The Joint Chiefs of Staff support a sharp rise in Tricare fees for under-65 retirees and their families because retiree health costs are soaking up dollars needed to buy new weapons and sustain force readiness, they say.
The problem they describe is real, but their solution is flawed, says Dov Zakheim, Department of Defense comptroller from 2001 to 2004.
Zakheim doesn’t oppose raising Tricare fees. His sympathies, he said, are with defense officials struggling with soaring personnel costs and a Congress that has approved “one benefit after another benefit after another.”
But the proposed Tricare fee increases, for all the angst they have caused, are a weak response to the inexorable cost growth of military health care in recent years, Zakheim said.
A far more effective solution, he argued, would be to shift part or all of current health care expenses out of the defense budget.
But, Zakheim suggested, the fee hikes so unpopular with younger retirees as well as the current career force will be no more effective than a speed bump in slowing health care costs. Those costs have jumped from $19 billion in 2001 to almost $42 billion in 2006.
Factors behind that growth, Zakheim said, include elimination of Tricare co-payments for active duty families; startup of Tricare for Life for Medicare-eligible retirees; expansion of Tricare Prime remote for service members and families assigned away from base; expanded Tricare eligibility for reserve and National Guard members; and medical inflation.
The growth won’t slow substantially, Zakheim said, “even if the Department of Defense is able to realize every single one of its proposed savings measures.”
Higher fees or not, he said, the “health program will continue to consume ever larger portions of the defense budget.”
That could leave the Joint Chiefs in just a few years with the same sort of budget pressure they’re dealing with now.
One problem with the planned fees, Zakheim said, is that they aren’t aimed at the 1.7 million Medicare-eligible retirees whose health care needs are a major driver behind the escalating costs. Also, the fees aren’t large enough to make Tricare less attractive compared with other health plans. Finally, Congress is poised to continue to expand health benefits, particularly for reservists, thus adding perhaps another $6.4 billion to military health care costs within five years.
The logic of moving Tricare for Life costs off budget is that care for elderly beneficiaries is an entitlement that must be funded, like Social Security and Medicare, Zakheim said. It shouldn’t have to compete with discretionary spending needed to buy weapons, maintain equipment or train troops.
If allowed to take effect, the shift would slice about a quarter off the cost of military health care. But the White House’s Office of Management and Budget has “effectively obviated this initiative,” Zakheim told a House subcommittee on military personnel on March 31.
It did so by directing defense officials to continue to list Tricare for Life costs as defense health expenses even though the Treasury Department has begun picking up the tab for future users.
Zakheim said that’s a mistake. If he had his way, the full Tricare program would be viewed as an entitlement and removed from the defense budget.
OMB, however, wants the real cost of Tricare for Life or other military medical benefits exposed to keep pressure on the Defense Department and Congress to make cuts.
The 2005 change to payment procedures for the retiree fund aligned “treatment of retired military personnel over 65” with that of “U.S. government employees,” Zakheim argued. That is, health spending on current employees, military and civilian, remains discretionary, while health care for older retirees is mandatory spending funded by the treasury.
Obviously, Zakheim said, the shift of $11 billion in health funding to the Treasury Department would have no beneficial impact on the federal deficit. But it could relieve budget pressures on the services from their health care accounts.
In response to Zakheim’s criticisms, OMB said Tricare for Life is funded exactly like the Military Retirement System and the Federal Employees Retirement System. But in OMB’s view, last year’s move to have the Treasury Department make military Tricare for Life payments had the effect of excusing the Defense Department from paying “its fair share” of accrued health benefits.
Zakheim said removing Tricare for Life obligations from the defense budget would trim defense medical costs by $100 million through 2014, giving the services some budgetary breathing room.
OMB signaled that’s not going to happen.
“OMB, the Senate Budget Committee, the House Budget Committee and the Congressional Budget Office all agreed that (full) budget authority and outlays” will continue to be placed in the annual defense appropriations bills regardless of whether the Defense Department or the Treasury Department makes payment to the fund, an official said.
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