Gates Seeking To Contain Military Health Costs

Francis Brady enjoys a six-figure salary and generous benefits at the consulting firm Booz Allen Hamilton, but as a retired Marine lieutenant colonel he and his family remain on the military’s bountiful lifetime health insurance, Tricare, with fees of only $460 a year. He calls the benefit “phenomenal.” “It is so cheap compared to what Booz Allen has,” Colonel Brady said in a recent interview, acknowledging that premiums called for by private employers can run many times greater. Of nearly 4.5 million military retirees and their families, about three-quarters are estimated to have access to health insurance through a civilian employer or group. But more than two million of them stay on Tricare. As the costs of private health care continue to climb, their numbers are only expected to grow.

(Nytimes)

Francis Brady, a retired Marine lieutenant colonel, says Tricare is "phenomenal," much cheaper than a private-sector plan.

Francis Brady enjoys a six-figure salary and generous benefits at the consulting firm Booz Allen Hamilton, but as a retired Marine lieutenant colonel he and his family remain on the military’s bountiful lifetime health insurance, Tricare, with fees of only $460 a year. He calls the benefit “phenomenal.”

“It is so cheap compared to what Booz Allen has,” Colonel Brady said in a recent interview, acknowledging that premiums called for by private employers can run many times greater.

Of nearly 4.5 million military retirees and their families, about three-quarters are estimated to have access to health insurance through a civilian employer or group. But more than two million of them stay on Tricare. As the costs of private health care continue to climb, their numbers are only expected to grow.

Now, as part of a broad offensive to cut Pentagon spending, that group is once again in the sights of Defense Secretary Robert M. Gates, who is seriously considering whether to ask for Tricare fee increases in next year’s budget — and perhaps start one of the last fights of his public career.

Already, he has met with the chairmen of President Obama’s bipartisan fiscal commission, which faces a deadline this week for getting an agreement on a plan to address the federal budget deficit.

The battle over Tricare pits the efforts of the Pentagon to contain the exploding cost of health care for nearly 10 million eligible beneficiaries against the pain and emotions of those who say they have already “paid up front” with service in uniform, particularly those who deployed to America’s two current wars. The 10 million figure includes active-duty personnel, retirees, members of the National Guard and Reserves and their families.

The arguments reflect the broader debate over the huge Pentagon budget that will intensify next year when Mr. Gates, who says he will step down in 2011, continues his campaign to cut off what he calls the “gusher” of defense spending. Total health care costs for the Pentagon, which is the nation’s single largest employer, top $50 billion a year, a tenth of its budget and about the same amount that it is spending this year on the war in Iraq. Ten years ago, health care cost the Pentagon $19 billion; five years from now it is projected to cost $65 billion.

But Tricare fees have not increased since 1995.

“Health care costs are eating the Defense Department alive,” Mr. Gates said in a much-noticed speech in May. Defense budget analysts say that rising health care costs will make less money available for new weapons, repairs to a worn-out arsenal and quality-of-life programs like schools on military bases.

“In the long run, it could actually limit our ability to field a military of sufficient size,” said Todd Harrison, a senior fellow for defense budget studies at the Center for Strategic and Budgetary Assessments in Washington.

Veterans groups and military officers’ lobbies have responded by going on high alert. One of the most powerful of them, the Military Officers Association of America, is preparing a public relations campaign that will focus on what it calls the broken promise between the nation and the people who defend it.

“Don’t ask the folks who have done so much more for this country, who have been called to act since 9/11, to be the first in line to give some more,” said Norbert R. Ryan Jr., a retired vice admiral and president of the military officers’ group. As for Tricare’s generous benefits, Admiral Ryan said that anyone “can get this good deal — go over to a recruiting office and sign up for Iraq and Afghanistan.”

Defense officials point out that Mr. Gates is weighing only whether to increase the cost of health insurance for retirees and their families, not those on active duty, who receive Tricare at no cost. Any fee increases would also not affect military retirees 65 and older, who use a free program called Tricare for Life that supplements Medicare. It is not possible to estimate the exact savings without knowing what rate increase might be proposed, but analysts say even a modest rise could recoup billions of dollars annually for the Pentagon.

If the past is any guide, veterans groups are expected to point out that any fee increases could affect those disabled by the wars in Iraq or Afghanistan who do not use the free services available to them at veterans’ hospitals, either because they choose not to or because they live too far away.

Mr. Gates has included proposals to increase Tricare fees for retirees in three of his past four Pentagon budgets. In 2008, when he held the same job under the Bush administration, Mr. Gates proposed a five-year phased increase of the annual $460 family fee for Tricare Prime, the popular H.M.O.-like option offered to military retirees, to a maximum of $1,260 to $2,460, depending on a retiree’s income, according to an analysis by the Congressional Budget Office.

Tricare refers to the $460 payment as an “enrollment fee,” not a premium. With $12 co-pays per doctor visit, some drug prescription payments and other costs, the current annual out-of-pocket expense for a family on Tricare Prime is estimated at $1,200 per year, still substantially less than what is available from private employers.

Congress, unwilling to be seen as inflicting any kind of pain on the military or veterans, rejected the increases. Mr. Gates said he got the message — “The proposals routinely die an ignominious death on Capitol Hill,” he said in May — and he did not try again in 2010. But in shaping that budget proposal, Obama administration officials also told the Pentagon not to raise it, lest it distract from Mr. Obama’s overhaul of the nation’s health care system earlier this year.

Some Pentagon officials and military advocacy groups have suggested alternatives to raising fees that could cut costs. One idea is to renegotiate the lucrative Tricare packages with the insurance companies, hospitals and drug companies that actually operate the programs. Another is to promote a cost-saving mail-order pharmacy.

Defense officials say that Mr. Gates has to make up his mind about any health care fee increases in the next weeks, in time for the Pentagon to submit its 2012 spending plans to the White House budget director in December. Defense analysts who spoke to Mr. Gates over the summer said he told them that he did not know if it was realistic to try to increase military health care costs while troops were at war.

But Defense Department officials have since said they see a window of opportunity in the growing alarm over the federal debt, the focus of two bipartisan panels that are proposing deep cuts in government spending.

Mr. Gates met in recent weeks with the leaders of one of the panels, former Senator Alan K. Simpson, a Republican, and Erskine B. Bowles, a Democrat and the former chief of staff to President Bill Clinton. They are the co-chairmen of Mr. Obama’s fiscal commission, which has proposed raising Tricare fees. The panel is trying to deliver a final report to the White House on Wednesday, if the members can reach a consensus that fast.

The panel is considering proposals to increase fees for military retirees working for civilian companies, but it would also require employers to reimburse the government for a share of the health insurance costs of those on their payroll who opt for Tricare. That measure alone, described as an effort to make civilian employers pay “a normal business expense,” could recoup $3 billion annually for the Pentagon.

In the meantime, Colonel Brady, 51, said he did not want to be overly dramatic about what was at stake. Although he spent 22 years in the Marines, six of them deployed, including to the 1991 Persian Gulf war, he said he could not buy the argument about a broken promise.

“Tricare is a very good deal for me, and if it costs some more, well, O.K.,” he said. Raising Tricare fees would be a financial burden for many retirees, he acknowledged, but he could not honestly say it would be for him.