Officials planning health-care changes

By Tom Philpott: Military Update

Senior defense officials characterized the military health benefit as “extremely rich” during a Wednesday meeting with service association representatives over plans to raise retirees’ TRICARE fees.

Officials requested the meeting, say attendees, to explain to The Military Coalition, an umbrella group of three dozen military and veterans groups, why the department intends to boost TRICARE enrollment fees and deductibles for under-65 retirees and families as early as next October.

Tentative budget plans also would raise co-payments in the TRICARE retail drug network and mail-order program, which could impact all retirees, including those 65 and older, their spouses and survivors.

Dr. William Winkenwerder, assistant secretary of defense for health affairs, made his pitch in a presentation titled “Sustaining the Benefit.” He also answered questions from a polite but worried group of association health care experts. He declined to unveil or to confirm specific fee increases planned, saying this would occur “soon,” perhaps with delivery of the Bush administration 2007 defense budget request to Congress in early February.

Asked if the fees planned would match those that have appeared in draft budget documents, and have been in this news column since early December, Winkenwerder suggested that some new changes are planned.

“I wouldn’t want you to think that what you have seen is what’s going to be done,” Winkenwerder said, according to an association official who took notes during the meeting.

Winkenwerder defended the cost-saving estimates used in internal Pentagon briefings, which have persuaded military leaders to support the fee increases, said sources. Some Pentagon analysts say the cost estimates rely unreasonably on a shift of 600,000 under-65 retirees away from TRICARE to use employer-provided health plans.

Winkenwerder defended any cost assumptions used as reasonable and developed by experienced analysts. He also defended the goal of encouraging TRICARE beneficiaries to use alternative health insurance. His handout for attendees showed that the number of TRICARE-eligible retirees and family members under age 65 will hover at around 3 million through at least 2011.

But the proportion of that population reliant on TRICARE is rising, from 66 percent in 2002 to 78 percent this year and to 87 percent by 2011, unless TRICARE fees and deductibles are raised, Winkenwerder said.

TRICARE never was intended to get private sector employees off the hook for providing benefits to their own employees, he added.

Asked what the department would do if the higher fees don’t result in many billions of dollars in savings, Winkenwerder said that would have to be addressed when and if it occurs. Any plan must rely on a set of assumptions, he said, but human behavior is hard to predict.

Proposed TRICARE increases described in draft budget documents would set higher fees for retired officers than for enlisted. Winkenwerder confirmed that he supports having those “with greater means” pay more.

He made his presentation at Fleet Reserve Association headquarters in Alexandria, Va., accompanied by Dr. Stephen L. Jones, his principal deputy. Jones, since November 2004, has been responsible for TRICARE strategic planning, legislative affairs and communication programs.

Winkenwerder described TRICARE as a “great” benefit endangered by rising costs. Service leaders, he said, are seeing those costs encroach on other budget programs, causing real fiscal and management challenges.

His handout blamed the rising costs on five factors: new, expanded military health benefits since 2000; growing reliance on an “extremely rich” benefit by under-65 retirees who previously used civilian benefits; higher usage rates by TRICARE beneficiaries versus private sector counterparts; rapid cost growth in pharmacy programs; and inflation for health services nationwide.

In 2004, Winkenwerder said, average out-of-pocket health costs for military retirees were $680 compared with $3,700 for private sector employees. That gap will widen if TRICARE fees remain frozen at levels first set in 1995, he said.

He said if recent trends hold, defense health budgets will grow from 7.6 percent of total defense spending in 2005 to 12 percent by 2015. On the other hand, if health costs are kept at 8 percent of the department’s “top line,” Winkenwerder said, it could save up to $20 billion a year by 2015 to be used on other programs. Up to half of those savings could be achieved through “modest benefit changes,” the handout explained.

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