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Budget experts: Move Tricare beneficiaries to Obamacare

The Defense Department could slash its enormous health care budget by requiring Tricare beneficiaries not on active duty to get health care coverage through Affordable Care Act exchanges, according to several current and former congressional budget experts.

In the past several budget cycles, the Pentagon has sought to reduce its $52 billion health budget by asking Congress to approve cost-savings measures that include increased Tricare fees for retirees, fees for Tricare For Life beneficiaries and cost-shares for active-duty families.

Some proposals, such as reducing prescription costs by promoting use of military and mail-order pharmacies, have been implemented, but for the most part, Congress has resisted changes to the status quo for those who use the military health system and its private health care network.

But, the budget analysts said, the Defense Department could realize tremendous savings if it tapped into the resources offered by the general, civilian health care system and coverage available through federal or state exchanges.

"It's a little radical, but should we be thinking about how some of the military system might transition some of their people to the Affordable Care Act exchanges, especially in sparsely populated areas of the country?" said Alice Rivlin, former director of the Congressional Budget Office and the Office of Management and Budget who now serves as a senior fellow in economic studies at the Brookings Institution.

"The case for the special supply of [health] services is strong for the active duty. For the families ... the case for having a dedicated supply system is much weaker. That suggests the possible appeal of the option Alice mentioned, which is to help them have fair, well-financed access to the general health care system," said Henry Aaron, also a senior fellow at Brookings who once served as assistant secretary for planning and evaluation at the former Department of Health, Education and Welfare.

The military health system budget funds military hospitals and clinics, a medical school, research, medical support for military operations and health care for 9.6 million beneficiaries, including about 1.3 million active-duty service members.

The Congressional Budget Office issued a report in January 2013 noting that the increases in the military health budget — a 130 percent increase since 2000 to the current $52 billion cost — largely are attributable to the introduction of the Tricare For Life benefit, which supports Medicare-eligible military retirees and their families and the increased draw of Tricare Prime for military retirees and their families.

Currently, active-duty family members on Tricare Prime — the military's health maintenance organization-style program — pay no annual enrollment fees and no cost-shares to see a physician.

Retirees pay $555.84 a year to enroll themselves and their families in Tricare Prime and pay fees ranging from $12 to 20 percent of a bill depending on the care received.

Assistant Secretary of Defense for Health Affairs Dr. Jonathan Woodson said Tricare beneficiaries now pay about 9 percent of their total health care bill out-of-pocket, down from 27 percent in 1994 when Tricare was introduced.

In an effort to save money, the military services have launched efforts to draw Tricare beneficiaries back to military treatment facilities rather than use private-sector care, which costs the Defense Department significantly more money to provide.

Speaking at a forum on health care reform, compensation policy and the DoD health budget sponsored by the Brookings Institution, the analysts said they recognize that the Pentagon has a responsibility to provide health care coverage to the troops and, as a matter of recruitment and retention, offer a robust health benefit to their family members.

"The DoD has got to maintain a strong compensation program to attract the people it needs and probably, we would all agree, a a generous one to recognize the service of the men and women in uniform, because it's been very taxing and continues to be," said former Pentagon comptroller Robert Hale.

But, several panelists added, the military itself doesn't necessarily have to be the institution providing at least the health care for its nonmilitary dependents and retirees.

And, John Mayer, a military health and energy analyst with Booz Allen Hamilton, added the Pentagon should be under no obligation to continue providing "free health" care to those who have retired from military service and have access to health care either through their employers or the Affordable Care Act.

"Having a program where they can go in and get free health care, and do it as often as they want seems to be a burden that the American public shouldn't have to bear," Mayer said, speaking of the military retiree population who uses Tricare.

The growing cost of health care is a longtime concern for the Pentagon and is one of the benefits being reviewed by the Military Compensation and Retirement Modernization Commission, an independent panel commissioned by Congress to review military pay and benefits, to include housing, health care and retirement packages.

This year, Congress again rejected Pentagon proposals to change Tricare included in the White House budget, saying any significant changes should come after the commission releases its report, expected in February.

A change as significant as booting all civilian Tricare beneficiaries to private health insurance likely would meet strong resistance by Congress.

Members of the military service organizations present at the Brookings forum said they are waiting the outcome of the commission review and called the dialogue "interesting."

"I think there were some excellent people on this panel ... with some nuggets to think about, especially when it comes to working on things together, between the military health system and the civilian health delivery system, working on commonalities where it makes sense. But some of this stuff ... I just think some of them really don't understand the military health system," said retired Navy Capt. Kathy Beasley of the Military Officers Association of America.

Recognizing that some of the ideas discussed during the forum, especially regarding the Affordable Care Act, would generate concern among Tricare beneficiaries, moderator Michael O'Hanlon, also a senior fellow with Brookings, said the discussion was a "brainstorming session" and not reflective of any DoD intentions.

"Framing the discussion today, as you are aware, we've got an active assistant secretary, we've got a former comptroller and other people who are brainstorming, so you are hearing different ideas in different veins and I just want to underscore that point," O'Hanlon said.

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