MILITARY UPDATE
Proposal to raise prescription fees for retirees defeated

By Tom Philpott

Defense Department officials have defeated a White House budget initiative that would have raised prescription fees for military retirees, their spouses and survivors in October. The plan included imposing first-ever co-payments on retiree prescriptions filled at base pharmacies.

The Office of Management and Budget plan, which was sent to the Pentagon Dec. 16 as a proposal for fiscal 2005, would have raised fees on retirees and their families. Co-pays under the TRICARE mail order and TRICARE retail benefit would climb to $20, up from $9, for name-brand drugs, and to $10, up from $3, for generic drugs.

Also, the same $20 or $10 fees would be charged retirees using military pharmacies, breaking a long-tradition that all prescriptions filled on base are free to eligible beneficiaries. The OMB plan would have taken effect Oct. 1.

Administration sources first alerted the Air Force Sergeants Association to the OMB plan before Christmas. AFSA sounded an alarm with other associations. OMB documents obtained by AFSA said imposing higher drug co-pays on retirees, their spouses and survivors "could generate significant revenues," from $728.3 million in fiscal 2005 up to $954.7 million by 2009, a five-year defense budget gain of $4.2 billion.

James D. Staton, AFSA's executive director, warned President Bush in a Dec. 29 letter that the plan would break faith with "those who sacrificed a good portion of their lives for this nation" and sends "an awful signal to those currently serving and considering a military career."

Staton also warned Bush that "military veterans and retirees are beginning to waiver in their support of this administration in light of repeated gestures of indifference and disrespect."

Other associations also reacted vigorously and by New Year's Eve the OMB plan had been withdrawn, at least as part of the 2005 defense budget, which will be delivered to Congress by late January.

Behind the OMB idea is concern that pharmacy costs are rising everywhere, including in DoD, and co-payments have proven effective in the civilian healthcare industry for controlling costs. While imposing fees for prescriptions on base is controversial, the defense officials said it will remain among options to be weighed in the year ahead.

The OMB document said proposed $20 and $10 co-pays for military retirees would match fees at VA hospitals. That's incorrect, unless OMB also plans to order higher fees for VA prescriptions in fiscal 2005. VA facilities provide drugs at no charge for service-related conditions and charge $7 on other prescriptions.

James E. Lokovic, director of government relations for AFSA, rejected the administration's notion of applying business strategies to earned benefits.

" ... (T)hese people earned it and the government owes them," he said, referring to free lifetime benefits including for drugs on base. "It's disgusting that they would even float this notion. This government has a debt to (military retirees) and ought to be budgeting for it. You cannot run military benefit programs like a business."

With the start of the TRICARE Senior Pharmacy Program in April 2001, and the rising popularity of the TRICARE retail benefit, Pentagon drug costs rose from $855 million in 1996 to more than $3 billion in 2002. They are expected to hit $7.6 billion by 2010.

Defense officials still plan to unveil a new plan perhaps this April when the new TRICARE support contracts take effect. The plan will broaden the list of drugs stocked at base pharmacies and available by mail, but will adopt a new three-tier co-pay scheme to curb growth in the TRICARE retail benefit. Drugs not included still would be available in the retail network but at higher co-pay of $22 for a 30-day supply. Proponents say that's still below the more than $30 average charged under commercial plans. But service associations view $22 as too high, and say they will fight it, with congressional action if necessary.

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