Military Medical Care [1 ed.] 9781614703112, 9781606925751

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Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved. Military Medical Care, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved. Military Medical Care, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

MILITARY MEDICAL CARE

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No part of this digital document may be reproduced, stored in a retrieval system or transmitted in any form or by any means. The publisher has taken reasonable care in the preparation of this digital document, but makes no expressed or implied warranty of any kind and assumes no responsibility for any errors or omissions. No liability is assumed for incidental or consequential damages in connection with or arising out of information contained herein. This digital document is sold with the clear understanding that the publisher is not engaged in rendering legal, medical or any other professional services.

Military Medical Care, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved. Military Medical Care, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

MILITARY MEDICAL CARE

Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved.

LINDA F. BERNSTEIN AND

SARAH W. CONSTABLE EDITORS

Nova Science Publishers, Inc. New York

Military Medical Care, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

Copyright © 2009 by Nova Science Publishers, Inc. All rights reserved. No part of this book may be reproduced, stored in a retrieval system or transmitted in any form or by any means: electronic, electrostatic, magnetic, tape, mechanical photocopying, recording or otherwise without the written permission of the Publisher. For permission to use material from this book please contact us: Telephone 631-231-7269; Fax 631-231-8175 Web Site: http://www.novapublishers.com

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NOTICE TO THE READER The Publisher has taken reasonable care in the preparation of this book, but makes no expressed or implied warranty of any kind and assumes no responsibility for any errors or omissions. No liability is assumed for incidental or consequential damages in connection with or arising out of information contained in this book. The Publisher shall not be liable for any special, consequential, or exemplary damages resulting, in whole or in part, from the readers’ use of, or reliance upon, this material. Independent verification should be sought for any data, advice or recommendations contained in this book. In addition, no responsibility is assumed by the publisher for any injury and/or damage to persons or property arising from any methods, products, instructions, ideas or otherwise contained in this publication. This publication is designed to provide accurate and authoritative information with regard to the subject matter covered herein. It is sold with the clear understanding that the Publisher is not engaged in rendering legal or any other professional services. If legal or any other expert assistance is required, the services of a competent person should be sought. FROM A DECLARATION OF PARTICIPANTS JOINTLY ADOPTED BY A COMMITTEE OF THE AMERICAN BAR ASSOCIATION AND A COMMITTEE OF PUBLISHERS. LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA ISBN: 978-1-61470-311-2 (eBook)

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CONTENTS Preface Chapter 1

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Chapter 2

Chapter 3

Chapter 4

Chapter 5

vii Military Medical Care: Questions and Answers Richard A. Best Jr Military Health Care: The Issue of “Promised” Benefits David F. Burrelli Military Health Care: Cost Data Indicate that Tricare Reserve Select Premiums Exceeded the Costs ofProviding Program Benefits United States Government Accountability Office DOD and VA Health Care: Challenges Encountered by Injured Servicemembers during Their Recovery Process United States Government Accountability Office Increases in Tricare Costs: Background and Options for Congress Richard Best and Don J. Jansen

Index

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21

47

79

93 101

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PREFACE Many military health care beneficiaries, particularly military retirees, their dependents, and those representing their interests, state that they were promised “free health care for life at military facilities” as part of their “contractual agreement” when they entered the armed forces. Efforts to locate authoritative documentation of such promises have not been successful. Congressional report language and recent court decisions have rejected retiree claims seeking ‘free care at military facilities’ as a right or entitlement. These have stated that the medical benefit structure made up of military health care facilities, Tricare and Medicare currently provide lifetime health care to military members, retirees and their respective dependents. Nevertheless, claims continue to be made, particularly by those seeking additional benefits from the Department of Defense, or attempting to prevent an actual or perceived reduction in benefits. Recent changes in the availability of military benefits and eligibility for these benefits have lead to speculation that retiree out-of-pocket costs may be increased. Growth in military health care spending, it has been argued, will lead to increased competition for defense dollars. Groups representing military retirees have stated that it is among their objectives to prevent what they describe as cost-shifting from the military to the beneficiaries. Although military health care is arguably among the most generous health benefit programs available, these groups see potential increases in out-of-pocket beneficiary payments as a part of the “broken promise.” Chapter 1 - The primary mission of the military health system, which encompasses the Defense Department’s hospitals, clinics, and medical personnel, is to maintain the health of military personnel so they can carry out their military missions, and to be prepared to deliver health care during wartime. The military health system also provides, where space is available, health care services in

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Preface

Department of Defense (DOD) medical facilities to dependents of active duty service members and to retirees and their dependents. The Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) was established in 1966 legislation as the military equivalent of a health insurance plan, run by DOD, for active duty dependents, military retirees and the dependents of retirees, survivors of deceased members, and certain former spouses. CHAMPUS reimburses beneficiaries for portions of the costs of health care received from civilian providers. As a follow-on to CHAMPUS, DOD established Tricare to coordinate the efforts of the services’ medical facilities. Tricare also provides beneficiaries with the opportunity to receive their care through a DOD-managed health maintenance organization (Tricare Prime), a preferred provider organization (Tricare Extra), or to continue to use regular CHAMPUS (now known as Tricare Standard). The military health system currently includes some 75 hospitals and 461 clinics serving an eligible population of 8.9 million. It operates worldwide and employs some 39,000 civilians and 92,000 active duty military personnel. Calculating the total cost of military medical spending is complicated by the different categories of funds involved; DOD statistics on total medical spending indicate a growth from $17.5 billion in FY2000 to an estimated $37 billion in FY2008 (the latter figure includes an accrual fund for future retirees). CHAMPUS was originally intended to provide retirees with health care benefits from the time of their retirement, usually in their mid-40s, to the time they become eligible for Medicare at age 65. In response to concerns about growing medical costs for retirees over age 65, the FY2001 Defense Authorization Act established a program, known as Tricare for Life, to serve as a second payer to Medicare for retirees and their spouses and survivors beginning in FY2002. Congress also extended a pharmacy benefit to Medicare-eligible beneficiaries. Some retirees groups advocate opening the Federal Employees Health Benefits Program (FEHBP) to military retirees, but an FEHBP demonstration project did not prove very popular among beneficiaries. Military health care issues are addressed in annual defense authorization and appropriations bills; for additional details and the status of current legislation, see CRS Report RL33999, Defense: FY2008 Authorization and Appropriations, by Pat Towell, Stephen Daggett, Amy Belasco. Chapter 2 - Many military health care beneficiaries, particularly military retirees, their dependents, and those representing their interests, state that they were promised “free health care for life at military facilities” as part of their “contractual agreement” when they entered the armed forces. Efforts to locate

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authoritative documentation of such promises have not been successful. Congressional report language and recent court decisions have rejected retiree claims seeking ‘free care at military facilities’ as a right or entitlement. These have stated that the medical benefit structure made up of military health care facilities, Tricare and Medicare currently provide lifetime health care to military members, retirees and their respective dependents. Nevertheless, claims continue to be made, particularly by those seeking additional benefits from the Department of Defense, or attempting to prevent an actual or perceived reduction in benefits. Recent changes in the availability of military benefits and eligibility for these benefits have lead to speculation that retiree out-of-pocket costs may be increased. Growth in military health care spending, it has been argued, will lead to increased competition for defense dollars. Groups representing military retirees have stated that it is among their objectives to prevent what they describe as cost-shifting from the military to the beneficiaries. Although military health care is arguably among the most generous health benefit programs available, these groups see potential increases in out-of-pocket beneficiary payments as a part of the “broken promise.” Chapter 3 - The Department of Defense’s (DOD) TRICARE Reserve Select (TRS) program allows most reservists to purchase coverage under TRICARE, the military health insurance program, when not on active duty. DOD intends to set premiums at a level equal to the expected costs of providing TRS benefits. The National Defense Authorization Act for 2007 required GAO to review TRS costs. As discussed with the committees of jurisdiction, GAO compared (1) the TRS premiums established by DOD to the reported costs of providing benefits under TRS in 2006 and (2) DOD’s projected costs for TRS before implementation to DOD’s reported costs for the program in 2005 and 2006. To do this work, GAO examined DOD analyses and interviewed DOD officials and external experts. Chapter 4 - Despite coordinated efforts, DOD and VA have had problems sharing medical records for servicemembers transferred from DOD to VA medical facilities. GAO reported in 2006 that two VA facilities lacked real-time access to electronic medical records at DOD facilities. To obtain additional medical information, facilities exchanged information by means of a time-consuming process resulting in multiple faxes and phone calls. Chapter 5 - In its FY2007, 2008, and 2009 budget submissions, the Department of Defense (DOD) proposed increases in Tricare enrollment fees, deductibles, and pharmacy co- payments for retired beneficiaries not yet eligible for Medicare. The raises were justified by DOD as necessary to constrain the growth of health care spending as a proportion of the overall defense budget in the next decade. Many beneficiaries argued that the proposed hikes were unfair and

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unnecessary. The proposed increases found favor in neither chamber and Congress passed legislation to prohibit such increases. The FY2007 Defense Authorization Act (P.L. 109-364) prohibited increases in premiums, deductibles and co-payments prior to September 30, 2007. For FY2008, the Administration based its budget submission on the assumption of fee increases but the FY2008 National Defense Authorization Act (P.L. 110-181) extended the prohibition of increases in copayments and enrollment fee until October 2008. For FY2009, the Administration’s budget submission assumed fee increases linked to recommendations made by the Task Force on the Future of Military Health Care. However, both House and Senate versions (H.R. 5658/S. 3001) of the defense authorization bill contain provisions to prohibit fee increases in 2009. In July 2008, the Tenth Quadrennial Review of Military Compensation recommended new fees linked to Medicare Part B premiums. This report will be updated as necessary.

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Chapter 1

MILITARY MEDICAL CARE: QUESTIONS AND ANSWERS∗ Richard A. Best Jr.

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ABSTRACT The primary mission of the military health system, which encompasses the Defense Department’s hospitals, clinics, and medical personnel, is to maintain the health of military personnel so they can carry out their military missions, and to be prepared to deliver health care during wartime. The military health system also provides, where space is available, health care services in Department of Defense (DOD) medical facilities to dependents of active duty service members and to retirees and their dependents. The Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) was established in 1966 legislation as the military equivalent of a health insurance plan, run by DOD, for active duty dependents, military retirees and the dependents of retirees, survivors of deceased members, and certain former spouses. CHAMPUS reimburses beneficiaries for portions of the costs of health care received from civilian providers. As a follow-on to CHAMPUS, DOD established Tricare to coordinate the efforts of the services’ medical facilities. Tricare also provides beneficiaries with the opportunity to receive their care through a DODmanaged health maintenance organization (Tricare Prime), a preferred ∗

Excerpted from CRS Report RL33537, dated August 4, 2008.

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Richard A. Best provider organization (Tricare Extra), or to continue to use regular CHAMPUS (now known as Tricare Standard). The military health system currently includes some 75 hospitals and 461 clinics serving an eligible population of 8.9 million. It operates worldwide and employs some 39,000 civilians and 92,000 active duty military personnel. Calculating the total cost of military medical spending is complicated by the different categories of funds involved; DOD statistics on total medical spending indicate a growth from $17.5 billion in FY2000 to an estimated $37 billion in FY2008 (the latter figure includes an accrual fund for future retirees). CHAMPUS was originally intended to provide retirees with health care benefits from the time of their retirement, usually in their mid-40s, to the time they become eligible for Medicare at age 65. In response to concerns about growing medical costs for retirees over age 65, the FY2001 Defense Authorization Act established a program, known as Tricare for Life, to serve as a second payer to Medicare for retirees and their spouses and survivors beginning in FY2002. Congress also extended a pharmacy benefit to Medicare-eligible beneficiaries. Some retirees groups advocate opening the Federal Employees Health Benefits Program (FEHBP) to military retirees, but an FEHBP demonstration project did not prove very popular among beneficiaries. Military health care issues are addressed in annual defense authorization and appropriations bills; for additional details and the status of current legislation, see CRS Report RL33999, Defense: FY2008 Authorization and Appropriations, by Pat Towell, Stephen Daggett, Amy Belasco.

MOST RECENT DEVELOPMENTS Although the Administration based its budget submission for FY2009 on assumed savings from higher co-payments and enrollment fees for retirees under age 65 and for pharmaceuticals, on May 22, the House approved its version of FY2009 Defense Authorization Act (H.R. 5658) which would preclude DOD from altering co-payment levels and instituting enrollment fees for retirees. The Senate version (S. 3001) would provide an addition $1.2 billion necessary to cover the rejection of the Administration’s plans for higher Tricare fees. In addition, both bills would require DOD to recalculate Tricare Reserve Select premiums which GAO has judged are higher than necessary to cover the costs of this program, which provides optional health care benefits to drilling reserve personnel not on active duty.

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BACKGROUND AND ANALYSIS Although the Military Health System is primarily designed to provide medical services to active duty service members, it is also a major source of medical care, in both military and civilian facilities, to the dependents of active duty personnel, military retirees, and retirees’ dependents. Since 1967, civilian care to millions of dependents and retirees (and retirees’ dependents) has been provided through a program originally known as the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). Since 1995, DOD has sought to coordinate the medical care efforts of the Army, Navy, and Air Force, and to institute managed care principles in a program known as Tricare. Tricare provides beneficiaries with the opportunity of choosing a health maintenance organization option, a preferred provider option, or a feefor-service option. The implementation of Tricare and other efforts to manage DOD health care more efficiently as well as downsize as part of the overall post-cold war reductions of the entire Defense Department, meant that less care was available to non-active duty beneficiaries, especially to those aged 65 and over. Informed, articulate, and well-organized, this population sought authorization to obtain health care benefits after they became eligible for Medicare. The Defense Authorization Act for FY200 1 (P.L. 106-259) provided that DOD would cover costs not covered by Medicare and also established a pharmacy benefit in a program known as Tricare for Life. This chapter attempts to answer basic questions about defense health care, its beneficiary population, the medical services it provides, its costs, and major changes that are underway or have been proposed. Citations are made to more detailed CRS studies where appropriate. The General Accountability Office (GAO) and the Congressional Budget Office (CBO) have also published important studies. In addition, the Office of the Assistant Secretary of Defense for Health Affairs Home Page may be of interest, available at [http://www.tricare.mil/].

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QUESTIONS AND ANSWERS

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1. What Is the Purpose of DOD’s Military Health System? DOD provides medical care to active duty military personnel, eligible military retirees, and eligible dependents of both groups. The primary mission of the military health system is to maintain the health of military personnel, so they can carry out their military missions, and to be prepared to deliver health care required during wartime. Often described as the medical readiness mission, this effort involves medical testing and screening of recruits, emergency medical treatment of servicemen and women involved in hostilities, and the maintenance of physical standards of those in the armed services. In support of those in uniform, the military health system also provides, where space is available, health care services to dependents of active duty service members. Space available care is also provided to retirees and their dependents. Some former spouses are also included. Since 1966, civilian medical care for dependents of active duty personnel, and for retirees and their dependents who are under age 65, has been available (with certain limitations and co-payments) through CHAMPUS. Since October 2001, retirees and their dependents eligible for Medicare (and enrolled in Medicare Part B) have had access to Tricare for Life, which pays most charges that are not covered by Medicare. Retirees also have a pharmacy benefit.

2. What Is the Structure of the Military Health System? Under the Secretary of Defense, DOD’s medical effort is headed by the Assistant Secretary of Defense for Health Affairs (ASD/HA), currently Dr. William Winkenwerder, Jr. An October 1991 reorganization strengthened the role of the ASD/HA by giving the incumbent planning, programming, and budgeting responsibilities for defense health care, including facilities operated by the Army, Navy (which also provides health care services to the Marine Corps), and Air Force. The Surgeons General of the Army, Navy and Air Force retain considerable responsibility for managing military medical facilities and personnel. The military health system currently includes 75 hospitals and 461 clinics operating worldwide, and employs more than 39,000 civilians and 92,000 active duty military personnel. Direct care costs include the provision of medical care directly to beneficiaries, the administrative requirements of a large medical establishment, and maintaining a capability to provide medical care to combat

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forces in case of hostilities. Civilian providers under contract to DOD have constituted a major portion of the defense health effort in recent years. Even if the number of active duty personnel in DOD remained the same over the next few years, costs associated with the military health system are expected to grow. This results from general inflation in the cost of health care and an increasing percentage of care being provided to retirees and their dependents. (In 1950 retirees made up 8% of those eligible for military health care; by 1997 it was over 50%.) Reductions in direct care can actually lead to growth in overall DOD health spending because beneficiaries whose access to military medical facilities is removed through base closures may turn to more costly care from civilian providers, for which they can seek reimbursement from DOD. Each year the Office of the Secretary of Defense (OSD) forwards a budget request to Congress for the Defense Health Program (DHP), which includes monies needed for procuring equipment, operation and maintenance, and care for civilian beneficiaries. Funding for the compensation of military medical personnel is contained in the Military Personnel appropriation accounts of the individual military departments. Additional requests are made in procurement and military construction accounts.

3. How Much Does Military Health Care Cost Beneficiaries? Active duty service members receive covered medical care in military facilities without additional costs, other than small per diem charges. Other beneficiaries pay differing amounts depending on their status and where they receive care. If care can be obtained at military facilities, there is no charge for medical services, and only small daily charges for hospital stays. Tricare costs vary by the option selected. Active duty personnel are automatically enrolled in Tricare Prime without any premiums; their dependents may join, also without premiums. Retirees (under age 65) must pay $230 (individual) or $460 (family) each year in enrollment fees. Small co-payments are required for visits to civilian care providers who are part of the Tricare network. Tricare Standard has a more complicated cost structure. There are no premiums or enrollment fees. At present, for outpatient care in civilian hospitals and clinics, there is a yearly deductible of $150 for an individual and $300 for a family (with lower fees for the most junior enlisted personnel). After the yearly deductible is met, dependents of active duty personnel pay 20% of CHAMPUSapproved care; all others pay 25%. For inpatient care, there is no deductible for CHAMPUS-approved care, but families of active duty service members pay a

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small per diem. Other Tricare beneficiaries will pay the lesser of 25% of the billed charges or a fixed daily amount ($535.) of care covered by Tricare. In addition, there is a “cap” on annual care; active duty families are reimbursed for allowable expenses over $1,000; other families are reimbursed for allowable expenses over $3,000. These figures are generalized; there are a number of important exceptions that are explained in the Tricare Handbook and in the underlying Federal Regulations (32 CFR 199). The Handbook urges beneficiaries to check with their Health Benefits Advisors before seeking care. Tricare Extra, the preferred provider option, has a cost structure similar to Tricare Standard except that beneficiaries who use health care providers in the Extra network pay 5% less than they would if using non-network providers. Inpatient care costs $14.80 per day for active duty dependents and $250 per day (or 25% of daily hospital costs, whichever is less) for retirees and their dependents. Care may still be obtained from military facilities if space is available. As part of the FY2007 budget submission, the Administration requested congressional authority to increase enrollment fees and co-payments for retirees and their dependents who are not eligible for Medicare and Tricare for Life. DOD, maintaining that costs of defense health care have doubled over the past decade and can be expected to reach $64 billion by FY2015, sought to have nonMedicare eligible retirees pay a larger share of their health care costs. It also proposed that rates be adjusted annually for inflation. The Administration expressed particular concern that private employers and state and local governments have encouraged their Tricare-eligible employees to depend on DOD rather than provide a benefit. In addition to higher enrollment fees for Tricare Prime and higher deductibles for Tricare Standard, the plan included small increases in co-payments for prescriptions obtained in retail pharmacies and a few medications would not be covered; this increase would also apply to beneficiaries who are eligible for Medicare. These proposals were not accepted, but Congress established a Task Force on the Future of Military Healthcare to assess and make recommendations regarding the availability and affordability of military healthcare over the long term. In its December 2007 final report the Task Force recommended phased-in changes in enrollment fees and deductibles for retirees under 65 “that restore cost-sharing relationships put in place when Tricare was created.” In addition, the Task Force recommended indexing the cost-sharing relationships and a modest enrollment fee for Tricare for Life beneficiaries. See [http://www.dodfuturehealthcare.net]. A GAO assessment (GAO- 07-647) concluded that although the DOD proposal for higher enrollment fees and deductibles might yield some $2.3 billion in savings, it would be unlikely to save

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the $9.8 billion that has been claimed. The Administration proposed higher fee levels for FY2008, but defense authorization legislation retains them at current levels and the provision was retained in the FY2008 Defense Authorization Act (Section 701, P.L. 110-181).

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4. In What Ways Has the Military Health System Been Changing in Recent Years? During the Cold War, military health care was designed to support a fullscale, extremely violent war with the Soviet Union and its allies in Europe. High casualties were anticipated along with a need for in-theater medical treatment facilities. The collapse of the Soviet Union and the end of the Warsaw Pact led to a major reassessment of U.S. defense policy. In the future, defense planners believe, the most likely conflicts will be of limited duration and involve smaller numbers of troops. The overall size of the active duty force has been reduced by one-third since the mid-1980s. Planners expect that casualties can be treated locally (with greater reliance on telemedicine) or, if necessary, evacuated to military medical facilities in the continental United States (CONUS). This strategic planning, along with associated military personnel reductions, requires a smaller medical establishment, fewer military medical personnel, and the closure of a number of hospitals and clinics In the mid-1990s, the number of military medical personnel declined by 15%, and the number of military hospitals was reduced by one-third. On the other hand, the number of potential beneficiaries of military medical care who are over age 65 has grown in absolute terms to 1.2 million, and now represents about one-half of the beneficiary population. This number is expected to grow until 2009. Most retirees become eligible for Medicare when they reach age 65 although some disabled retirees become eligible for Medicare earlier. In 1991 Congress acted (in P.L. 102-190) to reestablish CHAMPUS eligibility for persons under age 65 who become eligible for Medicare, Part A because of disability. Such persons are, however, required to enroll in Medicare Part B (and pay premiums) to be eligible for Tricare. In addition to revisions in military planning, nation-wide changes in the practice of medicine have also affected DOD. In particular, managed care initiatives and capitated budgeting that are widely adopted in the civilian community are being implemented in DOD’s Tricare program. Tricare is also designed to coordinate medical care efforts of the three military departments in three geographical regions, each under a single military commander known as a lead agent. The lead agents are responsible for managing care provided by all

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military medical facilities in their respective regions, and for contracting for additional care from civilian providers. These competitively-bid, region-wide contracts represent a significant change in delivery of defense health care and will, it is anticipated, result in cost savings. Detailed regulations governing Tricare were made effective on November 1, 1995 (32 CFR 199). Although care continues to be centered around military medical facilities, heavy reliance is placed on civilian contractors managed by the lead agent where necessary. The centerpiece of Tricare is the Tricare Prime option, a DOD version of a health maintenance organization (HMO) that the beneficiary joins, and which provides essentially all of his or her medical care. Care is provided through DOD medical personnel, hospitals, and clinics, as well as affiliated civilian physicians, hospitals, and other providers. Costs are contained through administrative controls and treatment protocols. In civilian practice, HMOs have been credited with some success in reducing costs, although opponents of these systems complain about restrictions on provider choice and incentives that may be created to constrain the delivery of services. Tricare Standard has been the military equivalent of a health insurance plan, run by DOD, for active duty dependents, military retirees and the dependents of retirees, survivors of deceased members, and certain former spouses. [1] Unlike private insurance plans, Tricare Standard does not require premiums. If care at a military facility cannot be provided (due to space limitations, limitations on the types of services that a facility is capable of providing, or due to the fact that a beneficiary may not live close enough to a military facility to make such travel reasonable), Tricare Standard will share responsibility with the beneficiary for the payment of care received from non-military health care providers, subject to regulations. Certain types of care, such as most dentistry and chiropractic services, are excluded. In addition to Tricare Standard and Tricare Prime there is a preferred-provider option, Tricare Extra. In Tricare Extra beneficiaries do not enroll or pay annual premiums but use physicians and specialists in the Tricare network and are charged 5% less for medical services. Many of the changes made in the past decade have been intended to improve medical care available to the active duty population, but they have also resulted in less medical care available in military facilities for retired personnel and their dependents. The introduction of Tricare for Life in FY2002 provided coverage for retired beneficiaries, but most of their care will undoubtedly be obtained from civilian providers reimbursed by Medicare and Tricare. The establishment of Tricare for Life and the current pharmaceutical benefit have contributed to significant growth in health care spending by DOD. The

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expanding costs of military healthcare reached $39 billion in FY2007 with the majority of the spending going to provide care to individuals no longer on active duty or to their family members. The Congressional Budget Office has also projected that DOD’s medical spending will grow by more than 80% in real terms by 2024. [2]

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5. Who Is Eligible to Receive This Care? Current law provides that active duty personnel are entitled to receive health care at military medical facilities. In addition, active duty dependents, military retirees and their dependents, and survivors of deceased members are eligible to receive health care at military medical facilities when space and professional services are available. Also eligible to receive care for a fixed fee in these facilities are certain government officials (including the President and Members of Congress) and certain foreign military personnel on active duty in the U.S. Reserve Component (their dependents are also entitled to care in military medical facilities and participation in Tricare under certain conditions, as discussed in question 14 below). Since 1967 DOD has funded care by civilian providers to dependents, retirees, and dependents of retirees who are under age 65 and unable to obtain access in a military health facility. After 1991 DOD began, with congressional support, moving towards managed care arrangements under the Tricare program that include greater use of civilian health care providers even for active duty personnel.

6. How Are Priorities for Care in Military Medical Facilities Assigned? Active duty personnel, military retirees, and their respective dependents are not afforded equal access to care in military medical facilities. Active duty personnel are entitled to health care in a military medical facility (10 U.S.C. 1074). According to 10 U.S.C. 1076, dependents of active duty personnel are “entitled, upon request, to medical and dental care” on a space-available basis at a military medical facility. Title 10 U.S.C. 1074 states that “a member or former member of the uniformed services who is entitled to retired or retainer pay ... may,

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upon request, be given medical and dental care in any facility of the uniformed service” on a space-available basis. This language entitles active duty dependents to medical and dental care subject to space-available limitations. No such entitlement or “right” is provided to retirees or their dependents. Instead, retirees and their dependents may be given medical and dental care, subject to the same space-available limitations. This language gives active duty personnel and their dependents priority in receiving medical and dental care at any facility of the uniformed services over military members entitled to receive retired pay and their dependents. The policy of providing active duty dependents priority over retirees in the receipt of medical and dental care in any facility of the uniformed services has existed in law since at least September 2, 1958 (P.L. 85-861). Since the establishment of Tricare and pursuant to the Defense Authorization Act of FY1996 (P.L. 104-106), DOD has established the following basic priorities (with certain special provisions): Priority 1: Active-duty service members; Priority 2: Active-duty family members who are enrolled in Tricare Prime; Priority 3: Retirees, their family members and survivors who are enrolled in Tricare Prime; Priority 4: Active-duty family members who are not enrolled in Tricare Prime; Priority 5: All other eligible persons.

The priority is given to active duty dependents to help them obtain care easily, and thus make it possible for active duty members to perform their military service without worrying about health care for their dependents. This is particularly important for active duty personnel who may be assigned overseas or aboard ship and separated from their dependents. As retirees are not subject to such imposed separations, they are considered to be in a better position to see that their dependents receive care, if care cannot be provided in a military facility. Thus, the role of health care delivery recognizes the unique needs of the military mission. The role of health care in the military is qualitatively different, and, therefore, not necessarily comparable to the civilian sector. The benefits available to service members or retirees, which require comparatively little or no contributions from the beneficiaries themselves, are considered by some to be a more generous benefit package than is available to civil servants or to most people in the private sector. Retirees may also be eligible to receive medical care at Department of Veterans Affairs (VA) medical facilities [3].

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7. What Is the Relationship of DOD Health Care to Medicare? Active duty military personnel have been fully covered by Social Security and have paid Social Security taxes since January 1, 1957. Social Security coverage includes eligibility for health care coverage under Medicare at age 65. It was the legislative intent of the Congress that retired members of the uniformed services and their eligible dependents be provided with medical care after they retire from the military, usually between their late-30s and mid-40s. CHAMPUS was intended to supplement — not to replace — military health care. Likewise, Congress did not intend that CHAMPUS should replace Medicare as a supplemental benefit to military health care. For this reason, retirees became ineligible to receive CHAMPUS benefits when, at age 65, they become eligible for Medicare. Many argued that the structure was inherently unfair because retirees lost Tricare/CHAMPUS benefits at the stage in life when they were increasingly likely to need them. It was argued that military personnel had been promised free medical care for life, not just until age 65. After considerable debate over various options for ensuring medical care to retired beneficiaries, Congress in the FY2001 Defense Authorization Act (P.L. 106-259) provided that, beginning October 1, 2001, Tricare pays out-of-pocket costs for services provided under Medicare for beneficiaries over age 64 if they are enrolled in Medicare Part B. This benefit is known as Tricare for Life (TFL). Disabled persons under 65 who are entitled to Medicare may continue to receive CHAMPUS benefits as a second payer to Medicare Parts A and B (with some restrictions).

8. Have Military Personnel Been Promised Free Medical Care for Life? Some military personnel and former military personnel maintain that they and their dependents were promised “free medical care for life” at the time of their enlistment. Such promises may have been made by military recruiters and in recruiting brochures; however, if they were made, they were not based upon laws or official regulations which provide only for access to military medical facilities for non-active duty personnel if space is available as described above. Space was not always available and Tricare options could involve significant costs to beneficiaries. Rear Admiral Harold M. Koenig, the Deputy Assistant Secretary of Defense for Health Affairs, testified in May 1993: “We have a medical care program for life for our beneficiaries, and it is pretty well defined in the law. That

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easily gets interpreted to, or reinterpreted into, free medical care for the rest of your life. That is a pretty easy transition for people to make in their thinking, and it is pervasive. We [DOD] spend an incredible amount of effort trying to reeducate people [that] that is not their benefit” [4]. Dr. Stephen C. Joseph, Assistant Secretary of Defense for Health Affairs in April 1998, however, argued that because retirees believe they have had a promise of free care, the government did have an obligation. Joseph did not specify the precise extent of the obligation. The FY1998 Defense Authorization Act (P.L. 105- 85) included (in Section 752) a finding that “many retired military personnel believe that they were promised lifetime health care in exchange for 20 or more years of service,” and expressed the sense of Congress that “the United States has incurred a moral obligation to provide health care to members and [retired] members of the Armed Services.” Further, it is necessary “to provide quality, affordable care to such retirees.” [5]

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9. What Actions Are Being Taken to Improve Military Medical Care for Retirees Aged 65 and Over? What is Tricare for Life? As noted above, military medical care is theoretically available to all retirees on a space-available basis. As a practical matter, however, the amount of space available to retirees over age 65 who are eligible for Medicare has become increasingly limited. This results from base closures, changing approaches to military medicine, and growth in the number of retirees. Retirees and retiree organizations have complained of being frozen out of military facilities, of being responsible for higher costs at a stage of life when more health care is required, and, especially, of the burden of having to pay for expensive pharmaceuticals that are taken on a regular basis. As a result of legislation in the 105th and 106th Congresses, several demonstration projects were established in specific localities to assess beneficiary acceptance and the fiscal viability of different approaches. These included: •

Medicare subvention by which care would be provided by DOD to retirees age 65 and over essentially on the same basis as is provided to retirees under 65 in Tricare Prime [enrollment fees of $230/460 (self/self+dependent) are required annually]; the legislation provides that DOD would be reimbursed for a portion of the costs of this care by Medicare. (The Medicare subvention demonstration project was established by Section 4015 of the Budget Reconciliation Act of 1998

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•

•

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•

13

(P.L. 105-33); it was a three-year project (termed Tricare Senior Prime) at six sites that was phased in beginning in July 1998 and concluding in December 2001.) [6] Access to the FEHBP plans used by civil service retirees with DOD paying the same share of premiums that is paid by the government for civilian enrollees (approximately 72%). An FEHBP demonstration was established by Section 721 of the FY1999 Defense Authorization Act (P.L. 105-261); it was conducted at eight sites for three years, ending December 31, 2002. It did not attract a large number of enrollees. Tricare as a supplement to Medicare. Established by Section 722 of the FY1999 Defense Authorization Act (P.L. 105-261), this program was scheduled to begin in 2000 and end in December 2002 but was overtaken by the establishment of Tricare for Life. A DOD-sponsored pharmaceutical benefit. The FY200 1 Defense Authorization Act (P.L. 106-398) extended pharmacy benefits to all retirees beginning in April 2001. Beneficiaries who became 65 before April 1, 2001, do not have to enroll in Medicare Part B to receive the DOD pharmacy benefit; those who turned 65 on or after April 1, 2001, have to be enrolled in Medicare Part B to use the pharmacy benefit.

In late 1999 and early 2000, a number of bills were introduced to provide more extensive medical care options to beneficiaries aged 65 and over. Some of the bills would have extended the durations of the demonstration projects or expanded them nationwide; others would have had DOD pay 100% of FEHBP premiums for certain older retirees. All such proposals would have entailed significant expenditures. During consideration of the FY2001 Defense Authorization Bill (H.R. 4205) on May 18, 2000, the House adopted an amendment to extend Medicare subvention nationwide by 2006. During consideration of its version of the FY2001 Defense Authorization Bill (S. 2549), the Senate on June 7, 2000, adopted an amendment that extended eligibility for participation in Tricare to beneficiaries over age 64, effective October 2001. Medicare would serve as a first payer for services provided, with Tricare providing reimbursement for some types of care that Medicare does not cover. Beneficiaries would be required to participate in Medicare Part B. Another floor amendment that would have included retiree access not only to Tricare but also to FEHBP (with the government paying all premiums for those whose service began before June 1956) failed on a procedural vote that required support by three-fifths of the senators. In

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late August 2000, the Clinton Administration indicated opposition to these initiatives to extend Tricare to beneficiaries over age 64 because of concerns with potential costs. The Senate amendment was essentially adopted by the conference committee along with provisions establishing a Medicare-eligible retiree health care fund that would accumulate regular transfers of funds from DOD to pay for Tricare benefits to Medicare-eligible beneficiaries. The conference version was adopted by large majorities in the House on October 11 and in the Senate on October 12 and was signed into law on October 30, 2000, becoming P.L. 106-398. Beginning October 1, 2001, for beneficiaries over age 64 who are enrolled in Medicare Part B, the Defense Department, through Tricare for Life (TFL) serves as a second payer to Medicare, paying out-of-pocket costs for medical services covered under Medicare. The beneficiaries are also eligible for medical benefits covered by Tricare but not by Medicare. The requirement for enrollment in Medicare Part B, which will cost $96.40 per month in 2008 for most military retirees is a source of concern to some beneficiaries, especially those who did not enroll in Part B when they became 65 and thus must pay significant penalties. Some argue that this requirement is unfair since Part B enrollment was not originally a prerequisite for access to any DOD medical care. On the other hand, waiving the penalty for military retirees could be considered unfair to other Medicare-users who did not enroll in Part B upon turning 65. The Medicare Prescription Drug, Improvement, and Modernization Act (P.L. 108-173), passed in December 2003, waived penalties for military retirees in certain circumstances during an open season in 2004. [7]

10. Should the Federal Employees Health Benefits Program (FEHBP) Be Open to Military Retirees? Some have long advocated making the health care plans for Federal civil servants and civil service retirees also available to Medicare-eligible military retirees instead of or in addition to Medicare subvention plans. The civil service system, known as the Federal Employees Health Benefits Program (FEHBP), is widely considered to be successful. It allows beneficiaries to choose among a number of health care plans. The government pays some 72% of the premiums and beneficiaries are responsible for the rest. Opening FEHBP to Medicareeligible military retirees would cause minor administrative expenses, but subsidizing annual enrollment fees for retirees and their dependents over 65 could involve around $2 billion annually (if the government paid 72% of average

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premiums), according to a Congressional Budget Office estimate. On the other hand, an FEHBP option would allow retirees to choose the type of health care plan they prefer and it would not affect the delivery of military medical care to the active duty population. In addition, FEHBP plans would also ensure the availability of care in geographic areas that might not be reached by Tricare options. Some potential beneficiaries, however, would not be willing to make the substantial premiums that are required for participation in FEHBP. Despite objections from the Defense Department, the FY1999 Defense Authorization Act (P.L. 105-26 1) included a FEHBP demonstration project limited to 66,000 participants in 6-10 geographic areas; enrollees had to pay the same level of premiums as paid by civil servants. The project began in January 2000 and ran for three years ending on December 31, 2002. It was evaluated by the Defense Department and the GAO, and it was it was evident that relatively few retirees opted for FEHBP coverage even after the initial open season was extended and additional brochures mailed out. [8] Legislation introduced in subsequent Congresses would have extended FEHBP eligibility to military retirees. Some bills included provisions by which DOD would pay the entire costs of FEHBP for those retirees (and their families) who served prior to June 7, 1956 (since statutory medical benefits for retiree medical care came into force on that date). Such a proposal has been estimated to cost over $4 billion annually.

11. How Are User’s Fees and Fee Schedules for Medical Services Assessed? User’s fees for medical services represent a means of generating revenues from those who use the services. In recent years user’s fees, also known as copayments, have been considered as a means of generating revenues in the military medical care system. Some observers see increased user’s fees as a primary way to increase beneficiaries’ cost-consciousness, arguing that far more than premiums and deductibles, cost-sharing discourages unnecessary medical services. The consideration of these fees has been subject to strong opposition from military personnel, retirees, and others who have viewed free or inexpensive health care as an important benefit of military service. To these individuals, user’s fees represent an “erosion of earned benefits.” Specifically, these benefits are not viewed by some beneficiaries as an insurance program paid for in a market context, but rather as a benefit that is earned by the unique nature of demands inherent in performing military service. The Defense Department’s FY2007 and FY2008

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budget submissions included provisions that would raise enrollment fees, copayments, and deductibles for retirees under age 65 and makes small increases in deductibles for pharmaceuticals for all retirees. This proposal has received opposition from retiree organizations. [9] Congress has refused to authorize such increases. By law (P.L. 102-396) and Federal Regulation (32 CFR 199.14), health care providers treating Tricare patients cannot bill for more than 115% of charges authorized by a DOD fee schedule. In some geographic areas, providers have been unwilling to accept Tricare patients because of the limits on fees that can be charged. DOD has authority to grant exceptions. Statutes (10 U.S.C. 1079) also require that payment levels for health care services provided under Tricare be aligned with Medicare’s fee schedule “to the extent practicable.” Over 90% of Tricare payment levels are now equivalent to those authorized by Medicare, about 10% are higher, and steps are being taken to adjust some to Medicare levels.

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12. What Will Be the Effect of Base Realignment and Closure (BRAC) on Military Medical Care? Base realignment and closures undertaken as part of the restructuring of the Defense Department in the post-Cold War period have prompted changes in the military health services system. As a result of base realignment and closure (BRAC) actions, 35% of the DOD medical treatment facilities providing services in 1987 were closed by the end of 1997 (although the number of eligible beneficiaries decreased by only 9%). Another BRAC round was undertaken in 2005. [10] Criteria for realignments and closures, established by DOD with congressional consent, include the need to deploy a force structure capable of protecting the national security, anticipated funding levels, and a number of military, fiscal, and environmental considerations that encompass community economic impact and community infrastructure. Four BRAC Commissions have specifically considered the effect of closing DOD hospitals and clinics on active duty military personnel as well as on other beneficiaries and potential beneficiaries. The first two BRAC Commissions recommended 18 military hospital closures; the third BRAC Commission recommended an additional 10. Facilities closed include hospitals in Philadelphia, PA; Oakland, CA; Orlando, FL; San Francisco, CA; Ft. Devens, MA; Ft. Ord, CA; and Long Beach, CA. In one case, the Commission overruled a DOD proposal to close the Naval Hospital in Charleston, SC.

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While DOD had commissioned a study group to examine military treatment facilities for the 1995 BRAC round, the assessment of military medical services appears to have been more comprehensive in 2005. A Medical Joint Cross-Service Group (JCSG) was established to review DOD healthcare functions and to provide BRAC recommendations. The review included healthcare education and training, healthcare services, medical and dental research, development, and acquisition. The Surgeon General of the Air Force chaired the Medical JCSG; other members included representatives from the military services, the Joint Staff, and the Office of the Secretary of Defense. The recommendations were submitted to senior DOD leadership for consideration in the preparations of the Secretary of Defense’s recommended BRAC actions. Recommendations included closing Brooks City- Base, San Antonio, TX; realigning Walter Reed Medical Center, Washington, DC; realigning the inpatient medical function at Lackland Air Force Base in San Antonio, TX and other initiatives. [11] With congressional encouragement, DOD has developed transition medical plans for certain closure sites. Medicare-eligible users of closed military hospitals will be encouraged to avail themselves of Tricare for Life and DOD’s mail order pharmacy. Nonetheless, the closure of military hospitals and clinics can be a source of anxiety, especially in communities that have attracted large numbers of residents seeking access to military medical care.

13. What Is the DOD Pharmacy Benefit? According to DOD officials, the pharmacy benefit is the one most in demand by beneficiaries. GAO has estimated that it costs some $1.3 billion annually. Those with access to military treatment facilities and those who are enrolled in Tricare Prime receive prescribed pharmaceuticals free of charge. Users of Tricare Extra and Tricare Standard are reimbursed for pharmaceuticals in accordance with the same schedule of deductibles and co-payments required for other medical services. In accordance with the provisions of the FY200 1 Defense Authorization Act (P.L. 106- 398), effective April 1, 2001, retirees have access to DOD’s National Mail Order Pharmacy and retail pharmacies in addition to pharmacies in military treatment facilities. Beneficiaries who turned 65 prior to April 1, 2001, qualify for the benefit whether or not they purchased Medicare Part B; beneficiaries who attain the age of 65 on or after April 1, 2001, must be enrolled in Medicare Part B to receive the pharmacy benefit. (There are deductibles for use of non-network pharmacies and co- payments for pharmaceuticals received from the National Mail Order Pharmacy and from retail pharmacies.)

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Military pharmacies do not necessarily carry every pharmaceutical available; thus, even some with access to military facilities must have certain prescriptions filled in civilian pharmacies; for these prescriptions beneficiaries can be reimbursed through Tricare. In October 1997, DOD implemented the National Mail Order Pharmacy (subsequently known as the Tricare Mail Order Pharmacy) that allows beneficiaries to obtain some pharmaceuticals by mail with small handling charges. The mail order program is designed to fill long-term prescriptions to treat conditions such as high blood pressure, asthma, or diabetes; it does not include medications that require immediate attention such as some antibiotics. In 2004 DOD, in response to guidance in the FY2000 Defense Authorization Act (P.L. 106-65, section 701), established a uniform formulary to discourage use of expensive pharmaceuticals when others are medically appropriate. Regulations to this effect were published in the Federal Register on April 1, 2004 (vol. 69, pp. 17035-17052). Prescriptions filled by the Tricare Mail Order Pharmacy currently cost $3 for a 90-day supply of a generic medication, $9 for a 90-day supply of a brand-name formulary medication, and $22 for a 30-day supply of a nonformulary medication. Section 702 of the FY2008 Defense Authorization Act (P.L. 110-181) prohibited increases in pharmacy co-payments through the end of FY2008.

14. What Medical Benefits are Available to Reservists? Reservists and National Guardsmen (members of the “Reserve Component”) who are serving on active duty have the same medical benefits as regular military personnel. Reserve personnel while on active duty for training and during weekly or monthly drills also are covered for illnesses incurred while on training or traveling to or from their duty station. In recent years, especially as members of the Reserve Component have had a larger role in combat operations overseas, Congress has broadened the medical benefits for Reservists. Those who have been notified that they are to be activated are now covered by Tricare up to 90 days before reporting. Reservists who have served more than 30 days after having been called up for active duty in a contingency are eligible for 180 days of Tricare coverage after the end of their service under the Transitional Assistance Management Program (TAMP). In addition, in 2004 Congress authorized (in P.L. 108-375, section 701) the Tricare Reserve Select (TRS) program for Reserve Component members called to active duty, under Title 10, in support of a contingency operation after September 11, 2001. To be eligible for TRS,

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reservists must agree to stay in the Reserves for one or more years and must pay monthly premiums (in 2008, $81 for an individual; $253 for a member and family coverage). The FY2006 Defense Authorization Act (P.L. 109-163) makes Tricare Standard available to all members of the Reserve Component who continue to serve in the Selected Reserves. In addition to those already eligible for Tricare Reserve Select, those who are unemployed or have no access to employersponsored health care will pay fees that cover 50% of the costs of the program; other reservists will pay fees covering 85% of the costs. (Those using Tricare Reserve Select pay fees that cover approximately 28% of the costs.) The FY2007 Defense Authorization Act, P.L. 109-364 repealed the threetiered cost share Tricare program for reserves established in the FY2006 legislation and replaced it with a single program that would permit non-active duty reservists to obtain Tricare coverage by paying a premium of 28% of the total costs of their coverage. The new Tricare Reserve Select program began October 1, 2007. In late 2007 the Government Accountability Office (GAO) issued a report indicating that TRS premiums have exceeded the costs of the program. FY2009 defense authorization bills (H.R. 5658/S. 3001) would require DOD to recalculate fee schedules. (See GAO Report, Military Health Care: Cost Data Indicate that TRICARE Reserve Select Premiums Exceeded the Costs of Providing Program Benefits,December 2007, GAO-08- 104.)

REFERENCES [1]

[2]

[3] [4]

For more information on those benefits available to former spouses, see CRS Report RL3 1663, Military Benefits for Former Spouses: Legislation and Policy Issues, by David F. Burrelli. Congressional Budget Office, Long-Term Implications of Current Defense Plans and Alternatives: Summary Update for Fiscal Year 2006, October 2005. See CRS Report RL32975, Veterans’ Medical Care: FY2006 Appropriations, by Sidath Viranga Panangala. U.S. Congress, House of Representatives, Committee on Armed Services, Military Forces and Personnel Subcommittee, 103rd Congress, 1st session, National Defense Authorization Act for Fiscal Year 1994 — H.R. 2401 and Oversight of Previously Authorized Programs, Hearings, H.A.S.C. No. 10313, April 27, 28, May 10, 11, and 13, 1993, p. 505.

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For additional background, see CRS Report 98-1006, Military Health Care: The Issue of “Promised” Benefits, by David F. Burrelli. [6] For background on the Medicare subvention issue, see CRS Report 96-207, Military Medical Care and Medicare Subvention Funding, by David F. Burrelli and Tina Nunno. The project ended on December 31, 2001. [7] See CRS Report RS21731, Medicare: Part B Premium Penalty, by Jennifer O’Sullivan. [8] See U.S., General Accountability Office, Report GAO-03-547, Military Retiree Health Benefits: Enrollment Low in Federal Employee Health Plans under DOD Demonstration, June 2003. [9] See CRS Report RS22402, Increases in Tricare Fees: Background and Options for Congress, by Richard A. Best Jr. [10] See CRS Report RL32216, Military Base Closures: Implementing the 2005 Round, by David E. Lockwood. [11] For further information, see the DOD BRAC website, [http://www.defenselink.mil/brac/].

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[5]

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In: Military Medical Care ISBN 978-1-60692-575-1 Editor: Linda F. Bernstein et al., pp. 21-45 © 2009 Nova Science Publishers, Inc.

Chapter 2

MILITARY HEALTH CARE: THE ISSUE OF “PROMISED” BENEFITS∗ David F. Burrelli

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ABSTRACT Many military health care beneficiaries, particularly military retirees, their dependents, and those representing their interests, state that they were promised “free health care for life at military facilities” as part of their “contractual agreement” when they entered the armed forces. Efforts to locate authoritative documentation of such promises have not been successful. Congressional report language and recent court decisions have rejected retiree claims seeking ‘free care at military facilities’ as a right or entitlement. These have stated that the medical benefit structure made up of military health care facilities, Tricare and Medicare currently provide lifetime health care to military members, retirees and their respective dependents. Nevertheless, claims continue to be made, particularly by those seeking additional benefits from the Department of Defense, or attempting to prevent an actual or perceived reduction in benefits. Recent changes in the availability of military benefits and eligibility for these benefits have lead to speculation that retiree out-of-pocket costs may be increased. Growth in military health care spending, it has been argued, will lead to increased competition for defense dollars. Groups representing ∗

Excerpted fro CRS Report 98-1006, dated January 19, 2006.

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David F. Burrelli military retirees have stated that it is among their objectives to prevent what they describe as cost-shifting from the military to the beneficiaries. Although military health care is arguably among the most generous health benefit programs available, these groups see potential increases in out-of-pocket beneficiary payments as a part of the “broken promise.”

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INTRODUCTION In recent years, numerous efforts have been made to increase, or prevent any decrease, of health care benefits and options available to military retirees. Many military retirees and others seeking these increases, or attempting to prevent any decrease in their benefits, often argue their claims based on assertions that the medical care promised to them is no longer available. [1] These retirees say that the relatively large military medical infrastructure that existed during the cold war provided greater access for retirees. They note that as a result of the reduction of the size of the Department of Defense (DOD), fewer DOD medical facilities are available. [2] In certain instances, organizations representing military retirees have alluded to broken promises. Some individuals have stated that the promised benefits included what they term “free” health care for life; others describe the promise as “free care for life in military health care facilities.” Congressional report language and recent court decisions based on a review of the legislative history of the statutory language related to military health care for retirees and dependents have not supported these assertions. These arguments also have not been supported by authoritative written documentation. In apparent response, a number of bills have been introduced seeking to expand military health care options. In the 108th Congress, at least two of these bills (H.R. 58 and S. 56) cite a “promise” or “commitment” as the rationale for provisions that would “restore health care coverage to retired members of the uniformed services.” [3] More recently, H.R. 602 and S. 407, “Keep Our Promises to America’s Military Retirees Act,” were introduced in the 109th Congress. These have attracted a relatively large number of co-sponsors. (These bills are discussed in more detail in the “Recent Legislation” section of this report.) Although previous attempts to pass such legislation have failed, Congress substantially expanded the military retiree health care benefits via the FY2001 National Defense Authorization Act. [4]

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BACKGROUND Under current law, active duty personnel are entitled to military health care and have a right or claim to this care. Active duty dependents are also entitled to this care, however, this entitlement is limited to space or service availability restrictions. Such an entitlement obligates the military to provide this care (subject to any stated restrictions such as space-availability for active duty dependents). As implemented by the Department of Defense, and interpreted by the courts, retirees and their dependents, while eligible for care on a space- or service-available basis, have no statutory entitlement to such care, thereby taking the position that the military services have full discretion determining when and under what circumstances retirees and their dependents will receive care from military treatment facilities or MTFs. Historically, those dependents and retirees (under age 65) who are unable to get care at MTFs can seek care via civilian providers under DOD’s Tricare benefit plan or Medicare, if eligible. Tricare is the name of the health benefit plan for all military beneficiaries. Tricare is composed of three types of coverage: Prime, Extra and Standard. Tricare Prime is comparable to a Health Maintenance Organization (HMO) using the MTF as the base of health care services. Tricare Extra is similar to a Preferred Provider Organization or PPO. Finally, Tricare Standard is a fee-for-service plan (formerly known as the Civilian Health and Medical Program of the Uniformed Services, (CHAMPUS [5])). Active duty personnel and their dependents are automatically enrolled in Tricare Prime. Retirees (under age 65) and their dependents must enroll in Tricare Prime or seek care via Tricare Extra or Standard. Until recently, at age 65, retirees lose eligibility for Tricare and become eligible for Medicare benefits. Thus, military service provides lifetime care from a number of government-sponsored or reimbursable sources. [6] With the passage of the FY2001 National Defense Authorization Act, beginning in October 2001, eligible military retirees over age 64 were allowed to participate in Tricare provided that they are enrolled in Medicare Part B. This new benefit is known as “Tricare for Life.”

“THE PROMISE” The creation of health care benefits and the rules and regulations pertaining to these benefit are within the authority of Congress. Under the Constitution,

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Congress has the authority To make Rules for the Government and Regulation of the land and naval Forces. [7] Without explicit authorization from Congress, such benefits can not be created nor conferred by the military or others. Searches of the relevant literature and legislative history do not reveal a congressional authorization for “free health care for life at military facilities” for military retirees. Some have asserted that prior to 1956, the lack of legal language to the contrary allowed the military to be contractually obliged to provide “promised” care. However, under our system of government, the military does not have the constitutional authority to create such a contractual obligation. The courts (as discussed below on pages 5, 6, and 7) have held that only Congress has such authority under the Constitution. The history of military health care shows that care provided to active duty members was originally paid for by the members as far back as 1799. [8] In that year, Congress enacted legislation for the military establishment to care for the “regimental sick” as well as an act for the “relief of sick and disabled seamen.” [9] Later changes provided permissive care to dependents and, later still, to retirees and their dependents. However, at no time were military retirees provided an entitlement to care. In 1956, Congress put the permissive nature of this benefit into law: ... a member or former member of a uniformed service who is entitled to retired or retainer pay, or equivalent pay may, upon request, be given medical and dental care in any facility of any uniformed service, subject to the availability of space and facilities and the capabilities of the medical and dental staff. [10] [Emphasis added.]

In 1966, Congress created Medicare which was designed to provide health care for people over age 65 as well as certain disabled individuals. A problem arose in that military personnel tended to retire at a relatively younger age (in most cases, early- to mid-40s) and could be without guaranteed access to health care until age 65. In other words, these retirees were not entitled to military health care and were too young to participate in Medicare. In an effort to address this inability to gain access, as well as provide for those active duty dependents who could not gain access to military medical facilities, Congress created the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). Modeled after the Blue Cross/Blue Shield high option, CHAMPUS was a fee-for-service benefit. Although it required no premiums, CHAMPUS did require cost sharing on the part of the beneficiary. Thus, CHAMPUS was not free, nor did it relate to care from MTFs. (As noted above, CHAMPUS later became part of Tricare.)

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Numerous assertions have been made concerning “promises” to military personnel and retirees with regard to health care benefits. Many appear to believe that they were “promised free health care for life at military facilities.” Efforts to locate written authoritative documentation of such “promises” have not been successful. However, some military recruiting literature does make general statements about health care. As an example, a recruiting brochure cited by The Retired Officers Association states:

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Health care is provided to you and your family members while you are in the Army, and for the rest of your life if you serve a minimum of 20 years of Federal service to earn your retirement. [11]

This language, of course, does not mention “free” health care. Nor does it mention that such care is to be provided via the military health services system and/or in military facilities. This advertised statement is correct in that military retirees do receive their promised lifetime benefits via MTFs (including space- or service- available care in retirement), Tricare and Medicare — all earned as a result of their federal military service. The same source quotes a 1991 CRS report as stating that “the ‘free health care for life’ promise was functionally true and had been used to good advantage for recruiting and retention.” [12] The report is much more nuanced, and developed the analysis more deeply than this. [13] It noted that the 1956 legislation did not authorize a legal entitlement for care to be provided to retirees and their dependents, but that the retiree and dependent population, in proportion to the available space in military health care facilities, was so low that as a practical matter, such care was usually available. It also observed that this de facto availability was, without question, a useful tool for recruiters. The end result appears to be that, regardless of the lack of statutory entitlement, many active duty personnel and their dependents, and retirees and their dependents, erroneously came to believe that they were guaranteed free health care in military facilities for life. Other sources have stated that such promises, whether or not actually made, are groundless. For example, in responding to questions from Congress concerning what benefits were promised, Rear Admiral Harold M. Koenig, Deputy Assistant Secretary of Defense for Health Affairs, sought to clarify a statement made by Vice Admiral Hagen concerning these benefits. Rear Admiral Koenig stated in 1993 that: There is a problem here of interpretation. [Vice Admiral Donald Hagen, Medical Corps Surgeon General, U.S. Navy] said medical care for life. That is

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David F. Burrelli true. We have a medical care program for the life of our beneficiaries, and it is pretty well defined in the law. That easily gets interpreted to, or reinterpreted into, free medical care for the rest of your life. That is a pretty easy transition for people to make in their thinking, and it is pervasive. We spend an incredible amount of effort trying to reeducate people that that is not their benefit. [14]

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According to the Department of Defense, “[a]s thus formulated, medical care for retirees in military medical facilities has always been, and to this day remains, a privilege, not an absolute right, as has been assumed by many.” [15] The federal courts have repeatedly held that such claims of a “promise” have no legal standing. In late 1997, a U.S. District Court dismissed a lawsuit by retirees against the U.S. seeking “free health care” from the military. According to the court: The court must reject plaintiffs’ contention that [10 United States Code sec. 1074(b)] confers authority on the military branches to guarantee free lifetime medical care to retirees and their dependents. First, plaintiffs cite to no regulation under sec. 1074(b) guaranteeing such care, but only cite to recruiting materials that make general representations as to eligibility for continued health care for retirees and their dependents. Even if the military departments had promulgated regulations under sec. 1074(b) that make an unequivocal promise of lifetime medical care for retirees and their dependents, the language of sec. 1074(b) itself is clearly conditional. Any regulations purporting to guarantee free and unconditional lifetime health care to retirees and their dependents would be inconsistent with the statute and therefore invalid. Larionoff, 431 U.S. at 873 n. 13 (“A regulation which ... operates to create a rule out of harmony with the statute ... is a mere nullity.”) (citing Manhatten General Equip. Co. V. Commissioner, 297 U.S. 129, 134 (1936)). Furthermore, under sec. 1074(b), “a retired member of a uniformed service is not entitled to medical care as a matter of right,” Lord v. United States, 2 Cl. Ct. 749, 756 (1983), and “retired personnel who fail to receive such care cannot successfully maintain an action for money damages based on such failure.” Id. At 757; see also Watt v. United States, 246 F. Supp. 386, 388 (E.D.N.Y. 1965 ) (“furnishing [medical care in a military facility] to a retired soldier is discretionary, not mandatory”). Because the law states that retirees are not entitled to health care as a matter of right, the representations upon which plaintiffs rely are to no effect. [16]

With respect to the contention that recruiters and others allegedly made “promises of free care for life,” and that such “promises” must be honored by the government, the court notes:

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Federal officials who by act or word generate expectations in the people they employ, and then disappoint them, do not ipso facto create a contract liability running from the Federal Government to the employee .... [17]

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In a separate case (Schism and Reinlie v. U.S.), another federal judge found military “retirees 65 and older do not have a binding contract with the Pentagon that guarantees them free health care for life at military hospitals.” [18] In 1999, a federal appeals court stated: Nothing in these regulations provided for unconditional lifetime free medical care or authorized recruiters to promise such care as an inducement to joining or continuing in the armed forces. While the Retirees argue that the above mentioned section 4132.1 gave those of them who served as officers in the Navy and Marine Corps the right to free unconditional medical care, we cannot agree. The [1922 Manual of the Medical Department of the United States Navy] Manual provided guidelines for the Navy’s Medical Department, but did not create any right in such officers to the free unconditional lifetime medical care they claim. It related only to hospital care, not the broader services that these Retirees seek, and covered only the period when it was in effect. In any event, in view of the general pattern of the military regulations that provides medical care to retirees only when facilities and personnel were available, we decline to read into the creation of such an enduring and broad right to unconditional free lifetime medical care. In sum, we conclude that the Retirees have not shown that they have a right to the health care they say was “taken” by the government. Since the basic premise of their claim fails, their taking claim necessarily also fails. [19]

On December 8, 1999, the Coalition of Retired Military Veterans appealed their case to the Supreme Court. [20] The Supreme Court denied the petition to review the lower court ruling on April 17, 2000. [21] On February 8, 2001, the U.S. Court of Appeals for the Federal Circuit reversed the lower court ruling (Schism and Reinlie v. U.S.) declaring “... the government breached its implied-in-fact contract with retirees when it failed to provide them with health care benefits.” [22] The appeals court reversed the district court decision and remanded the case for a determination of damages. Despite various claims, this finding applied only to the two named plaintiffs (and not to all military retirees), and no determination of damages was made. (Some have erroneously reported that the ruling “would have required the government to pay to three million retirees, widows and dependents up to $10,000 apiece.” [23]) On June 13, 2001, the Appeals Court vacated the judgment, withdrew its opinion, and agreed to rehear the appeal en banc. As stated “[t]he court has determined to rehear this case en banc to resolve the question of whether the promises of free

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lifetime care made to and accepted by Plaintiffs-Appellants should be afforded binding effect.” [24] On November 18, 2002, the U.S. Court of Appeals (voting 9-4) stated:

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In the end, because no actual authority existed for the recruiters’ promises of full free lifetime medical care, the plaintiffs cannot show a valid implied-in-fact contract. Thus, the plaintiffs’ claim must fail as a matter of law. [25]

On June 2, 2003, the Supreme Court denied the petition to review this case as well. [26] The claim of “free” or “promised” care is often reported in the media or by lobbying groups. Some media sources have contradicted the notion of free health care for life. [27] Conversely, others appear to accept or support the existence of such “promises.” Although these sources have no legal authority to effect such claims, their repetition of these so-called promises may serve to create or reinforce the notion of the existence of such “promises.” [28] Notably, certain former recruiters claim to have made such promises. They may well have. Nevertheless, as pointed out above, unauthorized promises based on mistakes, fraud, etc., do not constitute a contractual obligation on the part of the government/taxpayer. In a different vein, others suggest that although no such legal entitlement exists, a moral obligation or an obligation based on popular opinion is sufficiently compelling to make such a promise a reality. For example, Hon. Stephen Joseph, former Assistant Secretary of Defense (Health Affairs) stated before a congressional subcommittee in 1995: The lawyers will tell you that there is no fine print that says free medical care guaranteed for life. I think though it is facetious for anybody to sit up here and say that, that is not what recruits believe when they are talked to by their recruiter. That is a fact of life. [29]

Whether there is or should be a moral obligation is a matter of opinion; as decided by the courts and enforced by the administrators, these claims, like the others, do not create a contractual obligation on the part of the government/taxpayer. The courts, and other analysts, have noted that allowing these claims to create such an obligation would thwart the constitutional role of Congress (i.e., prevent the Congress from determining the compensation and benefits of the armed forces) and create a situation wherein military personnel/retirees (and potentially all other federal employees) could create or expand their own benefits with popular myth or rumor and without review.

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Despite extensive documentation, including court decisions, to the contrary, the belief in legally guaranteed “free lifetime care” persists, [30] and such claims continue color debate over the availability of these and other military health care benefits. [31]

RECENT LEGISLATION

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Though Congress has never authorized “free health care for life at military facilities,” various congressional reports have commented on the issue, and there have been recent legislative actions on the subject. For example, the Senate, explaining its support of additional benefits for military retirees, included nonbinding language in its report on the FY1998 National Defense Authorization Act that reiterated its intention with regard to the promise of lifetime care: A longstanding priority of the committee has been the improvement of the military health care system .... [T]he committee is concerned that the Department of Defense (DOD) faces significant constraints on its ability to meet the entire range of benefits expected by participants in the Military Health Service System .... The issue of health care for military retirees over age 65 is of special concern to the committee. The nation has incurred a moral obligation to attempt to provide care to military retirees who believe they were promised lifetime health care in exchange for a lifetime of military service. The nation fulfills its obligation through Medicare. [32]

This language expresses the view that a “promise” to military retirees was made — and that existing statutes and institutions do fulfill that promise. Later, with the enactment of the FY1 998 National Defense Authorization Act, Congress included the following language: SEC. 752. SENSE OF CONGRESS REGARDING QUALITY HEALTH CARE FOR RETIREES (a) Findings.-Congress makes the follow findings: (1) (2)

Many retired military personnel believe that they were promised lifetime heath care in exchange for 20 or more years of service. Military retirees are the only Federal Government personnel who have been prevented from using their employer-provided health care at or after 65 years of age.

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(4)

(5) (6) (7)

(8)

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(9)

Military health care has become increasingly difficult to obtain for military retirees as the Department of Defense reduces its health care infrastructure. Military retirees deserve to have a health care program that is at least comparable with that of retirees from civilian employment by the Federal Government. The availability of quality, lifetime health care is a critical recruiting incentive for the Armed Forces. Quality health care is a critical aspect of the quality of life of the men and women serving in the Armed Forces. (B) SENSE OF THE CONGRESS.- It is the sense of the Congress thatthe United States has incurred a moral obligation to provide health care to members and former members of the Armed Forces who are entitled to retired or retainer pay (or its equivalent); it is, therefore, necessary to provide quality, affordable health care to such retirees; and, Congress and the President should take steps to address the problems associated with the availability of health care for such retirees within two years after the date of the enactment of this Act. [33]

Although this language is also non-binding, it does give a sense of the rationale behind creating additional benefits for retirees [34]. Some in Congress would like to go further in clarifying the issue. On August 6, 1998, Representative Jo Ann Emerson introduced legislation that would have established a “Medicare eligible military retiree health care consensus task force.” Among its proposed duties, this task force would conduct “a comprehensive legal and factual study of ... [p]romises, commitments, or representations made to members of the Uniformed Service by Department of Defense personnel with respect to health care coverage of such members and their families after separation from the Uniformed Services.” [35] The twelve-member task force (including representatives of military retiree organizations) would determine what had been promised to military members and to what extent these promises were binding. This legislation was reintroduced in the 107th and 108th Congresses. [36] One reported response to this proposed legislation by an unidentified representative of a military retiree organization was somewhat muted, suggesting that “... we are really beyond the point of looking at broken promises. We are at the stage now where Congress knows something has to be done and is just trying to decide what to do.” [37] The legislation was referred to committee but was not reported out of committee prior to adjournment. As noted above, H.R. 58 and S. 56 were introduced on January 7, 2003. Among their provisions, H.R. 58 and S. 56 seek to expand military retiree health

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care options to include access to the Federal Employees Health Benefits Program. In offering these benefits, these bills present a number of “findings” (some of which appear inconsistent with the official history of military medical care). For example, H.R. 58 and S. 56 find that:

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Statutes enacted in 1956 entitled those who entered service on or after June 7, 1956, and retired after serving a minimum of 20 years or by reason of a service- connected disability, to medical and dental care in any facility of the uniformed services, subject to the availability of space and facilities and the capabilities of the medical and dental staff.

In contrast, the Department of Defense has always maintained that military retiree health care is, and always has been, permissive in nature and therefore not an entitlement. These bills were updated and reintroduced as H.R. 3474 and S. 2065 in the 108th Congress. As noted above, although none of these bills was enacted, Congress substantially expanded the health care benefits available to military retirees via the FY2001 National Defense Authorization Act. Among its provisions, this legislation provides an enhanced pharmacy benefit and, with certain restrictions, it extends Tricare coverage to those age 65 and older (known as “Tricare for Life”). For additional information, see CRS Issue Brief IB93 103, Military Medical Care Services: Questions and Answers, by Richard Best, updated regularly. On February 2, 2005, H.R. 602 was introduced in the House of Representatives. Two weeks later, on February 16, 2005, an identical bill, S. 407, was introduced in the Senate. [38] These 109th Congress bills are nearly identical to H.R. 3474/S. 2065, introduced in the 108th Congress. These latter bills have secured a relatively large number of co-sponsors (236 in the House and 11 in the Senate). Opponents of this legislation, however, have maintained that some of the bills’ findings and provisions are inconsistent with the official history of military health care. H.R. 602/S. 407 are discussed below on a section-by-section basis. Many of the arguments considered above are analyzed in the context of these proposals. Section 1 of H.R. 602/S. 407 provides a title for this bill. The short title is “Keep Our Promises to America’s Military Retirees Act.” Section 2 provides “Findings.” Each Finding is considered separately. The first “Finding” states that “No statutory health care program existed for members of the uniformed services who entered service prior to December 7, 1956, and retired after serving a minimum of 20 years.” Both proponents and opponents note that Congress had appropriated funds to afford nonactive duty military medical

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benefits for many years prior to 1956 with the knowledge that the system provided care, albeit of a permissive nature, to retirees. As noted earlier, on June 7, 1956, P.L. 84-569, became law. This law provided for the first time that the dependents of active duty personnel would be entitled to care in a military facility, subject to space- and service-availability restrictions. In addition, the law authorized care in civilian facilities for the dependents of active duty personnel. “In the final passage a House provision which would allow similar care for retired members and their dependents was rejected.” [39] Instead, this law authorized space- and service-available discretionary health care at military medical facilities for military retirees and their dependents, thus putting into statute the previous policy of permissive care for retirees and their dependents. The second Finding states “Recruiters, re-enlistment counselors, and officers at all levels of the uniformed services, and other government officials, as agents of the United States Government, used recruiting tactics that allowed members who entered the uniformed services prior to December 7, 1956, to believe they would be entitled to fully paid lifetime health care upon retirement.” Prior to June 7, 1956 there was no legal authority to make such promises. Opponents of H.R. 602 and S. 407 argue that with the passage of P.L. 84-569, any promises beyond those afforded in law were unsustainable. Third, the Findings note the decision delivered in the case of Schism v. United States [40] by the United States Court of Appeals for the Federal Circuit rejecting the retirees’ claims. In the United States Court of Appeals for the Federal Circuit decision of 2002, in Schism v. United States (No. 99-1402), the Court said: ‘Accordingly, we must affirm the district court’s judgment and can do no more than hope Congress will make good on the promises recruiters made in good faith to plaintiffs and others of the World War II and Korean War era — from 1941 to 1956, when Congress enacted its first health care insurance act for military members, excluding older retirees.... We cannot readily imagine more sympathetic plaintiffs than the retired officers of the World War II and Korean War era involved in this case. They served their country for at least 20 years with the understanding that when they retired they and their dependents would receive full free health care for life. The promise of such health care was made in good faith and relied upon. Again, however, because no authority existed to make such promises in the first place, and because Congress has never ratified or acquiesced to this promise, we have no alternative but to uphold the judgment against the retirees’ breach-ofcontract claim.... Perhaps Congress will consider using its legal power to address the moral claims raised by Schism and Reinlie on their own behalf, and indirectly for other affected retirees.’.

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This language appears to accept the retirees’ claims that an understanding existed that Schism and his dependents “would receive full free health care for life.” Lawyers representing Schism argued to the court that Schism was promised “free lifetime care at military facilities.” Under questioning, government lawyers were asked if “promises were made.” In response, the government lawyers affirmed that “promises were made.” However, the government lawyers did not affirm that the specific promise of “free lifetime care at military facilities” was made. Recruiting and other official literature promises lifetime care based on a military career, but a review of the literature indicates that it did not promise that retirees were entitled to “free” lifetime care “at military facilities.” The court in the Schism case and other courts have rejected this type of retiree claim, not based on the existence, or lack thereof of any such specific promise of “free lifetime care at military facilities,” but rather based on the lack of authority on the part of such individuals to make any such binding promises. The fourth Finding indicates “Only the United States Congress can make good on the promises recruiters made in good faith to plaintiffs and others of the World War II and Korean War era.” This finding reflects the fact that under the Constitution, [41] Congress has the power “To make Rules for the Government and Regulation of the land and naval Forces”and thereby to afford military retirees the benefits they seek. Implicitly acknowledged here is the fact that any such promise of benefits without this congressional authority does not create a contractual obligation on the part of the Federal government. The fifth Finding states “Statutes enacted in 1956 allowed those who entered service on or after December 7, 1956, and retired after serving a minimum of 20 years or by reason of a service-connected disability to medical and dental care in any facility of the uniformed services, subject to the availability of space and facilities and the capabilities of the medical and dental staff.” The June 7, 1956 statute officially put into law the space- and service-available provisions that had existed prior to that date for all eligible retirees, service-connected disabilities notwithstanding. The sixth Finding indicates “Recruiters, re-enlistment counselors, and officers at all levels of the uniformed services, and other government officials, as agents of the United States Government, continued to allow members who entered the uniformed services to believe they would be entitled to fully paid lifetime health care upon retirement, despite enactment of statutes in 1956, subsequent statutes, and the issuance of regulations that defined and limited the availability of medical care to retired members of the uniformed services.” Opponents counter that recruiting brochures and other documents produced by the plaintiffs in the above

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mentioned cases do not promise “fully paid” or “free lifetime” medical benefits at military facilities. The seventh Finding states “After 4 rounds of base closures between 1988 and 1995 and further drawdowns of remaining military medical treatment facilities, access to `space available’ health care in a military medical treatment facility is difficult or virtually nonexistent for many military retirees.” Critics and proponents of the proposed legislation note that there is no doubt that with the reduction in the number of facilities available, the amount of space-available health care for military retirees decreased. However, critics point out that that is not to say that these retirees were completely denied care (see footnote 1). Additionally, they note that under law military retirees remain eligible for other government-sponsored health care benefits including TRICARE, TRICARE for Life, Medicare and Veterans Affairs benefits, all earned as a result of military service. Eighth, “The failure to provide adequate health care upon retirement is preventing the retired members of the uniformed services from recommending, without reservation, that young men and women make a career of any military service.” Critics, however, are likely to note that military recruitment remained robust until early 2005, despite the hazards posed by Operations Iraqi Freedom (OIF) and Operation Enduring Freedom (OEF), and most analysts view recruiting difficulties encountered by the Army beginning in January 2005 as related to these post-9/11 wars rather than about compensation and benefits. Critics counter there is little if any indication that young people considering joining the armed forces are focused on retirement benefits, particularly retirement health care benefits, decades into the future. From their perspective, such concerns might ultimately affect career retention — but career retention has been at or substantially above goals since 9/11. Ninth, “Although provisions in the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 [42] extended coverage under the TRICARE program to medicare eligible military retirees age 65 and older, those provisions did not address the health care needs of military retirees under the age of 65.” Proponents and critics note that the provisions of Public Law 106-398 expanded health care coverage for Medicare-eligible retirees. Some have claimed that these are the most generous health care benefits offered by the Federal government. They assert that this law did not decrease any benefits for those retirees who are under age 65 which are already established in law. Tenth, “The United States should make good on the promises recruiters made in good faith in the World War II and Korean War era and reestablish high quality health care for all retired members of the uniformed services.” Critics are likely to

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argue that this Finding suggests that the quality of health care previously available to retirees has since been diminished and maintain that health care benefits have significantly increased in recent decades. From their perspective, the United States has made good on those benefits afforded military retirees under law. Section 3 of this legislation is entitled “Coverage of Military Retirees Under the Federal Employees Health Benefits Program.” As written, H.R. 602/S. 407 would provide all military members and retirees with access to FEHBP in the following manner. Section 3 of the bill would amend section 1108 of title 10 United States Code, which currently describes a now-expired demonstration project. The Secretary of Defense (in consultation with the Secretaries of other relevant departments) was authorized to enter an agreement with OPM to enroll up to 66,000 eligible beneficiaries in the Federal Employees Health Benefits Program (FEHBP) for a three-year period. The bill essentially proposes to broaden this program to all “eligible beneficiaries” effective October 1, 2005. Under the bill, “eligible beneficiaries” would include

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•

• •

a member or former member of the uniformed services entitled to retired or retainer pay or equivalent pay. The demonstration project limited eligibility to those members who were entitled to hospital benefits under Part A of Medicare; this bill does limit the definition in that fashion. The uniformed services includes not only the armed forces (which includes the Army, Navy, Air Force, Marine Corps and Coast Guard) but also the Commissioned Corps of the National Oceanic and Atmospheric Administration and of the Public Health Services. certain unremarried former spouses of members and former members who are not covered by an employer-sponsored health plan. dependents of deceased members or of certain former members or of members who died on while on active duty for a period of more than 30 days who meet the definition “member of family” for purposes of the FEHBP. The terms “dependent” and “member of family” do not cover all the same individuals. This could potentially create some confusion. While the term “dependent” includes spouses, unremarried widows/widowers, children under 21, children under 23 who are full-time students at an approved “institution of higher learning” actually dependent on the member or former member, among others, for purposes of title 10, the term”member of the family” for purposes of title 5 section 8901(5) only includes the spouse, an unremarried dependent child under 22 years of age (including adopted, recognized natural, step- or foster-

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•

child(ren) who actually live in a parent-child relationship) or unremarried dependent children incapable of self-support. individuals (1) who are dependents of a living member or former member who is, was (at the time of death), or would have been (but for the fact that the member was under 60 years of age) entitled to retired or retainer pay (2) who meet the “member of the family” definition. The demonstration project limited eligible beneficiaries to those member or former members who were entitled to benefits under Part A of Medicare; these bills do limit the definition in that fashion.

This definition may raise questions about coverage of 21 year old children not enrolled in institutions of higher learning. Presumably since children 22 years of age and older enrolled in institutions of higher learning are not “family members” for purposes of the Federal health plan, they would not be covered, even though the current title 10 definition permits coverage of such 22 year olds. Under the bill, “eligible beneficiaries” could enroll in a Federal Employees Health Benefit Plan for either self-only or self and family coverage which would include any dependent of the member or former member who is a “family member for purposes of chapter 89 of title 5.” For purposes of determining eligibility as a family member, chapter 89 of title 5 would be read as if the member or former member was an employee, and the only requirement for eligibility would be those contained in the bill. Under the bill, eligible beneficiaries who enroll in the FEHBP would not be eligible to participate in military-provided health care plans such as TRICARE. They could receive care in military medical treatment facilities, but that care would be billed to the FEHBP. Eligible beneficiaries could participate in the open season and change plans in the same manner as any other participants in the FEHBP. The government would contribute the same amount toward FEHBP coverage as if the electing beneficiary were an employee. Premiums for electing beneficiaries would be determined as if they were a separate risk pool. The Department of Defense would be required to develop and implement a system to reimburse those participating in the FEHBP for health care costs which are not paid for under FEHBP but would be paid for under TRICARE Standard. The idea of extending FEHBP benefits to military retirees is not new. Indeed, a demonstration project to allow military retirees to partake in these benefits was created (see Public Law 105-261, October 17, 1998) and ran for three years. Following evaluations by the Department of Defense and the then-General Accounting Office, it was reported that relatively few military retirees opted for FEHBP coverage. The demonstration project expired on December 31, 2002. [43]

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Section 4 is entitled “Reimbursement for TRICARE Pharmacy Benefits at TRICARE Network Pharmacy Levels to Certain Military Retirees and Dependents in Hardship Cases.” This section of the bill does not provide for codification of this provision in title 10. It would provide that eligible beneficiaries who have another insurance plan or program that provides primary coverage for health benefits (presumably the FEHBP, but it is not so limited) who receive certification from their physicians that “due to physical or medical constraints” they do not have access to a TRICARE network pharmacy and who meet criteria specified by the Secretary of Defense could receive reimbursement for pharmacy benefits received from a nonTRICARE network pharmacy in the same manner and same amount as the Secretary would reimburse such benefits received from a network pharmacy. This language appears to allow eligible beneficiaries to receive TRICARE pharmacy benefits without participating in TRICARE. Lastly, section 5 of the bill would amend section 1839 of Social Security Act [44] to provide that the monthly premium for eligible individuals to participate in Medicare Part B would be $0. That is, for individuals whose service in the uniformed services began before December 7, 1956 who are entitled to retired or retainer pay, the spouses of those individuals, and widows and widowers of such individuals would receive Medicare Part B for free. According to this bill, the fact that this group of individuals would receive Medicare Part B for free would not raise the premium paid by other Part B participants, and this group of individuals would not be subjected to income-based premium adjustments in the future. Such a change, however, would arguably increase Federal expenditures. (Part B of Medicare provides for non-hospital physician services). The bill proposes a January 2005 effective date for this provision, and would require that the Secretary of Health and Human Services provide rebates to eligible individuals of any premiums paid beginning on or after January 1, 2005. Section 625 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, (P.L. 108-173) waived the Part B enrollment penalties for military retirees, age 65 and over, who enrolled in the TRICARE for Life program from 200 1-2004, and the Secretary of Health and Human Services was to provide a rebate for any penalties paid after January 1, 2004. This bill would waive not only the penalties but also the premiums for participating in Part B. Opponents of the legislation are likely to point out that the recent addition of new benefits, the expansion of the numbers of beneficiaries, and other factors (including the general increase in the cost of care) have brought about increases in the costs to the government of providing military medical care, in general, and for

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retirees, in particular. According to a recent article in the New York Times, The cost of the main health care plan, has doubled since 2001 and will soon reach $50 billion a year, more than a tenth of the Pentagon’s budget. At least 75 percent of the benefits will go to veterans and retirees. Over the next decade, a new plan for military retirees, TRICARE for Life, will cost at least $100 billion, according to confidential budget documents, rivaling the costs of the biggest weapons systems the Pentagon is building.... The Pentagon, said William Winkenwerder Jr., the assistant secretary of defense for health affairs, faces “a growing, and serious, long-term problem.” [45] Efforts appear to be underway to raise Tricare fees and copayments over the next few years for retirees under the age of 65 and their families. At issue is what some see as rising medical costs becoming a readiness concern: In spite of our efforts to manage more efficiently, total spending for the Military Health System, including Retiree Accrual Fund, will reach $37 billion in 2005. Spending has essentially doubled in just the past four years! Our program growth is very rapid. Additionally, if current trends continue, over 75 to 80 percent of that spending will be for individuals no longer on active duty or their family members. The expansion of Tricare for Life, contributes to the growing size of our budget, as do other program elements. For example, our total pharmacy program has increased fivefold, that’s 500 percent since 2001 and now stands at over $5 billion. [46]

In an effort to control this growth in costs, it has been reported that the Department of Defense is considering raising out-of-pocket costs for many of its beneficiaries: ...[D]efense officials want annual enrollment fees for Tricare Prime, the military’s managed-care plan, to more than triple by October 2008 for workingage retired officers. They would go from $230 for an individual - and $460 for family coverage - to $750 and $1,500, respectively. The fees would double - to $450 and $900, respectively - for under-65 enlisted retirees. Retirees who use Tricare Standard, the military’s traditional fee-for-service health insurance, would also see their annual deductibles raised. They also would pay - for the first time - an annual enrollment fee. Beyond 2008, all Tricare fees and co- payments would be indexed to medical inflation.... In October, the Congressional Budget Office released an updated report on “The Long-Term Implications of Current Defense Plans.” It presented the kind of kudzu-like cost projections for military health care that have persuaded the Joint Chiefs of Staff to back [Assistant Secretary of Defense (Health Affairs)] Winkenwerder’ s plan. By 2024, the office reported, military medical cost will grow “by about 80 percent in real terms ...

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from $37 billion in 2006 to $66 billion.” That’s 37 percent of total budget growth expected across military operations, maintenance and personnel accounts. And those represent 60 percent of the defense budget. Other than the cost of war and contingency operations, the office reported, the greatest budget risk facing the military is health care costs. The report encouraged an increase in fees. But it suggested that a “transformational” set of higher fees and co-payments boost outof-pocket user costs to the level at civilian HMOs. [47]

In addition, the co-payments for many pharmaceuticals, under the above proposal would also be increased. By comparison, the annual cost of Blue Cross/Blue Shield coverage (for example, for a 47 year old individual or family of four, 80 percent coverage, $300 annual deductible, PPO) is $3,168 and $8,520, respectively. [48] Even with the above increases, military retirees would still pay a fraction of the annual costs that many civilians pay. The Military Officers Association of America (MOAA), a leading voice in The Military Coalition [49] announced, among its goals for 2006: •

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• • • • • • •

•

oppose health care cost-shifting from the government to military beneficiaries. increase health care access by reducing deterrents to provider participation.... remain vigilant in protecting against reductions in Medicare/Tricare reimbursement rates... eliminate preauthorization and referral hassles and other inconveniences.... eliminate the 115 percent billing limit when Tricare Standard (CHAMPUS) is the second payer to other health insurance. reinstate Tricare benefits for remarried widows when the second marriage ends. codify requirements to continue Prime benefits in localities affected by base reduction and closure actions. extend the Tricare Extended Care Health Option program (for severely disabled family members of active duty personnel) eligibility to three years for enrolled family members after the death of a servicemember, to allow time for the family to transition to other support services. seek increased funding for mental health and family counseling for deployed families.

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In justifying the achievement of the first of these goals MOAA claims that “Shifting health costs to beneficiaries ignores that the government has a higher obligation to military people than civilian employers have to their employees. Unique health and retirement benefits are an essential offset to unique arduous service conditions.” [50] On the face of it, many of these MOAA goals would likely increase Federal costs of providing military health care and more acutely increase the competition for dollars among Defense programs. Given the above, military medical care will remain a topic of congressional consideration in 2006. Another source of potential increase in Federal spending occurs when those who employ military retirees encourage them to remain on Tricare rather then join the employer’s sponsored health plan. Traditionally, Tricare is the second payer to other health care. When military retirees are employed, they are often covered by the civilian employer’s health plan, thus saving Federal spending on health care. However, certain companies and State governments are encouraging military retirees to remain on Tricare by offering Tricare Supplemental coverage. For example, teachers and other employees in North Carolina have received the following offer: Under a new law signed by North Carolina Governor Michael F. Easley on July 20, 2004, in lieu of the Teachers’ and State Employees’ Comprehensive Major Medical Plan eligible state employees may elect to instead be covered through the TRICARE Supplemental Health Insurance. Eligible employees who choose the TRICARE Supplement drop their employer-sponsored Teacher’s and State Comprehensive Major Medical health plan coverage to enroll in the TRICARE Supplement. The eligible employee may receive full health benefits coverage from TRICARE and the TRICARE Supplement (no deductibles, no co-pays, and no out-of-pocket costs). In addition, TRICARE and the TRICARE Supplement are fully portable - meaning the coverage follows the employee if they leave UNC Health Care. [51] Such arrangements allow states and other employers to minimize their health care costs while encouraging military retirees to remain under Tricare as their primary providers. This potentially represents an increase in Federal spending since in the past, military retirees joined the employer’s health plan and Tricare acted only as a second payer.

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REFERENCES [1]

[2] [3] [4] [5] [6]

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[7] [8]

[9] [10] [11] [12]

[13] [14]

[15] [16]

“About 365,000 elderly retirees and dependents-a thousand a day-will be seen by military doctors this year, Defense Department officials say.” Adde, Nick, “Medical Care Access Not Difficult for All,” Army Times, February 23, 1998: 22. CRS Report 95-435, Military Retiree Health Care: Base Closures and Realignments, David F. Burrelli and Elizabeth A. Dunstan. H.R. 58, Rep. Edwards, January 7, 2003 and S. 56, Sen. Johnson, January 7, 2003. P.L. 106-398, Oct. 30, 2000. P.L. 89-614, 80 Stat. 862, September 30, 1966. This general benefit structure is not new, nor has its consideration by Congress been a recent phenomenon. For example, see U.S. Congress, House Committee on Armed Services, CHAMPUS and Military Health Care, Subcommittee 2, Hearings, 93rd Cong., 2nd Sess., HASC No. 93-70, October 8, 1974. Interestingly, claims of “free health care for life” did not surface in these hearings. U.S. Constitution, Art. 1, Sec. 8, cl. 14. U.S. Congress, House Committee on Armed Services, Subcommittee No. 2, CHAMPUS and Military Health Care, 93d Cong., 2d Sess., December 20, 1974: 6. 1 Stat. 721 and 1 Stat. 729, March 2, 1799, respectively. United States Code, sec. 1074(b). Army brochure cited and reproduced in The Retired Officers Association Magazine, April 1996. The Retired Officers Association, April 1996. This CRS report was also similarly represented in Roberts, C.R., “Veterans Call It The Big Lie,” The American Legion, October 1995: 18. The article is based on exerts from The News Tribune, Tacoma, WA, by the same author. Best, Dick, Memorandum to Congress, Promises of Lifetime Medical Care, April 21, 1997. U.S. Congress, House Committee on Armed Services, National Defense Authorization Act for Fiscal Year 1994, H.R. 2401, Hearings, 103rd Cong., 1st sess., H.Rept. 103-13, April 27, 28, May 10, 11, and 13, 1993: 505. U.S. Department of Defense, Office of the Secretary of Defense, Military Compensation Background Papers, Fifth Edition, September 1996: 609. Coalition of Retired Military Veterans, et al. v. United States of America, U.S. Dist. of South Carolina, C.A.#2:96-3822-23, Dec. 10, 1997: 11-12.

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David F. Burrelli

[17] Coalition v. U.S.: 15-16. [18] Adde, Nick, Judge: lifetime care is no guarantee, Army Times, Sept. 21, 1998: 10. An appeal in this case is anticipated. Schism and Reinlie v. U.S. No. #:96cv349/RV United States District Court, N.D. Florida, June 10, 1997. [19] Sebastain v. United States, 185 F.3d 1368, 1372 (Fed. Cir. 1999). An appeal of this decision is pending. [20] Adde, Nick, Retirees head to Supreme Court, The Times, January 10, 2000: 14. [21] Sebastian v. U.S., 529 U.S. 1065, 120 S.Ct. 1669, 146 L.Ed.2d 479, 68 USLW 3391, 68 USLW 3655 (U.S., Apr. 17, 2000)(NO. 99-977). Summary of Orders: “Neither statutes nor regulations ever authorized armed services to promise free lifetime medical care to enlistees, and thus claim by nowretired members of the armed services that new regulations that diminish medical care previously available for military retirees constitute compensable taking is meritless.” Sebastian v. United States, 68 USLW. 3649 (April 18, 2000). Note: citations to this case make reference to different titles including, Coalition of Retired Military Veterans, CORMV, CRMV, or Sebastain and Sebastian, v. U.S. or United States [22] Schism and Reinlie v. U.S., 2001 U.S. App., 239 F.3d 1280, Feb. 8, 2001. [23] Armed Forces News, June 22, 2001. [24] Schism and Reinlie v. U.S. 2001 WL 664440 (Fed. Cir. (Fla)), June 13, 2001. [25] Schism and Reinlie v. United States, 2002 WL 31549178 (Fed.Cir.(Fla.)), November 18, 2002. [26] Schism and Reinlie v. United States, 123 S.Ct. 2246; 156 L.Ed.2d 125; 2003 U.S. LEXIS 4404; 71 USLW 3750, June 2, 2003. [27] Hamby, James E., Jr., “Free Care for Life Is a Myth,” Air Force Times, September 20, 1993: 18. [28] See, for example, Rich, Spencer, “Military Health Care Downsizing Leaves Retirees in a Bind,” Washington Post, July 30, 1996, p. A11; Editorials, “Veterans Should Not Be Forced to Pay for ‘Free’ Health Care,” Kerrville Daily Times, December 8, 1997: 4A; “ ... the promise of free health care in their later years was a major enticement to stay for a full career.” AFSA Calls for Tricare Reform, Sergeants, November 1995: 9; Kaczor, Bill, AP, “Military Retirees Appealing Benefits Denial,” Miami Herald, December 12, 1998: “At the heart of the matter is a 1956 law that permits free care for retirees at military hospitals and clinics but only on a space[-]available basis.” And, Joyce, Terry, “Network Offers Health Care Answers For

Military Medical Care, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

Military Health Care: The Issue of “Promised” Benefits

[29]

[30]

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[31]

[32]

[33] [34]

[35] [36] [37]

[38]

43

Military Families,” Charleston Post and Courier, January 9, 2000, “Folks who are upset about care that’s no longer available or cash outlays for what was supposed to be free.” U.S. Congress, House National Security Committee, Military Personnel Subcommittee, Hearings, Oversight of Previously Authorized Programs, 104th Cong., 1st sess., H.Rept 104-7, March 28, 1995: 828. The Retired Officer Association also credits Dr. Joseph with testifying (in 1995) “before Congress that DOD has an ‘implied moral commitment’ to provide health care to all eligible beneficiaries.” See U.S. Congress, House National Security Committee, Military Personnel Subcommittee, Hearings on National Defense Authorization Act for Fiscal Year 1998-H.R. 1119 and Oversight of Previously Authorized Programs. HNSC No. 105-6, 105th Cong., 1st sess., Feb. 27, 1997: 1-162, for a lengthy treatment of this issue. For example, an insert in The Retired Officer Magazine, January 1998, seeking FEHBP benefits for military retirees over 65, is entitled, “FEHBP65: The fix for broken health care promise.” According to the U.S. General Accounting Office, a demonstration project affording military retirees access to FEHBP coverage suffered low enrollment. The demonstration was ultimately terminated. US GAO, GAO-03-547, June 2003. U.S. Congress, Senate Committee on Armed Services, National Defense Authorization Act for Fiscal Year 1998, 105th Cong., 1st Sess., S.Rept. 105-29, S. 924, June 17, 1997: 294- 5. P.L. 105-85, Section 752, November 18, 1997. These additional benefits include the creation of demonstration projects known as Medicare Subvention and a Federal Employees Health Benefits Program option. In addition, Congress has instructed DOD to insure an improved pharmaceutical benefit for eligible beneficiaries. For additional information, see CRS Issue Brief IB93 103, Military Medical Care: Questions and Answers, by Richard Best. H.R. 4464, August 6, 1998: 2. H.R. 67, January 3, 2001, and H.R. 62, January 7, 2003. Cited as “a representative of a major military organization” lobbying for improved medical care for military retirees; see Maze, Rick, “A Broken Promise,” Navy Times, August 24, 1998: 24. In the 108th Congress, as noted above, S. 56, H.R. 58, S. 2065 and H.R. 3473 were introduced. These bills were not enacted. These bills are almost identical to H.R. 602 and S. 407. For the sake of brevity and because bills in the 109th Congress are still active, these 108th Congress bills are not

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44

[39] [40] [41] [42] [43]

[44] [45] [46]

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[47] [48]

[49]

[50]

David F. Burrelli analyzed here. However, much of the analysis that pertains to H.R. 602 and S. 407 are relevant to these 108th Congress bills. U.S. Congress, House Committee on Armed Services, Subcommittee No. 2, HASC No. 93-78, 93 Cong., 2nd sess., December 20, 1974. U.S. Congress, House Committee on Armed Services, Subcommittee No. 2, HASC No. 93-78, 93 Cong., 2nd sess., December 20, 1974. 316 F.3d 1259, Fed. Cir. 2002. Public Law 106-398; 11 Stat. 1654; October 30, 2000. 41 Art. 1, sec. 8, cl. 14. U.S. GAO, Military Retiree Health Benefits: Enrollment Low in the Federal Employee Health Plans under DOD Demonstration, May 2003, GAO-03547. 42 U.S.C., sec. 1395r. Weiner, Tim, “A New Call To Arms: Military Health Care,” New York Times, April 14, 2005. U.S. Congress, House Armed Services Committee, Subcommittee on Military Personnel, Overview Statement by The Honorable William Winkenwerder, Jr., Assistant Secretary of Defense for Health Affairs, October 19, 2005. Philpott, Tom, “Joint Chiefs To Back Higher TRICARE Fees,” Newport Daily News, January 1, 2006. Monthly premiums can vary by age, family size, location, type of coverage selected, level of deductibles, copayments, etc. For the purposes of this example, the location chosen was Northern Virginia. Rates were obtained at [http://www.carefirst.com/eSales/index.j sp]. According to its website [http://www.themilitarycoalition.org/ WhoWeAre.htm], “The Military Coalition is a group of 36 military, veterans and uniformed services organizations.... The philosophy of the Coalition is that by working together on issues of mutual agreement, the participating organizations can harness the grassroots support of more than 5.5 million members, plus their families and accomplish more that by working on these initiatives separately. When one or more of the Coalition organizations is invited to testify before Congress, we frequently coordinate the testimony with the other Coalition associations and present it on behalf of the entire Coalition. This lends greater weight and unanimity to the testimony than if it were presented by any individual association.” Military Officer, January 2006: 33. MOAA was formerly called The Retired Officers Association or TROA.

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[51] [http://www.unchealthcare.org/site/humanresources/benefits/health_ins] For an example of Tricare Supplements offered to private employers, see [http://www.corporatetricaresupp.com/program.asp].

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In: Military Medical Care ISBN 978-1-60692-575-1 Editor: Linda F. Bernstein et al., pp. 47-78 © 2009 Nova Science Publishers, Inc.

Chapter 3

MILITARY HEALTH CARE: COST DATA INDICATE THAT TRICARE RESERVE SELECT PREMIUMS EXCEEDED THE COSTS OF PROVIDING PROGRAM BENEFITS∗

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United States Government Accountability Office WHY GAO DID THIS STUDY The Department of Defense’s (DOD) TRICARE Reserve Select (TRS) program allows most reservists to purchase coverage under TRICARE, the military health insurance program, when not on active duty. DOD intends to set premiums at a level equal to the expected costs of providing TRS benefits. The National Defense Authorization Act for 2007 required GAO to review TRS costs. As discussed with the committees of jurisdiction, GAO compared (1) the TRS premiums established by DOD to the reported costs of providing benefits under TRS in 2006 and (2) DOD’s projected costs for TRS before implementation to DOD’s reported costs for the program in 2005 and 2006. To do this work, GAO examined DOD analyses and interviewed DOD officials and external experts.

∗

Excerpted from GAO Report 08-104, dated December 2007.

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WHAT GAO FOUND In 2006, the premium for both individual and family coverage under TRS— which DOD based on BCBS premiums—exceeded the reported average cost per plan of providing TRICARE benefits through the program. TRS currently serves less than 1 percent of the overall TRICARE population, and unlike most other TRICARE beneficiaries, TRS enrollees pay a premium to receive health care coverage. At the time of GAO’s analysis, TRS consisted of three tiers, established by law, with reservists in each tier paying different portions of the total premium, based on the tier for which they qualified. Over 90 percent of reservists who purchased TRS coverage enrolled in tier 1. The premium for individual coverage under tier 1 was 72 percent higher than the average cost per plan of providing benefits through the program. Similarly, the premium for family coverage under tier 1 was 45 percent higher than the average cost per plan of providing benefits. DOD based TRS premiums on BCBS premiums because, at the time DOD was developing TRS, actual data on the costs of TRS did not exist; however, these data are now available. Had DOD been successful in establishing premiums that were equal to the cost of providing benefits in 2006, the portion of the premium paid by enrollees in tier 1—which is set by law to cover 28 percent of the full premium—would have been lower that year. Reasons that TRS premiums did not align with benefit costs included differences between the TRS and BCBS populations and differences in the way the two programs are designed, which DOD did not consider in its methodology. According to experts, the most successful methods for aligning premiums with actual program costs involve using program cost data when setting premiums. The regulation governing TRS premium adjustments allows DOD to use either BCBS premiums or other means as the basis for TRS premiums. However, DOD officials told GAO that they plan to continue, at least for the near future, to base TRS premiums on BCBS premiums because of limitations associated with using currently available data to predict future TRS costs. However, these limitations should decrease over time as DOD gains more experience with the program and enrollment increases. Nonetheless, due to the uncertainty associated with predicting future health care costs, premiums are unlikely to exactly match program costs, even when they are based on cost data from prior years. Other insurance programs have methods to address differences between premiums and program costs, which are not provided to DOD in the law governing TRS. DOD overestimated the total cost of providing benefits through TRS. While the department projected that its total costs would amount to about $70 million in fiscal year 2005 and about $442 million in fiscal year 2006, DOD’s reported costs

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in those years were about $5 million and about $40 million, respectively. DOD’s cost projections were too high largely because it overestimated the number of reservists who would purchase TRS and the associated cost per plan of providing TRS benefits. DOD officials told GAO that they chose not to use TRS cost and enrollment data when projecting future year program costs and enrollment levels because of uncertainty about whether they would provide an accurate indication of future experience.

ABBREVIATIONS BCBS CPI-W

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DOD FEHBP MTF NDAA TRS

Blue Cross and Blue Shield Consumer Price Index for Urban Wage Earners and Clerical Workers Department of Defense Federal Employees Health Benefits Program military treatment facility National Defense Authorization Act TRICARE Reserve Select

December 21, 2007 Congressional Committees Since the September 11, 2001, terrorist attacks, the Department of Defense (DOD) has increasingly relied on reservists to support military operations, such as the conflicts in Iraq and Afghanistan. [1] In recognition of this, Congress has increased the health care benefits available to reservists and their dependents, which generally include family members such as spouses and dependent children. Specifically, the National Defense Authorization Acts (NDAA) for Fiscal Years 2005, 2006, and 2007 expanded the number of reservists and their dependents who qualify for TRICARE, the military health insurance program, and increased the period during which they qualify. [2] The NDAA for Fiscal Year 2005 established the program that DOD has named TRICARE Reserve Select (TRS), which currently allows most members of the Selected Reserves [3] to purchase TRICARE coverage for periods after the TRICARE coverage associated with active duty expires. After purchasing coverage, enrollees can obtain health care through TRICARE-authorized providers or hospitals or through DOD-operated military treatment facilities (MTF) if appointments are available. TRS currently

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serves a small portion of the TRICARE population—as of June 2007, only about 34,000 of the 9.1 million TRICARE beneficiaries were enrolled in TRS. Unlike most TRICARE beneficiaries who obtain health care benefits without paying premiums, reservists who qualify for TRS must pay a monthly premium to receive benefits through the program. By statute, DOD is required to set premiums for TRS at a level that it determines to be reasonable using an appropriate actuarial basis. [4] DOD officials told us that the department interpreted this to mean that TRS premiums should be set equal to the expected average costs of providing the benefit per plan. [5] TRS enrollees are responsible for paying a portion of the total premium set by DOD. In this report the term premium refers to the total premium—that is, the portion paid by enrollees, currently 28 percent, plus the portion covered by DOD, currently 72 percent. [6] DOD based the premiums for TRS on the Federal Employees Health Benefits Program’s (FEHBP) Blue Cross and Blue Shield (BCBS) Standard premiums, which the department adjusted to account for differences in age, gender, and family size between the BCBS population and the population of reservists and their family members who qualify for TRS. To keep pace with rising health care costs, DOD originally designed TRS so that the premiums are adjusted each year based on annual adjustments in BCBS Standard premiums. DOD planned to continue using this method to adjust premiums in the near future. The NDAA for Fiscal Year 2007 required that we review DOD’s costs of implementing the TRS program. [7] Specifically, as discussed with the committees of jurisdiction, we compared (1) the annual TRS premiums established by DOD to the reported costs of providing benefits under TRS in 2006 and (2) DOD’s projected costs for the TRS program before implementation to DOD’s reported costs for the program in 2005 and 2006. The NDAA for Fiscal Year 2007 also required that we describe how increases in TRS premiums compare with DOD’s annual rate of medical care price inflation. This information is included in appendix I. To compare the annual TRS premiums established by DOD to the reported costs of providing benefits under TRS in 2006, we reviewed DOD’s reported TRS enrollment data and data on the cost of providing TRS benefits through TRICARE-authorized civilian providers or hospitals, data on the administrative costs associated with providing TRS benefits, and data on the costs of providing TRS benefits through MTFs. Using DOD’s data, we calculated the average cost per TRS plan [8] of providing individual and family coverage as the sum of the reported costs divided by the average number of TRS plans. We also reviewed legislation relevant to the TRS program and literature on setting health insurance premiums and interviewed experts from the fields of health economics and

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finance and DOD officials in the TRICARE Management Activity and the Office of the Assistant Secretary for Health Affairs, which are responsible for managing the TRICARE program. We limited our analysis to calendar year 2006 because some 2007 data are still incomplete and because 2005 average cost data in some months are based on a very small number of enrollees. During the time period covered by our analysis, TRS included three tiers of eligibility with enrollees in each tier paying different portions of the premium based on the tier for which they qualified. We limited our analysis to tier 1 because it included over 90 percent of TRS plans and because tier 1 enrollee premium levels have applied to the entire TRS program since October 2007. In addition, we were unable to report the average cost per plan for tiers 2 and 3 separately, due to the low number of enrollees in these tiers. To compare DOD’s projected costs for the TRS program before implementation with DOD’s reported costs for the program in 2005 and 2006, we reviewed the analyses prepared by DOD before TRS’s implementation that projected (1) the number of individual and family plans in each tier of the TRS program and (2) the costs per plan of providing the TRS benefit. These projections were the two major factors used by DOD to estimate TRS costs. We compared these data with reported TRS enrollment and cost data from 2005 through 2007. In reporting the results of our comparison we use cost data through 2006 only, because some cost data for 2007 were incomplete due to the delay between when a claim is incurred and when it is paid. We also reviewed DOD internal documents and interviewed DOD officials. While we have raised concerns about the quality of DOD cost data in previous reports, [9] we determined that the data used for this analysis were sufficiently reliable for our purposes based on interviews with DOD officials and an examination of the data for obvious errors and omissions. However, we did not independently verify these data. For a complete discussion of our scope and methodology, see appendix II. We conducted our work from May 2007 through October 2007 in accordance with generally accepted government auditing standards.

RESULTS IN BRIEF In 2006, the premium for both individual and family coverage under TRS— which DOD based on BCBS premiums—exceeded the reported average cost per plan of providing TRICARE benefits through the program. The premium for individual coverage under tier 1 was 72 percent higher than the average cost per

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plan of providing benefits through the program. Similarly, the premium for family coverage under tier 1 was 45 percent higher than the average cost per plan of providing benefits. DOD based TRS premiums on BCBS premiums because, at the time DOD was developing TRS, actual data on the costs of delivering TRICARE benefits for the TRS population did not exist; however, these data are now available for 2005 and 2006. Had DOD been successful in establishing premiums that were equal to the cost of providing benefits in 2006, the portion of the premium paid by enrollees in tier 1—which is set by statute to cover 28 percent of the full premium—would have been lower that year—$566 instead of $972 for single coverage and $2,099 instead of $3,036 for family coverage. Reasons that basing TRS premiums on BCBS premiums did not successfully align TRS premiums with benefit costs included certain differences between the TRS and BCBS populations and certain differences between the two programs that DOD did not consider in its methodology. According to experts, the most successful methods for aligning premiums with the actual costs of providing benefits involve using program cost data when setting premiums. The regulation governing TRS premium adjustments allows DOD to use either BCBS premiums or other means as the basis for TRS premiums. However, DOD officials told us that they plan to continue, at least for the near future, to base TRS premium adjustments on BCBS premiums because of limitations associated with using currently available data to predict future TRS costs. DOD officials told us that the limitations associated with currently available data are due to the newness of the TRS program, recent changes to TRS, and the low number of enrollees. However, any limitations associated with TRS cost data should decrease over time as DOD gains more experience with the program and enrollment increases, thus enabling DOD to better project future health care costs. Nonetheless, due to the uncertainty associated with predicting future health care costs, premiums are unlikely to exactly match program costs, even when they are based on cost data from prior years. Other insurance programs have methods to address discrepancies between premiums and program costs, which are not provided to DOD in the law governing TRS. DOD significantly overestimated the total cost of providing benefits through TRS. While the department projected that its total costs would amount to about $70 million in fiscal year 2005 and about $442 million in fiscal year 2006, DOD’s reported costs in those years were about $5 million and about $40 million, respectively. DOD’s cost projections were too high largely because it overestimated the number of reservists who would purchase TRS as well as the associated cost per plan of providing benefits through the program. DOD officials told us that they considered TRS cost and enrollment data when developing future

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year projections of program costs and enrollment levels, but they chose not to use these data as part of their projections because of uncertainty about whether they would provide an accurate indication of likely future experience. With the goal of eventually eliminating reliance on BCBS premiums and to better align premiums with the costs of providing TRS health care benefits, we recommend that the Secretary of Defense direct the Assistant Secretary for Health Affairs to stop basing TRS premium adjustments only on BCBS premium adjustments and use the reported costs of providing benefits through the TRS program when adjusting TRS premiums in future years as limitations associated with the reported cost data decrease. We also recommend that DOD explore options for addressing instances in which premiums have been either significantly higher or lower than program costs in prior years, including seeking legislative authority as necessary. In its written comments on a draft of this report, DOD concurred with our conclusions and recommendations. See appendix III for DOD’s comments.

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BACKGROUND Beginning on April 27, 2005, DOD made TRICARE coverage available for purchase through TRS for certain reservists when they were not on active duty or eligible for pre- or postactivation TRICARE coverage. [10] Enrollees in TRS can obtain care from MTFs or from TRICARE-authorized civilian providers or hospitals. TRS enrollees can obtain prescription drugs through TRICARE’s pharmacy system, which includes MTF pharmacies, network retail pharmacies, nonnetwork retail pharmacies, and the TRICARE Mail Order Pharmacy. Since 2005, Congress has made this benefit available to a growing number of members of the Selected Reserves.

Changes in TRS Coverage The NDAA for Fiscal Year 2005 authorized the TRS program. [11] As originally authorized, TRS made TRICARE coverage available to certain members of the Selected Reserves—that is, reservists mobilized since September 11, 2001, who had continuous qualifying service on active duty for 90 days or more in support of a contingency operation. To qualify for TRS, reservists had to enter into an agreement with their respective reserve components to continue to serve in the Selected Reserves in exchange for TRS coverage. For each 90-day

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period of qualifying service in a contingency operation, reservists could purchase 1 year of TRS coverage. [12] Electing to enroll in this TRS program was a onetime opportunity, and as originally authorized, the program required reservists to sign the new service agreement and register for TRS before leaving active duty service. Reservists who qualified could also obtain coverage for their dependents by paying the appropriate premium. The NDAA for Fiscal Year 2006 expanded the number of reservists and dependents who qualify to participate in the TRS program. [13] Under the expanded program, which became effective on October 1, 2006, almost all reservists and dependents—regardless of the reservists’ prior active duty service—had the option of purchasing TRICARE coverage. Similar to the TRS program as it was originally authorized, members of the Selected Reserves and their dependents choosing to enroll in the expanded TRS program had to pay a monthly premium to receive TRICARE coverage. The portion of the premium paid by reservists in the Selected Reserves and their dependents for TRS coverage varied based on certain qualifying conditions that had to be met, such as whether the reservist also had access to an employer-sponsored health plan. The NDAA for Fiscal Year 2006 established three levels—which DOD calls tiers—of qualification for TRS, with enrollees paying different portions of the premium based on the tier for which they qualified. Those who would have qualified under the original TRS program, because they had qualifying service in support of a contingency operation, paid the lowest premium. In another change to the program, those reservists with qualifying service in support of a contingency operation now had up to 90 days after leaving active duty to sign the new service agreement required to qualify for this lowest premium tier. The NDAA for Fiscal Year 2007 significantly restructured the TRS program by eliminating the three-tiered premium structure.14 The act also changed TRS qualification criteria for members of the Selected Reserves, generally allowing these reservists to purchase TRICARE coverage for themselves and their dependents at the lowest premium—formerly paid by enrollees in tier 1— regardless of whether they have served on active duty in support of a contingency operation. In addition, the act removed the requirement that reservists sign service agreements to be qualified for TRS. Instead, the act established that reservists in the Selected Reserves qualify for TRS for the duration of their service in the Selected Reserves. DOD implemented these changes on October 1, 2007. See table 1 for an overview of TRS qualification criteria and the monthly portion of the TRS premiums paid by reservists.

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Table 1. Selected TRS Qualification Criteria and Premiums for Members of the Selected Reserves Monthly portion of the TRS premium paid by reservist Percentage of TRS Individual Family Duration of premium coverage coverage coverage Qualification criteria paid by enrollees TRS as authorized by the NDAA for Fiscal Year 2005 (Effective April 2005 through September 2006) Reservist must have qualifying 28 $75.00(April $233.00 One year of active duty service in support of 2005 (April coverage for a contingency operation on or through 2005 each after September 11, 2001, for at December through continuous least 90 days; reservist must 2005) December 90 days of agree to serve in the Selected $81.00 2005) qualifying Reserves for the entire period (January service. of TRS coverage. If reservist 2006 $253.00 was released from active duty through (January after April 26, 2005, reservist September 2006 must execute this service 2006) through agreement before release from September active duty. If reservist was 2006) released from active duty on or before April 26, 2005, reservist must execute this service agreement no later than October 28, 2005. TRS as authorized by the NDAA for Fiscal Year 2006 (Effective October 2006 through September 2007) Tier 1: Reservist must have qualifying active duty service in support of a contingency operation on or after September 11, 2001, for at least 90 days and must agree to serve in the Selected Reserves for the entire period of TRS coverage. Reservist must execute this service agreement within 90 days after release from active duty.

28

$81.00

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$253.00

One year of coverage for each continuous 90 days of qualifying service.

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Qualification criteria

Monthly portion of the TRS premium paid by reservist Percentage Duration of of TRS Individual Family coverage premium coverage coverage paid by enrollees 85 $247.00 $767.41 Up to 1 year of coveragewith an annual option to renew.

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Tier 3: Reservist does not qualify for tier 1 or 2; may be eligible for employer-sponsored insurance, but must execute a service agreement to serve in the Selected Reserves for the entire period of TRS coverage. Reservist must qualify during open season or submit documentation establishing a qualifying life event. TRS as authorized by the NDAA for Fiscal Year 2007 (Effective as of October 2007) Reservist must be a member of the Selected Reserves. Reservists who are eligible for coverage under FEHBP do not qualify to purchase TRS.

28

$81.00

$253.00

Coverage is available aslong as the reservist is a member of the Selected Reserves.

Source: GAO. Note: The Selected Reserves contains those units and individuals considered essential to wartime missions. As of 2005, 88 percent of reservists were considered part of the Selected Reserves.

Enrollment in TRS Currently, reservists who qualify for TRS may purchase TRS individual or family coverage at any time. Once enrolled in TRS, reservists and their dependents are able to obtain health care through MTFs, if appointments are available, or through TRICARE-authorized civilian providers or hospitals. Enrollees who choose to use civilian providers are subject to an annual deductible, co-payments, and coinsurance. When these enrollees use providers outside TRICARE’s civilian network, they pay higher cost shares and are considered to

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be using TRICARE Standard, the TRICARE option that is similar to a fee-forservice plan. When they use providers who are part of the TRICARE network, they pay discounted cost shares and are considered to be using TRICARE Extra, the TRICARE option that is similar to a preferred provider plan [15].

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DOD’s Methods for Developing TRS Premiums DOD is required by law to set premiums for TRS at a level that it determines to be reasonable using an appropriate actuarial basis. [16] DOD officials told us that the department interpreted this to mean that TRS premiums should be set equal to the expected average costs per plan of providing the benefit. Beginning in 2005, DOD based TRS premiums on the premiums for the BCBS Standard plan offered through FEHBP because, at the time DOD was developing TRS, actual data on the costs of delivering TRS benefits for the TRS population did not exist. To set the premiums, DOD compared characteristics of the beneficiary populations in each group and subsequently adjusted the BCBS premiums for differences in age, gender, and family size between the TRS and BCBS populations. The population that qualifies for TRS is younger, has a higher percentage of males, and has a larger number of dependents per sponsor than the BCBS population. Taken together, DOD concluded that these factors caused expected health care costs for the TRS population to be lower than expected health care costs for the BCBS population. To account for these differences, DOD set the TRS premium for individual coverage 32 percent lower than the corresponding BCBS premium and set the TRS premium for family coverage 8 percent lower than the corresponding BCBS premium. [17] According to DOD officials, the department based TRS premiums on BCBS premiums, rather than another health insurance plan’s premiums, because BCBS offers coverage that is similar to the coverage offered under TRICARE Standard. (For a comparison of cost-sharing provisions under TRS and BCBS Standard, see table 2.) In addition, like TRS, BCBS charges a separate premium for individual coverage and for family coverage, and each of these premiums is uniform nationally and updated annually. Furthermore, according to DOD officials, basing TRS premiums on BCBS premiums allowed the department to account for the effect of adverse selection on the department’s costs, because adverse selection is already accounted for in BCBS premiums [18]

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Table 2. Comparison of Cost-Sharing Provisions under TRS and Blue Cross and Blue Shield Standard 11 TRICARE Reserve Select

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Catastrophic limit a per family Calendar year deductible per individual/family Hospital inpatient deductible or copayment Primary doctor office visits Specialist office visits Retail pharmacy co-payment for generic drugs Mail-order pharmacy copayment for generic drugs Retail pharmacy co-payment for brand-name drugs Mail-order pharmacy copayment for brand-name drugs

In-network $1,000

Out-of-network $1,000

$150/$300or $50/$100 (E4 and below) Greater of $14.80 per day or $25 per admission

$150/$300or $50/$100 (E4 and below) Greater of $14.80 per day or $25 per admission

15 percent 15 percent $3

$3

$9

$9

b

b

Blue Cross and Blue Shield Standard In-network Out-of-network $4,000 $6,000 $250

$250

$100 per admission

$300per admission

b

$15

25 percent

b

$15

25 percent

Greater of $9 or 20 percent of total cost N/A

25 percent

45 percentor higher

$10

N/A

Greater of $9 or 20 percent of total cost N/A

25 percent

45 percentor higher

$35

N/A

20 percent 20 percent

Sources: DOD and the Office of Personnel Management. a The catastrophic cap is the maximum out-of-pocket expense for which TRICARE enrollees are responsible in a given fiscal year. The catastrophic cap applies only to services covered by TRICARE. b The in-network coinsurance rate is 15 percent of the negotiated rate, which is the rate network providers and participating nonnetwork providers have agreed to accept for covered services. The out-of-network coinsurance rate is 20 percent of the TRICARE allowable charge, which is the maximum amount TRICARE will pay for services.

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In order to compensate for rising health care costs, DOD originally designed TRS premiums so that they would be adjusted each year based on annual adjustments in the total BCBS Standard premiums. DOD planned to continue using this method to adjust premiums in the immediate future but allowed for the possibility that it might change the methodology at some point in the future. Thus, if BCBS premiums increased by 8.5 percent from 2005 to 2006, TRS premiums would be increased by the same percentage. New premiums are effective at the start of each calendar year. TRS premiums were increased by 8.5 percent for 2006 and scheduled to be increased by 1 percent for 2007, but a provision in the NDAA for Fiscal Year 2007 prevented this increase from being implemented for 2007. [19] According to DOD officials, another reason DOD decided to use BCBS as the basis for annual TRS premium adjustments was because BCBS premiums are updated annually, and the new premiums are made public each October. DOD officials told us they did not want to use DOD data to adjust premiums because they believe that doing so would be less transparent; that is, they wanted to avoid any appearance that the data might have been manipulated to DOD’s own financial advantage.

BASING TRS PREMIUMS ON BCBS PREMIUMS RESULTED IN TRS PREMIUMS THAT EXCEEDED THE COSTS OF PROVIDING PROGRAM BENEFITS IN 2006 In 2006, the premiums for both individual and family coverage under TRS exceeded the reported costs of providing TRICARE benefits through the program. The total premium for individual coverage under tier 1 was 72 percent higher than the average cost per plan of providing benefits through the program. Similarly, the total premium for family coverage under tier 1 was 45 percent higher than the average cost per plan of providing benefits. There are several reasons that basing TRS premiums on BCBS premiums did not successfully align TRS premiums with benefit costs. These include certain differences between the TRS and BCBS populations and certain differences between the two programs that DOD did not take into account. Experts indicated that data on the costs of delivering TRS benefits would provide DOD with an improved basis for adjusting premiums in future years.

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IN 2006, THE PREMIUM FOR BOTH INDIVIDUAL AND FAMILY COVERAGE UNDER TRS EXCEEDED THE REPORTED COSTS PER PLAN OF PROVIDING BENEFITS THROUGH THE PROGRAM In 2006, the premium for both individual and family coverage under TRS exceeded the reported costs per plan of providing TRICARE benefits through the program. For tier 1, the annual premium for individual plans of $3,471— including the share paid by enrollees and the share covered by DOD—was 72 percent higher than the average cost of providing benefits through TRS of $2,020 per plan. Similarly, the annual premium for family plans of $10,843 was 45 percent higher than the average cost of providing benefits through TRS of $7,496 per plan. (See Figure 1.) The average costs per TRS plan do not include certain administrative costs that DOD was not able to allocate specifically to TRS, such as advertising costs and program education. However, DOD officials told us that including these costs would not be sufficient to close the gap between TRS premiums and the average costs per plan. DOD also incurred start-up costs associated with establishing the TRS program, which are not included in the average costs per TRS plan because DOD did not intend for them to be covered by TRS premiums. The discrepancy between TRS premiums and reported TRS costs has implications for DOD’s cost sharing with TRS enrollees. By statute, the portion of the TRS premium paid by enrollees in tier 1—and all enrollees as of October 1, 2007—is to cover 28 percent of the full premium. In 2006, TRS enrollees in tier 1 paid $972 for individual coverage and $3,036 for family coverage. This covered 48 percent of the average cost per individual plan and 41 percent of the average cost per family plan. Had DOD been successful in establishing TRS premiums that were equal to the average reported cost per TRS plan in 2006, enrollees’ share of the premium would have been $566 for single coverage and $2,099 for family coverage in that year. [20]

Basing TRS Premiums on BCBS Premiums Is Unlikely to Successfully Align TRS Premiums with Benefit Costs Basing TRS premiums on BCBS premiums is unlikely to align TRS premiums with benefit costs because of several differences between the TRS and BCBS populations and programs that DOD did not take into account.

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.

Source: GAO analysis of DOD data.Type of plan 02,0004,0006,0008,00010,00012,00072 %45 %Note: The average cost per plan refers to tier 1 plans only. Figure 1. Comparison of DOD’s Reported Average Cost per Plan with TRS Premiums, 2006.

DOD based TRS premiums on BCBS premiums because at the time DOD was developing TRS, actual data on the costs of delivering TRS benefits to the TRS population did not exist. However, experts we interviewed suggested that because of demographic differences between the TRS and BCBS populations,

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BCBS-based premiums are unlikely to reflect TRS costs. In setting TRS premiums, DOD adjusted BCBS premiums to account for differences in age, gender, and family size between the TRS and BCBS populations. However, DOD did not take other demographic differences into account that could have potentially affected its likely success—such as enrollees’ geographic distribution and health status—because accounting for these differences is very difficult. The geographic distribution of a population is an important factor in predicting health care costs and corresponding health insurance premiums, in large part because physician payment rates vary across geographic locations. [21] Furthermore, according to experts we interviewed, the most important predictors of health care costs are measures related to enrollees’ health status, which were not fully available to DOD when it first established TRS premiums. Another factor that may have contributed to the disparity between TRS premiums and the program’s costs is the dissimilarity in the structures of the TRS and BCBS programs. While TRS premiums are designed to cover enrollees’ health care costs and certain administrative costs, BCBS premiums are designed to cover these costs and also may include contributions to or withdrawals from plan reserves [22] and profits. As a result, changes in BCBS premiums are generally not equal to changes in BCBS program costs.

TRS Cost Data Would Provide DOD with an Improved Basis for Adjusting Premiums in Future Years Experts indicated that data on the costs of delivering TRS benefits will provide DOD with an improved basis for adjusting premiums in future years. [23] They informed us that there are several methods of setting health insurance premiums. The methods that are most successful in aligning premiums with the actual costs of providing benefits involve using program cost data when setting premiums. Although TRS cost data did not exist when the program was implemented, leading DOD to base TRS premiums on BCBS premiums, TRS cost data from 2005 and 2006 are now available. In DOD’s description of its methodology for establishing and adjusting TRS premiums in the Federal Register on March 16, 2005, DOD allowed for the possibility of using other means to adjust premiums in the future. [24] It stated that it could base future changes in TRS premiums on actual cost data. However, DOD officials told us that the department has not used these data to adjust TRS premiums due to the limitations associated with using prior year costs to predict future costs. According to DOD officials, prior year claims data may not be indicative of future year claims costs

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due to the newness of the TRS program, recent changes to TRS, and the low number of enrollees. However, TRS cost data reflect actual experience with the program and any limitations associated with TRS cost data should decrease over time as DOD gains more experience with the program and more reservists enroll in it. Nonetheless, due to the uncertainty associated with predicting future health care costs, premiums are unlikely to exactly match program costs, even when they are based on cost data from prior years. To help adjust for discrepancies between premiums and program costs, some health insurance programs have established reserve accounts, which may be used to defray future premium increases or cover unexpected shortfalls from higher-than-anticipated costs. For example, as noted earlier, the Office of Personnel Management administers a reserve account for each FEHBP plan, including BCBS. These reserve accounts are funded by a surcharge of up to 3 percent of a plan’s premium. Once funds in the reserve accounts exceed certain minimum balances, they can be used to offset future year premium increases. Similarly, some health insurance programs make adjustments to premiums for subsequent years that account for any significant discrepancy between prior year premiums and program costs. The law governing TRS contains no provision for the establishment of a reserve account or for methods of increasing or decreasing premiums, after they are set, to address differences between premiums and costs in prior years.

TRS’S PROJECTED COSTS SIGNIFICANTLY EXCEEDED REPORTED COSTS FOR FISCAL YEARS 2005 AND 2006 LARGELY BECAUSE ENROLLMENT LEVELS WERE LOWER THAN DOD EXPECTED DOD’s estimated costs of providing TRS benefits were about 11 times higher than its reported costs. DOD’s cost projections were too high largely because it overestimated the number of reservists who would enroll in TRS as well as the associated cost per plan of providing benefits through the program. DOD officials told us that they considered TRS cost and enrollment data when developing future year projections of program costs and enrollment levels, but they chose not to use these data as part of their projections because they are uncertain that prior year enrollment and cost data are indicative of future year costs and enrollment levels.

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DOD’s Projected Costs Were Significantly Higher Than Its Reported Costs for TRS in Fiscal Years 2005 and 2006 DOD significantly overestimated the costs of providing benefits through TRS. Prior to TRS’s implementation, DOD estimated that total costs of providing benefits through the program would amount to about $70 million in fiscal year 2005 and about $442 million in fiscal year 2006. In contrast, reported costs in those years only amounted to about $5 million and about $40 million, respectively. [25] DOD estimated the program’s likely costs by multiplying the number of TRS plans that it projected would be purchased by DOD’s estimated cost per plan for individual and family plans. DOD estimated that its cost per plan would be equal to the total TRS premium minus the portion of the premium paid by enrollees. [26]

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DOD’s Projected Costs Were Higher Than Reported Costs for TRS Because It Overestimated the Number of TRS Enrollees and the Cost per Enrollee The number of reservists who purchased TRS coverage has been significantly lower than DOD projected, and as a result TRS program costs have also been lower than expected. DOD projected that about 114,000 reservists would purchase individual or family plans by 2007; however, as of June 2007 only about 11,500—or about 10 percent—of that number had purchased TRS plans. Over 90 percent of TRS enrollment had been for coverage under tier 1, which offered the lowest enrollee premium contributions of the three tiers in existence at the time covered by our analysis. Very few reservists signed up for coverage under tier 3, which had the highest enrollee premium contributions of the three tiers (See table 3.) DOD estimated the number of reservists who would purchase TRS coverage by dividing the population of reservists who qualify for each of the three tiers into several categories for which it estimated distinct participation rates, based on the premiums these reservists would likely pay for non-DOD health insurance. DOD projected lower enrollment for groups that had access to less expensive health insurance options, such as those who are offered insurance through their employers. DOD officials believe that enrollment in TRS will increase the longer the program is in place. However, while enrollment in TRS increased moderately through October 2006, it has remained relatively stable from October 2006 through June 2007. (See Figure 2.)

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Table 3. Comparison of the Projected Number of TRS Plans to the Reported Number of TRS Plans, June 2007

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Tier 1 Tier 2 Tier 3 All tiers

Projected number of plans (fiscal year 2007) Individual Family coverage coverage 18,216 78,591 3,096 6,285 2,639 5,359 23,951 90,235

Reported number of plans (June 2007)

Individual coverage 3,107 363 17 3,487

Familycoverage 7,412 610 25 8,047

Source: GAO analysis of DOD data. Figure 2. Number of TRS Plans in Each Tier, January 2006-June 2007.

In addition to the estimated number of plans purchased, the other major factor that affected DOD’s projection of overall TRS program costs was its estimate of the cost of providing benefits for each TRS plan. As previously stated, DOD based its estimated cost per plan on the total TRS premium minus the portion of the premium paid by enrollees. Because the premiums have been higher than DOD’s reported costs, DOD’s cost projections have also been too high.

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DOD’s Projection of Future TRS Enrollment Levels Is Likely Too High DOD developed a new model to project enrollment levels and program costs under TRS’s single-tiered premium structure that went into effect on October 1, 2007; however, DOD’s projection of future TRS enrollment levels is likely too high. DOD projected that the total number of TRS plans for individual and family coverage would be approximately 64,000 in fiscal year 2008 at a cost to the department of about $381 million for that year. [27] However, actual TRS enrollment data to date suggest that total TRS enrollment—and therefore program costs—are unlikely to be as high as DOD projected. As of June 2007, there were about 11,500 TRS plans—well below DOD’s projection of about 114,000. Enrollment will almost certainly increase to some extent because reservists who previously only qualified for tier 2 or tier 3 of the program—which required enrollees to pay a larger portion of the premium—have qualified for the significantly lower tier 1 enrollee premiums since October 1, 2007. However, the degree to which it will increase is not clear. DOD officials told us that they considered TRS cost and enrollment data when developing future year projections of program costs and enrollment levels, but they chose not to use these data as part of their projections because of uncertainty about whether they would provide an accurate indication of likely future experience. DOD’s past enrollment projections, made without the benefit of prior year enrollment data, were significantly higher than actual enrollment levels.

CONCLUSIONS Although DOD intended that TRS premiums would be equal to the expected costs per plan of providing the benefit, DOD set premiums for the program based on BCBS premiums that proved to be significantly higher than the program’s average reported costs per plan in 2006. Reservists’ portion of TRS premiums would have been lower in 2006 if DOD had aligned premiums with the cost of providing TRS benefits. DOD officials told us that the department planned to continue basing TRS premium adjustments on BCBS premium adjustments in the immediate future, but the regulation governing TRS premium adjustments allows for the possibility that the department might change its methodology at some point in the future. However, because TRS premiums were higher than the average costs per plan in 2006, continuing to adjust TRS premiums based on

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BCBS premium adjustments could widen the gap between TRS premiums and the average costs per plan. The discrepancy between TRS premiums and the reported program costs per plan results from the approach DOD used in setting TRS premiums. Basing TRS premiums on BCBS premiums is problematic because of several dissimilarities between the two programs. Most important, the average cost data now available suggest that TRS enrollees have incurred significantly lower health care costs than BCBS enrollees, even after adjusting for certain demographic characteristics. In addition, BCBS premiums may be based on more than program costs, whereas TRS premiums are intended to cover only costs. Basing TRS premiums on BCBS premiums may have been reasonable at the time that TRS was first implemented in 2005 due to the lack of available data on the cost of providing benefits through TRS. However, cost data that reflect actual experience under the program are now becoming available, and limitations associated with them should decrease over time as DOD gains more experience with the program and more reservists enroll in it. These data will provide DOD with an improved basis for setting premiums in future years, and allow the department to eventually eliminate its reliance on BCBS premiums. Nonetheless, due to the uncertainty associated with predicting future health care costs, premiums are unlikely to exactly match program costs, even when they are based on cost data from prior years. Other insurance programs have methods to address discrepancies between premiums and program costs, which are not provided to DOD in the law governing TRS. DOD has also had difficulty accurately estimating the likely cost of providing TRS benefits in large part because it overestimated the number of reservists who would likely purchase TRS coverage. Over time, the availability of actual cost and enrollment data should help DOD improve its projections for future years. With the goal of eventually eliminating reliance on BCBS premiums and to better align premiums with the costs of providing TRS health care benefits, we recommend that the Secretary of Defense direct the Assistant Secretary for Health Affairs to stop basing TRS premium adjustments only on BCBS premium adjustments and use the reported costs of providing benefits through the TRS program when adjusting TRS premiums in future years as limitations associated with the reported cost data decrease. We also recommend that DOD explore options for addressing instances in which premiums have been either significantly higher or lower than program costs in prior years, including seeking legislative authority as necessary.

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AGENCY COMMENTS

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We received written comments on a draft of this report from DOD. DOD stated that it concurs with our conclusions and recommendations and that it is committed to improving the accuracy of TRS premium projections. It further stated that our recommendations are consistent with DOD’s strategy to evolve the process, procedures, and analytical framework used to adjust TRS premiums as the quality and quantity of reported cost data improve. DOD’s written comments are reprinted in appendix III. We are sending copies of this report to the Secretary of Defense and other interested parties. We will also make copies available to others on request. In addition, the report will be available at no charge on GAO’s Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV.

Laurie Ekstrand Director, Health Care

LIST OF COMMITTEES The Honorable Carl Levin Chairman The Honorable John McCain Ranking Member Committee on Armed Services United States Senate The Honorable Daniel K. Inouye Chairman The Honorable Ted Stevens Ranking Member Subcommittee on Defense Committee on Appropriations United States Senate The Honorable Ike Skelton Chairman The Honorable Duncan L. Hunter Ranking Member

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Committee on Armed Services House of Representatives The Honorable John P. Murtha Chairman The Honorable C. W. Bill Young Ranking Member Subcommittee on Defense Committee on Appropriations House of Representatives.

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APPENDIX I: COMPARISON OF TRS PREMIUM GROWTH WITH DOD’S ESTIMATED RATE OF MEDICAL CARE PRICE INFLATION The John Warner National Defense Authorization Act (NDAA) for Fiscal Year 2007 required that we describe how increases in TRICARE Reserve Select (TRS) premiums compare with the Department of Defense’s (DOD) annual rate of medical care price inflation [1]. As discussed with the committees of jurisdiction, this appendix compares DOD’s January 2006 TRS premium increase and DOD’s proposed January 2007 TRS premium increase with DOD’s estimated annual rate of medical care price inflation in fiscal years 2005 and 2006 as well as the medical component of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Premiums for TRS were first established when the program was implemented in April 2005. To keep pace with rising health care costs, DOD originally designed TRS premiums so that they are adjusted each year based on annual adjustments in the Federal Employees Health Benefits Program’s Blue Cross and Blue Shield (BCBS) Standard plan premiums. DOD planned to continue using this method to adjust premiums in the immediate future, although program regulations allow some flexibility in setting the premiums. Accordingly, in line with BCBS, TRS premiums increased by 8.5 percent in January 2006. Based on increases in BCBS, TRS premiums would have increased by 1 percent in January 2007. However, the NDAA for Fiscal Year 2007 froze 2007 premiums through September 30, 2007, at the rates for calendar year 2006. DOD calculated its average annual rate of medical care inflation to be about 4.9 percent in fiscal year 2005 and about 4.7 percent in fiscal year 2006. DOD did not develop these estimates of inflation based on its own spending. Instead, DOD based the estimates on inflation rates provided annually by the Office of Management and Budget for the various components of the TRICARE operating budget, such as military personnel, private sector health care, and pharmacy. In contrast, the medical component of the CPI-W increased at lower rates than

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DOD’s rate of medical care price inflation. The medical care component of the CPI-W increased by about 4.1 percent in 2005 and about 4.2 percent in 2006. The medical care component of the CPI-W is based on medical expenses, but it is problematic to compare to DOD’s estimated rate of medical care inflation because it is based only on out-of-pocket medical expenditures paid by consumers, including health insurance premiums, and excludes the medical expenditures paid by public and private insurance programs Comparing premium growth trends with DOD’s annual rate of medical care price inflation and the medical care component of the CPI-W is problematic because of differences in each measurement. Unlike medical care price inflation, premium growth may reflect factors such as changes in the comprehensiveness of the policy, changes in the ratio of premiums collected to benefits paid, changes in costs because of increased utilization of health care services, contributions to or withdrawals from plan reserves, and profits.

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APPENDIX II: SCOPE AND METHODOLOGY To compare the annual TRS premiums established by DOD to the reported average costs per plan of providing benefits under TRS in 2006, we reviewed DOD’s reported TRS enrollment data and data on the cost of providing TRS benefits through TRICARE-authorized civilian providers or hospitals, data on the administrative costs associated with providing TRS benefits, and data on the costs of providing TRS benefits through military treatment facilities (MTF). Using DOD’s data, we calculated the average cost per TRS plan [1] of providing individual and family coverage as the sum of the reported costs divided by the average number of TRS plans. We also reviewed legislation relevant to the TRS program and literature on setting health insurance premiums and interviewed several experts from the fields of health economics and finance and DOD officials in the TRICARE Management Activity and the Office of the Assistant Secretary for Health Affairs. We limited our analysis to calendar year 2006 because some 2007 data are still incomplete and because 2005 average cost data in some months are based on a very small number of enrollees. At the time covered by our analysis, TRS included three tiers of eligibility with enrollees paying different portions of the premium based on the tier for which they qualified. [2] We limited our analysis to tier 1 because it included over 90 percent of TRS plans and because tier 1 enrollee premium levels have applied to the entire TRS program since October 2007. We are unable to report the average cost per plan for tiers 2 and 3 separately, due to the low number of enrollees in these tiers.

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To compare DOD’s projected costs for the TRS program before implementation to DOD’s reported costs for the program in 2005 and 2006, we reviewed the analyses prepared by DOD before TRS’s implementation that projected (1) the number of individual and family plans in each tier of the TRS program and (2) the costs per plan of providing the TRS benefit. These projections were the two major factors used by DOD to estimate TRS costs. We compared these data with reported TRS enrollment and cost data from April 2005 through June 2007. In reporting the results of our comparison we use cost data through 2006 only, because some cost data for 2007 were incomplete. We also reviewed DOD internal documents and interviewed DOD officials.

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Calculation of Average Costs per TRS Plan To determine the average cost of providing benefits under TRS for 2006— for individual and family plans—we reviewed TRS enrollment data and TRS purchased care cost data, administrative cost data, and data on the costs of providing TRS benefits through MTFs, each of which were provided to us by DOD. DOD officials provided TRS enrollment data to us in the form of multiple reports from the Defense Enrollment Eligibility Reporting System for each month from May 2005 through June 2007. Each report lists the number of TRS plans and enrollees in individual and family plans broken down by tier. Using these reports, we calculated the average number of TRS plans and enrollees in each month. For each month, from May 2005 through June 2007, we calculated the total costs of providing benefits under TRS by adding the cost components reported by DOD, which consist of purchased care costs, MTF costs, and administrative costs. Administrative costs were further divided among costs associated with claims processing and separate administrative fees levied by certain TRICARE managed care support contractors for each enrollee in each month. For each month, we calculated the average cost per TRS plan for individual and family coverage by dividing the total costs of providing benefits under TRS by the average number of TRS plans. We determined the average cost of providing benefits under TRS in 2006—for single and family plans—by summing the monthly averages and weighting them by enrollment in each month.

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Data Reliability Tests

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To ensure that the DOD data were sufficiently reliable for our analyses, we conducted detailed data reliability assessments of the data sets that we used. We restricted these assessments, however, to the specific variables that were pertinent to our analyses We reviewed DOD data that we determined to be relevant to our findings to assess their quality and methodological soundness. Our review consisted of (1) examining documents that describe the respective data, (2) manually and electronically checking the data for obvious errors and missing values, (3) interviewing DOD officials to inquire about concerns we uncovered, and (4) interviewing DOD officials about internal controls in place to ensure that data are complete and accurate. Our review revealed minor inconsistencies in DOD’s data that we reported to DOD officials. Overall, however, we found that all of the data sets used in this report were sufficiently reliable for use in our analyses. However, we did not independently verify DOD’s figures. We conducted our work from May 2007 through October 2007 in accordance with generally accepted government auditing standards.

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APPENDIX III: COMMENTS FROM THE DEPARTMENT OF DEFENSE

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REFERENCES [1]

[2]

[3]

In this report the term reservist includes all members of the seven reserve components: the Army National Guard and the Air National Guard as well as the Army Reserve, the Naval Reserve, the Marine Corps Reserve, the Air Force Reserve, and the Coast Guard Reserve. Prior to these expansions, a reservist and his or her dependents were eligible for TRICARE only while the reservist was serving on active duty for more than 30 days. The Selected Reserves contains those units and individuals considered essential to wartime missions. In 2005, 88 percent of reservists were considered part of the Selected Reserves.

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Military Health Care [4] [5] [6]

[7] [8]

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[9]

[10]

[11] [12]

[13] [14]

75

See 10 U.S.C. § 1076d(d)(2). In this report the term plan refers to a TRS policy purchased for individual or family coverage. By law, under a three-tiered premium structure in effect during fiscal year 2007, qualification criteria for TRS were set for each of three separate tiers: Members of the Selected Reserves who served in a contingency operation for 90 continuous days or more since September 11, 2001, qualified to purchase TRS coverage under tier 1 and paid 28 percent of the total premium. Members of the Selected Reserves who did not have such service but were either unemployed, self-employed, or not eligible for employersponsored insurance qualified to purchase TRS coverage under tier 2 and paid 50 percent of the total premium. Members of the Selected Reserves who did not qualify for tier 1 or tier 2 were qualified to purchase TRS coverage under tier 3, and paid 85 percent of the total premium. Due to a change in law, since October 1, 2007, all enrollees have paid 28 percent of the total premium. See Pub. L. No. 109-364, § 713(b), 120 Stat. 2083, 2289-90 (2006) In our analysis we calculated a separate average cost per TRS plan for individual and family coverage—not the average cost per TRS enrollee. GAO, Global War on Terrorism: DOD Needs to Improve the Reliability of Cost Data and Provide Additional Guidance to Control Costs, GAO-05-882 (Washington, D.C.: Sept. 21, 2005), and Medicare Subvention Demonstration: DOD Data Limitations May Require Adjustments and Raise Broader Concern, GAO/HEHS-99-39, (Washington, D.C.: May 28, 1999). TRICARE coverage is generally available to reservists and their dependents at no charge for up to 90 days prior to the beginning of active duty service and 180 days after. The Transitional Assistance Management Program offers 180 days of individual or family TRICARE coverage to reserve component members separated from active duty after being called up or ordered in support of a contingency operation for more than 30 days. See Pub. L. No. 108-375, § 701, 118 Stat. 1811, 1980-82 (2004). Reservists who were ordered to active duty for a period of more than 30 days, but served less than 90 continuous days due to an injury, illness, or disease incurred or aggravated while deployed, were eligible for 1 year of TRICARE coverage under TRS as originally authorized. See Pub. L. No. 109-163, §§ 701-702, 119 Stat. 3136, 3339-42. See Pub. L. No. 109-364, § 706, 120 Stat. 2083, 2282 (2006) (codified at 10 U.S.C. § 1076d).

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[15] TRICARE has three options, referred to as Standard (similar to fee-forservice option), Extra (similar to a preferred provider option), and Prime (similar to a health maintenance organization option). TRICARE Prime is not available under TRS. [16] See 10 U.S.C. § 1076d(d)(2). [17] The TRS premiums for family coverage and individual coverage were both affected by TRS’s younger population. The TRS premium for family coverage was affected by the TRS population’s larger number of dependents per sponsor, making its adjustment from the BCBS premium smaller. The TRS premium for individual coverage is affected by the TRS population’s larger percentage of males, who generally incur lower health care costs than females, making its adjustment larger. [18] Adverse selection occurs when people who know they have a risk of incurring health care expenses buy insurance coverage, while those who have relatively less risk of incurring health care expenses decide the insurance is too expensive and therefore do not buy it. In these cases, the resulting insured population is likely to incur greater-than-average health care costs. Therefore, any premiums set to account for an insured population with average health care costs may not be sufficient to cover the claims that eventually arise. [19] See Pub. L. No. 109-364, § 704, 120 Stat. 2083, 2280 (2006). This provision prevented any increase in premiums through September 30, 2007. The NDAA for Fiscal Year 2008, as passed by the House and Senate and reported on in Conference Report 110-477, contains a provision that would extend this prohibition through September 20, 2008. As of December 17, 2007, the President had not signed this bill into law. [20] The average costs per TRS plan reported above apply only to tier 1 plans and are weighted by the number of plans in each month in calendar year 2006. However, including tiers 2 and 3 in our calculation of the average costs per plan does not substantially change the results, because tier 1 comprised over 90 percent of all TRS plans. [21] GAO, Federal Employees Health Benefits Program: Differences in Health Care Prices across Metropolitan Areas Linked to Competition and Other Factors, GAO-06-281T (Washington, D.C.: Dec. 2, 2005). [22] Under 5 U.S.C. § 8909, the Office of Personnel Management administers a reserve account for each FEHBP plan, including BCBS. Funds in the reserves may be used to defray future premium increases, enhance plan benefits, reduce premiums, or cover unexpected shortfalls from higher-thananticipated claims.

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[23] We obtained information from experts in the fields of economics and finance. [24] See 70 Fed. Reg. 12798, 12800-01 (Mar. 16, 2005). [25] The TRS program does not receive a separate appropriation but is funded through the lump sum appropriation for the Defense Health Program, as well as the premiums paid by reservists. Both the lump sum appropriation and the premiums are credited to the Defense Health Program account. Since amounts in this account are generally available for all medical and dental care for DOD beneficiaries, not just for TRS benefits, funds not spent on TRS are available for other components of the Defense Health Program. See 10 U.S.C. §§ 1076d(d)(5), 1100. [26] Both DOD’s projected and reported costs also included approximately $25 million that DOD obligated over fiscal years 2005 and 2006 for start-up costs to be paid to the managed care support contractors and subcontractors that oversee TRICARE’s civilian provider network and process TRICARE claims, and for changes to DOD’s data systems. DOD officials told us that this $25 million had been obligated over fiscal years 2005 and 2006, but that it had not been paid out in full. As of September 18, 2007, DOD officials told us that they and the contractors had not yet determined the exact amounts to be paid. [27] DOD’s new model projects enrollment and costs through 2013 under TRS’s single-tiered structure. Approximately 107,000 reservists are expected to enroll in TRS by fiscal year 2010, with enrollment levels remaining relatively constant through fiscal year 2013. Program costs are projected to increase each year and amount to approximately $874 million in fiscal year 2013.

Appendix I [1]

See Pub. L. No. 109-364, § 713(b)(2)(B), 120 Stat. 2083, 2289 (2006).

Appendix II [1] [2]

In our analysis, we calculated a separate average cost per TRS plan for individual and family coverage—not the average cost per TRS enrollee. By law, under a three-tiered premium structure in effect during fiscal year 2007, qualification criteria for TRS were set for each of three separate tiers:

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Members of the Selected Reserves who served in a contingency operation for 90 or more continuous days since September 11, 2001, qualified to purchase TRS coverage under tier 1 and paid 28 percent of the total premium. Members of the Selected Reserves who did not have such service but were either unemployed, self-employed, or not eligible for employer-sponsored insurance qualified to purchase TRS coverage under tier 2 and paid 50 percent of the total premium. Members of the Selected Reserves who did not qualify for tier 1 or tier 2 were qualified to purchase TRS coverage under tier 3 and paid 85 percent of the total premium. Due to a change in law, since October 1, 2007, all enrollees have paid 28 percent of the total premium.

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Chapter 4

DOD AND VA HEALTH CARE: CHALLENGES ENCOUNTERED BY INJURED SERVICEMEMBERS DURING THEIR RECOVERY PROCESS ∗

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United States Government Accountability Office WHAT GAO FOUND Despite coordinated efforts, DOD and VA have had problems sharing medical records for servicemembers transferred from DOD to VA medical facilities. GAO reported in 2006 that two VA facilities lacked real-time access to electronic medical records at DOD facilities. To obtain additional medical information, facilities exchanged information by means of a time-consuming process resulting in multiple faxes and phone calls. In 2005, GAO reported that VA and DOD collaboration is important for providing early intervention for rehabilitation. VA has taken steps to initiate early intervention efforts, which could facilitate servicemembers’ return to duty or to a civilian occupation if the servicemembers were unable to remain in the military. However, according to DOD, VA’s outreach process may overlap with DOD’s process for evaluating servicemembers for a possible return to duty. DOD was ∗

Excerpted from GAO Report 07-606T, dated March 8, 2007. Statement of Cynthia A. Bascetta, Health Care.

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also concerned that VA’s efforts may conflict with the military’s retention goals. In this regard, DOD and VA face both a challenge and an opportunity to collaborate to provide better outcomes for seriously injured servicemembers. DOD screens servicemembers for PTSD but, as GAO reported in 2006, it cannot ensure that further mental health evaluations occur. DOD health care providers review questionnaires, interview servicemembers, and use clinical judgment in determining the need for further mental health evaluations. However, GAO found that 22 percent of the OEF/OIF servicemembers in GAO’s review who may have been at risk for developing PTSD were referred by DOD health care providers for further evaluations. According to DOD officials, not all of the servicemembers at risk will need referrals. However, at the time of GAO’s review DOD had not identified the factors its health care providers used to determine which OEF/OIF servicemembers needed referrals. Although OEF/OIF servicemembers may obtain mental health evaluations or treatment for PTSD through VA, VA may face a challenge in meeting the demand for PTSD services. VA officials estimated that follow-up appointments for veterans receiving care for PTSD may be delayed up to 90 days. GAO’s 2006 testimony pointed out problems related to military pay have resulted in debt and other hardships for hundreds of sick and injured servicemembers. Some servicemembers were pursued for repayment of military debts through no fault of their own. As a result, servicemembers have been reported to credit bureaus and private collections agencies, been prevented from getting loans, gone months without paychecks, and sent into financial crisis. In a 2005 testimony GAO reported that poorly defined requirements and processes for extending the active duty of injured and ill reserve component servicemembers have caused them to be inappropriately dropped from active duty, leading to significant gaps in pay and health insurance for some servicemembers and their families.

WHY GAO DID THIS STUDY As of March 1, 2007, over 24,000 servicemembers have been wounded in action since the onset of Operation Enduring Freedom (OEF) and Operation Iraqi Freedom (OIF), according to the Department of Defense (DOD). GAO work has shown that servicemembers injured in combat face an array of significant medical and financial challenges as they begin their recovery process in the health care systems of DOD and the Department of Veterans Affairs (VA).

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GAO was asked to discuss concerns regarding DOD and VA efforts to provide medical care and rehabilitative services for servicemembers who have been injured during OEF and OIF. This testimony addresses (1) the transition of care for seriously injured servicemembers who are transferred between DOD and VA medical facilities, (2) DOD’s and VA’s efforts to provide early intervention for rehabilitation for seriously injured servicemembers, (3) DOD’s efforts to screen servicemembers at risk for post- traumatic stress disorder (PTSD) and whether VA can meet the demand for PTSD services, and (4) the impact of problems related to military pay on injured servicemembers and their families. This testimony is based on GAO work issued from 2004 through 2006 on the conditions facing OEF/OIF servicemembers at the time the audit work was completed. To view the full product, including the scope and methodology, click on the link above. For more information, contact Cynthia A. Bascetta at (202) 512-7101 or [email protected].

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Mr. Chairman and Members of the Subcommittee: I am pleased to be here today to discuss health care and other services for U.S. military servicemembers wounded during Operation Enduring Freedom (OEF) or Operation Iraqi Freedom (OIF). [1] On March 1, 2007, the Department of Defense (DOD) reported that over 24,000 servicemembers have been wounded in action since the onset of the two conflicts. In 2005, DOD reported that about 65 percent of the OEF and OIF servicemembers wounded in action were injured by blasts and fragments from improvised explosive devices, land mines, and other explosive devices. More recently, DOD estimated in 2006 that as many as 28 percent of those injured by blasts and fragments have some degree of trauma to the brain. These injuries often require comprehensive inpatient rehabilitation services to address complex cognitive and physical impairments. In addition to their physical injuries, OEF/OIF servicemembers who have been injured in combat may also be at risk for developing mental health impairments, such as post-traumatic stress disorder (PTSD), which research has shown to be strongly associated with experiencing intense and prolonged combat. [2] While servicemembers are on active duty, DOD decides where they receive their care—at a military treatment facility (MTF), from a TRICARE civilian provider, [3] or at a Department of Veterans Affairs (VA) medical facility. From the OEF and OIF conflict areas, seriously injured servicemembers are usually brought to Landstuhl Regional Medical Center in Germany for treatment. From

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there, they are usually transported to MTFs located in the United States, with most of the seriously injured admitted to Walter Reed Army Medical Center or the National Naval Medical Center, both of which are in the Washington, D.C., area. [4] Once the servicemembers are medically stabilized, DOD can elect to send those with traumatic brain injuries and other complex trauma, such as missing limbs, to one of the four polytrauma rehabilitation centers (PRC) [5] operated by VA for medical and rehabilitative care. The PRCs are located at VA medical centers in Palo Alto, California; Tampa, Florida; Minneapolis, Minnesota; and Richmond, Virginia. While many servicemembers who receive such rehabilitative services return to active duty after they are treated, others who are more seriously injured are likely to be discharged from their military obligations and return to civilian life with disabilities. Our work has shown that servicemembers injured in combat face an array of significant medical and financial challenges as they begin their recovery process in the DOD and VA health care systems. In light of these challenges and recent media reports that have highlighted unsanitary and decrepit living conditions at the Walter Reed Army Medical Center, [6] you asked us to discuss concerns we have identified regarding DOD and VA efforts to provide medical care and rehabilitative services for servicemembers who have been injured during OEF and OIF. Specifically, my remarks today will focus on (1) the transition of care for seriously injured OEF/OIF servicemembers—those with traumatic brain injuries or other complex trauma, such as missing limbs—who are transferred between DOD and VA medical facilities; (2) DOD’s and VA’s efforts to provide early intervention for rehabilitation services as soon as possible after the onset of a disability for seriously injured servicemembers; (3) DOD’s efforts to screen OEF/OIF servicemembers at risk for PTSD and whether VA can meet the demand for PTSD services; and (4) the impact of problems related to military pay on injured servicemembers and their families. My testimony is based on issued GAO work. [7] The information I am reporting today reflects the conditions facing OEF/OIF servicemembers at the time the audit work was completed and illustrates the types of problems injured servicemembers encountered during their healing and rehabilitation process. To complete the work for these products, we visited DOD and VA facilities, reviewed relevant documents, analyzed DOD data, and interviewed DOD and VA officials. Our work was performed in accordance with generally accepted government auditing standards. In summary, DOD and VA have made various efforts to provide medical care and rehabilitative services for OEF/OIF servicemembers. The departments established joint programs to facilitate the transfer of injured servicemembers

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from DOD facilities to VA medical facilities, assess whether servicemembers will be able to remain in the military, and assign VA social workers to selected MTFs to coordinate the transfers. DOD has also established a program to screen servicemembers after their deployment outside of the United States has ended to assess whether they are at risk for PTSD. However, we found several problems in the efforts to provide health care and rehabilitative services for OEF/OIF servicemembers. For example, DOD and VA had problems sharing medical records and questions arose about the timing of VA’s outreach to servicemembers whose discharge from military service was not certain. Furthermore, we found that DOD cannot provide reasonable assurance that OEF/OIF servicemembers who need referrals for mental health evaluations receive them. Finally, problems related to military pay have resulted in overpayments and debt for hundreds of sick and injured servicemembers.

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DOD AND VA HAVE TAKEN ACTIONS TO FACILITATE THE TRANSFER OF SERVICEMEMBERS BUT EXPERIENCED PROBLEMS IN EXCHANGING HEALTH CARE INFORMATION In our June 2006 report, we found that DOD and VA had taken actions to facilitate the transition of medical and rehabilitative care for seriously injured servicemembers who were being transferred from MTFs to PRCs. [8] For example, in April 2004, DOD and VA signed a memorandum of agreement that established referral procedures for transferring injured servicemembers from DOD to VA medical facilities. DOD and VA also established joint programs to facilitate the transfer to VA medical facilities, including a program that assigned VA social workers to selected MTFs to coordinate transfers. Despite these coordination efforts, we found that DOD and VA were having problems sharing the medical records VA needed to determine whether servicemembers’ medical conditions allowed participation in VA’s vigorous rehabilitation activities. DOD and VA reported that as of December 2005 two of the four PRCs had real-time access to the electronic medical records maintained at Walter Reed Army Medical Center and only one of the two also had access to the records at the National Naval Medical Center. In cases where medical records could not be accessed electronically, the MTF faxed copies of some medical information, such as the patient’s medical history and progress notes, to the PRC. Because this information did not always provide enough data for the PRC provider to determine if the servicemember was medically stable enough to be

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admitted to the PRC, VA developed a standardized list of the minimum types of health care information needed about each servicemember transferring to a PRC. Even with this information, PRC providers frequently needed additional information and had to ask for it specifically. For example, if the PRC provider notices that the servicemember is on a particular antibiotic therapy, the provider may request the results of the most recent blood and urine cultures to determine if the servicemember is medically stable enough to participate in strenuous rehabilitation activities. According to PRC officials, obtaining additional medical information in this way, rather than electronically, is very time consuming and often requires multiple phone calls and faxes. VA officials told us that the transfer could be more efficient if PRC medical personnel had real- time access to the servicemembers’ complete DOD electronic medical records from the referring MTFs. However, problems existed even for the two PRCs that had been granted electronic access. During a visit to those PRCs in April 2006, we found that neither facility could access the records at Walter Reed Army Medical Center because of technical difficulties.

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DOD AND VA COLLABORATION IS IMPORTANT FOR EARLY INTERVENTION FOR REHABILITATION As discussed in our January 2005 report, the importance of early intervention for returning individuals with disabilities to the workforce is well documented in vocational rehabilitation literature. [9] In 1996, we reported that early intervention significantly facilitates the return to work but that challenges exist in providing services early. [10] For example, determining the best time to approach recently injured servicemembers and gauge their personal receptivity to considering employment in the civilian sector is inherently difficult. The nature of the recovery process is highly individualized and requires professional judgment to determine the appropriate time to begin vocational rehabilitation. Our 2007 HighRisk Series: An Update designates federal disability programs as “high risk” because they lack emphasis on the potential for vocational rehabilitation to return people to work. [11] In our January 2005 report, we found that servicemembers whose disabilities are definitely or likely to result in military separation may not be able to benefit from early intervention because DOD and VA could work at cross purposes. In particular, DOD was concerned about the timing of VA’s outreach to servicemembers whose discharge from military service is not yet certain. DOD

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was concerned that VA’s efforts may conflict with the military’s retention goals. When servicemembers are treated as outpatients at a VA or military hospital, DOD generally begins to assess whether the servicemember will be able to remain in the military. This process can take months. For its part, VA took steps to make seriously injured servicemembers a high priority for all VA assistance. Noting the importance of early intervention, VA instructed its regional offices in 2003 to assign a case manager to each seriously injured servicemember who applies for disability compensation. VA had detailed staff to MTFs to provide information on all veterans’ benefits, including vocational rehabilitation, and reminded staff that they can initiate evaluation and counseling, and, in some cases, authorize training before a servicemember is discharged. While VA tries to prepare servicemembers for a transition to civilian life, VA’s outreach process may overlap with DOD’s process for evaluating servicemembers for a possible return to duty. In our report, we concluded that instead of working at cross purposes to DOD goals, VA’s early intervention efforts could facilitate servicemembers’ return to the same or a different military occupation, or to a civilian occupation if the servicemembers were not able to remain in the military. In this regard, the prospect for early intervention with vocational rehabilitation presents both a challenge and an opportunity for DOD and VA to collaborate to provide better outcomes for seriously injured servicemembers.

DOD SCREENS SERVICEMEMBERS FOR PTSD AFTER DEPLOYMENT, BUT DOD AND VA FACE CHALLENGES ENSURING FURTHER PTSD SERVICES In our May 2006 report, we described DOD’s efforts to identify and facilitate care for OEF/OIF servicemembers who may be at risk for PTSD. [12] To identify such servicemembers, DOD uses a questionnaire, the DD 2796, to screen OEF/OIF servicemembers after their deployment outside of the United States has ended. The DD 2796 is used to assess servicemembers’ physical and mental health and includes four questions to identify those who may be at risk for developing PTSD. We reported that according to a clinical practice guideline jointly developed by DOD and VA, servicemembers who responded positively to at least three of the four PTSD screening questions may be at risk for developing PTSD. DOD health care providers review completed questionnaires, conduct face-to-face interviews with servicemembers, and use their clinical judgment in determining which servicemembers need referrals for further mental health

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evaluations. [13,14] OEF/OIF servicemembers can obtain the mental health evaluations, as well as any necessary treatment for PTSD, while they are servicemembers—that is, on active duty—or when they transition to veteran status if they are discharged or released from active duty. Despite DOD’s efforts to identify OEF/OIF servicemembers who may need referrals for further mental health evaluations, we reported that DOD cannot provide reasonable assurance that OEF/OIF servicemembers who need the referrals receive them. Using data provided by DOD, [15] we found that 22 percent, or 2,029, of the 9,145 OEF/OIF servicemembers in our review who may have been at risk for developing PTSD were referred by DOD health care providers for further mental health evaluations. Across the military service branches, DOD health care providers varied in the frequency with which they issued referrals to OEF/OIF servicemembers with three or more positive responses to the PTSD screening questions----- the Army referred 23 percent, the Air Force about 23 percent, the Navy 18 percent, and the Marines about 15 percent. According to DOD officials, not all of the OEF/OIF servicemembers with three or four positive responses on the screening questionnaire need referrals. As directed by DOD’s guidance for using the DD 2796, DOD health care providers are to rely on their clinical judgment to decide which of these servicemembers need further mental health evaluations. However, at the time of our review DOD had not identified the factors its health care providers used to determine which OEF/OIF servicemembers needed referrals. Knowing these factors could explain the variation in referral rates and allow DOD to provide reasonable assurance that such judgments are being exercised appropriately [16]. We recommended that DOD identify the factors that DOD health care providers used in issuing referrals for further mental health evaluations to explain provider variation in issuing referrals. DOD concurred with the recommendation. Although OEF/OIF servicemembers may obtain mental health evaluations or treatment for PTSD through VA when they transition to veteran status, VA may face a challenge in meeting the demand for PTSD services. In September 2004 we reported that VA had intensified its efforts to inform new veterans from the Iraq and Afghanistan conflicts about the health care services—including treatment for PTSD—VA offers to eligible veterans. [17] We observed that these efforts, along with expanded availability of VA health care services for Reserve and National Guard members, could result in an increased percentage of veterans from Iraq and Afghanistan seeking PTSD services through VA. However, at the time of our review officials at six of seven VA medical facilities we visited explained that while they were able to keep up with the current number of veterans seeking PTSD services, they may not be able to meet an increase in demand for these

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services. In addition, some of the officials expressed concern because facilities had been directed by VA to give veterans from the Iraq and Afghanistan conflicts priority appointments for health care services, including PTSD services. As a result, VA medical facility officials estimated that follow-up appointments for veterans receiving care for PTSD could be delayed. VA officials estimated the delays to be up to 90 days.

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PROBLEMS RELATED TO MILITARY PAY HAVE RESULTED IN DEBT AND OTHER HARDSHIPS FOR HUNDREDS OF SICK AND INJURED SERVICEMEMBERS As discussed in our April 2006 testimony, problems related to military pay have resulted in overpayments and debt for hundreds of sick and injured servicemembers. [18] These pay problems resulted in significant frustration for the servicemembers and their families. We found that hundreds of battle-injured servicemembers were pursued for repayment of military debts through no fault of their own, including at least 74 servicemembers whose debts had been reported to credit bureaus and private collections agencies. In response to our audit, DOD officials said collection actions on these servicemembers’ debts had been suspended until a determination could be made as to whether these servicemembers’ debts were eligible for relief. Debt collection actions created additional hardships on servicemembers by preventing them from getting loans to buy houses or automobiles or pay off other debt, and sending several servicemembers into financial crisis. Some battleinjured servicemembers forfeited their final separation pay to cover part of their military debt, and they left the service with no funds to cover immediate expenses while facing collection actions on their remaining debt. We also found that sick and injured servicemembers sometimes went months without paychecks because debts caused by overpayments of combat pay and other errors were offset against their military pay. [19] Furthermore, the longer it took DOD to stop the overpayments, the greater the amount of debt that accumulated for the servicemember and the greater the financial impact, since more money would eventually be withheld from the servicemember’s pay or sought through debt collection action after the servicemember had separated from the service. In our 2005 testimony about Army National Guard and Reserve servicemembers, we found that poorly defined requirements and processes for

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extending injured and ill reserve component servicemembers on active duty have caused servicemembers to be inappropriately dropped from active duty. [20] For some, this has led to significant gaps in pay and health insurance, which has created financial hardships for these servicemembers and their families. Mr. Chairman, this completes my prepared remarks. I would be happy to respond to any questions you or other members of the subcommittee may have at this time.

CONTACTS AND ACKNOWLEDGMENTS For further information about this testimony, please contact Cynthia A. Bascetta at (202) 512-7101 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Michael T. Blair, Jr., Assistant Director; Cynthia Forbes; Krister Friday; Roseanne Price; Cherie’ Starck; and Timothy Walker made key contributions to this statement.

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RELATED GAO PRODUCTS High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January 2007. VA and DOD Health Care: Efforts to Provide Seamless Transition of Care for OEF and OIF Servicemembers and Veterans. GAO-06-794R. Washington, D.C.: June 30, 2006. Post-Traumatic Stress Disorder: DOD Needs to Identify the Factors Its Providers Use to Make Mental Health Evaluation Referrals for Servicemembers. GAO06-397. Washington, D.C.: May 11, 2006. Military Pay: Military Debts Present Significant Hardships to Hundreds of Sick and Injured GWOT Soldiers. GAO-06-657T. Washington, D.C.: April 27, 2006. Military Disability System: Improved Oversight Needed to Ensure Consistent and Timely Outcomes for Reserve and Active Duty Service Members. GAO-06362. Washington, D.C.: March 31, 2006. Military Pay: Gaps in Pay and Benefits Create Financial Hardships for Injured Army National Guard and Reserve Soldiers. GAO-05-322T. Washington, D.C.: February 17, 2005.

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Vocational Rehabilitation: More VA and DOD Collaboration Needed to Expedite Services for Seriously Injured Servicemembers. GAO-05-167. Washington, D.C.: January 14, 2005. VA and Defense Health Care: More Information Needed to Determine If VA Can Meet an Increase in Demand for Post-Traumatic Stress Disorder Services. GAO-04-1069. Washington, D.C.: September 20, 2004. SSA Disability: Return-to-Work Strategies from Other Systems May Improve Federal Programs. GAO/HEHS-96-133. Washington, D.C.: July 11, 1996.

REFERENCES [1]

[2]

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[3]

[4]

[5]

[6]

[7]

OEF, which began in October 2001, supports combat operations in Afghanistan and other locations, and OIF, which began in March 2003, supports combat operations in Iraq and other locations. Charles W. Hoge et al., “Combat Duty in Iraq and Afghanistan, Mental Health Problems, and Barriers to Care,” The New England Journal of Medicine, 351 (2004): 13-22. DOD provides health care through TRICARE—a regionally structured program that uses civilian contractors to maintain provider networks to complement health care services provided at MTFs. Other MTFs that received OEF/OIF servicemembers include Brooke Army Medical Center (San Antonio, Texas), Dwight David Eisenhower Army Medical Center (Augusta, Georgia), Madigan Army Medical Center (Tacoma, Washington), Darnall Army Community Hospital (Fort Hood, Texas), Evans Army Community Hospital (Fort Carson, Colorado), and the Naval Hospital Camp Pendleton (Camp Pendleton, California). The Veterans Health Programs Improvement Act of 2004, Pub. L. No. 108422, § 302, 118 Stat. 2379, 2383-86, mandated that VA establish centers for research, education, and clinical activities related to complex multiple trauma associated with combat injuries. In response to that mandate, VA established PRCs at four VA medical facilities with expertise in traumatic amputation, spinal cord injury, traumatic brain injury, and blind rehabilitation. A PRC addresses the rehabilitation needs of the combat injured in one setting and in a coordinated manner. See, for instance, Dana Priest and Anne Hull, “Soldiers Face Neglect, Frustration at Army’s Top Medical Facility,” The Washington Post (Feb. 18, 2007). See Related GAO Products at the end of this statement.

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[9]

[10]

[11] [12]

[13]

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[14] [15]

[16]

[17]

[18]

United States Government Accountability Office GAO, VA and DOD Health Care: Efforts to Provide Seamless Transition of Care for OEF and OIF Servicemembers and Veterans, GAO-06-794R (Washington, D.C.: June 30, 2006). GAO, Vocational Rehabilitation: More VA and DOD Collaboration Needed to Expedite Services for Seriously Injured Servicemembers, GAO-05-167 (Washington, D.C.: Jan. 14, 2005). We also reported on early intervention in GAO, SSA Disability: Return-toWork Strategies from Other Systems May Improve Federal Programs, GAO/HEHS-96-133 (Washington, D.C.: July 11, 1996). GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.: January 2007). GAO, Post-Traumatic Stress Disorder: DOD Needs to Identify the Factors Its Providers Use to Make Mental Health Evaluation Referrals for Servicemembers, GAO-06-397 (Washington, D.C.: May 11, 2006). Health care providers that review the DD 2796 may include physicians, physician assistants, nurse practitioners, or independent duty medical technicians—enlisted personnel who receive advanced training to provide treatment and administer medications. DOD’s referrals are used to document DOD’s assessment that servicemembers are in need of further mental health evaluations. In our review we analyzed computerized data provided by DOD to identify 178,664 OEF/OIF servicemembers who were deployed in support of OEF/OIF from October 1, 2001, through September 30, 2004, and who have since been discharged or released from active duty. These servicemembers had answered the four PTSD screening questions on the DD 2796 and had a record of their completed questionnaire available in a DOD computerized database. We found that DOD data indicated 9,145 of the 178,664 servicemembers in our review may have been at risk for developing PTSD. The John Warner National Defense Authorization Act for Fiscal Year 2007 required DOD to develop guidelines for mental health referrals, as well as mechanisms to ensure proper training and oversight, by April 2007. Pub. L. No. 109-364, § 738, 120 Stat. 2083, 2303-4. GAO, VA and Defense Health Care: More Information Needed to Determine If VA Can Meet an Increase in Demand for Post-Traumatic Stress Disorder Services, GAO-04-1069 (Washington, D.C.: Sept. 20, 2004). GAO, Military Pay: Military Debts Present Significant Hardships to Hundreds of Sick and Injured GWOT Soldiers, GAO-06-657T (Washington, D.C.: April 27, 2006).

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[19] We found that after voluntary allotments and other required deductions, many times there was no net pay due the servicemember. [20] GAO, Military Pay: Gaps in Pay and Benefits Create Financial Hardships for Injured Army National Guard and Reserve Soldiers, GAO-05-322T (Washington, D.C.: Feb. 17, 2005).

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In: Military Medical Care ISBN 978-1-60692-575-1 Editor: Linda F. Bernstein et al., pp. 93-100 © 2009 Nova Science Publishers, Inc.

Chapter 5

INCREASES IN TRICARE COSTS: BACKGROUND AND OPTIONS FOR CONGRESS∗ Richard Best and Don J. Jansen

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ABSTRACT In its FY2007, 2008, and 2009 budget submissions, the Department of Defense (DOD) proposed increases in Tricare enrollment fees, deductibles, and pharmacy co- payments for retired beneficiaries not yet eligible for Medicare. The raises were justified by DOD as necessary to constrain the growth of health care spending as a proportion of the overall defense budget in the next decade. Many beneficiaries argued that the proposed hikes were unfair and unnecessary. The proposed increases found favor in neither chamber and Congress passed legislation to prohibit such increases. The FY2007 Defense Authorization Act (P.L. 109-364) prohibited increases in premiums, deductibles and co-payments prior to September 30, 2007. For FY2008, the Administration based its budget submission on the assumption of fee increases but the FY2008 National Defense Authorization Act (P.L. 110181) extended the prohibition of increases in co-payments and enrollment fee until October 2008. For FY2009, the Administration’s budget submission assumed fee increases linked to recommendations made by the Task Force on the Future of Military Health Care. However, both House and Senate versions (H.R. 5658/S. 3001) of the defense authorization bill contain ∗

Excerpted from CRS Report RS22402, dated August 15, 2008.

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Richard Best and Don J. Jansen provisions to prohibit fee increases in 2009. In July 2008, the Tenth Quadrennial Review of Military Compensation recommended new fees linked to Medicare Part B premiums. This report will be updated as necessary.

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BACKGROUND The dollar amounts allocated to health care in the budget of the Department of Defense (DOD) have more than doubled since FY2001, growing from about $17 billion to over $39 billion in FY2007. DOD projections for health care indicate that even further growth can be realistically anticipated, perhaps reaching $64 billion in FY20 15. In 1990, according to DOD estimates, health-care expenses constituted 4.5% of DOD’s budget; by 2015 they could reach over 12%. This growth in health-care costs could have a substantial effect on spending for other defense programs and/or the overall size of defense spending within the federal budget. The Defense health system, which is open to some 9.2 million potential beneficiaries, is large and complicated, but, in brief, DOD provides varying kinds of care to different elements of the eligible population: (1) a complete medicalcare benefit to active duty personnel and dependents; (2) a benefit program with annual enrollment fees and co-payments to retired military personnel and their dependents who are not eligible for Medicare; (3) a program for those retirees who are eligible for Medicare (and enrolled in Medicare Part B), known as Tricare for Life (TFL), that covers almost all costs that Medicare does not cover (and is funded with an accrual fund that is considered part of the defense budget); and (4) a premium-based health care benefit for reservists and their families known as Tricare Reserve Select. Military retirees aged 65 and above also remain eligible for treatment in military medical facilities on a space or service-available basis. As of 2007, 36% of Tricare beneficiaries were retirees under age 65 and their dependents, approximately 20% were TFL retirees (generally age 65 and older), and 44% were active duty personnel and their dependents. Care is delivered through one of four plans. The first is Tricare Prime, a health maintenance organization (HMO), which is required for active duty personnel and open to dependents and many retirees. Two other plans are Tricare Extra, a preferred provider option in which beneficiaries seek care from providers who have agreed to an established fee structure, and Tricare Standard (formerly CHAMPUS) in which beneficiaries can seek care from any licensed provider and obtain partial reimbursement. [1] A fourth plan, TFL, serves as a supplemental

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payer to Medicare for care by licensed providers. Prescriptions are available from military pharmacies at no cost; they can also be obtained from civilian pharmacies linked to DOD or by mail order with relatively low co-payments (e.g., $3 for a generic prescription; $9 for a brand; $22 for a non-formulary prescription). Special versions of these plans for beneficiaries in overseas and remote areas are also available. Several factors associated with these plans have led to current and projected cost growth. First, increases in costs of delivering medical services and of prescriptions reflect trends in medical care delivery throughout the civilian economy. [2] Pharmacy costs have seen the fastest rate of growth in DOD health care spending, quadrupling from $1.6 billion in FY2000 to $6.5 billion in FY2007. Second, the establishment of TFL in the FY2001 Defense Authorization Act (P.L. 106-398) greatly increased costs by extending a significant medical benefit to millions of Medicare-eligible retirees and their dependents. Third, expanded access to defense health care for non-active duty reservists was provided in the Defense Authorization Act for FY2007 (P.L. 109-364). In addition, co-payments in Tricare Prime have been eliminated and the catastrophic cap for retirees has been lowered from $7,500 to $3,000, increasing costs to DOD. Several additional factors have contributed to concerns about the costs of defense health care. In comparison to other plans, including those available to civil servants under the Federal Employees Health Benefit Plan (FEHBP), DOD provides an especially generous benefit with limited contributions and copayments required of beneficiaries. Observers also point out that most defense health care is not directly related to treating combat injuries. In recent decades, the multi-billion dollar system has been directed towards care of dependents, especially in the areas of obstetrics and pediatrics, and to the care of retirees at stages of their lives when medical needs tend to increase. Even with the need to care for injuries resulting from the U.S. commitment to Operation Iraqi Freedom, the bulk of DOD medical care is currently provided to dependents and retirees — not to the operating forces. Furthermore, Tricare beneficiaries, both active duty and retired, tend to make greater use of professional care than other sectors of the population. In FY2004, according to one estimate, in Tricare Prime the outpatient utilization rate was 44% higher than in civilian HMOs; the inpatient utilization rate was 60% higher.[3] Health-care analysts tend to ascribe this to lower out-of-pocket costs for DOD beneficiaries. [4] Low cost to beneficiaries and increases in the quality and efficiency of Defense health care in recent years have reportedly led many retirees with civilian jobs to choose Tricare even when they have access to other plans through their

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civilian employers. Special supplements by employers for Tricare beneficiaries are now illegal (see 10 U.S.C. 1 097c). In the FY2007 budget request, DOD first proposed changes to constrain the costs of health care by focusing on care for retirees and their dependents who are not Medicare- eligible. For these beneficiaries, DOD proposed charging, for the first time, annual enrollment fees for Tricare Standard, and also significantly increased annual enrollment fees for Tricare Prime. Annual deductibles would have also been increased. No initiatives were proposed that would affect active duty military and their dependents, nor were changes proposed for health-care benefits available to retirees eligible for Medicare (those aged 65 and over along with a much smaller number of disabled retirees) who are covered by TFL. The TFL-eligible beneficiaries would, however, have been required to make somewhat higher co-payments for some prescriptions. DOD also strongly urged that, in the future, cost shares be adjusted annually for inflation. The fact that enrollment fees for Tricare Prime were set at $230 (for individuals) and $460 (for individuals and their dependents) in 1995 and not subsequently adjusted has been viewed as an important contributing factor to the current budgetary situation. The Administration’s FY2008 budget submission was based on the assumption of $1.8 billion in proposed assumed savings to be derived from unspecified benefit reforms. For the FY2009 budget submission, the Administration endorsed the recommendations of the Task Force on the Future of Military Health Care mandated by the Defense Authorization Act for FY2007 (P.L. 109-364) (see below) and assumed $1.2 billion in savings from the increased Tricare premiums and co-payments. In July, 2008, the presidentially-directed 10th Quadrennial Review of Military Compensation (QRMC) issued its report on deferred and noncash compensation for members of the uniformed services [5]. The QRMC recommended that Tricare Prime premiums for single retirees under age 65 be set at 40% of Medicare Part B premiums (which vary by the enrollee’s adjusted gross income). Tricare Standard/Extra premiums for single retirees would be set at 15% of Part B premiums. Family rates would be set at twice the single rate regardless of family size. Tricare deductibles would be linked to Medicare rates with copayments waived for preventative care and prescription drug payments limited to no more than two thirds of the average copayment faced by civilians at retail pharmacies. In addition, the QRMC recommended that health care for retirees under age 65 be financed through accrual accounting in order to illuminate how current manning decisions will affect future costs.

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CONGRESSIONAL RESPONSES The FY2007 and FY2008 defense authorization acts prohibited DOD from increasing premiums, deductibles, co-payments, and other charges through September 30, 2008 (See section 704 and 708 of P.L. 109-364 and sections 701 and 702 of P.L. 110- 18 1). Provisions were also enacted (see section 707 of P.L. 109-364) to prohibit most civilian employers (including state and local governments) from actively encouraging or offering incentives to employees who are retired servicemembers to rely on Tricare. The 2007 national defense authorization (see section 711 of P.L. 109-364) also required the establishment of a DOD Task Force on the Future of Military Health Care, composed of military and civilian officials with experience in healthcare budget issues, to examine and report on efforts to improve and sustain defense health care over the long term including the “beneficiary and Government cost sharing structure required to sustain military health benefits.” Another provision of the same act (section 713) required the Government Accountability Office (GAO) in cooperation with the Congressional Budget Office (CBO) to prepare an audit of the costs of health care to both DOD and beneficiaries between 1995 and 2005. The Task Force on the Future of Military Health Care submitted its final report in December 2007 (available at [http://www.dodfuturehealthcare.net/ images/103-06-2-Home-Task_Force_FINAL_REPORT_1 22007.pdf]). It found existing cost-sharing provisions anachronistic and recommended phased-in changes in enrollment fees and deductibles that would restore cost-sharing relationships that existed when Tricare was created. For instance, this would mean that average enrollment fees for the average under-65 retiree family would gradually rise from $460 per year to $1,100 per year. GAO released its report, Military Health Care: TRICARE Cost-Sharing Proposals Would Help Offset Increasing Health Care Spending, but Projected Savings are Likely Overestimated (GAO-07-647, available at [http://www.gao.gov/new.items/d07647.pdf]) in May 2007. GAO concluded that DOD had overestimated savings that would result from higher cost-shares. GAO judged that DOD estimated more retirees would elect non- DOD medical care than is likely to be the case. GAO concluded, however, that DOD’s proposed fee and deductible increases would save at least $2.3 billion over five years. As part of the FY2009 budget request DOD asked for authority to implement the recommendations of the Task Force on the Future of Military Health Care for retirees and DOD’s budget submission assumed savings of $1.2 billion. Sections 701 and 702 of the House bill, H.R. 5658, preclude DOD from altering co-

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payment levels and enrollment fees through the end of FY2009. However, the Senate defense authorization bill for 2009 (S. 3001), authorizes an additional $1.2 billion over the Administration budget request to retain current Tricare fee levels. [6]

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MORE AMBITIOUS APPROACHES The fact that both armed services committees called for extensive outside reviews of military health-care financing indicates that Congress may revisit proposals for fee increases at some point as part of more comprehensive changes in defense health-care budgeting. A number of different approaches have already been suggested. One option that has been mentioned by CBO would provide an opportunity for retirees to forego defense health care until they turn 65 in exchange for a lump-sum payment. [7] The size of the payment would be adjusted to a level that would be less costly to DOD over the longer term than the current programs. The acceptability of this approach to retirees is uncertain; the number of retirees who would take such a payout is unknown and might be very limited given the attractiveness of Tricare. Another approach would be to offer beneficiaries a “cafeteria plan” under which they would receive an annual cash allowance for health care. Using this allowance they could then select a Tricare plan, a new option involving lower enrollment fees and higher co- payments and deductibles, or apply some of the funds against premiums for civilian health insurance. This could in effect allow retirees to establish health savings accounts (HSAs) for themselves and their dependents. CBO estimates that such an approach could reduce DOD’s outlays by 25% not including the cost of the cash allowance. [8] However, HSAs are controversial and making them available to military retirees could raise concerns among both beneficiaries and others with an interest in government health programs. [9] Still another option would be to readjust budgetary categories to remove health-care spending for retirees — both for those not yet eligible for Medicare and the accrual fund for TFL — from defense appropriation acts. Some have argued that this approach would encourage more meaningful analyses of current defense issues by removing the need to consider trade-offs with retiree health care. Others have countered that such a maneuver would undermine analysis by obscuring the true costs of decisions affecting military manpower.

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CONCLUSION DOD has maintained since 2006 that there is a need to adjust fees to make up for frozen fee structures over the past decade and that the proposed rates are still much lower than the fee structures of civilian plans including those in the FEHBP. [10] Retiree organizations have continued to argue that proposed raises in enrollment fees and co- payments were unfair, that the requirements of military service are unique and extraordinary and that health-care premiums have been paid in service and sacrifice. They also claim that DOD’s health-care benefit has significant influence on recruiting and retaining an all-volunteer force. Some further argue that fee hikes are especially inappropriate for retiring servicemembers who have borne the costs of the war on terror during the past several years. There are complex considerations with regard to any of the various approaches to dealing with the growth of miliary medical spending. To a considerable extent, the issues involving defense health care reflect larger healthcare issues that affect the entire country. In the case of retired servicemembers and their dependents, most recognize a special responsibility inasmuch as health care after retirement is undoubtedly an important incentive to follow a difficult and often dangerous career. Nevertheless, many observers also appear to believe that competing requirements for defense funds exist and that funds for medical care should not be seen as unlimited. These issues have been present ever since DOD proposed fee increases in 2006 and are not expected to disappear in the near future.

REFERENCES [1]

[2] [3]

This explanation is generalized; there are many special provisions. For further information, see CRS Report RL33537, Military Medical Care: Questions and Answers, by Richard A. Best Jr. For specific provisions, see the Tricare website [http://www.tricare.osd.mil]; relevant regulations are at 32 C.F.R. 199. See CRS Report RL32545, Health Care Spending: Context and Policy, by Jennifer Jenson Department of Defense, Evaluation of the Tricare Program: FY2005 Report to Congress, March 1, 2005, pp. 63, 57.

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Congressional Budget Office, Growth in Medical Spending by the Department of Defense, September 2003, p. 27. [5] Department of Defense, Report of The Tenth Quadrennial Review of Military Compensation: Volume II - Deferred and Noncash Compensation, July, 2008, pp 4 1-64. [6] See S.Rept. 110-33, May 12, 2008, p. 410. [7] See CBO, Growth in Medical Spending, pp. 18-19. [8] Ibid., pp. 19-20. [9] For additional background on HSAs, see CRS Report RL32467, Health Savings Accounts, by Bob Lyke, Chris L. Peterson, and Neela K. Ranade. [10] Department of Defense, Final Report of the Task Force on the Future of Military Health Care, December 2007, p. 92.

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[4]

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INDEX # 9/11, 47

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A access, xii, 5, 6, 13, 16, 19, 24, 25, 26, 30, 34, 42, 47, 48, 51, 54, 60, 72, 85, 103, 109, 124, 125 accounting, 82, 126 accuracy, 89 achievement, 55 actuarial, 67, 75 adjusted gross income, 126 adjustment, 100 administrative, 6, 11, 20, 67, 79, 82, 92, 93, 94 administrators, 39 advertising, 79 Afghanistan, 66, 113, 116 age, xi, 2, 3, 5, 7, 10, 13, 15, 17, 18, 19, 22, 24, 32, 33, 40, 41, 43, 48, 49, 50, 52, 53, 61, 67, 76, 82, 123, 126 agent, 10 agents, 10, 44, 46 aid, 22, 52, 72, 92, 101 allies, 9 alternative, 45 amputation, 117 analysts, 39, 47, 124 analytical framework, 89

annual rate, 67, 91 antibiotic, 109 antibiotics, 25 anxiety, 24 appendix, 67, 69, 71, 89, 91 appropriations, xi, 3 appropriations bills, xi, 3 armed forces, ix, xi, 29, 37, 39, 47, 49 Armed Forces, 41, 59 Army, 4, 6, 34, 47, 49, 57, 58, 98, 107, 109, 112, 114, 115, 116, 119 ASD, 6 assessment, 9, 23, 118 asthma, 25 attacks, 66 attractiveness, 128 auditing, 69, 95, 108 authority, 8, 22, 32, 33, 36, 38, 44, 45, 46, 71, 89, 128 automobiles, 114 availability, ix, xii, 9, 20, 30, 31, 33, 35, 39, 41, 43, 44, 46, 88, 113 average costs, 67, 75, 79, 88, 92, 100

B benefits, ix, xi, xii, 2, 3, 4, 14, 15, 18, 19, 21, 22, 26, 27, 30, 31, 32, 33, 34, 35, 38, 39, 40, 42, 43, 44, 46, 47, 48, 49, 50, 51, 52, 55, 56, 60, 62, 63, 64, 65, 66, 67, 69, 70,

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Index

76, 79, 82, 84, 86, 87, 88, 89, 92, 93, 94, 101, 111, 125, 127 binding, 37, 38, 42, 45 blood, 25, 109 brain, 106, 107 brain injury, 117

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C certification, 51 children, 49, 50, 66 civil servant, 14, 20, 21, 124 civil servants, 14, 20, 21, 124 civil service, 17, 20 civilian, x, 2, 4, 5, 6, 7, 10, 11, 12, 13, 14, 18, 25, 32, 41, 44, 54, 55, 56, 67, 71, 75, 92, 101, 104, 106, 110, 111, 116, 123, 124, 125, 126, 127, 128, 129 clinical judgment, 104, 112 clinics, x, 1, 2, 6, 7, 10, 11, 23, 24, 59 Clinton Administration, 19 closure, 10, 22, 24, 55 Coast Guard, 49, 98 cognitive, 106 coinsurance, 75, 78 cold war, 4, 30 Cold War, 9, 22 Collaboration, 103, 110, 115, 117 Colorado, 116 Committee on Appropriations, 90 Committee on Armed Services, 27, 57, 58, 60, 61, 90 communities, 24 community, 10, 23 compensation, 7, 39, 47, 111, 126 competition, 55 complement, 116 components, 71, 91, 94, 98, 101 conflict, 104, 107, 111 confusion, 49 Congress, vii, xi, xiii, 2, 7, 9, 10, 12, 15, 16, 22, 26, 27, 28, 31, 32, 33, 35, 39, 40, 41, 42, 43, 44, 45, 57, 58, 59, 60, 61, 62, 66, 71, 121, 122, 128, 130

Congressional Budget Office, 4, 12, 20, 27, 53, 127, 130 consciousness, 21 consensus, 42 consent, 23 Constitution, 32, 33, 46, 57 constraints, 40, 51 construction, 7 Consumer Price Index, 65, 91 consumers, 92 contingency, 26, 54, 71, 72, 73, 74, 98, 99, 102 contractors, 11, 94, 101, 116 contracts, 10 control, 53 copayment, 126 cost saving, 10 costs, ix, x, xi, xii, 2, 3, 4, 6, 7, 8, 11, 12, 15, 16, 17, 19, 21, 24, 26, 27, 30, 50, 52, 53, 54, 55, 56, 63, 64, 65, 67, 68, 69, 70, 76, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 91, 92, 93, 94, 100, 101, 122, 123, 124, 125, 126, 127, 129 cost-sharing, 9, 21, 76, 127 counseling, 55, 111 Court of Appeals, 38, 44 courts, 31, 33, 36, 39, 45 coverage, xii, 12, 15, 21, 26, 27, 31, 32, 42, 43, 47, 50, 51, 53, 54, 56, 60, 61, 63, 64, 66, 68, 69, 71, 72, 73, 74, 75, 76, 79, 80, 85, 87, 88, 92, 94, 98, 99, 100, 102 covering, 26 CPI, 65, 91, 92 credit, 104, 114 CRS, xi, 1, 3, 4, 27, 28, 29, 35, 43, 57, 60, 121, 130, 131

D data set, 94 database, 118 death, 49, 55 debt, 104, 108, 113, 114 decisions, ix, xi, 29, 31, 39, 126, 129

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Index deductibles, xiii, 8, 21, 24, 53, 56, 61, 121, 125, 126, 127, 128 defense, ix, xi, xii, xiii, 3, 4, 6, 8, 9, 10, 27, 30, 52, 54, 121, 122, 123, 124, 126, 127, 128, 129 Defense Authorization Act, xi, xiii, 2, 3, 4, 9, 14, 15, 16, 18, 21, 24, 25, 26, 122, 124, 125 Defense Health Program, 7, 101 definition, 49, 50 delivery, 10, 11, 14, 20, 123 demand, 24, 104, 105, 108, 113 demographic characteristics, 88 dentistry, 11 Department of Defense (DOD), ix, x, xii, xiii, 1, 30, 31, 35, 40, 41, 42, 43, 50, 51, 53, 58, 63, 65, 66, 91, 95, 105, 106, 121, 122, 130, 131 diabetes, 25 disability, 10, 43, 46, 107, 110, 111 disabled, 10, 33, 55, 125 discretionary, 36, 44 disorder, 105 distribution, 82 doctors, 57 draft, 71, 89 drugs, 71, 77 duration, 9, 72 duties, 42

E economics, 68, 93, 101 elderly, 57 employees, 8, 39, 55, 56, 126 employers, 8, 55, 56, 62, 85, 125, 126 employment, 41, 110 encouragement, 24 enrollment, xiii, 3, 7, 8, 17, 19, 20, 22, 52, 53, 60, 65, 67, 68, 70, 84, 85, 87, 88, 92, 93, 94, 101, 121, 122, 125, 127, 128, 129 erosion, 22 estimating, 88 Europe, 9 expansions, 98 expenditures, 18, 52, 92

103

expertise, 117

F failure, 36, 47 faith, 45, 46, 48 family, 7, 12, 14, 26, 34, 49, 50, 53, 54, 55, 61, 64, 66, 67, 68, 69, 75, 76, 77, 79, 80, 82, 84, 85, 87, 92, 93, 94, 98, 99, 102, 126, 127 family members, 12, 14, 34, 50, 53, 55, 66, 67 February, 38, 43, 57, 115 federal budget, 122 federal courts, 36 Federal Employees Health Benefits, xi, 3, 20, 42, 48, 60, 65, 67, 91, 100 Federal Register, 25, 83 fee, xiii, 4, 9, 12, 22, 27, 32, 34, 53, 75, 99, 122, 123, 127, 128, 129, 130 fees, xiii, 3, 7, 8, 17, 20, 21, 22, 26, 53, 94, 121, 123, 125, 127, 128, 129 females, 100 finance, 68, 93, 101 financial crisis, 104, 114 financing, 128 flexibility, 91 focusing, 125 fraud, 39 Friday, 98, 115 frustration, 113 funding, 23, 55 funds, x, 2, 19, 44, 83, 101, 114, 128, 130

G gauge, 110 gender, 67, 76, 82 General Accounting Office, 51, 60 generic drug, 77 generic drugs, 77 Georgia, 116 Germany, 107 Global War on Terror, 99 goals, 47, 54, 55, 104, 111

Military Medical Care, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

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good faith, 45, 46, 48 government, 8, 12, 16, 17, 19, 20, 32, 33, 37, 38, 39, 44, 45, 46, 47, 48, 50, 52, 54, 55, 56, 69, 95, 108, 126, 129 Government Accountability Office (GAO), 27, 127 grassroots, 62 groups, x, xi, xii, 3, 5, 30, 38, 85 growth, x, xiii, 2, 6, 12, 17, 53, 54, 92, 121, 122, 123, 129 guidance, 25, 112 guidelines, 37, 118 GWOT, 115, 118

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H handling, 25 hardships, 104, 114 harm, 36 harmony, 36 hazards, 47 healing, 108 health, ix, x, xi, xii, xiii, 1, 2, 3, 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 19, 20, 22, 26, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 59, 60, 62, 63, 64, 66, 68, 70, 72, 75, 76, 78, 82, 83, 85, 88, 89, 91, 93, 99, 100, 104, 105, 106, 107, 108, 109, 112, 113, 114, 116, 121, 122, 123, 124, 125, 126, 127, 128, 129, 130 Health and Human Services, 52 health care, ix, x, xi, xii, xiii, 1, 2, 3, 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 19, 20, 22, 26, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 50, 52, 53, 54, 55, 56, 57, 59, 60, 64, 66, 70, 75, 76, 78, 82, 83, 88, 89, 91, 100, 104, 105, 106, 107, 108, 109, 112, 113, 116, 121, 122, 123, 124, 125, 126, 127, 128, 129, 130 health care costs, 8, 50, 54, 56, 65, 67, 70, 76, 78, 82, 83, 88, 91, 100 health care system, 40, 105, 107

health insurance, x, xii, 2, 11, 53, 55, 63, 66, 68, 76, 82, 83, 85, 92, 93, 105, 114, 128 health insurance premiums, 68, 82, 83, 92, 93 Health Savings Accounts, 131 health services, 22, 34 health status, 82 healthcare, 9, 12, 23 heart, 59 high blood pressure, 25 high risk, 110 HMOs, 11, 54, 124 hospital, 7, 8, 23, 37, 49, 52, 111 hospital care, 37 hospital stays, 7 hospitals, x, 1, 2, 6, 7, 10, 11, 23, 24, 37, 59, 66, 67, 71, 75, 92 House, xiii, 3, 18, 19, 27, 43, 44, 57, 58, 59, 61, 90, 100, 122, 128

I id, 16, 35, 69, 76, 82 images, 127 impairments, 106 implementation, xii, 4, 64, 67, 68, 84, 93 incentive, 41, 130 incentives, 11, 126 income, 51, 126 increased competition, ix, xii, 30 indexing, 9 indication, 47, 65, 70, 87 inflation, 6, 8, 53, 67, 91, 125 infrastructure, 23, 30, 41 injuries, 106, 107, 117, 124 injury, 99, 117 institutions, 40, 50 insurance, x, xii, 2, 11, 22, 45, 51, 63, 65, 66, 70, 74, 76, 83, 85, 88, 92, 98, 100, 102, 105 internal controls, 94 interpretation, 35 intervention, 103, 105, 107, 110, 111, 117 interview, 104 interviews, 68, 112 Iraq, 66, 113, 116

Military Medical Care, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

Index

J

M

January, 15, 21, 29, 42, 47, 52, 57, 58, 59, 60, 61, 62, 73, 86, 91, 110, 115, 116, 117 jobs, 125 John Warner National Defense Authorization Act, 91, 118 Joint Chiefs, 53, 61 judge, 37 judgment, 38, 44, 110 jurisdiction, xii, 63, 67, 91

maintenance, x, 2, 4, 5, 7, 11, 54, 99, 123 Maintenance, 32 males, 76, 100 manpower, 129 Marines, 112 market, 22 marriage, 55 measurement, 92 measures, 82 media, 38, 107 medical care, 4, 5, 6, 7, 10, 11, 12, 14, 15, 16, 17, 18, 19, 20, 21, 24, 30, 35, 36, 37, 38, 39, 42, 46, 52, 55, 58, 60, 67, 91, 105, 107, 108, 123, 124, 127, 130 medical services, 4, 7, 12, 19, 21, 23, 24, 123 Medicare, ix, xi, xiii, 2, 4, 5, 8, 10, 12, 15, 17, 18, 19, 20, 22, 24, 28, 29, 32, 33, 34, 40, 42, 47, 48, 49, 50, 51, 52, 54, 60, 99, 121, 123, 124, 125, 126, 129 medication, 25 medications, 8, 25, 118 medicine, 10, 17 men, 26, 41, 47 mental health, 55, 104, 106, 108, 112, 113, 118 Miami, 59 military, ix, x, xi, xii, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 19, 20, 21, 22, 23, 24, 25, 26, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 63, 65, 66, 91, 92, 104, 105, 106, 108, 110, 111, 112, 113, 114, 123, 125, 127, 128, 129 military occupation, 111 Minnesota, 107 missions, x, 1, 5, 75, 98 money, 36, 114

K Korean, 45, 46, 48 Korean War, 45, 46, 48

L

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105

land, 33, 46, 106 land mines, 106 language, ix, xi, 13, 29, 31, 33, 34, 36, 40, 42, 45, 51 law, 12, 13, 16, 19, 22, 31, 33, 35, 36, 38, 44, 46, 47, 48, 56, 59, 64, 70, 75, 83, 88, 98, 100, 102 laws, 16 lawyers, 39, 45 lead, ix, xii, 6, 10, 30 leadership, 23 learning, 49, 50 legislation, x, xi, xiii, 1, 3, 9, 17, 26, 31, 33, 35, 42, 43, 47, 48, 52, 68, 92, 122 legislative, 15, 31, 33, 40, 71, 89 lifetime, ix, xi, 16, 29, 32, 34, 36, 37, 38, 39, 40, 41, 44, 45, 46, 58 limitations, 5, 11, 13, 65, 69, 70, 83, 88, 89 living conditions, 107 loans, 104, 114 lobbying, 38, 60 local government, 8, 126 location, 61 long-term, 25, 52 Low cost, 125

N nation, 10, 40

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national, 23, 127 National Defense Authorization Act, xii, xiii, 27, 31, 32, 40, 43, 47, 58, 59, 60, 63, 66, 122 National Guard, 26, 98, 113, 114, 115, 119 National Oceanic and Atmospheric Administration, 49 national security, 23 natural, 49 Navy, 4, 6, 35, 37, 49, 60, 112 network, 7, 8, 12, 24, 51, 71, 75, 76, 78, 101 New England, 116 New York, vi, 52, 61 New York Times, 52, 61 NO, 58 non-binding, 42 North Carolina, 56 nurse, 118 nurse practitioners, 118

Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved.

O obligation, 16, 33, 39, 40, 41, 46, 55 obligations, 107 OEF, 47, 104, 105, 106, 107, 108, 111, 112, 113, 115, 116, 117, 118 Office of Management and Budget, 91 Office of Personnel Management, 78, 83, 100 Offices of Congressional Relations and Public Affairs, 89, 115 OIF, 47, 104, 105, 106, 107, 108, 111, 112, 113, 115, 116, 117, 118 Operation Enduring Freedom, 47, 105, 106 Operation Iraqi Freedom, 105, 106, 124 OPM, 48 opposition, 19, 21 organization, x, 2, 4, 11, 42, 60, 99, 123 organizations, 17, 22, 30, 42, 62, 129 out-of-pocket, ix, xii, 15, 19, 30, 53, 54, 56, 78, 92, 124 outpatient, 7, 124 outpatients, 111 oversight, 118

P parent-child, 49 patients, 22 pay off, 114 penalties, 19, 52 penalty, 20 Pentagon, 37, 52 permit, 26 personal, 110 pharmaceutical, 12, 18, 25, 60 pharmaceuticals, 3, 17, 22, 24, 25, 54 pharmacies, 8, 24, 25, 71, 123, 126 Philadelphia, 23 philosophy, 62 phone, xiii, 103, 110 physicians, 11, 51, 118 planning, 6, 10 population, x, 2, 4, 10, 12, 20, 35, 64, 66, 67, 69, 76, 82, 85, 100, 122, 124 post-Cold War, 22 post-traumatic stress, 106 post-traumatic stress disorder, 106 power, 45, 46 PPO, 32, 54 predictors, 82 premium, 27, 51, 64, 66, 68, 69, 70, 72, 73, 74, 76, 78, 79, 80, 83, 84, 85, 86, 87, 89, 91, 92, 93, 98, 100, 101, 102, 123 premiums, xii, xiii, 3, 7, 10, 11, 17, 18, 19, 20, 21, 26, 27, 34, 52, 61, 63, 64, 66, 67, 69, 70, 72, 75, 78, 79, 80, 81, 82, 83, 85, 86, 87, 88, 89, 91, 92, 99, 100, 101, 122, 125, 126, 128, 129 prescription drug, 71, 126 Prescription Drug, Improvement, and Modernization Act, 20, 52 prescription drugs, 71 pressure, 25 preventative care, 126 priorities, 14 private, 8, 11, 14, 62, 91, 104, 114 private sector, 14, 91 profits, 82, 92

Military Medical Care, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

Index program, xi, xii, 2, 3, 4, 10, 13, 16, 18, 22, 25, 26, 35, 41, 44, 47, 48, 51, 52, 53, 55, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 79, 80, 82, 83, 84, 85, 86, 87, 88, 89, 91, 92, 93, 101, 108, 109, 116, 122 programming, 6 protocols, 11 provider networks, 116 PTSD, 104, 105, 106, 108, 111, 112, 113, 118 public, 78, 92 Public Health Service, 49

Q quality of life, 41 questioning, 45 questionnaire, 112, 118 questionnaires, 104, 112

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R RAC, 23 range, 40 real terms, 12, 54 reality, 39 rebates, 52 recognition, 66 recovery, 105, 107, 110 recruiting, 16, 34, 35, 36, 41, 44, 46, 47, 129 reduction, ix, xii, 30, 47, 55 reforms, 125 regional, 111 regular, x, 2, 17, 19, 26 regulation, 36, 64, 69, 87 regulations, 10, 11, 16, 32, 36, 37, 46, 58, 91, 130 rehabilitation, 103, 105, 106, 107, 108, 109, 110, 117 reimbursement, 6, 19, 51, 54, 123 rejection, 3 relationship, 49 relationships, 9, 127 reliability, 94, 99 research, 23, 106, 117

107

reservation, 47 reserves, 26, 82, 92, 101 responsibilities, 6 restructuring, 22 retail, 8, 24, 71, 126 retention, 35, 47, 104, 111 retirees, ix, x, xi, xii, 1, 2, 3, 4, 5, 6, 8, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 24, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 123, 124, 125, 126, 127, 128, 129 retirement, xi, 2, 34, 44, 46, 47, 55, 130 rice, 67, 91 risk, 50, 54, 100, 104, 105, 106, 108, 110, 111, 112, 118

S sacrifice, 129 savings, 3, 9, 125, 127, 128, 129 savings account, 129 Secretary of Defense, 5, 6, 7, 16, 23, 35, 39, 48, 51, 54, 58, 61, 70, 89 security, 23 self-employed, 98, 102 Senate, xiii, 3, 18, 19, 40, 43, 60, 90, 100, 122, 128 senators, 19 separation, 42, 110, 114 September 11, 26, 66, 71, 73, 74, 98, 102 services, x, 1, 5, 6, 11, 12, 13, 15, 19, 21, 22, 23, 31, 32, 34, 37, 43, 44, 46, 47, 48, 49, 51, 55, 58, 62, 78, 92, 104, 105, 106, 107, 108, 110, 113, 116, 126, 128 shares, 75, 125, 127 sharing, xii, 9, 21, 34, 76, 80, 103, 108, 109, 127 sign, 71, 72 sites, 17, 18, 24 Social Security, 15, 51 social work, 108, 109 social workers, 108, 109 South Carolina, 58 Soviet Union, 9

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108

Index

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speculation, ix, xii, 30 spinal cord, 117 spinal cord injury, 117 sponsor, 76, 100 spouse, 49 stages, 124 standards, 5, 69, 95, 108 statistics, x, 2 statutes, 40, 46, 58 statutory, 21, 31, 35, 43 strategic, 10 strategic planning, 10 stress, 105 students, 49 supplemental, 15, 123 supplements, 125 supply, 25 support services, 55 Supreme Court, 38, 58 Surgeon General, 23, 35 Surgeons, 6 survivors, x, xi, 2, 11, 12, 14 sympathetic, 45 systems, 11, 52, 101

trade, 129 trade-off, 129 training, 23, 26, 111, 118 transfer, 108, 109, 110 transition, 16, 24, 35, 55, 105, 107, 109, 111, 112, 113 transparent, 78 trauma, 106, 107, 117 traumatic brain injuries, 107 traumatic brain injury, 117 travel, 11 Tricare, vii, ix, x, xi, xiii, 2, 3, 4, 5, 7, 8, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 22, 24, 25, 26, 28, 29, 32, 34, 43, 53, 54, 55, 56, 59, 62, 63, 121, 123, 124, 125, 126, 127, 128, 130

U U.S. military, 106 uncertainty, 65, 70, 83, 87, 88 uniform, 5, 25, 76 United States, 9, 16, 36, 37, 41, 44, 45, 46, 48, 57, 58, 59, 90, 107, 108, 112 urine, 109

T tactics, 44 task force, 42 taxes, 15 teachers, 56 technicians, 118 telemedicine, 9 terrorist, 66 terrorist attack, 66 testimony, 62, 104, 105, 108, 113, 114, 115 Texas, 116 TF, 94 therapy, 109 thinking, 16, 35 Tier 3, 74, 86 time consuming, 109 timing, 108, 110 title, 43, 48, 49, 50, 51 total costs, 27, 65, 70, 84, 94

V values, 94 variables, 94 variation, 113 vein, 39 veterans, 52, 62, 104, 113 violent, 9 vocational, 110, 111 vocational rehabilitation, 110, 111 voice, 54 voting, 38

W war, 9, 54, 129 war on terror, 99, 129 Warsaw, 9

Military Medical Care, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

Index

Y yield, 9 young men, 47

Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved.

Warsaw Pact, 9 Washington Post, 59, 117 weapons, 52 women, 5, 41, 47 workforce, 110 World War, 45, 46, 48

109

Military Medical Care, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,