Over the Cliff

Jan. 1, 1997

Congratulations on your upcoming birthday!”

So declares a form letter that the Department of Defense sends to military retirees and their dependents as they approach age 65. It is also a polite precursor to an unfortunate kiss-off from the military health-care system.

The form letter notifies beneficiaries of the Military Health-Services System (MHSS) that they no longer will be eligible for enrollment in Tricare Standard (formerly CHAMPUS, the Civilian Health and Medical Program of the Uniformed Services). Then, it suggests that the recipient contact his or her nearest Social Security office to sign up for Medicare.

Doyle E. Larson, a retired Air Force officer who in September became National President of the Air Force Association, received his congratulatory letter last summer. Like many of his fellow retirees, he really had not given the event much thought. That changed–rapidly. He recalled that, when he made his first foray into the Medicare arena, he felt as if he had “stepped over a cliff.”

For example, simply locating a Social Security office and trying to get basic information proved to be an ordeal. He said that on his first try, he searched in vain for the Social Security office closest to his home in Burnsville, Minn. (He later found the office tucked away behind a hand-lettered sign in a large office building.) Once he found a second office in the Twin-Cities area of Minneapolis­Saint Paul, he faced the proverbial stone-faced ranks of overworked government employees.

The DoD letter had clearly instructed him to present the letter and nothing else when he applied for Medicare. The Social Security Administration employees in Minneapolis­Saint Paul wanted more, however. He said that they pointedly informed him that they did not work for the Defense Department.

After waiting several hours, Doyle Larson finally saw a Medicare counselor. The counselor told him that he would have to present his birth certificate and a copy of his discharge papers (DD Form 214) to apply for Medicare.

In the wake of this first, highly unsatisfactory session with the Social Security bureaucracy, he said he also “felt cast adrift and overwhelmed by the intricacies of the Medicare program.” Unlike some two-thirds of his fellow retirees, he did not regularly use a military treatment facility (MTF) for his medical care, for a simple reason: None was available near his home. He did occasionally use an MTF for his annual physical. Like most, he thought he would always have the option to use military medical care.

Handwriting on the Wall

Most of the more than two million military retirees and dependents are fully aware that, once they reach 65, the law will prohibit their participation in Tricare/CHAMPUS. When the day actually arrives, however, it’s still a shock.

In the past few years, it has become more of a shock to the more than one-third in that age group who routinely used MTFs for their medical care.

Some 380,000 military retirees and dependents aged 65 and older used MTFs exclusively during 1995. Another 600,000 used MTFs occasionally. It cost DoD about $1.4 billion to treat them. The Pentagon concluded that, in the post­Cold War world, it could no longer afford to foot that bill. Base closures and loss of medical personnel have taken their toll–effectively ending a “lifetime promise” of free medical care for retirees and dependents. Veterans who fought the nation’s wars and served in the military until retirement fully believed that they would have lifetime health care for themselves and their families. They were wrong.

The handwriting has been on the wall throughout the drawdown. There have been deeper cuts within the MHSS than for the overall military force, so deep that some MTFs have even sent letters directly to retirees informing them that they should seek civilian health care rather than hang on to the hope of space-available care.

Today, neither the Defense Department nor Congress will dispute the claim that a “promise” was made. In fact, recruiting literature used as late as 1993 proclaimed free medical care for military retirees for their lifetimes. However, when Congress created CHAMPUS in 1966, a year after it enacted Medicare legislation, lawmakers believed that military retirees who reached 65 would have two choices: space-available care in MTFs or Medicare.

In 1966, space-available care was easy to get, because space was plentiful. Today, it is not. It will be even less so once Tricare is fully implemented. [See “The Transition to Tricare,” December 1996, p. 46.] The Medicare-eligible military retirees, the group least able to cope with the burden of paying for high-cost medical care, are faced with a broken promise.

Congress had an opportunity this year to help rectify that situation, but it did not take it. The Defense Department and the Health Care Financing Administration finally reached an agreement in September on a Medicare Subvention test. It would have permitted the HCFA to reimburse DoD for health care provided to Medicare-eligible retirees.

This was a win-win situation for both agencies. Unfortunately, despite assurances from both organizations that the test would not cost the Medicare program more of its scarce dollars, some lawmakers said they needed more time.

The near miss was much on the mind of James M. McCoy, a former Chief Master Sergeant of the Air Force and later an AFA National President, who recently was appointed chairman of the Air Force Retiree Council. He said, “The Medicare Subvention test almost survived,” and it lasted “until the eleventh hour and 59 minutes and 59 seconds.” He added that he is confident the legislation will be reintroduced in 1997.

“It will be a very important piece of legislation in the next Congress,” he said. “Very senior people on the Senate and House sides have indicated they have a strong interest in reintroducing it.”

The Military Coalition, an assembly of American veterans organizations (AFA included), has worked for years on the Medicare Subvention proposal. Many groups also supported legislation last year to let Medicare-eligible military retirees and their dependents participate in the Federal Employees Health Benefits Program (FEHBP).

Following a six-month study, the Military Coalition proposed a three-tier health plan: Tricare, Medicare Subvention, and FEHBP. Although the coalition believes there are many “bugs” in Tricare, “it is reality.” It supports Medicare Subvention for those Medicare-eligible beneficiaries who live near MTFs and the FEHBP option for those who do not live near an MTF.

The Defense Department supports Medicare Subvention, but it still sees the FEHBP option as a potential problem.

Some retirees have decided to try the courts rather than wait for Congress to act. Although several have gone to court, only one, to date, has successfully filed a class-action lawsuit. Col. George E. Day, USAF (Ret.), a former prisoner of war and Medal of Honor recipient of the Vietnam War era, filed a class-action case in US District Court in Florida in July. The 71-year-old Florida lawyer filed for “breach of contract and [age] discrimination.” By December 1996, almost 900 military retirees had joined the lawsuit.

Wake-Up Call

Broad relief from the problem, whether as a result of Congressional action or court decisions, appears to be several years away. The Medicare Subvention test itself was planned to cover a period of three years and now probably could not be started before 1998. Retirees who are now 65 and those who will reach that age in the next few years may not want to wait for their DoD birthday letter.

There are currently more than 148,000 Air Force retirees aged 65 or older. Between 1997 and 2001 (probably the first year the Pentagon could implement full Medicare Subvention), another 123,376 Air Force retirees will go “over the cliff.” [See chart, above.]

The Defense Enrollment/Eligibility Reporting System (DEERS) Support Office (DSO), located in California, tracks the eligibility of all MHSS beneficiaries. It sends out the birthday letters and other notifications. Jack Evartt, deputy director of the DSO, said that his center has worked with the HCFA and the Social Security Administration to develop the instructions in the letters.

However, he emphasized that the procedures worked out at the top of the organization do not always filter down to each SSA office. “We are continually updating the information in the letters,” based not only on program changes but also on feedback from beneficiaries, he said.

The DSO mails the official notification of loss of Tricare/CHAMPUS eligibility to each MHSS beneficiary four months before his or her sixty-fifth birthday.

The period for making critical decisions regarding Medicare begins three months before an individual turns 65 and runs for three months after his or her birthday–essentially a seven-month initial enrollment period. Missing this seven-month period means paying higher premiums.

Once a retiree applies and is determined eligible for Medicare, he or she automatically receives coverage under the no-premium Part A, which is basic hospital coverage. According to the HCFA, you also are automatically enrolled in Part B, which provides some medical coverage and costs an enrollee $42.50 per month (1996 rate). Those who don’t want to enroll in Part B (and incur the monthly premium) must specifically state that when they sign up for Medicare.

The HCFA considers Part B “generally a good deal” because the federal government subsidizes about 75 percent of the program costs. It is important to obtain Part B coverage within the initial seven-month enrollment period. If a person elects not to take the coverage and then changes his mind later, he can still get into the program. However, the premium goes up 10 percent for each 12-month period after initial eligibility.

Handling the Medicare Gap

Most find that simply relying on Medicare’s Part A and Part B is not enough. Medicare does not cover every type of health service and requires deductibles and some co-insurance. Consequently, Medicare beneficiaries usually purchase supplemental coverage, either through a Medigap fee-for-service policy or a managed-care health maintenance organization (HMO) with a Medicare risk contract. The General Accounting Office (GAO) estimated in a September 1996 report that more than 75 percent of Medicare beneficiaries obtain private insurance to help cover their medical bills.

Timing is critical when purchasing Medigap insurance. Federal law guarantees an individual the right to purchase a Medigap policy, regardless of health condition, but only if he or she does so within six months of enrolling in Medicare Part B. Beyond that six-month period, the insurers can and do refuse to sell policies based on the applicant’s health history or current condition.

Recently, GAO reviewed the practices of the 25 largest Medigap insurers, which write about 65 percent of the Medigap policies. The Congressional agency found at least one alternative to bypass medical underwriting. Seven of the 10 policies offered through the American Association of Retired Persons are available to all AARP members without medical underwriting based on current and previous health status.

Another way to avoid the Medigap time crunch is to join a managed-care HMO with a fixed monthly payment. The HCFA requires HMOs with Medicare risk contracts to offer annual open-enrollment periods and to accept any beneficiary on a first-come, first-served basis. They may turn down only Medicare beneficiaries with permanent kidney failure. However, with an HMO, beneficiaries normally have a limited selection of physicians and hospitals.

GAO also found that 99 percent of Medicare beneficiaries who had private health insurance in 1991 retained the same insurance in 1994. Reason: The act of changing plans lays you open to the risk of medical underwriting.

To help reduce confusion, the National Association of Insurance Commissioners adopted 10 standard plans (labeled A through J) for Medigap policies. For example, Plan A is a basic benefit package, covering Medicare co-insurance, while Plan J offers the most comprehensive coverage, including prescription drugs. The coverage for each plan, which went into effect in 1992, is the same, regardless of insurance company. However, not all insurers or states carry every plan, although all must provide Plan A.

In 1993, Congress authorized a program called Medicare Select, which combines some managed-care provisions with the 10 standard Medigap policies. Initially, Medicare Select was limited as a demonstration project to 15 states. This year, Congress extended the program to all states, running through June 30, 1998. Medicare Select policies generally have lower premiums than normal Medigap policies. They require a beneficiary to use certain doctors and hospitals.

According to the HCFA, a policy holder in the Medicare Select program has the option to switch to a standard Medigap policy without medical underwriting.

These are just some of the critical decisions in store for military retirees when they reach 65. Most Americans face these same choices, but military retirees just now reaching 65 had every reason to expect to continue within the military medical system, if they so chose.

News reports around the country continue to document the unexpected financial burden of medical costs now faced by military retirees, especially enlisted members. There is ample evidence that neither defense officials nor Congress in years past foresaw the loss of access to military health care for retirees. The only question would seem to be whether Congress will allow DoD to remedy the situation.

USAF Retirees Reaching Age 65

Grade

Current

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Total

2d Lt.

204

6

2

7

2

3

2

2

0

5

3

6

242

1st Lt.

479

42

25

32

9

12

4

12

16

20

19

15

685

Capt.

1,275

151

173

220

282

302

351

363

459

449

413

468

4,906

Maj.

11,382

1,614

1,625

1,426

1,171

973

829

893

1,045

1,139

1,061

1,113

24,271

Lt. Col.

17,332

2,471

2,426

2,254

1,703

1,425

1,300

1,267

1,334

1,328

1,172

1,310

35,322

Col.

7,379

1,152

1,111

1,001

900

689

732

755

801

854

845

843

17,062

Brig. Gen.

357

52

44

49

47

34

23

25

17

13

25

17

703

Maj. Gen.

284

40

41

36

30

17

16

9

15

15

16

7

526

Lt. Gen.

75

9

8

7

5

13

9

6

3

2

4

3

144

Gen.

26

2

8

3

2

5

2

4

1

0

0

0

53

WO1

136

0

0

0

0

0

0

0

0

0

0

0

136

WO2

32

1

1

3

3

1

0

0

0

0

0

0

41

WO3

107

1

0

1

0

0

0

0

0

0

0

0

109

WO4

366

7

1

0

0

0

0

0

0

0

0

0

374

Amn. Basic

77

16

7

19

9

7

7

14

6

6

2

6

176

Amn.

271

72

57

71

46

59

57

62

56

48

45

44

888

A1C

345

104

93

109

99

121

152

140

90

92

118

147

1,610

SrA.

1,257

200

151

158

149

154

110

110

98

97

112

142

2,738

SSgt.

16,181

2,640

2,640

2,486

2,093

1,645

1,386

967

660

471

438

385

31,992

TSgt.

31,322

7,127

7,015

7,422

7,210

6,949

5,785

4,458

3,421

2,895

2,718

2,754

89,076

MSgt.

35,571

6,878

6,620

6,987

7,036

6,787

5,779

5,032

4,750

4,472

4,771

5,584

100,267

SMSgt.

13,707

2,375

2,092

2,046

2,189

1,981

1,608

1,489

1,251

1,248

1,370

1,706

33,071

CMSgt.

10,128

1,572

1,341

1,283

1,315

1,263

984

859

802

849

959

1,129

22,484

Aviation Cadet

4

0

0

0

2

0

2

0

0

0

0

0

8

Unknown

0

0

0

0

0

0

0

0

1

0

0

0

1

Total

148,297

26,532

25,481

25,620

24,311

22,440

19,138

16,467

14,826

14,003

14,091

15,679

366,885