Benderman Defense Trust

Projected Health Cuts Seen Tainting Task Force Work

An assumption in the Department of Defense’s 2008 budget request that $1.9 billion will be saved by raising TRICARE fees on military retirees next year  “poisons the water” for the work of the Task Force on the Future of Military Healthcare, says a key lawmaker.

The projected savings will reinforce a belief among retiree advocates that the task force is “stacked” and ready to meet DoD cost-cutting targets, said Rep. Vic Snyder (D-Ark.), the new chairman of the House armed services’ subcommittee on military personnel.

Snyder leveled that complaint at Dr. William Winkenwerder, assistant secretary of defense for health affairs, during a Feb. 13 hearing on the proposed fiscal 2008 defense health budget.

“It was not our intent to poison the water in any way,” Winkenwerder replied. “I hope that’s not the case.”

However, the $1.9 billion hole left in the defense health budget, he added, should be viewed by Congress as a sign of how committed defense leaders, especially military leaders, are to slowing retiree health costs.

Not only does the budget project $1.9 billion in savings on retiree healthcare, Snyder complained, but it ties those savings specifically to the work of the task force, which only held its first meeting last month.

Retiree advocates are understandably angry and even task force leaders are “very concerned,” Snyder said.

“The budget is saying flat out a recommendation will be made [by] a task force whose final report doesn’t come out until December of this year,” said Snyder.  “Some of us think that’s not very appropriate.”

Rep. John McHugh (N.Y.), ranking Republican on the subcommittee, shared Snyder’s concern and pressed Winkenwerder to explain what the department will do if those hefty savings aren’t realized.

“Do you have a back-up plan or a cut list?” McHugh asked. “That’s a lot of money.”

“It is,” said Winkenwerder. “And yes we do have some options that we could take. As you would guess, they are fairly dramatic in terms of their impact.”

Winkenwerder denied that the task force had been “stacked” with persons who support raising fees for military retirees. Yet he also expressed confidence that task force recommendations will be endorsed by DoD and urged they be given serious consideration by Congress. Recommendations to control costs are expected to be in an interim task force report due in May.

Critics can argue that Congress itself ensured that the task force was “stacked” by giving defense officials responsibility for appointing its 14 members and directing that half be drawn from inside the department.

Senior defense officials and top military officers, some of whom serve on the task force, made clear last year that they want fees, deductibles and co-payments raised sharply for retirees under age 65, their spouses or survivors. The aim is slow what they perceive as out-of-control health care spending that is encroaching on other defense budget priorities.

The department a year ago sought TRICARE fee increases that, over two years, would raise out-of-pockets costs for retirees E-6 and below by almost 50 percent, double them for senior enlisted retirees and triple them for officers. Beneficiary costs then would be indexed to rise annually by the percentage increase in health premiums for federal civilian employees.

Defense officials argued that TRICARE fees haven’t been raised since they were set in 1995. Officials last year projected their plan would save $735 million in fiscal 2007 and $1.8 billion after a second stepped increase in 2008. But Congress voted to block fee increases for at least a year.

When the fiscal 2008 defense budget was unveiled Feb. 5, Winkenwerder told Military Update the $1.9 billion savings projected for retiree healthcare meant the department was abandoning its call for a two-year phase of higher fees and assuming they occur in a single year.

But he said the projected savings really were a “placeholder” for whatever changes the task force eventually recommends.

Snyder said he has advised task force leaders to ignore the projected savings and just “do your business. It’s not the expectation of Congress that…your goal is to buy the recommendations of [last] year.”

Interviewed after the hearing, Snyder said last year’s proposed TRICARE fee increases, even if endorsed by the task force, “aren’t going to happen.” They simply are too steep to be acceptable, he said.

But Snyder doesn’t rule out including some TRICARE fee increases in the 2008 defense bill if the task force quickly endorses reasonable changes.

“If they come back with specific recommendations in a way that can have a timely impact on this year’s defense bill, of course we will embrace them if we can, and [if we] agree with them. But I don’t want them to feel any obligation to fulfill this [$1.9 billion savings target] in the president’s budget. That line shouldn’t have been there,” said Snyder.

Meanwhile, other lawmakers are introducing bills to inoculate retirees from sharp healthcare fee increases. The latest was unveiled Feb. 15 by Sens. Frank R. Lautenberg (D-N.J.) and Chuck Hagel (R-Neb.). It would limit TRICARE beneficiary fee increases to no more than the percentage rise in their compensation. In other words, healthcare fees for retirees could not exceed the annual percentage cost-of-living adjustment (COLA) in retired pay. Likewise, premiums for reservists under TRICARE Reserve Select would be capped at the annual percentage rise in basic pay.

The Military Coalition, an umbrella group for 35 separate military associations and veterans groups, endorses the Lautenberg-Hagel bill.

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