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GAO-11-160R 1 (2011-02-16)

handle is hein.gao/gaobaanwl0001 and id is 1 raw text is: i G AO . A~countakbity I Integrity * Reliabiity United States Government Accountability Office Washington, DC 20548 February 16, 2011 The Honorable Lindsey 0. Graham United States Senate Subject: DOD Health Care: Prohibition on Financial Incentives That May Influence Health Insurance Choices for Retirees and Their Dependents under Age 65 Dear Senator Graham: From fiscal years 2001 through 2010, the Department of Defense's (DOD) spending for health care increased from about $19 billion to nearly $49 billion, representing approximately 6 percent of DOD's total spending in fiscal year 2001 and approximately 9 percent in fiscal year 2010.' This health care spending primarily funds TRICARE-DOD's program that provides health care to active duty personnel and other beneficiaries, including retired servicemembers.2 According to DOD, the increase in its health care spending can be attributed to factors such as growth in the number of TRICARE beneficiaries. From fiscal years 2001 through 2010, the number of TRICARE beneficiaries increased by nearly 15 percent, from 8.3 million to 9.5 million beneficiaries. To help reduce DOD's health care costs, Congress passed section 707 of the John Warner National Defense Authorization Act for Fiscal Year 2007 (section 707),' which went into effect January 1, 2008. Section 707 prohibits employers with 20 or more employees from offering financial or other incentives to their employees who are eligible for TRICARE to not enroll in the employer-sponsored health insurance plan or to terminate such coverage. Historically, some employers offered financial or other incentives, which resulted in shifting much of the cost of providing health care for these employees from the employer to DOD. TRICARE beneficiaries who might have been offered incentives are retirees and their dependents under age 65 who have access to employer-sponsored health insurance in addition to TRICARE.4 When these employees accepted the incentives and did not enroll in the employer-sponsored health insurance, TRICARE became the primary payer and paid a 'Inj this report, fiscal year 2010 figures for DOD spending and TRICARE beneficiaries are estimates because actual figures were not available at the time we did our work. 'In addition to TRICARE, DOD's total health care spending also includes activities such as research and development. 'Pub. L. No. 109-364, § 707, 120 Stat. 2083, 2283-84 (2006) (codified at 10 U.S.C. § 1097c). 4Retirees and their dependents age 65 or older are generally eligible for Medicare and are eligible for TRICARE benefits if they enroll in Medicare Part B. TRICARE is a secondary payer to Medicare. Employers are prohibited from offering incentives to Medicare-eligible employees to not enroll in a group health plan, including an employer-sponsored health plan. For active duty personnel, TRICARE coverage is automatic and is the primary coverage. GAO-11-160R Section 707

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