Wednesday, February 18, 2015

How about “Math Up”?

Congress is debating recommendations from the Military Compensation and Retirement Modernization Commission:

Congresswoman to Colleagues: 'Man Up' and Overhaul Military Benefits

Under the panel's recommendations, retirees younger than age 65 would initially pay 5 percent of the cost of a private plan, but the figure would increase 1 percent a year until reaching 20 percent of the premium -- or until they're eligible to switch into Medicare and Tricare for Life.

"It's costing about, let's just say round numbers, $500 a year," [California Democrat Rep. Jackie] Speier said. "A 1-percent increase is $5. I mean, I think we have to pitch this for what it is: You're going to have better health care, you're going to have a bigger network, and it's going to cost you one Starbucks Latte a year. Are you in?"

Commissioner Stephen Buyer responded, "Bingo. Thank you."

Buyer, a former Republican congressman from Indiana who headed the Veterans' Affairs Committee, also noted that working-age retirees paid a bigger share of their health care costs in the early 1990s. "In 1994, when it started, it was a 27-percent premium," he said. "It's eroded to 5 percent."

On the one hand, I have always conceded that expecting premiums to keep pace with costs is not inherently unreasonable.  Whether 1994 is the appropriate benchmark is another question, but retirees have had their Tricare premiums more-or-less frozen for the last 2 1/2 years while health care costs have (presumably) increased, and that generosity is unsustainable.

But Jackie Speier doesn’t understand the math (and neither apparently does commissioner Buyer).  The proposal doesn’t increase our premiums by 1% of our current cost-share per year.  The proposal increases our premiums by 1% of the total cost per year.

My current Tricare premium cost-share is (I just checked) $46.32 per month, $555.84 per year.  This, I think, is the “$500” to which Speier refers.  If this is indeed 5% of a retiree family’s health care costs, then those costs run to $11,1116.80 per year.*  It is 1% of this number that the commission is recommending that our premiums be increased every year until they reach 20%; by the end of it, I’ll be paying an extra $1667.52 per year, plus 20% of whatever increase in health care costs occur between now and then.

Now, this may, or may not, be “fair”, and in any case it probably won’t drive us to homelessness.  But it’s more than the cost of a yearly Starbucks latte**, and it would be nice if Congressional Democrats stopped pretending otherwise.

* This plan includes no dental services, and involves additional costs for any drugs or services received from a civilian provider.

** I suppose that this number is closer to a Starbucks latte per day, but I’m not sure . . . because I don’t go to Starbucks every day, and neither does anyone else I know, precisely because of these kinds of prices.


heresolong said...

I have long been a proponent of giving each eligible veteran (ie retired or service connected disability) a voucher good for a certain number of dollars to purchase medical insurance. Then auction off the VA medical system hospitals and clinics to the highest bidder.

Imagine. Medical care from a doctor in your town instead of a two hour drive to the nearest VA hospital, only to be told you need to come back in two weeks.

It would probably cost the government less and result in better care for veterans since you could switch your doctor if you didn't like them.

Unfortunately I am not in a position of power so have no say in the matter.

Dr. Φ said...

Heresolong: Perhaps. But the article isn't really addressing the VA, it's addressing retirees whose families are covered by Tricare when they're not receiving care at military hospitals. That's a separate system from the VA, which covers service-connected disabilities for veterans who separated without retirement.

Anonymous said...

If it's just the cost of a Starbucks Latte, then Congress should just pick up the tab. I heard that, "This will make health care cheaper" argument before.

BTW, my family is on Tricare standard so I pay no premiums but I do pay a 20% cost share of the bills as they come in, after an annual per patient cap is reached.

The real benefit of tricare though is the power of the federal government telling suppliers how much they are allowed to charge (the Dr reimbursement rate). That right now is around 15% of what they charge other large insurers and I am sure my doctors see me as a charity case because of it. I dread ever having to find a new doctor or specialist who will accept me.

And the VA could save a lot of money if they stopped treating non service connected illness: heart problem on 75 year old guys who served three years in Germany in the 60's.

I am really glad us retirees are exempt from the VA system. I can imagine a day when the government decides to force us into it to "save money".

Anonymous said...

Just like they forced us into medicare after age 65.

Retiree health care costs are still paid by the DoD budget and, just like GM's Union retirees, are breaking the bank. Retirement and health care costs for guys who are living longer and demanding more expensive services are unsustainable in a pay as you go annual budget. Every new defense dollar is mostly consumed paying for the defense we bought decades ago.