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The Honolulu Advertiser
Posted on: Monday, January 9, 2006

Healthcare fee strategy faces doubt

By Tom Philpott

At least a few Pentagon analysts believe the Bush administration will face a new credibility challenge if officials of the TRICARE healthcare program tell Congress, as they have the Joint Chiefs, that plans to raise TRICARE fees and deductibles for under-age-65 retirees and their families will save the government $25 billion over nine years.

"Somebody needs to throw the (red) flag at the analysis behind these dollars promised,'' said an official who has studied the savings estimates used by senior officials in discussions over future health budgets. "That's where the whole thing falls apart, in my view."

An interview with TRICARE's top financial analyst couldn't be arranged for this column, and senior defense officials aren't likely to defend the cost figures they relied on until the 2007 defense budget request and the Quadrennial Defense Review are released next month.

But documents used during talks on the planned fee increases for 3 million beneficiaries fuel rising skepticism. They show savings of $31.6 billion an average of $3.5 billion a year from fiscal 2007 through 2015. About 80 percent of those savings, $24.9 billion, is traced to the "effect'' of higher TRICARE fees. The planned increases include:

  • Higher enrollment fees for TRICARE Prime, the managed care program, rising over three years from $230/$460 (individual/family) to $750/$1,500 for retired officers and $450/$900 for retired enlisted personnel.

  • An increase in annual deductibles for TRICARE Standard, the fee-for-service insurance plan, from $150/$300 (single/family) to $300/$600 for officers and $200/$400 for retired enlisted.

  • A first-time enrollment fee for retirees who use TRICARE Standard, rising to $300/$600 for officers and $200/$400 for enlisted retirees by fiscal 2009.

  • Adjusting TRICARE fees and deductibles annually after fiscal 2009 based on the inflation rate of healthcare services nationwide.

    The higher fees together would generate $5.4 billion in added revenues through 2015. The remaining 78 percent of projected savings $19.5 billion hinge on an assumption that 600,000 beneficiaries, facing the higher fees, will stop using TRICARE and shift to employer-provided health plans.

    The magnitude of the shift is said to be based on the experiences of civilian HMOs that have raised fees. But will the TRICARE users behave similarly? Some officials don't think so. Even after TRICARE Prime enrollment fees are tripled, as planned for officer retirees, one said, relatively few will leave TRICARE because most employer plans still will cost more.

    The planned fee increases aren't expected to be unveiled until after the administration's 2007 budget request and the Quadrennial Defense Review report are sent to Congress in February.

    Opponents of the TRICARE fee increases hope Congress will step in to stop them. Congressional staffers last week said the odds of that happening narrow if the Joint Chiefs, as expected, endorse the fee increases as a strategy for keeping healthcare costs under control.