department of defense agency financial report fiscal year 2012

Department of Defense Agency Financial Report for FY 2012
following assumptions to calculate the FY 2012 roll-forward amount:
MERHCF Benefits – Medical Trend
116
FY 2011 –
FY 2012
Ultimate Rate
FY 2036
Medicare Inpatient (Direct Care) 1.60% 5.35%
Medicare Inpatient (Purchased Care) 3.60% 5.35%
Medicare Outpatient (Direct Care) 2.26% 5.35%
Medicare Outpatient (Purchased Care) 3.26% 5.35%
Medicare Prescriptions (Direct Care) 0.00% 5.35%
Medicare Prescriptions (Purchased Care) 4.44% 5.35%
Medicare USFHP (Purchased Care) 3.83% 5.35%
Actuarial Cost Method Used: Aggregate Entry-Age Normal Method
Market Value of Investments in Market-Based and Marketable Securities: $264.8 billion
Assumed Interest Rate: 4.6 percent
The MERHCF liability includes Medicare liabilities for all Uniformed Services. The
$532.8 billion liability includes $520.7 billion for the Department, $10.8 billion for the
Coast Guard, $1.2 billion for the Public Health Service and $78.5 million for National Oceanic
and Atmospheric Administration (NOAA). The FY 2012 contributions from each of the
Uniformed Services were $10.8 billion from the Department, $261.9 million from the
Coast Guard, $36.0 million from the Public Health Service, and $1.8 million from NOAA.
Federal Employees Compensation Act (FECA)
The Department of Labor (DOL) annually determines the liability for future workers’
compensation benefits, which includes the expected liability for death, disability, medical,
and miscellaneous costs for approved compensation cases, plus a component for incurredbut-not-reported
claims. The liability is determined using historical benefit payment patterns
related to a specific incurred period to predict the final payment related to that period.
Consistent with past practice, these projected annual benefit payments have been
discounted to present value using the Office of Management and Budget’s economic
assumptions for 10-year U.S. Treasury notes and bonds. A 2.3 percent interest rate was
assumed for year one and 3.1 percent for year two and thereafter.
The DOL calculates this liability using wage inflation factors (cost of living adjustments or
COLAs) and medical inflation factors (consumer price index medical or CPIM). The actual
rates for these factors for charge back year (CBY) 2012 were also used to adjust the
methodology’s historical payments to current year constant dollars. The compensation
COLAs and CPIMs used in the projections for various charge back years were as follows:
CBY
Federal Employees – Compensation Act (FECA)
COLA CPIM
2013 2.83% 3.65%
2014 2.03% 3.66%
2015 1.93% 3.72%
2016 2.00% 3.73%
2017+ 2.03% 3.80%
Financial Information