Posted on: Monday, June 20, 2005

MILITARY UPDATE

By Tom Philpott

Defense Department officials say it's time that users of military healthcare pay a greater share of rising medical costs, perhaps through higher co-payments and enrollment fees that haven't been raised since TRICARE, the military's managed-care program, began a decade ago.

Dr. William Winkenwerder Jr., assistant secretary of defense for health affairs, said he and other senior defense officials, alarmed by a doubling of military healthcare costs over the past five years, are discussing ways to slow the growth with military leaders and Congress. Those talks, he suggested, include a range of options to raise out-of-pocket costs for beneficiaries.

In 1995, when the triple-option TRICARE plan began to be phased in for retirees and family members, enrollment fees for TRICARE Prime, the managed-care option, were set at $230 a year for an individual and $460 for family coverage. Those fees have not changed.

Retiree and family member co-payments have been frozen, too, at $12 for a visit to a civilian doctor and $11 a day for hospitalization. In fact, five years ago Congress eliminated all TRICARE Prime co-payments for active-duty family members.

Medical care for active-duty members is free and will not change. Regarding fees for retirees and family members, Winkenwerder declined to discuss options under review. Other sources said the menu being studied includes not only higher TRICARE Prime fees and co-payments, but possibly an enrollment fee for users of TRICARE Standard, the military's traditional fee-for-service option; payouts or buyouts to entice beneficiaries to use other health insurance options; a plan to combine any higher fees and co-pays with the offer of tax-deferred military Health Savings Accounts.

Winkenwerder indicated that stagnant fees and co-pays have been a factor in rising health costs, encouraging many younger retirees working in second careers to use TRICARE rather than employer-provided health insurance. With TRICARE, retirees under 65 see average out-of-pocket costs of about $700 a year, he said, versus $3,800 or so if they use employer-provided insurance. That gap is growing and has led to a steady migration of retirees and families into TRICARE and away from private-sector options.

In year 2000, Winkenwerder said, 60 percent of retirees under age 65 relied on TRICARE. Today, the figure is 72 percent and rising two to three points a year. It is expected to hit

85 percent by 2010. Reliance on TRICARE, said Winkenwerder, is being encouraged by civilian employers, including some state governments. Alabama, Nebraska, the Carolinas and Washington now entice employees who are retired military to rely on TRICARE by offering to cover their fees and co-pays with TRICARE "supplemental" insurance.

The biggest rise in military healthcare costs, however, has involved the elderly, through TRICARE for Life (TFL) and TRICARE Senior Pharmacy benefits begun in 2001.

Winkenwerder said total military health spending will hit $50 billion in 2010 — up from $18 billion in 2001 — if Congress takes no action to curb costs.

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