Cuts are coming to TRICARE
Health care for military personnel and their dependents is a major line item in the Pentagon's budget. Unless we take action to rein in expenditures, military health care costs will reach $65 billion per year – and TRICARE will cover some 9.6 million active duty troops, reservists and retirees.
And with sequestration looming, and budget cutbacks coming without a commensurate rollback in American military objectives and missions, it stands to reason that federal outlays for military health care are a tempting target for budget officials under the gun. Unless Congress intervenes, sequestration will kick in, and slash $54 billion from the Pentagon's budget in fiscal year 2013.
It’s an easy sell to bureaucrats: Military health care expenditures don’t kill terrorists, or deter the Chinese and North Koreans from military aggression. At least not directly. It doesn’t even make for attractive recruiting posters.
But it’s not an easy sell to military families, nor to the American people. An early trial balloon proposal to increase TRICARE premiums was floated by the Obama Administration early in the President’s term. It was a political non-starter.
It is less so during a campaign year.
As it stands now, military health care programs are very much on the chopping block. Yes, military personnel programs are not subject to the 10 percent across-the-board bloodletting that other parts of the budget are subject to. So base pay and allowances won’t be immediately affected (unless Congress cuts them to avoid sequestration!)
But TRICARE doesn’t fall under the military’s personnel budget. Instead, military health care falls under the Pentagon's operations budget. So unless officials can find enough waste, fraud and abuse in the system to offset the costs, something has to give. (And if it were that easy to find and eliminate waste, fraud and abuse, we’d already be doing it!).
Over the next five years or so, the fiscal situation confronting military planners is dire. According to reporting from the Army Times, the chief Defense comptroller – the bean-counter-in-chief at the Pentagon – we’re looking at about a $3 billion cut in military health care benefits.
Logically, the difference can be made up by reducing outlays for military health care, transferring money from elsewhere in the budget, or by increasing premiums for TRICARE benefits, or some combination of the three.
For his part, Republican presidential candidate Mitt Romney has already pledged not to raise TRICARE premiums if he is elected. He made this public commitment last week at a speech to members of the American Legion.
That sounds good to military families. But whenever a candidate rules something out, he narrows his options. As it stands now, it’s unlikely that we will find $3 billion to plug the gap from elsewhere in the Pentagon budget within the next year. A good round of base closings will help. But base closings are furiously opposed by individual Congressional representatives. Military health care expenditures, considered broadly, do not have that constituency in Congress to protect them. Previous Administrations have attempted to save money in the defense budget by closing bases – only to be shut down by Congress.
The option that’s left to Romney is to slash expenditures – most likely largely on reimbursements to TRICARE providers.
That’s going to make it a lot more difficult for military families to get care – especially if they don’t live near a major installation with a military hospital. Reserve and Guard families who are dependent on TRICARE for care, as well as those stationed in smaller communities and posts will be most severely affected. Care providers will simply cease taking in TRICARE business, as it becomes less profitable.
We see this already with Medicaid: Doctors are reimbursed at rates that barely allow them to keep their doors open. The providers still in the Medicaid business – and increasingly, Medicare – adhere to the mass-population clinic model: Long wait times to see a doctor for five minutes, and the practice of “take-a-number” medicine.
The execution problem, though, is this: Even as Romney’s proposal would make it more difficult for military members, dependents and veterans to find TRICARE providers, long-time military benefits correspondent Tom Philpott notes that Romney is pushing a proposal to offload some of the overloaded VA systems’ case load to TRICARE.
President Obama’s Department of Defense, however, under Secretary of Defense Leon Panetta and former Secretary Robert Gates – a Bush appointee originally, has already gone on record advocating an increase in health care costs for military families. Specifically, if the Obama administration has its way, some military families could see TRICARE Prime premiums increase three-fold over the next five years – from $520 per year all the way to over $2,480.
The Obama Administration’s proposals have veterans’ groups steamed: The compact we had with our troops when they were reenlisting 10, 15, 20 years ago, the argument goes, was that they would get free or extremely low-cost health care for life, if they did their 20 years with the military.
And they are right. That was the deal.
Now, a bit of soul-searching is in order. We just went through a hotly contested bailout of General Motors in 2009. One of the major obstacles to General Motors’ profitability was the huge burden of retiree health care costs. GM was still contractually obligated to pay for ‘Cadillac’ health care coverage for union workers long after they retired. Newer companies had no such obligations, and were eating GM for lunch.
The Obama Administration intervened in 2009, putting together a massive bailout package that protected the interests of the unions at the expense of GM’s bondholders and stockholders. In the end, members of unions loyal to the Obama Administration managed to have many of their interests preserved – it was the long-term non-union, salaried GM employees who took it on the chin.
At the time, the Obama Administration’s argument – and the labor unions’ – was that these health care benefits were a promise made to these workers, and that promise should be honored – precisely the opposite of the argument the Administration is making with regard to TRICARE benefits now.
Conservatives, of course, opposed the General Motors bailout, calling for the company to go through the traditional bankruptcy process. As a result of that process, the contracts with the unions would be renegotiated, either under Chapter 11 reorganization or Chapter 7 liquidation. Most or all of the more generous retirement benefits would have been eliminated to satisfy bondholders and holders of secured debt. Yes, workers were promised those health care benefits into retirement as part of the overall compensation deal. But some conservatives who now argue that our promises of free health care for life to career military should be sacrosanct had no problem whatsoever with tearing up the Cadillac health plans in Michigan. “That’s why we have Medicare” goes the argument. Indeed, opposition to the bailout – letting the company go bankrupt and tearing up the long-term agreements with union retirees was by far the more popular position, at the time.
The difference, of course, is that auto workers generally retired around the time they qualified for Medicare – and were less likely to have suffered debilitating injuries. Veterans retire in their late 30s to their 40s after 20 years. Even 30-year veterans often have a ways to go before they qualify for Medicare.
Neither side has a monopoly on goodness and light. Both sides exhibit a certain amount of hypocrisy on the matter.
My modest proposal:
- Coordinate retiree care with private sector medical care. If a retiree takes a civilian job and is eligible for a group health care plan at work, then that group plan is the first payer. TRICARE should only pick up what’s left over. We already do this with Medicare benefits.
- Do the same thing for dependents that are covered through group plans at work.
- Increase deductibles for treatment of non-service-related injuries and illnesses, especially for dependents. We can have separate deductibles for different ranks, based on ability to pay. Deductibles in TRICARE are already extremely low compared to plans available in the civilian sector – yet military families have steady paychecks and – until the personnel cuts come in earnest – have more job security than those in the private sector who are paying taxes to subsidize low premiums for military families.
- Charge a modest premium per child. This simply reflects the real costs to the military health care system in providing care to young children.
- Don’t take in married recruits. Former Commandant of the Marine Corps, General Carl E. Mundy Jr., tried to stop taking in brand new married enlistees during the last major force draw-down in 1993. He was overruled by then Secretary of Defense Les Aspin. But General Mundy was right.