Panetta: Military healthcare costs are on my radar in efforts to save money

President Obama’s nominee to lead the Pentagon has made it clear military personnel programs, once considered sacrosanct, will be scrutinized as the administration looks for spending cuts.

In written answers to advance policy questions posed by the Senate Armed Services Committee prior to his confirmation hearing, Leon Panetta endorsed proposals put forward by the Pentagon in its 2012 budget plan.

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“I believe that the proposed healthcare efficiencies are sensible efforts to control DOD’s health care costs while maintaining the same level of care,” Panetta wrote. “I also believe the modest increases in beneficiaries’ costs are reasonable.”

The Obama administration is proposing increasing TRICARE fees for retirees of working age, which have remained the same for a decade. Specifically, the proposal would raise premiums for family plans by $5 per month, and by $2.50 for individuals.

Panetta called those proposals a “first step.”

“I believe that we need to continue to explore all possibilities to control the costs of military healthcare,” the nominee wrote.

“Even with the estimated savings from the healthcare efficiencies proposed in the … 2012 budget, the cost of the Military Health System continues to increase as a percentage of the DOD budget and will exceed 10 percent of the budget in just a few years,” Panetta told the committee.

Washington’s focus on fiscal austerity will force changes, he made clear.

“During a period when there is heavy downward pressure on all federal spending, including defense spending, we must make smart choices that permit us to maintain a balance between personnel benefits and funding for equipment and readiness,” Panetta wrote.

During their final months in office, Defense Secretary Robert Gates and Joint Chiefs Chairman Adm. Michael Mullen have been arguing against defense cuts that eliminate combat systems and personnel.

During a June 2 session with reporters, Mullen said cuts should come from things like bloated staffs and unnecessary organizations -- and military healtcare reform, once considered an untouchable program.

“We have to put initiatives in place over the mid-term that will then start to generate cash in the out years,” Mullen said.

“Part of this is understanding where the money is,” Mullen said. “Two of the big places the money is is in healthcare, and it’s in pay and benefits.”

The Defense Business Board, a Pentagon advisory group, has warned that if left unchecked, personnel costs will end up being a poison pill for the military’s annual budget.