By Jared Serbu
Reporter
Federal News Radio

The Defense Department has won a key supporter in its effort to reduce health care costs by increasing premiums for working-age retirees under TRICARE, its managed care insurance program.

Rep. Buck McKeon, (R-Calif.), the chairman of the Armed Services Committee, told reporters Thursday that the language he will propose next week for the fiscal 2012 Defense authorization bill will include DoD’s proposed fee increase, albeit with one substantial difference: rather than indexing future increases to the actual rate of national health care cost growth, McKeon’s bill would tie the hikes to the growth in retirees’ cost of living adjustments (COLA).

In 2011 and 2010, the military retiree COLA was zero.

McKeon’s position appears to put him at odds with the Armed Services Committee’s military personnel subcommittee, which signed off Wednesday in a unanimous voice vote on language that would prohibit DoD from raising TRICARE fees. Congress has included that prohibition for the last several years. The prohibition passed by the subcommittee would last for one year.

“I want to do more, but the challenge of finding mandatory spending offsets limited what I could achieve,” said Rep. Joe Wilson (R-S.C.), the subcommittee’s chairman. “I strongly believe that military retirees have made significant down payments through their dedicated service to the nation. It is not right for the nation to ask them to pay more for the health care to which they are entitled as all citizens are being personally challenged financially by rising gas prices.”

McKeon said letting DoD increase the fees but tying them to a lower inflation index was a good compromise.

“We have not done anything to raise that premium for years, and health care costs have gone up so rapidly,” McKeon said after his speech at the Heritage Foundation in Washington. “In a perfect world, I’d like to give everybody everything, but it isn’t that way. We’re in a situation right now where everybody’s going to have to sacrifice some. The military sacrifices a lot, so we’re asking them for just a little bit.”

The full Armed Services Committee is scheduled to mark up the 2012 Defense authorization bill next Wednesday.

TRICARE fees for working-age retirees have been fixed at $460 per year since Congress first established the program in 1995. In testimony Wednesday to the Senate Armed Services Committee’s personnel subcommittee, Robert Hale, DoD’s chief financial officer, argued that’s not what Congress intended when it created the program, since the government’s share of retiree health care costs now grows every year.

“Had they been indexed to a medical index, fees of $460 for families would have grown to more than $1,000 by now,” he said. “Instead, retiree out-of-pocket expenses actually fell from 27 percent of total health care costs in 1995 to 11 percent today.”

DoD estimates the fee increase would reduce its health care costs by $434 million between 2012-2016. Its overall package of changes to the military health system would cut health care costs by $3.2 billion, he said.

The remainder of DoD’s health care reform proposal includes cuts to the fees paid to private hospitals in military communities, cutting 700 civilian contractors from TRICARE staff, and incentives for beneficiaries to use DoD’s mail order prescription service rather than retail pharmacies.

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