Hike set for Tricare drug fees as of February

House-Senate conferees have agreed to the more modest House-passed plan for raising drug co-payments on military family members and retirees who fill prescriptions at Tricare retail outlets or through mail order.

The fee increases are scheduled to take effect Feb. 1, 2013, Tricare officials said as the fiscal 2013 defense authorization bill, with many other provisions affecting the military community next year, moved toward final passage.

The new pharmacy fee plan includes a requirement that beneficiaries 65 and older have all maintenance drugs for chronic conditions refilled, for at least one year, through Tricare mail order or at base pharmacies, rather than through retail outlets where the cost to Tricare is one-third higher.

Tricare likely will need to publish a draft regulation, solicit public comment and launch an education effort for elderly beneficiaries before it begins to enforce home delivery for seniors. That could delay starting that portion of the pharmacy plan until April or later.

It is a matter “under review and as yet we do not have an implementation time frame established,” said Kevin Dwyer, deputy chief of benefit information and outreach for the Tricare Management Activity.

Conferees were persuaded to embrace the House plan, supported by advocates for military beneficiaries, over more aggressive fee hikes sought by the Obama administration. The Senate version of the defense bill was silent on the issue, which was a nod for the administration to proceed.

But during the past two weeks, a House-Senate conference ironed out differences between separate versions of the defense bill and the House plan prevailed. So after January 2013, at Tricare retail outlets, the current $12 co-pay for brand name drugs on the military formulary will rise to $17. The $25 co-pay for nonformulary drugs will jump to $44. The co-pay for generic drugs at retail will stay at $5. Drugs will stay free at military pharmacies.

For mail order, the current $9 co-pay for brand names on formulary will increase to $13. The $25 co-pay for brand names off formulary will jump to $43. Generic drugs will continue to be dispensed by mail at no cost.

For fiscal 2014 and beyond, the plan directs that drug fees be raised annually by the same percentage as retiree cost-of-living adjustments. In years when a COLA increase applied to pharmacy fees would total less than a dollar, it will be delayed a year and combined with the next adjustment so that drug fee increases, when executed, are always a dollar or more.

The administration wanted drug fees reset substantially higher in 2013 and to grow by $2-a-year through 2016. It then wanted annual adjustments to match medical inflation, not retiree COLAs.

Mail-order users of brand-name drugs save two-thirds on co-pays automatically because refills are for 90 days versus 30 days at retail. Given those savings and the convenience of home delivery, backers of the House plan expect most elderly beneficiaries, once forced to use mail order, to stay with it, saving Tricare hundreds of millions of dollars year after year.

The projected savings allowed the House to roll back the drug-fee increases sought by the administration without raising the budget’s top line. In fact, so many Tricare dollars will be saved that conferees used some of that money to fix a “glitch” in Combat-Related Special Compensation.

CRSC ‘glitch’

Effective Jan. 1, 2013, several thousand retirees forced from service short of 20 years due to combat-related disabilities will see their compensation pop by an average of a few hundred dollars a month. These folks became eligible for CRSC in 2008 when Congress expanded the program to cover these so-called “Chapter 61” retirees. But the formula for calculating payments had a flaw, which some disabled retirees noticed when the VA raised their disability rating but their take home pay didn’t change.

Whether and how individuals are affected depends on a mix of factors including original service disability rating, length of service, rank and the VA rating for combat-related conditions.

Enhanced SERB

Other personnel-related provisions in the defense bill (HR 4310) will give the services new authority to hold Enhanced Selective Early Retirement Boards for paring ranks of retirement-eligible officers during the force drawdown. The enhanced SERB allows the services to be more selective in retiring senior officers. It was used effectively after the Vietnam War. Current SERB authority is more limited. For example, an officer now can be screened for early retirement only every five years. It also is difficult to target specific year groups or job specialties when services need to pare a sizable number of officers in grades O-5 and O-6.

Time-in-grade waivers

The defense bill also will double the number of time-in-grade waivers the services can use to reduce excess senior officers. These waivers lower from three years to two the time O-5s and above must serve in current grade to retire at that rank. It’s another force shaping tool sought by the services as force strength falls.

A new commission

The bill establishes a special nine-member commission to review military pay and retirement changes that will preserve “viability of the all-volunteer force,” starting with a package of reforms being drafted by the Department of Defense. The commission is to deliver a report to Congress within 15 months, recommending any changes to the Defense Department or “president’s” plan that at least five commissioners support.

The commission, by law, will not propose changes to retirement for the current force. But it can propose enticements to current serving members to switch retirement plans voluntarily. Presumably, the offer would include some lower-value package with earlier vested and portable benefits, which also would deliver long-term retirement savings to the government.

Conferees rejected the president’s request that recommendations from the pay commission have the sanctity of recommendation from base closing commissions, which Congress could accept or reject but not modify them.

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