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

By Lisa Rein
Tuesday, March 15, 2011; 12:58 PM

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.

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