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DOD poses rise in fees for retirees' health care


The military is proposing raising health care fees and deductibles for its 3.1 million retirees younger than 65 and their dependents, as well as co-pays for prescription drugs for all retirees this year, according to the proposed Department of Defense budget.

Military associations have attacked the proposal -- one of them sent more than 25,000 e-mails to members of Congress and inserted letters into its magazine that can easily be torn out and mailed to elected officials.

The debate over the increases, which would nearly triple premiums for some retired officers between now and 2008, is likely to intensify as veterans accuse the Bush administration of disloyalty and broken promises, and as Defense Secretary Donald H. Rumsfeld and other top Pentagon leaders use charts and data on skyrocketing health care costs to make their case. The fees and deductibles have not changed since 1995.

In addition to stagnant rates, William Winkenwerder Jr., assistant secretary of defense for health affairs, said that the Tricare For Life program is also raising the department's costs. Added in 2000, the program pays for many services that Medicare doesn't cover for retirees older than 65, but increasing those rates would require legislation from Congress. This group also already pays higher Medicare Part B premiums every year.

"From my personal standpoint as a retiree, to adjust any of these programs, the Defense Department must do it moderately," said Paul Arcari, a retired Air Force colonel from Clinton. "Don't do it grossly to compensate for 10 years of bad management and bad leadership."

Many military retirees, who on average leave active duty in their early- to mid-40s, take on second careers. Winkenwerder said that 82 percent of the military's retirees younger than 65 work, but an increasing number of them opt to stick with the military's health care plan. In fact, Defense Department leaders say that some companies and states are "incentivizing" -- giving employees free supplemental health care coverage if they stay with Tricare -- to cut their costs.

"So suddenly, because of the nature of this, we have created a magnet to attract a whole lot of people into this that otherwise might not have been in it," Rumsfeld said during a House Armed Services Committee hearing on the department's 2007 budget proposal. "And it is something that we just have to face up to because it's an enormous amount of money."

Rep. John M. McHugh, a New York Republican and chairman of the House's military personnel subcommittee, told Rumsfeld that he was concerned that much of the expected savings from the higher fees were the result of "changes in behavior," meaning retirees would switch to their employer's insurance or use fewer services.

"I guess we could talk about the morality of that," McHugh told Rumsfeld and Gen. Peter Pace, chairman of the Joint Chiefs of Staff. "Is that the way to contain costs -- persuade people not to use health care?"

The Defense Department's proposal catches the fees up with health care inflation since 1995. Once that's done in 2008, the rates would be adjusted annually to match rises in the health care costs for federal civilian workers.

More specifics:

Annual enrollment fees, or premiums, for the military's managed care (HMO) option -- Tricare Prime -- would more than double for senior enlisted retirees and roughly triple for officers by 2008. Another tier would be added for retirees in lower ranks, so-called "junior" enlistees, who would be spared from the harshest increases. Those fees would rise about 40 percent.

Annual premiums would be added to the military's fee-for-service program -- Tricare Standard -- for the first time. Deductibles would nearly double for retired officers and rise slightly for all enlisted retirees.

Co-pays for prescription drugs purchased at stores would rise to $15 for brand-name drugs and $5 for generic ones. Mail-order co-pays, however, would drop to zero for generic drugs and remain the same, $9, for brand-name ones. These changes are proposed for all military retirees.

Arcari said that he views the proposed prescription rates as reasonable, but that in total, the president's budget sends a poor message to recruits, which the military has struggled to find since the war in Iraq began.

"If, as a leader, you are perceived as taking away benefits and breaking promises, retirees aren't going to recruit for you," Arcari said. "They say to us, 'Why should we make it a career when all of the benefits are being eroded?'"

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