October 24, 2014

Health Care Costs Put Pressure on Military Budget

  • The American health care system is a patchwork of public and private programs that serve citizens in different ways, depending on their age, military...

As health care costs claim more and more of the nation’s defense budget, policymakers must make tough decisions about how to rein in those costs.

The Congressional Budget Office (CBO) last year projected that spending on the military health system could increase from $51 billion in 2013 to $65 in 2017. A recent CBO presentation shows health care costs consuming over 14 percent of the defense budget in 2030, up from less than 10 percent this year.

Much of this spending is related to the Pentagon’s TRICARE health plans, including TRICARE for Life, the military’s wrap-around coverage for enrollees in Medicare Part B.

Military families pay significantly less for health care than their civilian counterparts with employer- based insurance. Last year military retiree families with TRICARE Prime, a managed care option, paid only $965 in out-of-pocket costs while their civilian counterparts in an HMO paid $6,080.

More than a fourth of military retirees switched from private insurance to TRICARE between 2001 and 2012. The Defense Department attributes most of that to low TRICARE premiums and out-of-pocket expenses.

Reform options include minimum out-of-pocket costs for TRICARE for Life so that it no longer covers most or all of Medicare’s cost-sharing requirements. The latest Simpson-Bowles deficit-reduction plan endorses similar reforms.

Other options include consolidating military medical agencies and increasing various fees, copayments and deductibles. CBO estimates that such options could save billions of dollars a year.

Even though coverage for active-duty servicemen or service-related injuries would be untouched by reform options, many members of Congress have opposed even moderate steps to help the Pentagon hold down its health care bills for military retirees.