By Alexander Pearson
TRICARE is the regionally managed civilian healthcare program of the Department of Defense (DoD). It provides relatively low-cost health care for 9.6 million active duty, reserve and retired members of the US military and their dependents. Care for recipients is provided by both the DoD and a network of civilian healthcare professionals. TRICARE developed out of CHAMPUS (Civilian Health and Medical Program of the United States), which was established in 1966 to allow the DoD to contract with private health care companies to provide civilian care for the military.
As the name suggests, there are three healthcare options for TRICARE beneficiaries; Prime, Extra, and Standard. TRICARE Prime provides healthcare through Military Treatment Facilities (MTFs), TRICARE Extra is a preferred provider option, and TRICARE Standard is a fee-for-service option. Active duty, guard and reserve members are automatically enrolled in TRICARE Prime while dependents and retirees are restricted to the latter two options.
TRICARE insurance premiums are, on average, vastly cheaper than those of private insurance plans. This is especially the case for military retirees and their dependents:
- The Congressional Budget Office (CBO) estimated in 2013 that retiree families only paid a fifth of what privately insured civilians paid.
- Annual out-of-pocket costs for military retirees who received their healthcare through TRICARE Prime were just over $950 in 2012, whereas annual out-of-pocket costs for privately insured civilians were just over $6,000.
This low cost of care has been achieved at a high cost to the US taxpayer:
- Annual DoD spending on TRICARE increased from $19 billion in fiscal 2001 to $53 billion in fiscal 2012. This growth was more than twice as large as medical inflation over this period.
- The current spending level accounts for around 10 percent of the Pentagon’s non-war budget.
- The annual cost of TRICARE will reach $65 billion in 2015. By 2030, the CBO predicts that spending on TRICARE as a percentage of overall US defense spending will increase to more than 14 percent.
These spiraling costs have, according to an analysis published in the Armed Forces Journal, resulted from a number of key trends:
- Between 2000 and 2010 the TRICARE-eligible population increased by 43%. Around 85% of this newly eligible population was not active duty. Congressional initiatives have been primarily responsible for this TRICARE expansion. The “Tricare for Life” program introduced in 2002 allowed retired military personnel to receive TRICARE Prime in addition to their Medicare insurance plan. Annual spending on “Tricare for Life” amounts to $9.7 billion.
- The out-of-pocket costs of TRICARE have not increased with medical inflation. In real terms, TRICARE became 41% cheaper for working-age beneficiaries between 1997 and 2010. This ever cheaper option in comparison to private plans resulted in 3.3 million retirees between the ages of 45 and 64 choosing TRICARE over private plans provided by their civilian jobs.
The executive has repeatedly attempted to control these spiraling costs. However, Congress has been generally hostile towards any reform proposals:
- During his time in office, former Defense Secretary Robert Gates, along with the Joint Chiefs of Staff, presented three separate budget proposals that would have raised premiums for TRICARE beneficiaries.
- Congress rejected an administration proposal in 2012 to tie TRICARE premiums to the incomes of retirees and higher co-payments for pharmacy drugs.
- Both the House and Senate have rejected the Obama administration’s proposals for TRICARE reform in its 2014 budget request.
The lack of support in Congress can be attributed to two main factors:
- There is a general perception that forcing military veterans to pay more for their healthcare is ‘anti-military’. Congressmen generally fear this accusation and, as a result, shy away from supporting TRICARE reform efforts.
- Lobbying efforts by military support organizations have influenced certain members of Congress to oppose attempts at TRICARE reform. The Center for Responsive Politics estimated that these lobbying efforts amounted to around $12 million between 2007 and 2011.
Despite the failure of previous attempts, a number of TRICARE reforms have been successfully implemented by the Obama administration:
- In 2011, Congress agreed to raise the annual enrollment fees for retirees covered by TRICARE Prime.
- Originally drafted in 2007, plans were agreed upon in 2012 to restrict the number of retirees on TRICARE Prime in order to lower costs. 175,000 retirees were switched from TRICARE Prime to TRICARE Standard on October 1, 2013.
Despite recent Congressional rejections of reform proposals in the 2014 budget request, it is likely that some modest form of TRICARE reform will be implemented in the near future. The ongoing, across-the-board spending cuts resulting from sequestration will put pressure on Congress to find cuts in the defense budget that are not deemed vital to the end strength of the US military.
Automatic cuts will also put immense pressure on the Pentagon, whose constituent military branches are already facing prospective cuts to their high priority programs. These branches will likely advocate some modest reform of TRICARE in order to save money for these programs.
Taken together, the pressure for modest reform will increase with time. This change is likely to resemble previous proposals put forward by the Obama administration. If such reform proposals are implemented, the resultant savings would amount to approximately $12.8 billion over a five year fiscal period.