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The Honolulu Advertiser
Posted on: Monday, April 17, 2006

New health fees plan proposed

By Tom Philpott

The Joint Chiefs support a sharp rise in TRICARE fees for under-65 retirees and their families, they say, because health costs are soaking up dollars needed to buy new weapons and sustain force readiness.

The problem they describe is real, but their solution is flawed, says Dov S. Zakheim, the Department of Defense comptroller from 2001 to 2004.

Zakheim doesn't oppose raising TRICARE fees. His "sympathies," he said, are with Defense officials struggling with soaring personnel costs and a Congress that has approved "one benefit after another benefit after another."

But the proposed TRICARE fee increases, for all the angst they've caused, are a weak response to the "inexorable" cost growth of military healthcare in recent years, Zakheim said.

A far more effective solution, he says, would be to shift part or all of healthcare expenses out of the defense budget.

Those costs have jumped from $19 billion in 2001 to almost $42 billion in 2006. Factors behind that growth, Zakheim said, include elimination of TRICARE co-payments for active duty families; start up of TRICARE for Life (TFL) for Medicare-eligible retirees; expansion of TRICARE Prime remote for service members and families assigned away from base; expanded TRICARE eligibility for Reserve and National Guard members, and medical inflation.

One problem with the planned fees, Zakheim said, is they aren't aimed at 1.7 million Medicare-eligible retirees whose healthcare needs are a "major driver" behind escalating costs. In addition, the fees aren't large enough to make TRICARE less attractive when compared to other health plans. Finally, Congress is poised to continue to expand health benefits, particularly for reservists, thus adding perhaps $6.4 billion more to military healthcare costs within just five years.

Zakheim said legal authorities already are in place to begin to shift medical costs out of the defense budget starting with TRICARE for Life, the military's prized supplement to Medicare. After TRICARE for Life began in 2001, Congress set up an accrual fund to pay for it. The services made monthly payments to this Retiree Health Care Fund to cover future costs of current members and their families.

The fiscal 2005 defense authorization bill changed that payment procedure, directing the Treasury, rather than the Defense Department, to make the payments, saving Defense about $11 billion a year. By contrast, the planned TRICARE fee increases would save just $11.2 billion over 10 years.

The logic of moving TFL costs off budget is that care for elderly beneficiaries is an "entitlement" that must be paid for, like Social Security and Medicare, Zakheim said. It shouldn't have to compete with "discretionary" spending needed to buy weapons, maintain equipment or train troops.

Zakheim said removing TRICARE for Life obligations from the defense budget would trim the Defense Department's medical costs by $100 million through 2014, giving the services a lot of budgetary breathing room.

So far the key players in the House, the Senate and the federal bureaucracy are indicating that Zakheim's proposal is likely to happen any time soon.