Mandatory Spending

Function 550 - Health

Introduce Minimum Out-of-Pocket Requirements in TRICARE for Life

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2023–
Change in Outlays                        
  MERHCF 0 0.1 0.1 -1.8 -2.9 -3.1 -3.3 -3.5 -3.7 -3.8 -4.5 -21.9
  Medicare   0   0   0   -0.5   -1.3   -1.6   -1.7   -1.8   -1.9   -1.9   -1.8   -10.7
    Total 0 0.1 0.1 -2.3 -4.2 -4.7 -5.0 -5.3 -5.6 -5.7 -6.3 -32.6

This option would take effect in January 2026, although some changes to outlays would occur earlier.

MERHCF = Department of Defense Medicare-Eligible Retiree Health Care Fund.

TRICARE for Life (TFL) is a supplement to Medicare for military retirees and their Medicare-eligible family members. The program pays nearly all medical costs not covered by Medicare and requires few out-of-pocket fees.

This option would introduce minimum out-of-pocket requirements for TFL beneficiaries. For calendar year 2026, TFL would not cover any of the first $850 of an enrollee's cost-sharing payments (those for which enrollees are responsible when they receive health care) under Medicare and would cover only 50 percent of the next $7,650 in such payments. Because all further costs would be covered by TFL, enrollees would not be obligated to pay more than $4,675 in 2026. Thereafter, those dollar limits would be indexed to grow at the same rate as average Medicare costs (excluding Part D drug benefits). To reduce beneficiaries' incentive to avoid out-of-pocket costs by switching to military facilities (which currently charge no copayments for hospital services provided to TFL beneficiaries), this option would also require TFL beneficiaries seeking care from those facilities to make payments roughly comparable to the charges they would face at civilian facilities. This option would reduce spending for Medicare as well as for TFL because higher out-of-pocket costs would lead beneficiaries to use fewer medical services.