Here it Comes...

Call it the "Ghost of Christmas yet-to-come," or a lump of coal in some future holiday stocking.

If you're a military retiree, be forewarned: the "smart" boys and girls in D.C. have been looking at your health care benefits and ways to slash them.  Seems the lifetime health coverage promised for those who served at least 20 years is far too generous.  That's right, the same Tricare standard option that requires retirees to pay up to 20% of their health care bill is too expensive, and about the bust the federal budget.

That's why the good, left-wing Brookings Institution recently held a forum to discuss possible options for reducing the military's health care bill, which currently totals $52 billion a year.  One idea that kept popping up: moving Tricare beneficiaries to Obamacare.  From Military Times:

"It's a little radical, but should we be thinking about how some of the military system might transition some of their people to the Affordable Care Act exchanges, especially in sparsely populated areas of the country?" said Alice Rivlin, former director of the Congressional Budget Office and the Office of Management and Budget who now serves as a senior fellow in economic studies at the Brookings Institution.   

It's worth noting that Ms. Rivlin, who has held senior economic posts in several Democratic administrations, never spent a day in uniform.  Ditto for Henry Aaron, another Brookings scholar who once served as Assistant Secretary for Planning and Evaluation at the former Department of Health, Education and Welfare:

"The case for the special supply of [health] services is strong for the active duty. For the families ... the case for having a dedicated supply system is much weaker. That suggests the possible appeal of the option Alice mentioned, which is to help them have fair, well-financed access to the general health care system," said Aaron.

Another speaker, John Mayer of Booz Allen Hamilton, went even further, saying the military was under "no obligation" to provide "free health care" to those who have retired from the armed forces and have access through their employer, or Obamacare.  

"Having a program where they can go in and get free health care, and do it as often as they want seems to be a burden that the American public shouldn't have to bear," Mayer said, speaking of the military retiree population who uses Tricare.   

Interestingly, Mr. Mayer is a West Point grad who now runs his company's energy, military health care and infrastructure division.  Apparently, he left the Army long before he became retirement-eligible, so it's clear Mr. Mayer doesn't have any skin in the game.  And, given his responsibilities at Booz Allen Hamilton, we're guessing he probably has some ideas about moving military retirees and dependents into Obamacare, while helping the corporate bottom line.  

At this point, it's helpful to inject a little reality.  First, as our colleague George Smiley pointed out two years ago, Tricare is anything but a "budget buster."  In fact, the program returned $500 million to DoD in 2012, and the actual refund may be closer to $1 billion.  The reason?  Tricare was operating below projected costs, which slightly debunks Mr. Mayer's notion that military retirees are sucking up all that free health care and bankrupting the Pentagon in the process.  

Secondly, it is helpful to review the recent history of military health care and remember why we arrived at this point in the first place.  Back in the mid-1990s, Bill Clinton was looking for ways to trim the military budget.  One of the tactics he used was under-funding programs that covered on-base treatment for the armed forces community.  Tricare was created to cover services that moved "off-post" when retirees and dependents were largely exiled from base hospitals and clinics.  

As a managed-care program, Tricare was supposed to be affordable, both for patients and the government.  But former Air Force Surgeon General Paul Carlton pointed out the fallacy of that logic, in a 2001 interview with Air Force magazine:

"If a base hospital can do 10 appendectomies but gets budgeted to perform only nine, the 10th patient still gets care. But rather than use military care, the patient is referred to the civilian network. DOD still pays for the operation, eventually, when contracts are adjusted. If it had been done on the base, the cost would have been $300 (the cost of a surgical pack). On the outside, the same procedure will cost DOD $6,000 in payments to the Tricare contractor.

That charge is reasonable, Carlton said, but it shows the folly of shorting military hospitals in hopes of saving money.

"For want of $300, I'm spending $6,000," said Carlton. "There's no guilty party here. This is just an historical account of what has happened. That's the [death] spiral I speak of." 

We're guessing the cost of that surgical pack has increased slightly over the past decade, but that's nothing compared to appendectomy bill at your local, civilian hospital.  According to Health care Bluebook.com, a "fair" price for that procedure is about $10,000.  Assuming our Tricare patient picks up his (or her) 20% tab, the government is still on the hook for $8,000, more than ten time the cost of the surgical pack on-base.  And yet, the experts who convened at Brookings believe that Obamacare will be more efficient than Tricare.  

Finally, we should also observe that no one on the panel seemed overly concerned about the folks who would pay the Obamacare bill--military retirees and their families.  As we've noted (on multiple occasions), the typical service member who leaves the ranks after 20 years isn't a Colonel or General; in fact, the average retiree is an E-6, which equates to a Staff Sergeant in the U.S. Army or Marine Corps; a Petty Officer First Class in the Navy or Coast Guard, or a Technical Sergeant at the USAF.  Their monthly pension is just over $1,800, before taxes and other deductions.  

Currently, that retired E-6 doesn't pay an annual fee to enroll their spouse and children in Tricare Standard; a family of four pays $545 a year to participate in Tricare Prime; after annual deductibles are met, beneficiaries pay 12-20% of their medical bill, depending on their plan and the type of service rendered.  

Critics of Tricare point out that beneficiaries pay far less than their civilian counterparts, reinforcing the notion that military retirees and dependents are crowding doctor's offices for that "free" care.  But such arguments ignore the impact of higher premiums and co-pays on military families.  

Consider this example: TSgt Smith retired from the Air Force last month, after 21 years of service.  He earned an associate's degree while on active duty and is working part-time towards completing his bachelor's.  Before leaving the service, he found a job with a small company that pays $50,000 a year.  Unfortunately, the firm has discovered it's cheaper to pay the Obamacare fine than to offer health care coverage for its employees.  Sergeant Smith's wife is a stay-at-home mom for their two young children.  So (at least for now), government-backed health care becomes their only option.  

How would someone like TSgt Smith--who fits the profile of a "typical retiree"--be affected by a shift to Obamacare?  According to the Henry J. Kaiser foundation, if Sergeant Smith and his family are pushed into the exchanges, they would pay $574 a month for coverage, or $6883 a year, and that's with a monthly subsidy of $191.  If TSgt Smith doesn't qualify for a subsidy, he would pay over $700 a month for the same plan.  And that doesn't include a $2,000 annual deductible, and higher co-pays for all services. 

Put another way: if these "ideas" ever become law, Sergeant Smith is in for quite a shock; if he's lucky, that monthly retirement check might cover his mortgage and health insurance and that's about it.  Quite a change from the "free, lifetime health care" he was promised back in 1993.  

So far, the proposals outlined at Brookings are just that--suggestions.  To date, the Pentagon has resisted major changes in retiree healthcare programs, realizing the potential impact on recruiting and retention.  But every SecDef since Robert Gates has been wailing about rising health care costs, and it's no secret that ideas broached at places like Brookings or the Heritage Foundation are often used as test balloons and (if they garner enough support) become law of the land.  With DoD leadership itching for a change, military retirees and dependents may find themselves longing for the "good ol' days" of Tricare, as they try to navigate the train wreck called The Affordable Care Act.
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ADDENDUM:  As you might expect, there is a political under-current to all of this.  It's no secret that Obamacare needs more enrollees, to ease financial pressure on the program.  So, why not push 9 million Tricare beneficiaries into the system?  The government could mandate enrollment when service members receive their retirement orders and "automatically" deduct premiums from their monthly checks.                  

Don't laugh--it may be closer that you think.  And lest we forget, John Boehner and Congressional Republicans recently funded Obamacare through next September, as part of the $1 trillion Cromnibus crap sandwich.  Based on that precedent, it wouldn't be hard to convince Republican lawmakers that shifting military retirees and dependents to Obamacare is really a good idea.