TRICARE is only a part – the larger, civilian “purchased care” part that delivers care to dependents and retirees – of the Military Health System. The “direct care” component, consisting of the tri-service-run fixed facilities with uniformed and civilian staffs, operational medicine components, and research and educational institutions, is another. Military advocacy groups argue that focusing budget reforms on one part of the system, while ignoring flaws in the other, is both illogical and unjust.

In a white paper released in the summer of 2012, retired U.S. Navy Capt. Kathryn Beasley, MOAA’s deputy director of Government Relations for Health Affairs, questioned the Pentagon’s focus on the purchased-care side of the MHS for cost reduction. The paper, “Innovative Solutions will Reduce DoD Health Care Costs,” argues that more than a decade of war has done serious damage to the MHS, which is no longer a “system” at all, but a disjointed collection of inefficiencies. The most obvious reason for this is that operational requirements have created a resource drain on fixed medical facilities. “You just add all that up over 10 years,” said Beasley, “and that’s an awful lot of military medical capability, used for the operational theater, leaving open and vacant a lot of areas in the military medical infrastructure here back home. A lot of the care that would normally be done in those confines finds its way out to the civilian sector – and as more and more of the care migrates out to the purchased-care environment, it’s often difficult to reabsorb it.”

Beasley agrees that the Pentagon budget is at an “inflection point” where personnel costs are eroding the military’s ability to meet mission requirements. But MOAA’s argument is that military health care cost increases should be addressed more holistically, rather than with a primary focus on retirement benefits – in other words, reforms should address the “how?” of military spending, rather than simply the “how much?”

“MOAA believes,” Beasley writes, “innovative solutions are available to address the challenge of increasing costs without inhibiting care delivery or raising beneficiary costs.”

The organization outlines five recommendations for reducing military health care costs:

1. Reducing pharmacy costs, primarily through a shift toward home delivery. This approach is widely embraced, and incentives for doing so – higher co-payments for everything but mail-order generic drugs, and a mandatory home delivery pilot program for older retirees – have been written into the 2013 budget proposal, though MOAA is opposed to many of its provisions.
2. Using scarce medical resources more efficiently by establishing a Unified Medical Command. While most of the MHS’s delivery of care is properly described as “tri-service,” the oversight is still assigned to three separate uniformed service headquarters, comprising the surgeons general of the Army, Navy, and Air Force and their staffs. The idea of a unified command has been studied 19 times since 1947, but the idea appears to be gaining momentum.
3. More effectively managing chronic disease in the beneficiary population, through prevention programs and medical home models. These practices discourage emergency room use, both in the direct and purchased-care environments.
4. Reforming the TRICARE contracting and acquisition processes to encourage accountability, risk-sharing, quality outcomes, and communication between the direct- and purchased-care components – with the ultimate goal of recapturing expensive network care into the direct-care environment.
5. Effective use of technology to break down information stovepipes between DoD and the Department of Veterans Affairs, and between the military treatment facilities (MTFs) and contracted civilian providers.

MOAA’s white paper offers few policy prescriptions more specific than these broadly worded suggestions. One of its main goals, Beasley writes, is “to open a dialogue so experienced and interested people can create a military health care system which is customer focused, cost effective, and truly moves us from ‘health care to health.’”

 

Budget Suspense

Of course, the main obstacle to systemic reform is that it’s complicated. MOAA’s study offers few numbers, and concedes that administrative costs at the headquarters level are a miniscule share of the military’s health care costs. Nobody will really know how much money these reforms will save until after they’ve been implemented. Nothing could be simpler, by contrast, than calculating the amount saved by higher premiums on retirees – the fee payments are simply balance sheet entries in the black.

The politics of cost shifting in the defense budget, however, are anything but simple. As of October 2012, both the House and Senate versions of the defense authorization bill had taken significant whacks at the Pentagon proposals – both did away with fee increases for TRICARE Standard and TRICARE For Life, while limiting any TRICARE Prime fee increase to the annual cost-of-living-adjustment (COLA) percentage. The House version, furthermore, would limit pharmacy co-payments for 2013, cap future co-payment increases at the COLA percentages, and require the DoD to establish a Unified Medical Command.

In May 2012, White House officials released a policy statement pointing out that the overall funding level supported by the House version of the authorization would violate the provisions of the Budget Control Act of 2011 – the law resulting from a last-minute deal between Democratic and Republican lawmakers to avert fiscal crisis. The law introduced several complex mechanisms for reducing future deficits, and also set in motion the self-imposed, across-the-board cuts, or sequestration, now scheduled to cut $1.2 trillion in unspecific government cuts over the next 10 years – of which about $500 billion to $600 billion will be sliced from the defense budget.

For now, it seems everyone in both the executive and legislative branches is preferring to ignore this looming threat. But it won’t be long, warned Harrison, before the fiscal realities can no longer be ignored.

“The future outlook for TRICARE is simply increasing uncertainty,” he said. “DoD doesn’t even have much certainty about the overall budget level, because sequestration could come in and whack 10 percent off every account. And when DoD proposes changes, they don’t seem to go anywhere in Congress. But the fact is you can’t let costs – health care in particular – continue to grow faster than the rest of the budget when, overall, the budget is starting to decline. Something has got to give.”

This story was first published in The Year in Veterans Affairs & Military Medicine 2012-2013 Edition.