Special report: Tricare program not shielded from budget hawks
Health plan for military personnel and their families becomes vulnerable in fight over SGR, efforts to curb federal spending
The rising cost of Tricare, the military’s healthcare coverage program, has brought increasing scrutiny from lawmakers and an administration intent on reducing the federal budget deficit. However, some provider and beneficiary advocates worry that efforts to control the program’s spending are undermining a separate push to expand access to care.
The nine types of managed-care plans in Tricare—which was implemented nationwide in 1997—cover nearly 10 million uniformed service members, retirees and their dependents, and pay for care through both military healthcare facilities and civilian providers.
Those private providers have seen a range of cost-cutting moves directed at them in recent years, even as Tricare has simultaneously pushed to increase the number of civilian providers who will treat its beneficiaries. And the tension between those separate initiatives is increasing as the program’s overall spending draws fire as a driver of rising federal healthcare spending.
Former Defense Secretary Robert Gates sounded the loudest recent alarm about the costs of Tricare when he described its current spending as “simply unsustainable” in February testimony before the House Armed Services Committee. Changes were needed, he said, to control spending in military healthcare, which had grown to a projected $52.5 billion in the current fiscal year from $19 billion in fiscal 2001 (See chart).
The ballooning costs have produced a range of spending reduction proposals, many of which have focused on increasing the relatively low cost-sharing for Tricare beneficiaries compared with other federal health insurance programs. For example, the $3 trillion deficitreduction plan President Barack Obama presented in September would increase pharmacy cost-sharing by replacing fixed-dollar copayments with percentage-based charges for the families of active-duty members and retirees. Additionally, it would establish first-ever annual fees in the Tricare program geared toward retired beneficiaries also eligible for Medicare.
But two looming cuts would focus on lowering the program’s spending on providers. The first is a 27.4% cut in the physician pay rate known as the sustainable growth-rate formula, which is used by both Medicare and Tricare; the cut is required under a federal cost-control funding formula that dates from 1997 and scheduled to go into effect at the beginning of 2012. The second possible cut is a deficitreduction plan that would slice Medicare and Tricare provider payments starting in 2013 if a $1.2 trillion deficit reduction package is not approved by Congress by Dec. 23.
Both types of cuts would have a larger impact on Tricare providers, according to patient advocates. That is because Tricare generally treats Medicare rates as a ceiling, while paying many individual service categories at lower rates. Conversely, Tricare officials have emphasized that there are some other categories of services for which the program pays more than Medicare to some providers in certain regions.
Steve Strobridge, a retired Air Force colonel and director of government relations for the Military Officers Association of America, says the provider cuts that most concern his organization come under the planned 27.4% rate reduction. “That will dramatically affect their willingness to participate,” he says about private physicians.
What’s next for the SGR?
The looming cut to the SGR is highly unlikely to occur, according to many members of Congress. However, it remains unclear whether legislators will agree to a permanent fix to the costly problem or simply approve another temporary patch that freezes the rates or provides a token increase.
Physicians’ advocates have maintained that continuing the pattern of recent years in which Congress temporarily waives the physician pay cuts after months of brinkmanship, or even brief implementations of the cuts, is causing hardships for providers and leading some to reconsider their participation in Tricare and Medicare.
“Access to healthcare for military families is in serious jeopardy,” Dr. Robert Wah, chairman of the American Medical Association, said in a recent written statement about the impact of the looming SGR cut.
Veterans and provider advocates also are concerned about cuts to Tricare providers that would come through the so-called congressional supercommittee. If that panel fails to reach bipartisan agreement on $1.2 trillion in deficit reductions over 10 years—a prospect that appears increasingly likely, according to congressional sources—then cuts of that size will automatically come from the military budget and from federal healthcare programs. Any cuts to Medicare—whether automatic or part of a negotiated deal—also would affect Tricare providers, advocates say, because they would