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CBO: Bar younger retirees from Tricare Prime, save $90 billion

Jan. 17, 2014 - 06:00AM   |  
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Pushing working-age military retirees out of Tricare Prime could save the Pentagon nearly $90 billion over the next 10 years, a measure that would generate the most savings of the various options recently considered by the Congressional Budget Office to trim the defense health budget.

In a report released Thursday, CBO analysts said the cost-cutting options that would make the biggest dent in the $52 billion Defense Department medical budget would be those that increased military retirees’ contributions to their own health care.

According to the CBO, proposals to increase Tricare enrollment fees and copayments for working-age retirees could save $24.1 billion from 2015 to 2023, while introducing minimum out-of-pocket charges for beneficiaries using Tricare for Life would save roughly $18.4 billion.

But banning working age retirees from the Pentagon’s HMO-style Prime plan could save $89.6 billion — an amount difficult to ignore, budget experts said.

“Shifting current cost-sharing arrangements so that beneficiaries pay a greater percentage of their health care costs would reduce DoD’s spending significantly ... primarily by encouraging people to leave Tricare in favor of other providers. It also would encourage those who continued to participate in Tricare to use fewer services,” the report states.

CBO warned, however, that estimating the entire potential savings to the federal budget if the options were implemented is difficult, because they would force some Tricare users to other federal health programs, such as the Veterans Health Administration, or use nontaxable employer-offered care, which would lower the revenue those options generate.

Veterans advocates have long been concerned about the impact of Tricare fee increases on their members. In 2013, 171,000 retirees and their families lost access to Tricare Prime — a change that had been in the works since 2007 — but they were not told about it until just months before, setting off a firestorm of complaints.

And each year, Congress has thwarted Pentagon efforts to increase fees sharply or implement enrollment payments for some programs.

“The proposed DoD increases have been very troubling to our beneficiaries,” Gold Star Wives President Sandra Drew told the Military Compensation and Retirement Modernization Commission in November.

Pentagon officials have sought to assuage fears, however. Speaking to Military Times on Jan. 8, Defense Health Agency acting deputy director Al Middleton said the military health system must tread carefully in restricting retiree access to Prime at military hospitals because they often represent the most challenging cases that allow military medical personnel to keep their skills sharp.

“It would be a worry to push this group from medcial care because the clinical material would evaporate,” Middleton said.

For its analysis, CBO considered three main areas in which DoD could control costs: improving chronic disease management; increasing efficiencies within the military health program and changing retirees’ access to Tricare.

Analysts concluded that the savings from educating patients on better monitoring their conditions and improving disease management would “be small, tens of millions of dollars each year.”

In terms of streamtlining administrative costs, CBO examined the potential savings of closing the Uniformed Services University of the Health Sciences and concluded that those savings also would be small because they would be offset by the costs of increasing the number of medical school scholarships needed to maintain force medical readiness.

Also, the report said, the school is so small, shuttering it would only save “a few million to about $150 million, significantly less than the savings that would result from cost-sharing options.”

In 2012, the Defense Department spent $52 billion on health care.

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