Survivor Benefits  |  Provisions in both House and Senate bills a first.

Senate Passes SBP Provision

Thanks to Senate champions Mary Landrieu (D-La.) and Olympia Snowe (R-Maine), who joined forces to push Landrieu’s Survivor Benefit Plan (SBP) amendment, the Senate has approved legislation to phase out the SBP “widows tax.”

To win over Senate Republican leaders, Landrieu was forced to accept modifications to her amendment, which sought to phase out the SBP age-62 annuity reduction over 31/2 years (by April 2008, as approved by the House in June). Senate leaders insisted on a10-year phase-out, raising the minimum SPB annuity from 35 percent of SBP-covered retired pay to:

• 40 percent of retired pay on Oct. 1, 2005;
• 45 percent on Oct. 1, 2008; and
• 55 percent on Oct. 1, 2014.

In addition, the Senate adopted a Sen. John Ensign (R-Nev.)-proposed change to Landrieu’s “open season” plan to let non-participating retirees enroll in the improved SBP. Landrieu’s plan envisioned charging late enrollees a premium penalty proportional to their retirement date, up to an additional 4.5 percent of retired pay. The added penalty would be paid every month for life. The House approved this and it was used in the 1992 SBP open season. Late enrollees would have to live at least two years for their survivors to receive coverage.

The Senate-approved Ensign amendment would make open-season enrollees pay all back premiums plus interest in a lump sum.

MOAA strongly prefers the House-passed plan. Many “greatest generation” widows won’t be able to wait 10 years for full benefit relief. The Senate’s onerous payment requirements ($30,000 to $80,000 for an O-5 who retired in 1994 or 1985, respectively) would deter enrollment by all but the most recent retirees and discourage protecting more spouses. Because both the House and Senate have proposed ending the age-62 SBP benefit reduction, some kind of SBP fix in the final bill is a near-certainty.

None of this would have happened without the resolve of Landrieu, who stood her ground despite great pressure from Republican Senate leaders to withdraw her SBP amendment. We also owe thanks to the thousands of MOAA members and others who contacted their senators to insist on including an SBP fix in the Senate bill.

A conference committee of House and Senate leaders now must resolve their differences. Most Hill sources think negotiations will drag well into September and could continue past the election. Please urge your representatives and senators to retain the House SBP provisions in the final FY 2005 Defense Authorization Bill (see page 24).

Health Care |  Citizen soldiers would receive permanent coverage for a fee.

Senate Backs Reserve TRICARE

During June action on the FY 2005 Defense Authorization Bill, the Senate approved (by a 70-25 margin) an initiative to expand health care eligibility for the Selected Reserve. Sponsored by Sens. Lindsey Graham (R-S.C.) and Tom Daschle (D-S.D.), the plan envisions coverage similar to what Congress approved last year as a one-year test.

The new amendment would let Selected Reservists enroll in TRICARE Prime for a premium of $530 ($1,860 for family coverage). Those premiums cover 28 percent of program cost—the same percentage paid by federal civilians. Premium payments would stop upon mobilization.

Alternatively, members with employer coverage could elect to have the government subsidize that premium when the member is mobilized.

The House version of the defense bill calls only for a three-year test of premium-based TRICARE, and would apply only to members who have no access to employer health coverage. About 20 percent (174,000 of the 870,000 members) of the Selected Reserve have no health benefits.

We must keep in context that service leaders now advise guardmembers and reservists to expect to be mobilized every five or six years. With pre- and post-deployment processing, many are separated from their families for 18 months—longer than most active duty members.

This is a significant change of contract for most reservists, some of whom already have been deployed several times since the first Gulf War. The government must provide year-round health insurance options to help offset the enormous additional demands being placed on our nation’s reserve forces. Family members shouldn’t have to bounce in and out of TRICARE every time their sponsor is mobilized and deactivated.

TRICARE for the Guard and Reserve is an essential tool to help stem what many National Guard and Reserve leaders see as a looming recruitment and retention crisis.

MOAA and The Military Coalition have made “continuity of care” options for reserve forces and their families a priority, and we are pleased by the Senate’s strong support. We hope MOAA members will urge their legislators to retain the Senate provision in the final FY 2005 Defense Authorization Act (see “Grassroots Alert,” page 24).

Legislation |  Senate OKs upgrades for concurrent receipt, reserves.

More Defense Bill Amendments

The Senate considered 350 proposed amendments during floor action on the FY 2005 Defense Authorization Bill. Among these were a substantial number affecting military “people programs,” including:

• Sen. Harry Reid’s (D-Nev.) amendment to eliminate providing immediate full concurrent receipt for those retirees with 100-percent disability ratings without any phase-in period. Although we would have liked broader concurrent receipt action, Senate leaders strongly resisted Reid’s efforts to win a broader amendment. MOAA strongly supports this as an additional incremental step toward full concurrent receipt. See “Grassroots Alert” on page 24 to find out how you can support this initiative for 100-percent disabled retirees.
• Sen. Jack Reed’s (D-R.I.) amendment to require a 20,000 increase in the Army’s FY 2005 end strength.
• Sen. Richard Durbin’s (D-Ill.) amendment to make up any lost pay for federal employees mobilized for Guard or Reserve duty.
• An amendment by Sens. Hillary Rodham Clinton (D-N.Y.) and Jim Talent (R-Mo.) to improve medical examinations, documentation, and tracking for military members.

Other worthwhile initiatives proved less successful. Sen. Jon Corzine’s (D-N.J.) amendment to lower the Guard and Reserve retirement age from age 60 to age 55 prompted a budget point of order on the grounds that there was no budget authority for such a change. Corzine’s motion to waive the budget requirement received 49 votes—11 short of the 60 votes required to win a budget waiver.

Similarly, Sen. Tom Daschle’s (D-S.D.) amendment to provide mandatory funding for VA health care was defeated when it didn’t get 60 votes for a budget waiver.

Survivor Benefits |  Strobridge makes SBP case aboard Air Force One.

MOAA Asks for President’s Support

On June 16, Col. Steve Strobridge, USAF-Ret., director of MOAA’s Government Relations Department, rode in Air Force One with President George W. Bush as he flew to MacDill afb in Florida. During the trip, Strobridge had the opportunity to ask the president to support MOAA’s top legislative issue: ending the Survivor Benefit Plan (SBP) widows tax.

Strobridge was one of seven representatives of military and veterans’ organizations invited for the one-hour meeting about military and veterans’ issues and the progress of the war on terrorism.

In addition to reaffirming his commitment to stay the course in the war on terrorism, Bush expressed his intent to make sure the nation keeps its promises to veterans. He noted VA Secretary Anthony Principi’s success in reducing the veterans’ disability claims backlog, reduced waiting times for VA care, and providing the extraordinary care and rehabilitation for servicemembers wounded in Iraq and Afghanistan.

Strobridge expressed MOAA’s strong support for the VA’s efforts in these areas. He also took the opportunity to tell the president an SBP fix is MOAA’s top legislative priority this year and our expectation that both the House and Senate would approve phasing out the age-62 benefit cut. He told the president this is a fix to a big problem that makes widows feel devalued and ignored by their government, and that MOAA hopes the administration will support it.

Bush indicated his familiarity with MOAA’s SBP initiative and other issues discussed, including Guard and Reserve health coverage, GI Bill improvements, and veterans’ health care funding, among others.

He said he understood MOAA’s concerns with Pentagon and White House budget letters opposing some of these initiatives, and stressed that initial positions taken by his budget people were just that — initial positions. He said he intends to work with Congress and the veterans’ associations on these issues, and noted that he signed a significant concurrent receipt provision into law last year despite the concerns previously expressed by other administration officials.

Although that’s not an explicit commitment for support, it was at least an indication that administration opposition to an SBP fix isn’t necessarily set in stone as the legislative process goes forward.

Survivor Benefits |  Misleading point paper circulated on Capitol Hill.

Pentagon Seeks to Keep “Widows Tax”

The day after Col. Steve Strobridge, USAF-Ret., director of MOAA’s Government Relations Department, spoke with President George W. Bush (see “MOAA Asks for President’s Support,” page 22), MOAA learned DoD leaders were sending papers to Congress asserting that military widows should continue to have their Survivor Benefit Plan (SBP) annuity cut by one-third when they turn 62. DoD’s arguments were off-base enough to warrant detailed refutation.

DoD Assertion 1: Military retirees were fully informed about the age-62 benefit cut since
the start of the program in 1972.

MOAA Response 1: Some retirees were informed, but thousands didn’t get good information about the “Social Security offset” to SBP during the first 10 years of the program.

When the program started in 1972, the formula for the Social Security offset was so complicated that benefit counselors couldn’t even calculate it. Because benefits counselors had no idea what the benefit reduction would be for any individual, most didn’t even mention it in the early years. Even today, when older (pre-1985) retirees call the military finance center to ask how much their survivor’s individual benefit will be reduced by the Social Security offset, the finance center doesn’t calculate it for them. MOAA members have to get that calculation from MOAA (after providing extensive pay history data).

The SBP election forms members used to sign up for the program—at least from 1972 through 1982—made no mention of any benefit reduction at any age. The forms (an example can be found in MOAA’s “Fighting for Fairness” brochure at www.moaa.org/legislative/SBP/SBP_fff_2004.pdf) asserted that the SBP annuity is 55 percent of covered retired pay, with no mention of any lesser amount.

Service briefings have been much better since the mid-1980s, when the age-62 benefit was changed to a flat 35 percent of covered retired pay for members attaining retirement eligibility after 1985. But that doesn’t change the reality that thousands of older retirees were led to think (and built their estate plans on the assumption) that their survivors would get 55 percent of covered retired pay for life, plus Social Security.

DoD Assertion 2: Retiree groups wrongly claim retirees pay more for SBP than promised and wrongly claim the government promised to subsidize 40 percent of SBP, when many SBP groups already have subsidies above 40 percent.

MOAA Response 2: This misleading claim seeks to deny history and change the originally intended subsidy rules on retirees and survivors after the fact.

Legislative history (backed by DoD’s own memos) clearly shows Congress, guided by the DoD Actuary, set military premiums in law with a 60/40 cost share for newly retiring, non-disabled retirees.

It’s true that the subsidy is higher (and should be higher) for certain groups, such as retirees with service-connected disabilities that affect their longevity and their ability to purchase other insurance. People who die on active duty obviously have (and should have) a 100 percent SBP subsidy. The 40 percent basic SBP subsidy was intended to apply to the normal, non-disabled retiring member.

When the 40 percent subsidy declined substantially by 1990, Congress restored the intended subsidy by reducing SBP premiums, further validating Congress’ original intent. DoD provided Congress the premium levels to restore the 40 percent subsidy.

Now DoD admits the subsidy for newly retiring, non-disabled retirees again has declined even further (to 19 percent) because of increased longevity and other factors. Congress must act again to restore the intended subsidy by ending the age-62 benefit reduction.

DoD Assertion 3: There is no inequity between military and federal civilian SBP—the two aren’t comparable. Military retirement is better because military people retire younger and don’t contribute to retirement as federal civilians do. Military survivors get Social Security, while some federal civilians don’t. Military retirees can purchase supplemental SBP to prevent any benefit decline at age 62.

MOAA Response 3: The inequities and aptness of the military versus federal civilian comparisons are obvious to any reasonable observer. DoD is mixing apples and oranges by comparing retirement plans when the issue is survivor benefits.

Military people contribute to their retirement at least as much as any civilian, but in a way far more dear than money—it’s 20 to 30 years of personal and family sacrifice, arduous service conditions, and limits on their freedoms that few civilians are willing to endure.

Military retirement (and SBP) is based on only the basic pay portion of military “salary” (about 65 percent to 70 percent of full pay and allowances), whereas federal civilian retirement is based on full pay and locality pay.

No federal civilian SBP program has any survivor benefit decline at any age.

The federal subsidy for both federal civilian programs—33 percent for Federal Employee Retirement System (FERS) and 48 percent for Civil Service Retirement System—is far higher than the military’s 19 percent.

A younger retirement age is a disadvantage for SBP because military enrollees often pay SBP premiums twice as long as federal civilians, even though their spouses receive about the same years of benefits (thus the far higher federal civilian SBP subsidies).

The fact that some federal civilian survivors don’t get Social Security is not applicable to military survivors, because their federal civilian retiree spouses didn’t pay Social Security taxes, either.

Federal civilians who paid for both SBP and Social Security (under FERS, which was enacted in 1984) receive benefits from both programs without any reduction, and military retirees who paid for both deserve the same treatment.

Including Supplemental SBP in the comparison is equally erroneous because it has no government subsidy whatsoever and is so expensive that less than 2 percent of military retirees take it. No federal civilians are required to pay additional premiums to maintain their survivor benefit levels.

Pharmacy |  Computer errors, generic substitution pose problems.

Rx Contract Debuts With Some Glitches

June 1 marked the kick-off of the new TRICARE Retail Pharmacy program (TRRx). Under TRRx, prescription medications no longer will be administered by four regional contractors. Instead, a single company, Express Scripts Inc. (ESI), runs the program nationwide.

The single contract affords nationwide portability. Beneficiaries no longer have to pay up-front for medications and file claims for reimbursement when they travel outside their TRICARE region.

Unfortunately, computer and telephone problems posed headaches for the contractor, beneficiaries, and pharmacies in the first several days of the new contract. Hours after the start of the program, ESI began experiencing glitches in its claims-processing software. As a result, pharmacies were not able to verify beneficiary eligibility. That meant claims processing was held up, and some beneficiaries were asked to pay up-front and re-file claims later.

ESI fixed the software problems, in many cases on a pharmacy-by-pharmacy basis; however, a more problematic issue was brought to light.

A significant aspect of the DoD pharmacy program is the policy requirement to substitute generic drugs for brand-name pharmaceuticals whenever a generic version exists. In such cases, the brand-name drug is covered only when the beneficiary’s provider obtains a “medical necessity” approval from TRICARE.

Unbeknownst to associations and beneficiaries, DoD decided to void all previous medical necessity rulings with the June 1 implementation of the new pharmacy contract. This policy effectively forced these beneficiaries to jump through the same hoops again, even for refills of previously approved brand-name drugs.

On one hand, generic substitution is a normal cost-control policy that is a key element of almost all pharmacy plans, and the beneficiary’s doctor can assert a medical necessity to prescribe the brand-name drug. On the other hand, DoD doesn’t make it easy to get a medical necessity determination. It requires the doctor to call a specific TRICARE phone number and justify the decision to TRICARE pharmacy administrators. But DoD hasn’t made that number widely available, and frustrated doctors sometimes find themselves having to make several calls.

Meanwhile, beneficiaries often must make another appointment with their doctor (and pay another copayment) to discuss the generic versus brand-name issues and ask the doctor to make the “medical necessity” call, if appropriate. Providers often charge an extra fee for these administrative efforts.

MOAA was disappointed in DoD’s action on several counts. This change never was discussed in any of DoD’s meetings with beneficiary groups. Affected beneficiaries received no advance notice—they learned of the brand-name denial at the pharmacy and found themselves having to accept an inappropriate generic or pay the full (often expensive) cost out of their pockets. Worse yet, beneficiaries weren’t told how to obtain new medical necessity determinations.

When the problem came to light, MOAA complained to senior DoD health officials that prior medical necessity determinations should be honored until completion of any necessary verification review. Further, DoD needs to broadly disseminate the specifics of the medical necessity approval process in all its pharmacy publications.

To their credit, DoD leaders acknowledged the inequity and initiated both short- and long-term fixes. Within a week, ESI computer systems were updated to override the “generic substitute” rejection for any brand-name drug dispensed to the beneficiary in the past six months. This grandfathering will be good for 120 days, to allow affected beneficiaries time to renew the medical-necessity determination. For the longer term (by early September), DoD will send individual notifications to the affected beneficiaries, providing them information on the medical necessity determination process.

In the meantime, here’s the process to obtain medical-necessity documentation if your doctor determines it’s medically necessary that you have the brand-name drug rather than its generic equivalent:

Your doctor must provide the following:

• beneficiary’s name;
• beneficiary’s date of birth;
• sponsor’s Social Security number;
• beneficiary’s home address; and
• most important, the doctor must provide the specific reason why the patient needs the brand-name medication instead of the generic (i.e., generic medication has proven ineffective, the patient previously experienced an adverse reaction to the generic, the patient has been treated successfully on the brand-name medication and is stable, etcetera).

Your doctor can call ESI at (866) 684-4488 to get an immediate decision, or the information can be faxed to (866) 684-4477 for a decision in 24 to 48 hours.

Beneficiaries and providers should be aware that writing a note on the prescription is not sufficient to successfully process the prescription.

If a medical-necessity request is denied, you have the right to an appeal. Call (866) 363-8779 to inquire about the reason for the denial and find out how to file the appeal.