Before the end of summer, the Senate is expected to consider the FY2013 National Defense Authorization Act (NDAA). There are some major differences with the House, which passed its version weeks ago. Yet both versions of the FY2013 NDAA repudiate the administration’s reforms to Tricare, the military health-care system. This congressional rebuke comes even as the department’s health-care costs are spiraling out of control, rising at twice the rate of inflation for the civilian health-care sector. In the words of former secretary of defense Robert Gates, these costs are "eating the department alive."
From 2001 to 2012, military health-care expenditures rose over 170 percent, from $19 billion to $53 billion. As a share of defense spending, health care represented 6.1 cents of every dollar spent by DoD in 2010, up from 4.5 cents in 2000. At $53 billion, health care is roughly 10 percent of DoD’s base budget, and without reform it is expected to rise an additional 28 percent to $64 billion by 2015.
Three primary factors are responsible for soaring costs.
First, rates have remained virtually unchanged since the creation of Tricare in 1995. Working-age retirees pay just $520 a year per family to use Tricare. Meanwhile, the average American family spends between $4,000–5,000 per year on health care. When Tricare was implemented in 1996, working-age retirees and their dependents were expected to contribute 27 percent to the cost of their health care; today, that figure has fallen to 11 percent. Retirees over the age of sixty-five pay nothing for their plan, Tricare for Life. Yet, this group represents the highest per capita cost; in 2007, more than half of DoD health-care expenditures went to Tricare for Life beneficiaries.
Second, the number of people eligible for Tricare grew from 6.8 million to 9.7 million people, an increase of 43 percent. Moreover, these beneficiaries have health-service-utilization rates well above the averages of civilian health-care plans.
Third, Congress has significantly expanded Tricare by adding seventeen new programs, covering new procedures and loosening plan restrictions.
The president’s FY2013 budget request attempted some nominal reforms. It proposed modest increases in enrollment fees for working-age retirees, pegging future increases to medical inflation rates and imposing an enrollment fee for Tricare for Life. The House rejected these reforms in the FY2013 NDAA passed two weeks ago, instead including only a modest increase in pharmacy co-pays because of “the firmly-held sense of Congress that prior service to our nation is a pre-payment of health-care benefits in retirement.”
At the same time, Congress has often invoked the war fighter, the men and women serving in Iraq and Afghanistan, as the reason for expanding Tricare benefits and refusing cost increases. But as Brittany Gregerson convincingly shows, the greatest beneficiaries of Tricare in the last decade are retirees and their families, not active-duty service members. Furthermore, only 17 percent of the active-duty force today will serve the requisite twenty years to retain the right to remain on Tricare after retiring. Millions of men and women who faithfully served in Iraq and Afghanistan won’t see this benefit.
One Defense Business Board member, retired major general Arnold Punaro, has compared DoD to the auto industry: “General Motors did not start out to be a health care company that occasionally built an automobile. Today, we're on the path in the Department of Defense to turn it into a benefits company that may occasionally kill a terrorist.” Like other entitlements, military health care has become a political third rail.