Lawmakers Agree to Boost Tricare Pharmacy Co-Pays in 2016 Defense Bill

Capitol in fog.

U.S. lawmakers on Tuesday agreed to increase pharmacy co-pays that largely affect military retirees as part of a sweeping defense bill.

The issue became a sticking point between negotiators in the House of Representatives and the Senate. It was one of the main items stalling passage of the legislation, known as the Fiscal 2016 National Defense Authorization Act, which sets policy and spending goals for the fiscal year beginning Oct. 1.

Rep. William "Mac" Thornberry, a Republican from Texas and chairman of the House Armed Services Committee, pushed for modest increases to pharmacy co-pays in the Tricare for Life military health care program for elderly retirees -- less than those proposed by the Pentagon and approved by the Senate.

Congressional negotiators "rejected more than 60% of the proposed increases to Tricare pharmacy co-pays supported by the President and the Senate," a committee fact sheet of the legislation states. "Instead, the Conference Agreement includes modest adjustments to co-pays for brand name and generic medications, at the minimum amount necessary to offset the retirement program."

POTENTIAL FEE CHANGES

The fact sheet of the $612 billion bill -- which President Obama has threatened to veto over the tens of billions of dollars added to the war budget -- didn't specify the actual rate increases.

The Pentagon recommended steadily boosting co-pays for a one-month prescription refill at retail pharmacies from $8 in 2015 to $14 in 2025 for generic medications and from $20 in 2015 to $46 in 2025 for brand-name medications. A report accompanying the legislation appears to set a one-time increase to those figures in 2016, with a retail co-pay of $10 for generic medications and $24 for brand-name medications.

Even so, veterans' advocates argue that military members who served 20 years or more shouldn't be on the hook for helping fund a retirement savings account designed for troops who may spend only a fraction of that time in service.

PAY AND BENEFITS

As expected, the defense bill would overhaul the military retirement system by offering troops a 401(k)-like plan with full vesting after just two years of service and matching contributions of up to 5 percent of basic pay after four years of service.

Under the military's existing defined-benefit plan, most officers and enlisted personnel who serve 20 years receive annual retirement pay equal to half of their average basic pay over their last three years of service. The legislation would reduce that figure from 50 percent to 40 percent, in part to fund a 401(k)-like defined-contribution Thrift Savings Plan for the more than eight in 10 service members who leave the military without getting any retirement benefit.

The so-called blended retirement plan would also let a service member take part of his retirement pay as a lump-sum payment after 12 years of service and after 20 years. The overhaul wouldn't take effect until 2018 "to allow DoD and relevant stakeholders time for implementation," the summary states.

The bill also includes a troop pay raise of 1.3 percent rather than 2.3 percent for next year. The Pentagon proposed the lower figure, which compares to a 1 percent bump in basic pay service members received the past two years. But it's less than the 2.3 percent estimated increase in private-sector wage growth, which military pay is supposed to track by law.

Lawmakers rejected proposals to overhaul the military commissary system and ordered the Defense Commissary Agency to plan for making the system self-funded by 2018. They asked officials to submit a report by March 1 on how the commissary -- which receives $1.4 billion a year in taxpayer funding -- could find savings by privatizing operations, working with grocers to provide military discounts, closing stores or combining the commissary and exchange systems. They also blocked the commissary from making changes in how produce is shipped to stores in Asia.

HOUSING ALLOWANCES

Also expected, the legislation would slow the growth of basic allowances for housing (BAH) by 4 percent until 2019, in addition to the 1 percent approved for the current year. The proposal is part of a broader plan to have service members eventually pay an average of 5 percent of their housing costs.

Lawmakers rejected a proposal to eliminate multiple BAH payments to military members who live together. Married military couples without children receive two such payments -- both at the "without dependents" rate. The Senate had proposed for dual-military married couples to receive one BAH payment -- and for military members sharing off-base housing to get a reduced housing benefit.

But lawmakers indicated they plan to consider the proposals next year and called on Defense Secretary Ashton Carter to submit a report "on how to amend the current BAH system to most accurately capture actual housing cost" and "consider the primary purpose of the benefit to offset housing costs of uniformed members incurred by virtue of their service."

Most troops, however, view the housing allowance as a key part of their salaries and even Pentagon officials have warned that such a change would impact recruiting and retention. Advocacy groups have criticized the proposal as a "marriage tax."

"Changing housing allowances based on marriage or cohabitation significantly undermines the fairness of military pay and puts troops at a competitive disadvantage to their private-sector peers," Mike Hayden, chief lobbyist for the Military Officers Association of America, wrote in a blog post.

Note: This story was updated to correct in the 15th paragraph the type of BAH rate married couples receive.

-- Brendan McGarry can be reached at brendan.mcgarry@military.com.

-- Amy Bushatz can be reached at amy.bushatz@military.com.

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