Tricare target of Pentagon cuts as health care projected to reach $65B

March 14, 2011

Among government workers, one group enjoys lifetime health benefits virtually unmatched in the United States: military retirees.

As soaring medical costs have forced steep cuts to benefits offered by government and private plans, the program, known as Tricare, has grown more generous. The premiums are a fraction of those in the private sector, deductibles are low and co-pays limited. Premiums have not changed in 16 years. But Tricare’s costs are exploding, projected in five years to hit $65 billion to insure 9.6 million people.

Now, in the face of two wars and serious budget constraints, the Pentagon says it needs to charge higher fees. And with congressional hearings on Tricare opening Wednesday, Defense Secretary Robert M. Gates finds himself pitted against retired service members, one of Washington’s most powerful and beloved constituencies.

Gates has tried to boost Tricare premiums in three Pentagon budgets. He made the case to Congress that spiraling personnel and health-care costs are “crippling” the military, as retirees receiving full pensions decline new health insurance when they go to work for private companies. He has warned that weapons modernization programs and equipment for U.S. troops in Iraq and Afghanistan are in jeopardy.

But Congress rebuffed him each time, temporarily prohibiting the Pentagon from making changes to Tricare fees.

Gates is now back with a far more modest proposal to raise premiums for 586,000 retirees of working age by $2.50 a month for individuals and $5 a month for families. He is supported by the six members of the Joints Chiefs of Staff, who wrote an unusual plea to Congress in February urging passage of the plan.

Opponents, however, are giving little ground.

“Throughout their careers, military people were told, ‘We beat you up a lot, but if you’re willing to put up with this over two to three decades, free health care for life is your benefit,’” said Steve Strobridge, director of government relations for the Military Officers Association of America, among the most influential service groups.

The new plan asks families to pay $520 a year, up from $460. Individual coverage would rise to $260, from $230. The higher fees, for the program’s popular HMO, are part of a Pentagon effort to slash personnel costs by $7 billion. They would set the stage for future increases tied to growth in health costs, which the Pentagon estimates at just more than 6 percent a year.

“The current Tricare arrangement . . . is simply unsustainable,” Gates told the House Armed Services Committee in February, a day after rolling out the Pentagon’s spending plan for 2012. At $52.5 billion, health costs account for one-tenth of the defense budget, up from $19 billion a decade ago. Active duty service members and their families receive Tricare at no cost. The same is true for military retirees older than 65, who receive Tricare for Life as a free supplement to Medicare.

The Pentagon’s previous proposal, which would have more than tripled premiums over five years, was dismissed, with the help of a forceful campaign by veterans and military service groups. With Congress and the national mood favoring smaller government, Pentagon officials hope the current, scaled-down proposal will be more politically palatable on Capitol Hill. And Capitol Hill aides say chances are better than ever this year to push a fee increase through Congress.

Pentagon officials are adamant that even retired service members must contribute to the costs of fighting two expensive wars in Iraq and Afghanistan. Tricare was never free, they say.

“I know of no such deal,” Gates’s spokesman Geoff Morrell said. “Some point to an old recruiting poster offering free health care, but it’s certainly not prescribed in law. This hasn’t been free for the past 16 years.”

But the battle is far from over.

After Gates warned last fall that he planned to revive his campaign to raise Tricare fees, opponents again went on high alert, meeting with the White House and organizing a letter-writing campaign to Congress.

The officers group mobilized, joining other service associations in a furious lobbying effort to defeat the plan. Today, the 32-member coalition is divided on Gates’s more modest proposal, although there is consensus that any future increase in premiums should be tied to the rate of inflation.

The military officers groups and a handful of others have spent about $11.8 million since 2007 to lobby against fee increases and other health and benefit issues, according to the Center for Responsive Politics, which tracks lobbying.

Many lawmakers agree with retired service members that lifetime health care was part of an agreement they made for risking their lives on the battlefield.

“The government decided 40 years ago to go to an all-volunteer military, and they’re going to have to pay for it,” said Skip Bowen, who turned down the private plan offered by the government contractor in Tysons Corner that hired him last year when he retired from the Coast Guard. Tricare saved him thousands of dollars a year.

Bowen retired as master chief petty officer, the Coast Guard’s highest enlisted rank. He said he could afford to pay $60 more. “But we’re not talking about a bunch of generals and senior officers here,” he said. “We’re talking about enlisted folks who definitely don’t make a lot of money in retirement.”

Much of the growth in Tricare is coming from retirees such as Bowen, who are shifting away from private plans — which cost families on average $4,000 annually — offered during second careers, or the plans of working spouses. About three-quarters of the 4.5 million military retirees and their families ages 45 to 64 have access to private insurance through their civilian jobs, the Pentagon says. A majority now stay on Tricare.

The program was created in 1995 to fill in health coverage as hundreds of military bases across the country consolidated and their hospitals and medical clinics closed. Active-duty service members and some retirees got preference for medical care on bases. Other retirees were encouraged to seek care outside the system. Tricare has added a no-cost policy for older retirees, free prescription drug coverage for many and lowered out-of-pocket expenses.

When the Pentagon unveiled its budget last month, Sen. James Webb (D-Va.), who chairs the military personnel subcommittee, vowed to oppose any increases to Tricare fees.

“As someone who grew up in the military and served in the military,” he said in a statement, “I start from the presumption that lifetime health care for career military personnel is part of a moral contract between our government and those who have stepped forward to serve.”

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