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CBO: Raising health fees on working-age retirees would save more than other cuts

Jul. 5, 2013 - 03:51PM   |  
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The Pentagon could save billions in health care costs by raising Tricare fees for working-age retirees, but it would save only millions if it slashed other medical programs, according to a new report from the Congressional Budget Office.

Military advocacy groups have long said that the Defense Department could control health care costs by restructuring its medical system and Tricare, trimming pharmacy costs and focusing on health and preventive care.

But CBO analyst Carla Tighe Murray told attendees at the Western Economic Association Conference this week that these other approaches would save just $100 million, compared to the billions that would be generated by increasing fees on military retirees below age 65.

According to Murray, the portion of total health care costs paid out of pocket by the average military retiree family was 11 percent last year, down from 27 percent when Tricare was introduced in 1996. That shrinkage has been one of the main drivers in the Pentagon’s escalating health care costs, which have reached $50 billion a year.

Retiree families using Tricare also pay less than one-fifth as much for health care as their civilian counterparts using company employee health plans, she noted.

Cost-sharing options that could save billions include allowing retirees and family members access only to Tricare Standard or Extra for a fee, introducing minimum out-of-pocket costs for Tricare for Life, and increasing fees, co-payments and deductibles for retirees.

According to CBO, other approaches, such as creating a unified health command or implementing the planned Defense Health Agency, would save roughly $47 million a year, while closing the Uniformed Services University of the Health Sciences could save additional millions — although the Defense Department still would need to finance additional scholarships for military personnel at civilian medical schools.

USUHS funding in 2012 was $190 million for operations and maintenance and $35 million for military personnel.

DoD has struggled with its ballooning health care costs, which make up about 9 percent of the department’s total budget. It has asked Congress repeatedly for the authority to raise fees on working-age military retirees and their families, who often have access to health care through civilian employment and who pay health care fees much lower than most civilians.

The average military retiree family on Tricare Prime pays about $965 in out-of-pocket costs a year for health care, while those who use Standard or Extra pay $1,035, according to CBO figures.

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