Supporting the Troops: The TRICARE Quagmire

Issue Briefs | Health

No. 141
Monday, March 10, 2014
by Jacob Casey

TRICARE, the military health insurance program run by the Department of Defense, has a well-deserved reputation for inadequate quality at an exorbitant public cost. Drastic changes to this program are needed to ensure access to health care for 9.6 million active-duty service members, National Guardsmen and Reservists, retired service members (age 60 and above), survivors and their families.

Through a variety of programs, TRICARE offers three types of health care plans: Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO) and fee-for-service, each with different deductibles, premiums and copays.2

The majority of TRICARE recipients are enrolled in the managed care option, TRICARE Prime.3 Coverage under the most affordable and comprehensive program only requires beneficiaries to enroll and pay an annual fee, though the fee is waived for active duty servicemen and their families.4 However, the Prime option offers a limited choice of providers because enrollees receive care from an assigned Primary Care Manager (PCM) and specialty care is provided by referral only.5

Alternatively, the TRICARE Standard and Extra programs offer the most freedom of choice of providers, but only to nonactive-duty beneficiaries. Unlike Prime, TRICARE Standard and Extra beneficiaries are not required to enroll and "can get care from any TRICARE-authorized provider, network or non-network."6

Finally, TRICARE for Life provides care for retired seniors by offering "secondary coverage to TRICARE beneficiaries who have both Medicare Part A & B."7 Other plans are available, but combined they only account for 8 percent of TRICARE participants.

Unlike health care obtained through the Department of Veterans Affairs, TRICARE is not a provider; instead, it operates like insurance. Depending on the program, enrollees can receive services at military bases or from a participating civilian doctor of their choice. But servicemen and their families have difficulties finding caregivers, experience long wait times for primary care providers and travel long distances to see specialists. The result is reduced access to care and poorer health outcomes.

Problem: Lack of Access to Providers. TRICARE recipients often experience difficulty finding primary caregivers. Among the 82 percent of civilian providers aware of the program, the acceptance rate of new TRICARE patients is lower than for other types of public and private coverage:8

A 2008 survey found that 96 percent of physicians accepted new commercially insured patients, 86 percent accepted new patients on Medicare, and 72 accepted new patients on Medicaid.

By contrast, between 2008 and 2011, only 58 percent of civilian providers accepted new TRICARE patients.

Access to care is particularly bad for the more than 2 million "nonenrolled beneficiaries" - those who utilize plans such as TRICARE Standard and Extra.9 According to a 2013 Government Accountability Office (GAO) report on TRICARE surveys, one in three nonenrolled beneficiaries "experienced problems finding a civilian provider who would accept TRICARE," a difficulty that varied by location. Geographic areas with civilian provider networks that agreed to accept TRICARE reimbursement rates for their services, called Prime Service Areas (PSA), saw a higher percentage of nonenrolled beneficiaries "experience problems finding a civilian primary care or specialty care provider compared to those in non-Prime Service Areas (non-PSA)," where providers may charge up to 15 percent more than the standard TRICARE reimbursement rate for their services.10

The GAO found that the top survey response was "providers were either not accepting TRICARE payments or new TRICARE patients." Because PSA providers are required to charge below-market prices for their services, their alternative to losing money on each patient is either to refuse service or lower quality. In fact, 19 percent of civilian primary care providers and 22 percent of specialty care providers cited reimbursements as the primary reason for not accepting new TRICARE patients.11

Problem: Quality of Care. For many, satisfaction with care is poor as well. Over the survey period, nonenrolled beneficiaries rated satisfaction with their health care lower than those with commercial insurance, Medicare fee-for-service and even Medicaid. However, a 2010 Altarum Institute report found the satisfaction level of TRICARE Prime enrollees was similar to civilians.12 While increasing reimbursement rates would help mitigate quality concerns, this option may not exist for long, due to the rapidly expanding public cost.

Problem: Costs. Military health care spending is out of control. From 2001 to 2011, general military health care spending grew an average of 6.3 percent annually.13 This was twice as fast as the rise in the nation's overall health care costs.14 The TRICARE program has largely contributed to this growth, tripling over the last decade. TRICARE spending now accounts for about 10 percent of the baseline defense budget.15According to the Congressional Budget Office (CBO), by 2030 the Department of Defense will spend $90 billiona year on health care, which would match the Department's current spending on all military research and development programs combined.16

Left unabated, health care costs will continue to consume an increasing portion of the defense budget. Coupled with a slowdown in projected defense spending, this could seriously threaten the funding of personnel, technological development and equipment modernization, and even crucial national security initiatives.17

Increased demand has caused this explosion of costs. Indeed, Congress paved the way in 2001 by increasing benefits for reservists and expanding eligibility to military retirees over 65.18 But the primary problem is not expanded access to the program; rather, the cost of other health insurance options is causing more of the eligible population to utilize TRICARE.

The rising cost of health care services and prescription drugs have pushed up insurance premiums for the general population, but the trend has not affected TRICARE because Congress sets its fees, rather than the marketplace. In fact, premiums for enrollees have not risen in the 17 years since TRICARE's inception in 1996. As a result:19

Enrollment fees for TRICARE Prime recipients remain stable and low at $38 a month, about 12.5 percent of the average cost of comparable private insurance.

In constant fiscal year 2012 dollars, however, the TRICARE Prime premium declined $68 (12 percent) from fiscal year 2002 to fiscal year 2012.

In contrast, the average private health insurance premium increased $1,642 (67 percent) during the same period.

Thus, the relatively stable TRICARE Prime fees strongly appeal to military retirees, who pay only a fraction of what they would pay for private plans.20Figure I shows that retiree utilization of TRICARE Prime and Standard/Extra increased from about 55 percent in 2001 to nearly 81 percent 2012. As TRICARE use increased, private insurance coverage fell.

The out-of-pocket cost to TRICARE enrollees is also lower than other public health care programs. [See Figure II.] Civilians using other federal health care systems pay an average annual out-of-pocket cost of about $3,400, but TRICARE enrollees pay only $1,200.21 The incentives are clear. If military personnel consider cost when choosing a provider, TRICARE will continue to bear an additional burden as growing numbers of people enroll. Further, because of the lower out-of-pocket cost, TRICARE enrollees will tend to consume more care.

Problem: ObamaCare Will Increase Costs. With ObamaCare mandates looming, TRICARE could see another surge in demand. The new health law is encouraging businesses to push portions of their workforce into public health care programs.22 The most conservative estimates put the loss of employer coverage after full implementation of the Affordable Care Act (ObamaCare) at around 11 million, while others reach as high as 35 million.23 Because it is common for retirees to choose TRICARE over other group health insurance, many military personnel will likely choose TRICARE as well.24

Solutions. Raising premiums and deductibles for retirees, limiting double coverage, and creating policies that discourage over-utilization would improve the system, but those efforts fail to address the root of the problem: third-party costs and decision making. To achieve the efficiencies a real market creates, health care needs to reflect its value to the patient.25

Servicemen, their families and retirees should be encouraged to consume appropriate levels of care, while higher quality providers must be allowed to reap commensurate rewards. The Department of Defense could accomplish this by replacing TRICARE with deposits to Health Savings Accounts (HSAs) for each eligible service member or retiree, from which they could pay for routine medical care from private providers. Unused balances in the accounts would roll over for use in future years. Beneficiaries should also have choices for catastrophic coverage provided by private insurers, with Defense Department subsidies. Military personnel could be credited a certain amount of money based on their length of service. They would receive better care, while the cost of military health care would stabilize and likely decrease, as increased efficiency lowers costs.

Conclusion. While the failures of TRICARE are widely known, neither the public nor the administration have shown a willingness to make the necessary changes to fix it. Any real market-based solutions face steep political challenges because nobody wants to be perceived as reducing benefits for servicemen and retirees. Former Defense Secretary Robert Gates tried repeatedly throughout his tenure to create a financially sound system, but stringent opposition in Congress thwarted his efforts.26

To care for our military, we must control spending and provide coverage and services that reflect the needs of patients. The system will continue to be dysfunctional until health care decisions are by made those receiving care. Without reform, the patriotic enthusiasm of Americans to provide unlimited, free or below-market price health care to our nation's uniformed personnel ensures skyrocketing costs and poor health outcomes. Something has to give. TRICARE truly is our nation's most challenging military quagmire.

Jacob Casey is a research associate with the National Center for Policy Analysis.

1. "Number of Beneficiaries," TRICARE. Available at

2. "TRICARE Plans," TRICARE. Available at

3. "Number of Beneficiaries," TRICARE. Available at

4. "TRICARE Prime Overview," Military Advantage. Available at

5. Ibid.

6. "Compare Plans," TRICARE. Available at

7. Ibid.

8. "Defense Health Care: TRICARE Multiyear Surveys Indicate Problems with Access to Care for Nonenrolled Beneficiaries," United States Government Accountability Office, April 2013. Available at

9. Ibid.

10. Ibid.

11. Ibid.

12. "MHS Wide Final Report 2010: TRICARE Outpatient Satisfaction Survey," Altarum Institute, September 27, 2010. Available at percent20MHS percent20Wide percent20Final percent20Report percent20 percent20FY10.pdf.

13. Sarah Kliff, "Defense has a health care spending problem," Washington Post, January 6, 2012. Available at

14. Gregg Zoroya, "Military's health care costs booming," USA Today, April 25, 2010. Available at

15. Lawrence J. Korb et al., "Restoring Tricare: Ensuring the Long Term Viability of the Military Health Care System," Center for American Progress, March 2011. Available at

16. "Long-Term Implications of the 2013 Future Years Defense Program," Congressional Budget Office, July 2012. Available at

17. Ibid.

18. Ibid.

19. Ibid.

20. "Long-Term Implications of the 2013 Future Years Defense Program," Congressional Budget Office, July 2012. Available at

21. Kevin Baron, "Gates: Tricare system hindered by bureaucracy budget failures," Stars and Stripes, September 3, 2010. Available at

22. "Broken Promise: Why ObamaCare Will Force Americans to Lose the health Care Coverage They Have and Like," U.S. House Ways and Means Committee, May 1, 2012, available at; and "Employers Wary of Health Reform Costs and Hassles: Health Reform Financial Analysis Report," Lockton Benefit Group, April 5, 2011. Available at percent20wary percent20of percent20Health percent20Reform percent20Costs percent20and percent20Hassles_Actuarial percent20Analysis.pdf.

23. Alyene Senger, "What Are the Odds Your Employer Will Drop Health Coverage?" Heritage Foundation, July 27, 2012. Available at

24. "United States Department of Defense Fiscal Year 2011 Budget Request," United States Department of Defense, February 2010. Available at

25. For a discussion on third-party payment, see John C. Goodman, "Third-Party Payers and Perverse Incentives," Psychology Today, July 18, 2012. Available at

26. Lisa Rein, "Tricare target of Pentagon cuts as health care projected to reach $65B," Washington Post, March 14, 2011. Available at

Read Article as PDF