The Effects of Proposals to Increase Cost Sharing in TRICARE

June 5, 2009

With the growth of health care costs outstripping the rate of growth of the economy, many policymakers worry that the current TRICARE program—which provides health care for the uniformed services, military retirees, and their families—will become unaffordable in the future. In its budget submissions for 2007, 2008, and 2009, the Department of Defense (DoD) proposed that the enrollment fees, deductibles, and copayments of some TRICARE beneficiaries be increased to encourage more efficient use of the system and to reduce medical spending. The President’s budget request for fiscal year 2010 did not include a similar proposal, but the issue of how to address the military’s growing health care costs remains unresolved.

At the request of the Ranking Member of the Senate Budget Committee, CBO examined the potential effects of increased cost sharing in the TRICARE program. As a basis for its analysis, CBO used DoD’s most recent proposal—the President’s budget request for fiscal year 2009—and the recommendations of the Task Force on the Future of Military Health Care, issued in December 2007. CBO found that the higher out-of-pocket costs that DoD proposed reflected the growth seen in civilian health care spending. In addition, CBO determined that, on the basis of currently available research, DoD had used reasonable assumptions about the responses of TRICARE beneficiaries to some of the proposed changes but that those responses might actually be stronger, leading to larger reductions in spending than DoD had estimated. CBO also found, however, that DoD’s estimates did not include the possible effects that increased cost sharing for TRICARE might have on other federal programs (such as Medicaid and the Federal Employees Health Benefits program) and on federal revenues. Those effects would reduce, though only modestly, the potential savings to be realized from increasing TRICARE beneficiaries’ costs.