Slim Chance to Stop Higher Rx Co-Pays, Smaller 'BAH' Hikes

By Tom Philpott When Congress reconvenes Nov. 12, opponents of billions of dollars in military compensation “reforms” sought by President Obama and the Joint Chiefs of Staff will have one final and narrow opportunity to derail the plans. Three significant compensation changes still alive on Capitol Hill are: -- A second consecutive 1-percent cap on the January military pay raise; -- A string of annual increases in prescription drug co-payments for retirees who use retail pharmacies or TRICARE mail order, which would begin next year; -- Higher out-of-pocket rental costs to be paid by a million service members who draw stateside Basic Allowance for Housing (BAH). The Senate Armed Services Committee’s version of the fiscal 2015 defense authorization bill would allow all three, having accepted the case of military leaders that compensation must be slowed to sustain readiness amid shrinking budgets. The House-passed bill declines to endorse these changes. However, the House left itself in a weak position to stave off the pay curbs by also declining to identify defense budget cuts elsewhere to replace hefty savings tied to raising drug co-pays and slowing BAH increases over the next several years. As a result, House-Senate conferees tasked with negotiating a final defense bill likely face the choice of accepting compensation curbs in the Senate bill or cutting force readiness more directly by slashing training, tying up ships, grounding aircraft or making deeper force cuts, Hill sources suggest. Only fast-spending readiness accounts like these could produce equivalent savings to pay curbs. Still the Military Coalition, a consortium of 32 associations and veterans’ groups, is pressing to block the compensation curbs whatever the odds of success. In a letter this month to retiring Sen. Carl Levin (D-Mich.), chairman of the committee, and Sen. James Inhofe (R-Okla.), its ranking member, the coalition urges repeal of additional defense spending cuts called for under the 2011 Budget Control Act (BCA) with its indiscriminate deficit-reduction tool called sequestration. The BCA, it argues, has created a “benefits versus bullets” debate that puts readiness at risk. “Funding is needed for both – not one over the other.” Meanwhile, on the coalition’s behalf, Military Officers Association of America found “champions” to introduce amendments to the Senate bill (S. 2410) during floor debate. Sen. Marco Rubio (R-Fla.) wants the pay cap replaced with a raise to match private sector wage growth. Sen. Kay Hagan’s (D-N.C.) amendment would block the planned pharmacy co-pays. Mark Begich (D-Alaska) is seeks to remove bill language that would dampen BAH increases through 2017. But this year, like last year, the Senate might not debate a defense bill if leaders decide there isn’t time to sort through amendments, debate them for a week or longer, hold a full Senate vote, appoint conferees to iron out differences with the House and then pass a compromise bill through both chambers. That is still Levin’s desire for the last defense bill he will shepherd through the Senate. But Senate Majority Leader Harry Reid is just as likely to decide there aren’t enough days left in a lame-duck Congress to allow regular order. Last year when pressed for time, the Senate never debated the defense bill cleared by the armed services committee. Instead, key senators and staff met informally with House counterparts, negotiated away differences between the Senate committee bill and the House-passed bill. The result was a new bill that quickly cleared the House and then the Senate with no debating final details. If that happens this year, it would scuttle the coalition’s plan to force senators to accept or reject the three popular amendments from its champions. “It is an uphill battle,” retired Air Force Col. Mike Hayden, MOAA’s director of government relations, acknowledged. At least the coalition’s letter, he said, reminds senators that a high-profile commission has been studying compensation issues for a year, and is due to report its findings by February. Here are more details on compensation changes in the Senate bill, along with new estimates on savings if enacted, as prepared by Congressional Budget Office: PAY CAP – Capping the Jan. 1 military raise at 1 percent, versus 1.8 to match private sector wage growth, and denying any raise to flag and general officers, would save the department $588 million in 2015 and $3.9 billion through 2019. DAMPENING BAH – Basic Allowance for Housing rates are adjusted annually to keep pace with average local rents for types of housing deemed appropriate based for pay grade and marital status. The Senate bill would dampen BAH increases for three years until rates cover 95 percent, not 100 percent, of average local rents. Also, monthly BAH no longer would include the average cost of renter’s insurance. These changes would trim program costs by $4 billion through 2019. HIGHER RX CO-PAYS – Prescriptions filled on base would remain free but co-pays at retail outlets and mail order would increase, most sharply for brand name medicines. The changes largely would impact retirees and their families. The $17 co-pay at retail for brand name drugs on the military’s formulary would jump to $26 initially and see annual increases until reaching $45 by 2024. The $5 co-pay for generic drugs at retail would increase by $1 a year until 2024. The co-pay of $13 for mail order brand name drugs on formulary would double to $26 next year and reach $45 by 2024. Generic drugs would be free if filled by mail until 2019, then a $9-co-pay would be charged for a 90-day supply. Drugs not on the formulary cost $44 to fill at retail pharmacies. Under the Senate bill, non-formulary drugs would only be available by mail order or on base, not at retail outlets, starting next year. The $41 mail order co-pay for a three-month supply would jump to $51 and increase annually to reach $90 by 2024. Last March, TRICARE began requiring older beneficiaries to get all maintenance medicines for chronic conditions by mail or on base, for at least a year. The Senate bill would make this requirement permanent and expand it to impact all retirees and their family members, regardless of age. Exempted from higher co-pays would be members medically retired, spouses of members who die on active duty and family members of both groups. The higher co-pays would save the Defense health program $1.5 billion in direct costs by 2019 and $3 billion more in accrual payments into a fund set up to cover health costs of military retirees also eligible for Medicare. The cost estimates, CBO says, take into account that higher co-pays also will cause some beneficiaries to stop taking medicine, resulting in more clinic visits and hospitalizations. Send comments to Military Update, P.O. Box 231111, Centreville, VA, 20120, email milupdate@aol.com or twitter: Tom Philpott @Military_Update