Military Health Crisis Mirrors America’s

Health care is eating up 10 percent of the Pentagon's budget and rising fast.

Jonathan Rue notes in “The Truth About Military Health Care” that Congress in standing in the way of Pentagon leaders’ efforts to control out-of-control costs for retiree healthcare. The numbers are truly staggering:

From 2001 to 2012, military health-care expenditures rose over 170 percent, from $19 billion to $53 billion. As a share of defense spending, health care represented 6.1 cents of every dollar spent by DoD in 2010, up from 4.5 cents in 2000. At $53 billion, health care is roughly 10 percent of DoD’s base budget, and without reform it is expected to rise an additional 28 percent to $64 billion by 2015.

Three primary factors are responsible for soaring costs.

First, rates have remained virtually unchanged since the creation of Tricare in 1995. Working-age retirees pay just $520 a year per family to use Tricare. Meanwhile, the average American family spends between $4,000-5,000 per year on health care. When Tricare was implemented in 1996, working-age retirees and their dependents were expected to contribute 27 percent to the cost of their health care; today, that figure has fallen to 11 percent. Retirees over the age of sixty-five pay nothing for their plan, Tricare for Life. Yet, this group represents the highest per capita cost; in 2007, more than half of DoD health-care expenditures went to Tricare for Life beneficiaries.

Second, the number of people eligible for Tricare grew from 6.8 million to 9.7 million people, an increase of 43 percent. Moreover, these beneficiaries have health-service-utilization rates well above the averages of civilian health-care plans.

Third, Congress has significantly expanded Tricare by adding seventeen new programs, covering new procedures and loosening plan restrictions.

This is, of course, unsustainable and, as Rue points out, “Increasing health-care costs in DoD’s budget mean less money for bombs, bullets and training.” If that which is unsustainable won’t be sustained–and it’s been rumored that such is the case–then something has to be done.

I disagree with Rue–and the Pentagon leadership–that this “something” is to pass on the costs to retirees or to cut out the benefits altogether.

Congress’s unwillingness to reform Tricare is emblematic of larger trend in an American society still haunted by Vietnam, still coming to grips with the emergence of a small, separate caste of soldiers who does the nation’s fighting. Overcompensating for the past and seeking to support the troops with more than a bumper sticker, today’s veterans are lionized and given deference not accorded other public servants. As Andrew Bacevich recently wrote, “reward has taken its place alongside remembrance.” Having asked so little of ourselves, we justify our inaction and assuage our consciences through such praise and reward.

I joined the Marine Corps for a lot of reasons. Cheap health care wasn’t one of them.

But it was certainly part of the calculation for many, especially those in the enlisted force, in deciding to stay on for 20 or more years of service. It was for my late father, who enlisted in the Army in 1962 and retired in 1983. Granted, most of his service was in an era when soldiers were paid paltry salaries but promised generous benefits for life if they put in their 20. Starting around the time he retired, military compensation–and, yes, prestige–escalated tremendously.

At the same time, though, benefits actually decreased. Notably, healthcare. When my dad retired, the expectation was that he and my mother would be allowed free treatment in military hospitals to the end of their days. One of the reasons he decided to retire-in-place outside Fort McClellan, Alabama was access to Nobel Army Medical Hospital and other post facilities. By 1995, that promise went away and was replaced by Tricare, which gave them more flexibility but substantially higher out-of-pocket costs. Thanks to BRAC, Fort McClellan eventually went away, too, making the broken promise somewhat moot.

The problem here, it seems to me, isn’t that the Pentagon is spending too much money on retiree medical benefits but rather that America’s health care system is broken. We’ve spent decades erecting a payment structure around employers and insurance companies and sent costs through the roof.  That almost killed off General Motors and Chrysler and is now so out of control that it’s threatening to overrun the Pentagon, whose annual budget exceeds the GDP of all but a handful of countries on the planet.

The solution, then, isn’t to go back on our promises to our military retirees after they’ve already done their 20 years any more than it’s screwing over pensioners at the Big 3. Rather, it’s getting America’s health care costs down to the level sustained by other industrialized democracies.

FILED UNDER: Economics and Business, Health, Military Affairs, National Security
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. anjin-san says:

    Rather, it’s getting America’s health care costs down to the level sustained by other industrialized democracies.

    Sounds reasonable to me. The fact that you feel this way makes you wonder why you are Republican.

  2. James Joyner says:

    @anjin-san: I’m an outlier in the American debate. While my position is slightly closer to the Democratic one on this, I thought ObamaCare was actually a step in the wrong direction–ratcheting up access (which I support in principle) while doing little to control costs.

  3. Gromitt Gunn says:

    Absolutely. The ties between employment status and health coverage need to be broken in order for this problem to be resolved.

  4. Andy says:

    Just to be clear, James, military retirees go on Medicare after 65. Tricare for life is secondary coverage on top of Medicare parts A & B.

  5. James Joyner says:

    @Andy: Right–it’s supplemental insurance. My dad was 66 when he died but mom still gets half his retirement (he paid dearly for that) and Tricare.

  6. Andy says:

    Rather, it’s getting America’s health care costs down to the level sustained by other industrialized democracies.

    So true, but unfortunately that’s a lot easier said than done. Military medicine isn’t able to control costs yet has some advantages over most coverage out there. Tricare, for example, pays 85% of Medicare’s fee schedule. The military system also has a lot of military doctors who are salaried employes who do not get paid via fee-for service. Finally, the military population is, on the whole, much healthier than the general population.

    We can’t, at this point, even get cost growth down to the rate of inflation, much less reduce costs. So while I agree with you, I’m not sure how we get from here to there.

  7. Dave Schuler says:

    The proportion of military spending devoted to heatlhcare depends on how you classify “military”. When you add the VA healthcare budget (whcih is usually not included when reckoning defense spending) to the DOD healthcare budget it’s even more than 10% of the combined total.

  8. al-Ameda says:

    Gromitt Gunn is exactly right: “Absolutely. The ties between employment status and health coverage need to be broken in order for this problem to be resolved.”

    Cconservatives, on the other hand, ask:
    “When is the private sector going to take care of this problem?”
    or, “When is Obama going to cut taxes so that the private sector will have incentives to solve this problem?”

    Essentially, we’re going nowhere.

  9. walt moffett says:

    Reducing medical costs how? The military experience even when the docs are on salary and liability concerns minimal, things keep growing. I leave open the possibility these facts may have slowed the rise, btw. Hmm, be interesting to see where the costs are rising.

  10. Mikey says:

    @al-Ameda:

    Cconservatives, on the other hand, ask:
    “When is the private sector going to take care of this problem?”

    Well, I’m somewhat conservative, and I’ve been saying the link between employment and health insurance should be broken for a long time–specifically BECAUSE doing so would create opportunities for private-sector solutions.

    It will be difficult to do so, unfortunately, because of the favored tax treatment businesses receive for providing it as a benefit. We’d have to fix that problem first. (Yes, I’m arguing for raising a tax. I said I’m only “somewhat” conservative for a reason.)

  11. anjin-san says:

    I thought ObamaCare was actually a step in the wrong direction–ratcheting up access (which I support in principle) while doing little to control costs.

    Perhaps. But I am not seeing anything from the GOP aside from “Let the free market unicorns solve the problem.” Meanwhile, it is a huge problem, and we do need to deal with it.

    Though it is interesting to note Republicans in the house inching towards embracing portions of Obama’s evil, socialistic, death panel enabling health plan. (Sarcasm not directed at you)

  12. James says:

    @James Joyner:

    […] while doing little to control costs

    Have you heard of the IPAB? Bonus point: Which major political party refuses to vote on a nominee for said Board, because of legislative sour grapes?

  13. Gromitt Gunn says:

    @Mikey: Absolutely. The primary reason I work for a government agency is the quality of the health insurance combined with the fact that I couldn’t get a individual policy if I tried. I’ve been wanting to be my own boss for a while, but until there is some sort of exchange I can get into, it just isn’t happening.

  14. @walt moffett:

    Reducing medical costs how? The military experience even when the docs are on salary and liability concerns minimal, things keep growing. I leave open the possibility these facts may have slowed the rise, btw. Hmm, be interesting to see where the costs are rising.

    This seems to be a lot of problem in a lot of our public institutions, from medicine to education to infrastructure construction. We seem to keep paying more and more for less and less results, and I find myself increasingly wondering where all the money is going.

  15. Mikey says:

    @Gromitt Gunn: Health insurance should be a lot more like true insurance. Right now it’s more of a cost-sharing (and cost-shifting) arrangement. The problem with spiraling health care costs is pretty easy to figure out, IMHO–most of the time, consumers have a third party paying the bills and have no idea whatsoever what the true cost is.

    Eliminate the favored tax treatment for businesses but keep it for individuals. Allow anyone to open a health savings account. Allow the purchase of insurance from any insurer, even one in another state. Deductibles should be high (to improve cost awareness), but coverage should be comprehensive when it kicks in. Create private exchanges for hard-to-insure people like you.

    The only thing I haven’t quite figured out is how to make sure employers actually put what they used to pay for employee health care into the employee’s paycheck (so the employee acan actually buy insurance with it) rather than just pocketing it. Any ideas?

  16. Scott says:

    Yes,the military health costs have been rising. This article seems to imply that retirees are the issue. However, I think this onion needs to be peeled back some more. What is the impact of 10 years of warfare on these costs? What is the relative efficiency of the military health-care system compared to the private sector? What percentage of the milttary health-care costs are spent outside of the military hospitals in the private sector? Which part is rising faster? I’m a retiree. I and my famiy receive care at the local military hospital. I consider it quite good and comprehensive. Compared anecdotally with my neighbors, I think I prefer my system with their, especially not having to deal with the harassment from the insurance companies.

  17. James Joyner says:

    @Scott: Rue’s making several, somewhat related points. First, the number of retirees on Tricare is going up. Second, they’re using Tricare at a much higher rate than active soldiers because they’re older. Third, unlike active soldiers, they provide very little in present combat power.

  18. anjin-san says:

    so the employee acan actually buy insurance with it

    Do you have any experience trying to buy health insurance as an individual? Unless you are young and healthy, it can range from unpleasant to maddening to impossible.

  19. James says:

    Unless you are young and healthy, it can range from unpleasant to maddening to impossible.

    See also: young, healthy, but born with a pre-existing condition. Then it ranges from uninsurable to unaffordable.

  20. Tsar Nicholas says:

    Good blog post.

    Regarding cost control, California’s MICRA statute is the archetype, although junk lawsuits admittedly are far less sof a problem in military circles than for the population at large. Patent reform in the medical device and pharmaceutical arenas also would help. Unfortunately, however, neither of those measures are foreseeable. Democrats reflexively are opposed to any meaningful tort reforms and big pharma — which has a lot of politicos by their wallets and purses, both Republican and Democrat — is opposed to patent reforms for Rx drugs. The medical device industry also has eyes and ears on K Street.

    Separate but related topic: We really need to expand the HSA program. Unless we start weaning the public at large off of expecting and needing Uncle Sugar to pay for their healthcare costs as they get older we’re heading for a fiscal train wreck of epic proportions.

  21. Mikey says:

    @anjin-san:

    Do you have any experience trying to buy health insurance as an individual? Unless you are young and healthy, it can range from unpleasant to maddening to impossible.

    No doubt, but there has to be a way to address that.

    And it really misses the larger point, which is the way we do things right now is just broken. It doesn’t control costs (in fact it exacerbates the problem) and it’s not sustainable in the long term.

  22. Gromitt Gunn says:

    @Tsar Nicholas: Health Savings Accounts are great if (a) you do not have any chronic conditions requiring maintenance (b) you have money to save (c) you also have a catastrophic policy to cover major surgeries and things like that.

    For someone without money to save – or at a very low marginal tax rate – the motivations to save are negligible. For someone with one or more chronic conditions that require regular treatment, the balance in the HSA will constantly be drained.

    And on top of that – the real kicker – is that we have been guaranteeing hospitals that they will be reimbursed for emergency room care since the mid-1980s. You’ll never get a majority of legislators to turn that over and the American people really wouldn’t stomach a repeal. So there is a huge moral(e) hazard built in to that safety net.

  23. James says:

    @Mikey:

    No doubt, but there has to be a way to address that.

    Um…yes. It’s called the Affordable Care Act. Perhaps you’ve heard of it?

  24. anjin-san says:

    No doubt, but there has to be a way to address that.

    I’m all ears. What solution do you propose? Considering it is a matter of life or death for countless millions, are we really supposed to cross our fingers and hope for the best?

    And it really misses the larger point, which is the way we do things right now is just broken.

    We all know there is a problem. Democrats are actually trying to fix it. Republicans want people to trust their access to health care to the tender mercies of the insurance companies.

  25. anjin-san says:

    We really need to expand the HSA program

    Look at savings rates in this country. Do you really think that is a fix?

  26. george says:

    @Mikey:

    No doubt, but there has to be a way to address that.

    Any way of addressing that will ultimately come down to some sort of single payer (gov’t) scheme – which is what should be aimed at right now anyway. Obamacare might be the best he thought he could get through Congress, but its still a very bad system. I really wonder if forcing it through would really be an election loser – even the most pro-free enterprise parties in other western gov’ts won’t even mention getting rid of it, because its so popular among citizens. The arguments there are about dual care (gov’t and private), not getting rid of gov’t.

    And oddly enough, gov’t paid care (services are still provided by private doctors etc) is everywhere much cheaper than US costs, and gives about the same results.

    Of course, I’m now living in Canada so I’m biased – lot’s of things wrong with the Canadian system (ideally it would allow private and gov’t), but I much, much prefer it to what I left behind.

  27. Dave Schuler says:

    Any way of addressing that will ultimately come down to some sort of single payer (gov’t) scheme – which is what should be aimed at right now anyway.

    I’ve supported single payer for more than thirty years but in the absence of the will either to deny somebody some healthcare that they want or pay providers less single payer alone won’t solve the cost problems we have. I don’t see that will.

  28. george says:

    @Dave Schuler:

    I agree that single payer has to include denying some services to some people, but that happens under any system – and I’d argue the percentage of people denied care is greater under private insurance than under single payer. And judging by the relative amount spent in America and Canada, single payer tends to be cheaper.

    Though ultimately, a combination of single and private (as in some European countries) works best, in that everyone is covered with the basics, but those with more resources can buy more.

  29. al-Ameda says:

    @george:

    I believe that Switzerland has the model we could adapt for our purposes.

    Switzerland has a single-payer system wherein everyone pays an 8% tax for a basic comprehensive national health insurance plan (as specified by legislation). People then purchase the basic plan from private insurers (profit is regulated by law), and if people want to purchase additional coverage they are free to do so in the private markets.

    Switzerland spends a lot per capita for their health system, yet it is still less costly than our system, and no one is uninsured.

  30. mattb says:

    @george:

    I agree that single payer has to include denying some services to some people, but that happens under any system.

    DEATH PANEL SUPPORTER!!!

    Why do you and your “facts” (like single paper systems are more cost effective than our present system) hate grandmas and insurance companies?!

  31. BigEd says:

    Just to make sure I understand your points here, James:

    You think the USA is vastly overspending for retired military healthcare in general, but in the case of your Father he did not get as much as he should have??

  32. James Joyner says:

    @BigEd:

    You think the USA is vastly overspending for retired military healthcare in general, but in the case of your Father he did not get as much as he should have??

    No. I argue that my father didn’t get what he was promised, which is something entirely different. And we didn’t have a healthcare crisis in 1982, although we were presumably on a glide path toward one.

  33. Franklin says:

    Okay, combination of single payer (for basic services) and private (for more luxury if you can afford it). I’m on board with it. Now who exactly do I vote for?

  34. walt moffett says:

    @Stormy Dragon:

    I think Cheops and Imhotep had a similar conversation about rising costs and decreasing returns, if not the first camp fire builders. And as we see in this thread, many would much rather snark over the past than look onwards.

    for S&G value look up the price of titanium surgical instruments (all the rage now since MRI’s won’t yank them out of the patient) vs steel. Ponder why a suture removal kit sells for about 50 cents, goes on your bill for several dollars yet the buck or so insurance pays a buck or so. Or the recent mandate that shingles vaccines be covered by all policies. Walgren’s billed for $250 and was paid about $200 when my wife had one. If insurance only pays the medicare rate (as mine does) why not simply bill every one at that rate?

  35. Mikey says:

    @anjin-san: @george: @al-Ameda: This Wiki on France’s health care system has some interesting information. Essentially they have a universal-coverage system that is not single-payer. Health care in France – Wikipedia

    I’m not generally in favor of a Canadian-modeled system, but then I haven’t lived there, I’ve just talked to several Canadian colleagues who tell me for basic care it’s great, but they are entirely dissatisfied with some aspects (like the guy who screwed up his knee playing hockey and had to drive himself from Ottawa to Buffalo and shell out $700 for an MRI he would have had to wait a month-and-a-half for in Canada). But I know anecdote != data, too…

    When it comes down to it, I think everyone in this debate is a lot closer to agreement than they think–we all agree something has to be done.

  36. Mikey says:

    Why is my comment in purgatory?

  37. Mikey,

    It appears that it got caught in the spam filter due to the number of links in there. I went ahead and approved it so it should be there now.

  38. Mikey says:

    @Doug Mataconis: Thanks, Doug. Upper limit of links apparently equals “three.”

  39. george says:

    @Mikey:

    I’d kind of agree with that – it’s excellent for basic care (which is probably why Canadians on average live longer than Americans); despite what you hear down south.

    My experience (and I agree, anecdote != data), from a very serious auto accident, was that I was very quickly picked up by the ambulance, very quickly taken into the ER, and received excellent and timely treatment. By what I’d heard in the US, I’d have expected to have died in the hospital halls … (luckily for me) that was very far from the case. And I’ve never talked to a Canadian who has experience otherwise – even its biggest local critics (sometimes reluctantly) admit that its very good in emergencies and other basic care. American critics of the Canadian system just sound silly with many of their complaints because of that (really, corpses aren’t pilling up in the hospital hallways).

    On the other hand, if you have a bad knee, you might wait a month or so (one older fellow I know had to wait almost three months for knee replacement surgery, again he might be an outlier but it happens), and it’d be nice to have a private system available for that part. As I said, in my experience it’s definitely preferable to the US system, but still could be improved greatly. The Swiss system sounds much better.

  40. Mikey says:

    @george: Glad to hear you came out of that OK…hopefully they didn’t tattoo a maple leaf on your butt while you were unconscious…

    One area where America seems to have a very clear advantage is medical research. I haven’t done enough research to figure out why, but there has to be a reason why such a large proportion of Nobel laureates in medicine are American or have done their Nobel-winning research in American institutions. Is it just a matter of numbers–America has a large number of research institutions and therefore a large number of Nobel prizes? Or does it reflect a higher level of medical innovation that’s due to our less-regulated system of medicine? Or is there another reason I haven’t thought of?

  41. george says:

    @Mikey:

    I agree, America has great medical research (in fact, all kinds of scientific research) – mainly because the gov’t has made research (medical and otherwise) a priority. Which means not only funding, but the best and brightest from other countries going to study and then stay to research at American universities. I don’t think it has much to do with the less regulated system, as America has the same lead in physics and chemistry, and those aren’t regulated anywhere. In research, talent attracts talent (potential graduate students move towards those doing the most significan research), and funding gets the ball rolling.

  42. Mikey says:

    @george: Yeah, I pretty much agree. American higher education is considered among the best (if not the best) in the world, so it attracts smart people from all over.

    I think another factor, which is reflected in the government’s policy of funding research, is America’s tradition of innovation.