Tricare

[darrels joy]

TRICARE
Page 50 TRICARE is the federal health care program that covers current members of the armed forces and military retirees, as well as their families and survivors. In total, more than 9 million beneficiaries are eligible to use TRICARE. Care is provided through government-owned and -operated hospitals, medical clinics, dental clinics, and contracts with networks of private-sector providers. Most of the costs incurred by TRICARE are funded by discretionary appropriations to the Department of Defense. However, once military retirees become eligible for Medicare, all costs incurred on their behalf by both the Medicare and TRICARE programs are treated as mandatory outlays. (That is, they do not require annual appropriations, and the available funding is not limited.)

page 167 Military personnel and retirees, and their dependents and survivors who are eligible to use TRICARE (the military’s health plan) pay cost sharing and enrollment fees that depend on the type of coverage they use and whether they are also eligible for other coverage, such as Medicare. Veterans seeking health care from the Department of Veterans Affairs currently face no premiums or enrollment fees; however, eligibility and cost sharing in that system depend on disability status, income, and other factors.

The options in this chapter examine policies that would modify the cost-sharing obligations individuals face in those federal programs. Some options would provide greater uniformity among a program’s cost-sharing obligations. Others would reduce overlapping coverage and duplication of benefits among programs.

[darrels joy]

page 187
Option 95 chart TriCare - Active duty family members

The Department of Defense (DoD) provides health care benefits to family members of active-duty personnel through a collection of health plans known as TRICARE. There are currently three TRICARE plans from which such beneficiaries may choose—Prime, Standard, or Extra—and those beneficiaries pay no premiums or enrollment fees for their coverage. TRICARE Prime is operated much like a civilian health maintenance organization (HMO), with a military or civilian primary care manager providing referrals to network providers. Family members of active-duty personnel enrolled in TRICARE Prime generally face no copayments at the point of service, whether they receive care from a military or civilian provider.1 (1. One exception is for pharmaceuticals. Beneficiaries who have prescriptions filled at retail pharmacies or through mail order face copayments of $3, $9, and $22, respectively, for generic, brandname formulary, and brand-name nonformulary medications. Prescriptions filled at out-of-network retail pharmacies are reimbursed at 50 percent of the cost. Prescriptions filled at military treatment facilities are free. ) In part because of the low out-of-pocket costs, those beneficiaries have rates of utilization of services that are substantially higher than those of a comparison group in a civilian HMO.2 (2. DoD estimates that among TRICARE Prime enrollees, inpatient utilization is 58 percent higher and outpatient utilization is 39 percent higher than a civilian HMO comparison group. These results were adjusted to reflect differences in age and sex among the populations being compared. See Department of Defense, Evaluation of the TRICARE Program: FY2008 Report to Congress (February 29, 2008).) Family members who choose not to enroll in Prime are covered by TRICARE Standard (the program’s fee-for-service plan) or Extra (the program’s preferred provider plan). Beneficiaries in those two plans have a greater choice of providers but face deductibles and coinsurance rates that vary depending on the type of service and whether the provider participates in a TRICARE network.

Under this option, DoD would provide active-duty personnel who have dependents with a special $500 cash allowance for health expenses while at the same time increasing out-of-pocket costs for care received through TRICARE Prime. The allowance would be nontaxable (like the current housing allowance) and could be used in one of two ways.

Under the first alternative, family members could use the allowance to help offset the out-of-pocket costs of any of the current TRICARE plans (Prime, Standard, or Extra). However, cost sharing under TRICARE Prime would be altered to incorporate copayments that would cover, on average, about 10 percent of the cost of health care services obtained either at military facilities or from civilian providers. Each TRICARE plan would include an annual cap on out-of-pocket expenditures to control the financial consequences of catastrophic illness. Under the second alternative, military family members could show proof of insurance and apply the $500 allowance toward their share of the premiums, copayments, and deductibles of another health insurance plan.

Currently, military treatment facilities (MTFs) do not charge eligible individuals copayments for medical services or pharmaceuticals. In order to reduce beneficiaries’ incentive to switch to MTFs and avoid the minimum out-of-pocket requirements, DoD would need to establish procedures for collecting payments from TRICARE beneficiaries seeking care from MTFs. If implemented, this option would save about $3 billion in discretionary outlays over the next five years and roughly $7 billion from 2010 to 2019. That estimate incorporates the cost of the cash allowances and accounts for the decreased demand for medical care among enrollees that would result under the new plan. (The higher out-of-pocket expenses would be expected to encourage restraint in health care purchases.) The estimate also accounts for the increased cost of the benefit for a small number of eligible family members of active-duty personnel who do not use TRICARE but instead rely on an employment-based health plan. Those beneficiaries currently cost the system nothing but would still receive the cash allowance.

This option would also result in a small increase in mandatory outlays resulting from some military dependents’ increased use of Medicaid services. In addition, federal tax revenues would decrease somewhat as more dependents of active-duty service members enrolled in private insurance plans, which would yield a shift in compensation from taxable wages to nontaxable fringe benefits. The degree of those two effects would depend on the specifics of any enacting legislation.

This option would offer several advantages. First, enrollees in TRICARE Prime would have a stronger incentive to use medical services prudently because they would be responsible for a share of the cost. Second, the ability to use the allowance to pay the premiums of another health insurance plan would induce some spouses to enroll in their employer’s plan rather than in TRICARE. That feature of the option would mean that some health care costs would be shifted to the civilian employers of military spouses, thus reducing DoD’s spending. Finally, because family members would commit annually to enrolling in a health insurance plan, total utilization of services would be easier to predict than it is under the current system, which allows users to join or leave at any time. Thus, this option would improve resource planning within the military health care system and allow DoD to negotiate firmer contracts for pharmaceuticals and civilian medical services. That advantage would exist even if most beneficiaries chose to remain in one of the three traditional TRICARE plans.

This option would also have potential disadvantages. Enrollees in TRICARE Prime would assume additional risks and might face financial difficulties, despite the plan’s cap on families’ annual out-of-pocket expenditures. Moreover, families that obtained health insurance through a spouse’s employer might have their coverage disrupted if the active-duty service member relocated to a new post. DoD would have to develop methods to prorate cash allowances and deductibles for beneficiaries who were forced to change from a private health care plan to TRICARE coverage (or vice versa) midyear.

RELATED CBO PUBLICATIONS

: Evaluating Military Compensation, June 2007; Consumer-Directed Health Plans: Potential Effects on Health Care Spending and Outcomes, December 2006; Military Compensation: Balancing Cash and Noncash Benefits, Issue Brief, January 16, 2004; and Growth in Medical Spending by the Department of Defense, September 2003

[darrels joy]

Page 190 Option 97 graph Medical care for retirees not eligible for medicare

In the mid-1990s, the Department of Defense (DoD) instituted a plan called TRICARE to provide health care for members of the military and their dependents, as well as for eligible military retirees and their families.

TRICARE comprises three different options: an option similar to a health maintenance organization (HMO), called TRICARE Prime; an option with a preferred-provider network, called TRICARE Extra; and a traditional fee-for-service plan, called TRICARE Standard. When most military personnel enter the armed forces, they are between 18 and 22 years of age, and they are able to retire after serving 20 years. Military retirees who are not yet eligible for Medicare (generally those ages 38 to 65) may enroll in TRICARE Prime by paying an annual enrollment fee of $230 (for single coverage) or $460 (for family coverage). In addition, those Prime enrollees make a $12 copayment for each outpatient visit to a civilian physician or other civilian health care provider (visits to military providers are free).

Those who do not enroll in TRICARE Prime may receive benefits under TRICARE Extra or Standard. Beneficiaries who use either one of those two plans must pay an annual deductible of $150 (single coverage) or $300 (family coverage) before typical cost-sharing rates apply. The TRICARE enrollment fees, copayments, and deductibles have remained unchanged since 1995.

Military retirees enrolled in TRICARE Prime bear smaller costs than would be owed under typical civilian plans. DoD has estimated that a typical military retiree and his family who enrolled in the Prime plan faced about $780 in annual out-of-pocket costs (that is, TRICARE copayments and the enrollment fee) in 2007, whereas a comparable family enrolled in an HMO through a civilian employment-based plan paid $3,950 (as the employee’s share of the premium plus copayments). TRICARE Prime beneficiaries also use the system more than comparable civilian beneficiaries do: DoD estimates that the rate of utilization of inpatient services is 58 percent higher and the outpatient utilization rate 39 percent higher for Prime enrollees than for civilian HMO enrollees.1( 1. Department of Defense, Evaluation of the TRICARE Program: FY2008 Report to Congress (February 29, 2008).) This option would raise the enrollment fees, copayments, and deductibles for younger military retirees who wished to use TRICARE. Single beneficiaries could enroll in TRICARE Prime by paying a $550 annual fee, and families could enroll for $1,100 annually. The family enrollment fee of $1,100 per year is approximately equivalent to the $460 fee first instituted in 1995, after an adjustment for the nationwide growth in health care spending per capita. Under this option, each medical visit to a civilian Prime provider would entail a copayment of $28, which, again, is approximately equivalent to the amount that was established in 1995.

Copayments for mental health visits and inpatient care would also be adjusted accordingly. Single retirees (or their surviving spouses) who used TRICARE Standard or Extra would face an annual deductible of $350; the deductible for families would be $700. Those increases would also be consistent with the nationwide growth in per capita health care spending. In addition, and for the first time, users of TRICARE Standard or Extra would be required to enroll and pay a $50 annual fee for single coverage and a $100 annual fee for family coverage. For people currently serving in the military and for their families, enrollment fees, copayments, and deductibles in the three plans would remain at their current levels.

The option would reduce DoD’s outlays in three ways. First, the increased fees would be used to directly offset the costs of treating military retirees. Second, the higher out-of-pocket costs would induce some retirees who would otherwise have used TRICARE to enroll in a civilian health plan instead. Third, the higher copayments and deductibles would reduce the use of health care services by military retirees who remained in TRICARE. DoD’s precise cost savings under the option are difficult to predict because they would depend on how strongly people responded to the new fee structure. The net effect on the federal budget is also difficult to predict because increased fees may cause eligible retirees to switch to other federal programs, such as Medicaid (if an individual has low income), the Federal Employees Health Benefit (FEHB) program (if a person is employed as a civilian by the federal government), or the Veterans Health Administration. An estimate of the effects of increasing TRICARE fees, copayments, and deductibles is that discretionary outlays would be reduced, on net, by about $25 billion over the 2010–2019 period, under the assumption that appropriations were reduced accordingly. This option would increase mandatory spending for Medicaid and for FEHB annuitants by $1 billion over the same period, and it would reduce revenues by $4 billion. The drop in revenues would occur because some of the retirees who left TRICARE would switch to employment-based health benefits, leading to a shift in compensation from taxable wages to nontaxable fringe benefits.

The increased fees for retirees would not affect service members currently on active duty or in the reserves. In fact, only about 15 percent of enlisted service members and approximately 50 percent of officers remain for an entire career and qualify for retiree health benefits. Much of the estimated savings under this option stems from increasing the enrollment fees charged for TRICARE Prime, with the expectation that some current users would leave the system and some potential users would seek care elsewhere. Although researchers have found that increasing cost sharing can reduce medical expenditures without adversely affecting the health of the average person, an argument against implementing the higher fees set out in this option is that they could discourage some people from seeking health are or treating their illnesses in a timely manner.

RELATED CBO PUBLICATIONS

: Evaluating Military Compensation, June 2007; Military Compensation: Balancing Cash and Noncash Benefits, Issue Brief, January 16, 2004; and Growth in Medical Spending by the Department of Defense, September 2003

[darrels joy]

Page 192 Option 98 chart VA without service connected disability

In 2008, just over 5 million veterans received medical care from the Department of Veterans Affairs (VA). All VA patients are enrolled in one of eight priority care groups, determined on the basis of income, disability status, and other factors. Currently, veterans in Priority Groups 6 to 8, the lower-priority groups, are charged copayments (and the health plans of any who have private insurance may be billed) for treatment of nonservice-connected conditions.
This option would increase out-of-pocket costs for veterans in Priority Group 5—those who do not have service-connected disabilities and whose income is below a VAdefined threshold. The option is targeted toward the largest priority group (31 percent of VA enrollees) that consumes the greatest share (33 percent) of VA’s medical resources each year. Currently, those patients pay no fees for inpatient or outpatient medical care, although veterans in this group who earn more than the VA pension level ($11,000 or more per year, depending on whether the veteran has a spouse or dependents) pay $8 per prescription, up to an annual cap of $960. This option would maintain that prescription copayment for higher-income enrollees but also institute copayments of $1 for prescriptions that the lowest-income enrollees fill at VA facilities and copayments of between $1 and $2 for each health care encounter that veterans in Priority Group 5 have with the VA medical system. Such increased cost sharing for Priority Group 5 veterans would reduce discretionary spending for VA medical services by about $3 billion over the five-year period from 2010 through 2014. Although VA-provided medical care would remain less expensive than alternative care for many veterans, some of those for whom VA facilities were less convenient might switch to civilian providers and services funded under Medicare or Medicaid, and mandatory spending for those programs would increase by $200 million for that same period. From 2010 through 2019, this option would reduce discretionary outlays by $7 billion but would increase mandatory outlays by $420 million.

A rationale for this option is that increased cost sharing for veterans in Priority Group 5 could reduce VA’s spending by making those veterans more cost-conscious in their demand for health care services. An argument against the option is that it focuses on one of the poorest groups of veterans and leaves unchanged the out-of-pocket expense of those in lower-priority groups. Veterans in Priority Groups 6 to 8—a population that is expected to equal 33 percent of VA enrollees and consume 15 percent of VA’s medical resources in 2009—make copayments, and their insurance plans (if any) are billed; however, the resulting revenue covers about a fifth of the cost of their care. (Net of copayments, those veterans are expected to consume 13 percent of VA’s medical resources.) Veterans in Groups 6 to 8 have more income than veterans in Group 5, lending support to the argument that VA should concentrate first on recovering additional costs from those lower-priority groups through higher copayments and improved billing practices. However, such changes are unlikely to substantially reduce the growth in VA’s medical spending.

RELATED CBO PUBLICATIONS

: Statement of Allison Percy, Principal Analyst, Congressional Budget Office, Future Medical Spending by the Department of Veterans Affairs, before the House Subcommittee on Military Construction, Veterans Affairs, and Related Agencies, Committee on Appropriations, February 15, 2007; Potential Growth Paths for Medical Spending by the Department of Veterans Affairs, Letter to the Honorable Larry E. Craig, July 14, 2006; and The Potential Cost of Meeting Demand for Veterans’ Health Care, March 2005

[darrels joy]

Page 202

Medicaid is the largest public source of payment for long-term care. In 2006, approximately 48 percent—or $52.9 billion—of Medicaid’s spending went toward long-term care services.

It would require workers to contribute a percentage of their pretax wages to an individual account reserved specifically to pay for long-term care insurance. In the Congressional Budget Office’s estimation, a contribution of 1.2 percent of income subject to the Social Security payroll tax would meet the option’s funding requirements.

1 (1. In 2009, the cap on wage income subject to the Social Security tax will be $106,800. ) non-wage earners, such as stay-at-home spouses, would not be covered under this option.)

The option has the following parameters:

B The accounts themselves would be administered by a federal entity, which would invest them in Treasury securities.

B The money in the account would be the property of the individual and would be part of the individual’s estate if he or she died before turning 65.

B At age 65, the balance of the account would be required to be used to purchase the most generous long-term care insurance policy available given that balance.

B

In the case of accounts with money left over after the purchase of the most generous policy, the account holder would have free use of the remaining funds after paying income tax.

B

Regardless of an individual’s earnings, the same requirements would apply once the individual came to need long-term care services. Low-wage workers would have relatively small balances with which to purchase coverage and might need Medicaid coverage once their policy was exhausted. In contrast, highwage workers would presumably have large balances, would purchase policies that provided inexhaustible benefits, and could have money remaining in their account.

B

Individuals younger than 50 but older than 30 years of age on January 1, 2012, would have the value of their countable assets (the Medicaid asset test) reduced by the total dollar value of their insurance benefits. For individuals who were younger than 30—given the number of years before they would reach 65—policymakers could wait until more information was available before deciding how to apply Medicaid’s financial eligibility rules.

Administrative mechanisms would also need to be in place to make this option effective. CBO presumed that a federal agency would be responsible for collecting, managing, and distributing contributions to the individual accounts. In addition, the federal government would be responsible for any enforcement mechanisms as well as the execution of any penalties related to individuals’ failure to participate in the program.

In the future, as policymakers observed the program, they might wish to consider further changes for individuals who were younger than age 30 in 2012. Alternatives to this option’s approach could be considered that still would achieve its ultimate goals of reducing reliance on public financing for long-term care needs. One formulation would be to make no changes to current law. After people exhausted their private insurance benefits, they would have to deplete their personal finances before qualifying for Medicaid. Another possible formulation would be to retain the Medicaid financial eligibility requirements but allow the dollar value of the private LTC insurance benefits to be applied against the insured individual’s assets in determining eligibility. That is, if a person used the account to purchase a policy with benefits equaling $150,000 (1,000 days of coverage at $150 per day) and had assets worth $175,000, the assets for purposes of assessing Medicaid eligibility would be $25,000. A third alternative would be to eliminate Medicaid asset tests entirely. However, that modification would redefine current Medicaid eligibility rules, possibly resulting in more individuals’ receiving Medicaid-funded long-term care services. Any changes to Medicaid eligibility rules could have substantial implications for long-term Medicaid costs. CBO has not analyzed those options in detail and so has not estimated their implications for the federal budget.

[darrels joy]

Page 206 Option 106 graph Tax and sugar sweetened beverages

[darrels joy]

Page 207 Option 107 graph Increase tax on cigarettes by $1 per pack (already $1.97)

[darrels joy]

Page 209 Option 108 graph Increase alcohol tax to $16 per proof gallon (currently $13.50 per proof gallon)

[darrels joy]

Page 211 Option 109 punish doctors who do not give enough flu vaccines

[darrels joy]

Page 212 Option 110 Base Medicare’s Coverage of Preventive Services on Evidence of Effectiveness

It grades the strength of the evidence of a service’s effectiveness as follows:

A—the task force strongly recommends the service;

B—the task force recommends the service;

C—the task force has no recommendation for or against the service (that is, there is at least fair evidence that the service can improve outcomes for patients, but the balance of benefits and harm is too even to justify a general recommendation);

D—the task force recommends against using the service (that is, at least fair evidence was found that the service is ineffective or that its harm outweighs its benefits); and

I—the evidence is insufficient for a recommendation for or against (that is, evidence is lacking that the service is effective, of poor quality, or conflicting, and the balance of benefits and harm cannot be determined).

This option would allow the Secretary of Health and Human Services to modify Medicare’s coverage of preventive services to which the USPSTF has assigned a grade other than A or B. The Secretary could maintain coverage despite the USPSTF’s recommendations, restrict coverage to certain subgroups that had risk factors that made the preventive service more likely to be beneficial, or eliminate Medicare’s coverage of the service. In estimating the change in outlays that this option might generate, the Congressional Budget Office assumed that coverage for all services assigned a grade of D would be eliminated and that most services assigned a grade of C or I would be retained. Specifically, coverage for the following services, CBO expects, would be eliminated:

electrocardiograms provided during the “Welcome to Medicare” visit that the program routinely provides for low-risk beneficiaries;

cervical cancer screening for women over the age of 65 whose recent PAP smears have been normal; and

the use of prostate-specific antigen tests to screen for prostate cancer in men over age 75.

This option would reduce outlays by about $360 million over the 2010–2014 period and by about $850 million over the 2010–2019 period.