It’s Showdown Time on Tricare

April 1, 2000

The Republican-led Congress appears ready once again to surpass the Clinton Administration on quality-of-life initiatives for servicemen and -women, this time in the area of military health care improvements for budget year 2001.

In deliberations last year, Congress pumped additional billions of dollars into military pay and retirement reforms that the Administration had proposed for Fiscal 2000. The results were a pay raise that was bigger than the White House had planned and more robust retirement benefits for service members who entered the military after July 31, 1986.

Now, the Congressional Republican majority intends to push reforms beyond the two relatively modest health care improvements that the Defense Department unveiled in early February. These focused on enhancing the provision of Tricare Prime coverage for active duty families but did nothing for retirees.

The health care portion of the 2001 budget request disappointed members of the Joint Chiefs of Staff. The Chiefs had challenged the Administration to earmark part of the federal budget surplus for financing sweeping reforms not only for active duty families but also for retirees under 65 and beneficiaries eligible for Medicare.

Army Gen. Henry H. Shelton, JCS Chairman, took the lead in criticizing the business side of Tricare, the military managed care program. He claimed that beneficiaries 65 and older are being pushed out of the military system as Tricare, for which most elderly are ineligible, is implemented nationwide. Shelton pledged that, just as the 2000 budget brought pay and retirement reform, 2001 would deliver major gains in health care benefits. In this, Shelton was disappointed.

Billions Needed

Defense officials understood that the kinds of reforms sought by the Chiefs would require billions in additional expenditures. Last spring, the Pentagon established the Defense Medical Oversight Committee, chaired jointly by the undersecretary of defense for personnel and readiness, and one of the service vice chiefs on an annual rotating basis. The committee includes all four service vice chiefs and service undersecretaries.

Through DMOC, senior military leaders with no medical backgrounds gain an appreciation for the pressures on health care costs. It also gives them the authority to recommend ways to close health care benefit gaps that harm recruiting and retention and have angered thousands of older retirees.

Committee members quickly concluded that projected health care budgets through 2007 were underfunded by more than $3 billion. They also examined why Tricare patients have trouble gaining access to the system, why civilian care providers and patients face delays in claim payments, and why tens of thousands of older retirees are being turned away from military treatment facilities as managed care focuses more of its resources on enrollees only.

By December, the Chiefs had reviewed the committee’s initial findings and presented to Defense Secretary William S. Cohen a list of initiatives to reform military health care–starting with the 2001 budget.

The JCS proposals included:

  • Extending Tricare Prime Remote coverage to families of 80,000 active duty members living more than 50 miles from a military medical treatment facility and therefore unable to participate in Tricare Prime. Last year, members in remote assignments became eligible for a managed care benefit, but their families had to continue to rely on the more costly fee-for-service insurance program, Tricare Standard (CHAMPUS).
  • Ending co-payments, of $6 or $12 per visit depending on rank, for service family members receiving civilian care under Tricare Prime.
  • Ending Tricare Prime annual enrollment fees, of $230 per individual and $460 per family, for under-65 retirees. In return for lower out-of-pocket costs, retirees would have to elect to enroll in Prime for as long as two years at a time, and they would be barred from using Tricare Standard. Under-65 retirees and dependents who elect to remain with Standard would see access to military hospitals limited to catastrophic care and the pharmacy. By one estimate, the cost of this provision could reach $4 billion a year, but as much as $300 million might be saved by forcing participants to use Tricare Prime.
  • Expanding Tricare Senior Prime from a six-site (10-facility) test to full implementation at bases throughout the country. The test is supposed to help determine the size of the potential savings to Medicare of allowing the elderly and persons eligible for Medicare through disability to enroll in military managed care, if they continue to buy Medicare Part B coverage. In other words, they would use Tricare as a Medicare Health Maintenance Organization. In theory, reimbursements to the Defense Department from the Health Care Financing Administration, which oversees the Medicare trust fund, would be lower than what HCFA would pay to treat the elderly through civilian providers.
  • In cases where Senior Prime isn’t available, making available to beneficiaries 65 and older access to a mail-order pharmacy benefit.
  • Making available to the elderly access to government-sponsored Medigap insurance for care not covered under Medicare or through Tricare as a Medicare HMO. The Medigap plan could include giving retirees the option of enrolling in something like the Federal Employees Health Benefits Program for government civilians.
  • Providing, starting in budget year 2002, a Tricare Prime Remote-like benefit to retirees under 65 who live away from military hospitals.
  • Fully funding future health care budgets. Even the $17 billion medical budget for Fiscal 2000 was found to be at least $200 million short of requirements, sources said, though civilian Tricare Prime contractors were claiming DoD owed them at least $1 billion for unanticipated, but covered, pharmacy costs.

Shelton urged Cohen to support the entire package but, at a minimum, back at least one substantial initiative for all three categories of beneficiaries: active duty families, under-65 retirees, and Medicare-eligible retirees.

Low Priority

The undersecretary of defense for personnel and readiness, Rudy De Leon, and the defense comptroller, William J. Lynn III, didn’t endorse the plan but fought hard with White House budget officials to support at least a mail-order pharmacy benefit for the elderly. In the end, the Administration endorsed only two health care provisions: to end Tricare Prime co-payments for active duty families and to expand Tricare Prime Remote for families of active duty members living away from military bases. Retiree initiatives weren’t considered a high priority.

Shelton didn’t hide his disappointment. In testimony before the Senate Armed Services Committee the day after the 2001 budget went to Congress, the JCS chairman said America has broken its promise of lifetime health care to generations of retirees. Said Shelton, “In their minds, we have broken that commitment, and I think we have.”

On Capitol Hill, lawmakers already were focusing on reforming military health care, weighing initiatives both large and small. The boldest is the Keep Our Promise to America’s Military Retirees Act, sponsored by Reps. Ronnie Shows (D-Miss.) and Charles Norwood (R-Ga.) in the House and by Sen. Tim Johnson (D-S.D.) and Sen. Paul D. Coverdell (R-Ga.) in the Senate. This bill would:

  • Restore full access for retirees, their families, and their survivors by making Tricare available for a lifetime rather than only until age 65.
  • Allow retirees of any age to enroll instead in the Federal Employees Health Benefits Program, the menu of medical plans offered to federal civilian employees. The government picks up 72 percent of the cost for civilian employees.
  • Require that the government pay 100 percent of FEHBP for retirees who entered service before June 7, 1956, and their surviving widow or widower. In 1956 a law was enacted to limit retiree health benefits to space-available care. For decades more, however, the armed services continued to promise recruits who served until retirement free health benefits for a lifetime.

Shows, a first-term Congressman, said that until he was elected to office, he assumed that military retirees had attractive health care benefits. But retirees in his home district set him straight. “I couldn’t believe the stories,” he said. They inspired him last fall to introduce an initial piece of reform legislation, one that would have affected only beneficiaries 65 and older.

By mid-February, that bill had 272 co-sponsors, for which lawmakers credited a groundswell of grassroots support from retiree groups throughout the country. After Johnson and Coverdell introduced a similar bill in the Senate–but one that applies to all retirees–Shows and Norwood matched the senators with companion legislation.

The new bill, if it becomes law, could cost taxpayers $8 billion to $10 billion a year. “So what?” said Norwood. “It absolutely means nothing to me. We gave our word.”

At a Tricare conference in Washington, D.C., in early February, Ed Wyatt, a staff member on the House Armed Services Committee, cautioned, “It’s a long swim [for lawmakers] from co-sponsoring a bill to signing a discharge petition” that would force it out of the committee and onto the floor for a vote. Wyatt pointed out that at least 218 members would have to decide “not only do I support this, … but I might be willing to sign up to pay for it, which means something else has got to go away.”

Cost remains the great obstacle for the Keep Our Promise legislation. Even its most ardent sponsors can’t explain how it might be financed except, in general, by tapping into what now appears to be a rising federal budget surplus.

That’s easier said than done, according to Congressional staffs. For example, a 1990 deficit-reduction law still requires that any new expenditure on an entitlement program be offset by an increase in taxes or a reduction in spending on some other federal entitlement.

Support From Heavyweights

Sen. John McCain (R-Ariz.), a Presidential aspirant, not only co-sponsored the Keep Our Promise bill but introduced his own legislation. It would, among other actions, implement Tricare Senior Prime (Medicare Subvention) nationwide and embrace many of the JCS initiatives deferred by the Clinton Administration.

Meanwhile, the staffs of Sen. Trent Lott (R-Miss.), the Senate majority leader, and Sen. John W. Warner (R-Va.), chairman of the Senate Armed Services Committee, were taking a more measured approach, pulling selective ideas from the JCS list to improve upon Clinton’s modest plan. Initial plans called for a Lott-Warner bill to take a $1 billion-a-year, or bite-size, approach to fulfilling health care promises to retirees. This would stand in contrast to what the staffers viewed as an unaffordable gulp contemplated in the Keep Our Promise bill.

Warner introduced a bill, titled Military Health Care Improvement Act of 2000, on Feb. 23 with an estimated cost of $600 million.

Some initiatives for 65-and-older retirees are certain to win support. They include:

  • Expansion of the mail-order pharmacy program and the Tricare retail pharmacy program to all Medicare-eligible beneficiaries. It would include an annual deductible of no more than $150.
  • Increase in the number of Tricare Senior Prime demonstration sites, from six to 12 and extension of the demonstration through 2005.
  • Extension of the test offer of FEHBP enrollment for military beneficiaries 65 and older at additional sites to encourage greater participation, with a view toward nationwide implementation when supporting data are available.
  • Establishment of a military home health care program for the disabled. Rather than transfer patients to Medicare or Medicaid, care would continue through Tricare but a cost cap would be imposed on the program of $100 million a year.

Though the White House response was disappointingly lukewarm, the Chiefs and Pentagon civilian leaders did succeed in pushing military health care into the legislative spotlight. What reforms finally become law in a Presidential election year can’t be confidently predicted.

“If ever there was a time when we should move our obligations to retirees from the back of the line to the front of the line, this is it,” said Johnson, whose own son, an Army sergeant, was preparing for assignment to Kosovo. Johnson said military people are watching to see if the government steps up to meet its commitment to earlier generations of military retirees.

Facing the Music–Finally

“There is a growing issue over what is adequate health care coverage for [65 and over] retirees. This group in particular is being pressed because the benefits they had from their military service in the past have been [on a] space-available [basis] in military treatment facilities. They’re being squeezed out of that as our medical structure is downsized and as the retiree population has increased. So there’s growing dissatisfaction with that benefit.

“There are a lot of proposals on the table, right now. General Shelton is working very hard on this. The Secretary [of Defense William S. Cohen] is reviewing options. There are a number of bills on the Hill. There’s talk about FEHBP, the Federal Employees Health Benefits Program, there’s talk about a pharmacy benefit, there’s talk about Medigap-a whole series of issues

“There are two things that you need to know, though, in the end. One, there’s a very big issue here–the question of equity and keeping faith with retirees–and, second, there is a very big bill with any of the proposals I just mentioned. We’re talking three, four, five billion dollars a year, a major bill. This is an issue we’re going to have to tackle and come to grips with-both what is the appropriate benefit and how do we pay for it.”

-A “senior defense official,” speaking to reporters at a Feb. 4 backgound briefing at the Pentagon.