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DOD’s Growing Health Care Crisis February 25, 2010

Posted by Matthew Leatherman in Analysis.
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Today President Obama gathers with Congressional leaders of both parties for a ‘Health Care Summit,’ the next step in an intensive, year-long dialogue about American medical insurance.  Reports of all types have demonstrated the unsustainable nature of these costs for the country and the taxpayer.  Less well documented, but equally challenging, is the Defense Department’s unique struggle with this issue.

Combat medicine is the most visible element of the Defense Department’s health care program.  From MEDEVAC to Walter Reed hospital, wounded veterans receive world-class care comprehensively and free of charge.  In more routine circumstances, active-duty service-members and their families also are treated for free.  These benefits pale in comparison to their sacrifice and, both morally and financially, are the right decision.

The Defense Department’s struggle with medical cost instead centers on the standard health insurance programs offered to Reservists, retirees, and their family members.  The current program, TRICARE, was introduced in 1995 and premiums were set at $230 for individuals and $460 for individuals plus their families.  Those rates have not changed since.

What has changed, however, is cost.  As Secretary Gates pointed out in his 01 February press conference, military health system costs have grown from $19 billion in FY01 to $50.7 billion in FY10.  Much of this is the result of skyrocketing health care costs generally, but DOD’s rate of growth from FY01-10 (166%) outpaces even that of Medicare (113%, as measured by Budget Authority).

In addition to per-person costs, the pool of individuals eligible for TRICARE also has grown.  The 2001 National Defense Authorization Act opened the pool up to Medicare-eligible retirees and their dependents, and the 2007 version of this legislation broadened access for non-active duty Reservists.  Secretary Gates pointed out in the same press conference that these expansions have motivated individuals that otherwise have health insurance to shift dramatically into the more generous TRICARE program, pushing DOD costs up even further.

The Defense Department’s solution to ballooning costs has been to propose increases in TRICARE enrollment fees, deductibles, and pharmacy co-pays in FY07, FY08, and FY09.  Much like the health insurance problem more generally, though, Congress decided that the cure is worse than the disease and did not act on those proposals.  The conclusion of today’s health care summit, whatever it may be, will not affect DOD’s unique circumstances – but it may provide a useful measure of our leaders’ willingness to tackle the problem.

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