CBO says military health-care costs could soar

Correction: An earlier version of this column misstated the amount of defense cuts mandated by the process known as sequestration. It is $1 trillion, not $1 billion. This version has been updated.

Walter Pincus
Reporter July 16, 2012

Active and retired service personnel and their families are increasing their use of the military health-care system at a faster rate than civilians enrolled in comparable private health programs, according to a report by the Congressional Budget Office.

As a result, the annual cost to the Defense Department’s health-care program could grow from $51 billion in fiscal 2013 to $65 billion by 2017 and to $90 billion by 2030, according to CBO estimates in the report, “Long-Term Implications of the 2013 Future Years Defense Program,” which was released Wednesday.

Walter Pincus reports on intelligence, defense and foreign policy for The Washingon Post. He first came to the paper in 1966 and has covered numerous subjects, including nuclear weapons and arms control, politics and congressional investigations. He was among Post reporters awarded the 2002 Pulitzer Prize for national reporting. View Archive

That means, according to CBO projections, the Defense Department, which will pay out 9 percent of its base budget for health care in fiscal 2013, would be paying out 14 percent in 2030, roughly equivalent to what it spends today on all military research-and-development programs.

The CBO’s projections are higher than the Pentagon’s because it “assumes that the Congress will continue its history of rejecting DoD’s proposals to shift some health care costs to the military beneficiaries receiving the care,” the report says.

The Defense Department this year sought to increase the annual fees in the Tricare program for service retirees still working in private jobs, those Medicare-eligible military retirees, and the pharmacy co-payments for active-duty personnel, retirees and their families.

Those changes would have generated savings of some $13 billion over the next five years, according to the CBO. Nonetheless, the House voted to prohibit almost all of the Pentagon’s proposals in its version of the fiscal 2013 defense authorization bill. The Senate is expected to follow suit.

One reason for the increased usage of the military health-care system is that it is cheaper.

“Low out-of-pocket expenses for Tricare beneficiaries (many of whose co-payments, deductibles, and maximum out-of-pocket payments have remained unchanged or have decreased since the mid-1990s), combined with the increased costs of alternative sources of health insurance coverage, make the Tricare program relatively more attractive each year,” according to the CBO report.

The result: “A larger share of military retirees and their dependents are relying on the program rather than participating in health insurance provided by civilian employers or purchasing of their own,” the CBO said. For example, last year only 25 percent of military retirees and their families enrolled in private health-care programs. That was half the 50 percent of retirees who used private health-care programs back in 2001.

As noted above, individual use of these programs is increasing at a faster rate than on the civilian side. For example, the CBO report shows that between 2006 and 2011, the average growth for care per civilian user rose 1.3 percent per year. In the same period, Defense Department spending per user for purchased medical care and contracts rose 4.2 percent and costs for direct care at military facilities and their administration grew by 3.2 percent.

Projecting into the 2013-2030 period, the CBO says the growth rate per user will average 5.5 percent for pharmaceuticals, 4.7 percent for purchased care and contracts, and 3.3 percent for direct care and administration.

The Republican-controlled House, which last week voted to repeal President Obama’s health-care law, takes up the fiscal 2013 defense appropriations bill this week.

The Obama administration, in commenting on the bill, which increases the president’s request by $1.1 billion, described itself as “disappointed that the Congress did not incorporate the requested Tricare fee initiatives . . . which are essential for DoD to successfully address rising personnel costs.” It said at least $1.8 billion in savings were involved.

The CBO report is not required reading for House members before they are allowed to vote, so don’t expect the House to reconsider the Pentagon health-care issue. It’s an election year, and as the report points out, there are 10 million people benefiting from the military health-care program as it is today.

As House members debate the defense spending bill, a lot of information will be tossed about. Much of it will be inaccurate. Some will be cherry-picked from the CBO report.

There will be a lot of hand-wringing over finding a way to avoid “sequestration” of defense spending — the requirement under the 2011 Budget Control Act to add roughly $500 billion in cuts over the next 10 years in addition to $487 billion already agreed to.

Democratic liberals have already noted the CBO report summary closes by saying that even if sequester occurs and the Defense Department budget over the next 10 years is reduced by nearly $1 trillion, the Pentagon base budget would still be larger than it was in 2006 under the George W. Bush administration.

An interesting debate point — but totally irrelevant to today’s situation.

On the other side, House Republican conservatives will inevitably join their presumptive presidential candidate Mitt Romney in accusing Obama of proposing the sequestered $1 trillion in defense cuts, which of course is not true. It’s the Congress that agreed to sequester as a trigger if compromise could not be reached by the bipartisan joint commission that was supposed to come up with an additional $1.2 trillion in reductions by the end of this year.

Congress still cannot agree on a debt-reduction package and only in the post-election lame-duck session will lawmakers be forced to take some action.

You can be sure that Medicaid and Medicare will be on the chopping block, but Defense Department health-care programs probably will not. They should be.

For previous Fine Print columns, go to washingtonpost.com/fedpage.

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