Bloomberg News

Security Will Suffer Unless Pentagon Health Care Gets Cuts: View

October 12, 2011

Oct. 13 (Bloomberg) -- An editorial on Monday identified specific weapons programs that could be targeted for cuts as the Pentagon faces growing pressure to help curb the federal deficit. There is, however, a huge area of potential Defense Department savings that doesn’t involve equipment and war- fighting capabilities: bringing under control the galloping -- and unsustainable -- cost of providing well-deserved benefits to those who serve our country.

The main issue here is Tricare, the health-insurance program for active-duty, reserve and National Guard troops and retirees, as well as their dependents. This year, the Pentagon plans to spend $52 billion on the program, or almost 8 percent of its $700 billion budget. That’s a 300 percent increase from 2001. If left unchecked, health costs will occupy an ever- greater share of military spending as overall budgets are cut, leaving less money to apportion to war-fighting and other national-security priorities.

There are plenty of good ideas for controlling, and even reducing, these costs. Of the 9.6 million people Tricare currently covers, fewer than 16 percent are on active duty. The program has never been adjusted for inflation or to reflect rising health-care costs. As a result, retirees pay about $460 a year for family coverage under Tricare Prime, a managed-care plan with minimal or no annual deductibles and co-payments. Compare that with the $3,997 average out-of-pocket cost for employer-provided family-health insurance.

Higher Fees

This year, the Obama administration decided to raise Tricare fees by $5 a month for families and $2.50 for individuals. That would trim just $434 million from the cost of the program from 2012 to 2016, the Pentagon estimates. But Congress blocked a proposal to keep future premiums at a pace with rising medical costs, as part of a plan that would net $8 billion in savings over five years.

More could be done. Lawrence J. Korb, a former assistant secretary of defense and now a senior fellow at the Center for American Progress, has offered a credible plan that could save $15 billion a year without depriving troops, their families and retirees of the care they have earned through their sacrifice.

His proposal calls for a gradual increase in the enrollment fees paid by working-age military retirees, based on retirement pay; increasing out-of-pocket expenses for those covered by the Tricare for Life program, used by Medicare-eligible recipients, and limiting the cost-sharing with Medicare; and reducing Tricare coverage for those who exceed a certain income limit or have access to insurance through a spouse or an employer.

Premium Disparity

From 2001 until last year, 22 percent of military retirees dropped their private health insurance to switch back to Tricare, mainly because of the increasing disparity in premiums and out-of-pocket expenses, though some may have lost their private coverage because of the recession. This trend added 689,000 retirees and family members under age 65 to Tricare’s rolls.

Defense Secretary Leon Panetta has warned that the trillion-dollar cuts that would kick in if the congressional supercommittee created by President Barack Obama deadlocks would “do serious damage to our ability to be able to make the kind of changes in our defense structure that are responsible and that do protect this country for the future.”

He is right. That’s why he needs to take control of the military’s budget-cutting process, in a way that strengthens our fiscal health while protecting the well-being of those who served.

--Editors: Max Berley, Tobin Harshaw.

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To contact the Bloomberg View editorial board: view@bloomberg.net.


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