From the Congressional Budget Office
TRICARE For Life (TFL) was introduced at the beginning
of fiscal year 2002 as a supplement to Medicare for
military retirees and their family members over age 65.
The wraparound program pays nearly all of its users'
remaining medical costs and carries few out-of-pocket
fees. Because the Department of Defense (DoD) is a passive
payer in the program—it neither manages care nor
provides incentives for cost-conscious use of services—it
has virtually no means to control the program's costs.
This option would help reduce the costs of TFL as well as
for Medicare by introducing small copayments for services
and by increasing copayments for prescription drugs
to match those commonly charged by civilian plans.
Because the program is a wraparound benefit, lawmakers
or DoD would need to establish new rules to ensure that
users paid minimum out-of-pocket charges—for example,
$20 for an office visit or $100 for the first day of a
hospital stay—before coverage would begin.
Introducing such charges would reduce the federal spending
devoted to TFL (including Medicare savings) by
about $1 billion in 2008, by $6.3 billion over the next
five years, and by $16 billion between 2008 and 2017.
Much of those savings would come from reduced
demand for medical services rather than from a transfer
of spending from the government to military retirees and
their families.
Introducing copayments into TFL would increase beneficiaries'
awareness of the cost of health care and promote a
concomitant restraint in the use of medical services.
Research has generally shown that introducing modest
cost sharing can substantially reduce medical expenditures
without causing measurable increases in adverse
health outcomes.
Among its disadvantages, this option could discourage
some patients (particularly low-income patients) from
seeking medical care and thus negatively affect their
health. Beneficiaries who require treatment for chronic
conditions, such as hypertension, might forgo purchasing
necessary drugs. Some recent research indicates that rapid
increases in copayments can lead to significant reductions
in beneficiaries' use of prescription medicines.
TRICARE For Life (TFL) was introduced at the beginning
of fiscal year 2002 as a supplement to Medicare for
military retirees and their family members over age 65.
The wraparound program pays nearly all of its users'
remaining medical costs and carries few out-of-pocket
fees. Because the Department of Defense (DoD) is a passive
payer in the program—it neither manages care nor
provides incentives for cost-conscious use of services—it
has virtually no means to control the program's costs.
This option would help reduce the costs of TFL as well as
for Medicare by introducing small copayments for services
and by increasing copayments for prescription drugs
to match those commonly charged by civilian plans.
Because the program is a wraparound benefit, lawmakers
or DoD would need to establish new rules to ensure that
users paid minimum out-of-pocket charges—for example,
$20 for an office visit or $100 for the first day of a
hospital stay—before coverage would begin.
Introducing such charges would reduce the federal spending
devoted to TFL (including Medicare savings) by
about $1 billion in 2008, by $6.3 billion over the next
five years, and by $16 billion between 2008 and 2017.
Much of those savings would come from reduced
demand for medical services rather than from a transfer
of spending from the government to military retirees and
their families.
Introducing copayments into TFL would increase beneficiaries'
awareness of the cost of health care and promote a
concomitant restraint in the use of medical services.
Research has generally shown that introducing modest
cost sharing can substantially reduce medical expenditures
without causing measurable increases in adverse
health outcomes.
Among its disadvantages, this option could discourage
some patients (particularly low-income patients) from
seeking medical care and thus negatively affect their
health. Beneficiaries who require treatment for chronic
conditions, such as hypertension, might forgo purchasing
necessary drugs. Some recent research indicates that rapid
increases in copayments can lead to significant reductions
in beneficiaries' use of prescription medicines.
