Plan to Raise Military Retirees' Health Costs Faces a Tough Fight

By Stephen Barr
Thursday, March 16, 2006

Like any other large employer, the Defense Department is struggling to hold down spending on health care, especially for retirees. But a Bush administration plan to raise fees and co-payments for medical coverage provided to military retirees under 65 has run into tough opposition.

Yesterday, a dozen groups representing military officers, enlisted personnel, reservists and retirees denounced the administration's plan as an unfair tax and pledged to support a bipartisan bill that would strip the Pentagon of its authority to raise health care enrollment fees and pharmacy co-payments.

Leaders of the military groups spoke at a news conference called by Reps. Chet Edwards (D-Tex.), a member of the House Appropriations Committee, and Walter B. Jones Jr. (R-N.C.), a member of the Armed Services Committee, to kick off their legislative effort. Edwards said the bill picked up 46 sponsors on the eve of its introduction.

Tricare, the military's health care program, has not adjusted its fees in 11 years, according to the Bush administration's fiscal 2007 budget. The program, which has been expanded by Congress in recent years, provides military personnel with health benefits from the time of their retirement, usually in their mid-forties, to the time they become eligible for Medicare, at 65.

Retirees may participate in Tricare for Life, which covers out-of-pocket expenses and other services not provided through Medicare. Retirees also can participate in a pharmacy benefit program provided to Medicare-eligible beneficiaries.

William Winkenwerder Jr ., assistant secretary of defense for health affairs, said military health care costs have doubled in the past five years and are projected to grow to $64 billion in 2015, or 12 percent of that year's estimated defense budget.

"Our spending today [on military health benefits] is greater than the entire Ministry of Defense budget in Germany," Winkenwerder said in a telephone interview.

The Pentagon, of course, does not have the option of scaling back or eliminating retiree health care and pensions, as some large private-sector companies are doing. In fact, Winkenwerder said, some employers, including six state governments, are urging their workers who are military veterans to use Tricare rather than their companies' insurance plans.

"We are in a major cost shift, and we have gained 300,000 to 400,000 new enrollees in recent years," he said, adding that the original Tricare program did not intend to provide coverage to military retirees who had gone on to second careers in the private sector.

The Bush administration's budget proposal would require non-Medicare retirees to pay a larger share of their health care costs and would adjust their rates annually for inflation, in a manner similar to the rate increases faced by civil service retirees covered by the Federal Employees Health Benefits Program.

The proposed fees, however, would be based on a sliding scale, with retired officers paying more than enlisted personnel. For example, a retired officer paying $460 annually for family coverage would pay $1,000 in 2007 and $1,400 in 2008. Retail co-payments for prescription drugs would increase from $3 to $5 for a generic and from $9 to $15 for a brand name. There would be no co-pay if a retiree purchased a generic drug through Tricare's mail-order service.

Winkenwerder said the proposal represented "modest adjustments" that "would maintain our status as among the best or very best health plans in the country."

But Edwards and Jones said the proposal would double or triple health care premiums for about 3 million military retirees, break the nation's promise to provide affordable care to military families, and jeopardize recruitment for the volunteer force.

Edwards said the bill would block the Pentagon proposal and would require this and future administrations to obtain congressional approval for hikes in military retiree health care costs. Jones warned the Bush administration that "they had better get on our side or they are going to get embarrassed."

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