Military Health Care: The Issue of "Promised" Benefits
Released: 2006-01-19T00:00:00

Introduction

In recent years, numerous efforts have been made to increase, or prevent any decrease, ofhealth care benefits and options available to military retirees. Many military retirees and othersseeking these increases, or attempting to prevent any decrease in their benefits, often argue theirclaims based on assertions that the medical care promised to them is no longer available. (1) These retirees say that therelatively large military medical infrastructure that existed during the cold war provided greateraccess for retirees. They note that as a result of the reduction of the size of the Department ofDefense (DOD), fewer DOD medical facilities are available. (2) In certain instances,organizations representing military retirees have alluded to broken promises. Some individuals havestated that the promised benefits included what they term "free" health care for life; others describethe promise as "free care for life in military health care facilities."

Congressional report language and recent court decisions based on a review of the legislativehistory of the statutory language related to military health care for retirees and dependents have notsupported these assertions. These arguments also have not been supported by authoritative writtendocumentation.

In apparent response, a number of bills have been introduced seeking to expand militaryhealth care options. In the 108th Congress, at least two of these bills ( H.R. 58 and S. 56 ) cite a "promise" or "commitment" as the rationale for provisions that would"restore health care coverage to retired members of the uniformed services." (3) More recently, H.R. 602 and S. 407 , "Keep Our Promises to America's Military RetireesAct," were introduced in the 109th Congress. These have attracted a relatively large number ofco-sponsors. (These bills are discussed in more detail in the "Recent Legislation" section of thisreport.) Although previous attempts to pass such legislation have failed, Congress substantiallyexpanded the military retiree health care benefits via the FY2001 National Defense AuthorizationAct. (4)

Background

Under current law, active duty personnel are entitled to military health care and have a rightor claim to this care. Active duty dependents are also entitled to this care, however, this entitlementis limited to space or service availability restrictions. Such an entitlement obligates the military toprovide this care (subject to any stated restrictions such as space-availability for active dutydependents). As implemented by the Department of Defense, and interpreted by the courts, retireesand their dependents , while eligible for care on a space- or service-available basis, have no statutoryentitlement to such care, thereby taking the position that the military services have full discretiondetermining when and under what circumstances retirees and their dependents will receive care frommilitary treatment facilities or MTFs. Historically, those dependents and retirees (under age 65) whoare unable to get care at MTFs can seek care via civilian providers under DOD's Tricare benefit planor Medicare, if eligible.

Tricare is the name of the health benefit plan for all military beneficiaries. Tricare iscomposed of three types of coverage: Prime, Extra and Standard. Tricare Prime is comparable toa Health Maintenance Organization (HMO) using the MTF as the base of health care services. Tricare Extra is similar to a Preferred Provider Organization or PPO. Finally, Tricare Standard isa fee-for-service plan (formerly known as the Civilian Health and Medical Program of theUniformed Services, (CHAMPUS (5) )). Active duty personnel and their dependents are automaticallyenrolled in Tricare Prime. Retirees (under age 65) and their dependents must enroll in Tricare Primeor seek care via Tricare Extra or Standard. Until recently, at age 65, retirees lose eligibility forTricare and become eligible for Medicare benefits. Thus, military service provides lifetime carefrom a number of government-sponsored or reimbursable sources. (6)

With the passage of the FY2001 National Defense Authorization Act, beginning in October2001, eligible military retirees over age 64 were allowed to participate in Tricare provided that theyare enrolled in Medicare Part B. This new benefit is known as "Tricare for Life."

"The Promise"

The creation of health care benefits and the rules and regulations pertaining to these benefitare within the authority of Congress. Under the Constitution, Congress has the authority

To make Rules for the Government and Regulation ofthe land and naval Forces. (7)

Without explicit authorization from Congress, such benefits can not be created nor conferred by themilitary or others. Searches of the relevant literature and legislative history do not reveal acongressional authorization for "free health care for life at military facilities" for military retirees. Some have asserted that prior to 1956, the lack of legal language to the contrary allowed the militaryto be contractually obliged to provide "promised" care. However, under our system of government,the military does not have the constitutional authority to create such a contractual obligation. Thecourts (as discussed below on pages 5, 6, and 7) have held that only Congress has such authorityunder the Constitution.

The history of military health care shows that care provided to active duty members wasoriginally paid for by the members as far back as 1799. (8) In that year, Congress enacted legislation for the militaryestablishment to care for the "regimental sick" as well as an act for the "relief of sick and disabledseamen." (9) Later changesprovided permissive care to dependents and, later still, to retirees and their dependents. However,at no time were military retirees provided an entitlement to care. In 1956, Congress put thepermissive nature of this benefit into law:

... a member or former member of a uniformed servicewho is entitled to retired or retainer pay, or equivalent pay may , upon request, be given medical anddental care in any facility of any uniformed service, subject to the availability of space and facilitiesand the capabilities of the medical and dental staff . (10) [Emphasis added.]

In 1966, Congress created Medicare which was designed to provide health care for peopleover age 65 as well as certain disabled individuals. A problem arose in that military personneltended to retire at a relatively younger age (in most cases, early- to mid-40s) and could be withoutguaranteed access to health care until age 65. In other words, these retirees were not entitled tomilitary health care and were too young to participate in Medicare. In an effort to address thisinability to gain access, as well as provide for those active duty dependents who could not gainaccess to military medical facilities, Congress created the Civilian Health and Medical Program ofthe Uniformed Services (CHAMPUS). Modeled after the Blue Cross/Blue Shield high option,CHAMPUS was a fee-for-service benefit. Although it required no premiums, CHAMPUS didrequire cost sharing on the part of the beneficiary. Thus, CHAMPUS was not free, nor did it relateto care from MTFs. (As noted above, CHAMPUS later became part of Tricare.)

Numerous assertions have been made concerning "promises" to military personnel andretirees with regard to health care benefits. Many appear to believe that they were "promised freehealth care for life at military facilities." Efforts to locate written authoritative documentation ofsuch "promises" have not been successful. However, some military recruiting literature does makegeneral statements about health care. As an example, a recruiting brochure cited by The RetiredOfficers Association states:

Health care is provided to you and your family memberswhile you are in the Army, and for the rest of your life if you serve a minimum of 20 years of Federalservice to earn your retirement. (11)

This language, of course, does not mention "free" health care. Nor does it mention that such careis to be provided via the military health services system and/or in military facilities. This advertisedstatement is correct in that military retirees do receive their promised lifetime benefits via MTFs(including space- or service-available care in retirement), Tricare and Medicare -- all earned as aresult of their federal military service.

The same source quotes a 1991 CRS report as stating that "the 'free health care for life'promise was functionally true and had been used to good advantage for recruiting andretention." (12) The reportis much more nuanced, and developed the analysis more deeply than this. (13) It noted that the 1956legislation did not authorize a legal entitlement for care to be provided to retirees and theirdependents, but that the retiree and dependent population, in proportion to the available space inmilitary health care facilities, was so low that as a practical matter, such care was usually available. It also observed that this de facto availability was, without question, a useful tool for recruiters. Theend result appears to be that, regardless of the lack of statutory entitlement, many active dutypersonnel and their dependents, and retirees and their dependents, erroneously came to believe thatthey were guaranteed free health care in military facilities for life.

Other sources have stated that such promises, whether or not actually made, are groundless. For example, in responding to questions from Congress concerning what benefits were promised,Rear Admiral Harold M. Koenig, Deputy Assistant Secretary of Defense for Health Affairs, soughtto clarify a statement made by Vice Admiral Hagen concerning these benefits. Rear Admiral Koenigstated in 1993 that:

There is a problem here of interpretation. [Vice AdmiralDonald Hagen, Medical Corps Surgeon General, U.S. Navy] said medical care for life. That is true. We have a medical care program for the life of our beneficiaries, and it is pretty well defined in thelaw. That easily gets interpreted to, or reinterpreted into, free medical care for the rest of your life. That is a pretty easy transition for people to make in their thinking, and it is pervasive. We spendan incredible amount of effort trying to reeducate people that that is not their benefit. (14)

According to the Department of Defense, "[a]s thus formulated, medical care for retirees inmilitary medical facilities has always been, and to this day remains, a privilege, not an absolute right,as has been assumed by many." (15)

The federal courts have repeatedly held that such claims of a "promise" have no legalstanding. In late 1997, a U.S. District Court dismissed a lawsuit by retirees against the U.S. seeking"free health care" from the military. According to the court:

The court must reject plaintiffs' contention that [10United States Code sec. 1074(b)] confers authority on the military branches to guarantee free lifetimemedical care to retirees and their dependents. First, plaintiffs cite to no regulation under sec. 1074(b)guaranteeing such care, but only cite to recruiting materials that make general representations as toeligibility for continued health care for retirees and their dependents. Even if the militarydepartments had promulgated regulations under sec.1074(b) that make an unequivocal promise oflifetime medical care for retirees and their dependents, the language of sec. 1074(b) itself is clearlyconditional. Any regulations purporting to guarantee free and unconditional lifetime health care toretirees and their dependents would be inconsistent with the statute and therefore invalid. Larionoff ,431 U.S. at 873 n.13 ("A regulation which ... operates to create a rule out of harmony with the statute... is a mere nullity.") (citing Manhatten General Equip. Co. V. Commissioner , 297 U.S. 129, 134(1936)).

Furthermore, under sec. 1074(b), "a retired member ofa uniformed service is not entitled to medical care as a matter of right," Lord v. United States , 2 Cl.Ct. 749, 756 (1983), and "retired personnel who fail to receive such care cannot successfullymaintain an action for money damages based on such failure." Id . At 757; see also Watt v. UnitedStates , 246 F. Supp. 386, 388 (E.D.N.Y. 1965 ) ("furnishing [medical care in a military facility] toa retired soldier is discretionary, not mandatory"). Because the law states that retirees are not entitledto health care as a matter of right, the representations upon which plaintiffs rely are to no effect. (16)

With respect to the contention that recruiters and others allegedly made "promises of free carefor life," and that such "promises" must be honored by the government, the court notes:

Federal officials who by act or word generateexpectations in the people they employ, and then disappoint them, do not ipso facto create a contractliability running from the Federal Government to the employee .... (17)

In a separate case (Schism and Reinlie v. U.S.), another federal judge found military "retirees65 and older do not have a binding contract with the Pentagon that guarantees them free health carefor life at military hospitals." (18)

In 1999, a federal appeals court stated:

Nothing in these regulations provided for unconditionallifetime free medical care or authorized recruiters to promise such care as an inducement to joiningor continuing in the armed forces. While the Retirees argue that the above mentioned section 4132.1gave those of them who served as officers in the Navy and Marine Corps the right to freeunconditional medical care, we cannot agree. The [1922 Manual of the Medical Department of theUnited States Navy] Manual provided guidelines for the Navy's Medical Department, but did notcreate any right in such officers to the free unconditional lifetime medical care they claim. It relatedonly to hospital care, not the broader services that these Retirees seek, and covered only the periodwhen it was in effect. In any event, in view of the general pattern of the military regulations thatprovides medical care to retirees only when facilities and personnel were available, we decline toread into the creation of such an enduring and broad right to unconditional free lifetime medicalcare.

In sum, we conclude that the Retirees have notshown that they have a right to the health care they say was "taken" by the government. Since thebasic premise of their claim fails, their taking claim necessarily also fails. (19)

On December 8, 1999, the Coalition of Retired Military Veterans appealed their case to theSupreme Court. (20) TheSupreme Court denied the petition to review the lower court ruling on April 17, 2000. (21)

On February 8, 2001, the U.S. Court of Appeals for the Federal Circuit reversed the lowercourt ruling (Schism and Reinlie v. U.S.) declaring "... the government breached its implied-in-factcontract with retirees when it failed to provide them with health care benefits." (22) The appeals court reversedthe district court decision and remanded the case for a determination of damages. Despite variousclaims, this finding applied only to the two named plaintiffs (and not to all military retirees), and nodetermination of damages was made. (Some have erroneously reported that the ruling "would haverequired the government to pay to three million retirees, widows and dependents up to $10,000apiece." (23) ) On June13, 2001, the Appeals Court vacated the judgment, withdrew its opinion, and agreed to rehear theappeal en banc. As stated "[t]he court has determined to rehear this case en banc to resolve thequestion of whether the promises of free lifetime care made to and accepted by Plaintiffs-Appellantsshould be afforded binding effect." (24)

On November 18, 2002, the U.S. Court of Appeals (voting 9-4) stated:

In the end, because no actual authority existed for therecruiters' promises of full free lifetime medical care, the plaintiffs cannot show a validimplied-in-fact contract. Thus, the plaintiffs' claim must fail as a matter of law. (25)

On June 2, 2003, the Supreme Court denied the petition to review this case as well. (26)

The claim of "free" or "promised" care is often reported in the media or by lobbying groups. Some media sources have contradicted the notion of free health care for life. (27) Conversely, others appearto accept or support the existence of such "promises." Although these sources have no legalauthority to effect such claims, their repetition of these so-called promises may serve to create orreinforce the notion of the existence of such "promises." (28)

Notably, certain former recruiters claim to have made such promises. They may well have. Nevertheless, as pointed out above, unauthorized promises based on mistakes, fraud, etc., do notconstitute a contractual obligation on the part of the government/taxpayer.

In a different vein, others suggest that although no such legal entitlement exists, a moral obligation or an obligation based on popular opinion is sufficiently compelling to make such apromise a reality. For example, Hon. Stephen Joseph, former Assistant Secretary of Defense (HealthAffairs) stated before a congressional subcommittee in 1995:

The lawyers will tell you that there is no fine print thatsays free medical care guaranteed for life. I think though it is facetious for anybody to sit up hereand say that, that is not what recruits believe when they are talked to by their recruiter. That is a factof life. (29)

Whether there is or should be a moral obligation is a matter of opinion; as decided by the courts andenforced by the administrators, these claims, like the others, do not create a contractual obligationon the part of the government/taxpayer. The courts, and other analysts, have noted that allowingthese claims to create such an obligation would thwart the constitutional role of Congress (i.e.,prevent the Congress from determining the compensation and benefits of the armed forces) andcreate a situation wherein military personnel/retirees (and potentially all other federal employees)could create or expand their own benefits with popular myth or rumor and without review.

Despite extensive documentation, including court decisions, to the contrary, the belief inlegally guaranteed "free lifetime care" persists, (30) and such claims continue color debate over the availability ofthese and other military health care benefits. (31)

Recent Legislation

Though Congress has never authorized "free health care for life at military facilities," variouscongressional reports have commented on the issue, and there have been recent legislative actionson the subject. For example, the Senate, explaining its support of additional benefits for militaryretirees, included non-binding language in its report on the FY1998 National Defense AuthorizationAct that reiterated its intention with regard to the promise of lifetime care:

A longstanding priority of the committee hasbeen the improvement of the military health care system ....

[T]he committee is concerned that theDepartment of Defense (DOD) faces significant constraints on its ability to meet the entire range ofbenefits expected by participants in the Military Health Service System....

The issue of health care for military retirees overage 65 is of special concern to the committee. The nation has incurred a moral obligation to attemptto provide care to military retirees who believe they were promised lifetime health care in exchangefor a lifetime of military service. The nation fulfills its obligation through Medicare. (32)

This language expresses the view that a "promise" to military retirees was made -- and that existingstatutes and institutions do fulfill that promise.

Later, with the enactment of the FY1998 National Defense Authorization Act, Congressincluded the following language:

SEC. 752. SENSE OF CONGRESS REGARDING QUALITY HEALTH CARE FORRETIREES

(a) Findings.-Congress makes the follow findings:

(1) Many retired military personnel believe that they were promised lifetime heathcare in exchange for 20 or more years of service.

(2) Military retirees are the only Federal Government personnel who have beenprevented from using their employer-provided health care at or after 65 years of age.

(3) Military health care has become increasingly difficult to obtain for militaryretirees as the Department of Defense reduces its health care infrastructure.

(4) Military retirees deserve to have a health care program that is at least comparablewith that of retirees from civilian employment by the Federal Government.

(5) The availability of quality, lifetime health care is a critical recruiting incentive forthe Armed Forces.

(6) Quality health care is a critical aspect of the quality of life of the men and womenserving in the Armed Forces.

(B) SENSE OF THE CONGRESS.- It is the sense of the Congress that-

(1) the United States has incurred a moral obligation to provide health care tomembers and former members of the Armed Forces who are entitled to retired or retainer pay(or its equivalent);

(2) it is, therefore, necessary to provide quality, affordable health care to such retirees;and,

(3) Congress and the President should take steps to address the problems associatedwith the availability of health care for such retirees within two years after the date of theenactment of this Act. (33)

Although this language is also non-binding, it does give a sense of the rationale behind creatingadditional benefits for retirees. (34)

Some in Congress would like to go further in clarifying the issue. On August 6, 1998,Representative Jo Ann Emerson introduced legislation that would have established a "Medicareeligible military retiree health care consensus task force." Among its proposed duties, this task forcewould conduct "a comprehensive legal and factual study of ... [p]romises, commitments, orrepresentations made to members of the Uniformed Service by Department of Defense personnelwith respect to health care coverage of such members and their families after separation from theUniformed Services." (35) The twelve-member task force (including representatives of military retiree organizations) woulddetermine what had been promised to military members and to what extent these promises werebinding. This legislation was reintroduced in the 107th and 108th Congresses. (36)

One reported response to this proposed legislation by an unidentified representative of amilitary retiree organization was somewhat muted, suggesting that "... we are really beyond the pointof looking at broken promises. We are at the stage now where Congress knows something has tobe done and is just trying to decide what to do." (37) The legislation was referred to committee but was not reportedout of committee prior to adjournment.

As noted above, H.R. 58 and S. 56 were introduced on January 7,2003. Among their provisions, H.R. 58 and S. 56 seek to expand military retireehealth care options to include access to the Federal Employees Health Benefits Program. In offeringthese benefits, these bills present a number of "findings" (some of which appear inconsistent withthe official history of military medical care). For example, H.R. 58 and S. 56find that:

Statutes enacted in 1956 entitled those who enteredservice on or after June 7, 1956, and retired after serving a minimum of 20 years or by reason of aservice-connected disability, to medical and dental care in any facility of the uniformed services,subject to the availability of space and facilities and the capabilities of the medical and dentalstaff.

In contrast, the Department of Defense has always maintained that military retiree health care is, andalways has been, permissive in nature and therefore not an entitlement. These bills were updated andreintroduced as H.R. 3474 and S. 2065 in the 108th Congress.

As noted above, although none of these bills was enacted, Congress substantially expandedthe health care benefits available to military retirees via the FY2001 National Defense AuthorizationAct. Among its provisions, this legislation provides an enhanced pharmacy benefit and, with certainrestrictions, it extends Tricare coverage to those age 65 and older (known as "Tricare for Life"). Foradditional information, see CRS Issue Brief IB93103, Military Medical Care Services: Questionsand Answers , by Richard Best, updated regularly.

On February 2, 2005, H.R. 602 was introduced in the House of Representatives. Two weeks later, on February 16, 2005, an identical bill, S. 407 , was introduced in theSenate. (38) These 109thCongress bills are nearly identical to H.R. 3474 / S. 2065 , introduced in the108th Congress. These latter bills have secured a relatively large number of co-sponsors (236 in theHouse and 11 in the Senate). Opponents of this legislation, however, have maintained that some ofthe bills' findings and provisions are inconsistent with the official history of military health care. H.R. 602/S. 407 are discussed below on a section-by-section basis. Many of thearguments considered above are analyzed in the context of these proposals.

Section 1 of H.R. 602 / S. 407 provides a title for this bill. The shorttitle is "Keep Our Promises to America's Military Retirees Act."

Section 2 provides "Findings." Each Finding is considered separately. The first "Finding"states that "No statutory health care program existed for members of the uniformed services whoentered service prior to December 7, 1956, and retired after serving a minimum of 20 years." Bothproponents and opponents note that Congress had appropriated funds to afford nonactive dutymilitary medical benefits for many years prior to 1956 with the knowledge that the system providedcare, albeit of a permissive nature, to retirees. As noted earlier, on June 7, 1956, P.L. 84-569,became law. This law provided for the first time that the dependents of active duty personnel wouldbe entitled to care in a military facility, subject to space- and service-availability restrictions. Inaddition, the law authorized care in civilian facilities for the dependents of active duty personnel. "In the final passage a House provision which would allow similar care for retired members and theirdependents was rejected." (39) Instead, this law authorized space- and service-availablediscretionary health care at military medical facilities for military retirees and their dependents, thusputting into statute the previous policy of permissive care for retirees and their dependents.

The second Finding states "Recruiters, re-enlistment counselors, and officers at all levels ofthe uniformed services, and other government officials, as agents of the United States Government,used recruiting tactics that allowed members who entered the uniformed services prior to December7, 1956, to believe they would be entitled to fully paid lifetime health care upon retirement." Priorto June 7, 1956 there was no legal authority to make such promises. Opponents of H.R. 602 and S. 407 argue that with the passage of P.L. 84-569, any promises beyond thoseafforded in law were unsustainable.

Third, the Findings note the decision delivered in the case of Schism v. United States (40) by the United States Courtof Appeals for the Federal Circuit rejecting the retirees' claims.

In the United States Court of Appeals for theFederal Circuit decision of 2002, in Schism v. United States (No. 99-1402), the Court said: 'Accordingly, we must affirm the district court's judgment and can do no more than hope Congresswill make good on the promises recruiters made in good faith to plaintiffs and others of the WorldWar II and Korean War era -- from 1941 to 1956, when Congress enacted its first health careinsurance act for military members, excluding older retirees.... We cannot readily imagine moresympathetic plaintiffs than the retired officers of the World War II and Korean War era involved inthis case. They served their country for at least 20 years with the understanding that when they retiredthey and their dependents would receive full free health care for life. The promise of such health carewas made in good faith and relied upon. Again, however, because no authority existed to make suchpromises in the first place, and because Congress has never ratified or acquiesced to this promise,we have no alternative but to uphold the judgment against the retirees' breach-of-contract claim.... Perhaps Congress will consider using its legal power to address the moral claims raised by Schismand Reinlie on their own behalf, and indirectly for other affectedretirees.'.

This language appears to accept the retirees' claims that an understanding existed that Schismand his dependents "would receive full free health care for life." Lawyers representing Schismargued to the court that Schism was promised "free lifetime care at military facilities." Underquestioning, government lawyers were asked if "promises were made." In response, the governmentlawyers affirmed that "promises were made." However, the government lawyers did not affirm thatthe specific promise of "free lifetime care at military facilities" was made. Recruiting and otherofficial literature promises lifetime care based on a military career, but a review of the literatureindicates that it did not promise that retirees were entitled to " free " lifetime care " at militaryfacilities. " The court in the Schism case and other courts have rejected this type of retiree claim, notbased on the existence, or lack thereof of any such specific promise of "free lifetime care at militaryfacilities," but rather based on the lack of authority on the part of such individuals to make any suchbinding promises.

The fourth Finding indicates "Only the United States Congress can make good on thepromises recruiters made in good faith to plaintiffs and others of the World War II and Korean Warera." This finding reflects the fact that under the Constitution, (41) Congress has the power"To make Rules for the Government and Regulation of the land and naval Forces"and thereby toafford military retirees the benefits they seek. Implicitly acknowledged here is the fact that any suchpromise of benefits without this congressional authority does not create a contractual obligation onthe part of the Federal government.

The fifth Finding states "Statutes enacted in 1956 allowed those who entered service on orafter December 7, 1956, and retired after serving a minimum of 20 years or by reason of aservice-connected disability to medical and dental care in any facility of the uniformed services,subject to the availability of space and facilities and the capabilities of the medical and dental staff." The June 7, 1956 statute officially put into law the space- and service-available provisions that hadexisted prior to that date for all eligible retirees, service-connected disabilities notwithstanding.

The sixth Finding indicates "Recruiters, re-enlistment counselors, and officers at all levelsof the uniformed services, and other government officials, as agents of the United StatesGovernment, continued to allow members who entered the uniformed services to believe they wouldbe entitled to fully paid lifetime health care upon retirement, despite enactment of statutes in 1956,subsequent statutes, and the issuance of regulations that defined and limited the availability ofmedical care to retired members of the uniformed services." Opponents counter that recruitingbrochures and other documents produced by the plaintiffs in the above mentioned cases do notpromise "fully paid" or "free lifetime" medical benefits at military facilities.

The seventh Finding states "After 4 rounds of base closures between 1988 and 1995 andfurther drawdowns of remaining military medical treatment facilities, access to `space available'health care in a military medical treatment facility is difficult or virtually nonexistent for manymilitary retirees." Critics and proponents of the proposed legislation note that there is no doubt thatwith the reduction in the number of facilities available, the amount of space-available health care formilitary retirees decreased. However, critics point out that that is not to say that these retirees werecompletely denied care (see footnote 1). Additionally, they note that under law military retireesremain eligible for other government-sponsored health care benefits including TRICARE, TRICAREfor Life, Medicare and Veterans Affairs benefits, all earned as a result of military service.

Eighth, "The failure to provide adequate health care upon retirement is preventing the retiredmembers of the uniformed services from recommending, without reservation, that young men andwomen make a career of any military service." Critics, however, are likely to note that militaryrecruitment remained robust until early 2005, despite the hazards posed by Operations Iraqi Freedom(OIF) and Operation Enduring Freedom (OEF), and most analysts view recruiting difficultiesencountered by the Army beginning in January 2005 as related to these post-9/11 wars rather thanabout compensation and benefits. Critics counter there is little if any indication that young peopleconsidering joining the armed forces are focused on retirement benefits, particularly retirementhealth care benefits, decades into the future. From their perspective, such concerns might ultimatelyaffect career retention -- but career retention has been at or substantially above goals since 9/11.

Ninth, "Although provisions in the Floyd D. Spence National Defense Authorization Act forFiscal Year 2001 (42) extended coverage under the TRICARE program to medicare eligible military retirees age 65 andolder, those provisions did not address the health care needs of military retirees under the age of 65." Proponents and critics note that the provisions of Public Law 106-398 expanded health care coveragefor Medicare-eligible retirees. Some have claimed that these are the most generous health carebenefits offered by the Federal government. They assert that this law did not decrease any benefitsfor those retirees who are under age 65 which are already established in law.

Tenth, "The United States should make good on the promises recruiters made in good faithin the World War II and Korean War era and reestablish high quality health care for all retiredmembers of the uniformed services." Critics are likely to argue that this Finding suggests that thequality of health care previously available to retirees has since been diminished and maintain thathealth care benefits have significantly increased in recent decades. From their perspective, theUnited States has made good on those benefits afforded military retirees under law.

Section 3 of this legislation is entitled "Coverage of Military Retirees Under the FederalEmployees Health Benefits Program." As written, H.R. 602 / S. 407 wouldprovide all military members and retirees with access to FEHBP in the following manner.

Section 3 of the bill would amend section 1108 of title 10 United States Code, whichcurrently describes a now-expired demonstration project. The Secretary of Defense (in consultationwith the Secretaries of other relevant departments) was authorized to enter an agreement with OPMto enroll up to 66,000 eligible beneficiaries in the Federal Employees Health Benefits Program(FEHBP) for a three-year period. The bill essentially proposes to broaden this program to all"eligible beneficiaries" effective October 1, 2005.

Under the bill, "eligible beneficiaries" would include

a member or former member of the uniformed services entitled to retired orretainer pay or equivalent pay. The demonstration project limited eligibility to those members whowere entitled to hospital benefits under Part A of Medicare; this bill does limit the definition in thatfashion. The uniformed services includes not only the armed forces (which includes the Army,Navy, Air Force, Marine Corps and Coast Guard) but also the Commissioned Corps of the NationalOceanic and Atmospheric Administration and of the Public Health Services.

certain unremarried former spouses of members and former members who arenot covered by an employer-sponsored health plan.

dependents of deceased members or of certain former members or of memberswho died on while on active duty for a period of more than 30 days who meet the definition"member of family" for purposes of the FEHBP. The terms "dependent" and "member of family"do not cover all the same individuals. This could potentially create some confusion. While the term"dependent" includes spouses, unremarried widows/widowers, children under 21, children under 23who are full-time students at an approved "institution of higher learning" actually dependent on themember or former member, among others, for purposes of title 10, the term"member of the family"for purposes of title 5 section 8901(5) only includes the spouse, an unremarried dependent childunder 22 years of age (including adopted, recognized natural, step- or foster-child(ren) who actuallylive in a parent-child relationship) or unremarried dependent children incapable ofself-support.

individuals (1) who are dependents of a living member or former member whois, was (at the time of death), or would have been (but for the fact that the member was under 60years of age) entitled to retired or retainer pay (2) who meet the "member of the family" definition. The demonstration project limited eligible beneficiaries to those member or former members whowere entitled to benefits under Part A of Medicare; these bills do limit the definition in thatfashion.

This definition may raise questions about coverage of 21 year old children not enrolled ininstitutions of higher learning. Presumably since children 22 years of age and older enrolled ininstitutions of higher learning are not "family members" for purposes of the Federal health plan, theywould not be covered, even though the current title 10 definition permits coverage of such 22 yearolds.

Under the bill, "eligible beneficiaries" could enroll in a Federal Employees Health BenefitPlan for either self-only or self and family coverage which would include any dependent of themember or former member who is a "family member for purposes of chapter 89 of title 5." Forpurposes of determining eligibility as a family member, chapter 89 of title 5 would be read as if themember or former member was an employee, and the only requirement for eligibility would be thosecontained in the bill.

Under the bill, eligible beneficiaries who enroll in the FEHBP would not be eligible toparticipate in military-provided health care plans such as TRICARE. They could receive care inmilitary medical treatment facilities, but that care would be billed to the FEHBP. Eligiblebeneficiaries could participate in the open season and change plans in the same manner as any otherparticipants in the FEHBP. The government would contribute the same amount toward FEHBPcoverage as if the electing beneficiary were an employee. Premiums for electing beneficiaries wouldbe determined as if they were a separate risk pool. The Department of Defense would be requiredto develop and implement a system to reimburse those participating in the FEHBP for health carecosts which are not paid for under FEHBP but would be paid for under TRICARE Standard.

The idea of extending FEHBP benefits to military retirees is not new. Indeed, ademonstration project to allow military retirees to partake in these benefits was created (see PublicLaw 105-261, October 17, 1998) and ran for three years. Following evaluations by the Departmentof Defense and the then-General Accounting Office, it was reported that relatively few militaryretirees opted for FEHBP coverage. The demonstration project expired on December 31, 2002. (43)

Section 4 is entitled "Reimbursement for TRICARE Pharmacy Benefits at TRICARENetwork Pharmacy Levels to Certain Military Retirees and Dependents in Hardship Cases." Thissection of the bill does not provide for codification of this provision in title 10. It would provide thateligible beneficiaries who have another insurance plan or program that provides primary coveragefor health benefits (presumably the FEHBP, but it is not so limited) who receive certification fromtheir physicians that "due to physical or medical constraints" they do not have access to a TRICAREnetwork pharmacy and who meet criteria specified by the Secretary of Defense could receivereimbursement for pharmacy benefits received from a non-TRICARE network pharmacy in the samemanner and same amount as the Secretary would reimburse such benefits received from a networkpharmacy. This language appears to allow eligible beneficiaries to receive TRICARE pharmacybenefits without participating in TRICARE.

Lastly, section 5 of the bill would amend section 1839 of Social Security Act (44) to provide that the monthlypremium for eligible individuals to participate in Medicare Part B would be $0. That is, forindividuals whose service in the uniformed services began before December 7, 1956 who are entitledto retired or retainer pay, the spouses of those individuals, and widows and widowers of suchindividuals would receive Medicare Part B for free. According to this bill, the fact that this groupof individuals would receive Medicare Part B for free would not raise the premium paid by other PartB participants, and this group of individuals would not be subjected to income-based premiumadjustments in the future. Such a change, however, would arguably increase Federal expenditures. (Part B of Medicare provides for non-hospital physician services). The bill proposes a January 2005effective date for this provision, and would require that the Secretary of Health and Human Servicesprovide rebates to eligible individuals of any premiums paid beginning on or after January 1, 2005.

Section 625 of the Medicare Prescription Drug, Improvement, and Modernization Act of2003, ( P.L. 108-173 ) waived the Part B enrollment penalties for military retirees, age 65 and over,who enrolled in the TRICARE for Life program from 2001-2004, and the Secretary of Health andHuman Services was to provide a rebate for any penalties paid after January 1, 2004. This bill wouldwaive not only the penalties but also the premiums for participating in Part B.

Opponents of the legislation are likely to point out that the recent addition of new benefits,the expansion of the numbers of beneficiaries, and other factors (including the general increase inthe cost of care) have brought about increases in the costs to the government of providing militarymedical care, in general, and for retirees, in particular. According to a recent article in the New YorkTimes,

The cost of the main health care plan, has doubled since2001 and will soon reach $50 billion a year, more than a tenth of the Pentagon's budget. At least 75percent of the benefits will go to veterans and retirees. Over the next decade, a new plan for militaryretirees, TRICARE for Life, will cost at least $100 billion, according to confidential budgetdocuments, rivaling the costs of the biggest weapons systems the Pentagon is building.... ThePentagon, said William Winkenwerder Jr., the assistant secretary of defense for health affairs, faces"a growing, and serious, long-term problem." (45)

Efforts appear to be underway to raise Tricare fees and copayments over the next few yearsfor retirees under the age of 65 and their families. At issue is what some see as rising medical costsbecoming a readiness concern:

In spite of our efforts to manage more efficiently, total spending for theMilitary Health System, including Retiree Accrual Fund, will reach $37 billion in2005. Spending has essentially doubled in just the past four years! Our programgrowth is very rapid. Additionally, if current trends continue, over 75 to 80 percentof that spending will be for individuals no longer on active duty or their familymembers. The expansion of Tricare for Life, contributes to the growing size of ourbudget, as do other program elements. For example, our total pharmacy program hasincreased five-fold, that's 500 percent since 2001 and now stands at over $5billion. (46)

In an effort to control this growth in costs, it has been reported that the Department ofDefense is considering raising out-of-pocket costs for many of its beneficiaries:

...[D]efense officials want annual enrollment fees for Tricare Prime, the military'smanaged-care plan, to more than triple by October 2008 for working-age retired officers. They would go from $230 for an individual - and $460 for family coverage - to $750 and$1,500, respectively. The fees would double - to $450 and $900, respectively - for under-65enlisted retirees. Retirees who use Tricare Standard, the military's traditional fee-for-servicehealth insurance, would also see their annual deductibles raised. They also would pay - forthe first time - an annual enrollment fee. Beyond 2008, all Tricare fees and co-paymentswould be indexed to medical inflation.... In October, the Congressional Budget Officereleased an updated report on "The Long-Term Implications of Current Defense Plans." Itpresented the kind of kudzu-like cost projections for military health care that have persuadedthe Joint Chiefs of Staff to back [Assistant Secretary of Defense (Health Affairs)]Winkenwerder's plan. By 2024, the office reported, military medical cost will grow "byabout 80 percent in real terms ... from $37 billion in 2006 to $66 billion." That's 37 percentof total budget growth expected across military operations, maintenance and personnelaccounts. And those represent 60 percent of the defense budget. Other than the cost of warand contingency operations, the office reported, the greatest budget risk facing the militaryis health care costs. The report encouraged an increase in fees. But it suggested that a"transformational" set of higher fees and co-payments boost out-of-pocket user costs to thelevel at civilian HMOs. (47)

In addition, the co-payments for many pharmaceuticals, under the above proposal would alsobe increased.

By comparison, the annual cost of Blue Cross/Blue Shield coverage (for example, for a 47 year old individual or family of four, 80 percent coverage, $300 annual deductible, PPO) is $3,168and $8,520, respectively. (48) Even with the above increases, military retirees would still paya fraction of the annual costs that many civilians pay.

The Military Officers Association of America (MOAA), a leading voice in The MilitaryCoalition (49) announced,among its goals for 2006:

oppose health care cost-shifting from the government to militarybeneficiaries.

increase health care access by reducing deterrents to providerparticipation....

remain vigilant in protecting against reductions in Medicare/Tricarereimbursement rates...

eliminate preauthorization and referral hassles and otherinconveniences....

eliminate the 115 percent billing limit when Tricare Standard (CHAMPUS)is the second payer to other health insurance.

reinstate Tricare benefits for remarried widows when the second marriageends.

codify requirements to continue Prime benefits in localities affected by basereduction and closure actions.

extend the Tricare Extended Care Health Option program (for severely disabledfamily members of active duty personnel) eligibility to three years for enrolled family members afterthe death of a servicemember, to allow time for the family to transition to other supportservices.

seek increased funding for mental health and family counseling for deployedfamilies.

In justifying the achievement of the first of these goals MOAA claims that "Shifting healthcosts to beneficiaries ignores that the government has a higher obligation to military people thancivilian employers have to their employees. Unique health and retirement benefits are an essentialoffset to unique arduous service conditions." (50)

On the face of it, many of these MOAA goals would likely increase Federal costs ofproviding military health care and more acutely increase the competition for dollars among Defenseprograms. Given the above, military medical care will remain a topic of congressional considerationin 2006.

Another source of potential increase in Federal spending occurs when those who employmilitary retirees encourage them to remain on Tricare rather then join the employer's sponsoredhealth plan. Traditionally, Tricare is the second payer to other health care. When military retireesare employed, they are often covered by the civilian employer's health plan, thus saving Federalspending on health care. However, certain companies and State governments are encouragingmilitary retirees to remain on Tricare by offering Tricare Supplemental coverage. For example,teachers and other employees in North Carolina have received the following offer:

Under a new law signed by North Carolina Governor Michael F. Easley on July 20, 2004,in lieu of the Teachers' and State Employees' Comprehensive Major Medical Plan eligiblestate employees may elect to instead be covered through the TRICARE Supplemental HealthInsurance.

Eligible employees who choose the TRICARE Supplement drop their employer-sponsoredTeacher's and State Comprehensive Major Medical health plan coverage to enroll in theTRICARE Supplement. The eligible employee may receive full health benefits coveragefrom TRICARE and the TRICARE Supplement (no deductibles, no co-pays, and noout-of-pocket costs). In addition, TRICARE and the TRICARE Supplement are fully portable- meaning the coverage follows the employee if they leave UNC Health Care. (51)

Such arrangements allow states and other employers to minimize their health care costs whileencouraging military retirees to remain under Tricare as their primary providers. This potentiallyrepresents an increase in Federal spending since in the past, military retirees joined the employer'shealth plan and Tricare acted only as a second payer.