Gates defends health-care fee increase for retirees

Washington Post Staff Writer
Thursday, February 17, 2011

Defense Secretary Robert M. Gates on Wednesday defended his plan to increase by $5 a month the fee retired working-age military personnel pay for family health-care coverage, after a member of Congress called it a "breach of trust."

Appearing before the House Armed Services Committee, Gates described it as "a modest increase" in the enrollment fee to TRICARE, the Pentagon's health-care plan. While the family rate would go up $5 a month, the cost for a single working-age retiree would rise $2.50.

Rep. E. Scott Rigell (R-Va.) told Gates that based on his conversations with retirees, who had enlisted with the expectation that they would get free health care for life, the proposed increase was "a breach of trust to change the deal."

Gates responded that it was Congress in 1995 that broke that trust when it approved a $460 annual fee for retiree TRICARE family coverage. "Once they [Congress] acknowledged a fee, the idea it was free for life was done away with," Gates said. He added that Congress never said 15 years ago that the fee would stay the same.

As he has said before, Gates pointed out that "many of these beneficiaries are employed full time while receiving full pensions, often forgoing their employer's health plan to remain with TRICARE." While the proposed increase will put the annual TRICARE fee for a family at $520 a year, the fee for a comparable health insurance program for federal workers averages $5,000 annually. According to one estimate, TRICARE costs the Pentagon $3,584 per beneficiary.

The administration proposal also calls for indexing the TRICARE fee from now on to future Medicare premium increases. Although the new increased fee will save only about $424 million over the next five years, Pentagon comptroller Robert Hale told reporters Monday that "it will keep growing" because of the indexing, "so if you go out, you know, 10 or 20 years, it will have a major influence."

Hale recalled that the George W. Bush administration tried to raise TRICARE retiree costs and was "turned down pretty much flat, by the Congress." He added, "We are hopeful that by starting slowly and modest proposals, we will get their agreement."

The health-care changes have been considered so sensitive that Adm. Mike Mullen, chairman of the Joint Chiefs of Staff; Gen. James E. Cartwright, the vice chairman; and the four services' chiefs of staff sent a letter last week supporting the proposals to Sen. Carl Levin (D-Mich.), chairman of the Senate Armed Services Committee.

They wrote that they sought improvement to health care for wounded warriors and support to their families. But after that, they "sought equity across all health care programs." That led them "to propose modest increases in TRICARE enrollment fees for working-age retirees and indexing of those fees." They added the changes "are modest and manageable, and leave fees well below the inflation-adjusted out-of-pocket costs set in 1995 when the current fees were established."

The letter concludes: "We understand that any changes to health care benefits create concern among the people we serve and the communities from which we receive care. . . . Our approach is careful, gradual, and responsible."

Defense health-care costs are among the fastest-growing parts of the Pentagon budget. They have grown from $19 billion in fiscal 2001 to the $52 billion proposed in the fiscal 2012 budget sent to Congress this week.

Along with the increased TRICARE fee, the administration is proposing other changes that Hale told reporters would save $8 billion over the next five years. These include making pharmacy co-pays more efficient by providing incentives for users to buy generic prescriptions and increase ordering by mail. There is also a proposal to phase out, over several years, special subsidies offered to a small group of hospitals that treat military families and retirees that result in payments above what Medicare provides.

One other major reduction is expected to come in the reduced number of contractors employed by the Pentagon in managing its health-care programs. The proposed budget puts those expenditures at $664 million, compared with $1.4 billion in fiscal 2010.

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