The military’s massive health insurance program offers millions of service members, retirees and their dependents quality care at relatively low cost. That’s what the government aimed for when it created the Civilian Health and Medical Program of the Uniformed Services in 1966, now known as TRICARE. But the price of that success has been high for Uncle Sam: The $53 billion program now consumes 10 percent of the Pentagon’s nonwar budget.

TRICARE premiums for beneficiaries have not kept up with inflation and the overall increase in health care costs during the past two decades. Congress agreed to raise TRICARE Prime annual enrollment fees for retirees in 2011 -- the first time the fees have gone up since 1995. Active-duty service members and their dependents do not pay for health care under TRICARE Prime.

Retired TRICARE Prime beneficiaries now pay between $39 and $79 more in annual fees than they paid nearly two decades ago. At the end of 2012, Congress rejected an Obama administration proposal to tie TRICARE fees to retired recipients’ income and impose higher co-payments for pharmacy drugs. Instead, lawmakers capped pharmacy co-pays beginning in 2014, aligning them with the annual retiree cost-of-living adjustment. Also nixed on Capitol Hill was a White House proposal to charge an enrollment fee for TRICARE for Life, the health care program Congress created in 2001 for military retirees age 65 and older.

Requiring TRICARE beneficiaries to pay more for their health care is a politically sensitive topic. No one wants to be seen as breaking faith with troops, their families or retirees, and military service organizations are a powerful lobby in Washington. There are signs, however, that real reform is on the horizon in 2013, driven largely by the government’s need to seriously cut spending -- everywhere. The 11th hour debate at the end of 2012 between Congress and the administration over avoiding the fiscal cliff and sequestration also was a reminder that TRICARE, unlike some other federal programs, is not exempt from those automatic, across-the-board spending cuts, now delayed until March.

We’re “looking at the proposal of a declining Defense budget perhaps for the rest of the decade,” says Todd Harrison, a senior fellow in defense budget studies at the Center for Strategic and Budgetary Assessments. According to Harrison, that means personnel costs have to shrink, which translates into reducing the number of people in the military or decreasing per person expenses. To avoid more painful cuts, Defense has to increase fees and pharmacy drug co-payments, he says. It’s something the department has been trying to do, but it often runs into resistance from Congress. “It’s going to keep coming back up,” he adds. “And eventually Congress will go along with some modest premium increases for TRICARE.”

A former Pentagon official says it makes sense to increase fees. “The cost to the beneficiary is far below what most people pay,” says the official, who expects the Obama administration will continue to press in 2013 for more contributions from TRICARE retirees.

Congress seems to be getting the memo, at least rhetorically. Sen. John McCain, R-Ariz., along with his GOP colleague Tom Coburn from Oklahoma talked in early December about the need for TRICARE beneficiaries to pay more. “I understand the positions of the veterans groups in this country. I respect them. I love them, and I appreciate them,” McCain said during the Senate floor debate over the fiscal 2013 Defense authorization bill. “But we are going to have to get serious about entitlements for the military just as we are going to have to get serious about entitlements for nonmilitary.”

Some advocacy groups and many retirees have pushed back aggressively on proposals to hike TRICARE costs, in part by invoking the notion that members of the military were promised “free health care for life” when they joined the service. Military recruiters have promised that benefit to sweeten the deal with candidates. But Congress has never authorized free health care for life for retired service members, and the courts have affirmed such claims have no legal standing.

The myth persists partly because free health care for life essentially was the practice after World War II and throughout the Cold War. Kathy Beasley, deputy director for government relations at the Military Officers Association of America, says it was the “pervasive understanding years ago” that the government would provide free health care for military retirees. Beasley, who is a retired Navy captain, has worked as a military recruiter. “We always put that on our materials,” she says.

But as military facilities closed because of downsizing and medical costs grew during the past few decades, it became difficult for retired service members to obtain quality health care at little or no cost. Congress responded by creating TRICARE for Life, which supplements Medicare coverage for older retirees. “People were promised health care in retirement, but not free health care,” Harrison says. “The question is how much is a fair amount to pay?”

Because service members typically enter the military at a young age, they often retire earlier than civilians do and find work outside government. Many retirees covered by TRICARE Prime are still working and have access to other health insurance, either through their jobs or spouses. But TRICARE remains a more attractive option, primarily because it costs less than other health insurance. “TRICARE has been so successful that more retirees are choosing to stay on,” says Harrison.

Beasley notes that not all military retirees live in Washington, where salaries are typically higher than places outside the Beltway. “They aren’t all working,” she says.

Those who favor asking TRICARE beneficiaries to pay more might have a more receptive audience, especially among the under-65 crowd, than conventional wisdom has dictated. According to a July study from CSBA, military personnel “tend to undervalue retirement health care benefits, particularly early in their career.” That makes sense, given how young people traditionally view retirement and health care. But even among midcareer personnel, “89 percent would prefer an immediate $350 increase in annual pay in exchange for a $1,400 per year increase in the TRICARE Prime fee they would pay once they retire,” the study found.

McCain was more blunt in his assessment on the Senate floor in December: “I have not yet met a single 18-year-old, including my own son . . . who said, ‘Gee, I want to join the Marine Corps because of TRICARE.’ No, they joined the military because they want to serve their country.” It’s up to Washington, though, to figure out the right balance between rewarding that service and saving the government more money.