Military retirees can expect to pay more for insurance, medication under proposed budget

Out-of-pocket health care costs for military retirees and for users of the Tricare retail pharmacy network could jump in October if Congress approves the budget request President Barack Obama delivered Monday.

Annual active duty pay raises also would be affected but not until January 2015 when caps on raises would begin and last three years. The 2015 raise would be 0.5 percent, to be followed by a 1 percent across-the-board raise in 2016 and a 1.5 percent raise in 2017, if Congress accepts the administration’s plan to dampen compensation growth.

In defending these changes, Army Gen. Martin Dempsey, chairman of the Joint Chiefs, called current Tricare fees for retirees, nearly frozen since 1996, “an anachronism” the military no longer can afford.

“To build the force needed to defend the country under existing budget constraints,” added Defense Secretary Leon Panetta, “the growth in costs of military pay and benefits must be put on a sustainable course. This is an area of the budget that has grown by nearly 90 percent since 2001, and 30 percent above inflation, while (force) strength has only grown by 3 percent.”

Rep. Joe Wilson, R-S.C., chairman of the House subcommittee on military personnel, vowed to oppose every initiative to curb compensation growth or to raise retiree health fees. But criticism of these proposals from colleagues on the armed services committees was muted.

Lawmaker after lawmaker did lament the possibility of base closings and other various planned cuts even as they acknowledged that Panetta and Dempsey had to propose leaner budgets to implement $487 billion in defense cuts over 10 years ordered by Congress under last year’s Budget Control Act.

The Tricare increases target retirees of every age. Here are details:

Tricare Prime: The annual enrollment fees for the managed care program would be raised and fees tiered based on retired pay.

Family coverage for Tier 1 retirees, those with retired pay below $22,590, would see the enrollment fee of $520 climb by $80 a year for the next three years. It would be raised by $70 more in 2016 and by $43 in 2017 to reach $893, a 71 percent hike over five years. Dollar increases for individual coverage would be half that of family coverage. The percentage hike would be identical so the current fee of $260 would hit $446.50 in 2017.

Tier 2 fees, for retirees drawing $22,590 to $45,178, would climb for family coverage by $200 a year for a few years and then by $265 or more to reach $1,523 by 2017, to nearly triple the cost of family coverage.

Tier 3 would apply to retirees with annuities above $45,178. Their enrollment fee would jump by $300 a year the first two years, then by a little more and would reach $2048 by 2017, nearly four times the current fee. Individual coverage in Tiers 2 and 3 also would cost half of family coverage.

Tricare Prime fee increases after 2016 would be based on medical inflation, projected to be 5 percent annually. That accounts for the odd amount of fee hikes across the three tiers in 2017.

Tricare Standard/Extra: A first-ever annual enrollment fee would be set for the military’s fee-for-service insurance plan option and its preferred provider network option. It would be $140 for family coverage in 2013, climbing to $250 by 2017. The fee for individual coverage would be half that for families. The annual deductible of $300 (family) and $150 (individual) also would increase steadily to reach $580 (family) and $290 (individual) by 2017.

These Tricare changes for retirees under 65 and their families are projected to save $12.1 billion over the next 10 years, which means beneficiaries will pay that much more out of pocket.

Tricare For Life: An enrollment fee would be imposed on this supplement to Medicare. Like the Prime enrollment fee, the fee would be tiered based on retired pay.

Tier 1 (less than $22,589 in retired pay) would see an annual fee of $35 next year, rising to $150 by 2016 when fee would be indexed to medical inflation. The fee for Tier 2 retirees ($22,590 to $45,178) would be $75 next year and climb to $300 by 2016. It would be adjusted for inflation thereafter. Tier 3 retirees pay $115 next year and $450 by 2016.

This proposal would save $5 billion over 10 years in discretionary spending plus another $5.9 billion in mandatory spending.

Pharmacy co-payments: To encourage beneficiaries to use the cheapest points of pharmacy service – bases and mail order – and also to encourage generic drugs over brand names, co-payments for brand name drugs would rise sharply starting next year.

Co-pays for 30-days of brand name drugs in the retail network would climb next October from $12 to $26, and increase by $2 a year thereafter until reaching $34 in fiscal 2017. Co-pays for brand name at mail order, now $9 for a 90-day supply, also would climb to $26 in the fall and rise steadily to $34 by 2017.

The intent, said Rear Adm. Thomas J. McGinnis, chief of pharmaceutical operations, is to return cost shares for beneficiaries filling brand names prescriptions off base to what they would have paid if co-pays had been adjusted for medical inflation since Tricare began in 1996.

Officials also plan to block retail outlets from dispensing “third tier” drugs, those deemed too expensive to be on the military formulary of more than 5000 drugs. There are 179 such drugs now, plus more than 100 types of glucose test stripes. Retailers no longer could dispense these for Tricare unless physicians say they are medically necessary.

To comment, email, write to Military Update, P.O. Box 231111, Centreville, VA, 20120-1111 or go to

More in Herald Business Journal

Snohomish County’s campaign to land the 797 takes off

Executive Dave Somers announced the formation of a task force to urge Boeing to build the plane here.

A decade after the recession, pain and fear linger

No matter how good things are now, it’s impossible to forget how the collapse affected people.

Panel: Motorcycle industry in deep trouble and needs help

They have failed to increase sales by making new riders out of women, minorities and millennials.

Costco rises as results display big-box retailer’s resiliency

Their model has worked in the face of heightened competition from online, brick-and-mortar peers.

For modern women, 98-year-old rejection letters still sting

In a stark new video, female Boeing engineers break the silence about past inopportunity.

Tax reform needs the public’s input on spending priorities

The GOP tax plan is a good idea, but the next step should give us a voice on how taxes are spent.

Commentary: GM, Boeing fight a war of words over Mars

Boeing is strongly signaling how crucial deep-space exploration is to its future.

Under cloud of ethics probes, Airbus CEO Enders to step down

He leaves in 2019 after 14 years. Meanwhile, aircraft division CEO Fabrice Bregier leaves in February.

$4.99 sandwich promotion irks some Subway business owners

Management insists that “most franchisees support the promotion.”

Most Read