Reject Disproportional TRICARE Fee Hikes

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1 Reject Disproportional TRICARE Fee Hikes Issue: The FY14 DoD budget would shift $25+ billion in costs to military beneficiaries over 10 years by: Raising annual fees by $1,000 or more for retired families of all ages Imposing means-testing of military retiree health benefits which no other federal retirees endure. Dramatically increasing pharmacy copays to approach or surpass the median of civilian plans See details on reverse, and cumulative impact on military families in the attachments Background: DoD proposed similar fee increases last year and in the past. Congress enacted selected current and future increases in 2011 and 2012, but explicitly limited discretionary increases by DoD. Congress rejected larger increases on the basis that: Pentagon leaders need to do more to more effectively manage costs instead of penalizing beneficiaries Achieving savings by driving beneficiaries away from using service-earned benefits is inappropriate Cost Growth Since 2000/2001 claims are misleading 2000/2001 is inappropriate baseline; that era reflected spending and retention low points Health cost growth spiked in after TFL enactment, but has been declining since (less than 1% in 2012) law and policy changes will reduce future costs substantially DoD s own documents prove military health costs are NOT exploding Combined personnel and health costs are less than 1/3 of DoD budget same as they ve been for 30 years In fact, DoD has used health account as cash cow to fund other needs Diverted $700M surplus in FY12; $2.5 billion surplus over FY10-12 FY12 reprogramming request to Hill acknowledged retiree costs went down 2.5% At 10% of DoD budget, DoD is getting health cost bargain vs. 16% share of all national spending DoD fee plan is a bait and switch breach of faith. Defense leaders talk of grandfathering retirement for current troops, but would cut their future health benefits by $1,000 a year or more. If breaking faith with the currently serving is wrong, so is changing the rules on those who already completed year careers. Proposed increases are out of line with changes authorized by Congress. The FY2012 and FY2013 Defense Authorization Acts already increased fees, including large Rx copay hikes, and required future increases at rate of military retired pay growth law specified no enrollment fee beyond Medicare Part B should be required for beneficiaries over 65, recognizing their lengthy service as their premium. Proposed health fee schedules discriminate against military retirees. No other federal employee or retiree pays income-based fees for service-earned health coverage, and it s rare in the private sector. Comparison with civilian/corporate cash fees is inappropriate. Military retirement and medical benefits are the primary offsets for enduring decades of extraordinarily arduous service conditions. Military retirees pre-pay huge up front health premiums through years of service and sacrifice. DoD leaders should be held accountable to fix program inefficiencies. Studies show consolidation of budget oversight would save billions vs. having three separate service programs and multiple contractors vie for budget share. Much more can be done to save money through chronic disease management. Recommendation: Make no further changes to TRICARE fee laws. Changes enacted in 2011 and 2012 will generate large savings from the beneficiary side. DoD leaders must be held equally accountable.

2 Impact of DoD-Proposed FY2014 TRICARE Fees on Military Families (E-7 to O-5) (Recommended by DoD in the President s Budget) E-7 / O-5 Retiree* Under Age 65, Family of Three TRICARE Prime** Current FY 2014 Proposed FY 2018 Enrollment Fee $539 $771-$900 $980-$1,200 Doctor Visit Copays $60 $80 $80 Rx Cost Shares*** $528 $744 $1,032 Yearly Cost $1,127 $ 1,595-$1,724 $2,092-$2,312 Retiree Under Age 65, Family of Three TRICARE Standard Current FY 2014 FY 2018 Proposed Enrollment Fee $0 $140 $250 Deductible $300 $320 $580 Rx Cost Shares*** $528 $744 $1,032 Yearly Cost $828 $1,204 $1,862 * Enrolled in 2 nd Retirement Income Tier **Enrolled to the network and assumes 5 doctor visits per year. ***Assumes 2 generic and 2 brand name prescriptions per month in retail pharmacy E-7 / O-5 Retiree* Over Age 65 and Spouse TRICARE For Life** Current FY 14 Proposed FY 2018 Medicare Part B $2,496 $2,596**** $3,036**** Enrollment Fee* $0 $107-$150 $457-$600 Rx Cost Shares*** $645 $957 $1,376 Yearly Cost $3,141 $3,660-$3,703 $4,869-$5,012 *Enrolled in 2 nd Retirement Income Tier **Assumes lowest tier Medicare Part B premium for new enrollee in ***3 generic and 4 brand name prescriptions per month (mail-order refills for 1 and 2) ****Assumes Part B increases of 4% per year Currently Serving Family of Four TRICARE Standard* Current FY 13 Proposed FY 2017 Enrollment Fee $0 $0 $0 Deductible $300 $300 $300 Rx Cost Shares** $324 $432 $624 Yearly Cost $624 $732 $924 * Spouse and 2 children use Standard. **Assumes 2 generic and 1 brand name prescriptions per month at retail pharmacy.

3 DoD-Proposed Fees -- TRICARE Prime Family (Retiring in FY 14) Fees Rank Now FY % E-7 w/20 yrs E-9 w/28 yrs O-5 w/22 yrs O-8 w/30 yrs FY % FY % FY % $539 $586 $771 $877 $980 $539 $750 $900 $1050 $1200 $539 $750 $900 $1050 $1200 $539 $900 $1200 $1500 $1800 1

4 DoD-Proposed Fees (TRICARE Standard Family) Current FY14 FY18 Ann. Enroll. Fee $0 $140 $250 Deductible $300 $320 $580 Total* $300 $460 $830 *Plus 25% copay for all care 2

5 DoD-Proposed TFL Enrollment Fee (Medicare-Eligible Couple) Rank Now FY14.5% (% of Ret Pay, subject to cap) (in add n to $2.5K-$8K/Yr Part B premium) FY15 1% FY16 1.5% FY17 2% E-7 $0 $107 $219 $336 $457 E-9 $0 $150 $300 $450 $600 O-5 $0 $150 $300 $450 $600 O-8 $0 $200 $400 $600 $800 3

6 DoD-Proposed Rx Copays Retail FY11 FY13 FY14 FY18 Generic $3 $5* $5 $9 Brand $9 $17* $26 $34 Non-form. $22 $44* N/A N/A Mail Order Generic $3 $0 $0 $9 Brand $9 $13* $26 $34 Non-form. $22 $43* $51 $66 *for FY14+, current law mandates COLA-base increases

7 Critics Ignore Recent Benefit/Fee Changes 13% Prime Fee Hike (2011) Annual Prime Fee Hikes (2012+) $8-$23 Rx Copay Hikes ( ) Annual Rx Copay Hikes (2014+) Mandatory Mail-order Rx Refills 170K Losing Prime Eligibility 5