FY 2015 Budget Seeks to Merge Three TRICARE Plans to Save DoD Costs

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 By Sandra Basu

WASHINGTON — In a highly controversial proposal, President Barack Obama’s FY 2015 budget request recommends merging three TRICARE health plans for those under 65 — Prime, Standard and Extra — into a “single, modernized health plan.”

Beneficiaries would be required to pay “modestly higher deductibles and copays,” according to DoD, but the “simplified structure is designed to encourage members to use more affordable means of care.”

In addition, the request proposes more increases in pharmacy copays. While the FY 2013 National Defense Authorization Act included some adjustments to the TRICARE pharmacy copay structure, “additional adjustments are necessary to fully incentivize the use of mail order and generic drugs,” DoD argued in a budget document.

Secretary of Defense Chuck Hagel met  with the Council of Governors at Coast Guard Headquarters in Washington in February to discuss the budget recommendations. Photo by Erin A. Kirk-Cuomo .

Secretary of Defense Chuck Hagel met with the Council of Governors at Coast Guard Headquarters in Washington in February to discuss the budget recommendations. Photo by Erin A. Kirk-Cuomo

“We will simplify and modernize our TRICARE health insurance program by consolidating plans and adjusting deductibles and copays in ways that encourage members to use the most affordable means of care, such as military treatment facilities, preferred providers, and generic prescriptions,” Secretary of Defense Chuck Hagel explained at a budget briefing earlier this year. “We will ask retirees and some active-duty family members to pay a little more in their deductibles and copays, but their benefits will remain affordable and generous, as they should be.”

Hagel said that, under the plan, medically retired servicemembers, their families and the survivors of servicemembers who die on active duty would not pay the annual participation fees charged to other retirees and would pay a smaller share for healthcare costs than other retirees.

Modernization and Readiness

The proposed health benefit changes were among several military compensation reforms that DoD officials said were necessary to enable each of the military services to invest in modernization and readiness.

Other proposed reforms were reducing the commissary subsidy, slowing the growth of basic allowance for housing and requesting a 1% basic pay raise in FY 2015, along with a general officer and flag officer pay freeze in FY 2015. Hagel has said that basic pay raises beyond FY 2015 “will be restrained, though raises will continue.”

The defense secretary told Congress that he realized the recommendations would be “controversial” but said that, if the department continued on “the current course without making these modest adjustments now, the choices will only grow more difficult and more painful down the road.”

“We will inevitably have to either cut into compensation even more deeply and abruptly or we will have to deprive our men and women of the training and equipment they need to succeed in battle,” Hagel said.

Meanwhile, on its website, the Military Officers Association of America (MOAA) called the changes a “quadruple whammy” and warned  retention and readiness problems could result.

“MOAA understands the difficult predicament the Pentagon now faces and we agree that ending the harmful effects of sequestration must be accomplished. But the ‘quadruple whammy’ of capping pay, increasing out-of-pocket housing expenses, slashing commissary benefits, and cutting health care benefits would be four giant steps toward repeating the unwise measures which led to retention and readiness problems in the past,” the advocacy group wrote.

The proposed changes to TRICARE come as the MHS is in the midst of pursuing various structural and governance reforms, including the new Defense Health Agency (DHA).

Assistant Secretary of Defense for Health Affairs Jonathan Woodson, MD, told a House Armed Services subcommittee at a recent hearing that the establishment of the Defense Health Agency “represented a major milestone in the department and serves as a starting point for comprehensive enterprisewide reform.”

Woodson and DHA Director Lt. Gen. Douglas Robb, MD told lawmakers that, since Oct. 1, they have begun integrating several of the common tasks handled by the Army, Navy and Air Force medical departments into 10 “shared services” under the DHA. These services include: the TRICARE Health Plan, pharmacy programs, medical education and training, medical research and development, health information technology, facility planning, public health, medical logistics, acquisition and budget and resource management.

The reform effort already is resulting in savings, the DoD officials said.

“If we look at just FY 2014, we projected $148 million dollars in savings this year, and through the first quarter we have already achieved $80 million dollars of those savings. So the issue is that we are ahead of schedule in terms of the savings, and then as we look at all of the areas, particularly related to the shared services, we are outpacing our projections,” Woodson said.

Still, a Government Accountability Office (GAO) official questioned whether DoD officials could correctly determine cost savings. GAO Director of Defense Capabilities and Management Brenda Farrell said in written testimony that DoD needs to complete implementation of recommendations from GAO’s November 2013 report.

That report recommended, for example, that DoD develop a baseline assessment of the number of personnel currently working within the MHS headquarters and an estimate for the DHA at full operating capability. That report pointed out that staffing data was lacking and that the $46.5 million DoD promoted as anticipated personnel savings were inaccurately predicted.

Farrell’s written testimony also cited that the DoD has not “clarified its plan to monitor implementation costs” and that in “instances where estimated implementation costs increase, overall savings may be negatively affected.”

DoD officials told lawmakers that they are addressing GAO’s recommendations. Woodson called the implementation work of the DHA “complicated” and reminded lawmakers that what they are doing is a “work in progress.”

“We have to map what is a new agency. This has never been done before,” he said.

Robb also told lawmakers that the “staffing model for DHA is a work in progress,” but assured that there will be no growth in terms of personnel.

Comments (3)

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  1. D T Ross says:

    It is just outrageous, as a retiree from the US Army & a Viet Nam Vet I know that there is no trust remaining with me and the federal government. I also know that I was not promised free healthcare. I do know that after retirement that Tricare in its present form is what I was granted. Now the DoD wants to change the rules of the game again. Congress (i), if you ever want my vote again when it comes time for you to be reelected you had better make the right choice. When I was in the military I did more then what was expected of me and now I expect you to stand by your word. I have grandsons that are coming of age and if this comes to version you can bet that I will not do what my father and grandfathers did and that is to encourage them to enter the military.

  2. Wayne A Schirner says:

    If the three separate Tricare plans are rolled into one, how will the MTF know who is enrolled to them? It seems like it would be back to “space-A” for all non-AD beneficiaries.

  3. Jim Mathis says:

    The next place our Congress to look at for cost cutting then, is Presidential and Congressional salaries and perks, their present retirement system and a limit on the number of R&R vacations including a reasonable cap on those expenses which includes security costs and transportation without passing those costs on to local state and city governments. Their salaries, retirement and vacation expenses need to be capped at the same rate as annual military and social security raises This country needs a serious discussion and action on this before we go further and further in debt!

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