March 2007

FY '08 TRICARE Fee Proposals Come Under Fire Again From Military Groups And Congress - Sandra Basu

WASHINGTON—Military associations and some key members of Congress are unhappy that the Bush administration is assuming in its FY 2008 budget request that $1.9 billion will be saved by raising TRICARE fees for military retirees next year.

Last year when the Bush administration released its FY 2007 budget, it rolled out a series of proposals, aimed to reduce the growing cost of health care, that were eventually rejected by Congress. This year the proposed Bush administration’s FY 2008 $481.4 billion budget request for the Department of Defense (DoD) has not yet put any detailed TRICARE fee increase proposals on the table. However, the FY 2008 $20.6 billion budget for the Defense Health Program that DoD is asking for includes a “placeholder” legislative proposal that assumes that Congress will enact some type of TRICARE benefit fee change for working age retirees that will allow the agency a projected $1.9 billion in savings.

DoD is currently awaiting recommendations from a congressionally directed task force mandated in the 2007 National Defense Authorization, called The Task Force on the Future of Military Health Care, to look at the financial health of military medicine. The panel is expected to produce a preliminary report in May and a final report in December with recommendations as to how DoD can save money for health care.

At a House Armed Services Subcommittee on Military Personnel hearing held last month, Assistant Secretary of Defense for Health Affairs Dr. William Winkenwerder Jr. told subcommittee members that DoD is waiting for the Task Force’s recommendations before it comes out with a detailed proposal for the $1.9 billion savings projected in the proposed budget because it did not want to “direct” the Task Force to a solution.

“We did not believe it would be appropriate to come forward with a detailed [proposal], either a continuation of last year’s proposal or a modification of it, because we thought that would then be directing the Task Force to one solution or another,” Dr. Winkenwerder said.

Enough Money?
Both Subcommittee Chairman, Rep. Vic Snyder (D., Ark.), and Ranking Member, Rep. John M. McHugh (R., N.Y.), expressed dismay that the administration was proposing a health care budget that was assuming savings based on Task Force recommendations that have not been made yet.

“Some of us think that it is not very appropriate to base a number or savings on a Task Force recommendation [especially since its] final report is not out until December,” Rep. Snyder said at the hearing.

Rep. Snyder also said that the assumed savings “poisons the waters” for the work of the Task Force and that the assumed savings will lead people to believe that DoD had “stacked” the Task Force with individuals that are in favor of its fee increase plan.

“We have not, nor do we think it would make good sense to ‘stack the Task Force.’ That just isn’t in anybody’s interest. It is a bipartisan group,” Dr. Winkenwerder said in response to Rep. Snyder’s concerns. “We have been clear from a department standpoint that we are only supporting the Task Force in terms of [DoD] providing whatever data, whatever information, important studies and analysis that have been requested.”

The Task Force is comprised of 14 members, seven of whom are from DoD and another seven who are from outside. Congress, in fact, directed DoD to appoint the 14 members, seven of which had to be from inside DoD. Senior DoD leaders such as Vice Chief of Staff Air Force Gen. John D.W. Corley, Deputy Surgeon General Navy Rear Adm. John Mateczun, MC, and Air Force Surgeon General Lt. Gen. James Roudebush, MC, among others, are on the Task Force.

Rep. McHugh wanted to know what DoD would do if the Task Force did not come up with recommendations that would save DoD $1.9 billion.

“What if they come back with no savings? I kind of doubt that will happen, but it is within their perimeters. What do we do about the $1.9 billion [assumed savings in the budget]? Do you have a backup plan or a cut list? That is a lot of money,” Rep. Hugh said.

Dr. Winkenwerder did not offer any specifics, but said that whatever measures taken in that scenario would be “fairly dramatic in terms of their impact,” and that DoD’s preference is to move forward with the Task Force.

“I just have confidence that we will be able to stand behind and support their [the Task Force’s] recommendations,” Dr. Winkenwerder said. “I would be very surprised if their recommendations are not recommendations that we can support,” he said.

Picking Up From Last Year
Congress approved a $21.2 billion budget for the Defense Health Program in the FY 2007 Joint Funding Resolution that passed Feb. 14.

Last year’s proposals that were not approved by Congress included a new enrollment fee for TRICARE Standard; annual higher deductibles for beneficiaries who use Standard, a fee-for-service health care option; and annual higher enrollment fees for retirees who use TRICARE Prime, a health plan similar to an HMO. The cost-share for active duty members and their dependents in these programs would not have changed under the FY 2007 failed proposed plan, but would have applied to retirees under 65 years of age. In addition to these changes, the plan called for co-payments under the TRICARE retail pharmacy network to be raised for all beneficiaries, except active duty.

At the annual Military Health System Conference held earlier this year DoD Undersecretary of Defense for Personnel and Readiness David S.C. Chu, PhD, explained to an audience of military health professionals that changes had to be made to the health care benefit because it is growing at a rate that is not sustainable.

“Today as you know, health care accounts for approximately eight per cent of the Department of Defense budget, up from 4.5 per cent in the early 1990s. We project it will be 12 per cent of the department’s budget by the middle of the next decade. No one believes that is sustainable. Something will give,” he said.

Dr. Chu said that the increase in costs is coming mostly from retired beneficiaries who are working, but opt to keep their TRICARE insurance.

“A major part of the increase arises from retired beneficiaries who are working in a second career with access to other health insurance. They find TRICARE financially attractive because we have not changed premium levels since the program’s initiation a decade ago. For this reason, the department began advocating that we rebalance TRICARE so that these beneficiaries’ cost responsibility was back towards what was originally established,” he said.

Opposition
Officials from the Military Officers Association of America (MOAA) say they are not pleased by DoD’s FY ‘08 budget request. MOAA director of the government relations, Col. Steven Stobridge, USAF (Ret.), said in an interview with U.S. MEDICINE that the proposal that was introduced last year was a two-year fee proposal that assumed $735 million in savings the first year and $1.8 billion in savings the second year. This year’s proposal would assume the savings of both years in one year, he said.

Stobridge said he is under “no illusion” that the Task Force will have to approve something because the proposed budget is built on the assumption that it will save money.

“We are under no illusions about this Task Force. Half of the Task Force works for the secretary of defense and he appointed the other half, so to us there is not much doubt of where they are headed,” Stobridge said.

Members of Congress, such as the House Armed Forces Committee Chairman, have also voiced opposition to the DoD budget proposal. A press statement on the breakdown of the President’s DoD budget by House Armed Forces Committee Chairman Rep. Ike Skelton (D., Mo.) stated that “if these proposals are not successful in FY ‘08, the budget for military health care will be underfunded by between $1.8 billion and $2.3 billion.

“Health care is one of the most important benefits our nation provides to our servicemembers and their families. I believe Congress will be extremely reluctant to increase fees and make other changes that would erode health care benefits. We will look carefully at the assumptions in the health care request to ensure this budget adequately funds the health care needs of our troops,” said Rep. Skelton in a statement.

Rep. Chet Edwards (D., Texas) and Rep. Walter Jones (R., N.C.) have introduced a bill similar to one they introduced last year that would prevent DoD from imposing a TRICARE fee increase of up to $1,000 a year for retired members under age 65 and their families. The bill, H.R. 579, had 67 cosponsors as of the middle of February. Military organizations such as MOAA support the measure.

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