Addressing Rising Military Health Costs

CAP Event Looks at Reforming Tricare

Panelists at a CAP event this week debated how to bring down rapidly increasing military health costs while still providing quality care for our troops.

For more on this event visit its event page.

“Career military personnel pay… their [health care] fees upfront in service and sacrifice,” said Vice Admiral Norbert Ryan this week at an event at the Center for American Progress. Vice Adm. Ryan’s (U.S. Navy, ret.) statement became the center of a lively debate about the financial challenges facing the military health care system and how to best balance the needs of the military retiree community and the American taxpayer in today’s tough fiscal environment.

The event’s panel consisted of Vice Adm. Ryan, the president of the Military Officers Association of America and a decorated naval aviator, and two other distinguished veterans: David Chu, who currently serves as the president of the Institute of Defense Analyses and served as undersecretary of defense for personnel and readiness in the administration of George W. Bush, and Lawrence Korb, a Senior Fellow at Center for American Progress who served as assistant secretary defense for personnel and management during the Reagan administration. The Center for American Progress’s own Rudy DeLeon, a former deputy secretary of defense and current senior vice president for national security, moderated the panel.

The discussion revolved around a recent report by the Center for American Progress that maps out a set of recommendations to reduce military health care expenses by $15 billion a year by 2015—enough to hold the military health care budget stable at 2011 levels.

Military health costs have grown by nearly 300 percent in the past decade and now consume almost 10 percent of the baseline defense budget. To put number that in perspective, last year the United States spent about as much on military health care as it did on the war in Iraq. Secretary of Defense Robert Gates has publicly lamented that these “health care costs are eating the Department of Defense alive.”

The recommendations in the CAP report ensure that active-duty troops and their dependents will continue to receive health care at no cost and that military retirees will continue to have access to top-quality, affordable health care for life. But they would require military retirees to assume greater responsibility for the cost of their health care based on their ability to pay. Vice Adm. Ryan argued, however, that working-age military retirees should face no more than modest fee increases given that they have already paid in advance for health care by serving repeated deployments in combat zones.

Chu and Korb argued that the benefits in the Tricare military health program are considerably more generous than they were designed to be. Tricare fees have not been raised since the program was created in the mid-1990s despite skyrocketing health care costs nationwide. As a result, an individual retiree on Tricare Prime pays just $19 a month, or $230 a year, for health insurance. Families pay $38 a month or $460 a year for coverage.

Chu, Korb, and deLeon also drew attention to the dramatic increase in the number of working-age retirees who chose to remain on Tricare rather than accept more expensive coverage through their employer. This arrangement leaves the Pentagon effectively subsidizing private corporations who do not have to pay health care costs for these retirees.

Korb argued that controlling Tricare costs would not have the catastrophic consequences some Americans envision. Tricare coverage serves only a small number of veterans, many of whom undertake second careers after leaving the military. Troops who do not serve full 20-year careers—most of our men and women in uniform fall into this category—are not eligible for military health care after they leave the service. Moreover, lower-income, disabled, or needy veterans have separate funding streams to cover their care through the Department of Veterans Affairs. These programs are not part of the Defense Department budget and do not contribute to the Pentagon’s health care costs.

As a result, while the United States must ensure that all veterans have access to affordable, top-quality health care, generous Tricare benefits may not be the best avenue to achieve this goal. Instead, increasing cost-sharing in Tricare will help to maintain long-term, high-quality services and access for those eligible veterans who do not have other coverage options.

Secretary of Defense Robert Gates recently proposed small increases in the health care fees paid by military retirees. All three panelists agreed that Tricare fees are likely to increase modestly in the near future. Vice Adm. Ryan stressed that neither he nor his organization is opposed to modest fee increases for working-age military retirees. He suggested, however, that the Pentagon look elsewhere for savings so that it can avoid substantially increasing fees for military retirees. He cited the home delivery prescription drug service as a means to bring about significant reductions in health care spending.

The panel illustrated the strong emotions that pervade the issue of health care for military retirees. Gates’s modest adjustments are unlikely to significantly diminish future cost growth in the Tricare military health system, so the rising cost of military health care is likely to remain a controversial issue for some time.

For more on this event visit its event page.

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