Pentagon rejects raising retiree drug costs, for now

Tom Philpott

Defense Department officials have defeated a White House budget initiative that would have raised prescription fees for military retirees, their spouses and survivors next October. The plan included imposing first-ever co-payments on retiree prescriptions filled at base pharmacies.
Higher pharmacy fees remain a possibility by October 2005.
The Office of Management and Budget’s plan, which was sent to the Pentagon Dec. 16 as a “draft Program Budget Decision” for fiscal 2005, would have raised fees on retirees and their families. Co-pays under the TRICARE mail order and TRICARE retail benefit would climb to $20, up from $9, for name-brand drugs, and to $10, up from $3, for generic drugs.
Also, the same $20 or $10 fees would be charged retirees using military pharmacies, breaking a long-tradition that all prescriptions filled on base are free to eligible beneficiaries. The OMB plan would have taken effect Oct. 1, 2004.
“The bigger news is it’s not going to happen,” said a senior DoD official Dec. 31. “We won’t do anything in [the] ’05 [budget]. We may study it and look at whether or not we should do something in ’O6.”
Administration sources first alerted the Air Force Sergeants Association to the OMB plan before Christmas. AFSA sounded an alarm with other associations. OMB documents obtained by AFSA said imposing higher drug co-pays on retirees, their spouses and survivors “could generate significant revenues,” from $728.3 million in fiscal 2005 up to $954.7 million by 2009, a five-year defense budget gain of $4.2 billion.
James D. Staton, AFSA’s executive director, warned President Bush in a Dec. 29 letter that the plan would break faith with “those who sacrificed a good portion of their lives for this nation” and sends “an awful signal” to “those currently serving and considering a military career.”
Staton warned Bush too that “military veterans and retirees are beginning to waiver in their support of this administration in light of repeated gestures of indifference and disrespect.”
Other associations also reacted vigorously and by New Year’s Eve the OMB plan had been withdrawn, at least as part of the 2005 defense budget, which will be delivered to Congress by late January.
Behind the OMB idea is concern that pharmacy costs “are rising everywhere,” including in DoD, and co-payments have proven effective in the civilian healthcare industry for controlling costs. While imposing fees for prescriptions on base is controversial, the Defense official said it will remain among options to be weighed in the year ahead.
“That might be a good idea but I haven’t seen the data that tells me it is,” the official said. He added, “[W]e clearly need to help guide people to mail order and generic drugs,” less costly alternatives. Higher co-pays, he said, “is one way to guide people to that.”
With the start of the TRICARE Senior Pharmacy Program in April 2001, and the rising popularity of the TRICARE retail benefit, DoD drug costs rose from $855 million in 1996 to more than $3 billion in 2002. They are expected to hit $7.6 billion by 2010.

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