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McCain eyes barring retirees from Tricare Prime

Oct. 25, 2011 - 08:58PM   |   Last Updated: Oct. 25, 2011 - 08:58PM  |  
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The congressional panel tasked with making deficit-reduction decisions is facing sharply conflicting views on whether military retirement and health benefits should be put on the chopping block.

In the mix is a radical proposal from Sen. John McCain, R-Ariz., that would have potentially far-reaching effects on the health care of retirees and active-duty family members. McCain, ranking Republican on the Senate Armed Services Committee, has proposed barring military retirees from signing up for Tricare Prime, the least expensive Tricare option available to them.

The proposal is drawn from a March 2011 report from the nonpartisan Congressional Budget Office on ways to reduce the federal deficit.

Tricare Prime is the military's managed care plan, with an annual enrollment fee of $460 for individuals and $520 for families and low co-pays for treatment. The CBO said barring retirees and their families from Prime would reduce Tricare costs by $111 billion over 10 years.

But the proposal could have the secondary effect of reducing the number of civilian doctors willing to be part of the Tricare networks that provide care to active-duty family members, according to industry sources who asked not to be identified because they did not want to be quoted criticizing McCain.

About 5.4 million people are enrolled in Tricare Prime, with 1.5 million potentially affected by McCain's plan.

Seventy-one percent of retirees and retiree family members in Tricare Prime rely entirely on the military for health care. That would drop to 35 percent under the McCain proposal, according to the CBO's estimate.

How much such a change would cost retirees and their families would depend on their health care needs. Outpatient visits under Tricare Prime are $12, but the other two Tricare options require paying a percentage of costs 20 percent under Extra and 25 percent under Standard.

Because of the higher fees, the CBO expects that retirees and their families who were forced out of Prime and signed up for one of the other Tricare plans would voluntarily reduce doctor's visits and other expenses, which is a factor in the overall savings estimate.

"This option would begin to curtail the growth in health care costs, freeing those resources for other important uses," CBO said in its report.

A Government Accountability Office report in June said Tricare Extra and Tricare Standard have suffered problems getting civilian health care providers to accept military beneficiaries, largely because of low reimbursement rates that generally match the rates paid by Medicare. That's not a problem for Tricare Prime beneficiaries, because doctors who are part of the networks must accept them as patients.

McCain's recommendations on retired pay and health care are a shock to some.

Steve Strobridge of the Military Officers Association of America said the Arizona Republican's support for cutting military benefits was unexpected. "MOAA is surprised and disappointed," he said.

McCain said in an interview that he expected complaints.

"As someone who has committed his life to serving our nation and the men and women who protect it, this was not an easy decision," he said. "I believe we must all share in the burden to ensure that our nation's debt does not imperil our economic and security future.

"Supporting modest Tricare reform to protect the long-term viability of this important program is a step we must strongly consider," McCain said.

‘Supercommittee' begins work

McCain's proposal is one of many being considered in closed-door deliberations of Joint Select Committee on Deficit Reduction, the "supercommittee," which began work Oct. 19, with decisions expected by Nov. 18.

The outcome is far from clear because the House and Senate Armed Services committees have vastly different opinions about whether military benefits should be candidates for cuts.

The differences are so stark they raise questions about whether any deficit reduction plan that targets retiree benefits could pass the House.

On one side, the House Armed Services Committee opposes calls to raise Tricare costs for retirees, and its Republican members strongly object to a White House proposal to appoint a commission to overhaul the military retirement system with an eye toward reducing costs by making it more like private-sector plans.

An Oct. 14 letter to the deficit panel from Republicans on the House committee urges "caution" when considering cuts in benefits for current and future retirees.

The proposals "ignore the fact that … military retirement is deferred compensation for the extraordinary sacrifices made by military retirees through 20 to 30 or more years of service to the nation," said the letter signed by Rep. Buck McKeon, R-Calif., the House committee chairman, and other Republican members.

According to McKeon's letter, changes in retired pay and health care benefits "will be judged as breaking faith with current and former service members," and it specifically opposes dismantling the 20-year retirement plan, at least for now. A letter to the supercommittee from the House committee's ranking Democrat, Rep. Adam Smith of Washington, makes no recommendations about cuts in military benefits.

The view from the Senate Armed Services Committee is different. In separate letters to the supercommittee, Sen. Carl Levin, D-Mich., the armed services committee chairman, and McCain both endorse several deficit reduction proposals unveiled in September by President Obama.

They include a call to create a new $200 annual enrollment fee for Medicare-eligible retirees who sign up for Tricare for Life, to increase prescription drug co-pays for military family members and retirees, and to create the independent commission to study military retired pay.

The Tricare for Life fee would be $200 in 2012 and $295 in 2013, and would continue to rise.

Levin supports that plan but wants to cap annual fee hikes. He believes the charge should increase by no more than the annual percentage increase in military retired pay, and by the same amount as any increases in Tricare enrollment fees for military retirees under age 65. Levin also said a commission that looks at military retired pay should not stop there but also review the entire military compensation package, including basic pay, food and housing allowances, special pays and bonuses, health care and the tax-free status of some pays.

But Levin said a review does not necessarily mean cuts. He said he is looking for a discussion that would show the value of compensation and retirement to maintaining the viability of the all-volunteer force.

Levin agreed with his House counterpart McKeon that any changes to retired pay should not apply to current service members or retirees.

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