To fund benefits for families of fallen service members, Congress looks to hike pharmacy costs

Come next year, military retirees and family members might be required to kick in a few extra dollars when filling their drug prescriptions in order to fund a benefit program for military widows and widowers that’s perilously close to running out of money.

The program, known as the Special Survivor Indemnity Allowance (SSIA), currently pays $310 per month to about 63,000 Americans whose spouses died either on active duty or during retirement after having paid into DoD’s Survivor Benefits Plan. The fund that pays the SSIA benefits is due to expire next May, and at the moment, there’s no plan to replenish it.

In recent years, Congress has patched over the problem with short-term workarounds, but in its version of the National Defense Authorization Act, the Senate Armed Services Committee voted last week to create a long-term funding stream for SSIA, paid by higher pharmacy copays in DoD’s TRICARE program.

The exact amount of the proposed fee hikes is unclear, since, as of this writing, the committee has not released the full text of the bill it approved. But an executive summary committee staff distributed on May 29 advertises the measure as a “permanent” fix to the SSIA program.

One complication for the armed services committees’ efforts to fix the annuity has been that under congressional budgeting rules, it is a mandatory spending program, and any proposals to spend money on it are supposed to be offset by a reduction in federal obligations to other military benefits.

Complicating matters further, neither chamber has passed a budget resolution for the upcoming year, so none of the appropriations or authorization committees know the amounts by which they’ll be asked to cut spending within their respective jurisdictions to achieve the Republican conference’s agenda on matters like health care and tax reform.

Because of that, Mac Thornberry (R-Texas), the chairman of the House Armed Services Committee, urged his members to defer a decision on what to do about SSIA.

“We cannot and we will not allow [SSIA to expire],” Thornberry said Wednesday night during the committee’s markup of the House version of the NDAA. “But I expect that the Budget Committee is also going to require this committee to come up with some other mandatory savings. So rather than lock things in now, we need to look at all of these demands for mandatory savings and try to work our way through them without unduly burdening active duty and retirees with drastically higher co-pays.”

Rep. Susan Davis (D-Calif.) had proposed an amendment that appears to be similar to the Senate’s version. Hers would raise generic drug co-pays filled at retail pharmacies by $4 to fund the benefit and also double its monthly payout to $620 over the next three years.  But at Thornberry’s urging, she withdrew the amendment while the House awaits a budget resolution and in hopes of reaching a final compromise with the Senate later in the year.

She said the proposal to increase out-of-pocket costs for TRICARE pharmacy beneficiaries would be tough for many of her colleagues to swallow — indeed, Congress has rejected several of the Defense Department’s requests in recent years to do so.

“But I don’t think this is breaking faith with our retirees. A military unit of any size takes care of its service members and families as a team,” Davis said. “I’ve spoken to many retirees, and they do not object to helping the widows of other service members and retirees for a small pharmacy increase. But this is one of those really tough issues.”

Just as Congress’ approach to funding SSIA has been somewhat ad hoc, the program itself is seen by many military service organizations and sympathetic members of Congress as a band-aid to a larger problem.

It was set up in 2008 to partially address overlaps and inconsistencies between two programs for survivors of military members who were killed in action.

The Dependency and Indemnity Compensation (DIC) program, administered by the Department of Veterans Affairs, pays tax-free stipends to the survivors of service members who died while on active duty, and some former military members who later died of service-connected causes or while they were receiving VA benefits.

The Survivor Benefit Program (SBP), administered by DoD, is more akin to a life insurance program. Military members are allowed to sign up and begin paying premiums once they retire, but the program also pays full benefits to the spouses of service members who die in the line of duty.

However, current law requires the benefits paid out under the two programs to offset each other so that the government isn’t paying the full amounts to a spouse who’s entitled to both. In a hypothetical example, if a survivor is entitled to $1,200 under DIC, that payment would cancel out the first $1,200 of any SDP annuity he or she would normally be entitled to, an issue opponents refer to as the “widow’s tax.”

SSIA was meant to partially fill the gap created by that “offset,” but only covers about 25 percent of the SDP annuity that a spouse who’s covered by both programs would otherwise receive, according to estimates calculated by the Military Officers Association of America.

That’s particularly unfair, said Rep. Jackie Speier (D-Calif.), to the decedents of retirees who had already paid premiums for the SDP benefit.

“It’s a bait-and-switch, pure and simple,” she said. “And the fix we’ve been providing so far is a small fix. Under the widow’s actual [SDP] policy, she should be receiving about $1,500 a month and she’s getting $310. We should really fix this or get rid of this life insurance policy altogether. Because it really is a fraud to tell someone that they have a policy, but they can’t use it if they’re getting this other benefit from the VA.”

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