that program, enrollees can choose from a variety of different private-sector insurance plans, depending on where they live, and the government picks up, on average, 70 percent of their premiums. "Any clerk who works in the Pentagon for as long as I did has [FEHBP]," said retired Army Col. George Bartel; why can't military retirees?

The latest FEHBP bill to sweep Congress is Reps. Shows and Norwood's. In its original form, it is a bill only eight pages long, half of it preamble, sponsored by a freshman in the minority and a maverick in the majority, introduced at the tail end of the 1999 legislative session. Yet in less than five months, it has won more than 270 co-sponsors, and Sens. Timothy P. Johnson, D-S.D., and Paul Coverdell, R-Ga., have introduced a similar version in the Senate.

Why such success? "I wish I could tell you I had everybody in the House rounded up over Christmas and I twisted their arm, but I didn't," chuckled Rep. Norwood. It was the grass roots-and the modems. "The e-mail traffic," he said, "is unbelievable."

"All of this has come about because of the activity on the Internet," said retired Army Col. Dick Manion, an activist in Augusta, Ga., whose frequent e-mails reach more than a thousand people-many of whom immediately forward them to hundreds more.

But the groundswell is not purely grass roots: It is led by a powerful lobby that combines GI discipline with AARP-like activism. Manion, for example, belongs to The Retired Officers Association, a lobby with a $15.6 million annual budget and a headquarters near the Pentagon, staffed with well-connected former colonels. The association claims 400,000 members; allied groups can mobilize millions more. Over the winter recess, Representatives and Senators were swamped with appeals to support the Shows-Norwood bill. Unofficially, however, some association sources consider this bill a mere opening gambit. "It has a principle that people are going to like," said one, "[but] it costs $4.5 billion dollars a year," at least. Beyond covering the government's standard 70 percent of FEHBP premiums for retirees over 65, the bill would pay 100 percent of the FEHBP premium-free health care, in essence-for retirees who enlisted in the military before the "space-available" caveat was enacted in 1956. Furthermore, Shows and Norwood have introduced a new bill, H.R. 3573, offering FEHBP to military retirees under age 65 as well, a costly addition also included in the Johnson-Coverdell Senate measure.

Even the most uncompromising of the big associations, the 160,000-member National Association for Uniformed Services, will not nail its flag to this mast: "The optimum would be passing the Shows-Norwood bill," said the group's legislative director, retired Army Col. Charles C. Partridge, "but it's going to be very expensive and scare a lot of people off. ... Let's drive these bills as far as we can."

Many retirees, however, do not want to settle for less than total victory. Said Internet activist Dick Manion: "I'm not willing to compromise on anything." The retirees' ideal is the good old Cold War days of free lifetime care at military hospitals, with no need to pay even subsidized FEHBP premiums for civilian care. Indeed, FEHBP does not seem cheap to older enlisted troops who retired on a sergeant's humble pension and who are also the very retirees least likely to have private insurance from a second career. Said Larry D. Rhea, deputy legislative director of the Non Commissioned Officers Association, "There's a difference between an E-7's [a senior sergeant's] retired pay and an O-6's [a colonel's] that an awful lot of people don't want to take into consideration."

To test for such problems, Congress authorized a demonstration project in 1998 to allow military retirees over 65 to enroll in FEHBP at six selected sites around the country. To control costs, enrollment was capped at 66,000 people-but only 2,000 have signed up. Skeptics say the slow start has already proven that FEHBP is not what retirees really want.

"That's bullshit," snapped Rep. James P. Moran, D-Va., an author of the original FEHBP demonstration-project bill, whose district includes many retired military and their families. "This was my bill, and-God!-they eviscerated the thing." Moran and pro-FEHBP activists blame the low enrollment not on FEHBP itself, but on the Pentagon's implementation, particularly on frighteningly unclear provisions about whether enrollees could ever get their old coverage back if the test ended and on a lackluster publicity campaign.

Indeed, the informational mailers sent out for the FEHBP test look thin and colorless beside the hefty, inviting packet promoting a parallel demonstration project for over-65 retirees, Tricare Senior Prime, which has 30,000 enrollees. Senior Prime costs retirees less than FEHBP and gets them back into their beloved military hospitals-but the other open secret of its success is that Defense officials have always favored Senior Prime over FEHBP. The first reason is financial. Under FEHBP, the Defense Department must pay when over-65 retirees are treated in civilian facilities. Under Tricare Senior Prime, the Pentagon gets reimbursed from Medicare to treat the over-65s in military facilities. FEHBP is a loss-Tricare Senior Prime, a gain-for Pentagon coffers.

But the institutional imperative behind Tricare Senior Prime is as important to Defense as the finances. While FEHBP pulls retirees out of the military system, Senior Prime pushes them back in-and though the military cannot treat all of the over-65s, it does want to care for those it can: Its doctors and nurses need the practice. "If we didn't see over-65s here, we'd have to shut down the general surgery training program," said Lt. Col. Craig Shriver, chief of the surgical residency program at Walter Reed Army Medical Center. "They're the ones who get sick." Still, the Pentagon's Dr. Bailey concedes that FEHBP "could ... possibly fill in some of the blanks" in retiree care without hurting military readiness for war, while retirees have no objection to Tricare Senior Prime's being one option among many. Presidential hopeful Sen. John McCain, R-Ariz., included both options, along with Tricare reforms for active-duty troops, in his bill, S. 2013 (introduced shortly before the South Carolina primary). "There has to be a multitier and multilayer approach," said House Armed Services Committee member Mac Thornberry, R-Texas. "There's no one solution that is going to meet all the needs of active-duty and retired."

The Trouble With Tricare

While older retirees feel locked out of the military's medical system, those under age 65-active-duty troops, younger retirees, and their families-sometimes feel locked in. The basic problem is the same as in private-sector managed care: access, or rather the lack of it. "Trying to manage the cost of care, you tend to put [in] a fair number of bureaucratic hassle factors," said Walter Reed commander Maj. Gen. Harold L. Timboe. "You see the backlash now."

Military personnel face some unique "hassle factors." Consider a standard civilian HMO requirement: pre-authorizations for specialty care. In Tricare, "some regions do them; some regions don't; some regions do them for certain procedures but not for others," said longtime advocate for military families Sydney Hickey. "When you move, how are you supposed to know?"

No population moves more often than the active-duty military. While their Tricare coverage no longer lapses en route-initially the system required them to disenroll on departure from their old region, then re-enroll on arrival in the new, a cause of countless headaches-they still must learn a new region's house rules every few years, or more often, if, for instance, they have a child away at college.

Military families also complain about being bogged down frequently in administrative trivia, particularly in the communication between the military system and the private providers under Tricare. While about three-quarters of all care is still provided in military hospitals and clinics, the remainder is provided by civilians. Since the civilians provide a disproportionate share of specialty care, the more serious a family's medical problems become, the more maddening the bureaucracy becomes.

"You've got a chest cold or something, that's not a problem," said Maj. Matthew Sambora, of Hanscom Air Force Base in Massachusetts. "[But] when you go through the referral process, the amount of bureaucracy that is required for you to get to the care you need is really just unbelievable," he stated. "I've got a binder full of documentation going back and forth ... resolving a billing dispute between the hospital and Tricare."

Felix Alvarado, an under-65 retired Air Force chief master sergeant in Texas, had to fight off collection agencies "three or four times" after Tricare inadvertently dropped him from the rolls. He bought private-sector coverage "the first chance I got."

Such reimbursement battles do not endear Tricare to civilian doctors either, who complain that they don't get paid on time. At one point, recalled Pat Evans of the Taylor-Jones-Haskell County Medical Society in Texas, "we had physicians who had not been paid in six months or longer." Some providers have stopped taking Tricare altogether. Even in the Pacific Northwest, the longest-running and arguably best-managed region, more than 20,000 patients had to find new coverage after the Group Health Cooperative there pulled out of the Tricare network last year, citing burdensome regulations and low reimbursement rates.

Just as local doctors complain that they are not being paid properly by the regional contractors, the contractors complain that they are not being paid by the Pentagon. "The mechanism for paying contractors was designed many years ago," said Jim Woys, senior vice president of Foundation Health Federal Services, one of the regional Tricare contractors. "[It] doesn't fit today's environment."

The Pentagon is finalizing a new Tricare contract, underpinned by more-flexible regulations and better databases, that it hopes will prevent reimbursement problems in the future. But the contractors still claim hundreds of millions of dollars in past overruns. For now, these claims remain in negotiation-and off budget. That's more money the Pentagon may have to request from Congress. "We may well have to send up a budget amendment," said Pentagon Comptroller William J. Lynn. Even optimistic Defense officials talk in terms of at least a $216 million shortfall in health funding next year. That will require a congressional bailout before addressing any of the system's structural problems that affect the lives of active-duty families and retirees.

If reform is too cautious, disappointed troops may quit. If reform is too radical, it might disrupt the delicate balance between wartime readiness and peacetime welfare. And if reform tries to meet both missions at once, it may cost more than the country can afford. The health of the armed forces is on the operating table. The delicate operation is up to Congress now.