By Sandra Basu

WASHINGTON — If the Obama Administration has its way, the Military Health System (MHS) will tighten its belt — and its wallet — next fiscal year.

Under President Barack Obama’s proposed FY 2013 budget, the DoD Unified Medical Budget that supports the MHS would receive $48.7 billion, down from the $52.8 billion this year.

According to the administration, priorities in the proposed MHS budget include “enhancing the well-being and psychological health of military families, ensuring excellence in military children’s education, developing career and educational opportunities for military spouses, and ensuring child-care availability and quality for the armed forces.”

The smaller MHS budget is part of an overall proposed DoD budget that would provide $525.4 billion in discretionary funding for the base DoD budget, a decrease of $5.1 billion from the 2012 enacted level. DoD Overseas Contingency Operations funding will fall by 23%.

“This budget continues efforts to reduce excess overhead, eliminate waste and improve business practices across the department,” Secretary of Defense Leon Panetta said at a recent Senate Armed Services hearing on the proposed FY 2013 budget.

Robert F. Hale Undersecretary of Defense (comptroller), and Air Force Lt. Gen. Larry O. Spencer, director of force structure, resources and assessment for Joint Staff, discuss President Barack Obama's FY 2013 Defense budget proposal at the Pentagon. - DOD photo by U.S. Navy Petty Officer 1st Class Chad J. McNeeley

MHS Prepares for Change

The proposed reduction in the healthcare budget came as little surprise. In the weeks prior to the budget release, Assistant Secretary of Defense for Health Affairs Jonathan Woodson, MD, told an audience at the 2012 MHS Conference that it would be “a smaller, leaner military which leverages technology to be more agile and flexible” and that “these same attributes will be true for military medicine.”

Woodson also said the reduction in the defense budget “will shine an even brighter light on military health costs, which could now exceed 10% of the base Department of Defense budget, if reforms are not made.” Still, he said the MHS has an opportunity to “shape” its future and that military medical personnel should not allow themselves to be “distracted or confused by the fiscal challenges.”

“Instead, we should seize upon the opportunity to become stronger and better and more relevant,” he said.

Increased TRICARE Fees

Specifics of the president’s proposed budget plan included proposals recommending increases in healthcare fees, co-pays and deductibles to be phased in over four to five years. The fees would not increase for active-duty troops, survivors of troops who died on active duty or medically retired troops, according to DoD officials.

Panetta told the Senate Armed Services Committee last month there was “no holy ground ” when it came to having to make decisions about budget cuts.

The proposed changes include:

• Further increasing enrollment fees for retirees under age 65 in the TRICARE Prime program, using a tiered approach based on retired pay that requires senior-grade retirees with higher retired pay to pay more and junior-grade retirees less;
• Establishing a new enrollment fee for the TRICARE Standard/Extra programs and increasing deductibles;
• Establishing a new enrollment fee for the TRICARE-for-Life program for retirees 65 and older, also using a tiered approach;
• Implementing additional increases in pharmacy co-pays in a manner that increases incentives for use of mail order and generic medicine;
• Indexing fees, deductibles, pharmacy co-pays, and catastrophic caps to reflect the growth in national healthcare costs.