Panel rejects proposals to raise military retirees’ health care premiums

At the same time the House passed a bill requiring civilian federal employees to contribute more to their pensions, lawmakers on the Armed Services Committee rejected the Obama administration’s proposals to increase the amount military retirees pay for their health care insurance.

The committee advanced the fiscal 2013 National Defense Authorization Act Thursday, approving a 1.7 percent pay raise for military service members next year as well as limiting increases to enrollee pharmacy co-pays under the TRICARE program. A fact sheet from Armed Services called the TRICARE-related hikes in the markup “modest” vis-à-vis the administration’s recommendations for the program outlined in its fiscal 2013 budget proposal.

The panel’s bill would increase co-pays for brand and nonformulary drugs in 2013, ranging from an additional $4 to $19 either monthly or every three months, depending on the enrollee’s prescription refill schedule. It also would cap pharmacy co-pays beginning in 2014 so that such fees are in line with the annual retiree cost-of-living adjustment. The costs associated with the fee increases would be offset by a five-year pilot program requiring TRICARE for Life recipients to obtain maintenance drug refills through the mail.

But the panel rejected the administration’s recommendations to raise premiums for military retirees based on their retirement pay, among other fee hikes. “These proposals went too far and were not included in the bill,” committee Republicans said in a statement. TRICARE serves 9.3 million beneficiaries, including 5.5 million military retirees.

Under Obama’s plan, premiums for TRICARE retirees under the family plan would increase between $31 and $128 per month, with those in the upper-income bracket seeing the biggest hike. The White House in its budget recommendations also proposed new co-pays, initiation of standard and extra annual enrollment fees, and adjustments to deductibles and catastrophic coverage caps, all in an effort to keep pace with medical inflation. The president proposed increases for drug co-payments in the brand and nonformulary categories that range from an additional $14 to $26 per month or every three months, depending on the refill schedule.

TRICARE beneficiaries would retain the $5 monthly co-pay for generic drugs under both the House and administration proposals.

The administration said its recommended changes to TRICARE would save the Defense Department an estimated $12.9 billion in discretionary funding and generate $4.7 billion in mandatory savings on Medicare-eligible retiree health care over the next five years. It is projected to save the department $12.1 billion over the next 10 years.

Increasing health care costs for service members and retirees has long been a politically sensitive subject, with lawmakers and military advocates wary of appearing ungrateful for the sacrifices of service members. Participant fees under TRICARE were set in 1995 and have remained at $460 per year for the basic family plan. “This has become one of those third-rail issues in American politics,” said Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments, who follows Defense issues.

Defense implemented TRICARE Prime fee increases for new retiree enrollees beginning in fiscal 2012. New beneficiaries in TRICARE Prime now pay an additional $2.50 per month for individual members and $5 per month for family enrollment -- bringing the total annual fee to $260 and $520, respectively. Costs for retirees already in the program, as well as survivors of active-duty service members and medically retired participants, remain at $230 per year for individuals and $460 per year for families.

Like most federal agencies, Defense is under pressure to cut costs and streamline its operations. The $554 billion authorization bill Armed Services approved is $3.7 billion more than Obama’s 2013 request, which has put lawmakers and administration officials at odds over where and how to make budget cuts. “They [committee lawmakers] are making the cost of military personnel higher than it would have been under the president’s request,” said Harrison. That means the department and Congress will have to come up with savings elsewhere, possibly in areas such as troop readiness, research and development, or procurement, he added.

The Senate’s version of the authorization legislation, including the provisions related to TRICARE, likely will be different from the House version, Harrison said. As it relates to TRICARE, the Senate’s bill will look more like the administration’s plan, according to Harrison. “They’ll be more inclined to let some of these savings stand,” he said.