Military health care fee hikes criticized after surplus shown

The Defense Department’s push to phase in substantial Tricare fee increases for military retirees came under fresh attack from Congress and military associations this week after officials conceded an unexpected “downward spike” in Tricare cost growth tied to private sector health care.

Robert Hale, the Defense Department comptroller, held a press conference Thursday morning to defend the credibility of department claims that soaring health costs make the Tricare benefit “unsustainable” unless retirees pay more.

Defense officials had based their Tricare budget request for fiscal 2012 on projections that the cost of care delivered through private sector providers would jump by 12.9 percent for active duty and by 8.9 percent for all other beneficiaries including military retirees.

Instead, in the first six months of the fiscal year, private sector health costs grew at “historically low rates,” according to budget documents. The rate was only 0.6 percent for active duty. More surprising, private sector care costs for retirees, their families and survivors actually fell 2.7 percent.

As a result, the health program has a $708 million surplus, which the department wants to “reprogram” into other accounts to cover higher than expected fuel prices, the unscheduled deployment of a second aircraft carrier to the Middle East, and higher transportation costs tied to Pakistan’s closure of the main land route for U.S. supplies into Afghanistan.

But the health budget surplus has angered critics on Capitol Hill and advocates for military retirees. They say it suggests senior defense officials knowingly have exaggerated the trajectory of health budgets to try to persuade Congress to approve higher Tricare fees for retirees.

Hale and Dr. Jonathan Woodson, assistant secretary of defense for health affairs, said the issue of a “reasonable” 2 percent miss on health cost projections for fiscal 2012 is unrelated to their call to raise Tricare fees on retirees. These officials maintain that growth in military health costs will continue to outpace defense spending generally, straining other programs.

The House already has refused to back the Defense Department plan to raise Tricare fees on military retirees in fiscal 2013. The Senate Armed Services Committee also has rejected these proposals to phase in higher enrollment fees for Tricare programs.

But these ideas will be raised again as Defense officials continue to argue that, unless fees increase, additional force cuts will be needed.

Rep. Joe Wilson, R-S.C., chairman of the House armed services subcommittee on military personnel, said he recently also learned that this is the second year of health budget surpluses. In fiscal 2011, Defense Department had $500 million in excess Tricare funds reprogrammed to other accounts. Hale said Thursday he could not confirm that information.

“I was surprised,” Wilson said in a phone interview. “Because the information we had been provided is that the reason for increasing the Tricare premiums, up to 365 percent … is ever increasing health care costs. As it turns out, there really is a downward spike.”

“At the very least,” higher fees sought in defense plans beyond 2012 “should be withdrawn and premiums should be frozen,” he said.

Wilson and 23 House colleagues, including a few Democrats on the armed services committee, sent a letter of concern July 24 to Defense Secretary Leon Panetta, suggesting the reprogramming request raises doubts about department arguments that health care costs are out of control.

Hale responded to Wilson and his colleagues in a July 30 letter, explaining that the surplus was due to “uncertainty about medical inflation and health care use, and the impact of continual benefit changes and efficiency initiatives.”

Hale told Wilson that in years past money had to be shifted into Tricare accounts because spending was higher than projected. In any case, the need for Tricare fee increases is unrelated, Hale wrote.

He noted that total military health costs rose from $19 billion in fiscal 2001 to more than $52 billion last year, a climb of 174 percent.

That the Defense Department has found a surplus of Tricare dollars two years running should spur Congress to be skeptical of claims that beneficiaries need to pay more, said Steve Strobridge, director of government relations for Military Officers Association of America. This “gives lie to all their uproar” about health costs sinking future defense budgets, he said.

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