The fiscal 2015 budget proposal the White House submitted to Congress Tuesday makes another attempt to shift at least some of the Defense Department’s healthcare cost burden onto the beneficiaries of its TRICARE system.

The department’s previous attempts to rein in some of its healthcare costs have been mostly centered on the idea of requiring working military-age retirees to pay more for their insurance.

Year after year, they’ve been met with immediate opposition from military associations, and mostly rejected by Congress. And on the idea of consolidating TRICARE, DoD hasn’t fared much better, hitting a wall with Congress for the past several years.

So this year, officials say they tore up the old plan and went back to the drawing board.

“We have taken a very clean-sheet look at this, with [the assistant secretary for] health affairs leading the discussion, and we’re going to submit a single, simplified TRICARE plan with a series of fees to incentivize not only the best care, but the most inexpensive care to the taxpayer,” said Lt. Gen. Mark Ramsay, the Joint Staff’s top budget official.

The budget proposal would combine DoD’s managed care insurance plan, TRICARE Prime, with its fee-for-service plans, TRICARE Standard and TRICARE Extra, consolidating them into a single health plan.

Officials said one primary goal is to incentivize people to obtain services from the military’s own treatment facilities rather than turning to private providers.

More recent retirees would pay more

Defense officials said the new unified plan would offer participants “more benefits and choices.”

But it also would boost out-of-pocket costs for many DoD healthcare beneficiaries, a significant number of whom pay little or nothing for their health care under current law. Taken together, the changes would save DoD $12 billion over the next five years.

Active duty service members would continue to get free care, but their family members would be subject to new fees. They would pay between $10 and $50 per visit to a civilian healthcare provider within TRICARE’s network and 20 percent of the total bill to non-network providers. Most services at military medical facilities would continue to be free of charge.

Military retirees below the Medicare eligibility age also would see their out-of-pocket costs increase. They would pay an enrollment fee of $572 per year, plus new co-pays at both military and civilian care facilities.

Older retirees entering the Medicare system for the first time also would begin paying a new annual fee to participate in DoD’s “medigap” plan, TRICARE for Life. DoD has covered the entire cost of that program up until now; but under the proposal, retirees would pay 0.5 percent of their annual pension pay starting next year, escalating to 2 percent by 2019.

DoD officials say they are aware their healthcare proposals will meet opposition, but they said they have done everything else they can to reduce the department’s health insurance bills while being fair to beneficiaries at the same time.

The department says it is saving $3 billion each year because of past decisions to consolidate purchases of prescription drugs and align its private-provider reimbursement rates with those paid by Medicare.

But TRICARE, officials argued Tuesday, has grown to be a more generous benefit each year since it was first created in 1996. Premiums for retirees have not increased at nearly the same rate as the nation’s overall healthcare expenses. Pentagon analysts say beneficiaries paid about a quarter of their own medical costs when the TRICARE system was created in 1996. As of this year, the figure has fallen to 11 percent.

Defense Undersecretary Robert Hale, DoD’s comptroller, said if Congress continues to block changes on health care and other forms of compensation, the money is going to have to come from somewhere else within the increasingly-constrained Pentagon budget.

“If they turn down all of these, it will create about a $2.1 billion hole in our fiscal 2015 budget and about a $30 billion hole over the next five years,” he said.

Housing benefits to take a hit

The healthcare changes DoD officials proposed Tuesday are part of a series of compensation adjustments the department is proposing as part of its 2015 budget.

Ramsay said the lower budget levels the department is facing, with or without sequestration, require the department to not just reduce its overall size, but also address the fundamental drivers of its personnel costs.

“One of the things that became very obvious to us as we examined all of this last fall was the need to go look at our total military pay and compensation package. We have to keep a balance across the force,” he said. “At any budget level, we know they’re coming down, and we are looking at trying to balance what the force costs in terms of people against the capability, the capacity and readiness of that force. So we worked very hard with the Joint Chiefs of Staff and the senior enlisted leaders of the services to look at proposing a package of major initiatives.”

Among them is a 1 percent pay increase for both military and civilian employees for the next five years, which is very likely to fall behind wage growth in the private sector.

“We’re also going to slow the growth in the basic allowance for housing until we reach about 5 percent out of pocket for military members over about a three-year period. And we’re going to eliminate renters’ insurance from the computation, so that will bring it to about 6 percent,” Ramsay said.

Additionally, DoD would make a significant and controversial change to commissaries, the chain of subsidized supermarkets with outlets at most military bases in the U.S. and overseas.

The proposal would save $1 billion per year by requiring most of those stores to sink or swim on their own, without the federal funding that keeps prices low for military shoppers. But the Pentagon still would funnel $400 million per year to stores in overseas or remote U.S. locations where service members do not have easy access to private grocery stores.

DoD’s cost-saving ideas for 2015 also include a new round of “efficiency initiatives,” including the department’s previously-announced plans to cut its headquarters level staff by 20 percent.

The Pentagon spelled out those plans in more detail Tuesday, saying that the department would reduce its civilian workforce by 5 percent over the next five years.

Each of the military services plans cutbacks on the order of 1 percent per year beginning in 2015, with the exception of the Navy. That service says it needs to do some targeted hiring in certain areas, such as shipyard workers and firefighters.

The civilian workforce across DoD also can expect some narrow plus-ups in certain other areas, including employees who work in cyber and IT fields. Along with special operations forces, whose funding will grow by 10 percent, cyber is one of the few areas of DoD spending that would actually grow in 2015. The department is proposing to spend a total of $5.1 billion.

“A large portion of that is cyber operations, defense and offense, at [U.S. Cyber Command], but elsewhere as well, including within the military services,” Hale said. “Another part of it is our overall information assurance, public key infrastructure, research and development activities, DARPA and others. We’ve tried to capture it all within that number, but there’s a lot of gray area in terms of what counts as cyber. We’re doing a lot of other things that contribute.”

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