Defense health officials didn’t do the Obama administration any favor Wednesday when they announced a “small” increase in the daily fee that military retirees under 65, their families and covered survivors must pay for inpatient care in civilian hospitals under TRICARE Standard that starting Thursday.

The jump, in fact, for working age retirees and their families is $110 per day, a 20.6 percent increase.

TRICARE Standard is the military’s fee-for-service insurance option. The inpatient cost share for retirees under age 65 and their family members was increased to $645 a day from $535. The actual formula for beneficiaries is $645 a day, or 25 percent of total hospital charges, whichever is less.

Families of active duty members who use Standard for civilian hospital stays will see a more modest increase in their daily charge, from $15.65 a day to $16.30, or $25 per admission, whichever is greater.

The increase for retirees stunned and angered at least one service association.

“This shocking announcement is extremely disappointing, given your public assurances earlier this year that the Defense Department would not be proposing any TRICARE fee increases for (fiscal) 2010,” retired Navy Vice Adm. Norbert R. Ryan Jr., president of the Military Officers Association of America told Defense Secretary Robert Gates. Ryan’s protest letter was sent hours after TRICARE officials unveiled their new inpatient fees for Standard.

Austin Camacho, spokesman for TRICARE Management Activity in Falls Church, Va., said the increase results from a regulation requiring that the Standard “inpatient per diem cost share be calculated so that, in the aggregate, the total cost-sharing amount is equivalent to 25 percent of the CHAMPUS-determined allowable costs for covered services or supplies provided” during inpatient stays in civilian hospitals.

“The regulation also requires that we publish the rates annually, Camacho said. “About three years ago Congress froze the per diem at $535 and later extended the freeze to Sept. 30. Hence, there is a large increase now that the freeze is no longer in effect.”

MOAA’s criticism, likely to be echoed by other service associations, centers on Gates statements earlier this year that the department wouldn’t be seeking TRICARE fees increases for fiscal 2010. It’s unclear now whether he meant that the department wouldn’t seek any new legislative authority to raise retiree TRICARE fees, as the Bush administration did for the past three years, or whether he meant DoD would keep all fees frozen through the year.

Service associations presumed, from Gates’ statements, that they would not have to lobby Congress again this year to insert language in the defense bill to block fee increases for Standard users through 2010.

“We believe that the only reason the Armed Services Committees didn’t include a similar prohibition in their mark-ups of the FY2010 Defense Authorization Act was that they took Administration assurances on this subject at face value,” Ryan told Gates.

“They believe, as we do, that the current $535 per day retiree inpatient co-pay is already far larger than inpatient co-pays under most civilian insurance plans,” said Ryan, urging Gates to reverse the decision. “We don’t understand how a further 21 percent increase to $645 meets any standard of equity or reasonableness for the most seriously ill and injured beneficiaries to whom it would apply.”

The unexpected increase also caught White House political operatives by surprise. It comes amid an emotional debate over national health care reform. The fee increase, and service association criticism, almost certainly will be used by Republicans to deepen doubts about the president’s intentions regarding his health care initiatives.

In his letter, however, Ryan gave Gates the benefit of the doubt.

“Because of your previous assurances, we believe these increases were undertaken without your knowledge or approval,” Ryan told the defense chief. But he urged Gates to “repudiate and overturn this inappropriate and unfair increase.”

Camacho confirmed that the impact of the $110-a-day increase in hospital charges is leavened by the annual $3000 catastrophic cap on TRICARE fees that remains in effect for military beneficiaries. That means the maximum number of days the higher inpatient fees can be charged to Standard plan users is four, for an annual out-of-pocket increase of $440.

Most Standard users hospitalized in civilian facilities actually will pay the higher fee for even fewer days than four. That’s because the catastrophic cap is reached using most out-of-pocket cost under TRICARE Standard including the annual deductible payment, pharmacy co-pays, outpatient cost shares and costs exceeding TRICARE-allowable charges.

TRICARE for Life, the golden supplement to Medicare for retirees and dependents age 65 and older, is unaffected by the new inpatient fees.

Before this year, the largest annual increase in Standard inpatient fees for retirees was 16 percent, from $441 a day to $512, in October 2004.

Retirees and their family members who use Standard for hospital care also pay 25 percent of what TRICARE deems to “allowable charges” for separately billed professional services received as inpatients. They also must cover any costs that exceed allowable TRICARE rates.

Gates said in April that rising costs for military health are “eating the Department alive.”

He made clear then that he wanted Congress to allow fees increases. But Gates said the department this year would not be proposing any plan to increase fee and then leave a hole in its health budget on the presumption Congress would agree to the changes.

To comment, e-mail milupdate@aol.com, write to Military Update, P.O. Box 231111, Centreville, VA, 20120-1111 or visit www.militaryupdate.com.

(Oct. 3, 2009)