Caps on Pay and BAH and Higher Rx Co-Pays


tom-phipottMILITARY UPDATE: Smaller BAH Raises, Higher Drug Co-Pays Gain Steam

The Senate Appropriations Committee has approved a fiscal 2015 defense money bill that fully supports the Senate Armed Services Committee’s earlier embrace of key military compensation curbs sought by the Joint Chiefs of Staff.

Both committees have rejected proposals to restructure TRICARE dramatically by consolidating plan options and by raising fees. They also reject a $200 million hit to the annual subsidy for commissaries which could force some commissaries to cut hours of operation and a few even to close.

But Senate appropriators have shaped a funding bill that supports the armed services committee on three significant compensation changes:

Pay Cap: A second straight cap of 1 percent on the annual military pay raise. A 1.8 percent increase is needed this January to keep pace with private sector wage growth.

BAH Raise Caps: A dampening for three years of yearly increases to Basic Allowance for Housing which is paid to a million service members living off base in the United States. The goal is to slow BAH adjustments until the allowances cover only 95 percent of local rental costs. Current BAH rates cover 100 percent of members’ local rental costs at stateside assignments. Current rates also cover average renter’s insurance, but that would end, just as the Joint Chiefs propose, if the Senate defense bill becomes law.

Higher Drug Co-Pays: Pharmacy co-payments would be increased for beneficiaries who have prescriptions filled at retail outlets, or choose to use brand name medicines instead of less costly generic drugs. This change largely would impact military retirees and their families.

The goal is to “fully incentivize” use of TRICARE mail order and also generic drugs to save on program costs. By changing behavior, and also by collecting higher fees, the Department of Defense estimates it would save $829 million in 2015. The Congressional Budget Office estimates savings of $4.4 billion over five years.

Prescriptions filled at base pharmacies would remain free. But the current $17 co-pay at retail outlets for a 30-day supply of a brand name drug on the military formulary would jump to $26 in January, and by $2 more annually over seven years to reach $40 by 2022 and then $45 by 2024.

Beneficiaries now face a co-pay of $44 to get non-formulary drugs at local pharmacies. Under the plan, non-formulary drugs could only be obtained through home delivery. And the co-pay for a three-month supply of mail order pills would climb from $43 to $51 in January and increase annually thereafter to reach $66 by 2017 and $90 by 2024.

Co-pays for brand name drugs on the formulary, if filled by mail, would double from $13 to $26 next year, and increase by $2 to $4 annually to reach $34 by 2019 and $45 by 2024. Generic drugs would continue to be available at no charge by mail order until 2019 when a co-pay would be set at $9 for a 90-day supply. The current $5 co-pay for generic drugs at retail would be increased by $1 a year, starting in 2015, and reach $14 in 2024.

TRICARE runs a pilot program that requires older beneficiaries to obtain drugs for chronic conditions, like high blood pressure, through home delivery for at least a year. This took effect last spring. The Senate bill would replace the temporary trial with a permanent requirement that all retirees and their family members, regardless of age, use mail order or base pharmacies for maintenance medications.

Over on the House side, the armed services committee in May rhetorically rejected most compensation curbs proposed. But other than restoring half of the $200 million cut proposed for commissary operations, the House panel did not identify offsets in the budget that could be used to pay for a full military raise, to stop a planned rollback in housing allowance adjustments or to scuttle the administration push for higher pharmacy fees.

The Republican-led House committee did note in a press release that Obama would need “legislative relief” to make “his proposed compensation cuts.” Until then he remains “legally bound to provide established benefits to the military community,” it said.

Acknowledging it made no effort this year to find funds to thwart the proposed cuts, it added: “In light of Congress’ consistent opposition to premature, ill-advised cuts to war fighters’ pay and benefits, Chairman [Harold “Buck”] McKeon expects the President to find an alternate solution.”

However, neither the White House nor the Senate Armed Services Committee plans to look for a different solution. The Joint Chiefs back curbs in compensation to be able to fund other readiness needs as defense budgets shrink. So when House-Senate conferees meet in the fall to iron out differences between defense bills, House conferees almost certainly will have to defer to the Senate’s plan on compensation and drug co-pays.

House members will have succeeded in keeping fingerprints off cuts to military compensation going into November elections, but they most likely will not do anything to scuttle them.

Advocates for service members and military retirees believe their last best hope to protect full BAH increases or to block higher pharmacy fees will be to find a senator to introduce a rollback amendment when the defense authorization bill comes up for full Senate vote this fall. Finding more than $1 billion in offsets to replace the savings anticipated from dampening BAH and boosting pharmacy fees still would be difficult.

VA REFORM IMPASSE – Even as the Senate moved swiftly to confirm former Procter & Gamble CEO Robert McDonald as the new Secretary of Veterans Affairs, Senate-House conferees on a VA reform bill to improve veterans’ access to health care were signaling trouble reaching a deal. More details next week as Congress races toward its five-week August recess.

Send comments to Military Update, P.O. Box 231111, Centreville, VA, 20120, email or twitter: Tom Philpott @Military_Update

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Tom Philpott has been breaking news for and about military people since 1977. After service in the Coast Guard, and 17 years as a reporter and senior editor with Army Times Publishing Company, Tom launched "Military Update," his syndicated weekly news column, in 1994. "Military Update" features timely news and analysis on issues affecting active duty members, reservists, retirees and their families.

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