Editor’s Note: This article by Patricia Kime is part of MOAA’s 2020-21 TRICARE Guide, brought to you by MOAA Insurance Plans, administered by Association Member Benefits Advisors (AMBA). A version of the guide appeared in the November 2020 issue of Military Officer magazine.

TRICARE has come a long way since its evolution from the Civilian Health and Medical Program of the United States, or CHAMPUS, in the early 1990s. And if the past 27 years are any indication, the program will continue to evolve as populations shift, patients change and the Pentagon continues to figure out how to manage costs and provide health care to millions. 

With roots based in a system established to provide care for non-active-duty patients — originally on a space-available basis at military hospitals and clinics — TRICARE has grown to a $14.4 billion program serving nearly 9.6 million beneficiaries, including 1.4 million active-duty troops.

To understand how TRICARE became what it is today, one must begin in the mid-1960s, when the population of military retirees and dependents ballooned, straining a health system that previously could accommodate most beneficiaries at military facilities or sent family members to private facilities for inpatient care.

To ensure that the booming population of retirees and family members assigned to locations not near a base had access to health services, Congress created CHAMPUS, a fee-for-service insurance plan requiring cost shares but without the premiums or enrollment fees of traditional insurance.

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CHAMPUS proved to be popular — so popular, in fact, that usage, combined with an increase in beneficiaries (up 162% between 1981 and 1990) caused expenses to skyrocket and shortfalls in the Defense Department health budget. Those increases also occurred at a time when health care reforms were sweeping the nation: the 1980s saw the development of managed care and health maintenance organizations (HMOs), and Congress saw an opportunity.

The concept of the HMO is straightforward: organizations and companies could carefully monitor and control costs by requiring beneficiaries go see primary care physicians before receiving specialty or inpatient care, with an aim to reduce costs and unnecessary admissions. In return, patients received additional benefits, like preventive services and prescription drug coverage.

Congress directed DoD in the 1990s to consider this model, and TRICARE was born, a three-pronged approach to health care that included TRICARE Prime, an HMO-like option of managed care; TRICARE Extra, a system in which patients could reduce costs at civilian providers by choosing those in a network; and TRICARE Standard, similar to traditional CHAMPUS in which they could receive care from non-network providers but pay more out of pocket.

‘Identity Crisis’

Since the first beneficiaries enrolled in TRICARE in 1995, DoD and Congress have been tweaking the benefit nearly every year since, according to Bryce Mendez, a defense health care analyst with the Congressional Research Service.

“The department struggles with this identity crisis — does it operate the military health system as an integrated health system … like a Johns Hopkins, Intermountain Health or Mayo Clinic? But at the same time, it has these military specific requirements. It’s the question Congress continues to have: is this the best way for the MHS to operate?” Mendez said.

TRICARE began with six health care contractors managing private care for beneficiaries in 12 regions of the country, overseen by the TRICARE Management Activity. In 1995, of the $15.2 billion military health system budget, the CHAMPUS/TRICARE share was $3.6 billion or 24 percent, serving 5.7 million beneficiaries.

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Three wars and several drawdowns and military buildups later, TRICARE has two primary contractors: Humana Military in the TRICARE East Region and Health Net Federal Services in the West, managed by the Defense Health Agency. The military health system’s budget is roughly $34 billion, with 42% spent on TRICARE.

With such a sizable chunk of the Pentagon’s non-operational budget, the military health program is often in the crosshairs of budget-conscious lawmakers and the White House, explained Mendez.

“Some members of Congress have this ‘well, I understand the military’s role in having its own health system, but it is costing way too much to do this, so why can’t we just outsource this, send it to the network?’” he said.

Evolution in Care

In addition to the basic three types of TRICARE (now reduced to two, TRICARE Prime and TRICARE Select), the benefit has grown extensively since its introduction. In 2001, Congress rolled out TRICARE For Life, a Medicare wraparound program designed to ease the financial burden of the out-of-pocket costs associated with Medicare for older retirees.

Other developments followed, including:

• Zero copays for active duty families (2001)
• TRICARE Reserve Select (2005)
• TRICARE Young Adult, a premium-based plan that gave dependents age 23 to 26 a military health care option (2011).

The average cost of employer-sponsored health insurance in 2019 in the U.S. was $7,188 for single coverage and $20,576 for family coverage, according to an annual survey by the Kaiser Family Foundation. The average single deductible was $1,655, with some workers — 1 in 8 — paying as much as $3,000.

In contrast, active duty military family members pay no enrollment fees and no deductibles and have catastrophic caps of between $1,000 and $1,044, depending on when their service member joined, while military retirees below age 65 pay between $300 and $600 per year for TRICARE Prime enrollment, have no deductibles and pay a maximum of $3,000 each year for health coverage. Starting next year, those retirees using TRICARE Select will be required to pay an enrollment fee of $150 to $300, depending on the number of people covered, and will have a catastrophic cap of $3,500.

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The relatively low cost of military health care for “working age” retirees, as well as their access to free prescriptions at military installations, has made the benefit a target in Congress, who have seen an opportunity to reduce the Pentagon budget while requiring retirees to shoulder more of the burden.

“Everyone has studied this issue over the past few decades and there are lingering themes in all the reports, mainly, that there are cost savings [to the federal government] of pushing everything to the civilian sector,” Mendez said.

Should TRICARE End?

In January, 2015, the Military Compensation and Retirement Modernization Commission (MCRMC) recommended that the Defense Department abandon TRICARE in favor of providing a selection of commercial insurance plans for active duty family members, reservists and retirees to choose from, similar to the Federal Employee Health Benefits Program.

Neither Congress nor DoD have come out in favor of the measure, but the Pentagon has tested the waters by shedding the TRICARE Retiree Dental Program and giving beneficiaries the option of seeking coverage through the Federal Dental and Vision Insurance Program (FEDVIP).

“Congress has looked at the MCRMC report and pondering whether some of their findings might make sense, utilizing the economies of scale of these grander federal programs. There may be some opportunities to play off these programs,” Mendez said. “Without saying it’s a pilot program, they are looking at FEDVIP and taking lessons learned from it to see if that might be a particular model for the entire medical benefit.”

Under reforms of the military health system set by Congress in the fiscal 2017 National Defense Authorization Act (NDAA), at least 200,000 non-uniformed beneficiaries — family members and retirees — will receive health services in the private sector through TRICARE.

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Already, retirees lose priority at military treatment facilities the day they remove their uniforms. Mendez said Congress will need to have a “tough conversation” about the future of the military health system TRICARE as retirees and the seriously wounded from Iraq and Afghanistan age.

“There’s still opportunity to improve the program and benefits and how the system is administered. As we see each year, there is always some reforming TRICARE or tinkering with benefits … it’s an evolving process,” Mendez said.

Patricia Kime is a reporter who covers military health care issues in the Washington, D.C., area.