Military health care costs still rising

By Tom Philpott: Military Update

Defense Department officials say it’s time users of military health care pay a greater share of rising medical costs, perhaps through higher co-payments and enrollment fees that haven’t been raised since TRICARE, the military’s managed care program, began a decade ago.

In an interview, Dr. William Winkenwerder, Jr., assistant secretary of defense for health affairs, said he and other senior defense officials, alarmed by a doubling of military health care costs over the last five years, are discussing ways to slow the growth with military leaders and Congress.
Those talks, he suggested, include a range of options to raise out-of-pocket costs for beneficiaries.

In 1995, when the triple-option TRICARE plan began to be phased in for retirees and family members, enrollment fees for TRICARE Prime, the managed care option, were set at $230 a year for an individual and $460 for family coverage. They have not changed.

Retiree and family member co-payments have been frozen too at $12 for a visit to a civilian doctor and $11 for a day for hospitalization. In fact, five years ago Congress eliminated all TRICARE Prime co-payments for active-duty family members. Their co-payments for inpatient care also ended.

Medical care for active duty members is free and will not change. Regarding fees for retirees and family members, Winkenwerder declined to discuss any specific option under review. Other sources said the menu being studied includes not only higher TRICARE Prime fees and co-payments but possibly an enrollment fee for users of TRICARE Standard, the military’s traditional fee-for-service option; payouts or buyouts to entice beneficiaries to use other health insurance options; a plan to combine any higher fees and co-pays with the offer of tax-deferred military Health Savings Accounts.

Winkenwerder indicated that stagnant fees and co-pays have been a factor in rising health costs, encouraging many younger retirees working in second careers to use TRICARE rather than employer-provided health insurance. With TRICARE, retirees under 65 see average out-of-pocket costs of about $700 a year, he said, versus $3,800 or so if they use employer-provided insurance. That gap is growing and has led to a steady migration of retirees and families into TRICARE and away from private sector options.

In 2000, Winkenwerder said, 60 percent of retirees under 65 relied on TRICARE. Today, the figure is 72 percent and rising two to three points a year. It is expected to hit 85 percent by 2010.

Reliance on TRICARE, said Winkenwerder, is being encouraged by civilian employers, including some state governments. Alabama, Nebraska, the Carolinas and Washington now entice employees who are retired military to rely on TRICARE by offering to cover their fees and co-pays with TRICARE “supplemental’’ insurance.

The biggest rise in military health care costs, however, has involved the elderly, through TRICARE for Life (TFL) and TRICARE Senior Pharmacy benefits begun in 2001. Before Congress enacted these plans, beneficiaries eligible for Medicare saw access to a guaranteed military health benefit end. As the department phased in managed care, the “greatest generation’’ of World War II and Korean War retirees also were being squeezed out of base hospital and clinics, denied what they saw as a promise of free lifetime care.

Congress responded by passing TFL, a “golden’’ supplement to Medicare that pays almost all health costs that Medicare won’t. TFL and a new senior pharmacy benefit now cover 1.7 million beneficiaries. The combined cost in 2005 is $6 billion and will rise to $9 billion by 2010.

Tom Philpott can be contacted at Military Update, P.O. Box 231111, Centreville, Va. 20120-1111, or by e-mail at:
milupdate@aol.com