The Department of Defense’s budget proposal for the 2013 fiscal year, while including a 1.7 percent increase in basic pay for military personnel, contains several provisions that will also increase the cost of health care for retired service members and their families, both in the coming year and the years ahead:

• Higher enrollment fees for TRICARE Prime members. TRICARE Prime experienced its first-ever fee increases in the 2012 budget. The 2013 budget continues that trend, and the budget overview released on Feb. 13 proposes additional increases into the future. For the highest-earning working-age retirees, the proposal calls for the current (2012) annual family enrollment fee of $520 to climb to $2,048 by FY 2017; for those in the lower tier of retirement pay, it will increase from $520 to $850.

• TRICARE Standard/Extra fees and deductibles. There is currently no annual enrollment fee for the military’s fee-for-service programs, but the 2013 budget proposes a $140 annual fee for families, to be raised to $250 in 2017. In addition, the Pentagon proposes an increase in the plans’ deductibles, from $300 per family in 2012 to $580 in 2017.

• TRICARE-for-Life annual enrollment fees. The proposal calls for the first-ever enrollment fees for military retirees over the age of 65 – for the highest-earning retirees, $115 annually, increasing to $475 annually over the next five years; for the lowest-earning, $35 annually, increasing to $158.

• Higher pharmacy co-payments. The Pentagon proposes higher co-payments in every category – generic, brand-name, and non-formulary – over the next five years, with the exception of generic mail-order medications, which will remain free until 2017. Under the proposal, the non-formulary prescriptions will only be available my mail beginning in FY 2013. For details, see the budget overview, page 5-4.

In its proposal, the Pentagon points out that none of the proposed changes will affect service members who are currently serving on active duty.

None of the proposals above are popular with service members or retirees, but the increase to TRICARE Prime enrollment fees seems particularly to have struck a nerve; it’s hard not to notice that $2,048 is nearly four times the current family enrollment fee for the highest-paid retirees.

In its overview, the DoD introduces its Military Health System (MHS) provisions by explaining that the system, which now covers 9.6 million beneficiaries, costs more than twice as much as the $19 billion spent in FY 2001 – the FY 2013 request calls for $48.7 billion.

“To address these rapidly rising costs,” the document states, “the Department has taken a comprehensive look at all facets of the MHS health care model – emphasizing the need to balance the number one priority of continuing to provide the highest quality care and service, while ensuring fiscally responsible management for long-term sustainment of the MHS benefit.”

To analysts both inside and outside government, however, the government-borne health care costs of military retirees under 65 – most of whom are working second careers in a civilian sector – have been a focus for reform. Because TRICARE fees remained frozen for fifteen years after the program was created in 1996, while health insurance premiums for families soared, most of these working military retirees, understandably, chose to stay with TRICARE Prime rather than enroll with their private employer – thereby shifting cost increases onto the Department of Defense, which has had to devote an ever-increasing portion of its budget to cover these health care costs.

The Pentagon’s proposal to shift some of those costs back – about $13 billion over the next five years – would constitute a sizeable change. $2,048 is real money, but the Pentagon is betting that it can be borne my military retirees who are earning at least $45,179 in retirement pay – and most of whom, in addition to that pay, are earning another salary. Four times greater than the current annual enrollment fee is still less than half what the average American family pays in annual health insurance premiums – $4,728 in 2011, according to the annual index compiled by Milliman, an international actuarial and consulting firm. The annual fee paid by retirees in the lowest income bracket, $0-$22,589 annually, will be a more modest $893.

In a release soon after the budget was revealed on Feb. 13, Vice Adm. Norb Ryan, Jr. (USN-Ret.), president of the Military Officers Association of America, made it clear that his organization considered such a comparison between military health coverage and its private-sector counterpart a false equivalence.

“Throughout a service career,” Ryan said, “military people have been told that their decades of service and sacrifice constitute the steep up-front premium that will earn them military health coverage in retirement. Now, after the fact, they’re proposing to change a service-based program to a need-based system that may be appropriate for welfare recipients, but is a gross insult to those who already have completed decades of service to their country.”

The battle lines are drawn, and it’s still early in an election-year budget fight that’s certain to last well into the next fiscal year.