Presentation by Carla Tighe Murray, CBO Analyst, at the Western Economic Association Conference

1. Congressional Budget Office
Approaches to Reduce Federal Spending
on the Defense Health System
Presentation at the Western Economic Association Conference
July 1, 2013
Carla Tighe Murray
Senior Analyst, National Security Division

2. 1C O N G R E S S I O N A L B U D G E T O F F I C E
Actual and Projected Costs for Military Health Care as a
Share of DoD’s Budget, 1990 to 2030
Percent
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
0
2
4
6
8
10
12
14
16
Actual Projected
TRICARE
Initiated
FYDP
Projection
TRICARE for Life
Initiated
CBO's Projection
FYDP = DoD’s 2013 Future Years Defense Program

3. 2C O N G R E S S I O N A L B U D G E T O F F I C E
Funding for the Military Health Care System, by Category
(Billions of 2013 dollars)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
0
10
20
30
40
50
60
Pharmaceuticals
Purchased Care and Contracts
Direct Care and Administration
TRICARE for Life Accrual Payments
Military Personnel

4. 3C O N G R E S S I O N A L B U D G E T O F F I C E
TRICARE Beneficiaries Pay Less Out-of-Pocket for
Their Health Care
■ Share of health care costs for a military retiree family
of working age (<65) has fallen
– 27 percent of the total cost of care in 1996, when TRICARE was first
fully implemented
– 11 percent in 2012
■ In 2012, retiree families paid less than one-fifth as much for
their care as civilian counterparts with employment-based
insurance

5. 4C O N G R E S S I O N A L B U D G E T O F F I C E
Costs for Military Retiree Families Under TRICARE Plans and for
Civilian Counterparts with Employment-Based Insurance, 2012
(Dollars)
Premium or
Enrollment Fee
Deductibles and
Copayments
Total Annual
Out-of-Pocket Costs
TRICARE Prime 520 445 965
Civilian HMO 5,080 1,000 6,080
TRICARE as a Percentage of the
Civilian Plan 16%
TRICARE Standard or Extra 0 1,035 1,035
Civilian PPO 4,270 1,295 5,565
TRICARE as a Percentage of the
Civilian Plan 19%

6. 5C O N G R E S S I O N A L B U D G E T O F F I C E
Options for Slowing the Growth of Health Care Costs
■ Cost-sharing Options
– Increase fees, copayments,
and deductibles for military
retirees and families
– Prevent military retirees and
families from enrolling in
TRICARE Prime but allow
access to Standard/Extra for
an annual fee
– Introduce minimum out-of-
pocket costs to Tricare for Life
for Medicare-eligible retirees
and families
■ Other Approaches
– Expand disease management
programs
– Expand scholarships and close
the Uniformed Services
University of the Health
Sciences (USUHS)
– Hire additional auditors to
combat fraud
– Combine the military
departments’ medical
establishments

7. 6C O N G R E S S I O N A L B U D G E T O F F I C E
Estimated Budgetary Effects of TRICARE’s Cost-Sharing
Options, 2014 to 2023
Approach Annual Savings
Increase Cost Sharing for TRICARE Users As much as several billion dollars
Other Approaches
(Disease management, close USUHS,
hire more auditors, or combine medical
establishments) As much as roughly $100 million

8. 7C O N G R E S S I O N A L B U D G E T O F F I C E
Potential for Savings in the Other Approaches
■ Expand disease management programs
– Studies of DoD’s existing program find small to nonexistent savings
■ Expand the use of scholarships and close USUHS
– In 2012, USUHS funding was $190 million for operations and
maintenance and $35 million for military personnel
– Transferring functions means continuing some funding
■ Hire additional auditors
– A cost to the government
■ Combine military medical establishments
– DoD estimated that savings from implementing the Defense Health
Agency could equal $46.5 million per year
– GAO’s assessment was that savings would be lower