By Jared Serbu
Reporter
Federal News Radio

Defense Department officials defended their proposed medical insurance fee hike before House lawmakers Tuesday. Pentagon officials say the military must bend the health care cost curve as part of the department’s overall effort to operate more efficiently.

DoD’s testimony came one day ahead of military retiree groups’ appearance before the same panel, the House Armed Services Subcommittee on Personnel. They said the Pentagon’s proposed increases to insurance premiums failed to recognize the sacrifices their members had made to the country.

As they examine those differing views, subcommittee members must decide whether or not to support the fee increase as proposed in the Obama administration’s fiscal 2012 budget request. Congress has consistently prohibited the Pentagon from increasing fees since 2007, when such proposals were first made.

At issue is a Defense Secretary Robert Gates’ proposal to increase fees paid by working-age retirees for TRICARE Prime, the military’s managed care program, by $2.50 to $5 per month. The proposed hike would boost the annual premium for family health coverage from $460 to $520. TRICARE fees have not been increased since the program was created in 1995.

In testimony Wednesday, Air Force Col. Steve Strobridge (Ret.), the government affairs director for the Military Officers Association of America, said the proposal was less concerning that what he said were “draconian” fee increases proposed by Gates in previous years, but retirees objected to the notion that future year’s increases would be tied to Medicare inflation.

“MOAA has not taken the position that TRICARE fees should never rise,” he said. “If retired pay doubles or triples due to cost-of-living adjustments over a lifetime, we believe it would be unrealistic to expect that fees would not rise by even one dollar. However, we assert that the statute should provide reasonable guidelines for setting and adjusting TRICARE fees. The government puts no cap on the sacrifices it demands of servicemembers and their families. In contrast, current law leaves their crucial career health care package subject to dramatic swings with year-to-year leadership and/or budget changes.”

Strobridge said military retirees had “pre-paid” their health care premiums through their service in the armed forces. He said his organization recommended that Congress limit any future TRICARE fee increases to the rate at which military pay rises, rather than tying them to medical inflation.

Testifying before the subcommittee the previous day, Jonathan Woodson, Assistant Secretary of Defense for Health Affairs, said DoD viewed the proposed TRICARE fees as modest, and that the military’s health care costs had risen 11.8 percent per year, on average, from 2001 to 2008.

Woodson said the department’s proposal was crafted to minimize the impact on retirees.

“Our proposals have been carefully considered,” he said. “We have incorporated numerous safeguards – grandfathering in all current enrollees to unique programs; phasing-in new reimbursement methodologies for providers, and exempting certain beneficiaries such as survivors and medically retired servicemembers from enrollment fee changes in order to protect our most vulnerable beneficiaries and providers. None of these proposals affect the free health care we deliver to our active duty service members.”

He said the department was taking other steps, besides the fee increases, to reduce its health care costs, such as encouraging mail-order prescriptions, standardizing medical supplies and equipment, enforcing contract price ceilings and emphasizing urgent care and nurse advice by telephone.

“We’ve endeavored to streamline our practices and produce efficiencies,” he said. “We’re using the patient-centered medical home as a method for particularly managing chronic disease, which reduces costs but also increases quality of care. We centralized procurement of medical devices, and we’ve also reduced service contracts. We continue to look at that as a source of efficiencies. We’re undergoing an efficiency evaluation to reduce 780 [full-time equivalent positions] from Health Affairs and the TRICARE Management Activity.”

No member of the subcommittee explicitly voiced support for DoD’s proposed fee increase, though Rep. Niki Tsongas (D-Mass.) said Congress would have to examine the TRICARE fee structure in light of the military’s rapidly growing costs. She said, however, that future increases should take into account the disparity in pension income earned by various retirees. She said some retired generals can earn more than $200,000 in retirement pay, while retired enlisted members make as little as $17,000 from their pensions.

She asked department officials whether they had considered indexing fee increases to the size of a retiree’s pension.

Woodson said DoD had not explored the idea, because in order to carry out such a proposal fairly, it would need to consider all sources of a retiree’s income.

“Even an enlisted person who retires after 20 years may enter a very good-paying job,” he said. “What they actually make may not always relate just to their retirement pay. We would probably have to means test against their total salaries are. It’s conceivable that following retirement, as talented as our men and women are who serve, they get advanced degrees and are doing quite well. What we have proposed is a modest fee increase. If we were proposing large fee increase, I would agree with you strongly.”

But Rick Jones, director of government relations for the National Association of Uniformed Services, said that although the proposed $60-per-year increase may appear modest, said he feared DoD’s proposal would lead to much larger increases in future years.

“It is clear that the plan is a nose under the tent, a Trojan horse designed to divide the voice of retirees and start the roll-out for substantial increases in TRICARE fees and co-pays,” Jones said. “While it is true costs for military health care have increased over the past decade, the cause is not, repeat, not military retirees using their earned benefits. The true accelerant for rising costs is the war.”

To identify additional health care efficiencies, DoD has created a new position to conduct an study of its programs, both to find savings, and improve access to care. The job will be filled by former Maine Congressman and Governor John Baldacci.

That announcement drew scorn from the subcommittee’s chairman, Rep. Joe Wilson (R-S.C.), who called the new job a “military health care czar.”

“I truly believe that that’s a duplication,” he said. “The [Government Accountability Office] said just two weeks ago that our government suffers from duplication, fragmentation, overlap. And then a new position is created at a time when we’re all concerned about efficiencies, and now we’re adding a new job — I believe $163,000 a year. It just doesn’t seem right to me. In light of this study, why should Congress enact what you’re proposing, which are the Defense health cost efficiencies if this work could be overturned by another major reform by another party?”

Cliff Stanley, DoD’s undersecretary for personnel and readiness, will be Baldacci’s boss in the new position. He defended the appointment, saying the Pentagon needed an outsider to examine its personnel issues.

“I wanted to have an objective look,” Stanley said. “I’ve looked at GAO reports. But my charge from Secretary Gates when I first joined the department last year was to look at personnel and readiness a little differently. I don’t think we’ve been as open as we should have been in terms of following some of the recommendations that have been laid down before. I needed an outside look, and I have a former member of Congress as well as a former governor to help with the holistic viewpoint of readiness, of wellness, of looking at how we’re going to do patient satisfaction. Cost is the last piece. I don’t see duplication here.”

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