DoD considering ways to control healthcare costs

Tuesday February 28, 2006

The Department of Defense is considering raising TRICARE premiums for retirees under age 65, as a way to control the long-term costs of military healthcare and save the benefits for future service members.

- Without this increase, there is concern that long-term costs may eventually diminish the benefits provided and impact the nation's defense capability and national security.

- DoD provides truly outstanding health benefits for active-duty and reserve-component members, retirees, and their families under TRICARE, and plans to continue this service.

- "TRICARE has improved steadily in recent years," said Dr. William Winkenwerder Jr., assistant secretary of Defense for Health Affairs. "Independent surveys show TRICARE ranks as one of the nation's best health plans," he said. Unique benefits include a national network of more than 220,000 physicians, all U.S. hospitals, and 55,000 retail pharmacies. Military medical facilities have one of the best electronic health record systems in the world.

- Winkenwerder pointed out the issue at hand: "TRICARE's costs have more than doubled in 5 years from $19 billion in FY 01 to $38 billion in FY 06, and analysts project these costs to reach $64 billion by 2015 - more than 12 percent of DoD's anticipated budget. It's at 8 percent today."

- Costs have grown because of expansion of benefits, increased use by retiree beneficiaries, health inflation, and no change in TRICARE premiums in the last 10 years.

- Large numbers of under-65 retirees are dropping employer-sponsored healthcare plans and relying on TRICARE. As a result, DoD increasingly subsidizes healthcare costs for many private-sector companies and some state governments.

- Total beneficiary cost shares have declined substantially. Beneficiaries paid 27 percent of their service cost in 1995 but only 12 percent in 2005, Winkenwerder said.

- It is essential to restore an appropriate cost-sharing relationship between beneficiaries and the Defense Department as an employer and provider of TRICARE. DoD has a plan to address this very important issue so that the military health benefit program can be on a fiscally sound foundation for the long term.

- A reasonable approach, achieved in a stepwise fashion, will be to re-establish the proportional level of individual cost sharing of 1995. This plan will have no impact on active-duty personnel or over-65 retiree beneficiary premiums.

- Even with proposed changes in the DoD plan, TRICARE would REMAIN the nation's very best health benefit and would continue to cost significantly less than comparable federal, state, and private health plans.

The Army supports DoD's efforts of informing Congress of the steps that are necessary to sustain this great health benefit. It is vitally important to our beneficiaries and to our national security. For more information visit


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"If nothing is done now, then DoD could be paying $64 billion for military health care in 2015."

Gen. Peter Pace
Chairman of the Joint Chiefs of Staff


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