Points of Interest: Congress Weighs Survivor Benefit Plan Reform

By Tom Philpott

"With the services canceling out [promises of] free lifetime medical and dental care, I could use that $55 a month toward a good health insurance policy," Anderson said.

Congress is considering such arguments in deciding whether to include SBP reforms in this year's defense bill. Though no hearings on SBP are scheduled, members and staff of the House National Security Committee are interested in a package of low-cost reforms proposed by The Military Coalition, a group representing 24 service associations.

There's no money or political will to kill the most criticized SBP feature: the Social Security offset. Benefit payments will continue to drop from 55% of retired pay to 35% when a surviving spouse turns 62.

"We'd love to do something about that," said Steve Strobridge, a coalition spokesman and deputy director of government relations for The Retired Officer Association. "But we have to acknowledge it's a big-cost issue and, in the current environment, would not fly."

The coalition proposes four more subtle changes:

"Paid-up" SBP —Premiums now are paid until the retiree or spouse dies or divorces. Under the reform proposal, premiums also would end after 30 years.

Strobridge said this provision would be a first step to reverse a steady decline in the government's subsidy of SBP. When SBP began in 1972, tax dollars covered 40% of costs, with premiums covering the remaining 60%. Over time, premiums grew faster than benefits. and the subsidy has slipped to 26%.

If Congress approves the paid-up rule, no current enrollee would see immediate relief. Because SBP didn't begin until late 1972, no premiums would end until 2002. Retirees like Anderson who initially joined SBP's forerunner, the Retired Serviceman's Family Protection Plan, couldn't count those years against a 30-year rule because RSFPP wasn't subsidized, Strobridge said.

Withdrawal Option —Currently, a decision to enroll in SBP can't be revoked, The coalition says retirees should be given a chance to opt out two years into retirement. By then, they can weigh SBP's costs and benefits against factors such as second-career incomes, family needs, and insurance alternatives.

"Many people don't participate now because they're afraid of locking themselves in," said Strobridge. An escape window actually would save tax dollars, he said, through higher enrollments generating more premiums.

Active Duty Deaths —Survivors of members who die on active duty would receive SBP automatically, as though the deceased had retired with a service-connected disability. SBP now is paid only if an active duty member died after becoming eligible to retire with 20 or more years of service. It can also be paid if there's time before death to arrange a disability retirement.

Automatic SBP would eliminate inequities that occur when, for example, one victim of a military plane crash dies instantly and another lingers long enough for officials to arrange disability retirement.

Forgotten Widows —Token SBP of $165 a month would be paid to widows of retirees who died before having a full opportunity to enroll. As few as 10,000 widows, most of them 70 or older, could be eligible.

Payments would go to unremarried widows of retirees who died before March 21, 1974. They also would go to widows of reservists who died from 21 September 1972 to 1 October 1978 before drawing earned retirement starting at age 60.

No Mail-Order Benefit for Elderly

Dr. Edward Martin, Acting Assistant Secretary of Defense for Health Affairs, has shelved a proposal he unveiled last January to provide a mail-order pharmacy benefit to beneficiaries 65 and older.

Associations and retirees opposed the plan because it would be funded in part by ending free on-base prescriptions for 350,000 beneficiaries 65 and older.

Martin proposed providing a mail-order benefit to all Medicare-eligibles. Premiums would be set at $11 to $14 a month, with a co-payment of $8 on each prescription. That would cover half of the plan's cost. Another $200 million would be raised by ending the on-base pharmacy benefit.

"The constituency reacted very negatively," Martin said. Retirees become eligible for Medicare at age 65, and lose eligibility for Champus or TRICARE Prime, the new managed care program. But Medicare has no pharmacy benefit.

Martin said his plan would provide a new benefit to 800,000 elderly who don't live near a base. But those who do "don't want a co-pay," he said, and argue they were promised free care for life. That ignores "the fact that 800,000 people now . . . don't get squat," he said.

"We can't go forward in this environment without cost neutrality," Martin said. "How many tanks or airplanes are we not going to build because I want to give a free benefit that now isn't a benefit? . . . The money just isn't there. Tough time, hard choices."

Martin's former boss, Dr. Stephen Joseph, retired 1 April with a warning that Pentagon medical budgets are severely underfunded. What the General Accounting office estimates as a $609 million shortfall for fiscal 1998 could grow to $1.3 billion by 2003, Joseph said. 

 

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