Military Groups Brace for Battle Against Higher Health Care Costs

The administration's push to shift more health care costs onto current military personnel and retirees met with resistance in Congress even before the details were revealed in the president's fiscal 2015 budget Tuesday.

Now the Pentagon's proposal to cut costs by consolidating its three health care options under Tricare into one, tack on new fees for those eligible for Medicare, and increase pharmacy co-pays is expected to receive an even chillier reception on Capitol Hill.

After all, it's an election year, and lawmakers from both parties have said repeatedly they want to wait until a commission they created comes up with a comprehensive plan before they overhaul compensation and benefits. The commission is not due to make recommendations until next year.

The force of the pushback on Capitol Hill is likely to mirror the strength of the opposition from military groups. Many raised initial concerns Tuesday but were looking for more specifics from the Pentagon before they launched their plans of attack.

Others came out swinging right away, arguing that any health care increases were nonnegotiable.

"The American Legion adamantly opposes any increases to Tricare, whether they be co-pays or additional fees of any kind," said Joseph Grassi, a deputy director with the American Legion. "The administration and Congress keeps going to Tricare as a way to save money, and it's the wrong answer."

Active-duty soldiers will push back, too, said Michael Hayden, legislative director with the Military Officers Association of America.

"The Pentagon's proposals will face a very tough road ahead. This is another attempt to shift significant costs onto beneficiaries, but with a twist. Not just retirees, but these proposals will impact the pockets of currently-serving members and their families," Hayden said.

Lawmakers just went through a hellish political mess, yielding to outrage from veterans' groups and reversing a measure to reduce military retiree pensions that was included in last year's budget agreement.

Now the Department of Defense is back at lawmakers' doorstep, asking for a series of sensitive cuts to shrink military benefits—including reducing commissary benefits, slashing housing allowances, and capping pay increases—which were detailed in a defense-budget sneak-peek last week.

On Tuesday, the Pentagon unveiled more details of its plan to tackle health care costs, which have long been a prime target for reform because they are the largest and fastest-rising of the personnel costs that threaten to overtake the department's budget.

"Internal savings initiatives are not enough to curb the expected increase in health care costs the department expects to experience in the coming years," said a defense budget overview from the office of the undersecretary of Defense.

"Therefore, DoD must pursue reasonable health benefit reform now as part of a balanced approach to cost containment."

The comptroller's defense-budget overview noted that health care costs accounted for only 4 percent of the department's base budget in 1990, compared with almost 10 percent in 2012.

The Pentagon contends that while health care costs have exploded, Congress has largely resisted efforts to allow beneficiaries to cover more of the cost—a trend that cannot continue.

The department argues that in 1996, a typical working-age military retiree's family that used civilian health care contributed on average roughly 27 percent of the total cost of its health care, while today that percentage has dropped to less than 11 percent. Health care costs, DoD says, have doubled or tripled during this time, but a family's out-of-pocket expenses, including enrollment fees, deductibles, and cost shares, has grown by only 30 to 40 percent.

The proposal would nearly triple pharmacy co-pays over the next decade. But it would also require all beneficiaries with long-term maintenance medications to fill their prescriptions by mail, which is significantly cheaper and is unlikely to be opposed by military and veterans' service organizations.

For an active-duty military member with three dependents who uses a mix of Tricare and civilian health care, the share of costs borne by the family would increase to 3.3 percent from 1.4 percent, or to $364 from $158, under the proposed consolidated Tricare plan, according to the Pentagon.

For a non-Medicare-eligible retiree under 65 with three dependents, the costs would go to $1,526 from $1,378, and raise the percent of the costs borne by the beneficiary to 10.8 percent from 9.3 percent.

Both the George W. Bush and Obama administrations have tried for the better part of a decade to rein in the soaring costs of Tricare, which provides coverage for both military personnel and retirees.

But in the face of massive pushback from military and veterans' service organizations, the Pentagon has made only modest inroads in this quest since 2005.

Last year, lawmakers rejected all of DoD's Tricare proposals, which called for raising annual fees by at least $1,000 for all military retirees, imposing means-testing of military health benefits, and significantly increasing pharmacy co-pays.

Because health costs have been a source of such long-standing tension, however, Congress has occasionally surrendered to the pressure and thrown DoD a bone.

In fiscal 2012, Congress allowed certain fee increases, enrollment rates to increase with inflation, and pharmacy co-pay increases. In fiscal 2013, Congress rejected most of the Pentagon's Tricare-reform requests to increase fees, establish new ones, impose means-testing for military retirees, and increase pharmacy co-pays. Instead, Congress agreed to require Medicare-eligible beneficiaries to fill long-term prescriptions by mail to reduce costs.

Military associations say that there are some proposals, like initiating fees for Medicare-eligible beneficiaries, that have been requested before and are bound to keep coming back until DoD succeeds.

In other cases, the department has taken into account some of the past criticisms of proposed cost increases and tried to lay out a set of reforms that conceivably stand a chance of approval on Capitol Hill.

"Some of these fees are actually more reasonable than what they have tried to put forward before. They are trying to work the art of the possible, I think. It's a sign that they want something to pass because they are under such budget pressures," said Joyce Raezer, the executive director of the National Military Family Association.

"But to comment more on some of the specifics, we have a lot of questions, and we are going to be looking for some answers and then we'll circle back and see what is the impact, especially for our active-duty families," Raezer said.