Here Comes Tricare For Life

April 1, 2001

Like tens of thousands of Medicare-eligible military beneficiaries, retired Air Force MSgt. Robert Hall of Hillsboro, Tex., is impatient to know whether, after years of broken health care promises, the military truly is about to deliver a health care benefit that he can count on.

The word from the government: Yes, it is.

Plans call for the new benefit to arrive in two distinct parts: Tricare Senior Pharmacy (TSRx) on April 1 and, on Oct. 1, Tricare for Life-at least that portion of TFL being described as the “golden supplemental” to Medicare.

Combined, the two programs have the potential to turn the health benefits package of 1.4 million military elderly into one of the best in the country. In fact, they will require an increase in spending on military health care of roughly $60 billion over the next decade. This prospective cost has got Pentagon and other federal government leaders wringing their hands, unsure how they will pay for this “fully funded entitlement” and still protect programs, like weapon systems, that have a more direct impact on readiness, but pay they must. The new benefits are enshrined in law and, Tricare officials said, beneficiaries like Bob Hall can turn from questioning whether the benefits are real to understanding the details and how to take full advantage of them.

They are about to see their access to care improved and their out-of-pocket costs reduced, said Tricare officials.

Steve Lillie, director of 65-and-over benefits for the Tricare Management Activity, headquartered in Falls Church, Va., estimates that health care costs for a typical Medicare-eligible beneficiary who has Medigap insurance should drop by about $2,000 a year when TFL officially begins next fall.

Hall, 68, and his wife each pay monthly Medicare Part B premiums of $50. That is a requirement for using TFL. He also pays $187 a month for Medicare supplemental insurance. Hall doesn’t plan to drop that coverage until TFL has been operating a few months and delivering the benefits promised.

“We were promised free medical care for life back in 1953, and they didn’t deliver,” Hall said. “I’m afraid they might do that again.”

Tricare’s Pharmacy

To enjoy the first important benefit, however, Hall won’t have to do more than begin using it. Starting April 1, all Medicare-eligible beneficiaries-retirees, spouses, or survivors-will have the same pharmacy options as those now available to under-65 beneficiaries enrolled in Tricare Prime, the military’s managed care program. That includes the National Mail Order Pharmacy program, a Tricare retail drug benefit, a nonnetwork drug benefit for those residing outside a managed care network, and continued access to cost-free medications on base.

Beneficiaries such as Hall, who turned 65 before April 1, automatically qualify for the pharmacy benefit, even if they are not currently enrolled in Medicare Part B. Those who turn 65 on or after April 1 must be enrolled in Part B to use TSRx.

However, Medicare-eligible individuals won’t be the only group of military beneficiaries to see pharmacy benefits change on April 1. Everyone–active duty family members, under-65 retirees and their dependents, and 65-and-over beneficiaries–will see the start of a new co-payment scheme for prescriptions not filled at a Military Treatment Facility. It is part of a Defense Department initiative to simplify the benefit and encourage greater use of generic over name brand drugs.

How It Works

Here’s how the “standardized two-tiered” benefit will work: Anyone using the National Mail Order Pharmacy-regardless of age, beneficiary category, or Tricare enrollment status-will pay $3 for a 90-day supply of a generic drug or $9 for a name brand drug. Active duty family members had been paying $4, so their costs will fall by $1 per prescription if they buy generic and rise by $5 if they buy a name brand drug. Mail order is best for persons on maintenance medications for, say, high blood pressure or cholesterol problems.

Beneficiaries who have prescription drug coverage under another health insurance plan cannot use the mail order program unless the medication is not covered under their plan or until they exceed the other plan’s dollar limit.

For short-term illnesses or when medicines are needed fast, beneficiaries can use the Tricare retail network. Again, the co-pay will be $3 for generic, $9 for brand medicines, but only for a 30-day supply. In other words, mail order still delivers triple the value over the retail network. Active duty family members enrolled in Tricare Prime had been paying $5 per prescription through the retail network, and eligible retirees and their families paid $9. Both stand to save on generic drugs under the new co-payment plan, but active duty families will pay $4 more than they did before on name brands.

Users of Tricare’s retail network who are not enrolled in Tricare Prime now have a co-pay on each prescription of 15 or 20 percent, depending on whether they are an active duty dependent or a retiree or a retiree’s dependent. After April 1, these groups, too, will pay only $3 for a 30-day supply of generic medicine and $9 for 30 days of a brand name.

Beneficiaries who must rely on a nonnetwork pharmacy will pay $9, or 20 percent of the cost, for a 30-day supply, whichever is greater. Under this option, they first must pay an annual deductible of $150 per person, or $300 per family.

The great unknown for pharmacy beneficiaries is the impact of the Defense Department shifting to a uniform formulary later this year or in 2002. If the formulary selection is tightened, costs could rise. The modest co-pays, of $3 on generic or $9 on brand name drugs, will not apply to nonformulary medicines. With the health system struggling to control costs, tightening the inventory of drugs available by mail order and in the Tricare retail network would cut overall costs.

As of April 1, however, all drugs available through NMOP and the retail network were considered formulary medicines. If that changes, the redesignated nonformulary drugs, whether filled by mail or through the retail network, will carry a hefty co-payment, likely 20 percent of cost.

Plans called for mailing TSRx information packets to Medicare-eligible beneficiaries by mid-February. Those who did not receive them are urged to make sure their names and addresses are current in the Defense Enrollment Eligibility Reporting System. (See box on p. 42 for details on contacting DEERS.)

Questions about any aspect of the Defense Department pharmacy program, including TSRx, can be answered by calling toll-free: (877) DODMEDS (363-6337).

Tricare for Life

On Oct. 1, Hall and other Medicare-eligible beneficiaries–retirees, their spouses, and survivors–can begin to use Tricare Standard (formerly known as CHAMPUS) as a supplement to Medicare. No enrollment is required. Beneficiaries only need to have Medicare Part B and be sure their DEERS information is correct.

For 2001, the Part B premium is $50 a month. Seniors also might face a surcharge, or penalty, of 10 percent for each year they delayed past age 65 to enroll in Part B. Exempt from the surcharge are persons who were covered by employee health insurance instead of Medicare.

For 25,000 elderly beneficiaries living overseas, the arrival of Oct. 1 means they can begin using Tricare Standard as their primary medical insurance. They, too, must be enrolled in Medicare Part B, even though the Medicare program isn’t available overseas.

Tricare doesn’t have the staff or time to do more than implement the most critical phase of the Tricare for Life, the so-called “golden” supplement to Medicare. But the law also requires that the elderly have an equal shot, with under-65 beneficiaries, to enroll in Tricare Prime, the military’s managed care program. Officials expect to comply with that more complex requirement sometime next year.

In the meantime, elderly beneficiaries already enrolled in military managed care programs will be able to stay in them after Oct. 1, said J. Jarrett Clinton, acting assistant secretary of defense for health affairs.

This beneficiary group includes 33,500 enrollees in a Tricare Senior Prime demonstration program who likely will become the first elderly population enrolled in Tricare Prime.

Also, beneficiaries now enrolled in Tricare Prime can now stay in the program as they turn 65. “We’re not going to age them out,” said Clinton.

The Tricare staff still can’t say when they will be prepared-or funded-to open Tricare Prime enrollment to many more Medicare-eligible retirees. Indeed, Clinton cautioned hospital commanders and Tricare managers about the higher costs and greater time needed to care for the elderly, suggesting the right age mix of enrolled beneficiaries will have to be determined locally, based on readiness and available resources.

The elderly, Clinton told a conference of Tricare managers in January, require “two to three times more medical care than the population we are traditionally associated with.”

Frank Rohrbough, a health benefit expert speaking for The Military Coalition, an umbrella group of service associations, estimated that, because so many retirees have been “disenfranchised” for years from the military system, only about 200,000 elderly out of 1.4 million will want to enroll in military managed care, if allowed. Comfortable with their civilian providers, most will elect to use Tricare as second payer to Medicare.

Clinton challenged that view, advising conference attendees to “give great thought to how many do we want in and how many will come.” He added, “There are those that argue very few will come. I don’t believe that.”

Tricare Standard as a second payer plan to Medicare will be comparable to a category “F” Medigap plan, said Tricare executive Lillie. “F” plans are the most popular on the “A-to-J” spectrum of standardized plans health insurers can offer under Medicare rules.

Like most Medigap plans, TFL will cover all routine Medicare co-payments and deductibles, including the 20 percent cost share for physician services and the $792 deductible for inpatient hospitalization.

Superior on Two Fronts

TFL will be superior to Medigap plans in at least two ways, Lillie said. First, there will be the “unlimited pharmacy benefit” of the TSRx. “Even the most expensive Medigap plans-those that include pharmacy-cap expenditures at no more than $3,000 a year per beneficiary,” Lillie said. Tricare doesn’t impose such a cap for its drug benefit.

Second, and more importantly, said Lillie, Tricare Standard users won’t have to pay Medigap premiums on top of Part B. That will save an average of $1,500 a year. Hall and his wife, for example, would save $2,244. With TFL, most out-of-pockets costs will be limited to Part B premiums and modest drug co-pays for prescriptions not obtained through base pharmacies.

Medicare and Tricare are expected to work well in tandem. For services by both plans, Medicare will pay its allowable amount and Tricare usually will cover what remains, including routine patient cost shares and deductibles. If the care-for example, certain types of chiropractic care-is covered by Medicare but not Tricare, Medicare will pay its normal amount and the beneficiary will pay deductibles and cost share. If care is covered by Tricare, but not by Medicare, Tricare will provide its traditional Tricare Standard coverage with the beneficiary paying any required cost shares and deductibles. Example: For network hospital stays beyond 150 days, Medicare coverage is exhausted, but Tricare pays 80 percent of the cost and patients pay 20 percent.

What all this means, said Rohrbough, is that, except for Medicare Part B premiums, TFL should cover all health costs for most elderly patients. “Tricare for Life is potentially better than any Medicare supplement that’s out there,” Rohrbough said.

The risk to beneficiaries of relying solely on Medicare and TFL, he said, “is very, very low,” particularly because Congress last year improved the catastrophic cap on out-of-pocket health costs for service families, lowering it from $7,500 to $3,000. In other words, even if a family faces a medical catastrophe, total exposure to medical costs is $3,000. This does not include custodial care for aged or infirm.

Defense officials estimate that 6 percent of the 65-and-older population have delayed enrollment in Medicare Part B and therefore face a surcharge, or late enrollment penalty. For every year past 65 that they waited to enroll, the $50 a month premium rises by 10 percent. For example, a 75-year-old retiree who waited 10 years will pay a 100 percent penalty or Part B premiums of $100 instead of $50. Exempt from the surcharge are elderly covered by employer-provided health benefits and who therefore had no need to enroll in Part B at age 65.

Military associations will press this year for legislation to waive the Part B penalty for beneficiaries who didn’t enroll in Part B because they expected to be able to rely on military doctors and hospitals for care. Stiff resistance is expected from lawmakers who are longtime guardians of the Medicare Trust Fund. Even some military retirees who have been paying for Part B for years oppose the move, arguing that, if their peers are granted waivers, they should be reimbursed for premiums they have paid since turning 65.

Details on how health care providers who treat TFL patients will be reimbursed aren’t firm, Lillie said, but the goal is to keep the process as simple as possible for providers and virtually invisible to patients. The hoped-for scenario is that patients will only have to present providers with their Medicare card. Providers will file the claim with Medicare, which will pay its share and, using DEERS enrollment information, forward the remainder to Tricare. Doctors and hospitals will get two checks, one drawn on the Medicare Trust Fund and one from Tricare.

In deciding how to implement TFL, Tricare officials sought input from health benefit experts from military associations and veterans groups. Lillie said the TFL Working Group has been invaluable for policy-makers in understanding and addressing concerns of beneficiaries. One effort of the group is to design a matrix that will show at a glance what Medicare covers, what TFL will cover, and what beneficiaries will have to pay. A draft version of that chart is shown on p. 43.

Don’t Drop It–Yet

Beneficiaries are urged not to drop their Medigap coverage before Oct. 1 and indeed, like Hall, to keep such coverage past Oct. 1, if important issues regarding the transition to TFL aren’t clarified.

There are continuing talks between Tricare and the Health Care Financing Administration, which oversees Medicare, on issues such as the ability of beneficiaries with pre-existing conditions to restore Medigap coverage if, for some reason, TFL doesn’t meet their needs. Another issue raised by The Military Coalition is whether HCFA should declare TFL an approved Medicare supplement. Such a designation would bar other Medigap insurers from selling insurance to TFL beneficiaries that only duplicate TFL benefits.

Retirees like Bob Hall aren’t alone in worrying about the permanence and strength of Tricare for Life. Tricare managers and medical professionals who attended the Tricare Conference in January also wanted reassurance.

They listened to a panel of Congressional staffers who helped write TFL legislation. Panel moderator, Mary Gerwin, a deputy assistant secretary of defense for health affairs, said retirees “can put those feelings of broken promises behind [them]. … This is a mandatory-constituted program. So we’re going to implement it and the dollars will simply have to be there for us.”

Robert Henke, a staff member for the Senate Appropriations Committee, said the question for lawmakers this year is “how we pay for it, not shall we pay for it. … What weapon system or systems do we defer?”

Lawmakers “asked us collectively to develop a plan to provide care for disenfranchised Medicare-eligible beneficiaries,” said Charles S. Abell, a senior staff member for the Senate Armed Services Committee. “They wanted it to be as comprehensive as possible and yet try to keep the cost within bounds.”

He quipped, “One out of two is not that bad.”

How To Update DEERS Data

You can update your DEERS information by:

  • visiting the nearest military personnel office with an ID card facility.
  • visiting a Military Treatment Facility.
  • e-mailing changes to:
  • faxing changes to: (831) 655-8317.
  • mailing changes to: DEERS Support Office, Attention: COA, 400 Gigling Road, Seaside, CA 93955-6771.
  • making changes online at the DEERS address change Web site:

For more information, call the DEERS Support Office at its toll-free numbers: (800) 538-9552; (800) 334-4162 (California only); or (800) 527-5602 (Alaska and Hawaii).

Draft Overview of Tricare for Life Coverages

The following matrix (see PDF version for chart) provides a general overview of the covered health care benefits that will become available for military beneficiaries who are age 65 and over and eligible for both Medicare and Tricare. This chart is not an all-inclusive summary of your benefits.

Whenever a benefit is covered by both plans, Medicare will pay first and Tricare will pay second. If the care you receive is both a Medicare and Tricare benefit, Tricare will pay applicable Medicare deductible and cost-sharing amounts. You will have no out-of-pocket expenses, after meeting the Tricare deductible of $150.

The amounts listed below that display what Medicare and Tricare will pay are based on your use of a Medicare participating provider. If your provider does not accept Medicare assignment, Tricare will cover up to your legal liability (115 percent of Medicare-allowed amount).

If enrolled in Tricare Prime, there are penalties for going outside the network.

Additional Coverage

(From TFL Working Group)

Medicare (Part B) or Tricare also cover the following care (check the Medicare and Tricare Health Benefits Handbook for specific cost-sharing responsibilities):

Speech language pathology services

Artificial limbs and eyes

Arm, leg, back, and neck braces

Chiropractic services (limited)

Ambulance service (limited)

Preventive services

Medicare does not cover health care services delivered outside of the US. For persons residing or traveling overseas, Tricare will be the only payer for care, and beneficiaries will have the same co-payments as all other Tricare Standard retired beneficiaries overseas.

Tom Philpott, the editor of “Military Update,” lives in the Washington area. His most recent article for Air Force Magazine, “Tricare for Life,” was published in the December 2000 issue.