The TRICARE Quagmire

March 10, 2014

TRICARE, the military health insurance program operated by the Department of Defense, offers three types of health plans: Health Maintenance Organization (HMO), Preferred Provider Organization (PPO) and fee-for-service plans. The majority of Americans receiving TRICARE are enrolled in TRICARE Prime, a managed care plan, says Jacob Casey, a research associate with the National Center for Policy Analysis.

Active service members, National Guardsmen and reservists, retired servicemen (age 60 and above), survivors and their families are eligible for the health plans. Unfortunately, TRICARE is plagued with problems that impact quality and access to care.

The acceptance rate of new TRICARE patients is lower than for other types of coverage, both public and private.

  • Only 58 percent of civilian providers accepted new TRICARE patients between 2008 and 2011, while 72 percent accepted new Medicaid patients and 96 percent accepted new commercially insured patients.
  • This problem is rooted in the fact that providers are required to charge below-market prices for services to TRICARE patients. In order to not lose money, providers have to refuse service or lower quality.

From 2001 to 2011, military health care spending grew 6.3 percent annually on average, twice as fast as the rise in the nation's overall health care costs. TRICARE is a major contributor to this, having tripled over the last 10 years.

  • By 2030, the Congressional Budget Office estimates that the Defense Department will spend $90 billion per year on health care, matching current spending on all military research and development programs combined.
  • This cost explosion is due to increased demand. Because Congress sets TRICARE fees so low, premiums have not risen in the 17 years since TRICARE was created in 1996.
  • As the costs of other insurance options have shot up, TRICARE becomes more and more appealing. Enrollment fees for TRICARE Prime are $38 per month, just 12.5 percent of the average cost of comparable private insurance.
  • Incredibly, while the TRICARE Prime premium declined 12 percent from 2002 to 2012 in fiscal year 2012 dollars, the average private health insurance premium increased 67 percent.
  • Not only do these low costs encourage enrollment in TRICARE, but the low out-of-pocket costs encourage greater consumption of services.

Real, market-based reform is necessary. Casey suggests replacing TRICARE with Health Savings Accounts (HSAs) for each eligible service member or retiree. Deposits could be placed into HSAs, and unused balances could be rolled over into future years. With HSAs, quality of care for our nation's military would increase and costs would fall. Lawmakers need to overcome political challenges to reform and take action to place health care decisions into the hands of those actually receiving care.

Source: Jacob Casey, "Supporting the Troops: The TRICARE Quagmire," National Center for Policy Analysis, March ­­10, 2014.

 

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