Proposed Hikes to Tricare Pharmacy Fees Stall Defense Bill Talks

Proposed increases to pharmacy co-pays that would mostly affect military retirees have stalled negotiations on the annual defense bill.

The U.S. Defense Department recommended increasing pharmacy co-pays in the Tricare for Life military health care program for elderly retirees as part of its budget for fiscal 2016, which begins Oct. 1. While the Senate supported the idea, the House of Representatives resisted the change.

Now, Rep. William "Mac" Thornberry, a Republican from Texas and chairman of the House Armed Services Committee, is offering a compromise.

"The House is willing to consider modest Tricare co-pay adjustments, but only enough to prevent a point of order on the Senate floor related to the retirement system," he wrote in a memo this week to fellow Republicans on the panel, according to POLITICO. "They would be roughly 30 percent of the Senate proposal."

POTENTIAL IMPACT

While the congressman didn't detail how that would impact pharmacy co-pays in Tricare for Life over the next decade, an unofficial estimate can be determined by applying the percentage to figures detailed in the defense budget documents.

The Pentagon recommended boosting co-pays for a one-month prescription refill at retail pharmacies from $8 in 2015 to $14 in 2025 for generic medications and from $20 in 2015 to $46 in 2025 for brand-name medications. A 30-percent increase to the difference of those figures would translate into a retail co-pay of $10 in 2025 for generic medications and $28 for brand-name medications.

Similarly, the Pentagon recommended boosting co-pays for a three-month refill through mail orders from $0 in 2015 to $14 in 2025 for generic medications, from $16 in 2015 to $46 in 2025 for brand-name medications, and from $46 in 2015 to $92 in 2025 for non-formulary, or specialty, medications. A 30-percent increase to the difference of those figures could translate into a mail-order co-pay of $4 in 2025 for generic medications, $25 for brand-name medications and $60 for non-formulary, or specialty, medications.

Retirees would still be able to fill prescriptions for generic and brand-name medications for free at military hospitals and clinics, though this is only an option for the roughly two-thirds of them who live within 40 miles of a base or installation.

RETIREMENT CONTROVERSY

Jim Talent, the former Republican senator from Missouri, and Mackenzie Eaglen, a national security analyst at the conservative think tank American Enterprise Institute, support the fee changes in part because they would help control rising military personnel costs.

"There are three reasons why the Senate approach is a needed reform," they wrote in a July 29 op-ed for The Hill newspaper. "First, it discourages overutilization, a classic purpose of copays. Next, this modest cost sharing encourages retirees to get generic drugs through the mail or go to an installation --saving both them and the government money. Finally, the funds raised by the increased copays are a revenue source for the new retirement savings accounts created in both versions of the bill."

Yet this last point is sure to draw fire from veterans' advocates. They'll likely argue that military members who served 20 years or more shouldn't be on the hook for helping to fund a retirement savings account designed for troops who may only spend a fraction of the time in service.

Both the House and the Senate voted to support overhauling the military retirement system by offering troops a 401(K)-like plan with matching contributions and full vesting after just two years. Yet the chambers disagreed over how retiring troops could elect to receive a lump-sum payment.

CONGRESS ADJOURNS

The House on Wednesday adjourned for a five-week summer recess, meaning negotiations on the defense bill won't likely resume until September. The legislation, called the National Defense Authorization Act, is a massive bill that sets policy goals and spending targets for the year.

The Defense Department proposed limited pay raises for troops over the next five years, even though Congress sets the rate each year as part of the budget process. The spending plan calls for a raise of 1.3 percent in fiscal 2016 and 2017, 1.5 percent in fiscal 2018 and 2019, and 1.8 percent in 2020.

The Pentagon spending plan would also slow the growth of basic allowances for housing (BAH) by another 4 percent over the next two to three years, in addition to the 1 percent approved for this year. Therefore, service members would eventually pay an average of 5 percent of the costs.

But more so than the other recommended personnel changes, the pharmacy co-pays became a sticking point in congressional deliberations.

--Brendan McGarry can be reached at brendan.mcgarry@military.com