Government and You E-News

February 7, 2006

Here’s the News!

1. DoD Budget Request Calls for Targeted Pay Raises for Some, Increased Health Care Costs for Others: The administration released its FY 2007 budget proposal February 6 with a variety of briefings on proposed funding changes. At the Pentagon, officials discussed pay and quality of life proposals, in addition to funding for weapons systems, operations and maintenance, and research. The DoD budget request totals $493 billion. At Monday’s press briefing, DoD Comptroller Tina Jonas stated the administration proposed to increase pay by only 2.2 percent in 2007 (after 3.1 percent this year), which would be the smallest military pay raise since 1994. Military pay raises are based on the Employment Cost Index (ECI), the measure of wage grown in the civilian sector. The DoD budget request would also provide an unspecified targeted pay raise for certain warrant officers and senior enlisted members in mid-2007. The proposal includes $1.9 billion for bonuses and incentives to recruit and retain personnel. It would increase funding available for Basic Allowance for Housing by 5.9 percent. In addition, the budget would provide funding to eliminate the remaining 49,000 inadequate housing units on military installations. It would provide other quality of life investments, including $1.5 billion for the construction of living quarters for unmarried enlisted personnel, new child development centers, and for new educational schools and projects. Details of the exact construction proposed will be released soon.

Ms Jonas also referenced the Department’s proposed changes in health care cost shares for many beneficiaries (see item #2 in this newsletter for details on the specifics). She stated DoD’s goal “is to continue to provide the highest quality care to our military personnel and their family by placing the program on a fiscally sound foundation for the long term.” To accomplish the goal, the budget proposal includes $39 billion in 2007, which is an increase of $2 billion over this year. Ms Jonas discussed in general terms the proposed cost shares for retirees under age 65 and their families and survivors. She also emphasized that the increases would not affect active duty members.

DoD budget materials will be posted at: http://www.dod.mil/comptroller/defbudget/fy2007/index.html.

2. Officials Share Details of Health Care Cost Increase Proposals: As some DoD officials were conducting the press briefing Monday afternoon at the Pentagon on the FY 2007 budget proposal, other officials were briefing military association representatives on the exact details of the proposals affecting out-of-pocket costs paid by military beneficiaries. NMFA’s Chairman of the Board and Chief Executive Officer Tanna Schmidli and Joyce Raezer, Director, Government Relations, attended the briefing hosted by Dr. Stephen Jones, Principal Deputy Assistant Secretary of Defense for Health Affairs, and BG Elder Granger, Deputy Director of the TRICARE Management Activity. These officials shared the rationale for the increased enrollment fees, TRICARE Standard deductibles, and pharmacy co-payments, aimed primarily at the 3.1 million military retirees under age 65, their families, and survivors. Both Dr. Jones and BG Granger emphasized the quality of the benefit and the quality of the beneficiaries, stating the increases were needed to sustain the benefit in the future for those who had earned it. They highlighted recent expansions in the benefit and stated that beneficiary costs needed to be brought in line both with increases in civilian plans and with the original division of costs when TRICARE began. In 1995, they said, beneficiaries paid 27 percent of the total health care costs, but are paying only 12 percent today. They noted there has been no change in TRICARE premiums in the past 10 years, even as the DoD health care budget has doubled in the past 5 years, going from $19 billion in FY 2001 to $38 billion this year. Internal efficiencies, they claimed, are not enough “to stem the tide of rising health care costs.” They stated that beneficiary behaviors also needed to change, but acknowledged the Department needed to give a higher priority to preventive health programs after association representatives noted that preventive health programs such as smoking cessation are not TRICARE benefits.

As part of the FY 2007 budget proposal, DoD is seeking the following changes:
  • Create a three-tier TRICARE Prime enrollment fee system and increase these fees substantially in FY 2007 and FY 2008, before setting future increases to average changes in the Federal Employees Health Benefits Plan (FEHBP). Currently all retirees under the age of 65 pay the same annual enrollment fee for TRICARE Prime: $230 for an individual and $460 for a family.
    • Retired junior enlisted members (E-6 and below) would see Prime enrollment fees increase to $275 for an individual and $550 for a family in FY 2007 and $325 and $650 in FY 2008.
    • Prime enrollment fees for retired senior enlisted (E-7 and above) members would increase to $350 and $700 in FY 2007 and $475 and $950 in FY 2008.
    • For retired officers, Prime enrollment fees would increase to $500 for an individual and $1,000 for a family in FY 2007 and $700 and $1,400 in FY 2008, more than triple the current annual fee.
  • Create a first-time-ever enrollment fee for TRICARE Standard, the basic health care benefit to which military servicemembers, retirees, their families, and survivors are entitled. The annual fee would only be charged to retirees under age 65, their families, and survivors.
    • In FY 2007, retired junior enlisted members in Standard would pay $75 for an individual and $150 for a family. In FY 2008, they would pay $140 and $280.
    • Senior enlisted retirees in Standard would pay $100 for an individual in FY 2007 and $200 for a family and $200 and $400 in FY 2008.
    • Standard enrollment fees for officer retirees would start at $150 and $300 in FY 2007 and rise to $280 and $560 in FY 2008.
  • TRICARE Standard annual deductibles would also increase in two tiers over the next two years from the current $150 for an individual and $300 for a family.
    • For all retired enlisted members, they would rise to $175 and $350 in FY 2007 and $185 and $370 in FY 2008.
    • For retired officers, deductibles would increase to $225 for an individual and $450 for a family in FY 2007 and $280 and $560 in FY 2008 (NMFA note to those of you who are shaking your head in wonder as you’re reading: yes that’s right—under this plan, an officer retiree and family would pay an enrollment fee of $560 and then have to pay out of pocket to meet the $560 deductible before DoD would begin paying anything for the benefit they earned!).
  • Change pharmacy co-payments slightly for all beneficiaries, except active duty servicemembers who pay no co-payments. Medications obtained in military hospitals and clinics would remain free. The co-payment for generic medications obtained through the TRICARE Mail Order Pharmacy (TMOP) would be eliminated (it is currently $3 for a 90-day supply) and the co-payment for brand-name and the third-tier (non-formulary) drugs would remain $9 and $22 for a 90-day supply obtained through the TMOP. The elimination of the mail order co-payment for generic drugs is one way DoD hopes to persuade more beneficiaries to use the TMOP rather than retail pharmacies. Co-payments for generics in the retail pharmacy will increase to $5 for a 30-day supply and $15 for a 30-day supply of a brand-name. The third tier price of $22 would remain the same.

What will remain the same under DoD’s proposal?
  • The catastrophic cap of $1,000 per year for active duty family members and $3,000 for retirees. The catastrophic cap is the maximum out-of-pocket amount beneficiaries must pay in one year for covered costs.
  • TRICARE Prime co-payments for retirees will remain at $12 per medical visit. There are no co-payments under Prime for active duty members and their families.
  • No cost changes for TRICARE for Life beneficiaries other than the increases in retail pharmacy co-pays.
  • No co-pays for medications obtained in military hospital and clinic pharmacies.

DoD will have to seek legislative approval from Congress for what will probably be the most controversial of its proposed changes. While it has the authority to increase TRICARE Prime enrollment fees and pharmacy co-pays, it will need permission from Congress to create the tiered system and institute the TRICARE Standard enrollment fee.

Now that the details of DoD’s proposals are known, NMFA will examine them closely and consult with other military association members of The Military Coalition and with Congressional offices to raise beneficiary concerns. Our initial review of these proposals has left us most concerned about the proposed Standard enrollment fee. We believe the establishment of such a fee destroys the status of TRICARE Standard as an earned benefit and puts it on the same level as any other employer-sponsored insurance plan. Also, officials at the Monday meeting with the association representatives did not have a clear answer to NMFA’s question of what value the Standard beneficiary would receive for their premium other than the “opportunity” to pay a 25 percent cost share (plus an additional 15 percent if seeing a non-participating provider), an increasing deductible, an inpatient hospital cost share of more than $500 per day, and—because of these potential high costs—premiums for a TRICARE supplemental insurance policy.

NMFA will provide more information on actions taken regarding these proposals in future editions of this newsletter.

3. DoD Releases QDR: The Defense Department has unveiled the Quadrennial Defense Review (QDR), charting the way ahead for the next 20 years. The 92-page report, sent to Congress on February 3, was driven, managed, and authored by senior leaders throughout the department. Its release corresponds with that of the fiscal 2007 DoD budget request, sent to Congress on February 6.

The QDR aims to shift military capabilities to fight terrorism and meet other threats, while shaping a defense structure better able to support and speed up this reorientation. It incorporates lessons learned from operational experiences from Iraq and Afghanistan, as well as experience gained in other operations associated with the so-called "long war" against terrorism in places like the Philippines, Horn of Africa, Georgia, and Northern Africa. It promotes more special operations, intelligence gathering, language and cultural capabilities, improved communications and enhanced security-cooperation activities.

The report calls for a transformation in health and health care parallel to other transformation efforts. It acknowledges the Department’s “lifetime relationship with the entire Department of Defense family” and emphasizes the importance of “prevention, wellness and personal choices and responsibility.” It praises the ongoing implementation of DoD’s electronic medical records system. Regarding the health care benefit, the QDR states: “Above all, the Department’s military and civilian senior leaders endorse the need to modernize the TRICARE benefit structure for those customers who are not on Active Duty” in order “to achieve the longest, healthiest lives at the lowest cost.” The report discusses the need to change legislation and rules “to adjust TRICARE cost-sharing features so that they restore the balance Congress created in establishing the TRICARE program in the 1990’s and also to seek authority for Health Savings Accounts.” (p. 73)

The QDR’s limited discussion on what is needed to recruit and train the force focuses on education and training, so that servicemembers have the skill sets them need to meet evolving requirements. The report also discusses the future of the Guard and Reserve, stating the goal that select Guard and Reserve members and units must be more accessible and readily deployable today. The QDR is very much an operational document and so there is scant mention of families in the report other than the statement: “Increasing the adaptability of the Total Force while also reducing stress on military personnel and their families is a top priority for the Department.” (p. 75) Unfortunately, the report does not go into details about how that stress will be reduced. In his “Chairman’s Assessment” of the QDR, General Pace does emphasize the need for a force with enough “depth and critical skills to allow sufficient time for rest and refit between combat assignments.” General Pace also states the importance of “more fully integrating support systems to deliver first class administrative services, supplies, and support programs for our professionals and their families.” The Chairman also emphasizes the importance of providing increased educational opportunities for servicemembers as a part of the quality of life package. (p. A-6).

For more information and to download a copy of the report, go to: http://www.defenselink.mil/qdr/.

4. More Changes Coming to Pharmacy Formulary: DoD recently released the minutes of the December 16, 2005 Uniform Formulary Beneficiary Advisor Panel (BAP) meeting, which highlight the next round of changes to the list of drugs available at certain co-pays for military patients. The BAP reviewed four classes of drugs to include: Alzheimer’s Drugs, Nasal Steroids, Antidepressants (Part 1) and Macrolide/Ketolide Antibiotics. The members of the BAP continued to express their concern to DoD officials that beneficiaries are not receiving timely information on which medications are to move to the third co-pay tier (or non-formulary status). In addition, the entire BAP membership expressed the belief that deployed troops or troops preparing to deploy should be immune from the implementation of any changes, especially for mental health medications such as the antidepressants. NMFA has two members on the BAP, Sydney Hickey who serves as the Chairperson and Debbie Fryar, Deputy Director, Government relations.

The National Defense Authorization Act for Fiscal Year 2000, section 701, mandated that the Secretary of Defense establish a Uniform Formulary Beneficiary Advisory Panel to comment on the recommendations for the uniform formulary made by the DoD Pharmacy and Therapeutics Committee (P&T Committee). Currently, medications are available under one of two co-payment tiers: generic ($3) and brand name ($9). Any drug in a therapeutic class determined to be either not as clinically effective or as cost effective as other drugs in the class may be recommended for placement in the third co-payment or non-formulary tier ($22). Any drug placed into the third tier will still be available to beneficiaries in retail pharmacies or through the TRICARE mail order pharmacy program but at the higher co-payment. Non-formulary tier drugs will not be available in MTF pharmacies unless the prescription was written by an MTF provider and medical necessity for the drug has been established.

The BAP recommendations were forwarded to Dr. William Winkenwerder, Assistant Secretary of Defense for Health Affairs, who made the final decision in early January. To view a chart summarizing the most recent approved formulary changes, go to: DocServer/Pharmacy_Formulary_December_Minutes.pdf?docID=4461. To read more about the Pharmacy and Therapeutics or the BAP click here: www.pec.ha.osd.mil/. You can review the BAP minutes in their entirety, at: www.tricare.osd.mil/pharmacy/BAP/default.htm.

5. Heads Up! Drugs Moving to Third Tier on February 15: On February 15, 2006, several drugs will move to the third co-payment tier of $22 for a 30 day supply at network retail pharmacies and $22 for a 90 day supply through the mail order pharmacy. Third tier drugs are not available at military treatment facility (MTF) pharmacies unless the prescription has been written by an MTF provider and medical necessity is established. The drugs moving to the third tier are:
  • Alpha 1 Blockers (for prostate hypertrophy): Flomax
  • ACE Inhibitor/Diuretic (for high blood pressure): Accuretic, Uniretic
  • ACE Inhibitor (for high blood pressure): Aceon, Accupril, Quinapril, Altace, Univasc

For more information on the Uniform Formulary and drug tiers, go to: http://www.tricare.osd.mil/pharmacy/default.cfm.

6. What’s in Store for the VA in FY 2007? Secretary of Veterans Affairs James Nicholson announced February 6 that President Bush will seek a record $80.6 billion in the fiscal year 2007 budget for the Department of Veterans Affairs (VA). The overwhelming majority of the resources are targeted for health care and disability compensation. The FY 2007 proposal represents an increase of $8.8 billion, or 12.2 percent, above the budget for 2006. The FY ’07 budget proposal calls for $38.5 billion in discretionary funding, mostly for health care. For health care alone, the President’s request is an increase of $3.5 billion (or more than 11 percent) over the FY 2006 level. The budget proposal also would provide $42.1 billion in mandatory funding, mostly for compensation, pension, and other benefit programs.

The budget proposal recycles two provisions from last year. In an effort to help the VA care for those veterans who count on it the most—those with service-connected disabilities—the VA is again asking non-disabled, higher income veterans (Priority 7 and 8 veterans) to pay a $250 annual enrollment fee and higher pharmacy co-payments (from $8 to $15). Priority 7 and 8 veterans were not eligible to receive VA medical care at all, or only on a case-by-case space available basis, until 1999 when new authority allowed VA to enroll them in any year that resource levels permitted. VA officials state these veterans typically have other alternatives for addressing their medical care costs, including third-party health insurance coverage, TRICARE, or Medicare, and thus believe it is acceptable to ask Priority 7 and 8 veterans to assume a modest share of the cost of their care. Secretary Nicholson stated that under no circumstances will a veteran make a co-payment of any kind for the treatment of a service-connected condition.

The FY ’07 budget request is also intended to provide the resources necessary to make servicemembers’ transition from active duty military status to civilian life is as smooth and seamless as possible. Men and women still on active duty should find it easier to access VA benefits when they near the end of their military service because of a program that allows early application for disability claims and other benefits. To read the VA Press Release regarding the budget proposal, go to: http://www1.va.gov/opa/pressrel/PressArtInternet.cfm?id=1075

7. Is a Virtual Career the Right Job for You? Military spouses know that career portability and progression are always a challenge in a military lifestyle. With many spouses moving every two to three years, being “the new person in the office” is not an unfamiliar feeling. Aware of these sacrifices and difficulties military Family Support Centers have teamed up with Staffcentrix, a company that provides training to military spouses in the form of a 14-hour seminar on how to use their computer and business support skills to find home-based jobs.

The seminar, known as The Staffcentrix Portable Career & Virtual Assistant Training Program for Military Spouses™, trains military spouses to build successful businesses that are financially viable, portable, and personally gratifying. Successful candidates are persons who do not require much supervision, are disciplined, “go-getter”, and are able to set their own work schedule and stick to it.

The average daily salary of a virtual assistant can range from $25 to $50 per hour. Virtual employers save on traditional operating costs, employment taxes, and benefits since virtual assistants are independent contractors and are responsible for paying their own employment taxes.

Working as a virtual assistant might not be for everyone, but for those spouses trying to bridge a gap with career progression and a military lifestyle, it is certainly a good start. For further information and a complete list of military installations that have spouse employment professionals on staff who have been certified by Staffcentrix to deliver the program, go to: http://www.msvas.com/MSVATraining.htm

8. Congress Passes Student Loan Relief for Deployed Troops: A bill to provide student loan relief for servicemembers whose college educations were disrupted by deployments to Iraq or Afghanistan has cleared both Houses of Congress and will be sent to the President for signature. A provision of S. 1932, the Deficit Reduction Omnibus Budget Reconciliation Act, passed on February 1 by the House of Representatives, would defer student-loan payments and the accrual of any interest on student loans for troops deployed to Iraq or Afghanistan. Such protection was routinely provided to mobilized reservists before a 1992 overhaul of federal education law eliminated the mandatory deferral of student loan payments. The Military Coalition, a group of 36 military-related associations including NMFA, has been asking Congress to provide student-loan relief, including mandating full refunds of tuition paid by anyone called to military service before they are able to earn the course credits. Refunds are not part of S. 1932, however.

Under the bill, student loan payments can be deferred for up to three years for someone who is mobilized during a war, military operation or other emergency. Mobilization in either federal or state status could qualify a servicemember for deferred payments on loans and interest accrual. While mostly aimed at National Guard and Reserve members, active-duty members temporarily assigned away from their permanent duty station also qualify for the loan deferments. The legislation applies to loans made since July 1, 2001. (Source: http://www.armytimes.com/story.php?f=1-292925-1506966.php)

9. Military-Related Bills Clear Kentucky Senate: The Kentucky Senate recently passed three bills of interest to local military families. Senate Bill (SB) 2, also known as the “Military Families Benefits Bill,” focuses primarily on National Guard and Reserve families, but also has a provision to assist some active duty families. The bill would create a Military Family Assistance Trust Fund. When a Kentuckian is deployed as a member of the regular military outside the United States or a member of the National Guard or Reserve on any federal active duty, the servicemember's family may apply to receive a grant from the trust fund to pay for necessities such as housing, utilities, groceries; health insurance co-pay, and child care.

The Senate also passed SB 47, which would expand to elementary and middle schools what is currently the law for high schools, that one class period be devoted to Veterans Day observances on or near Veterans Day.

Finally, the Senate passed SB 30, which would enable TRICARE-eligible state employees to choose to remain in TRICARE and receive a state-funded TRICARE supplemental insurance policy for themselves and their family members rather than using Kentucky’s public employee health insurance program. This move by the Kentucky Senate is similar to actions by several other states and private employers to encourage military beneficiaries to use TRICARE as their primary insurance rather than using their employer-sponsored insurance. DoD officials cite these actions and the increasing numbers of military retirees opting to remain in TRICARE instead of using their employer-sponsored plans as a major reason for its proposals to increase beneficiary fees and cost shares. (Source: http://news.communitypress.com/apps/pbcs.dll/article?AID=/20060202/EDIT/602020467/1076/Local)

10. Navy MWR Provides Advise to Military Families Going to Asia: Through a new series of interactive CD-ROMs, Navy Morale, Welfare and Recreation (MWR) can now provide Sailors and their families with a sneak peek of what foreign lands, such as Japan and other parts of Asia, have to offer. The CDs contain informative and entertaining videos about quality of life resources. The interactive function allows Sailors and their family members to link directly to websites containing valuable information on travel, culture and other practical topics.

Topics include housing, currency rates and language. Links in the CD-ROM easily direct Sailors to apartment floor plans or convert dollars to yens. To make shopping and traveling less challenging, the CD translates frequently used phrases from English to Japanese. Phrases range from “thank you” to “where’s the restaurant?” On the CDs, Sailors, family members and civilian employees stationed in the selected overseas locations provide comments and recommendations regarding their experiences at duty stations in Asia.

Although the CDs are primarily focused on Japan, they also contain information about Diego Garcia, Guam, Korea and other countries in the region. CD-ROMs for Europe and the Middle East are also in production. Sailors can request copies to learn more about Rota, Sigonella, Naples, Bahrain, Dubai and much more in Summer 2006. While the CDs are currently out of stock, Sailors can complete information to receive one soon by going to: http://www.mwr.navy.mil/. (Source: http://www.news.navy.mil/search/display.asp?story_id=22172)

11. Military Spouses: NMFA Scholarships are for You! The National Military Family Association is now accepting applications for the NMFA Joanne Holbrook Patton Military Spouse Scholarship Program. Any uniformed service spouse—active, retired, National Guard, Reserve or survivor—studying toward professional certification or attending post-secondary or graduate school is encouraged to apply. Scholarships are normally in the amount of $1,000, and the number awarded each year varies depending on funding. Scholarship funds may be used for tuition, fees, books, and school room and board. Applications can be found at www.nmfa.org/scholarships2006.

Scholarship selection is based on completion of some survey questions that will help NMFA advocate for education changes on your behalf, short-answer questions, and an essay question. Applications will only be accepted online and must be submitted by midnight April 15, 2006.

12. Sound Off About Military Pay! In recent years, Congress—thanks in part to the work of NMFA and other military associations—has increased servicemembers’ pay and compensation benefits, including deployment pays and housing allowances. Proposals are continually being floated by policymakers that could change how servicemembers are compensated. What does your family think of current pay and benefits for uniformed services members? How much does the level of pay and other compensation benefits influence your servicemember’s decision to remain in the military? Do military pay and compensation benefits provide an income better than what your family could receive from private sector employment or do the benefits still miss the mark with military families? Would your family like larger pay raises now, more bonuses, or a steady rate of compensation and continued benefits in retirement?

Log on to www.nmfa.org/surveys today and tell us what you think!


- hfs

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