USA Today on TRICARE
Today's edition of USA Today features an editorial advocating increasing premiums for military retirees enrolled in TRICARE. The editorial correctly notes that since premiums have not risen since 1995, they remain at extraordinarily low levels compared to other health insurance plans -- a disparity that USA Today says "is simply too big to defend in the time of strained budgets." CRFB agrees with this assessment, though we are well aware that changes to health benefits for military retirees are not exactly popular. To understand the situation and the potential effects on the defense budget, one must first have some background.
Military retirees who have 20 or more years of service are entitled to receive coverage under TRICARE's basic health plan -- TRICARE Prime. The premiums for this coverage are the same today as when they were set in 1995 -- $230 for individuals or $460 for family coverage. These premiums have never been increased, nor have they been indexed to inflation or adjusted to reflect rising health care costs. As a result, the percentage of total health care costs paid by the military retiree has shrunk significantly over the past 16 years.
Last week, in what is to be one of his final policy speeches as Secretary of Defense, Robert Gates said that controlling and prioritizing defense spending "will require doing something about spiraling health care costs -- and in particular the health insurance benefit for working age retirees whose fees are one-tenth those of federal civil servants, and have not been raised since 1995." Under his proposal, the premiums would only be increased $5 a month, to $520 a year for families.
CRFB strongly supports this premium increas, and believe that premiums will have to grow further as health care costs continue to rise. However, it would be unwise to only look at premiums when there are proven ways to actually reduce -- rather than shift -- health care spending.
Take, for example, TRICARE for life -- the Medigap policy for military retirees. TRICARE for Life essentially protects military retirees from all of the cost-sharing in Medicare, and therefore makes them completely insensitive to prices. The Fiscal Commission had a recommendation to limit first-dollar coverage for TRICARE for Life and to limit how much cost-sharing it could cover beyond that.
A similar option scored by CBO, which would eliminate coverage for the first $550 of costs and to half of the next $4,950, would reduce the deficit by over $40 billion -- with more than a 20 percent of the savings coming from lower Medicare costs. Regulating private Medigap plans to comply with a similar policy could save another $50 billion.
This type of creative policy thinking can help us to reduce the deficit in the most effective and efficient way, and actually find secondary benefits -- like lower overall health care costs. But at the end of the day, there can be no sacred cows.