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Administration Continues to Propose Increases in TRICARE Premiums

TRICARE is the major health insurance program for the U.S. military, their dependents and retirees. It was created in the Nineties as a follow on to the CHAMPUS program primarily due to the end of the Cold War and the BRAC process. This led to the closing of hundreds of installations across the country making it harder for military retirees especially to gain access to health care. TRICARE is similar to an HMO in that it allows members to utilize private health care providers and facilities. The way it is set up requires a small premium each year.

As the U.S. military has grown over the past decade which includes numbers of dependents and retirees health care has become a major cost to the Defense Department. In 2012 it will cost over $50 billion or about eight percent of the total proposed budget. In the last decade the cost of military health care has increased from about $20 billion to a projected $64 billion in 2015 in unadjusted dollars.

In a move to try and counter these increases Secretary of Defense Robert Gates has proposed charging more for the premiums by as much as 300 percent. These moves have not been included in the defense budget as Congress has eliminated the increases. In 2012 the proposal is a much more modest $2.50 to $5.00 a month and this may have a better chance of approval.

The size of TRICARE is illustrated by the on-going struggle between Humana (HUM) and UnitedHealth Group (UNC) over the Southern region management contract. The two companies have protested the awards to each other of this potentially $20 billion contract.

Personnel costs as a whole have increased dramatically over the last two decades and this is eating up the Defense top line budget authority. Gates has already proposed the simplest way to lower these costs by eliminating Soldiers and Marines but this is also being fought by Congress as it makes little sense to reduce the size of the military when it is still engaged in Iraq and Afghanistan.

If defense spending will stay flat or start to be reduced to keep a decent amount of money for development and production of weapons health care costs need to have their growth limited. At the same time the nation and Government must pay for the care of its active duty forces and retirees as failure to do so would negatively impact recruiting, retention and the effectiveness of the U.S. military. Transferring some of the costs to the users may be a simple solution in the short term but it does set a precedent where larger and more harsh increases to premiums could be added by a future administration and Congress which then could lead to lack of access and care for military personnel.

As with all aspects of cutting Federal spending this won’t be easy but it is clear that something needs to be done due to the current deficits and budgetary pressures.

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One Response to “Administration Continues to Propose Increases in TRICARE Premiums”

  1. Companies Continue Fights for U.S. Military Health Care Contracts | Defense Procurement News on June 27th, 2011 2:17 am

    [...] has been recognized by leadership such as departing Secretary of Defense Robert Gates and some moves have been proposed to reduce spending or slow the rate of growth. If changes are not [...]

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